UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________
Form 10-Q
_______________________________________________________________________
(Mark One)
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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30, 2013
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission File Number: 001-35186
_______________________________________________________________________
SPIRIT AIRLINES, INC.
(Exact name of registrant as specified in its charter)
_______________________________________________________________________
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Delaware
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38-1747023
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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2800 Executive Way
Miramar, Florida
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33025
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(Address of principal executive offices)
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(Zip Code)
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(954) 447-7920
(Registrant’s telephone number, including area code)
_______________________________________________________________________
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
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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 (§ 232.405 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
ý
No
o
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 “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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ý
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting company
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o
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Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes
o
No
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Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the close of business on October 18, 2013:
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Class
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Number of Shares
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Common Stock, $0.0001 par value
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72,647,167
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Table of Contents
INDEX
PART I. Financial Information
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ITEM 1.
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UNAUDITED CONDENSED FINANCIAL STATEMENTS
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Spirit Airlines, Inc.
Condensed Statements of Operations
(unaudited, in thousands, except per share data)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2013
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2012
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2013
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2012
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Operating revenues:
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Passenger
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$
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279,499
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$
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202,181
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$
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739,515
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$
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594,071
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Non-ticket
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177,126
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140,136
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494,886
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396,049
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Total operating revenues
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456,625
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342,317
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1,234,401
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990,120
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Operating expenses:
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Aircraft fuel
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144,986
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122,016
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411,903
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350,974
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Salaries, wages and benefits
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66,805
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54,413
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192,758
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160,556
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Aircraft rent
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42,134
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37,536
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125,121
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106,469
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Landing fees and other rents
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22,106
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19,060
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61,508
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51,240
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Distribution
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17,916
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14,620
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50,874
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43,559
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Maintenance, materials and repairs
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16,908
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14,211
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43,890
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37,254
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Depreciation and amortization
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8,475
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3,815
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22,403
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10,012
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Other operating
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38,884
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35,253
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110,799
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95,862
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Loss on disposal of assets
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165
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—
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426
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482
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Special charges (credits)
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442
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(8,288
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)
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488
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(8,345
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)
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Total operating expenses
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358,821
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292,636
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1,020,170
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848,063
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Operating income
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97,804
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49,681
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214,231
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142,057
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Other (income) expense:
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Interest expense
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36
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10
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140
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1,334
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Capitalized interest
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(36
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(10
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(140
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(1,334
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)
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Interest income
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(87
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)
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(171
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)
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(308
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)
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(766
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Other expense
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115
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109
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252
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236
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Total other (income) expense
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28
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(62
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)
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(56
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(530
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Income before income taxes
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97,776
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49,743
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214,287
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142,587
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Provision for income taxes
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36,673
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18,859
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80,562
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53,693
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Net income
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$
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61,103
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$
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30,884
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$
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133,725
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$
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88,894
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Basic earnings per share
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$
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0.84
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$
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0.43
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$
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1.84
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$
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1.23
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Diluted earnings per share
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$
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0.84
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$
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0.43
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$
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1.83
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$
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1.22
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The accompanying Notes are an integral part of these Condensed Financial Statements.
Spirit Airlines, Inc.
Condensed Balance Sheets
(unaudited, in thousands)
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September 30, 2013
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December 31, 2012
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Assets
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Current assets:
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Cash and cash equivalents
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$
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540,195
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$
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416,816
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Accounts receivable, net
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27,838
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22,740
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Deferred income taxes
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14,512
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12,591
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Other current assets
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79,299
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95,210
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Total current assets
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661,844
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547,357
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Property and equipment:
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Flight equipment
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5,148
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2,648
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Ground and other equipment
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49,567
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43,580
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Less accumulated depreciation
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(23,202
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(17,825
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)
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31,513
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28,403
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Deposits on flight equipment purchase contracts
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132,483
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96,692
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Aircraft maintenance deposits
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145,598
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122,379
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Deferred heavy maintenance
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110,514
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80,533
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Other long-term assets
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43,187
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44,520
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Total assets
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$
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1,125,139
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$
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919,884
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Liabilities and shareholders’ equity
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Current liabilities:
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Accounts payable
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$
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20,766
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$
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24,166
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Air traffic liability
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180,735
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131,414
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Other current liabilities
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129,770
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121,314
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Total current liabilities
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331,271
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276,894
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Long-term deferred income taxes
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43,932
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33,216
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Deferred credits and other long-term liabilities
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26,167
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27,239
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Shareholders’ equity:
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Common stock
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7
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7
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Additional paid-in-capital
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513,142
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504,527
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Treasury stock
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(2,257
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(1,151
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Retained earnings
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212,877
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79,152
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Total shareholders’ equity
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723,769
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582,535
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Total liabilities and shareholders’ equity
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$
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1,125,139
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$
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919,884
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The accompanying Notes are an integral part of these Condensed Financial Statements.
Spirit Airlines, Inc.
Condensed Statements of Cash Flows
(unaudited, in thousands)
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Nine Months Ended September 30,
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2013
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2012
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Net cash provided by operating activities
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$
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173,631
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$
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88,807
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Investing activities:
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Proceeds from sale of property and equipment
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—
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14
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Proceeds from sale of slots
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—
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9,060
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Pre-delivery deposits for flight equipment, net of refunds
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(41,328
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(6,817
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)
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Purchase of property and equipment
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(17,028
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(21,711
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Net cash used in investing activities
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(58,356
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)
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(19,454
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Financing activities:
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Proceeds from options exercised
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675
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410
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Proceeds from sale and leaseback transactions
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6,900
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12,427
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Payments to pre-IPO shareholders pursuant to tax receivable agreement
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—
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(26,905
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Excess tax benefits from share-based compensation
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1,635
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1,466
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Repurchase of common stock
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(1,106
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(936
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Net cash provided by (used in) financing activities
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8,104
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(13,538
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)
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Net increase in cash and cash equivalents
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123,379
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55,815
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Cash and cash equivalents at beginning of period
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416,816
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343,328
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Cash and cash equivalents at end of period
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$
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540,195
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$
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399,143
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Supplemental disclosures
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Cash payments for:
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Interest
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$
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26
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$
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297
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Taxes
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$
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60,942
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$
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39,350
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The accompanying Notes are an integral part of these Condensed Financial Statements.
Notes to Condensed Financial Statements
(unaudited)
The accompanying unaudited condensed financial statements include the accounts of Spirit Airlines, Inc. (the Company). These unaudited condensed financial statements reflect all normal recurring adjustments which management believes are necessary to present fairly the financial position, results of operations and cash flows of the Company for the respective periods presented. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements of the Company and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
The interim results reflected in the unaudited condensed financial statements are not necessarily indicative of the results that may be expected for other interim periods or for the full year.
Certain prior period amounts have been reclassified to conform to the current year's presentation.
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2.
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Recent Accounting Developments
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In December 2011, the FASB issued amendments to Accounting Standards Update No. 2011-11,
Balance Sheet (Topic 210); Disclosures about Offsetting Assets and Liabilities
(ASU 2011-11). The amendments in this update are designed to enhance disclosures by requiring improved information about financial instruments and derivative instruments that are either (a) offset in accordance with certain right to set-off conditions prescribed by current accounting guidance or (b) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with current accounting guidance. On January 1, 2013, the Company adopted ASU 2011-11.
In January 2013, the FASB issued Accounting Standards Update No. 2013-01,
Scope
Clarification of Disclosures about Offsetting Assets and Liabilities
(ASU 2013-01), to limit the scope of ASU 2011-11 and its new balance sheet offsetting disclosure requirements to derivatives (including bifurcated embedded derivatives), repurchase agreements and reverse repurchase agreements, and securities borrowing and lending transactions. On January 1, 2013, the Company adopted ASU 2013-01 in conjunction with ASU 2011-11.
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3.
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Special Charges and Credits
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Secondary Offering Costs
Special charges and credits for the
nine
months ended
September 30, 2013
primarily include costs related to an underwritten public offering of
12,070,920
shares of common stock by certain stockholders affiliated with Indigo Partners LLC (Indigo) completed during the third quarter of 2013. The Company incurred a total of
$0.4 million
in costs related to this offering. The Company did not receive any proceeds from this offering.
On January 25, 2012, certain stockholders of the Company, including affiliates of Oaktree Capital Management and Indigo and certain members of the Company's executive team, sold an aggregate of
12,650,000
shares of common stock in an underwritten public offering. The Company incurred a total of
$1.3 million
in costs between 2011 and 2012 related to this offering, of which
$0.5 million
were incurred during the
nine
months ended
September 30, 2012
. These costs were offset by reimbursements from certain selling shareholders of
$0.6 million
in accordance with the Fourth Amendment to the Second Amended and Restated Investor Rights Agreement. The Company did not receive any proceeds from this offering.
Notes to Condensed Financial Statements—(Continued)
The following table sets forth the computation of basic and diluted earnings per common share:
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2013
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2012
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2013
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2012
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(in thousands, except per share amounts)
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Numerator
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Net income
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$
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61,103
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$
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30,884
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$
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133,725
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$
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88,894
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Denominator
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Weighted-average shares outstanding, basic
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72,632
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72,427
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72,571
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72,367
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Effect of dilutive stock awards
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371
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231
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363
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214
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Adjusted weighted-average shares outstanding, diluted
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73,003
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72,658
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72,934
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72,581
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Net Income per Share
|
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Basic earnings per common share
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$
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0.84
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$
|
0.43
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$
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1.84
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$
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1.23
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Diluted earnings per common share
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$
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0.84
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$
|
0.43
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$
|
1.83
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$
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1.22
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Potentially dilutive amounts excluded from calculations:
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Stock options and restricted stock units
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1
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—
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1
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|
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—
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Other current liabilities as of
September 30, 2013
and
December 31, 2012
consist of the following:
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September 30, 2013
|
|
December 31, 2012
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(in thousands)
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Federal excise and other passenger taxes and fees payable
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$
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24,051
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$
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23,401
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Aircraft maintenance
|
23,784
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|
|
22,319
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Salaries and wages
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22,357
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|
21,057
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Airport expenses
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16,757
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|
16,024
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Fuel
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12,994
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11,219
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Aircraft and facility rent
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6,133
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8,020
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Tax receivable agreement
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5,643
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7,987
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Other
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18,051
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11,287
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Accrued liabilities
|
$
|
129,770
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|
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$
|
121,314
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|
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6.
|
Financial Instruments and Risk Management
|
As part of the Company’s risk management program, the Company from time to time uses a variety of financial instruments to reduce its exposure to fluctuations in the price of jet fuel. The Company does not hold or issue derivative financial instruments for trading purposes.
The Company is exposed to credit losses in the event of nonperformance by counterparties to these financial instruments. The Company periodically reviews and seeks to mitigate exposure to the financial deterioration and nonperformance of any counterparty by monitoring the absolute exposure levels, each counterparty's credit ratings, and the historical performance of the counterparties relating to hedge transactions. The credit exposure related to these financial instruments is limited to the fair value of contracts in a net receivable position at the reporting date. The Company also maintains security agreements that require the Company to post collateral if the value of selected instruments falls below specified mark-to-market thresholds. As of
September 30, 2013
, the Company was not required to post collateral for these instruments.
Notes to Condensed Financial Statements—(Continued)
The Company records financial derivative instruments at fair value, which includes an evaluation of each counterparty's credit risk. The Company's derivative contracts generally consist of United States Gulf Coast jet fuel swaps (jet fuel swaps) and United States Gulf Coast jet fuel options (jet fuel options). Jet fuel swaps are agreements to protect the refining price risk between the price of crude oil and the price of refined jet fuel. Jet fuel options are costless collar contracts to manage the risk of increasing fuel prices. Fair value of the instruments is determined using standard option valuation models.
The Company chose not to elect hedge accounting on any derivative instruments entered into during the
three and nine
months ended
September 30, 2013
and
2012
and, as a result, changes in the fair value of these fuel hedge contracts are recorded each period in aircraft fuel expense.
The following table summarizes the components of aircraft fuel expense for the
three and nine
months ended
September 30, 2013
and
2012
:
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|
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|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
(in thousands)
|
|
Into-plane fuel cost
|
$
|
143,978
|
|
|
$
|
123,517
|
|
|
$
|
402,066
|
|
|
$
|
351,057
|
|
|
Settlement losses (gains)
|
6,663
|
|
|
(580
|
)
|
|
6,348
|
|
|
(543
|
)
|
|
Unrealized mark-to-market losses (gains)
|
(5,655
|
)
|
|
(921
|
)
|
|
3,489
|
|
|
460
|
|
|
Aircraft fuel
|
$
|
144,986
|
|
|
$
|
122,016
|
|
|
$
|
411,903
|
|
|
$
|
350,974
|
|
All realized gains and losses are reflected in the accompanying statements of cash flows in cash flow from operating activities.
During peak hurricane season (August through October), the Company enters into jet fuel swap agreements to protect the refining price risk between the price of crude oil and the price of refined jet fuel. As of
September 30, 2013
and
December 31, 2012
, the Company had fuel hedges consisting of jet fuel swaps and jet fuel options, respectively, with crude oil and refined products as the underlying commodities. As of
September 30, 2013
, the Company had approximately
21%
of its forecast fourth quarter 2013 fuel consumption protected from refining risk using jet fuel swaps. As of
December 31, 2012
, the Company had jet fuel option agreements in place to protect
7.8 million
gallon
s, or approximately
5%
, of its
2013
anticipated jet fuel consumption at a weighted-average ceiling and floor price of
$3.09
and
$2.84
per
gallon
, respectively.
|
|
|
|
7.
|
Commitments and Contingencies
|
Aircraft-Related Commitments and Financing Arrangements
The Company’s contractual purchase commitments consist primarily of aircraft and engine acquisitions through manufacturers and aircraft leasing companies. On June 20, 2013, the Company entered into an amendment to the Airbus A320 Family Purchase Agreement, by and between the Company and Airbus S.A.S., dated May 5, 2004 (Airbus Amendment) for the order of an additional
20
Airbus A321 aircraft. These aircraft are in addition to the
95
aircraft not yet delivered under Spirit's existing order with Airbus and are scheduled for delivery between 2015 and 2017. On October 1, 2013, the Company entered into agreements with International Aero Engines AG (IAE) and Pratt & Whitney (collectively, the IAE & P&W Agreement) for the provision and servicing of engines to power its fleet of Airbus A320-family aircraft. The commitments reflected below are inclusive of the additional commitments resulting from the IAE & P&W Agreement. The Company's aircraft orders, including the conversion
of
10
Airbus A320 orders to Airbus A321 orders and the conversion of
5
Airbus A321 orders to Airbus A321neo orders, consisted of
115
A320 family aircraft (
40
of the existing A320 model,
45
A320neos,
25
of the existing A321 model, and
5
A321neos) with Airbus,
5
direct operating leases for A320neos with a third party,
6
spare engine orders for V2500 SelectOne™
engines with IAE and
9
spare engine orders for PurePower PW1100G-JM eng
ines with Pratt & Whitney. Aircraft are scheduled for delivery from
2013
through
2021
, and spare engines are scheduled for delivery from
2014
through
2023
. Committed expenditures for these aircraft and related flight equipment, including estimated amounts for contractual price escalations and pre-delivery payments, will be approximately
$136 million
for the
remainder of 2013
,
$412 million
in
2014
,
$794 million
in
2015
,
$640 million
in
2016
,
$816 million
in
2017
, and
$2,743 million
in
2018 and beyond
. We have secured financing commitments with third parties for our next
ten
aircraft deliveries from Airbus, which are scheduled for delivery between 2013 and 2014. We do not have financing commitments in place for the remaining
105
Airbus firm aircraft orders scheduled for delivery between 2015 and 2021.
During the first
nine
months of
2013
, the Company took delivery of
six
aircraft,
two
of which were financed via direct operating leases and the remaining
four
under sale and leaseback transactions with third-party aircraft lessors. The
four
sale and
Notes to Condensed Financial Statements—(Continued)
leaseback transactions resulted in net deferred losses of
$1.4 million
. Deferred losses are included in other long-term assets on the accompanying balance sheet. Deferred losses are recognized as an increase to rent expense on a straight-line basis over the term of the respective operating leases. Deferred gains are included in deferred credits and other long-term liabilities on the accompanying balance sheet. Deferred gains are recognized as a decrease to rent expense on a straight-line basis over the term of the respective operating leases. The Company had agreements in place prior to the delivery of these aircraft which resulted in the settlement of the purchase obligation by the lessor and the refund of
$21.5 million
in pre-delivery deposits from Airbus during the
nine
months ended
September 30, 2013
. The refunded pre-delivery deposits have been disclosed in the accompanying statements of cash flows as investing activities within pre-delivery deposits for flight equipment, net of refunds. In addition, the Company entered into a sale and leaseback transaction with third-party lessors for the sale and leaseback of
one
V2500 SelectOne™ IAE engine. Cash outflows related to the purchase of the engine have been disclosed in the accompanying statements of cash flows as investing activities within purchases of property and equipment and the cash inflows from the sale of the engine as financing activities within proceeds received from sale and leaseback transactions. All of the leases from these sale and leaseback transactions are accounted for as operating leases. Under the terms of the lease agreements, the Company will continue to operate and maintain the aircraft. Payments under the lease agreements are fixed for the term of the lease. The lease agreements contain standard termination events, including termination upon a breach of the Company's obligations to make rental payments and upon any other material breach of the Company's obligations under the leases, and standard maintenance and return condition provisions. These return provisions are evaluated at inception of the lease and throughout the lease terms and are accounted for as additional rent expense when it is probable that such amounts will be paid to the lessor. Upon a termination of the lease due to a breach by the Company, the Company would be liable for standard contractual damages, possibly including damages suffered by the lessor in connection with remarketing the aircraft or while the aircraft is not leased to another party.
Future minimum lease payments under noncancelable operating leases as of
September 30, 2013
and the periods in which payments are due were as follows:
|
|
|
|
|
|
|
|
|
Operating Lease Obligations
|
|
|
(in thousands)
|
|
Remainder of 2013
|
$
|
47,411
|
|
|
2014
|
188,817
|
|
|
2015
|
188,492
|
|
|
2016
|
181,369
|
|
|
2017
|
157,756
|
|
|
2018 and thereafter
|
574,141
|
|
|
Total minimum lease payments
|
$
|
1,337,986
|
|
During the second quarter, the Company extended the operating leases on
14
of its Airbus A319 aircraft, which were previously set to expire in 2017 through 2019. These extensions resulted in an additional
$72.8 million
of lease commitments from 2017 through 2022.
Some of the Company’s master lease agreements provide that the Company pays maintenance reserves to aircraft lessors to be held as collateral in advance of the Company’s required performance of major maintenance activities. Maintenance reserve payments are either fixed contractual amounts or utilization based. Fixed maintenance reserve payments for these aircraft and related flight equipment, including estimated amounts for contractual price escalations, are expected to be approximately
$1.8 million
for
the remainder of 2013
,
$7.4 million
in
2014
,
$7.6 million
in
2015
,
$8.0 million
in
2016
,
$7.4 million
in
2017
, and
$24.2 million
in
2018 and beyond
. These lease agreements provide that maintenance reserves are reimbursable to the Company upon completion of the maintenance event in an amount equal to the lesser of (1) the amount of the maintenance reserve held by the lessor associated with the specific maintenance event or (2) the qualifying costs related to the specific maintenance event.
Notes to Condensed Financial Statements—(Continued)
Reservation System
The Company is contractually obligated to pay the following minimum guaranteed payments to the provider of its reservation system as of
September 30, 2013
:
$0.9 million
for the
remainder of 2013
,
$3.9 million
in
2014
,
$3.9 million
in
2015
,
$3.9 million
in
2016
,
$3.9 million
in
2017
, and
$2.6 million
in
2018
and thereafter.
Litigation
The Company is subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. The Company believes the ultimate outcome of such lawsuits, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on its financial position, liquidity or results of operations.
Credit Card Processing Arrangements
The Company has agreements with organizations that process credit card transactions arising from the purchase of air travel, baggage charges, and other ancillary services by customers. As it is standard in the airline industry, the Company's contractual arrangements with credit card processors permit them, under certain circumstances, to retain a holdback or other collateral, which the Company records as restricted cash, when future air travel and other future services are purchased via credit card transactions. The required holdback is the percentage of the Company's overall credit card sales that its credit card processors hold to cover refunds to customers if the Company fails to fulfill its flight obligations. If the Company fails to satisfy certain liquidity and other financial covenants, the processing agreements provide the processors the right to require the Company to maintain cash collateral up to approximately
100%
of the Company's air traffic liability, resulting in a commensurate reduction of unrestricted cash. As of
September 30, 2013
and
December 31, 2012
, the Company continued to be in compliance with its credit card processing agreements, and the processors were holding back
$0
of remittances.
The maximum potential exposure to cash holdbacks by the Company's credit card processors, based upon advance ticket sales and $9 Fare Club memberships as of
September 30, 2013
and
December 31, 2012
, was
$203.8 million
and
$144.8 million
, respectively.
Employees
Approximately
59%
of the Company’s employees are covered under collective bargaining agreements. The table below sets forth our employee groups and status of the collective bargaining agreements as of
September 30, 2013
.
|
|
|
|
|
|
|
|
|
|
|
Employee Groups
|
|
Representative
|
|
Amendable Date
|
|
Percentage of Workforce
|
|
Pilots
|
|
Air Line Pilots Association, International (ALPA)
|
|
August 2015
|
|
24%
|
|
Flight Attendants
|
|
Association of Flight Attendants (AFA-CWA)
|
|
August 2007
|
|
34%
|
|
Dispatchers
|
|
Transport Workers Union (TWU)
|
|
August 2018
|
|
1%
|
During the third quarter of 2013, the Company reached a five-year agreement with the TWU. The Company is currently in negotiations with the AFA-CWA to reach a new collective bargaining agreement.
The Company is self-insured for health care claims, up to a stop loss amount, for eligible participating employees and qualified dependent medical claims, subject to deductibles and limitations. The Company’s liabilities for claims incurred but not reported are determined based on an estimate of the ultimate aggregate liability for claims incurred. The estimate is calculated from actual claim rates and adjusted periodically as necessary. The Company has accrued
$2.1 million
and
$1.9 million
for health care claims as of
September 30, 2013
and
December 31, 2012
, respectively.
|
|
|
|
8.
|
Fair Value Measurements
|
Under ASC 820,
Fair Value Measurements and Disclosures
, disclosures are required about how fair value is determined for assets and liabilities, and a hierarchy for which these assets and liabilities must be grouped is established, based on significant levels of inputs, as follows:
Level 1
—Quoted prices in active markets for identical assets or liabilities.
Level 2
—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Notes to Condensed Financial Statements—(Continued)
Level 3
—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes several valuation techniques in order to assess the fair value of the Company’s financial assets and liabilities. The Company's derivative contracts generally consist of jet fuel swaps and jet fuel options. These instruments are valued using energy and commodity market data, which is derived by combining raw inputs with quantitative models and processes to generate forward curves and volatilities.
The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Assets and liabilities measured at gross fair value on a recurring basis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of September 30, 2013
|
|
|
Total
|
|
Level
1
|
|
Level
2
|
|
Level
3
|
|
|
(in millions)
|
|
Cash and cash equivalents
|
$
|
540.2
|
|
|
$
|
540.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Jet fuel swaps
|
1.7
|
|
|
—
|
|
|
1.7
|
|
|
—
|
|
|
Total assets
|
$
|
541.9
|
|
|
$
|
540.2
|
|
|
$
|
1.7
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Jet fuel swaps
|
$
|
4.9
|
|
|
$
|
—
|
|
|
$
|
4.9
|
|
|
$
|
—
|
|
|
Total liabilities
|
$
|
4.9
|
|
|
$
|
—
|
|
|
$
|
4.9
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2012
|
|
|
Total
|
|
Level
1
|
|
Level
2
|
|
Level
3
|
|
|
(in millions)
|
|
Cash and cash equivalents
|
$
|
416.8
|
|
|
$
|
416.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Jet fuel options
|
0.3
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
Total assets
|
$
|
417.1
|
|
|
$
|
416.8
|
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash and cash equivalents at
September 30, 2013
and
December 31, 2012
are comprised of liquid money market funds and cash. The Company maintains cash with various high-quality financial institutions. The Company had no transfers of assets or liabilities between any of the above levels during the
nine
months ended
September 30, 2013
and
the year ended
December 31, 2012
.
The Company did not elect hedge accounting on any of the derivative instruments, and as a result, changes in the fair values of these fuel hedge contracts are recorded each period in fuel expense. Fair values of the instruments are determined using standard option valuation models. The Company also considers counterparty risk and its own credit risk in its determination of all estimated fair values. Within the Condensed Balance Sheets, the Company offsets fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting arrangement. All derivative instruments are presented on a gross basis in the table above. The Company determines the fair value of jet fuel options utilizing an option pricing model based on inputs that are either readily available in public markets or can be derived from information available in publicly quoted markets. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of derivative contracts it holds.
The fair value of the Company's jet fuel swaps are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets; therefore, the Company has categorized these
Notes to Condensed Financial Statements—(Continued)
instruments as Level 2. Due to the fact that certain inputs utilized to determine the fair value of the Company's jet fuel options are unobservable (principally implied volatility), the Company has categorized these instruments as Level 3.
The Company's Valuation Group is made up of individuals from the Company's Risk Management, Treasury and Corporate Accounting departments. The Valuation Group is responsible for the Company's valuation policies, procedures and execution thereof. The Company's Valuation Group reports to the Company's Chief Financial Officer and Finance Committee, who approve all derivative transactions. The Valuation Group compares the results of the Company's internally developed valuation methods with counterparty reports at each balance sheet date and assesses the Company's valuation methods for accurateness and identifies any needs for modification.
The following table presents the Company’s activity for assets and liabilities measured at gross fair value on a recurring basis using significant unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
|
Jet Fuel Option Activity for the Three Months Ended September 30, 2013
|
|
|
(in millions)
|
|
Balance at June 30, 2013
|
$
|
(0.3
|
)
|
|
Total realized or unrealized gains (losses) included in earnings, net
|
0.5
|
|
|
Settlements, net
|
(0.2
|
)
|
|
Balance at September 30, 2013
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Jet Fuel Option Activity for the Nine Months Ended September 30, 2013
|
|
|
(in millions)
|
|
Balance at December 31, 2012
|
$
|
0.3
|
|
|
Total realized or unrealized gains (losses) included in earnings, net
|
0.1
|
|
|
Settlements, net
|
(0.4
|
)
|
|
Balance at September 30, 2013
|
$
|
—
|
|
The Company records the fair value adjustment of its aircraft fuel derivatives in the accompanying statement of operations within aircraft fuel and on the balance sheet within other current assets or other current liabilities, depending on whether the net fair value of the derivatives is in an asset or liability position as of the respective date.
|
|
|
|
9.
|
Stock-Based Compensation
|
The Company has stock plans under which directors, officers, key employees, and consultants of the Company may be granted restricted stock awards, stock options and other equity-based instruments as a means of promoting the Company’s long-term growth and profitability. The plans are intended to encourage participants to contribute to and participate in the success of the Company.
The Company's board of directors adopted, and the Company's stockholders approved, the Amended and Restated 2005 Incentive Stock Plan, or the 2005 Stock Plan, effective January 1, 2008. The total number of shares of common stock authorized for issue pursuant to awards granted under the 2005 Stock Plan was
2,500,000
shares. The 2005 Stock Plan provided for the grant of non-qualified stock options, stock appreciation rights, restricted stock, performance shares, phantom stock, restricted stock units and other awards that are valued in whole or in part by reference to the Company's stock.
On May 9, 2011, the Company's board of directors adopted, and the Company's stockholders approved, the 2011 Equity Incentive Award Plan, or 2011 Plan. Under the 2011 Plan,
3,000,000
new shares of common stock are reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights or SARs, restricted stock awards, restricted stock unit awards, deferred stock awards, dividend equivalent awards, stock payment awards, performance share awards and other stock-based awards, in addition to shares remaining available for future awards under our 2005 Stock Plan. The number of shares reserved for issuance or transfer pursuant to awards under the 2011 Plan will be
Notes to Condensed Financial Statements—(Continued)
increased by the number of shares represented by awards outstanding under the Company's 2005 Stock Plan that are forfeited or lapse unexercised. No further awards will be granted under the 2005 Stock Plan, and all outstanding awards will continue to be governed by their existing terms. As of
September 30, 2013
and
December 31, 2012
,
2,709,523
and
2,689,490
shares of the Company’s common stock, respectively, remained available for future issuance under the 2011 Plan.
Stock-based compensation cost is included within salaries, wages and benefits in operating expenses in the accompanying statements of operations. Stock-based compensation cost for the
three and nine
months ended
September 30, 2013
and
2012
, amounted to
$1.2 million
and
$1.3 million
, and
$4.0 million
and
$3.0 million
, respectively. The tax benefit recognized in income related to stock-based compensation for the
three and nine
months ended
September 30, 2013
and
2012
, was
$0.4 million
and
$0.5 million
, and
$1.5 million
and
$1.1 million
, respectively.
Restricted Stock
Restricted stock and restricted stock unit awards are valued at the fair value of the shares on the date of grant. Generally, granted shares and units vest
25%
per year on each anniversary of issuance. Each restricted stock unit represents the right to receive one share of common stock upon vesting of such restricted stock unit. Compensation expense is recognized on a straight-line basis over the requisite service period.
A summary of the status of the Company’s restricted stock shares (restricted stock awards and restricted stock unit awards) as of
September 30, 2013
and changes during the
nine
months ended
September 30, 2013
is presented below:
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted-Average
Grant Date Fair Value ($)
|
|
Outstanding at December 31, 2012
|
449,629
|
|
|
16.93
|
|
|
Granted
|
135,005
|
|
|
25.90
|
|
|
Vested
|
(165,745
|
)
|
|
13.15
|
|
|
Forfeited
|
(89,744
|
)
|
|
19.09
|
|
|
Outstanding at September 30, 2013
|
329,145
|
|
|
21.94
|
|
There were
135,005
and
377,942
restricted stock shares granted during the
nine
months ended
September 30, 2013
and
2012
, respectively. The total fair value of restricted stock shares vested during the
nine
months ended
September 30, 2013
and
2012
was
$4.1 million
and
$3.6 million
, respectively.
As of
September 30, 2013
and
2012
, there was
$6.1 million
and
$6.5 million
, respectively, of total unrecognized compensation cost related to nonvested restricted stock to be recognized over a weighted-average period of
2.8 years
and
3.4 years
, respectively.
Stock Options
Stock option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant, vest over
four
years of continuous service, and have
ten
-year contractual terms. The fair value of each stock option award is estimated on the date of grant using the Black Scholes model. There were
no
options granted during the
nine
months ended
September 30, 2013
or
2012
. Expected volatilities are based on the historical volatility of a group of peer entities within the same industry. The expected term of options is based upon the simplified method, which represents the average of the vesting term and the contractual term. The risk-free interest rate is based on U.S. Treasury yields for securities with terms approximating the expected term of the option.
Notes to Condensed Financial Statements—(Continued)
A summary of share option activity under the 2011 Plan as of
September 30, 2013
and changes during the
nine
months ended
September 30, 2013
is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Options
|
|
Weighted-
Average
Exercise
Price ($)
|
|
Average
Remaining
Contractual
Term
(Years)
|
|
Aggregate
Intrinsic
Value
($000)
|
|
Outstanding at December 31, 2012
|
247,650
|
|
|
9.59
|
|
|
8.0
|
|
$
|
2,015
|
|
|
Exercised
|
(70,900
|
)
|
|
9.51
|
|
|
|
|
|
|
Forfeited or expired
|
(97,375
|
)
|
|
10.74
|
|
|
|
|
|
|
Outstanding at September 30, 2013
|
79,375
|
|
|
8.26
|
|
|
6.9
|
|
2,065
|
|
|
Exercisable at September 30, 2013
|
44,375
|
|
|
8.03
|
|
|
6.9
|
|
1,164
|
|
|
Vested or Expected to Vest at September 30, 2013
|
78,913
|
|
|
8.25
|
|
|
6.9
|
|
2,053
|
|
The total intrinsic value of share options exercised during the
nine
months ended
September 30, 2013
was
$1.2 million
.
As of
September 30, 2013
and
2012
, there was
$0.1 million
and
$0.7 million
, respectively, of total unrecognized compensation cost related to options expected to be recognized over a weighted-average period of
0.8 years
and
2.2 years
, respectively.
Performance Share Awards
During
2013
and
2012
, the Company granted certain senior-level executives restricted stock units that vest based on market and service conditions as part of a long-term incentive plan, which are referred to herein as performance share awards. The number of shares of common stock underlying each award is determined at the end of a three-year performance period. In order to vest, the senior level executive must still be employed by the Company, with certain contractual exclusions, at the end of the performance period. At the end of the performance period, the percentage of the stock units that will vest will be determined by ranking the Company’s total shareholder return compared to the total shareholder return of the 11 peer companies identified in the plan. Based on the level of performance, between
0%
and
200%
of the award may vest. Within
60 days
after vesting, the shares underlying the award will be issued to the participant. In the event of a change in control of the Company or the disability or death of a participant, the payout of any award is limited to a pro-rated portion of such award based upon a performance assessment prior to the change-in-control date or date of disability or death.
The market condition requirements are reflected in the grant date fair value of the award, and the compensation expense for the award will be recognized on a straight-line basis over the performance period assuming that the requisite service is rendered regardless of whether the market conditions are achieved.
The grant date fair value of the performance share awards was determined through the use of a Monte Carlo simulation model, which utilizes multiple input variables that determine the probability of satisfying the market condition requirements. A summary of the variables used is presented below for grants occurring in the respective periods:
|
|
|
|
|
|
|
|
|
|
Weighted-Average at Grant Date for Nine Months Ended September 30, 2013
|
|
Weighted-Average at Grant Date for Nine Months Ended September 30, 2012
|
|
|
Expected volatility factor
|
0.41
|
|
0.39
|
|
|
Risk free interest rate
|
0.32
|
%
|
0.45
|
%
|
|
Expected term (in years)
|
2.72
|
|
2.74
|
|
|
Expected dividend yield
|
—
|
%
|
—
|
%
|
The volatility was based upon a weighted average of the volatility for the Company and the most recent volatility of the peer group. The peer group used to calculate volatility is consistent with the group used for the traditional employee stock options. The Company chose to use historical volatility to value these awards because historical stock prices were used to develop the correlation coefficients between the Company and each of the peer companies within the peer group in order to model stock price movements. The volatilities used were calculated over the most recent period, which aligned with the performance period at the grant date for each respective grant. The risk-free interest rate was based on the implied yield
Notes to Condensed Financial Statements—(Continued)
available on U.S. Treasury zero-coupon issues with remaining terms equivalent to the remaining performance period. The Company does not intend to pay dividends on its common stock in the foreseeable future. Accordingly, the Company used a dividend yield of
zero
in its models for the
nine
months ended
September 30, 2013
and
2012
.
The following table summarizes the Company’s performance share awards for
nine
months ended
September 30, 2013
:
|
|
|
|
|
|
|
|
|
|
|
Number of Awards
|
|
Weighted-Average Fair Value at Grant Date ($)
|
|
Outstanding at December 31, 2012
|
280,907
|
|
|
20.30
|
|
|
Granted
|
109,950
|
|
|
25.94
|
|
|
Vested
|
—
|
|
|
—
|
|
|
Forfeited
|
(79,950
|
)
|
|
21.76
|
|
|
Outstanding at September 30, 2013
|
310,907
|
|
|
21.92
|
|
As of
September 30, 2013
and 2012, there was
$6.3 million
and
$7.5 million
of total unrecognized compensation cost related to performance share awards. The unrecognized cost is expected to be recognized over
1.7 years
and
2.3 years
, respectively.
|
|
|
|
10.
|
Tax Receivable Agreement
|
On June 1, 2011, the Company completed its initial public offering of common stock, or IPO. In connection with the IPO, the Company entered into a Tax Receivable Agreement (TRA) and thereby distributed immediately prior to the completion of the IPO to the holders of common stock as of such time, or the Pre-IPO Stockholders, the right to receive an amount equal to
90%
of the cash savings in federal income tax realized by the Company by virtue of the use of the federal net operating loss, deferred interest deductions, and alternative minimum tax credits held by the Company as of March 31, 2011, which is defined as the Pre-IPO NOL. Cash tax savings generally will be computed by comparing the actual federal income tax liability to the amount of such taxes that the Company would have been required to pay had such Pre-IPO NOLs not been available. Upon consummation of the IPO and execution of the TRA, the Company recorded a liability with an offsetting reduction to additional paid-in-capital. The amount and timing of payments under the TRA will depend upon a number of factors, including, but not limited to, the amount and timing of taxable income generated in the future and any future limitations that may be imposed on the Company's ability to use the Pre-IPO NOLs. The term of the TRA will continue until the first to occur of (a) the full payment of all amounts required under the agreement with respect to utilization or expiration of all of the Pre-IPO NOLs, (b) the end of the taxable year including the tenth anniversary of the IPO or (c) a change in control of the Company.
In accordance with the TRA, the Company is required to submit a Tax Benefit Schedule showing the proposed TRA payout amount to the Stockholder Representatives within
45
calendar days after the Company files its tax return. Stockholder Representatives are defined as Indigo Pacific Partners, LLC and OCM FIE, LLC, representing the
two
largest ownership interests of pre-IPO shares. The Tax Benefit Schedule shall become final and binding on all parties unless a Stockholder Representative, within
45
calendar days after receiving such schedule, provides the Company with notice of a material objection to such schedule. If the parties, for any reason, are unable to successfully resolve the issues raised in any notice within
30
calendar days of receipt of such notice, the Company and the Stockholder Representatives shall employ the Reconciliation procedures. If the Tax Benefit Schedule is accepted, the Company has
five
days after the acceptance to make payments to the pre-IPO shareholders. Pursuant to the TRA's Reconciliation procedures, any disputes that cannot be settled amicably, are settled by arbitration conducted by a single arbitrator jointly selected by both parties.
During the second quarter of 2012, the Company paid
$27.2 million
, or
90%
of the 2011 tax savings realized from the utilization of NOLs, including
$0.3 million
of applicable interest. During 2012, management adjusted for an immaterial error in the original estimate of the liability. This adjustment reduced the liability with an offset to additional paid in capital. As of December 31, 2012, the Company estimated the TRA liability remaining to be
$8.0 million
.
During the third quarter of 2013, the Company filed an amended 2009 income tax return in order to correct its NOL carry forward as of December 31, 2009. As a result, the Company's NOL carry forward as of March 31, 2011 was consequently reduced by
$7.8 million
, which corresponds to a reduction in the estimated TRA benefit of
$2.4 million
with an offset to additional paid in capital. On September 13, 2013, the Company filed its 2012 federal income tax return, and on October 14, 2013 the Company submitted Tax Benefit Schedule to the Stockholder representatives. As of
September 30, 2013
, the Company estimated the TRA liability to be
$5.6 million
.
Notes to Condensed Financial Statements—(Continued)
On October 1, 2013, the Company entered into agreements with each of Pratt & Whitney (P&W), a division of United Technologies Corp., and International Aero Engines AG (IAE) for the provision and servicing of engines to power its fleet of Airbus A320-family aircraft. The agreement with Pratt & Whitney covers provisioning of PW1100G-JM engines to power the Company’s order (including direct leased aircraft) for
55
A320neo family aircraft, of which the Company is scheduled to begin taking delivery in 2015. The Company and Pratt & Whitney also entered into a corresponding maintenance service agreement covering
119
engines, including spare engines. The agreement with IAE covers provisioning of V2500-series engines to power
45
of the existing A320 family aircraft on order, with deliveries commencing in 2015, and a maintenance service agreement covering up to
96
engines, including spare engines. As part of the transaction, the Company also amended and restated its existing maintenance service agreement with IAE, which agreement currently covers
147
engines, including spare engines. Commitments disclosed within Note 7, "Commitments and Contingencies," are inclusive of additional commitments resulting from the agreement with IAE and P&W.
On October 15, 2013, the Company had an aircraft experience an engine failure shortly after takeoff. The aircraft immediately returned to the airport, landed safely and the passengers and crew safely disembarked from the aircraft. The airframe and engine incurred damage as a result of the failure. We are working jointly with the FAA and the NTSB to determine the cause of the engine failure, and until the investigation has been completed, and liability determined, it is difficult to assess what the direct financial impact to the Company will be. We believe the total impact to the statement of operations from this incident could be up to
$10 million
which includes expenses related to repairing the damage to the aircraft involved, the write-off of the deferred heavy maintenance related to the engine, and other operating expenses. It is not certain whether any portion of these expenses will ultimately be recovered through insurance or other related claims.
|
|
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical factors are “forward-looking statements” for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” and “potential,” and similar expressions intended to identify forward-looking statements. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” in this report and in Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2012
and subsequent Quarterly Reports on Form 10-Q. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
Spirit Airlines is an ultra low-cost, low-fare airline based in Miramar, Florida that offers affordable travel to price-conscious customers. Our all-Airbus fleet currently operates more than 250 daily flights to over 50 destinations in the United States, Caribbean and Latin America. Our stock trades on the NASDAQ Global Select Stock Market under the symbol "SAVE".
Our ultra low-cost carrier, or ULCC, business model allows us to compete principally through offering low base fares and charging separately for select optional services, thereby allowing customers the freedom to save by choosing only the extras they value. We have unbundled components of our air travel service that have traditionally been included in base fares, such as baggage and advance seat selection, and offer them as optional, ancillary services (which we record in our financial statements as non-ticket revenue) as part of a strategy to enable our passengers to identify, select, and pay only for the services they want to use.
We are focused on price-sensitive travelers who pay for their own travel, and our business model is designed to deliver what we believe our customers want: low fares. We aggressively use low fares to stimulate air travel demand in order to increase passenger volume, load factors and non-ticket revenue on the flights we operate. Higher passenger volumes and load factors help us sell more ancillary products and services, which in turn allows us to reduce the base fare we offer even further, stimulating additional demand. We strive to be recognized by our customers and potential customers as the low-fare leader in the markets we serve.
We compete based on total price. We believe other airlines have used an all-inclusive price concept to effectively raise total prices to consumers, rather than lowering fares by unbundling each product or service. For example, carriers that tout “free bags” have included the cost of checking bags in the total ticket price, which does not allow passengers to see how much they would save if they did not check luggage. We believe that we and our customers benefit when we allow our customers to know the total price of their travel by breaking out the cost of optional products or services. Before they pay, our customers are easily able to compare the total cost of flying with us versus flying with another airline.
We allow our customers to see all available options and their prices prior to purchasing a ticket, and this full transparency illustrates that our total prices are lower, on average, than our competitors, even when options are included.
Comparative Operating Statistics:
The following tables set forth our operating statistics for the three-month and nine-month periods ended
September 30, 2013
and
2012
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Percent Change
|
|
|
2013
|
|
2012
|
|
|
Operating Statistics (unaudited) (A):
|
|
|
|
|
|
|
Average aircraft
|
50.9
|
|
|
42.5
|
|
|
19.8
|
%
|
|
Aircraft at end of period
|
51
|
|
|
42
|
|
|
21.4
|
%
|
|
Airports served in the period
|
54
|
|
|
52
|
|
|
3.8
|
%
|
|
Average daily aircraft utilization (hours)
|
12.8
|
|
|
12.8
|
|
|
—
|
%
|
|
Average stage length (miles)
|
956
|
|
|
892
|
|
|
7.2
|
%
|
|
Block hours
|
60,009
|
|
|
50,159
|
|
|
19.6
|
%
|
|
Passenger flight segments (PFSs) (thousands)
|
3,374
|
|
|
2,814
|
|
|
19.9
|
%
|
|
Revenue passenger miles (RPMs) (thousands)
|
3,241,309
|
|
|
2,552,316
|
|
|
27.0
|
%
|
|
Available seat miles (ASMs) (thousands)
|
3,637,951
|
|
|
2,972,651
|
|
|
22.4
|
%
|
|
Load factor (%)
|
89.1
|
%
|
|
85.9
|
%
|
|
3.2 pts
|
|
|
Average ticket revenue per passenger flight segment ($)
|
82.84
|
|
|
71.85
|
|
|
15.3
|
%
|
|
Average non-ticket revenue per passenger flight segment ($)
|
52.50
|
|
|
49.80
|
|
|
5.4
|
%
|
|
Total revenue per passenger flight segment ($)
|
135.34
|
|
|
121.65
|
|
|
11.3
|
%
|
|
Average yield (cents)
|
14.09
|
|
|
13.41
|
|
|
5.1
|
%
|
|
RASM (cents)
|
12.55
|
|
|
11.52
|
|
|
8.9
|
%
|
|
CASM (cents)
|
9.86
|
|
|
9.84
|
|
|
0.2
|
%
|
|
Adjusted CASM (cents)
|
10.00
|
|
|
10.15
|
|
|
(1.5
|
)%
|
|
Adjusted CASM ex fuel (cents)
|
5.86
|
|
|
6.02
|
|
|
(2.7
|
)%
|
|
Fuel gallons consumed (thousands)
|
45,521
|
|
|
37,761
|
|
|
20.6
|
%
|
|
Average economic fuel cost per gallon ($)
|
3.31
|
|
|
3.26
|
|
|
1.5
|
%
|
(A) See "Glossary of Airline Terms" elsewhere in this quarterly report for definitions used in this table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Percent Change
|
|
|
2013
|
|
2012
|
|
|
Operating Statistics (unaudited) (A):
|
|
|
|
|
|
|
Average aircraft
|
49.0
|
|
|
40.6
|
|
|
20.7
|
%
|
|
Aircraft at end of period
|
51
|
|
|
42
|
|
|
21.4
|
%
|
|
Airports served in the period
|
54
|
|
|
52
|
|
|
3.8
|
%
|
|
Average daily aircraft utilization (hours)
|
12.7
|
|
|
12.8
|
|
|
(0.8
|
)%
|
|
Average stage length (miles)
|
944
|
|
|
902
|
|
|
4.7
|
%
|
|
Block hours
|
170,552
|
|
|
142,779
|
|
|
19.5
|
%
|
|
Passenger flight segments (PFSs) (thousands)
|
9,253
|
|
|
7,776
|
|
|
19.0
|
%
|
|
Revenue passenger miles (RPMs) (thousands)
|
8,833,712
|
|
|
7,144,329
|
|
|
23.6
|
%
|
|
Available seat miles (ASMs) (thousands)
|
10,185,421
|
|
|
8,388,581
|
|
|
21.4
|
%
|
|
Load factor (%)
|
86.7
|
%
|
|
85.2
|
%
|
|
1.5 pts
|
|
|
Average ticket revenue per passenger flight segment ($)
|
79.92
|
|
|
76.40
|
|
|
4.6
|
%
|
|
Average non-ticket revenue per passenger flight segment ($)
|
53.49
|
|
|
50.93
|
|
|
5.0
|
%
|
|
Total revenue per passenger flight segment ($)
|
133.41
|
|
|
127.33
|
|
|
4.8
|
%
|
|
Average yield (cents)
|
13.97
|
|
|
13.86
|
|
|
0.8
|
%
|
|
RASM (cents)
|
12.12
|
|
|
11.80
|
|
|
2.7
|
%
|
|
CASM (cents)
|
10.02
|
|
|
10.11
|
|
|
(0.9
|
)%
|
|
Adjusted CASM (cents)
|
9.97
|
|
|
10.20
|
|
|
(2.3
|
)%
|
|
Adjusted CASM ex fuel (cents)
|
5.96
|
|
|
6.02
|
|
|
(1.0
|
)%
|
|
Fuel gallons consumed (thousands)
|
126,832
|
|
|
106,320
|
|
|
19.3
|
%
|
|
Average economic fuel cost per gallon ($)
|
3.22
|
|
|
3.30
|
|
|
(2.4
|
)%
|
(A) See "Glossary of Airline Terms" elsewhere in this quarterly report for definitions used in this table.
Executive Summary
For the
third
quarter of
2013
, we achieved the highest quarterly profits and margins in Company history with a
21.4%
operating margin, an
increase
of
6.9
points compared to the prior year period. We generated pre-tax income of
$97.8 million
and net income of
$61.1 million
on operating revenues of
$456.6 million
. For the
third
quarter of
2012
, we generated pre-tax income of
$49.7 million
and net income of
$30.9 million
on operating revenues of
$342.3 million
, and achieved a
14.5%
operating margin.
For the
nine
months ended
September 30, 2013
, we achieved a
17.4%
operating margin, an
increase
of
3.1
points compared to the prior year period. We generated pre-tax income of
$214.3 million
and net income of
$133.7 million
on operating revenues of
$1.2 billion
. For the
nine
months ended
September 30, 2012
, we generated pre-tax income of
$142.6 million
and net income of
$88.9 million
on operating revenues of
$990.1 million
, and achieved a
14.3%
operating margin. The increase in our 2013 income is a result of our increased capacity, continued strong demand for our low fares, and increased growth in our ancillary revenues.
Our adjusted CASM ex-fuel for the
third
quarter of
2013
was
5.86 cent
s, a
2.7%
decrease
year-over-year. During the second quarter 2013, we entered into lease extensions covering 14 of our existing A319 aircraft. In addition to extending the lease term, we negotiated reduced lease rates resulting in lower rent expense for the remaining term of the leases, contributing to the year-over-year decrease in adjusted CASM ex-fuel. Higher depreciation and amortization expense per available seat mile related to amortization of heavy maintenance events partially offset the decrease.
As of
September 30, 2013
, we had
51
Airbus A320-family aircraft in our fleet comprised of 29 A319s, 20 A320s, and two A321s. With the scheduled delivery of
three
A320s during the remainder of
2013
, we expect to end
2013
with
54
aircraft in our fleet.
Comparison of three months ended
September 30, 2013
to three months ended
September 30, 2012
Operating Revenues
Operating revenues
increase
d
$114.3 million
, or
33.4%
, to
$456.6 million
for the
third
quarter of
2013
, as compared to the
third
quarter of
2012
, as we achieved an
89.1%
load factor on an
increase
in traffic of
27.0%
.
Total revenue per available seat mile (RASM) for the
third
quarter
2013
was
12.55 cent
s, an
increase
of
8.9%
compared to the
third
quarter of
2012
. Total revenue per passenger flight segment
increase
d
11.3%
from
$121.65
in the
third
quarter of
2012
to
$135.34
in the
third
quarter of
2013
. Our average ticket fare per passenger flight segment
increase
d from
$71.85
to
$82.84
, or
15.3%
, compared to the prior year period, and non-ticket revenue per passenger flight segment
increase
d from
$49.80
to
$52.50
, or
5.4%
, compared to the prior year period.
Non-ticket revenue decreased as a percentage of total revenue from
40.9%
in the
third
quarter of
2012
, to
38.8%
in the
third
quarter of
2013
. Stronger demand in the third quarter of 2013, as compared to the third quarter of 2012, allowed us to better leverage our ability to revenue manage our inventory, resulting in higher ticket revenue per passenger segment.
Operating Expenses
Operating expenses
increase
d
$66.2 million
, or
22.6%
, for the
third
quarter of
2013
compared to the
third
quarter of
2012
, primarily due to our
22.4%
capacity growth as well as higher amortization of our heavy maintenance events on our aircraft.
Aircraft fuel expense includes both into-plane expense (defined below) plus the effect of mark-to-market adjustments to our portfolio of derivative instruments, which is a component of aircraft fuel expense. Into-plane fuel expense is defined as the price that we generally pay at the airport, including taxes and fees. Into-plane fuel prices are affected by the global oil market, refining costs, taxes and fees, which can vary by region in the United States and other countries where we operate. Into-plane fuel expense approximates cash paid to the supplier and does not reflect the effect of our fuel derivatives. Management chose not to elect hedge accounting on any derivative instruments during
2013
or
2012
and, as a result, changes in the fair value of these fuel hedge contracts are recorded each period in aircraft fuel expense.
Aircraft fuel expense, our largest operating cost as a percentage of operating expenses,
increase
d in the
third
quarter of 2013 by
$23.0 million
, or
18.8%
, due to a
19.6%
increase
in block hours, an increase of
$2.5 million
in realized and unrealized net losses from fuel derivatives, offset by a
3.4%
decrease
in into-plane cost per gallon compared to the
third
quarter of
2012
.
The elements of the changes are illustrated in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Percent Change
|
|
|
2013
|
|
2012
|
|
|
|
(in thousands, except per gallon amounts)
|
|
|
|
Into-plane fuel expense
|
$
|
143,978
|
|
|
$
|
123,517
|
|
|
16.6
|
%
|
|
Cash paid (received) from settled derivatives, net
|
6,663
|
|
|
(580
|
)
|
|
(1,248.8
|
)%
|
|
Economic fuel expense
|
150,641
|
|
|
122,937
|
|
|
22.5
|
%
|
|
Impact on fuel expense from unrealized (gains) and losses arising from mark-to-market adjustments to our outstanding fuel derivatives
|
(5,655
|
)
|
|
(921
|
)
|
|
514.0
|
%
|
|
Aircraft fuel expense (per Statement of Operations)
|
$
|
144,986
|
|
|
$
|
122,016
|
|
|
18.8
|
%
|
|
Fuel gallons consumed
|
45,521
|
|
|
37,761
|
|
|
20.6
|
%
|
|
Economic fuel cost per gallon
|
$
|
3.31
|
|
|
$
|
3.26
|
|
|
1.5
|
%
|
|
Into-plane fuel cost per gallon
|
$
|
3.16
|
|
|
$
|
3.27
|
|
|
(3.4
|
)%
|
Gulf Coast Jet indexed fuel is the basis for a substantial majority of our fuel consumption and is impacted by both the price of crude oil as well as increases or decreases in refining margins associated with the conversion of crude oil to jet fuel. The into-plane fuel cost per gallon
decrease
by
3.4%
primarily as a result of lower Gulf Coast Jet fuel prices during the
third
quarter of
2013
as compared to
third
quarter of
2012
.
We track economic fuel expense, which we define as into-plane fuel expense plus or minus the cash we paid or received from hedge counterparties for positions that we settle during the relevant period, including hedges that we terminate early during the period. The key difference between aircraft fuel expense and economic fuel expense is unrealized mark-to-market changes. When we refer to economic fuel expense, we include realized gains or losses only when they are settled through a cash payment to or from our derivative contract counterparties. We believe this is the best measure of the effect fuel prices are currently having on our business because it most closely approximates the net cash outflow associated with purchasing fuel for our operations. Accordingly, many industry analysts evaluate airline results using this measure, and it is used in our internal management reporting. Total net
loss
recognized for hedges that settled during the
third
quarter of
2013
was
$6.7 million
, compared to a net
gain
of
$0.6 million
in the prior year period. These amounts represent the net cash received or paid for the settlement of hedges. The unrealized mark-to-market gain of
$5.7 million
for the
third
quarter of 2013 is mainly the result of increases in the fair value of our fuel hedge contracts (or decreases in our derivative liabilities) as our hedge contracts are settled and recognized as realized losses.
During peak hurricane season (August through October), we enter into jet fuel swap agreements to protect the refining price risk between the price of crude oil and the price of refined jet fuel. As of
September 30, 2013
, we had approximately
21%
of our forecast fourth quarter 2013 fuel consumption protected from refining risk using these jet fuel swaps.
We measure our operating cost performance on a per-ASM basis, since one ASM is the unit of production of an airline’s capacity. The following table presents our cost per-ASM, or unit cost, for the three months ended
September 30, 2013
and
2012
, followed by explanations of the material changes on a unit cost basis and/or dollar basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Per-ASM Change
|
|
Percent Change
|
|
|
2013
|
|
2012
|
|
|
|
(in cents, except for percentages)
|
|
Aircraft fuel
|
3.99
|
|
|
4.10
|
|
|
(0.11
|
)
|
|
(2.7
|
)%
|
|
Salaries, wages, and benefits
|
1.84
|
|
|
1.83
|
|
|
0.01
|
|
|
0.5
|
%
|
|
Aircraft rent
|
1.16
|
|
|
1.26
|
|
|
(0.10
|
)
|
|
(7.9
|
)%
|
|
Landing fees and other rents
|
0.61
|
|
|
0.64
|
|
|
(0.03
|
)
|
|
(4.7
|
)%
|
|
Distribution
|
0.49
|
|
|
0.49
|
|
|
—
|
|
|
—
|
%
|
|
Maintenance, materials and repairs
|
0.46
|
|
|
0.48
|
|
|
(0.02
|
)
|
|
(4.2
|
)%
|
|
Depreciation and amortization
|
0.23
|
|
|
0.13
|
|
|
0.10
|
|
|
76.9
|
%
|
|
Other operating
|
1.07
|
|
|
1.19
|
|
|
(0.12
|
)
|
|
(10.1
|
)%
|
|
Loss on disposal of assets
|
—
|
|
|
—
|
|
|
—
|
|
|
NA
|
|
|
Special charges (credits)
|
0.01
|
|
|
(0.28
|
)
|
|
0.29
|
|
|
NA
|
|
|
CASM
|
9.86
|
|
|
9.84
|
|
|
0.02
|
|
|
0.2
|
%
|
|
Adjusted CASM (1)
|
10.00
|
|
|
10.15
|
|
|
(0.15
|
)
|
|
(1.5
|
)%
|
|
Adjusted CASM ex fuel (2)
|
5.86
|
|
|
6.02
|
|
|
(0.16
|
)
|
|
(2.7
|
)%
|
|
|
|
|
(1)
|
For the three months ended
September 30, 2013
, adjusted CASM excludes mark-to-market
gains
of
0.16 cent
s per-ASM,
loss
on disposal of assets of
less than 0.01 cent
, and special
charges
of
0.01 cent
. For the three months ended
September 30, 2012
, adjusted CASM excludes mark-to-market
gains
of
0.03 cent
s per-ASM,
loss
on disposal of assets of
less than 0.01 cent
, and special
credits
of
0.28 cent
s.
|
|
|
|
|
(2)
|
Excludes all components of fuel expense, including realized and unrealized mark-to-market gains and losses, loss on disposal of assets, and special charges and credits.
|
Our adjusted CASM ex-fuel for the
third
quarter of
2013
was
down
2.7%
as compared to the same period in
2012
. During the second quarter of
2013
, we entered into lease extensions covering 14 of our existing A319 aircraft. The lease extensions provide for reduced lease rates resulting in lower rent expense for the remaining term of the leases which contributed to the decrease in adjusted CASM ex-fuel as compared to the
third
quarter of
2012
. In addition, we had a decrease in expense related to wet-leased aircraft which we incurred during the third quarter of 2012 in order to maintain desired capacity during the summer months. Also contributing to the decrease in adjusted CASM ex-fuel is the decrease in other operating expenses on a per-ASM basis as compared to the same period in
2012
, which is mainly attributed to in-sourcing of certain contract work as well as a decrease in software consulting costs related to the ERP implementation. These decreases were partially offset by higher heavy maintenance amortization expense for the
third
quarter of
2013
resulting from the increase in deferred heavy aircraft maintenance events as compared to the same period in
2012
.
Labor costs for the
third
quarter of
2013
increase
d
$12.4 million
, or
22.8%
, compared to the
third
quarter of
2012
, primarily driven by a
31.3%
increase
in our pilot and flight attendant workforce resulting from the introduction of
nine
new aircraft since the
third
quarter of
2012
. On a per-ASM basis, labor costs outpaced our capacity growth primarily due to a significant
increase
in our health care costs during the
third
quarter of
2013
as compared to the same prior year period.
Aircraft rent expense for the
third
quarter of
2013
increase
d by
$4.6 million
, or
12.2%
, compared to the
third
quarter of
2012
. All our aircraft are financed through operating leases. This
increase
in aircraft rent expense was primarily driven by the delivery of
nine
new aircraft subsequent to the end of the
third
quarter of
2012
. The
increase
was partially offset by the reduction in rent expense for 14 A319 aircraft for which lease extensions with reduced lease rates were negotiated with the lessor during the second quarter of
2013
. On a per-ASM basis, aircraft rent expense
decrease
d due to reduced rent expense related to the negotiated terms for the 14 A319 aircraft as well as year-over-year decrease in expense related to wet-leased aircraft which we incurred during the third quarter of 2012 in order to maintain desired capacity during the 2012 summer months.
Landing fees and other rents for the
third
quarter of
2013
increase
d
$3.0 million
, or
16.0%
, on an absolute dollar basis, as compared to the
third
quarter of
2012
primarily due to a
13.4%
increase
in departures. On a per-ASM basis, landing fees and
other rents
decrease
d as our increase in capacity outpaced our increase in departures and passenger flight segments which are the main drivers for landing fees and other rents.
Distribution costs
increase
d by
$3.3 million
, or
22.5%
, in the
third
quarter of
2013
as compared to the
third
quarter of
2012
. The
increase
is primarily due to increased sales volume and an
increase
of approximately
7.6
percentage points year-over-year in the percentage of sales from third-party travel agents, which are more expensive than selling directly through our website. This shift in distribution mix did not materially affect operating income because the revenues received from sales through third-party travel agents are designed to at least offset the associated incremental costs. The
decrease
on a per unit basis is primarily due to a
decrease
in our effective credit card fee rates period-over-period.
Maintenance costs for the
third
quarter of
2013
increase
d by
$2.7 million
, or
19.0%
, compared to the prior year period. The
increase
in maintenance costs is mostly due to the aging of our fleet, which requires more comprehensive work during routine scheduled maintenance, as well as the timing of the mix of maintenance checks performed during the
third
quarter of
2013
as compared to the prior year period. The decrease in maintenance cost on a per-ASM basis is due largely to the $2.3 million in one time costs associated with the 2012 seat maintenance program. Maintenance expense is expected to increase significantly as our fleet continues to grow and age, resulting in the need for additional repairs over time.
We account for heavy maintenance under the deferral method. Under the deferral method, the cost of heavy maintenance is capitalized and amortized as a component of depreciation and amortization expense in the statement of operations until the next heavy maintenance event or end of the lease term. The amortization of heavy maintenance costs was
$6.5 million
and $2.3 million for the
third
quarters of
2013
and
2012
, respectively. If heavy maintenance events were amortized within maintenance, materials, and repairs expense in the statement of operations, our maintenance, materials, and repairs expense would have been
$23.4 million
and $16.5 million for the
third
quarters of
2013
and
2012
, respectively.
Depreciation and amortization
increase
d by
$4.7 million
primarily due to deferred heavy aircraft maintenance events, which in turn resulted in higher amortization expense recorded in the
third
quarter of
2013
compared to the prior year period.
Other operating expense for the
third
quarter of
2013
increase
d by
$3.6 million
, or
10.3%
, compared to the
third
quarter of
2012
, primarily due to an
increase
in overall operations. For example, we operated
13.4%
more flights with
19.9%
more passenger flight segments, which drove increases in variable operating expenses such as ground handling and security expense. On a per-ASM basis, our other operating expenses
decrease
d
10.1%
as compared to the same period in 2012. This decrease is primarily due to the in-sourcing of certain contract work during 2013 as well as a year-over-year decrease in software consulting costs which were incurred in 2012 related to our ERP system implementation.
Other income (expenses)
Interest expense and corresponding capitalized interest in the
third
quarter of 2013 primarily relates to interest related to the tax receivable agreement (TRA). Interest expense and corresponding capitalized interest in the
third
quarter of 2012 primarily relates to interest on pre-delivery deposits (PDPs) and interest related to the TRA.
Income Taxes
Our effective tax rate for the
third
quarter of
2013
was
37.5%
compared to
37.9%
for the
third
quarter of
2012
. In arriving at these rates, we considered a variety of factors, including our forecasted full-year pre-tax results, the U.S. federal rate of 35%, expected nondeductible expenses, and estimated state income taxes. We evaluate our tax rate each quarter and make adjustments when necessary. Our final effective tax rate for the full year is dependent on the level of pre-tax income and the magnitude of any nondeductible expenses in relation to that pre-tax income.
Comparison of nine months ended
September 30, 2013
to nine months ended
September 30, 2012
Operating Revenues
Operating revenues
increase
d
$244.3 million
, or
24.7%
, to
$1.2 billion
for the
nine
months ended
September 30, 2013
, compared to the prior year period, as we achieved an
86.7%
load factor on an
increase
in traffic of
23.6%
.
Total RASM for the
nine
months ended
September 30, 2013
was
12.12 cent
s, an
increase
of
2.7%
compared to the same period of
2012
. Total revenue per passenger flight segment
increase
d
4.8%
from
$127.33
for the
nine months ended
September
30, 2012
to
$133.41
for the
nine months ended
September 30, 2013
. Our average ticket fare per passenger flight segment
increase
d from
$76.40
to
$79.92
, or
4.6%
, compared to the prior year period.
Non-ticket revenue as a percentage of total revenue remained relatively stable from
40.0%
for the
nine months ended
September 30, 2012
to
40.1%
for the
nine months ended
September 30, 2013
. Stronger demand throughout the year, particularly in the third quarter of 2013, as compared to prior year allowed us to better leverage our ability to revenue manage our inventory, resulting in higher ticket revenue per passenger segment.
Operating Expenses
Operating expense
increase
d for the
nine
months ended
September 30, 2013
by
$172.1 million
, or
20.3%
, compared to the same period for
2012
primarily due to our
21.4%
capacity growth as well as higher amortization of heavy maintenance events on our aircraft.
Aircraft fuel expense for the
nine
months ended
September 30, 2013
increase
d
$60.9 million
, or
17.4%
, compared to the prior year period as a result of a
19.5%
increase
in block hours, an increase of
$9.9 million
in net realized and unrealized losses from fuel derivatives, offset by a
3.9%
decrease
for into-plane fuel cost per gallon year-over-year. The elements of the changes are illustrated in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Percent Change
|
|
|
2013
|
|
2012
|
|
|
|
(in thousands, except per gallon amounts)
|
|
|
|
Into-plane fuel expense
|
$
|
402,066
|
|
|
$
|
351,057
|
|
|
14.5
|
%
|
|
Cash paid (received) from settled derivatives, net
|
6,348
|
|
|
(543
|
)
|
|
(1,269.1
|
)%
|
|
Economic fuel expense
|
408,414
|
|
|
350,514
|
|
|
16.5
|
%
|
|
Impact on fuel expense from unrealized (gains) and losses arising from mark-to-market adjustments to our outstanding fuel derivatives
|
3,489
|
|
|
460
|
|
|
658.5
|
%
|
|
Aircraft fuel expense (per Statement of Operations)
|
$
|
411,903
|
|
|
$
|
350,974
|
|
|
17.4
|
%
|
|
Fuel gallons consumed
|
126,832
|
|
|
106,320
|
|
|
19.3
|
%
|
|
Economic fuel cost per gallon
|
$
|
3.22
|
|
|
$
|
3.30
|
|
|
(2.4
|
)%
|
|
Into-plane fuel cost per gallon
|
$
|
3.17
|
|
|
$
|
3.30
|
|
|
(3.9
|
)%
|
Total net
loss
recognized for hedges that settled during the
nine
months ended
September 30, 2013
was
$6.3 million
, compared to a net
gain
of
$0.5 million
in the prior year period, representing the net cash received or paid for the settlement of hedges.
During peak hurricane season (August through October), we enter into jet fuel swap agreements to protect the refining price risk between the price of crude oil and the price of refined jet fuel. As of
September 30, 2013
, we had approximately
21%
of our forecast fourth quarter 2013 fuel consumption protected from refining risk using these jet fuel swaps. Additionally, total unrealized gains and losses arising from mark-to-market adjustments to our outstanding fuel derivatives during the
nine
months ended
September 30, 2013
was a
$3.5 million
net loss. Our net position is due to a decrease in the market price for refining margin on jet fuel hedges when compared to that market as of the time of our hedge trade.
We measure our operating cost performance on a per-ASM basis, since one ASM is the unit of production of an airline’s capacity. The following table presents our cost per-ASM, or unit cost, for the
nine
months ended
September 30, 2013
and
2012
, followed by explanations of the material changes on a unit cost basis and/or dollar basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Per-ASM Change
|
|
Percent Change
|
|
|
2013
|
|
2012
|
|
|
|
(in cents, except for percentages)
|
|
Aircraft fuel
|
4.04
|
|
|
4.18
|
|
|
(0.14
|
)
|
|
(3.3
|
)%
|
|
Salaries, wages, and benefits
|
1.89
|
|
|
1.91
|
|
|
(0.02
|
)
|
|
(1.0
|
)%
|
|
Aircraft rent
|
1.23
|
|
|
1.27
|
|
|
(0.04
|
)
|
|
(3.1
|
)%
|
|
Landing fees and other rents
|
0.60
|
|
|
0.61
|
|
|
(0.01
|
)
|
|
(1.6
|
)%
|
|
Distribution
|
0.50
|
|
|
0.52
|
|
|
(0.02
|
)
|
|
(3.8
|
)%
|
|
Maintenance, materials and repairs
|
0.43
|
|
|
0.44
|
|
|
(0.01
|
)
|
|
(2.3
|
)%
|
|
Depreciation and amortization
|
0.22
|
|
|
0.12
|
|
|
0.10
|
|
|
83.3
|
%
|
|
Other operating
|
1.09
|
|
|
1.14
|
|
|
(0.05
|
)
|
|
(4.4
|
)%
|
|
Loss on disposal of assets
|
—
|
|
|
0.01
|
|
|
(0.01
|
)
|
|
NA
|
|
|
Special charges (credits)
|
—
|
|
|
(0.10
|
)
|
|
0.10
|
|
|
NA
|
|
|
CASM
|
10.02
|
|
|
10.11
|
|
|
(0.09
|
)
|
|
(0.9
|
)%
|
|
Adjusted CASM (1)
|
9.97
|
|
|
10.20
|
|
|
(0.23
|
)
|
|
(2.3
|
)%
|
|
Adjusted CASM ex fuel (2)
|
5.96
|
|
|
6.02
|
|
|
(0.06
|
)
|
|
(1.0
|
)%
|
|
|
|
|
(1)
|
For the
nine
months ended
September 30, 2013
, adjusted CASM excludes mark-to-market
losses
of
0.03 cent
s per-ASM,
loss
on disposal of assets of
less than 0.01 cent
, and special
charges
of
less than 0.01 cent
. For the
nine
months ended
September 30, 2012
, adjusted CASM excludes mark-to-market
losses
of
0.01 cent
per-ASM,
loss
on disposal of assets of
0.01 cent
, and special
credits
of
0.10 cent
s.
|
|
|
|
|
(2)
|
Excludes all components of fuel expense, including realized and unrealized mark-to-market gains and losses, loss on disposal of assets, and special charges and credits.
|
Our adjusted CASM ex-fuel for the
nine
months ended
September 30, 2013
decrease
d by
1.0%
as compared to the same period in
2012
. During the second quarter of 2013, we entered into lease extensions covering 14 of our existing A319 aircraft. The lease extensions provide for reduced lease rates resulting in lower rent expense for the remaining term of the leases which contributed to the decrease in adjusted CASM ex-fuel as compared to the same period in 2012. In addition, we had a year-over-year decrease in expense related to wet-leased aircraft which we incurred during prior year in order to maintain desired capacity during the summer months. Also contributing to the decrease in adjusted CASM ex-fuel is the decrease in other operating expenses on a per-ASM basis as compared to the same period in 2012, which is mainly attributed to in-sourcing of certain contract work as well as a decrease in software consulting costs related to the ERP implementation. These decreases were partially offset by higher heavy maintenance amortization expense for the
nine
months ended
September 30, 2013
resulting from the increase in deferred heavy aircraft maintenance events as compared to the same period in 2012.
Labor costs for the
nine
months ended
September 30, 2013
increase
d
$32.2 million
, or
20.1%
, compared to same period in
2012
, primarily driven by a
27.1%
increase
in our pilot and flight attendant workforce resulting from the introduction of
nine
new aircraft since the
third
quarter of
2012
. On a per-ASM basis, labor costs
decrease
d slightly as the growth in capacity outpaced our increases in labor costs for the period.
Aircraft rent expense for the
nine
months ended
September 30, 2013
increase
d by
$18.7 million
, or
17.5%
, compared to the same period in
2012
. This
increase
was primarily driven by the delivery of
nine
new aircraft subsequent to the end of the
third
quarter of
2012
. On a per-ASM basis, aircraft rent expense
decrease
d due to the reduced expense from the modification of our lease terms with the 14 A319 aircraft and a year-over-year decrease in expense related to wet-leased aircraft which we incurred during prior year in order to maintain desired capacity during the 2012 summer months.
Landing fees and other rents for the
nine
months ended
September 30, 2013
increase
d
$10.3 million
, or
20.0%
, as compared to the same period in
2012
primarily due to a
14.7%
increase
in departures. On a per-ASM basis, landing fees and other rents
decrease
d as our increase in capacity outpaced our increase in departures and passenger flight segments which are the main drivers for landing fees and other rents.
Distribution costs
increase
d by
$7.3 million
, or
16.8%
, for the
nine
months ended
September 30, 2013
as compared to the same period in
2012
. The
increase
is primarily due to increased sales volume and an
increase
of approximately
6.1
percentage points year-over-year in the percentage of sales from third-party travel agents, which are more expensive than sales directly through our website. This shift in distribution mix did not materially affect operating income because the revenues received from sales through third-party travel agents are designed to at least offset the associated incremental costs. The
decrease
on a per unit basis is primarily due to a
decrease
in our effective credit card fee rates period-over-period.
Maintenance costs for the
nine
months ended
September 30, 2013
increase
d by
$6.6 million
, or
17.8%
, compared to the prior year period. The
increase
in maintenance costs is mostly due to the aging of our fleet, which requires more comprehensive work during routine scheduled maintenance, as well as the timing of the mix of maintenance checks performed during the
nine
months ended
September 30, 2013
as compared to the
nine
months ended of
September 30, 2012
. The
decrease
in maintenance costs on a per-ASM basis is due largely to the one time costs associated with the 2012 seat maintenance program in addition to $0.9 million of maintenance and repair related costs in the second quarter of 2012 from hail storm damage. Maintenance expense is expected to increase significantly as our fleet continues to grow and age, resulting in the need for additional repairs over time.
We account for heavy maintenance under the deferral method. Under the deferral method, the cost of heavy maintenance is capitalized and amortized as a component of depreciation and amortization expense in the statement of operations until the next heavy maintenance event or end of the lease term. The amortization of heavy maintenance costs was
$16.3 million
and $5.6 million for the
nine
months ended
September 30, 2013
and
2012
, respectively. If heavy maintenance events were amortized within maintenance, materials and repairs expense in the statement of operations, our maintenance, materials and repairs expense would have been
$60.2 million
and $42.9 million for the
nine
months ended
September 30, 2013
and
2012
, respectively.
Depreciation and amortization
increase
d by
$12.4 million
primarily due to deferred heavy aircraft maintenance events, which in turn resulted in higher amortization expense recorded in the
nine
months ended
September 30, 2013
compared to the prior year period.
Other operating expense for the
nine
months ended
September 30, 2013
increase
d by
$14.9 million
, or
15.6%
, compared to the prior year period, primarily due to an
increase
in departures of
14.7%
which led to increases in variable operating expenses such as ground handling and security expense. On a per-ASM basis, our other operating expenses
decrease
d as compared to the same period in 2012. This decrease is primarily due to the in-sourcing of certain contract work during 2013 as well as a year-over-year decrease in software consulting costs which were incurred in 2012 related to our ERP system implementation.
Other income (expenses)
Interest expense and corresponding capitalized interest in the
nine
months ended
September 30, 2013
primarily relates to interest on the TRA. Interest expense and corresponding capitalized interest in the
nine
months ended
September 30, 2012
primarily relates to interest on PDPs and interest related to the TRA.
Income Taxes
Our effective tax rate for the
nine
months ended
September 30, 2013
was
37.6%
compared to
37.7%
for the
nine
months ended
September 30, 2012
. In arriving at these rates, we considered a variety of factors, including our forecast full-year pre-tax results, the U.S. federal rate of 35%, expected nondeductible expenses, and estimated state income taxes. We evaluate our tax rate each quarter and make adjustments when necessary. Our final effective tax rate for the full year is dependent on the level of pre-tax income and the magnitude of any nondeductible expenses in relation to that pre-tax income.
Liquidity and Capital Resources
Our primary source of liquidity is cash on hand and cash provided by operations. Our main uses of liquidity are for working capital needs, capital expenditures, PDPs and maintenance reserves. Our total cash at
September 30, 2013
was
$540.2 million
, an increase of
$123.4 million
from
December 31, 2012
.
Our most significant capital needs are to fund the acquisition costs of our aircraft. PDPs relating to future deliveries under our agreement with Airbus are required at various times prior to each delivery date. In the
nine
months ended
September 30,
2013
,
$21.5 million
of PDPs have been returned related to delivered aircraft and engines in the period, and we have paid
$62.8 million
for future deliveries of aircraft and spare engines. As of
September 30, 2013
, we have
$132.5 million
of PDPs on our balance sheet.
Maintenance reserves are paid to some aircraft lessors and are held as collateral in advance of our performance of major maintenance activities. In the
nine
months ended
September 30, 2013
, we recorded an increase of
$10.2 million
in maintenance reserves, net of reimbursements, and as of
September 30, 2013
, we have
$207.1 million
(
$61.5 million
in other current assets and
$145.6 million
in prepaid aircraft maintenance to lessors) on our balance sheet.
We have secured third-party financing commitments for our next
ten
aircraft deliveries from Airbus, which are scheduled for delivery in 2013 through 2014. We do not have financing commitments in place for the remaining 105 aircraft currently on firm order which are scheduled for delivery in 2015 through 2021. These future aircraft deliveries may be leased or otherwise financed based on market conditions, our prevailing level of liquidity, and capital market availability.
Net Cash Flows Provided By Operating Activities.
Operating activities in the
nine
months ended
September 30, 2013
provided
$173.6 million
in cash compared to
$88.8 million
provided
in the
nine
months ended
September 30, 2012
. The increase is primarily due to larger operations in the
nine
months ended
September 30, 2013
as compared to the prior year period. In addition, air traffic liability has increased
$49.3 million
period-over-period accounting for portion of the additional cash on hand. The increase is driven by increases in capacity and higher fares.
Net Cash Flows Used In Investing Activities.
In the
nine
months ended
September 30, 2013
, investing activities
used
$58.4 million
, compared to
$19.5 million
used
in the prior year period. The increase is mainly due to an increase in paid PDPs, net of refunds, during the
nine
months ended
September 30, 2013
, compared to the prior year period, driven by the timing of aircraft deliveries and our amended order with Airbus. In the
nine
months ended
September 30, 2012
,
$9.1 million
was received as a result of proceeds from the sale of slots at Ronald Reagan National Airport (DCA). Capital expenditures decreased period-over-period mainly due to expenses incurred in 2012 related to the implementation of SAP, our new enterprise resource planning system.
Net Cash Flows Provided By (Used In) Financing Activities.
During the
nine
months ended
September 30, 2013
, financing activities
provided
$8.1 million
, compared to
$13.5 million
used
in the prior year period. The change in financing activities is driven mostly by the timing of the tax receivable agreement payment.
Commitments and Contractual Obligations
The following table discloses aggregate information about our contractual obligations as of
September 30, 2013
, including obligations resulting from the October 1, 2013 agreement described below, and the periods in which payments are due (in millions):
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|
|
Remainder of 2013
|
|
2014 - 2015
|
|
2016 - 2017
|
|
2018 and beyond
|
|
Total
|
|
Operating lease obligations
|
|
$
|
47
|
|
|
$
|
377
|
|
|
$
|
340
|
|
|
$
|
574
|
|
|
$
|
1,338
|
|
|
Flight equipment purchase obligations
|
|
136
|
|
|
1,206
|
|
|
1,456
|
|
|
2,743
|
|
|
5,541
|
|
|
Total future payments on contractual obligations (1)
|
|
$
|
183
|
|
|
$
|
1,583
|
|
|
$
|
1,796
|
|
|
$
|
3,317
|
|
|
$
|
6,879
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|
|
|
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|
(1)
|
Does not include remaining contractual payments to the Pre-IPO Stockholders under the Tax Receivable Agreement. See Note 10 to the Condensed Financial Statements.
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On October 1, 2013, we entered into agreements with each of Pratt & Whitney and International Aero Engines AG for the provision and servicing of engines to power our fleet of Airbus A320-family aircraft. The flight equipment purchase obligations reflected above are inclusive of the additional commitments resulting from these agreements. Some of our master lease agreements provide that we pay maintenance reserves to aircraft lessors to be held as collateral in advance of our required performance of major maintenance activities. Some maintenance reserve payments are fixed contractual amounts, while others are based on actual flight hours. Fixed maintenance reserve payments for these aircraft and related flight equipment, including estimated amounts for contractual price escalations, are expected to be approximately
$1.8 million
in
the remainder of 2013
,
$7.4 million
in
2014
,
$7.6 million
in
2015
,
$8.0 million
in
2016
,
$7.4 million
in
2017
, and
$24.2 million
in
2018 and beyond
.
Additionally, we are contractually obligated to pay the following minimum guaranteed payments to the provider of our reservation system as of
September 30, 2013
:
$0.9 million
during the
remainder of 2013
,
$3.9 million
in
2014
,
$3.9 million
in
2015
,
$3.9 million
in
2016
,
$3.9 million
in
2017
and
$2.6 million
in
2018
.
Off-Balance Sheet Arrangements
We have significant obligations for aircraft as all
51
of our aircraft are financed under operating leases and therefore are not reflected on our balance sheets. These leases expire between 2016 and 2025. Aircraft rent payments were
$43.1 million
and
$35.6 million
for the three months ended
September 30, 2013
and
2012
, respectively, and
$125.3 million
and
$103.2 million
for the
nine
months ended
September 30, 2013
and
2012
, respectively. Our aircraft lease payments for
46
of our aircraft are fixed-rate obligations.
Five
of our aircraft leases provide for variable rent payments, which fluctuate based on changes in LIBOR (London Interbank Offered Rate).
Our contractual purchase commitments consist primarily of aircraft and engine acquisitions through manufacturers and aircraft leasing companies. On June 20, 2013, we entered into an amendment to the Airbus A320 Family Purchase Agreement, by and between us and Airbus S.A.S., dated May 5, 2004 (Airbus Amendment), for the order of an additional 20 Airbus A321 aircraft. These aircraft are in addition to the 95 aircraft not yet delivered under our existing order with Airbus and will be scheduled for delivery between 2015 and 2017. On October 1, 2013, we entered into agreements with International Aero Engines AG (IAE) and Pratt & Whitney (collectively, the IAE & P&W Agreement) for the provision and servicing of engines to power its fleet of Airbus A320-family aircraft. The commitments reflected below are inclusive of the additional commitments resulting from the IAE & P&W Agreement. Our aircraft orders, including the conversion of
10
Airbus A320 orders to Airbus A321 orders and the conversion of
5
Airbus A321 orders to Airbus A321neo orders, consisted of
115
A320 family aircraft (
40
of the existing A320 model,
45
A320neos,
25
of the existing A321 model, and
5
A321neos) with Airbus, 5 direct operating leases for A320neos with a third party, 6 spare engine orders for V2500 SelectOne™
engines with International Aero Engines AG and 9 spare engine orders for PurePower PW1100G-JM engines with Pratt & Whitney. Aircraft are scheduled for delivery from
2013
through
2021
, and spare engines are scheduled for delivery from
2014
through
2023
. Committed expenditures for these aircraft and related flight equipment, including estimated amounts for contractual price escalations and aircraft PDPs, are expected to be approximately
$136 million
for the
remainder of 2013
,
$412 million
in
2014
,
$794 million
in
2015
,
$640 million
in
2016
,
$816 million
in
2017
and
$2,743 million
in
2018 and beyond
.
As of
September 30, 2013
, we had lines of credit related to corporate credit cards of
$18.6 million
from which we had drawn
$3.7 million
. As of
September 30, 2012
, we had lines of credit related to corporate credit cards of
$13.6 million
from which we had drawn
$4.3 million
.
As of
September 30, 2013
, we had lines of credit with counterparties for both physical fuel delivery and jet fuel derivatives in the amount of
$24.5 million
. We are required to post collateral for any excess above the lines of credit if the derivatives are in a net liability position and make periodic payments in order to maintain an adequate undrawn portion for physical fuel delivery. As of
September 30, 2013
, we had drawn
$12.7 million
on these lines of credit. As of
September 30, 2012
, we had lines of credit with counterparties for both physical fuel delivery and jet fuel derivatives in the amount of
$18.0 million
. As of
September 30, 2012
, we had drawn
$9.7 million
on these lines of credit.
As of
September 30, 2013
, we had
$5.8 million
in uncollateralized surety bonds and a
$25.1 million
in unsecured standby letter of credit facilities of which
$10.4 million
had been drawn upon for issued letters of credit.
GLOSSARY OF AIRLINE TERMS
Set forth below is a glossary of industry terms:
“Adjusted CASM” means operating expenses, excluding mark-to-market gains or losses, loss on disposal of assets, and special charges (credits), divided by ASMs.
“Adjusted CASM ex fuel” means operating expenses excluding aircraft fuel expense, loss on disposal of assets, and special charges (credits), divided by ASMs.
“AFA-CWA” means the Association of Flight Attendants-CWA.
“Air traffic liability” or “ATL” means the value of tickets sold in advance of travel.
“ALPA” means the Airline Pilots Association, International.
“ASIF” means an Aviation Security Infrastructure Fee assessed by the TSA on each airline.
“Available seat miles” or “ASMs” means the number of seats available for passengers multiplied by the number of miles the seats are flown, also referred to as "capacity".
“Average aircraft” means the average number of aircraft in our fleet as calculated on a daily basis.
“Average daily aircraft utilization” means block hours divided by number of days in the period divided by average aircraft.
“Average economic fuel cost per gallon” means total aircraft fuel expense, excluding mark-to-market gains and losses, divided by the total number of fuel gallons consumed.
“Average non-ticket revenue per passenger flight segment” means the total non-ticket revenue divided by passenger flight segments.
“Average ticket revenue per passenger flight segment” means total passenger revenue divided by passenger flight segments.
“Average stage length” represents the average number of miles flown per flight.
“Average yield” means average operating revenue earned per RPM, calculated as total revenue divided by RPMs.
“Block hours” means the number of hours during which the aircraft is in revenue service, measured from the time of gate departure before take-off until the time of gate arrival at the destination.
“CASM” or “unit costs” means operating expenses divided by ASMs.
“CBA” means a collective bargaining agreement.
“CBP” means United States Customs and Border Protection.
“DOT” means the United States Department of Transportation.
“EPA” means the United States Environmental Protection Agency.
“FAA” means the United States Federal Aviation Administration.
“FCC” means the United States Federal Communications Commission.
“FLL Airport” means the Fort Lauderdale-Hollywood International Airport.
“GDS” means Global Distribution System (e.g., Amadeus, Galileo, Sabre and Worldspan).
“Into-plane fuel cost per gallon” means into-plane fuel expense divided by number of fuel gallons consumed.
“Into-plane fuel expense” represents the cost of jet fuel and certain other charges such as fuel taxes and oil.
“Load factor” means the percentage of aircraft seats actually occupied on a flight (RPMs divided by ASMs).
“NMB” means the National Mediation Board.
“Operating revenue per-ASM,” “RASM” or “unit revenue” means operating revenue divided by ASMs.
“OTA” means Online Travel Agent (e.g., Orbitz and Travelocity).
“Passenger flight segments” or "PFS" means the total number of passengers flown on all flight segments.
“PDP” means pre-delivery deposit payment.
“Revenue passenger mile” or “RPM” means one revenue passenger transported one mile. RPMs equals revenue passengers multiplied by miles flown, also referred to as "traffic".
“RLA” means the United States Railway Labor Act.
“TWU” means the Transport Workers Union of America.
“TSA” means the United States Transportation Security Administration.
“ULCC” means “ultra low-cost carrier.”
“VFR” means visiting friends and relatives.
"Wet-leased aircraft" means a lease where the lessor provides for aircraft, crew, maintenance and insurance, also known as an "ACMI".
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ITEM 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Market Risk-Sensitive Instruments and Positions
We are subject to certain market risks, including commodity prices (specifically aircraft fuel). The adverse effects of changes in these markets could pose a potential loss as discussed below. The sensitivity analysis provided below 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.
Aircraft Fuel
. Our results of operations can vary materially due to changes in the price and availability of aircraft fuel. Aircraft fuel expense for the
nine
months ended
September 30, 2013
and
2012
represented
40.4%
and
41.4%
of our operating expenses, respectively. Increases in aircraft fuel prices or a shortage of supply could have a material adverse effect on our operations and operating results. We source a significant portion of our fuel from refining resources located in the southeast United States, particularly facilities adjacent to the Gulf of Mexico. Gulf Coast fuel is subject to volatility and supply disruptions, particularly during hurricane season when refinery shutdowns have occurred, or when the threat of weather related disruptions has caused Gulf Coast fuel prices to spike above other regional sources. During peak hurricane season (August through October), we may enter into jet fuel swaps to protect the refining price risk between the price of crude oil and the price of refined jet fuel. Gulf Coast Jet indexed fuel is the basis for a substantial majority of our fuel consumption. Based on our fuel consumption over the last twelve months, a 10% increase in the average price per gallon of aircraft fuel would have increased aircraft fuel expense by approximately
$53.4 million
. To attempt to manage fuel price risk, from time to time we use jet fuel options or jet fuel swaps to mitigate a portion of the crack spread between crude and jet fuel. As of
September 30, 2013
, we had approximately
21%
of our forecast fourth quarter 2013 fuel consumption protected from refining risk using jet fuel swaps.
The fair value of our fuel derivative contracts as of
September 30, 2013
and
December 31, 2012
was a
$3.2 million
liability
and a
$0.3 million
asset
, respectively. We measure our financial derivative instruments at fair value. Fair value of the instruments is determined using standard option valuation models. Changes in the related commodity derivative instrument cash flows may change by more or less than this amount based upon further fluctuations in futures prices. Outstanding financial derivative instruments expose us to credit loss in the event of nonperformance by the counterparties to the agreements. However, we do not expect the counterparties to fail to meet their obligations. As of
September 30, 2013
, we believe the credit exposure related to these fuel forward contracts was negligible.
Interest Rates
. We have market risk associated with changing interest rates due to LIBOR-based lease rates on five of our aircraft. A hypothetical 10% change in interest rates in 2012 would affect total aircraft rent expense in 2013 by
less than $0.1 million
.
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ITEM 4.
|
CONTROLS AND PROCEDURES
|
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of
September 30, 2013
. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of
September 30, 2013
, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended
September 30, 2013
, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
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|
ITEM 1.
|
LEGAL PROCEEDINGS
|
We are subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. We believe the ultimate outcome of pending lawsuits, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on our financial position, liquidity, or results of operations.
The following is an update to Item 1A Risk Factors contained in our Annual Report on Form 10-K for the year ended
December 31, 2012
(2012 Form 10-K). For additional risk factors that could cause actual results to differ materially from those anticipated, please refer to our 2012 Form 10-K.
Risks Related to Our Business
We are subject to extensive and increasing regulation by the Federal Aviation Administration, the Department of Transportation, and other U.S. and foreign governmental agencies, compliance with which could cause us to incur increased costs and adversely affect our business and financial results.
Airlines are subject to extensive and increasing regulatory and legal compliance requirements, both domestically and internationally, that involve significant costs. In the last several years, Congress has passed laws, and the DOT, FAA and TSA have issued regulations, relating to the operation of airlines that have required significant expenditures. We expect to continue to incur expenses in connection with complying with government regulations. Additional laws, regulations, taxes and increased airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce the demand for air travel. If adopted, these measures could have the effect of raising ticket prices, reducing revenue and increasing costs. For example, the DOT finalized rules, effective on April 29, 2010, requiring new procedures for customer handling during long onboard tarmac delays, as well as additional reporting requirements for airlines that could increase the cost of airline operations or reduce revenues. The DOT has been aggressively investigating alleged violations of the new rules. A second set of DOT final rules, which became effective in August 2011 and January 2012, addresses, among other things, concerns about how airlines handle interactions with passengers through advertising, the reservations process, at the airport and on board the aircraft, including requirements for disclosure of base fares plus a set of regulatorily dictated options and limits on cancellations and service charges for changes and cancellations. Failure to remain in full compliance with these rules may subject us to fines or other enforcement action, including requirements to modify our passenger reservations system, which could have a material effect on our business. The DOT has a pending notice of proposed rulemaking addressing additional accommodations required for passengers with certain disabilities. In addition, the FAA recently issued its final regulations governing pilot rest periods and work hours for all airlines certificated under Part 121 of the Federal Aviation Regulations. The rule, which is effective January 4, 2014, impacts the required amount and timing of rest periods for pilots between work assignments and modifies duty and rest requirements based on the time of day, number of scheduled segments, flight types, time zones, and other factors.
We cannot assure you that compliance with these new rules will not have a material adverse effect on our business.
On August 3, 2010, the Airline Baggage Transparency and Accountability Act was introduced in the United States Senate. This legislation, if enacted, would increase disclosure regarding fees for airline ticket sales, impose federal taxes on charges for carry-on and checked baggage, authorize the DOT's Aviation Consumer Protection Division to oversee lost and stolen baggage claims, and require data collection and the public release of collected data concerning airline handling of lost, damaged and stolen luggage. More recently, the United States Senate passed an amendment to the FAA reauthorization bill that, if enacted, would impose federal taxes at a rate of 7.5% on charges for carry-on baggage. If the Airline Baggage Transparency and Accountability Act, the Senate amendment to the FAA reauthorization bill or similar legislation were to be enacted, it is uncertain what effect it would have on our results of operations and financial condition.
We cannot assure you that these and other laws or regulations enacted in the future will not harm our business. In addition, the TSA mandates the federalization of certain airport security procedures and imposes additional security requirements on airports and airlines, most of which are funded by a per ticket tax on passengers and a tax on airlines. The federal government has on several occasions proposed a significant increase in the per ticket tax. The proposed ticket tax increase, if implemented, could negatively impact our financial results.
Our ability to operate as an airline is dependent on our maintaining certifications issued to us by the DOT and the FAA. The FAA has the authority to issue mandatory orders relating to, among other things, the grounding of aircraft, inspection of aircraft, installation of new safety-related items and removal and replacement of aircraft parts that have failed or may fail in the future. A decision by the FAA to ground, or require time consuming inspections of or maintenance on, our aircraft, for any reason, could negatively affect our business and financial results. Federal law requires that air carriers operating large aircraft be continuously “fit, willing and able” to provide the services for which they are licensed. Our “fitness” is monitored by the DOT, which considers factors such as unfair or deceptive competition, advertising, baggage liability and disabled passenger transportation. While the DOT has seldom revoked a carrier's certification for lack of fitness, such an occurrence would render it impossible for us to continue operating as an airline. The DOT may also institute investigations or administrative proceedings against airlines for violations of regulations.
International routes are regulated by treaties and related agreements between the United States and foreign governments. Our ability to operate international routes is subject to change because the applicable arrangements between the United States and foreign governments may be amended from time to time. Our access to new international markets may be limited by our ability to obtain the necessary certificates to fly the international routes. In addition, our operations in foreign countries are subject to regulation by foreign governments and our business may be affected by changes in law and future actions taken by such governments, including granting or withdrawal of government approvals and restrictions on competitive practices. We are subject to numerous foreign regulations based on the large number of countries outside the United States where we currently provide service. If we are not able to comply with this complex regulatory regime, our business could be significantly harmed. Please see “Business-Government Regulation.”
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Exhibit Number
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Description of Exhibits
|
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10.1***
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Amended and Restated V2500 General Terms of Sale, dated as of October 1, 2013, by and between Spirit Airlines, Inc. and IAE International Aero Engines AG, as supplemented by Side Letter No. 1 dated as of October 1, 2013.
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10.2***
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Amended and Restated Fleet Hour Agreement, dated as of October 1, 2013, by and between Spirit Airlines, Inc. and IAE International Aero Engines AG, as supplemented by Side Letter No. 1 dated as of October 1, 2013.
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10.3***
|
|
V2500 General Terms of Sale, dated as of October 1, 2013, by and between Spirit Airlines, Inc. and IAE International Aero Engines AG, as supplemented by Side Letter No. 1 dated as of October 1, 2013 and Side Letter No. 2 dated as of October 1, 2013.
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10.4***
|
|
Fleet Hour Agreement, dated as of October 1, 2013, by and between Spirit Airlines, Inc. and IAE International Aero Engines AG, as supplemented by Side Letter No. 1 dated as of October 1, 2013.
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10.5***
|
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PurePower PW1100G Engine Purchase Support Agreement, dated as of October 1, 2013, by and between the Company and United Technologies Corporation, acting through its Pratt & Whitney Division.
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31.1
|
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Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2
|
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
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32.1*
|
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2*
|
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Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS**
|
|
XBRL Instance Document
|
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101.SCH**
|
|
XBRL Taxonomy Extension Schema
|
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101.CAL**
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
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101.LAB**
|
|
XBRL Taxonomy Extension Label Linkbase
|
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101.PRE**
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
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*
|
Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing.
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**
|
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
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***
|
Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.
|
SIGNATURE
Pursuant to the requirements 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.
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SPIRIT AIRLINES, INC.
|
|
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|
|
Date: October 30, 2013
|
By:
|
/s/ Edward Christie
|
|
|
|
Edward Christie
|
|
|
|
Senior Vice President and
Chief Financial Officer
|
EXECUTION VERSION
AMENDED AND RESTATED
V2500
®
GENERAL TERMS OF SALE
BETWEEN
IAE INTERNATIONAL AERO ENGINES AG
AND
SPIRIT AIRLINES, INC.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
TABLE OF CONTENTS
1. Definitions 5
2.
Installed and Spare Engine Purchase Commitments 6
2.1
Agreement to Purchase Aircraft from Airbus 6
2.2
Agreement to Purchase Spare Engines from IAE 6
2.3
Type Approval and Changes in Specification 6
2.4
Inspection and Acceptance 7
2.5
Delivery, Shipping, Title and Risk of Loss or Damage 8
2.6
Price 8
2.7
Payment 8
3.
Spare Parts Provisions 10
3.1
Intent and Term 10
3.2
ATA Standards 11
3.3
Stocking of Spare Parts 11
3.4
Lead Times 11
3.5
Ordering Procedure 12
3.6
Modifications to Spare Parts 12
3.7
Inspection 12
3.8
Delivery and Packing 13
3.9
Prices 13
3.10
Payment 14
3.11
Conflict 15
4. Warranties, Guarantees and Liabilities 16
5. Product Support Services 21
6.
Miscellaneous 21
6.1
Delay in Delivery 21
6.2
Patents 23
6.3
Credit Reimbursement and Right of Setoff 24
6.4
Non-Disclosure and Non-Use 24
6.5
Taxes 24
6.6
Amendment 25
6.7
Assignment 25
6.8
Exhibits 25
6.9
Headings 25
6.10
Governing Law and Forum 25
6.11
Compliance with All Applicable Laws and Regulations 25
6.12
Notices 26
6.13
Exclusion of Other Provisions and Previous Understandings 26
6.14
Conditions Precedent 27
6.15
Termination Events 27
6.16
Effect of Termination 29
6.17
No Construction Against Drafter 29
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit A Contract Specifications 31
Exhibit A-1 V2524-A5 Turbofan Engine Model Specification 32
Exhibit A-2 V2527-A5 Turbofan Engine Model Specification 34
Exhibit A-3 V2533-A5 Turbofan Engine Model Specification 36
Exhibit B Schedules 38
Exhibit B-1 Aircraft Delivery Schedule 39
Exhibit B-2 Spare Engine Price and Delivery 40
Exhibit B-3 Escalation Formula 41
Exhibit C Product Support Plan 43
Exhibit D Warranties 64
*****
Exhibit E Guarantees 87
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
THIS CONTRACT is made this 1st day of October, 2013, (this “
Contract
”),
BETWEEN
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IAE INTERNATIONAL AERO ENGINES AG
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a joint stock company organized and existing under the laws of Switzerland, with a place of business at 400 Main Street, M/S 121-10, East Hartford, Connecticut 06108, USA, (hereinafter called “
IAE
”) and
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SPIRIT AIRLINES, INC.
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a corporation organized and existing under the laws of Delaware, whose principal place of business is at 2800 Executive Way, Miramar, Florida 33025 (hereinafter called “
Spirit
”).
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WHEREAS:
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A.
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As of the date hereof, (i) Spirit has acquired or has firmly ordered an aggregate of forty (40) new Airbus A320 family aircraft, all powered by, or to be powered by, V2500-A5 engines, (ii) Spirit has acquired or firmly ordered an aggregate of eleven (11) new V2500-A5 spare engines from IAE all of which are or will be operated by Spirit and (iii) Spirit has the option to purchase four (4) additional new V2500-A5 spare engines from IAE
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B.
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IAE and Spirit have entered into a V2500
®
General Terms of Sale dated March 1, 2005, as amended from time to time, including all side letters and amendments thereto, for the provision of V2500-A5 engines, modules, spare parts, tools, equipment, and product support services for the support and operation of certain V2500-A5 engines (the “
2005 GTA
”);
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C.
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Spirit and IAE subsequently signed the V2500 Propulsion System and FHA Proposal dated October 27, 2006, as amended from time to time, including all side letters and amendments thereto, which outlines the financial support and support services for Spirit’s then-incremental order for A320 family aircraft powered by V2500-A5 engines and order for V2500-A5 spare engines (the “
2006 Proposal
”);
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D.
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IAE and Spirit have entered into a V-Services
SM
Fleet Hour Agreement dated October 1, 2013 for the provision of certain off-wing maintenance for the V2500-A5 engines operated by Spirit (the “
Fleet Hour Agreement
”);
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E.
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IAE and Spirit hereby agree to amend and restate the 2005 GTA in its entirety to incorporate the provisions contained in the 2006 Proposal; and
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F.
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IAE and Spirit now wish to agree upon terms whereby IAE will supply to Spirit V2500 engines, modules, spare parts, special tools, ground equipment, and product support services for the support and operation of the V2500 Engines.
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NOW THEREFORE IT IS AGREED AS FOLLOWS:
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
In this Contract unless the context otherwise requires:
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1.1
|
“Aircraft” shall mean the forty (40) new Airbus A320 family aircraft powered by new Engines firmly ordered (including nineteen (19) A320 family aircraft already delivered as of the date of the Contract) and being acquired by Spirit from Airbus for delivery as set forth in Exhibit B-1 to this Contract.
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1.2
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“
Airbus
” shall mean Airbus SAS, with its principal place of business at 1, Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France, together with its successors and assigns.
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1.3
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“
Certification Authority
” shall mean the United States Federal Aviation Administration.
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1.4
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“
Change Order
” shall have the meaning set forth in Section 2.3.1 hereto.
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1.5
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“
Engine(s)
” shall mean the IAE V2500 aero engine described in the applicable Specification(s).
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1.6
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“
Initial Provisioning
” shall mean the establishment by Spirit of an initial stock of Spare Parts, Support Equipment, and Vendor Parts.
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1.7
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“
Initial Provisioning Data
” shall mean information supplied by IAE to Spirit for Initial Provisioning purposes.
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1.8
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“
Initial Provisioning Orders
” shall mean orders for Spare Parts and Support Equipment for the purpose of Initial Provisioning.
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1.9
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“
Lead Time
” shall mean the period specified in the Spare Parts Catalog that represents the minimum time required between acceptance by IAE of an order by Spirit for Spare Parts and commencement of delivery of such Spare Parts.
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1.10
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“
Service Bulletins
” shall mean those service bulletins containing advice and instructions issued by IAE to Spirit from time to time in respect of Engines.
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1.11
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“
Spare Engines
” shall mean the Firm Spare Engines as defined in Section 2.2.1 and any additional new Spare Engines to be purchased in accordance with Section 2.2.2.
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1.12
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“
Spare Parts
” shall mean spare parts for Engines as identified in the Spare Parts Catalog, excluding the items listed in the Specification as being items of supply by Spirit.
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1.13
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“
Spare Parts Catalog
” shall mean the catalog published by IAE from time to time providing a description, Lead Time and price for Spare Parts available for purchase from IAE.
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1.14
|
“
Specification(s)”
shall mean the IAE Engine Specification(s) set forth in Exhibit A to this Contract, as the same may be amended, supplemented and/or updated from time to time.
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1.15
|
“
Supplies
” shall mean V2500 engines, Spare Parts, Vendor Parts, and Support Equipment.
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1.16
|
“
Support Equipment
” shall mean tools, and all equipment (including handling, transportation and ground equipment) to be supplied pursuant to this Contract for use with the Aircraft and not for installation on the Aircraft. Support Equipment does not constitute Spare Parts.
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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1.17
|
“
Vendor Parts
” shall mean parts not manufactured by IAE, including accessories, described as “Vendor Parts” in Initial Provisioning Data. Vendor Parts do not constitute Spare Parts
.
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2.
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Installed and Spare Engine Purchase Commitments
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2.1
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Agreement to Purchase Aircraft from Airbus
|
Spirit agrees to purchase the Aircraft from Airbus powered by new Engines for delivery according to the schedule set forth in Exhibit B-1 to this Contract and agrees with IAE that Spirit will accept delivery of the Aircraft according to the schedule set forth in Exhibit B-1 to this Contract, as the same may be amended, supplemented and/or updated from time to time.
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2.2
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Agreement to Purchase Spare Engines from IAE
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2.2.1
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Spirit hereby places a firm order with IAE for the purchase of eleven (11) new spare Engines (including eight (8) new spare Engines that have already been delivered as of the date of the Contract) (the “Firm Spare Engines”) for delivery according to the schedule set forth in Exhibit B-2 to this Contract, as the same may be amended, supplemented and/or updated from time to time.
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2.2.2
|
Spirit, at its option, may also purchase and place up to four (4) additional new Spare Engines (the “Option Spare Engines”) on firm order with IAE, provided that Spirit gives written notice to IAE at least ***** prior to the delivery date for each such Option Spare Engine as set forth in Exhibit B-2, as the same may be amended, supplemented and/or updated from time to time. IAE and Spirit shall promptly amend this Contract to revise Exhibit B-2 to reflect the firm order of Option Spare Engines from IAE.
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2.2.3
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Except as otherwise set forth in the following paragraph, Spirit agrees to purchase an Engine storage bag and transportation stand from IAE for delivery with each Spare Engine. The prices for such equipment are set forth in Exhibit B-2.
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In the event that Spirit elects not to purchase a storage bag and transportation stand from IAE for delivery with any Spare Engine, those Spare Engines for which this equipment is to be provided as Spirit furnished equipment shall be identified as such in Exhibit B-2 and Spirit shall provide such equipment to IAE at least
*****
prior to the scheduled delivery date of the applicable Spare Engine(s). If for any reason Spirit has not delivered such equipment to IAE at least
*****
prior to the scheduled delivery date of any applicable Spare Engine, then Spirit shall purchase such equipment from IAE at the prices set forth in Exhibit B-2.
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2.3
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Type Approval and Changes in Specification
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2.3.1
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The Spare Engines will be manufactured to the standards set forth in the Specification. After the date of this Contract, the Spare Engines may be varied from the standards set forth in the Specification and other IAE manufacturing specifications from time to time by written change orders (each a “Change Order”), which shall set forth in detail:
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(a)
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The changes to be made in the Spare Engines; and
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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(b)
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The effect (if any) of such changes on the Specification (including but not limited to performance and weight), on interchangeability of the Spare Engines in the airframe, on prices and on dates of delivery of the Spare Engines.
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Change Orders shall not be binding on either party until signed by IAE and Spirit but upon being so signed shall constitute amendments to this Contract.
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2.3.2
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IAE may make any changes in the Spare Engines that do not adversely affect the Specification (including but not limited to performance and weight), interchangeability of the Spare Engines in the airframe, prices or dates of delivery of the Spare Engines. In the case of such permitted changes, a Change Order shall not be required or if issued shall not be binding until signed by IAE and Spirit.
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2.3.3
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At the time of delivery of the Spare Engines there is to be in existence an FAA-issued “Type Approval Certificate” for the Spare Engines in accordance with the provisions of the Specification.
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2.3.4
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The Specification has been drawn with a view to the requirements of the Certification Authority and the official interpretations of such requirements in existence at the date of this Contract (such requirements and interpretations being hereinafter referred to as “Current Rules”). Subject to Section 2.3.2 above, IAE and Spirit agree that they will execute an appropriate Change Order in respect of any change required to the Spare Engines to enable such Spare Engines to conform to the requirements of the Certification Authority and the official interpretations of such requirements in force at the date of delivery of such Spare Engines.
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2.3.5
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The price of any Change Order is to be paid by IAE in the case of changes required to conform to the Current Rules and by Spirit in any other case.
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2.4
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Inspection and Acceptance
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2.4.1
|
IAE shall ensure that Spare Engines conform to the Specification through the maintenance of procedures, systems and records approved by the Certification Authority. An FAA-issued “Authorized Release Certificate” (FAA Form 8130-3, Airworthiness Approval Tag) or “Certificate of Conformity” (as the case may be) will be issued and signed by personnel authorized for such purposes.
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2.4.2
|
Upon delivery pursuant to Section 2.5.1 below and the issue of an “Authorized Release Certificate” (FAA Form 8130-3, Airworthiness Approval Tag) or a Certificate of Conformity pursuant to Section 2.4.1 above and IAE’s representation that the Engine storage bag and transportation stand, if purchased, conforms to the applicable purchase order, Spirit shall be deemed to have accepted the Spare Engines (and Engine storage bag and transportation stand, if purchased from IAE), and that the Spare Engines conform to the Specification. Spirit’s acceptance will, however, in no way prejudice its valid warranties and support rights under this Contract or the Fleet Hour Agreement. IAE shall, upon written request from Spirit and subject to the permission of the appropriate governmental authorities, arrange for Spirit to have reasonable access to the appropriate premises in order to examine the Spare Engines prior to the issue of conformance documentation and to witness Engine acceptance tests.
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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2.4.3
|
If Spirit refuses, is unable to accept, or otherwise hinders delivery of any Spare Engine that satisfies the requirements set forth herein, Spirit shall nevertheless pay or cause IAE to be paid therefore as if, for the purposes of payment only, the Spare Engines had been delivered.
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2.4.4
|
In any of the cases specified in Section 2.4.3 above, Spirit shall also pay to IAE such reasonable sum as IAE shall require in respect of storage, maintenance and insurance of those Spare Engines.
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2.5
|
Delivery, Shipping, Title and Risk of Loss or Damage
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2.5.1
|
Provided Spirit has made payment in accordance with Section 2.7 below, IAE will deliver the Spare Engines (and Engine storage bag and transportation stand, if purchased from IAE), at its option, either Ex-Works (INCOTERMS 2000) Connecticut, United States of America or Ex-Works (INCOTERMS 2000) Dahlewitz, Germany, in accordance with the delivery schedule set out in Exhibit B-2 to this Contract.
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2.5.2
|
Upon such delivery, title to and risk of loss of or damage to the Spare Engines (and Engine storage bag and transportation stand, if purchased from IAE) shall pass to Spirit.
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2.5.3
|
Spirit will notify IAE at least thirty (30) days before the scheduled time for delivery of the Spare Engines of its instructions as to the marking and shipping of the Spare Engines.
|
The purchase price for each of the Spare Engines shall be the unit base price set forth in Exhibit B-2 to this Contract, amended pursuant to Section 2.3 above, if applicable, and escalated in accordance with the escalation formula contained in Exhibit B-3 to this Contract. The purchase price for the Engine storage bag and transportation stand, if purchased from IAE, shall be the current IAE price in effect at the time of Spare Engine delivery.
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2.7.1
|
Spirit will make payment for Spare Engines (and Engine storage bag and transportation stand, if purchased from IAE) in United States Dollars as follows:
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(a)
|
*****
before the scheduled delivery of each of the Spare Engines, Spirit shall pay to IAE a non-refundable payment of
*****
of the Estimated Purchase Price of such Spare Engine.
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(b)
|
*****
before the scheduled delivery of each of the Spare Engines, Spirit shall pay to IAE a non-refundable payment of
*****
of the Estimated Purchase Price of such Spare Engine.
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(c)
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Immediately prior to the delivery of each of the Spare Engines, Spirit shall pay to IAE the balance of the escalated purchase price of such Spare Engine, plus the purchase price of the Engine storage bag and transportation stand, if purchased from IAE.
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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2.7.2
|
IAE shall have the right to require Spirit to make additional payments in respect of price changes arising from the provisions of Section 2.3 above on a similar basis to that specified in Section 2.7.1 above.
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2.7.3
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Spirit shall pay the full amount of payments falling due under this Section 2.7, without any withholding or deduction whatsoever.
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2.7.4
|
All payments under this Section 2.7 shall be made by wire transfer and shall be deposited not later than the due date of payment with:
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*****
or such other account in the United States as notified from time to time by IAE.
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2.7.5
|
For the purpose of this Section 2.7 “payment” shall only be deemed to have been made to the extent cleared or good value funds are received in the numbered IAE bank account specified in Section 2.7.4 above or as otherwise notified to Spirit in writing by IAE.
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2.7.6
|
If Spirit fails to make any payment pursuant to this Section 2 on or before the date when such payment is due, then, without prejudice to any of IAE's other rights, IAE will (a) be entitled to charge interest on the overdue amount, at the rate equal to the greater of ***** per annum or the New York Citibank prime rate plus ***** per annum, from the date such payment was due to the date such payment is made and (b) have the right (but not the obligation) to suspend work on the manufacture of Spare Engines pending the remedy of such failure and to reschedule the date of delivery of such Spare Engines following the cure of such failure. Notwithstanding the foregoing, Spirit shall not be liable for interest in respect of any overdue amount which is being contested in good faith.
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2.7.7
|
For the purpose of this Section 2.7, the “Estimated Purchase Price” of any of the Spare Engines shall be calculated in accordance with the following formula:
|
*****
where:
*****
.
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3.
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Spare Parts Provisions
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3.1.1
|
For as long as Spirit owns and operates one or more Aircraft in regular commercial service and is not in breach of any material obligation to IAE under this Contract, IAE shall use commercially reasonable efforts to make available adequate supplies of Spare Parts for sale to Spirit under this Contract. In consideration thereof, except as otherwise provided under Section 3.1.2 below, Spirit shall buy from IAE, and IAE shall sell to Spirit, all of Spirit's requirements of the following:
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(a)
|
Spare Parts and Support Equipment necessary to support Spirit’s operation of the Aircraft; and
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
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(b)
|
Vendor Parts for which direct supply arrangements between the manufacturers of such Vendor Parts and Spirit cannot be reasonably established. Spirit shall notify IAE in writing not less than the greater of (i) the lead time of the vendor as specified in the respective vendor manual or (ii) three (3) months before scheduled delivery requested by Spirit that Spirit intends to purchase such Vendor Parts from IAE.
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In an emergency or upon the reasonable request of Spirit, IAE may sell to Spirit Vendor Parts which it is not obligated to sell under this Contract, but which it has in stock or otherwise has reasonably available to it in current inventory.
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3.1.2
|
Purchase by Spirit from Others
|
*****
The parties to this Contract shall comply with the requirements of shipping procedures outlined in ATA Specifications 2000 and 300, provided that the parties shall be entitled to negotiate reasonable changes in those procedures or requirements of the specifications that, if complied with exactly, would result in an undue operating burden or unnecessary economic penalty.
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3.3
|
Stocking of Spare Parts
|
As soon as reasonably possible after receipt of IAE’s request, Spirit shall provide IAE with information reasonably required to enable IAE to plan and organize the manufacture and stocking of Spare Parts.
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3.4.1
|
IAE shall endeavor to deliver replenishment Spare Parts within the Lead Time specified in the IAE Spare Parts Catalog, except for certain major Spare Parts that are designated in the Spare Parts Catalog as being available at prices and lead times to be quoted upon request. Support Equipment and Vendor Parts are available at prices and lead times to be quoted upon request.
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3.4.2
|
If any order for replenishment Spare Parts shall call for a quantity materially in excess of Spirit's normal requirements, IAE shall notify Spirit and may request a special delivery schedule. If Spirit confirms that the full quantity ordered is required, delivery of the order shall be effected at delivery dates mutually acceptable to IAE and Spirit and the Lead Times provided by this Section shall not apply.
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3.4.3
|
In an emergency, IAE shall use its reasonable efforts to deliver all Spare Parts within the time limits specified by Spirit. IAE will provide notice of the action to be taken on such orders within the following time periods from IAE's receipt of such notice and based on the type of order:
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(a)
|
AOG (Aircraft on Ground) orders - within 4 hours;
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(b)
|
Critical (imminent AOG or work stoppage) - within 24 hours;
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(c)
|
Expedited (less than published or quoted lead time) - within 7 days.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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3.5.1
|
Orders for Spare Parts and Support Equipment may be placed by Spirit from time to time on an as-needed basis. Spirit shall give IAE as much notice as practicable of any change in its operation, including, but not limited to, changes in maintenance or overhaul arrangements affecting its requirements of Spare Parts, Support Equipment and including Vendor Parts.
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3.5.2
|
IAE shall promptly acknowledge receipt of each order for Spare Parts in accordance with ATA Specification 2000 procedure. Unless qualified, such acknowledgment, subject to variation in accordance with Section 3.4.2 above, shall constitute an acceptance of the order under the terms of this Contract.
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3.5.3
|
Standard package quantities shall be delivered and packed in accordance with the Spare Parts Catalog.
|
3.6
Modifications to Spare Parts
|
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3.6.1
|
IAE shall be entitled to make modifications or changes to the Spare Parts ordered by Spirit hereunder provided that the modification has received the approval of the Certification Authority and modified Spare Parts shall be substituted for Spare Parts ordered. IAE shall promptly inform Spirit by means of Service Bulletins when such modified Spare Parts (or Spare Parts introduced by a repair scheme) become available for supply hereunder. Notification of such availability shall be given to Spirit before delivery.
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3.6.2
|
Modified Spare Parts shall be substituted for Spare Parts ordered unless the modifications stated in Service Bulletins in the recommended or optional category are considered by Spirit to be unacceptable and Spirit so states in writing to IAE within ninety (90) days of the transmittal date of the applicable Service Bulletin, in which case Spirit shall be entitled to place a single order for Spirit’s anticipated total requirement of pre-modified Spare Parts, at a price and delivery schedule to be agreed.
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3.6.3
|
Unless Spirit notifies IAE in writing under the provisions of Section 3.6.2 above, IAE may supply at the expense of Spirit a modification of any Spare Part ordered (including any additional Spare Part needed to ensure interchangeability), provided that the modification has received the approval of the Certification Authority. The delivery of such Spare Parts shall begin on dates indicated by the applicable Service Bulletin. The delivery schedule shall be agreed at the time when orders for modifications are accepted by IAE.
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3.7.1
|
Conformance to the Specification of Spare Parts purchased hereunder will be assured by IAE through the maintenance of procedures, systems and records approved by the Certification Authority. Conformance documentation will be issued by IAE to Spirit and signed by IAE personnel authorized for such purpose.
|
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3.7.2
|
Conformance of Support Equipment and Vendor Parts purchased pursuant to this Section 3 will be assured by IAE conformance documentation and/or Vendor conformance documentation, as applicable.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
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3.7.3
|
Upon the issuance of conformance documentation in accordance with Sections 3.7.1 or 3.7.2 above and delivery in accordance with Section 3.8.1 below, Spirit shall be deemed to have accepted the applicable Spare Parts, Support Equipment, and Vendor Parts, and that they conform to the applicable specification without prejudice to any of Spirit’s warranty and support rights under this Contract or any other right of Spirit under applicable law.
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3.8.1
|
IAE shall deliver Spare Parts, Support Equipment and Vendor Parts if such parts are purchased from IAE pursuant to this Section 3, Ex-Works (INCOTERMS 2000) the point of manufacture. Shipping documents and invoices shall be in accordance with ATA Specification 2000.
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3.8.2
|
Upon such delivery as described in Section 3.8.1, title to and risk of loss of or damage to the Spare Parts, Support Equipment, and Vendor Parts shall pass to Spirit.
|
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3.8.3
|
In accordance with ATA Specification 2000 requirements, Spirit shall advise IAE at time of order of its instructions as to the marking and shipping of the Spare Parts, Support Equipment and Vendor Parts.
|
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3.8.4
|
The packaging of Spare Parts, Support Equipment, and Vendor Parts shall be in accordance with ATA Specification 300 Category 2 standard, unless deviations are otherwise agreed pursuant to Section 3.2 and shall be free of charge to Spirit. Category 1 standard packaging, if required by Spirit, shall be paid for by Spirit.
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3.9.1
|
Prices of all Spare Parts, Support Equipment, and Vendor Parts shall be quoted in U.S. Dollars, in the Spare Parts Price Catalog, or Initial Provisioning Data, or in individual quotations. Such prices shall represent net unit prices, Ex-Works (INCOTERMS 2000), IAE point of manufacture according to Section 3.8.1 above.
|
Prices and Lead Times in the Spare Parts Price Catalog or by individual quotations are valid for the time period as listed in the Spare Parts Catalog or as shown in the quotation.
|
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3.9.2
|
Prices applicable to each order placed by Spirit hereunder shall be the prices in effect at the time of such order according to the terms of the Spare Parts Price Catalog.
|
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3.9.3
|
IAE may from time to time adjust its prices for Spare Parts and Support Equipment upon not less than ninety (90) days prior written notice to Spirit. Any individual price errors in the calculation of prices may be corrected in good faith without advance notice to Spirit.
|
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3.9.4
|
On request by Spirit, prices of Spare Parts, Support Equipment, or other materials not included in the Spare Parts Price Catalog shall be quoted within a reasonable time by IAE.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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3.10.1
|
Payment for all purchases of Spare Parts, Support Equipment, and Vendor Parts under this Section 3 shall be made by Spirit to IAE *****. Payment for any other invoices arising under this Contract shall be made by Spirit to IAE *****.
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3.10.2
|
Spirit undertakes that IAE shall receive payment in U.S. Dollars of the full amount of payments falling due under this Section 3.10, without any withholding or deduction whatsoever.
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3.10.3
|
All payments under this Section 3.10 shall be made by wire transfer to, and shall be deposited not later than the due date of payment with:
|
*****
or such other account in the United States as otherwise notified from time to time by IAE in writing to Spirit.
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3.10.4
|
For the purpose of this Section 3.10, payment shall only be deemed to have been made to the extent immediately available funds are received in the account specified in sub-Section 3.10.3 above or as otherwise notified by IAE in accordance with the terms of this Contract.
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3.10.5
|
Notwithstanding Section 3.10.1 above, payments for all purchases of Spare Parts, Support Equipment and Vendor Parts shall be due from Spirit upon delivery, or at IAE's option prior to delivery of such items upon the occurrence of any of the following events: (a) a receiver or trustee is appointed for any of Spirit's property, or (b) Spirit is adjudicated or voluntarily becomes a bankrupt under any bankruptcy or winding up laws or other similar legislation, or (c) Spirit becomes insolvent or makes an assignment for the benefit of creditors, or (d) Spirit fails to make payment to IAE in accordance with any of Spirit's material obligations to IAE under this Contract or any other agreement with IAE, or (e) is in material default under any section of this Contract after receipt of written notice of such default and the expiration of any applicable cure period in respect thereof.
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3.10.6
|
If Spirit fails to make any payment for any Spare Parts, Support Equipment, or Vendor Parts on or before the date when such payment is due, then, without prejudice to any other rights set forth herein or under applicable law, IAE will be entitled to charge interest on the overdue amount, at the rate of the greater of ***** or the New York Citibank prime rate plus ***** per annum, from the date such payment was due to the date such payment is made.
Notwithstanding the foregoing, Spirit shall not be liable for interest in respect of any overdue amount which is being contested in good faith.
|
In the event of any conflict between the provisions of this Contract and the provisions of ATA Specifications 101, 2000 and 300, or purchase orders from Spirit the provisions of this Contract shall prevail.
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4.
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Warranties, Guarantees and Liabilities
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4.1
|
I
AE warrants to Spirit that, at the time of delivery, the Supplies sold hereunder will be free of defects in material and manufacture, and will conform substantially to applicable specifications and the rules and regulations of the Certificating Authority. IAE's liability and
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Spirit's remedies under this warranty are limited to the repair or replacement, at IAE's election, of Supplies or parts thereof returned to the place of manufacture in accordance with IAE’s written shipping instructions and which are shown to IAE's reasonable satisfaction to have been defective; provided, that written notice of the defect shall have been given by Spirit to IAE within ***** after the first operation or use of the Supplies (or if the Supplies are installed in Spirit Aircraft, *****) after the date of delivery of such Supplies by IAE to Spirit. Transportation charges for the return of Supplies to IAE pursuant to this Section 4.1 and their reshipment to Spirit and the risk of loss thereof will be borne by IAE only if the Supplies are returned in accordance with written shipping instructions from IAE and judged by IAE, acting reasonably, to have been defective at the time of delivery to Spirit.
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4.2
|
In addition, IAE grants and Spirit accepts the following (all as set forth in Exhibit D, the “Warranties”):
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*****.
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4.3
|
IAE also grants and Spirit accepts the following (all as set forth in Exhibit E, the “Guarantees”):
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*****.
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4.4
|
The parties agree that the Warranties shall apply to any equipment that falls within the type of equipment covered by those Warranties, which are manufactured, supplied or inspected by IAE howsoever and whenever (whether before, on or after the date first above written) acquired by Spirit from whatsoever source including but not limited to any V2500 aero engines and any associated equipment therefor, and any parts for such engines and associated equipment that form part of any aircraft acquired from the manufacturer.
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4.5
|
***** It is not the intent, however, to duplicate benefits or remedies provided to Spirit by IAE or another source (e.g., another equipment manufacturer or lessor) as a result of the same event or cause. Therefore, notwithstanding the terms of the Warranties and Guarantees, Spirit agrees that it shall not be eligible to receive benefits or remedies from IAE if it stands to receive or has received duplicate benefits or remedies from IAE or another source as a result of the same event or cause. Furthermore, in no event shall IAE be required to provide duplicate benefits to Spirit and any other party (such as a leasing company) as a result of the same event or cause.
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4.6
|
IAE and Spirit agree that the following provisions shall apply to each of the Guarantees, unless otherwise expressly set forth therein.
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4.6.1
|
Definitions and General Conditions
|
All of the Definitions and General Conditions set forth in the V2500 Engine and Parts Service Policy shall apply to the Guarantees. Exclusions set forth in the General Conditions of the V2500 Engine and Parts Service Policy shall apply to the Guarantees.
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4.6.2
|
Specific Conditions
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(a)
|
The rates and remedies in the Guarantees are predicated upon Spirit operating its Aircraft powered by Engines in accordance with the following operating conditions:
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(i)
|
An annual average flight cycle of: ***** hours for V2524-A5 powered Aircraft, ***** hours for V2527-A5 powered Aircraft, and ***** hours
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
for V2533-A5 powered Aircraft (each calculated from the moment the wheels of an Aircraft, on which an Engine is installed, leave the ground on take-off to the moment when the wheels of such Aircraft touch the ground on landing);
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(ii)
|
An annual average utilization of ***** hours per V2524-A5 powered Aircraft, ***** hours per V2527-A5 powered Aircraft, and ***** hours per V2533-A5 powered Aircraft;
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(iii)
|
An average engine thrust derate of: ***** for V2524-A5 powered Aircraft, ***** for V2527-A5 powered Aircraft, and ***** for V2533-A5 powered Aircraft, all relative to the name plate thrust rating;
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|
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(iv)
|
An average ambient temperature for take-off no greater than: ***** for V2524-A5 powered Aircraft, ***** for V2527-A5 powered Aircraft, and ***** for V2533-A5 powered Aircraft;
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(v)
|
Spirit’s main base will be located at Fort Lauderdale, Florida, USA;
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(vi)
|
Spirit acquiring all of the Aircraft and Firm Spare Engines as set forth in Exhibit B-1 and Exhibit B-2, as amended, supplemented and/or updated from time to time;
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(vii)
|
Spirit maintaining a minimum ratio of ***** Spare Engines to installed Engines for its Aircraft fleet;
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(viii)
|
Spirit owning, operating, and maintaining the Aircraft and Engines in regular and frequent airline operation for the duration of the Guarantee period(s), in accordance with Airbus’, IAE’s, and other applicable OEM’s technical manuals and the MMP (including Engine rebuild requirements);
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(x)
|
Spirit acquiring from IAE or other sources sufficient components, Spare Parts, and spare Engines at the levels mutually agreed by IAE and Spirit to maintain proper support of the Engines and Aircraft.
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(b)
|
Should any of the above operating conditions not be met or if Spirit takes Option Aircraft or Option Spare Engines, IAE, acting in good faith and in consultation with Spirit, may make reasonable and appropriate adjustments to the Guarantees, with appropriate retroactive application, to address any deviations from such operating conditions.
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4.7
|
SPIRIT ACCEPTS THAT THE WARRANTIES AND GUARANTEES GRANTED TO SPIRIT UNDER SECTIONS 4.1 THROUGH 4.4 ABOVE, TOGETHER WITH THE EXPRESS REMEDIES PROVIDED TO SPIRIT IN RESPECT OF THE SUPPLIES IN ACCORDANCE WITH THIS CONTRACT, ARE EXCLUSIVE AND ARE GIVEN BY IAE IN LIEU OF (A) ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE; AND (B) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM, OR REMEDY IN STATUTE, CONTRACT, TORT OR STRICT LIABILITY AGAINST OEM OR
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
ITS AFFILIATES, WHETHER OR NOT ARISING FROM THE NEGLIGENCE, ACTUAL OR IMPUTED (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), OF IAE OR ITS AFFILIATES, STOCKHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, PERMITTED ASSIGNS AND AGENTS.
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4.11
|
IAE and Spirit agree that credits issued to Spirit’s account with IAE pursuant to any of the Warranties or Guarantees may be utilized for the purposes identified in the applicable Warranty or Guarantee for up to ***** after the date of issuance. Within ***** after such date, Spirit may request in writing that the period for such use be extended by IAE for up to an additional ***** period, which request for extension IAE shall not unreasonably deny. After the expiration of the applicable time period, such credits shall expire.
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5.
|
Product Support Services
|
|
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5.1
|
IAE will make available to Spirit the Product Support Services described in Exhibit C to this Contract. Except when identified in such Exhibit C as being at additional cost or as requiring separate contractual arrangements, such Product Support Services shall be supplied at no additional charge to Spirit. IAE may delegate the performance of product support services to an affiliated company or any of IAE’s shareholders.
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5.2
|
Spirit will provide to any IAE customer support representative(s) working at its facility, free of charge:
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5.2.1
|
reasonable, secure office accommodation including furniture and office equipment and
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5.2.2
|
access to telephone, facsimile and secretarial services and
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5.2.3
|
access to such first-aid and emergency assistance as is customarily provided to Spirit's own employees and
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|
5.2.4
|
reasonable airfare, accommodations, and subsistence during any period in which the customer support representative(s) is required by Spirit to travel away from such customer support representative(s)' normal location at Spirit.
|
Spirit further agrees and acknowledges that such customer support representative(s) shall at all times remain employees of IAE and shall, in such capacity, be entitled to reasonable working benefits such as leaves of absence, sick days and holiday as are paid for and granted by IAE to its employees. However, such leaves shall not interfere with IAE’s provision of the Product Support Services to Spirit, and should any leave for a customer support representative extend beyond forty-five (45) days, IAE agrees to provide a substitute representative to ensure continuity of service. Notwithstanding the foregoing, at no time shall any IAE customer support representative be considered an employee or independent contractor of Spirit.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
6.1
Delay in Delivery
|
|
|
|
6.1.1
|
If IAE is hindered or prevented from performing any obligation hereunder including but not limited to delivering any of the Supplies within the time for delivery specified in this Contract (as such time may be extended pursuant to the provisions of this Contract) by reason of:
|
|
|
|
|
(a)
|
any cause beyond the reasonable control of IAE, or
|
|
|
|
|
(b)
|
fires, industrial disputes or introduction of essential modifications required by the Certification Authority, or
|
|
|
|
|
(c)
|
compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it proves to be invalid, except to the extent that the delay is caused by IAE’s failure to act in conformity with applicable deadlines set forth in such governmental regulation or order;
|
(any such delay an “
Excusable Delay
”) the time for delivery shall be extended by a period equal to the period for which delivery shall have been so hindered or prevented, and IAE shall not be under any liability whatsoever in respect of such delay.
|
|
|
|
6.1.2
|
If, by reason of any of the Excusable Delays embraced by Section 6.1.1 above, IAE is hindered or prevented from delivering any goods (that are the same as and include the Supplies) to purchasers (including Spirit) then IAE shall have the right to allocate in good faith such goods, as they become available, at its own discretion among all such purchasers and IAE shall not be under any liability whatsoever to Spirit for delay in delivery to Spirit resulting from such allocation by IAE and the time for delivery shall be extended by a period equal to the delay resulting from such allocation by IAE. *****
|
|
|
|
|
6.1.4
|
The right of Spirit to claim damages shall be conditional upon Spirit (i) notifying IAE of the its claim in writing within ***** from the Claim Start Date, and (ii) submitting a written claim therefor within ***** from the Claim Start Date.
|
The “Claim Start Date” shall be the date on which IAE notifies Spirit that the item of the Supplies so delayed is ready for delivery, or from the date on which Spirit exercises the right of cancellation in respect of such item conferred in accordance with Section 6.1.5 below, whichever date shall first occur.
|
|
|
|
6.1.5
|
Should IAE delay performance of any obligation for a reason other than an Excusable Delay hereunder including but not limited to delivery of any item of the Supplies beyond ***** from the time for delivery specified in this Contract (as such time may be extended pursuant to the provisions of this Contract) then, in addition to the right of Spirit under Section 6.1.3, Spirit shall be entitled to terminate the order with respect to the affected item on giving IAE notice in writing. Upon receipt of such notice IAE shall be free from any obligation in respect of such item except that IAE shall refund to Spirit any deposits made in respect of the purchase price of such item of the Supplies.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
6.2.1
|
IAE shall, subject to the conditions set out in this Section and as the sole liability of IAE in respect of any claims for infringement of industrial property rights, indemnify and hold Spirit harmless from and against any damages, costs and expenses including legal costs resulting from claim that the use of any of the Supplies by Spirit within any country to which at the date of such claim the benefits of Article 27 of the Convention on International Civil Aviation of 7th December 1944 (The Chicago Convention) apply, infringes any patent, design, or model duly granted or registered provided, however, that IAE shall not be liable to Spirit for any consequential damage or any loss of use of the Supplies or of the Aircraft in which the Supplies may be incorporated arising as a result directly or indirectly of any such claim.
|
|
|
|
|
6.2.2
|
Spirit will, as soon as reasonably practicable give notice in writing to IAE of any such claim whereupon IAE shall have the right at its own expense to assume the defense of or to dispose of or to settle such claim in its sole reasonable discretion and Spirit will give IAE all reasonable assistance and will not by any act or omission do anything that may directly or indirectly prejudice IAE in this connection, provided that IAE shall not agree to any settlement pursuant to which any fault is attributed to Spirit, without the prior written consent of Spirit.
|
|
|
|
|
6.2.3
|
IAE shall have the right to substitute for any allegedly infringing Supplies substantially equivalent non-infringing supplies.
|
|
|
|
|
6.2.4
|
Should Spirit be prevented from using any of the Supplies due to a claim of infringement of property rights by valid judgment or by settlement between Spirit, IAE and the claimant IAE will, at its expense as soon as possible but in no event more than ninety (90) days from the date of entry of such judgment or settlement either: (a) obtain for Spirit the right to use the respective Supply or Supplies free of charge or (b) replace the respective Supply or Supplies with a substantially equivalent non-infringing substitute, if available.
|
|
|
|
|
6.2.5
|
The indemnity contained in Section 6.2.1 above shall not apply to claims for infringement in respect of (i) Supplies manufactured to the specific design instructions of Spirit; (ii) Supplies not of IAE design (but IAE shall in the event of any claim for infringement pass on to Spirit so far as it has the right to do so the benefits of any indemnity given to IAE by the designer, manufacturer or supplier of such Supplies); (iii) the manner or method in which any of the Supplies is installed in the Aircraft; or (iv) any combination of any of the Supplies with any item or items other than Supplies.
|
|
|
|
|
6.4
|
Non-Disclosure and Non-Use
|
|
|
|
|
6.4.1
|
The terms and conditions of this Contract and any technical information provided in connection with it are confidential and proprietary to IAE and Spirit. Each Party agrees to: (a) limit disclosures of such confidential information only to persons who have a need to know within their organizations; (b) keep such information confidential; and (c) not disclose to any third party other than (i) as required by applicable law or legal process; (ii) in connection with the disclosure requirements of any applicable government authority or exchange; (iii) to its legal, financial, tax or other advisors who are bound by an obligation of confidentiality or to the
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
confidentiality requirements of this Contract and (iv) in connection with the enforcement of its rights hereunder, without the prior written consent of the other party (not to be unreasonably withheld), provided that, in the case of (c)(i), supra, the Party that is to disclose such confidential information in response to such applicable law or legal process shall forthwith notify the other Party, and upon the request of the other Party, shall cooperate with the other Party in contesting such disclosure.
|
|
|
|
6.5.1
|
Subject to Section 6.5.2 below, IAE shall pay all imposts, duties, fees, taxes and other like charges levied by any tax authority or any agency thereof in connection with the Supplies prior to their delivery.
|
|
|
|
|
6.5.2
|
All amounts stated to be payable by Spirit pursuant to this Contract exclude any value added tax, sales tax or similar such tax. In the event that the supply of goods or services under this Contract is chargeable to any value added tax, sales tax or similar such tax will be borne by Spirit. To ensure so far as possible that Spirit is not charged with European Community value added tax (“VAT”), Spirit will within 30 days of signature hereof, inform IAE of its VAT Code (if any) for inclusion on IAE's invoices.
|
|
|
|
|
6.5.3
|
Spirit shall pay all other imposts, duties, fees, taxes and other like charges by whomsoever levied.
|
|
|
|
|
6.5.4
|
Notwithstanding the foregoing, Spirit shall have no liability to IAE for any tax or taxes levied on IAE in connection with its gross income, or any franchise, turn-over or other similar tax or any tax levied on IAE relating to its business activities generally and not specifically arising out of or in connection with the transactions contemplated hereby.
|
|
|
|
|
6.5.5
|
In addition to the foregoing, IAE agrees to cooperate with Spirit in order to minimize the impact of any tax liability arising from the transactions hereunder.
|
This Contract shall not be amended in any way other than by written agreement by the parties on or after the date of this Contract, which agreement is expressly stated to amend this Contract.
6.7
(RESERVED)
In the event of any unresolved conflict or discrepancy between the Exhibits (which are hereby expressly made a part of this Contract) and Sections of this Contract then the Sections shall prevail.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
The Section headings and the Table of Contents do not form a part of this Contract and shall not govern or affect the interpretation of this Contract.
|
|
|
|
6.10
|
Governing Law and Forum
|
This Contract shall be subject to and interpreted and construed in accordance with the laws of
*****
.
*****
|
|
|
|
6.11
|
Compliance with All Applicable Laws and Regulations
|
|
|
|
|
6.11.1
|
Export/Import
Spirit agrees that it will not, directly or indirectly, sell, export, re-export, transfer, divert, or otherwise dispose of any IAE goods, software, technical data (including products derived from or based on such technical data), or services received directly or indirectly from IAE to any Prohibited Party without obtaining prior authorization from the relevant government authorities as required pursuant to Export Laws. Failure to do so will result in IAE invoking its rights to terminate this Contract per the provisions of Sections 6.15 and 6.16 below.
|
|
|
|
|
6.11.2
|
“Prohibited Parties”
means, collectively, those countries, and persons to whom the sale, export, re-export, transfer, diversion or other disposition of any IAE goods, software, technical data or services is prohibited by the applicable export laws and related regulations of the United States, German, British, Japanese, or European Union Governments.
|
|
|
|
|
6.11.3
|
Other Laws and Regulations
Each Party agrees that it will not, by act or omission, violate any applicable law or regulation of the United States or any political subdivision thereof where the violation thereof would result in the other Party being deemed to be in violation of such law or regulation or would otherwise result in a criminal or an un-indemnified civil penalty on the part of such other Party.
|
Any notice to be served pursuant to this Contract shall be in the English language and is to be sent by certified mail, recognized international carrier or facsimile (with confirmation copy by any of the other means) to:
In the case of IAE:
IAE International Aero Engines AG
400 Main Street, M/S 121-10
East Hartford, Connecticut 06108, United States of America
Facsimile No.
860-565
-4003
Attention: Chief Legal Officer and Company Secretary
In the case of Spirit:
Spirit Airlines, Inc.
2800 Executive Way
Miramar, Florida 33026
Facsimile No. (954) 447-7854
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Attention: Legal Department
or in each case to such other place of business as may be notified from time to time by the receiving party.
|
|
|
|
6.13
|
Exclusion of Other Provisions and Previous Understandings
|
|
|
|
|
6.13.1
|
This Contract contains the only provisions governing the sale and purchase of the Supplies and shall apply to the exclusion of any prior provisions on or attached to or otherwise forming part of any order form of Spirit, or any acknowledgment or acceptance by IAE, or of any other document that may be issued by either party relating to the sale and purchase of the Supplies.
|
|
|
|
|
6.13.2
|
The parties agree that neither of them have placed any reliance whatsoever on any representations, agreements, statements or understandings made prior to the signature of this Contract, whether orally or in writing, relating to the Supplies, other than those expressly incorporated in this Contract, which has been negotiated on the basis that its provisions represent their entire agreement relating to the Supplies and shall supersede all such representations, agreements, statements and understandings.
|
|
|
|
|
6.14
|
Conditions Precedent
|
During the term of this Contract, the obligations of IAE to provide, or cause to be provided Supplies or any other benefits to Spirit pursuant to the terms hereof, shall be subject to the non-existence of any of the following events on the date when such Supplies or benefits become due, and should any such event then exist IAE shall be under no obligation to provide, or cause to be provided any Supplies or any other benefits to Spirit:
|
|
|
|
6.14.1
|
A continuing event of default (taking into account any applicable grace period) by Spirit in (a) any payment due under the Contract (including any exhibits and letter agreements thereto), or *****; or
|
|
|
|
|
6.14.2
|
Any event that is a Termination Event or would be a Termination Event, but for lapse of time, shall have occurred.
|
|
|
|
|
6.15.1
|
Any of the following shall constitute a “Termination Event” under this Contract:
|
|
|
|
|
(a)
|
Spirit commences any case, proceeding or other action with respect to Spirit or its property in any jurisdiction relating to bankruptcy, insolvency, reorganization, dissolution, liquidation, winding-up, or relief from, or with respect to, or readjustment of, debts or obligations; or
|
|
|
|
|
(b)
|
Spirit seeks the appointment of a receiver, trustee, custodian or other similar official for Spirit for all or substantially all of its assets, or Spirit makes a general assignment for the benefit of its creditors; or
|
|
|
|
|
(c)
|
Spirit otherwise becomes the object of any case, proceeding or action of the type referred to in the preceding Sections 6.15.1(a) or 6.15.1(b) that remains unstayed, undismissed or undischarged for a period of sixty (60) days; or
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
(d)
|
An action is commenced against Spirit seeking issuance of a warrant of attachment, execution, distraint or similar process against all or substantially all of its assets that remains unstayed, undismissed or undischarged for a period of sixty (60) days; or
|
|
|
|
|
(e)
|
A continuing event of default (taking into account any applicable grace period) by Spirit on any payment of principal or interest on any indebtedness hereunder or in the payment of any guarantee obligation hereunder
*****
.
|
|
|
|
|
(f)
|
Failure to take the Aircraft and Spare Engines in accordance with the delivery schedule set forth in Exhibit B, as amended, supplemented or modified from time to time.
|
|
|
|
|
6.15.2
|
In the event of the occurrence of a Termination Event, Spirit shall be deemed to be in material breach of this Contract, and IAE shall at its option have the right to resort to any remedy under applicable law, including, without limitation, the right by written notice, effective immediately, to terminate this Contract; provided that, no such notice need be delivered, and this Contract shall automatically terminate upon the occurrence of a Termination Event specified in Section 6.15.1(a), 6.15.1(b), or 6.15.1(c)
|
|
|
|
|
6.15.3
|
Spirit shall have the option, at its sole discretion, to terminate this Contract in whole or in part, upon the occurrence of any of the following events:
|
|
|
|
|
(a)
|
IAE commences any case, proceeding or other action with respect to IAE or its property in any jurisdiction relating to bankruptcy, insolvency, reorganization, dissolution, liquidation, winding-up, or relief from, or with respect to, or readjustment of, debt or obligations;
|
|
|
|
|
(b)
|
IAE seeks the appointment of a receiver, trustee, custodian, or other similar official for IAE for all or substantially all of its assets, or IAE makes a general assignment for the benefit of its creditors;
|
|
|
|
|
(c)
|
IAE otherwise becomes the object of any case, proceeding or action of the type referred to in the preceding clauses (a) or (b) which remains unstayed, undismissed or undischarged for a period of sixty (60) days;
|
|
|
|
|
(d)
|
An action is commenced against IAE seeking issuance of a warrant of attachment, execution, distraint or similar process against all or substantially all of its assets which remains unstayed, undismissed, or undischarged for a period of sixty (60) days;
|
|
|
|
|
(e)
|
A continuing event of default (taking into account any applicable grace period) by IAE on any payment of principal or interest on any indebtedness hereunder or in the payment of any guarantee obligation hereunder
*****
.
|
6.16
Effect of Termination
Upon any expiration or termination of this Contract, the rights and obligations of the parties under this Contract will terminate. Notwithstanding anything herein to the contrary, all liabilities and obligations (including payment obligations) that have accrued prior to termination or expiration will survive. Notwithstanding the foregoing and for the avoidance of doubt, upon termination, IAE shall have no obligation to deliver goods not yet delivered.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
6.17
No Construction Against Drafter
This Contract has been the subject of negotiation between the parties. If an ambiguity or question of intent arises with respect to any provision of this Contract, this Contract will be construed as if drafted jointly by IAE and Spirit and no presumption or burden of proof will arise favoring or disfavoring either party by virtue of authorship of any of the provisions of this Contract.
6.18
Damages
In no event shall either Party to this Contract or either Party’s subsidiaries or affiliates, have any liability to any other Party hereto for any indirect, incidental, special, consequential, or punitive damages, including without limitation any damage to or loss of use, revenue or profit with respect to any Aircraft and/or Supplies.
[SIGNATURE PAGE FOLLOWS]
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit A
Contract Specifications
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit B
Schedules
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit B-1
Aircraft Delivery Schedule
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Aircraft No.
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Aircraft Type
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Engine Model
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Scheduled Delivery Date
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MSN
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ESN 1
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ESN 2
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1
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2
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3
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4
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5
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6
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7
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8
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9
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10
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11
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12
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13
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14
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15
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16
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18
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19
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20
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21
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22
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23
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24
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27
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28
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30
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31
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32
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37
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38
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39
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40
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit B-2
Spare Engine Price and Delivery
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Spare Engines
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No.
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Base Price (Jan-06$)
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Engine Model
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Scheduled Delivery Date
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ESN
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Firm Spare Engines
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1
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2
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3
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4
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5
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6
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7
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8
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9
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11
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Option Spare Engines
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1
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2
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4
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The applicable price for the Engine bag and transportation stand shall be the list prices set forth below, escalated from the base month to the delivery date of each Spare Engine.
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Equipment
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Base Price (Jan-06 US$)
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Engine Storage Bag
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*****
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Engine Transportation Stand
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Note
: Delivered Spare Engines are indicated by
italics
typeface.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit B-3
Escalation Formula
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1.
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Any unit base price or other sum expressed to be subject to escalation from the Base Month (as defined below) to month of delivery or other date of determination in accordance with the IAE Escalation Formula will be subject to escalation in accordance with the following formula:
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*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit C
Product Support Plan
PRODUCT SUPPORT
FOR THE
V2500 ENGINE
IAE INTERNATIONAL AERO ENGINES AG
Issue No. 7
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
TABLE OF CONTENTS
1.0 INTRODUCTION 44
2.0 CUSTOMER SUPPORT 44
2.1 CUSTOMER SUPPORT MANAGER 44
2.2 CUSTOMER SUPPORT REPRESENTATIVES 45
2.3 CUSTOMER TRAINING: 45
2.4 ENGINE MAINTENANCE MANAGEMENT 47
2.5 SPECIAL PROGRAMS 48
3.0 BUSINESS SUPPORT 48
3.1 ENGINE WARRANTY SERVICES 49
3.2 MAINTENANCE CENTER SUPPORT 49
3.3 MAINTENANCE FACILITIES PLANNING SERVICE 50
3.4 ENGINE RELIABILITY AND ECONOMIC FORECASTS 50
3.5 LOGISTICS SUPPORT STUDIES 50
3.6 LEASE ENGINE PROGRAM 51
4.0 TECHNICAL SERVICES 51
4.1 TECHNICAL SERVICES 51
4.2 POWERPLANT MAINTENANCE 53
4.3 CUSTOMER PERFORMANCE 53
4.4 DIAGNOSTIC SYSTEMS 54
4.5 HUMAN FACTORS 55
4.6 FLIGHT OPERATIONS 55
4.7 REPAIR SERVICES 56
4.8 TOOLING AND SUPPORT EQUIPMENT SERVICES 57
4.9 TECHNICAL PUBLICATIONS 58
5.0. SPARE PARTS 61
5.1 SPARE PARTS SUPPORT 61
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
1.0 INTRODUCTION
IAE International Aero Engines AG (IAE) will make the following support personnel and services available to Spirit: Flight Operations, Customer Performance, Customer Support Representatives, Customer Maintenance Support, Technical Services, Powerplant Maintenance, Service Data Analysis, Human Factors, Repair Services, Warranty Administration, Maintenance Facilities Planning, Tooling and Support Equipment Services, Product Support Technical Publications, Customer Training, Spare Parts Support and Maintenance Center Support. In general, these services are provided
*****
to V2500 customers, however, some specific customized services as noted in the descriptions below, may be purchased by Spirit from IAE.
To make these support services readily available to Spirit, in the most efficient manner, the Customer Support Group has been established and assigned primary responsibility within IAE for customer liaison. A Customer Support Manager is assigned to maintain direct liaison with each individual Customer. A description of the various product support services available to Spirit follows.
IAE reserves the right to withdraw or modify the services described herein at any time at its sole discretion. No such withdrawal or modification shall diminish the level of services and support which Spirit may be entitled to receive with respect to V2500 engines for which an proper order has been placed with IAE or with respect to aircraft with installed V2500 engines for which a firm order has been placed with the aircraft manufacturer, prior to the announcement of any such withdrawal or modification.
2.0 CUSTOMER SUPPORT
2.1 CUSTOMER SUPPORT MANAGER
The Customer Support Manager provides a direct liaison between the airline customer's Engineering, Maintenance, Operations, Logistics, Commercial and Financial organizations and the corresponding functions within IAE. The Customer Support Manager assigned to Spirit is responsible for coordinating and monitoring the effort of the Product Support Department functional organization to achieve timely and responsive support for Spirit.
The Customer Support Manager provides the following specific services to Spirit:
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Readiness Program and planning prior to EIS
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Technical recommendations and information.
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Engine Maintenance Management Plans
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Refurbishment, Modification and Conversion program planning assistance.
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Coordination of customer repair, maintenance and logistics requirements with the appropriate Product Support functional groups.
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Assist with critical engine warranty/service policy claims.
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The Customer Support Manager will represent Spirit in IAE internal discussions to ensure that the best interests of Spirit and IAE are considered when making recommendations to initiate a program, implement a change or improvement in the V2500 engine.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
2.2 CUSTOMER SUPPORT REPRESENTATIVES
IAE Customer Support Representatives provide the following services to Spirit:
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Maintenance Action Recommendations
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Daily Reporting on Engine Technical Situations
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Service Policy Preparation Assistance
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Prompt Communication with IAE
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2.2.1 Engine Maintenance Support Service:
Customer Support Representatives assist Spirit’s customer personnel in the necessary preparation for engine operation and maintenance. The Representative, teamed with a Customer Support Manager will work closely with the airplane manufacturer's support team particularly during the initial period of aircraft operation. Representatives are in frequent contact with the IAE offices on technical matters. Information and guidance received from the home office is transmitted promptly to Spirit which allows Spirit to share in all related industry experience.
The practice permits immediate use of the most effective procedures and avoidance of unsuccessful techniques. The IAE office contact ensures that IAE Representatives know, in detail, the latest and most effective engine maintenance procedures and equipment being used for maintenance and overhaul of V2500 engines. They offer technical information and recommendations to airline personnel on all aspects of maintenance, repair, assembly, balancing, testing, and spare parts support of IAE.
2.2.2 On The Job Training:
Customer Support Representatives will conduct on-the-job training for Spirit’s maintenance personnel. This training continues until the maintenance personnel have achieved the necessary level of proficiency. Training of new maintenance personnel will be conducted on a continuing basis.
2.2.3 Service Policy Administration:
Customer Support Representatives will provide administrative and technical assistance in the application of the IAE Engine and Parts Service Policy to ensure expeditious and accurate processing of airline customer claims.
2.3 CUSTOMER TRAINING:
2.3.1 IAE Customer Training offers Spirit the following support:
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Technical Training at Purpose Built Facilities
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On-site Technical Training
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Technical Training Consulting Service
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Training Aids and Materials
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2.3.2 Training Program:
The IAE Customer Training Center has an experienced full-time training staff which conducts formal training programs in English for airline customers' maintenance, training and engineering personnel. The standard training programs are designed to prepare customer personnel, prior to the delivery of the first aircraft, to operate and maintain the installed engines. Standard courses in engine operation, line maintenance, modular maintenance, performance and trouble-shooting are also available throughout the production life of the engine. The courses utilize the latest teaching technology, training aids and student handouts. IAE Customer Support will coordinate the scheduling of specific courses as required. Training at the Customer Training Center is provided to a limit of fifty (50) man-days per aircraft. The following is the curriculum of standard courses available. On-site technical training, technical training
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
consulting services and customized courses shall be provided upon Spirit’s request and subject to separate contractual arrangements.
2.3.3 General V2500 Familiarization:
This two day course is designed for experienced gas turbine personnel who will be responsible for planning, provisioning and maintenance of the V2500 engine. This course is also designed to appropriately familiarize key staff, supervisory and operations planning personnel and flight crews. Discussions are concentrated in the following subject areas:
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Engine construction features internal and external hardware.
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Engine systems operation, major components accessibility for removal/replacement.
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Performance characteristics
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Maintenance concepts, repair and replacement requirements and special tooling.
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The course is normally conducted in preparation for fleet introductory discussions in the provisioning of spares and tooling, training and line maintenance areas to acquaint the customer with the engine, its systems, operations and procedures.
2.3.4 Line Maintenance and Troubleshooting:
This course is designed for key line maintenance and troubleshooting personnel who have not received previous formal training on the V2500 engine. The classroom phases provide the student with the information essential for timely completion of line maintenance activities and the procedures for effective troubleshooting and correction of malfunctions in the V2500 engine systems and the engine/airframe interfaces. Classroom and shop training are provided for in the following areas:
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Troubleshooting Procedures
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Practical Phase Line Maintenance Tasks
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Additional courses are available in Borescope utilization and Engine Conditioning Monitoring (ECM)
2.3.5 V2500 Familiarization and Modular Maintenance:
Provides experienced heavy maintenance personnel with engine modular disassembly and assembly training. The training is concentrated in the following subject areas:
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Engine Description Overview
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Engine Systems Overview
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Heavy Maintenance Tasks
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Course duration and “hands-on” coverage are contingent on the availability of an engine and required tooling.
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2.4 ENGINE MAINTENANCE MANAGEMENT
Planning documents, tailored for individual operators, are developed to serve as Engine Maintenance Management Program criteria and should reflect the FAA requirements under which Spirit will operate. These are directed toward the objective of ensuring cost-effective operation with acceptable post-repair test performance, providing engine reliability to achieve maximum time between shop visits, and minimizing the adverse effects to operation of inflight
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
shutdowns and delays/cancellations. Through the institution of specific maintenance recommendations, proper engine performance, durability, and hot section parts lives can be achieved.
2.4.1 Operations Monitoring:
The following information is available to Spirit from the IAE Product Information Process (IP) 2 Group:
2.4.2 Operation Experience Reports:
IAE maintains V2500 Service Data System (SDS) data base from which selected engine operations and reliability summary reports will be developed and made available on a scheduled basis to Spirit. Data reported by IAE Customer Support Representatives serve as input to this data base. This computerized data maintenance and retrieval system will permit:
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A pooling and exchange of service experience for the benefit of the entire airline industry.
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A common statistical base.
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The selective querying of computer data files for answers to Spirit’s inquiries.
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In addition to providing operations, reliability and VIS reports, SDS serves in-house programs directed at improving engine design and enhancing overall customer support, including spare parts provisioning and warranty administration.
2.5 SPECIAL PROGRAMS
2.5.1 Engine Hardware Retrofit:
Engine Retrofits are carried out to provide modification of engine hardware configuration when required on delivered engines. This involves assisting in the marshaling of hardware, special tools, manpower and the scheduling of engine and material to modification sites.
2.5.2 Controlled Service Use Programs and Material:
IAE shall assume responsibility for the planning, sourcing, scheduling and delivery of Controlled Service Use material, warranty replacement material, service campaign material and program support material subject to the terms of special contracts with Spirit.
Urgent customer shipments, both inbound and outbound, are monitored, traced, routed and expedited as required. The receipt and movement of customer owned material returned to IAE is carefully controlled, thus assuring an accurate accounting at all times.
3.0 BUSINESS SUPPORT
The Business Support Group is dedicated to providing prompt and accurate assistance to you, our V2500 airline customer. This Group provides the following categories of assistance and support to Spirit:
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Engine Warranty Services
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Engine Reliability and Economic Forecasts
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Logistic Support Studies
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3.1 ENGINE WARRANTY SERVICES
Engine Warranty Services will provide the following support for the V2500 engine airline customer:
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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Prompt administration of claims concerning Engine Warranty, Service Policy, other support programs and Guarantee Plans.
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Investigation of part condition and part failure.
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Material provisioning administration for Controlled Service Use programs and other material support.
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3.1.1 Prompt Administration:
Spirit is assigned a Warranty Analyst whose job is to provide individual attention and obtain prompt and effective settlements of Warranty and Service Policy claims. A typical claim properly submitted is generally settled, including issuance of applicable credit memo, within thirty days. Experience generated by much of the data derived from such claims often enables IAE to monitor trends in operating experience and to address and often eliminate potential problems.
3.1.2 Investigation and Reports:
Parts returned to IAE pursuant to the terms of the Service Policy are investigated in appropriate detail to analyze and evaluate part condition and cause of part failure. A report of findings is prepared and forwarded to Spirit and to all IAE departments involved. In the case of vendor parts, the vendor is promptly informed. Where relevant, reports will include recommendations to preclude repetition of the problem.
3.2 MAINTENANCE CENTER SUPPORT
IAE has arranged for the establishment of Maintenance Centers which are available to accomplish repairs, modifications and conversions, as well as the complete overhaul of the V2500 engine subject to IAE's standard terms and conditions for such work.
Through the use of the IAE established Maintenance Centers and their capabilities, an operator can minimize or eliminate the need for investment in engine support areas depending on the level of maintenance he elects the Maintenance Center to perform. Savings in specific engine support areas, such as spare parts inventory, maintenance and test tooling, support equipment and test facilities, can be demonstrated. Use of Maintenance Centers can also minimize the need for off-wing maintenance and test personnel with their associated overhead.
3.3 MAINTENANCE FACILITIES PLANNING SERVICE
Maintenance Facilities Planning Service offers the following support to IAE customer:
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- General Maintenance Facility Planning Publications
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- Customized Facility Plans
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- Maintenance Facility and Test Cell Planning Consultation Services
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Maintenance Facilities Planning Service provides general and customized facility planning data and consultation services. Facility Planning Manuals for the V2500 engine will present the maintenance tasks, facility equipment and typical departments’ floor plans showing arrangement of equipment required to accomplish the tasks for all levels of maintenance. The Facility Equipment Manual is a catalog of standard facility equipment such as lathes, process tanks, hoists, cranes, etc., which is suitable for use in the maintenance and testing of IAE engines.
Customized facility planning services and consulting services are offered subject to separate contractual arrangements. Customized facility plans are developed to meet the requirements of customers' specific fleet sizes, activities and growth plans. The plans identify floor space, facility equipment, utilities and manpower requirements. On-site surveys are conducted as a part of customized plan development to determine the adaptability of existing facilities and equipment for the desired maintenance program. These plans provide floor plan layouts to show recommended locations for work stations, major equipment, marshaling and storage areas, workflow patterns, and structural and utility requirements to accommodate all the engine models that are maintained in the customer's shop. The Maintenance Facilities Planning Service also provides consultant services which are specifically related to the development of engine test cells, and the adaptation of existing maintenance facilities to accommodate expanding production requirements and/or new or additional IAE models.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
3.4 ENGINE RELIABILITY AND ECONOMIC FORECASTS
Engine reliability and economic forecasts in the forms of predicted shop visit rates and maintenance costs can be provided to reflect the airline customers' operating characteristics. Additionally, various analyses can be conducted to establish life probability profiles of critical engine parts, and to determine optimum part configuration and engine operating procedures.
3.5 LOGISTICS SUPPORT STUDIES
As required, logistics studies are conducted to assist in the planning of engine operational support. Such studies may include spare engine and spare module requirements forecasts, level of maintenance analyses, engine type economic evaluations and life cycle cost estimates.
3.6 LEASE ENGINE PROGRAM
An engine lease program will be made available to Spirit subject to IAE's standard terms and conditions of lease as per IATA Master Short Term Lease Agreement, form 5016 00. Pool spares will be stationed at selected locations to assure emergency protection against aircraft-on-ground (AOG) situations or to provide supplemental support during “zero spares” conditions. Lease engines offered to Customer will be of a configuration and certification standard acceptable to Customer. Availability will be subject to prior demand; however, the program logistics will be continually reviewed to assure the most effective deployment of available pool engines.
4.0 TECHNICAL SERVICES
4.1 TECHNICAL SERVICES
The Technical Services Group provides the following categories of technical support to the airline customer:
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Tooling and Support Equipment Services
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Technical Services is responsible for the overall technical support to the customers. The following services are provided:
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Technical Problem Identification/Corrective Action
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Technical Communication
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Engine Conversion Program Definition and Management
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Engine Upgrade and Commonality Studies
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Engine Incident Investigation Assistance
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Technical information supplied through IAE Customer Support Representatives, Customer Support Managers, customer correspondence and direct meetings with airlines' representatives permits assessment of the factors involved in technical problems and their impact on engine reliability and operating costs. Resolution of these problems is coordinated with responsible groups within IAE and the necessary corrective action is defined. In certain situations the corrective action involves the establishment of Service Evaluation programs for proposed modifications, and the establishment of warranty assistance programs in conjunction with the IAE Warranty Administration Group. Technical Services will assist customers in the implementation of recommended corrective action and improvements principally through official IAE technical communications, and direct customer contact.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
4.1.1 Technical Communications:
Technical Services is responsible for the release of technical communications. Primary communication modes involves release of limits and procedures through engine and maintenance manual revisions and the requirements associated with engine upgrade and/or conversion, durability and performance improvements, and problem resolution through Service Bulletins is provided by All Operator Letters and/or wires or direct technical written response to individual customer inquiries.
4.1.2 Engine Conversion Programs:
Technical Services defines minimum configuration levels for conversion of service engine models. They serve to assist the customer with the implementation of conversion programs into existing fleets by providing preliminary planning cost estimates and technical planning information regarding tooling, material and instructional requirements. Conversion programs are monitored for problem areas and Technical Services initiates and implements corrective action as may be necessary.
4.1.3 Engine Incident Investigation Assistance:
Assistance is provided to an airline in conducting engine incident investigations in responding to the requirements of the Certification Authority and the appropriate Airworthiness authority, as applicable.
4.1.4 Line Maintenance and Troubleshooting:
Line Maintenance and Troubleshooting Seminars can be conducted at the IAE Training Center with the objective of improving line maintenance effectiveness fleetwide. Specialized training on V2500 line maintenance and troubleshooting can be provided through on-site workshops by special contractual arrangement.
Troubleshooting support is provided primarily through powerplant troubleshooting procedures which are published in IAE and airframe manufacturer’s manuals. When an airline encounters an engine problem and corrective action taken has not been effective, more direct support in troubleshooting and maintenance can also be provided to the customer’s line maintenance personnel. Instructions on V2500 powerplant troubleshooting and maintenance shall also be provided to customer’s line maintenance personnel.
4.1.5 Airline Shop Maintenance:
Reviews of shop practices and procedures of Spirit shall be conducted, if requested by Spirit, to determine the most efficient and cost-effective methods for maintenance and repair of the V2500 in the environment in which the airline must maintain that engine.
4.2 POWERPLANT MAINTENANCE
Powerplant Maintenance covers responsibility for maximizing engine maintainability, establishing maintenance concepts and requirements and providing maintenance support plans for IAE. This group provided the following services:
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Definition of Maintenance Tasks and Resource Requirements
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Powerplant Maintenance conducts design reviews and comprehensive maintenance analysis of new engine designs and engine design changes to maximize engine maintainability consistent with performance, reliability, durability and life cycle cost considerations. Maintenance concepts, requirements and tasks are established to minimize maintenance costs. This group represents Spirit’s maintainability interests in internal IAE operations and upon request will assist Spirit in resolving specific maintenance task problems.
4.2.1 Progressive Maintenance Planning:
Powerplant Maintenance also provides Planning Guides based upon Maintenance Task Analysis. The guides present engine maintenance requirements, their subordinate tasks and the required resources to accomplish on-aircraft engine maintenance and the off-aircraft repair of engines by modular section/build group replacement. Maintenance requirements are also presented for the refurbishment of modular
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
section/build group by parts replacement, the complete repair of parts, the refurbishment of accessory components and for engine testing. The data in the Planning Guides is presented in a manner that is primarily intended to assist new operators by providing a phased introduction of new engines into their shops and to capitalize on the design maintainability features for the engine when they are developing their maintenance plans.
Powerplant Maintenance Engineering will assist new operators in planning a gradual, technically feasible, and economically acceptable expansion from line maintenance of installed engines through the complete repair of parts and accessory components.
4.3 CUSTOMER PERFORMANCE
Customer Performance provides for the following types of technical assistance to Spirit:
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Engine Performance Analysis Computer Programs for Test Cell Use
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Test Cell Correlation Analysis and Correction Factors
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Engine Stability Procedures and Problem Analysis
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Although much of the above support is provided in the form of procedures, data and recommendations in various publications, the group also answers inquiries of a performance nature which are forwarded to IAE by individual customers.
ENGINE PERFORMANCE ANALYSIS
Technical support is provided in a number of areas related to operational suitability including the development of the test requirements and performance limits for the Adjustment and Test Section of the Engine Manual. Computer programs that will assist Spirit in analyzing engine performance using test cell data can be provided subject to IAE’s then current standard license fees and Terms and Conditions.
4.3.1 Test Cell Correlation:
Technical assistance is provided to Spirit for developing appropriate corrections to be used for specific test configurations at Spirit’s owned test cell facilities. Reports are provided presenting correlation analyses and IAE recommended test cell corrections which permit comparison of the performance of Spirit tested engines with the respective Engine Manual limits and guarantee plan requirements.
4.3.2 Engine Stability:
Technical support is provided to ensure that engine stability and starting reliability are maintained. Service evaluation programs for proposed improvements are initiated and monitored to determine their effectiveness. In addition, problems relating to engine control systems which impact engine stability and performance are analyzed.
4.4 DIAGNOSTIC SYSTEMS
ADEM is responsible for the technical support of Spirit’s acquisition of inflight engine data and the assessment of engine performance through the use of that data. ADEM personnel provide the following services:
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Guidance to help Spirit define their engine monitoring system requirements.
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Development of hardware specifications and computer programs (by separate contractual arrangement) to satisfy engine diagnostic requirements.
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Coordination of all IAE airborne diagnostic support activity.
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4.4.1 Guidance In Defining Engine Monitoring systems Requirements:
ADEM can provide consultation services to assist Spirit in defining its engine condition and performance monitoring requirements and in selection of appropriate hardware and software systems to meet those requirements and options between Spirit, airframe manufacturer, and Airborne Integrated Data System (AIDS) manufacturer.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
4.4.2 Development and Coordination
ADEM personnel can, if requested by Spirit, develop hardware specification and make computer software available to accomplish Engine Condition Monitoring (ECM) and performance analysis of engine modules using AIDS data. Engine condition monitoring procedures, of both the manual and computerized variety can, if requested by Spirit, also be developed and provided in support of Spirit’s selected method of engine condition monitoring. Computer software will be provided to Spirit subject to IAE's then current standard license fees and Terms and Conditions.
Diagnostic Systems personnel also coordinate activities of cognizant functional groups at IAE to provide engine related information to Spirit, airframe manufacturer, and AIDS equipment vendor during the planning, installation, and operation of AIDS.
4.5 HUMAN FACTORS
Human Factors supplies data on task time and skill requirements necessary for accomplishing maintenance procedures.
Task data provided includes estimates of the man-hours, elapsed time and job skills necessary to accomplish maintenance tasks as described in IAE's Manual and Service Bulletins. Data is supplied for “on” and “off” aircraft maintenance tasks up to modular disassembly/assembly. Additional selected task data can, if requested by Spirit, be supplied on disassembly/assembly to the piece part level and on parts repair. In addition, the group can, if requested by Spirit, help solve problems related to skill requirements, body dimensions, or excessive man-hours encountered in accomplishing maintenance tasks.
4.6 FLIGHT OPERATIONS
Flight Operations provides Spirit with the following technical assistance concerning installed engine operations:
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Introduction of new equipment
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Problem resolution and assistance with in-service equipment
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Contractual commitment and development program support
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Publication of engine operations literature and performance aids
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4.6.1 New Equipment:
In accordance with Spirit’s needs, Flight Operations can provide on-site assistance in the training of operations personnel and help in solving engine operational problems that might arise during the initial commercial service period. Such assistance can, if requested by Spirit, include participation in initial delivery flights, engine operational reviews, and flight crew training activity.
4.6.2 Problem Resolution - In-Service Equipment:
In accordance with a mutually agreed upon plan, Flight Operations can, if requested by Spirit, perform cockpit observations to identify or resolve engine operating problems and to assess installed engine performance.
4.6.3 Contractual Support and Development Programs:
As required, Flight Operations can assist in evaluating installed engine performance relative to contractual commitments and engine improvements which have an impact on engine operations.
4.6.4 Publication Support:
Flight Operations is responsible for the issuance of Propulsion System Operating Instructions and correspondence pertaining to in-flight engine operations. Such material is coordinated with the airframe manufacturers as required. Special Presentations and Reports shall also be issued, as required, to support the activity described above.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
4.7 REPAIR SERVICES
Repair Services shall provide the following support to Spirit:
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Coordinated Repair Development Activity
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Customer Assistance on Repair Procedures and Techniques
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Qualification of Repair Sources
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Repair Development List
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4.7.1 Coordination of Repair Development:
Repair Services shall provide direct contact with all sources that initiate repair schemes. The Group shall coordinate with representatives of Engineering and Support Services disciplines in identifying repair needs, evaluating various repair options and establishing repair development procedures and schedules. The Group shall participate in setting repair evaluation and approval requirements. If and when the repair is approved and substantiating data is documented, Repair Services shall release the repair to the Engine Manual.
4.7.2 Technical Assistance:
Repair Services shall provide daily communications with Spirit via technical responses to inquiries direct from Spirit or through IAE’s Customer Support Representative office at Spirit’s facility. In addition, Repair Services shall make periodic visits to Spirit’s repair facilities to discuss new repairs under development, answer specific questions posed by the particular facility and review actual parts awaiting a repair/scrap decision. Occasionally, Repair Services make special visits to Spirit’s facilities to assist in training customer personnel in accomplishing particularly complex repairs.
4.7.3 Qualification of Repair Sources:
Repair Services shall coordinate the qualification of repair sources for repairs proprietary to IAE or to an outside repair agency. They also perform a review of the qualifications of repair sources for critical, nonproprietary repairs for which a source demonstration is deemed necessary. The group shall participate in negotiation of the legal and business agreements associated with these qualification programs.
4.8 TOOLING AND SUPPORT EQUIPMENT SERVICES
The Tooling and Support Equipment Services Group shall, as requested by Spirit, assist Spirit by providing the following services:
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Support Equipment Manufacturing/Procurement Documentation
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Engine Accessory Test Equipment and Engine Transportation Equipment Specifications
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Support Equipment Logistics Planning Assistance
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4.8.1 Support Equipment Documentation:
The tooling and Support Equipment Services Group designs the special support equipment required to disassemble, assemble, inspect, repair and test IAE engines. Special support equipment design drawings and Support Equipment Master Data Sheets, which describe how to use the support equipment, shall be supplied to Spirit in the form of 35mm aperture cards. Support equipment designs are kept current with engine growth, and tool Bulletins are issued to customers as part of continuing configuration management service. Updated Design and Master Data Sheets Aperture Cards and Tool Bulletins are periodically distributed to all IAE customers, including Spirit.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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4.8.2
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Engine Accessory Test Equipment and Engine Transportation Equipment Requirements:
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Engine accessory test equipment and engine transportation equipment general requirements and specifications are defined and made available to Spirit. If requested, the Tooling and Support Equipment Group will assist Spirit in the definition of engine accessory test and engine transportation equipment required for specific IAE needs.
4.8.3 Support Equipment Logistics Planning Assistance:
The Tooling and Support Equipment Group shall provide, at Spirit’s request, special support equipment lists which reflect the customer's unique requirements such as mix of engine models and desired level of maintenance to aid in support of equipment requirements planning.
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4.9
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TECHNICAL PUBLICATIONS
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IAE and its subcontractors produce publications and maintenance information as described below to support the maintenance and modification requirements of the airline customer. The publications are prepared in general accordance with Air Transport Association of America (ATA) Specification No. 100. The manuals will be available to Spirit subject to IAE’s current terms and conditions.
IAE supplies the airplane manufacturer with all the necessary information required to perform “On-Aircraft” engine maintenance, troubleshooting, and servicing. This information is developed through close coordination between the airplane manufacturer and IAE and is integrated by the airplane manufacturer into its maintenance publications.
In addition, listed and described below are the publications that IAE will make available to support Spirit’s maintenance program:
4.9.1 Engine Manual
The Engine Manual is a document which will be structured in accordance with ATA 100 section 2-13-0 with JEMTOSS applied in accordance with section 2-13-14. The manual will provide, in one place, the technical data requirements for information needed to maintain the engine and the maximum potential number of parts that could, regardless of design responsibility, remain with the engine when it is removed from the airplane. Additionally the manual includes coverage of interrelated parts (e.g. thrust reverser, cowlings, mounts, etc.) that can stay with the airplane when the engine is removed or can be removed for maintenance purposes in lieu of individual component maintenance manuals.
4.9.2 Standard Practices Manual
The Standard Practices Manual supplements the Engine Manual by providing, in a single document, all IAE recommended or approved general procedures covering general torques, riveting, lockwiring, cleaning policy, inspection policy standard repairs, etc., and marking of parts.
4.9.3 Illustrated Parts Catalog
The Illustrated Parts Catalog will be structured in accordance with ATA 2-14-0 and is a document which is used in conjunction with the Engine Manual for the identification and requisitioning of parts and assemblies. Its ATA structure is to be compatible with the Engine Manual Structure. Additionally the manual includes coverage of interrelated parts (e.g. thrust reverser, cowlings, mounts, etc.) that can stay with the airplane when the engine is
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
removed or can be removed for maintenance purpose in lieu of individual component maintenance manuals.
4.9.4 IAE Proprietary Component Maintenance Manuals
These manuals will be structured in accordance with ATA 2-5-0 and will cover data for chapters other than 71, 72, and 78.
4.9.5 Subcontractor Component Maintenance Manuals
These manuals will be structured in accordance with ATA 2-5-0 and are prepared directly by the accessory manufacturers. All accessory data is subject to IAE prepublication review and approval.
4.9.6 Engine and Accessory Component Service Bulletins
Each Engine and Accessory Component Service Bulletin will be produced in accordance with ATA 2-7-0. They will cover planning information, engine or component effectivity, reason for Bulletin, recommended compliance, manpower requirements, and tooling information relating to parts repair or modification. Subcontractor prepared Accessory Component Service Bulletins are reviewed by IAE prior to issuance. Alert Service Bulletins will be issued on all matters requiring the urgent attention of Spirit and will generally be limited to items affecting safety. The Bulletin will contain all the necessary information to accomplish the required action.
4.9.7 Operating Instructions
Engine operating instructions are presented in the form of General Operating Instructions supplemented by V2500 Specific Engine Operating Instructions which provide operating information, procedures, operating curves and engine limits.
4.9.8 Facilities Planning and Facility Equipment Manuals
The Facilities Planning Manual outlines the requirements for engine/component overhaul, maintenance, and test facilities in terms of basic operations, processes, time studies and equipment. The Facility Equipment Manual lists and describes the facility equipment used for engine maintenance, overhaul and repair.
4.9.9 Support Equipment Numerical Index
The Indexes, prepared for each major engine model, provide a listing, in numeric sequence, by maintenance level, of all IAE ground support equipment required to maintain and overhaul the engine. The Listings are cross-indexed to the applicable engine dash model and to the chapter and section of the Engine Manual.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
4.9.10 Technical Publications Index
This index contains a listing of available technical manuals and their contents.
4.9.11 Service Bulletin Index
This index will be in a format and on a revision schedule as determined by IAE.
4.9.12 Vital Statistics Logbook
The VSL provides the following information for each production engine on IAE’s interactive website.
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1
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Identification of major engine and nacelle components by part number, serial number and ATA - location.
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2
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Engine Test Acceptance Certificate.
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3
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List of all incorporated serialized parts by part number, serial number and ATA - Location. This list also includes an Industry Item List to identify specific parts by part number, serial number and ATA - Location which the airline customer may choose to monitor during the engine operational life. The parts listed represent approximately 80% of engine total value.
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4
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List of all incorporated life limited parts by part number, serial number and ATA - location.
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5
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List of all Service Bulletins that were incorporated during initial build of each new engine.
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4.9.13 Revision Services:
Regular, temporary, and “as required” revisions to technical publications will be made during the service life of IAE equipment. IAE’s current standard is ninety (90) days. The utilization of advanced techniques and equipment provides the airline customer with expedited revision service.
4.9.17 Distribution Media Options:
All publications are distributed via DVD or CDROM depending on the publication. Most of the publications are also available on IAE’s interactive website.
5.0. SPARE PARTS
5.1 SPARE PARTS SUPPORT
The Spare Parts Group provides the following categories of spare parts support to Spirit, as requested by Spirit:
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- Individual Customer Account Representatives
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- Spare Parts Inventory
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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- Effective Expedite Service
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- Worldwide Distribution
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5.1.1 Account Representative:
An Account Representative shall be assigned to Spirit. This representative provides individualized attention for effective spare parts order administration, and is the customer's interface on all matters pertaining to new part planning and procurement. Each representative is responsible for monitoring Spirit’s requirements and providing effective administrative support. The Account Representatives shall be thoroughly familiar with Spirit’s spare parts ordering policies and procedures and are responsible for ensuring that all of Spirit’s new parts orders are processed in an effective manner.
5.1.2 Spare Parts Provisioning Planning:
Prior to delivery of the first Spirit aircraft, preplanning discussions will be held to determine the aircraft/engine program, and engine spare parts provisioning and order plans. Mutually agreed upon provisioning target dates are then established and on-time completion tracked by Spirit’s Account Representative with the assistance of logistics specialists in Spare Parts Provisioning and Inventory Management. Meetings are held with Spirit at a mutually agreeable time to review suggested spare parts provisioning lists prepared by Spare Parts Provisioning. These lists are designed to support Spirit’s particular fleet size, route structure and maintenance and overhaul program.
5.1.3 Order Administration:
IAE subscribes to the general principles of Air Transport Association of America (ATA) Specification No. 2000, Integrated Data Processing - Supply. The procedures of Air Transport Association of America (ATA) Specification No. 200 may be used for Initial Provisioning (Chapter II), Order Administration (either Chapter III or Chapter VI), or Invoicing (Chapter IV).
A spare parts supply objective is to maintain a 90 percent on-time shipment performance record to Spirit’s requirements. The lead time for replenishment spare parts is identified in the IAE spare Parts Price Catalog. Initial provisioning spare parts orders should be placed at least six months prior to required delivery, while conversions and major modifications require full manufacturing lead times.
The action to be taken on emergency requests will be answered as follows:
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Aircraft-On-Ground (AOG) - within four hours (in these instances every effort is made to ship immediately).
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Critical (Imminent Aircraft-On-Ground (AOG) or Work Stoppage) -- Within 24 hours.
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Stock Outage -- Within seven working days (these items are shipped as per Spirit’s request).
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5.1.4 Spare Parts Inventory:
To ensure availability of spare parts in accordance with published lead time, spare parts provisioning maintains a modern, comprehensive requirements planning and inventory management system which is responsive to changes in Spirit’s demand, special support programs and engineering design. Organized on an engine model basis, this system is intended to maintain part availability for delivery to customers consistent with published lead times.
A majority of parts in the spare parts inventory are continually controlled by an Automatic Forecasting and Ordering System. Those parts which do not lend themselves to automatic control due to supercedure, unusual usage or conversion requirements are under the direct manual control of Spares Planning personnel. As additional protection against changes in production lead time or unpredicted demand, certain raw materials are also inventoried. Successful inventory management is keyed to accurate requirements planning. In support of the requirements planning effort, a wide ranging data retrieval and analysis program is offered. This program concerns itself both with the customer logistics and technical considerations as follows:
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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Forecasts of life limited parts requirements are requested and received semi-annually from major customers. Based on the size of Spirit’s order, Spirit shall be considered a major customer.
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Engine technical conferences are held frequently within IAE to assess the impact of technical problems on parts.
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For a selected group of parts a provisioning conference system is offered which considers actual part inventory change, including usage and receipts, as reported monthly by participating customers.
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5.1.5 Packaging
All material is packaged in general compliance with Air Transport Association of America (ATA) Specification No. 300.
5.1.6 World Airline Supplier’s Guide:
IAE subscribes to the supply objectives set forth in the World Airlines Supplier's Guide published by the Air Transport Association of America (ATA). IAE requires that its proprietary component vendors also perform in compliance with the precepts of the World Airline Suppliers' Guide.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit D
Warranties
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit E
Guarantees
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
400 Main Street, M/S 121-10
East Hartford, CT 06108 USA
October 1, 2013
Spirit Airlines, Inc.
2800 Executive Way
Miramar, Florida 33025
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SUBJECT:
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SIDE LETTER NO. 1 TO THE AMENDED AND RESTATED V2500-A5 GENERAL TERMS OF SALE BETWEEN IAE INTERNATIONAL AERO ENGINES AG AND SPIRIT AIRLINES, INC., OCTOBER 1, 2013
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Gentlemen:
We refer to the Amended and Restated V2500-A5 General Terms of Sale dated October 1, 2013 between IAE International Aero Engines AG (“
IAE
”) and Spirit Airlines, Inc. (“
Spirit
”), as amended from time to time, such agreement being hereinafter referred to as the “
Contract
”. Unless expressly stated to the contrary, and to the extent possible, terms used in this Side Letter No. 1 (“
Side Letter No. 1
”) shall have the same meaning given to them in the Contract.
WHEREAS:
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A.
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IAE and Spirit previously entered into the 2005 GTA, and subsequently entered into the 2006 Proposal, both of which have been superseded by the Contract; and
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B.
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This Side Letter No. 1 amends the Contract so as to provide certain financial and technical assistance to Spirit in support of Spirit’s selection of the V2500 engine to power its Aircraft, and in support of the integration of the Aircraft into its fleet.
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NOW, THEREFORE,
in consideration of the mutual benefits and obligations set forth herein, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1.
Fleet Introductory Assistance Credits
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1.1
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In consideration of Spirit’s agreement to purchase Aircraft No. 20 through Aircraft No. 40 inclusive, in accordance with the Contract, and to assist Spirit with the introduction of the Aircraft into its fleet, IAE shall issue credit notes to Spirit’s account with IAE in the following amounts (each a “Standard FIA Credit”):
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Aircraft Type
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Credit
(Jan-06 US$)
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Issued at Delivery & Acceptance of:
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A319 (V2524-A5)
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*****
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Each A319 Aircraft
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A320 (V2527-A5)
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*****
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Each A320 Aircraft
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A321 (V2533-A5)
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*****
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Each A321 Aircraft
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
For clarity, the financial assistance provided by IAE for Aircraft No. 1 through Aircraft No. 19 inclusive was issued in accordance with the 2006 Proposal.
2.
Spare Engine Credits
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2.1
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In consideration of Spirit agreeing to purchase the Spare Engines in accordance with the Contract, and to assist Spirit with such purchase, IAE shall credit Spirit‘s account in accordance with the following values for the corresponding Spare Engines (each a “Spare Engine Credit”):
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Engine Type
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Credit
(Jan-06 US$)
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Issued on Delivery & Acceptance of:
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V2524-A5
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*****
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Each Firm Spare Engine
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V2527-A5
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*****
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Each Firm Spare Engine
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V2533-A5
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*****
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Each Firm Spare Engine
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V2524-A5
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*****
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Each Option Spare Engine
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2.3
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Each Spare Engine Credit ***** shall be issued upon delivery to Spirit of the corresponding Firm or Option Spare Engine. Spirit agrees to provide IAE with written notice confirming acceptance of the corresponding Firm or Option Spare Engine promptly after acceptance.
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2.4
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Each Spare Engine Credit ***** shall be used by Spirit for payment against the corresponding spare Engine invoice.
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3.
Credit and Engine Pricing Escalation
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3.1
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The FIA Credits and Spare Engine Credits, referenced in Sections 1and 2above, are subject to escalation in accordance with the IAE Escalation Formula set forth in Exhibit B-3 to the Contract, and shall be escalated from a base month of January 2006 (the “Base Month”) to the earlier of the scheduled delivery date as set forth in Exhibit B-1 (and B-2 if applicable) of the Contract or the actual delivery date of the applicable Aircraft or Spare Engine (the “Base Escalated Credit”).
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3.5
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Upon delivery of each Aircraft, IAE will, as of the respective dates of delivery of each of the Aircraft delivered to Spirit, calculate the difference (if any) between:
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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(a)
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The Deemed Shipset Price (as defined below) escalated in accordance with Section 3.1 above; minus
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(b)
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The Deemed Shipset Price escalated in accordance with Section 3.1 above and capped in accordance with Section 3.2 above.
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IAE will adjust the amount of the FIA Credits due and payable to Spirit for each such Aircraft by such difference. For the purposes of administering this provision, the “
Deemed Shipset Price
” is as follows:
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Aircraft Type
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Deemed Shipset Price (Jan-06 US$)
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A319 (V2524-A5)
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*****
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A320 (V2527-A5)
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*****
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A321 (V2533-A5)
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*****
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•
4.
*****
5.
*****
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5.1
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Clause 6.3 of the Contract, *****, is deleted in its entirety and replaced with the following:
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“6.3
*****
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6.3.3
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IAE shall have the right to set off credits from time to time made available by IAE under the Contract either directly to Spirit or via Airbus or its subsidiaries and affiliates, in respect of the failure by Spirit, after any applicable grace period, to cure any payment default under (i) the Contract or (ii)
*****
, or (iii) the Fleet Hour Agreement.”
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6.
*****
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7.1
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Customer Support Manager
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IAE will assign a V2500-A5 customer support manager for Spirit who will coordinate the business and technical support services needed to support the Engines in Spirit’s fleet.
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7.2
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Customer Support Representative
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A customer support representative will be assigned to Spirit to assist Spirit on site in preparing for Engine operation. Such representation will be provided to Spirit at no charge, for a period of three (3) years from entry-into-service of the first Aircraft and thereafter for so long as Spirit operates a minimum of ten (10) Aircraft. The customer support representative will provide the services described and attributed to the representative in the Product Support Plan attached a Exhibit C to the Contract.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
The customer support representative will be supplied, subject to the condition that Spirit provides the following free-of-charge to the representative in connection with his or her duties:
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(a)
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Reasonable office accommodation including access to telephone, fax, and internet; and
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(b)
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Access to such first-aid and emergency assistance as in customarily supplied to Spirit’s own employees.
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Spirit agrees and acknowledges that the representative shall at all times remain an employee of IAE and shall, in such capacity, be entitled to holiday and vacation period as are granted by IAE to its employees. However, such leaves shall not interfere with IAE’s provision of the customer support services to Spirit, and should any leave for a customer support representative extend beyond forty-five (45) days, IAE agrees to provide a substitute representative to ensure continuity of service. Notwithstanding the foregoing, at no time shall any IAE customer support representative be considered an employee or independent contractor of Spirit. The customer support representative will provide on-site technical support for Engines at Spirit’s line stations, upon Spirit’s reasonable request, on an as-required basis to be determined by IAE. Spirit agrees to provide free of charge airfare from Spirit’s main base to any such line station as well as a reasonable allowance for per diem and hotel expenses.
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8.1
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IAE shall provide, subject to availability, Spirit ***** formal training programs covering courses ***** for a maximum of ***** for qualified Spirit personnel (of which ***** have been used as of the date of this Side Letter No. 1), for a period of ***** from entry-into-service of the first Aircraft, for so long as Spirit operates one or more Aircraft in commercial service.
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10.1
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Clause 6.7 of the Contract, Assignment, is deleted in its entirety and replaced with the following:
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“6.7.1
|
Except as otherwise agreed herein, Spirit may not assign in whole or part any of its rights or obligations under the Contract without the written consent of IAE (such consent not to be unreasonably withheld).
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6.7.6
|
IAE may, without recourse, assign its rights and/or delegate its obligations under this Agreement to any subsidiary or affiliate of IAE or United
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Technologies Corporation, or in connection with a merger, consolidation, reorganization, or voluntary sale or transfer of its assets; provided that such assignee/delegate is: (i) solvent at the time of such transfer and (ii) authorized by the applicable regulatory authorities, as necessary, to perform or procure the performance of all obligations being delegated/assigned; and (iii) able, in IAE’s sole, reasonable discretion, to make all payments required by IAE to be made to Spirit under the Contract.”
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11.1
|
Entire Agreement; Conflicts
|
This Side Letter No. 1 and the Contract constitute the sole and entire agreement between Spirit and IAE in relation to the matters set forth herein and shall supersede all previous agreements between Spirit and IAE, both oral and in writing, as of the date hereof. In the event of any conflict between the Contract and this Side Letter No. 1, the terms of this Side Letter No. 1 shall control and the Contract shall be deemed modified accordingly.
This Side Letter No. 1 shall not be amended, changed or modified in any way other than by agreement in writing, signed by Spirit and IAE, which is expressly stated to amend this Side Letter No. 1.
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11.3
|
Proprietary Information
|
This Side Letter No. 1 shall be subject to the confidentiality and non-disclosure provisions of the Contract.
This Side Letter No. 1 shall be subject to the governing provisions of the Contract.
This Side Letter No. 1 may be executed in one or more counterparts, each of which shall be deemed a duplicate original and all of which, when taken together, shall constitute one and the same document. Execution and delivery of this Side Letter No. 1 by exchange of facsimile copies or electronic mail bearing the signatures of the parties shall constitute a valid and binding execution and delivery of this Side Letter No. 1 by the parties.
Except as expressly amended by this Side Letter No. 1, all provisions of the Contract remain in full force and effect.
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Agreed to and accepted on behalf of:
IAE International Aero Engines AG
|
|
Agreed to and accepted on behalf of:
Spirit Airlines, Inc.
|
|
By:
|
/s/ Rick Deurloo
|
|
By:
|
/s/ Charles A. Rue
|
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Name:
|
Rick Deurloo
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Name:
|
Charles A. Rue
|
|
Title:
|
SVP Sales
|
|
Title:
|
VP Supply Chain
|
|
Date:
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10/2/13
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Date:
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10/1/13
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
EXECUTION VERSION
V-Services
SM
Fleet Hour Agreement
by and between
SPIRIT AIRLINES, INC.
and
IAE INTERNATIONAL AERO ENGINES AG
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
TABLE OF CONTENTS
1.
Definitions 3
2.
FHA Services 6
3.
Period of Cover 7
4.
Shop Visit Coverage 7
5.
Lease Engine Support 8
6.
Transportation 9
7.
General Fleet Hour Agreement Services 9
8.
Excess Work 10
9.
Obligations of Spirit 12
10.
FHA Rates and Payment 15
11.
Fleet Flexibility 20
12.
Warranties; Limitation of Liability 20
13.
Delays 22
14.
Duplicate Benefits 22
15.
Intellectual Property 22
16.
Amendment 23
17.
Assignment 23
18.
Notices 23
19.
Exclusion of Other Provisions and Previous Understandings 24
20.
Termination, Expiration and Events of Default 24
21.
Negation of Waiver 25
22.
Severability and Partial Invalidity 25
23.
Governing Law 25
24.
Publicity 26
25.
Confidentiality 26
26.
Compliance with All Applicable Laws and Regulations 26
27.
No Construction Against Drafter 27
28.
Damages 27
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Exhibit A Aircraft and Spare Engine Delivery Schedules
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28
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Exhibit B FHA Escalation Formula
|
32
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Exhibit D V2500 Turbofan Engine Model Specifications
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34
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Exhibit E Powerplant Description
|
41
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Exhibit G Engine Monitoring Services
|
44
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Exhibit H Excess Work Rates
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47
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Exhibit I FHA Rate Adjustment Tables
|
48
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
FLEET HOUR AGREEMENT
This Fleet Hour Agreement (this “
Agreement
”) is made this 1st day of October 2013, by and between
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IAE INTERNATIONAL AERO ENGINES AG
|
A joint stock company organized and existing under the laws of Switzerland, with a place of business at 400 Main Street, M/S 121-10, East Hartford, CT 06108 (hereinafter called “
IAE
”).
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AND
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SPIRIT AIRLINES, INC.
|
A corporation organized and existing under the laws of Delaware, with a place of business at 2800 Executive Way, Miramar, Florida 33025 (hereinafter called “
Spirit
”).
|
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Each a “
Party
” and together the “
Parties
”.
|
WHEREAS:
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|
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A.
|
As of the date hereof, (i) Spirit has acquired, leased or firmly ordered an aggregate of sixty-eight (68) new Airbus A320 family aircraft as described in Exhibit A, all powered by, or to be powered by, V2500-A5 engines, (ii) Spirit has acquired or firmly ordered an aggregate of eleven (11) new V2500-A5 spare engines from IAE all of which are or will be operated by Spirit and (iii) Spirit has the option to purchase a further four (4) new V2500-A5 spare engines from IAE;
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B.
|
IAE and Spirit have entered into a Fleet Hour Agreement dated April 11, 2005 for the provision of certain off-wing maintenance for the V2500-A5 engines operated by Spirit (the “
2005 FHA
”);
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C.
|
Spirit and IAE subsequently signed the V2500 Propulsion System and FHA Proposal dated October 27, 2006, as amended from time to time, which outlines the financial support and support services for Spirit’s incremental order for A320 family aircraft powered by V2500-A5 engines and order for V2500-A5 spare engines (the “
2006 Proposal
”);
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D.
|
IAE and Spirit have entered an Amended and Restated V2500
®
General Terms of Sale dated October 1, 2013, as amended from time to time, including all side letters and amendments thereto, for the provision of V2500-A5 engines, modules, spare parts, tools, equipment, and product support services for the support and operation of certain V2500-A5 engines (the “Existing Fleet
GTA
”)
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E.
|
IAE and Spirit hereby agree to replace in its entirety the 2005 FHA with this Agreement, which shall incorporate the applicable terms and conditions for off-wing maintenance support contained in the 2006 Proposal; and
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|
|
F.
|
IAE and Spirit now wish to agree upon terms whereby IAE shall arrange for, manage and subcontract certain maintenance of the Eligible Engines as defined herein.
|
NOW THEREFORE IT IS AGREED AS FOLLOWS:
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1.1
|
“
Accessory
” or “
Accessories
” includes those items listed in Exhibit C to this Agreement.
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1.2
|
“
Airbus
” shall mean Airbus SAS.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
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1.3
|
“
Aircraft
” shall mean all or each of the: (i) forty (40) A320 family aircraft powered by V2500-A5 engines in-service in Spirit’s fleet as of the date of this Agreement already delivered as described in the schedule set forth in Exhibit Ahereto (the “
Existing Aircraft
”) and (ii) twenty-eight (28) new Airbus 320 family aircraft powered by V2500-A5 engines to be delivered in accordance with the schedule set forth in Exhibit A hereto, as may be mutually agreed to be amended, supplemented or otherwise modified from time to time (the “
Firm Aircraft
”).
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1.4
|
“
Aircraft Maintenance Manual
” or “
AMM
” means the aircraft maintenance manual published by Airbus for the Aircraft.
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1.5
|
“
Airworthiness Directive
” shall mean any applicable airworthiness directive issued by the Aviation Authority based on certification rules current as of the date of this Agreement.
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1.6
|
“
Aviation Authority
” shall mean the FAA.
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1.7
|
“
Beyond Economic Repair
” shall mean wear, tear or damage to an item of Eligible Equipment beyond economic repair.
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1.8
|
“
BFE Item
” shall mean those items listed as such in Exhibit E of this Agreement.
|
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1.9
|
“
Business Day(s)
” shall mean a day other than a Saturday, Sunday or holiday scheduled by law for commercial banking institutions in the city of New York, New York, United States.
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1.10
|
“
Day
” means a calendar day.
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1.11
|
“
EBU Item
” shall mean those items listed as such in Exhibit E to this Agreement originally installed on the Eligible Engines or acquired new and dedicated solely for the support of Eligible Engines.
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1.12
|
“
Eligible Engine(s)
” shall mean the new Engines originally installed on the Aircraft and the Spare Engines. Exhibit A to this Agreement identifies the Eligible Engines by serial number and will be updated from time to time to: (i) add Eligible Engines and serial numbers as Spirit takes delivery of the Aircraft and the Spare Engines and (ii) to remove Eligible Engines in accordance with Section 11 hereto.
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1.13
|
“
Eligible Engine Flight Cycles
” *****.
|
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1.14
|
“
Eligible Engine Flight Hours
” *****.
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1.15
|
“
Eligible Equipment
” shall mean Eligible Engines.
|
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1.16
|
“
Eligible Removal
” shall mean *****.
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1.17
|
“
Engine(s)
” shall mean the basic IAE V2500-A5 turbofan engine, described in the V2500 Turbofan Engine Model Specification(s) set forth in Exhibit D of the Agreement, and which excludes Accessories, EBU Items, QEC Items and Nacelle Items.
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1.18
|
“
Engine Manual
” shall mean the IAE document which sets forth the requirements for Engine off-wing repair.
|
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1.19
|
“
Excess Work
” shall mean work undertaken by the Maintenance Center during a Shop Visit pursuant to this Agreement, which is further described in Section
8
of this Agreement.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
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|
|
1.20
|
“
FAA
” shall mean the United States Federal Aviation Administration.
|
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1.21
|
“Failure” shall mean *****.
|
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1.22
|
“
FHA
” shall mean this Fleet Hour Agreement.
|
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1.23
|
“
FHA Administration Manual
” means the logistical plan and instructions described in Section
7
of this Agreement.
|
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1.24
|
“
FHA Manager
” shall mean the manager provided by IAE for the support of the operation of this Agreement in accordance with the provisions of Section 7.3 of this Agreement.
|
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1.25
|
“
FHA Rate(s)
” shall mean the rate(s) collectively as set forth in Section 10 below.
|
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1.26
|
“
Foreign Object Damage
” shall mean*****.
|
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|
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1.27
|
“
Line Maintenance
” shall mean any work required to be carried out on an Engine in accordance with the appropriate Aircraft Maintenance Manuals and which can be accomplished either on-wing or off-wing without requiring the induction of such Engine into a Maintenance Center.
|
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1.28
|
“
Life Limited Parts
” or “
LLPs
” shall mean the Parts identified in Chapter 5 of the V2500-A5 Engine Manual as having specific life limits.
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1.29
|
“
Maintenance Center
” shall mean the IAE shareholder maintenance center designated by IAE in consultation with Spirit, from time to time to perform services under this Agreement and which is approved by the Aviation Authority as a certified repair station.
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1.30
|
“
Maintenance Management Plan
”, “
MMP
” or “
eMMP”
shall mean the then-current V2500 engine maintenance planning document described in Section
7
of this Agreement.
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1.31
|
“
Miscellaneous Shop Visit
” shall mean *****.
|
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1.32
|
“
Nacelle Items
” shall mean those items listed in Exhibit E as “DPP” (demountable power plant) items or “PP” (positionalized power plant) items originally installed on the Eligible Engines or acquired new and dedicated solely for the support of Eligible Engines.
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1.33
|
“
Part(s)
” shall mean *****.
|
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1.34
|
“
Period of Cover
” shall mean the period in which IAE agrees to provide the services pursuant to this Agreement, as set out in Section
3
of this Agreement.
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1.35
|
“
QEC Item
” shall mean those items listed as such in Exhibit E to this Agreement originally installed on the Eligible Engines or acquired new and dedicated solely for the support of Eligible Engines.
|
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1.36
|
“
Restoration Shop Visit
” or “
RSV
” shall mean *****.
|
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1.37
|
“
Service Bulletin(s)
” shall mean those V2500 service bulletins issued by IAE that are designated as “target” service bulletins in the MMP.
|
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|
1.38
|
“
Shop Visit
” shall mean a Restoration Shop Visit or a Miscellaneous Shop Visit.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
1.39
|
“
Spare Engine(s)
” shall mean all or each of the eleven (11) new V2500-A5 firmly ordered spare Engines either purchased or to be purchased by Spirit from IAE and the four (4) option spare Engines which Spirit has the right to purchase from IAE, already delivered or to be delivered in accordance with the schedule set forth in Exhibit A of this Agreement.
|
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1.40
|
“
Testable Engine
” shall mean *****.
|
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1.41
|
“
Transportation Coverage
” shall mean the services provided to Spirit under Section
6
of this Agreement.
|
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1.42
|
“
Workscope
” shall mean an IAE written repair request to the Maintenance Center(s) compliant with the MMP, approved by Spirit, such approval not to be unreasonably withheld, that authorizes the Maintenance Center(s) to undertake work on Eligible Equipment.
|
IAE shall provide to Spirit the following FHA service coverage for the Period of Cover for each Eligible Engine:
|
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|
|
2.1
|
Engine Shop Visit Coverage in accordance with the terms of Section 4
|
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2.2
|
Lease Engine Coverage in accordance with the terms of Section
5
.
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2.3
|
Transportation Coverage in accordance with the terms of Section
6
.
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2.4
|
General FHA Services in accordance with the terms of Section 7
.
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2.5
|
Excess Work as required in accordance with the terms of Section 8.
|
The provision of such coverage by IAE is subject to Spirit’s fulfillment in all material respects of its obligations under Section
9
.
This FHA shall become effective on the date of first commercial service of an Eligible Engine and will remain in force and effect for each Eligible Engine through the *****.
Each Eligible Engine following an Eligible Engine Removal shall be forwarded to the Maintenance Center. IAE shall communicate the Workscope to the Maintenance Center and cause the Maintenance Center to complete the Shop Visit in accordance with such Workscope. IAE shall pay to the Maintenance Center all charges directly incurred in respect of goods, work and services carried out during the Shop Visit for the following items:
|
|
|
|
4.2
|
IAE will use commercially reasonable efforts to provide the following documentation to Spirit following the release of an Eligible Engine from a Maintenance Center following a Restoration Shop Visit:
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
4.2.3
|
any Excess Work invoices arising from such Eligible Engine’s Restoration Shop Visit as soon as practicable but no later than *****, if applicable.
|
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|
4.3
|
IAE’s obligations for an Engine Shop Visit caused by Foreign Object Damage shall be limited to the provision of repair work and Parts provided through the Maintenance Center to a maximum of ***** per event *****.
|
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|
|
|
5.1
|
IAE agrees to provide a serviceable lease Engine (in the QEC configuration as defined in the lease Engine technical records which are made available to Spirit at the time of lease Engine offer) for use by Spirit in the event that (i) an Eligible Shop Visit occurs, and (ii) Spirit’s Spare Engines are unavailable due to support of another Eligible Shop Visit and no other Eligible Engines are available for such support. IAE will identify a lease Engine and use its reasonable endeavors to dispatch such Engine within 24 hours of notification of the requirement, but in any event shall endeavor to dispatch the Engine as soon as possible. Such Engine(s) will be provided subject to IAE’s standard short term engine lease agreement for V2500 Engines (IATA Master Short Term Lease Agreement, form 5016 00 (“
IATA Agreement
”)), except that the daily fee for such lease Engine will be waived. Should Spirit require a spare Engine to support a non-Eligible Shop Visit or that does not otherwise meet the above conditions, all terms of the IATA Agreement, including all applicable rates, charges and fees, shall apply. In the event IAE cannot provide an Engine as set forth herein Spirit shall have the right to lease an Engine from a third party. In such case, IAE shall reimburse Spirit for the direct and actual reasonable daily lease charges for such Engine lease up to maximum of ***** of the then current applicable IAE daily fee for lease Engines.
|
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|
5.3
|
Unless otherwise determined by the FHA manager, acting reasonably, Spirit is to return the IAE lease Engine within ***** after Spirit‘s Engine is returned to Spirit in accordance with Section 6.2 and such Engine is available for installation at Spirit’s facilities. Also, in the event that Spirit has leased an Engine from a third party as set forth in Section 5.1 above, IAE’s obligation to reimburse Spirit for the direct and actual reasonable cost for such Engine lease shall terminate ***** after
Spirit’s Engine is returned to Spirit in accordance with Section 6.2 and such Engine is available for installation at Spirit’s facilities.
|
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|
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|
6.1
|
Spirit shall deliver Eligible Engines to IAE in a Testable Engine configuration and the Accessories related to such Eligible Engines shall be in a serviceable condition.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
7.
|
General Fleet Hour Agreement Services
|
IAE shall provide the following additional Fleet Hour Agreement services:
|
|
|
|
7.1
|
IAE shall supply Spirit with a V2500-A5 electronic Maintenance Management Plan that shall establish the maintenance requirements including LLP management, incorporation of applicable Service Bulletins and Aviation Authority Airworthiness Directive requirements and Eligible Engine removal planning (“
MMP
”). The MMP shall be revised and updated at least once a year, taking into account Spirit’s then-current operation in consultation with Spirit and fleet-wide operational experience, among other considerations. Additionally, an FHA Administration Manual may be mutually agreed between the parties, which shall establish a logistical plan and instructions for Spirit to facilitate performance by Spirit and IAE under this Agreement.
|
*****
|
|
|
|
7.2
|
Engine monitoring data program services set forth in Exhibit G;
|
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|
|
|
7.3
|
an FHA Manager based at IAE's offices who shall be the point of contact for Spirit, twenty four (24) hours per day seven (7) days per week, in respect of the services described in this Agreement. The following responsibilities of IAE shall normally be undertaken by the FHA Manager:
|
*****
|
|
|
|
8.1
|
Any costs incurred by IAE or the Maintenance Center not covered under this Agreement shall be Excess Work and shall be paid for by Spirit in accordance with Section 10.4 of this Agreement. Excess Work shall include any labor, material and other charges for Eligible Engines that arise from the following:
|
*****
|
|
|
|
8.2
|
In the event IAE, following consultation with Spirit, determines that an Eligible Engine requires a Shop Visit that will be considered entirely to be Excess Work, then the IAE FHA Manager shall so notify Spirit and IAE shall perform such work.
|
Spirit agrees to fulfill the following responsibilities and perform the following tasks and to reasonably cooperate with IAE in the performance of IAE’s responsibilities hereunder.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Spirit shall at its own expense maintain Eligible Engine electronic condition monitoring capabilities for each Eligible Engine, and with respect to information and data required for the performance of this Agreement, Spirit shall:
|
|
|
|
9.1.1
|
maintain, collect and provide to IAE performance trend monitoring data on each Eligible Engine in accordance with Exhibit G, maintain timely records in form and detail sufficient for the accurate and expeditious administration of the terms of this Agreement including the assessment of operating conditions relative to those set out in Section 10.6 of this Agreement;
|
|
|
|
|
9.1.2
|
make available, and provide access to IAE’s provider of electronic condition monitoring data analysis, all data collected in accordance with 9.1.1 above in an electronic format agreed to by IAE, as required for the operation and administration of this Agreement;
|
|
|
|
|
9.1.3
|
implement and follow the IAE reasonable recommendations resulting from analysis of the performance trend monitoring data;
|
|
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|
|
9.1.4
|
within ten (10) Business Days after the end of each month during the Period of Cover, report to IAE, in an electronic format agreed to by IAE, the hours and cycles flown, take off derate, and day temperature for each flight by each Eligible Engine during the preceding month;
|
|
|
|
|
9.1.5
|
ensure that all data reasonably required by IAE (including borescope reports) to facilitate the correction of any problem causing an Eligible Engine Removal is promptly made available to IAE;
|
|
|
|
|
9.1.6
|
provide for each Eligible Engine, no later than two (2) Business Days following Eligible Removal, a removal report containing the following information with respect to the Eligible Engine:
|
(a)
a record of Eligible Engine total time and cycles;
(b)
position on the aircraft, aircraft number, and date of Eligible Engine removal;
(c)
reason for removal, flight and ground indications prior to and related to removal;
(d)
module rework history with time since new, time since overhaul and time since repair provided such module was serviced outside of this Agreement;
(e)
any borescope reports detailing any open discrepancies;
(f)
total LLP time, LLP part numbers, serial numbers, cycle limits, time since new, cycles since new, remaining cycles, and take-off bump cycles, if applicable;
(g)
latest build standard record;
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
(h)
records with respect to any Accessories, including part numbers, serial numbers, time and cycles since new, overhaul, Repair, or bench test, and a description of prior work performed for each item unless Spirit directs IAE where to send such Accessories;
(i)
if applicable, a non-incident certification in customary form that the Eligible Engine and all parts installed thereon:
(i)
have been operated and maintained in accordance with applicable IAE and Airbus instructions and manuals;
(ii)
have not been operated by any government or military service except as civil aircraft on the civil register; and
(iii)
have not been installed on any engine or module that was subject to any incident, accident, major failure, fire, extreme stress, over temperature outside normal operation, or over-speed; and
(j)
any other data reasonably requested by IAE.
|
|
|
|
9.1.7
|
provide the Engine serial numbers within thirty (30) Business Days of acceptance by Spirit of each applicable Aircraft covered under this Agreement as described in Exhibit A of this Agreement, as amended, supplemented or otherwise modified from time to time; and
|
|
|
|
|
9.1.8
|
ensure Eligible Engines are available for FHA services in a Testable Engine configuration (when inducted at the Maintenance Center).
|
|
|
|
|
9.2
|
Engine Preparation for Transportation
|
For the purposes of the transportation of Eligible Engines as required under this Agreement, Spirit shall:
|
|
|
|
9.2.1
|
make Eligible Engines available for shipment at Spirit’s main base no later than ten (10) days prior to their scheduled induction date;
|
|
|
|
|
9.2.2
|
maintain in a serviceable condition one (1) IAE approved transportation stand per spare Eligible Engine plus an additional serviceable IAE approved transportation stand;
|
|
|
|
|
9.2.3
|
at the time of an Eligible Engine Removal, remove the Eligible Engine from the Aircraft, mount it on an IAE approved transportation stand and prepare such Eligible Engine for shipment, all in accordance with the procedures specified in the applicable IAE manuals; and
|
|
|
|
|
9.2.4
|
ensure that it does not remove from the Maintenance Center the IAE approved transportation stand on which the Eligible Engine was transported to the Maintenance Center so that such stand is available at the Maintenance Center on the day such Eligible Engine undergoes testing, to enable efficient movement of such Eligible Engine to the test cell and return transportation of such Eligible Engine to Spirit.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
9.3
|
Operation, Maintenance and Troubleshooting of Eligible Equipment
|
Spirit shall operate, maintain and troubleshoot the Eligible Equipment compliant with the applicable Airbus operating, maintenance and troubleshooting manuals, the then current MMP for Spirit, and to the extent applicable, IAE’s written instructions, including, but not limited to, service information letters, all operator wires and non-modification service bulletins, component maintenance manuals and Airworthiness Directives. Spirit shall incorporate the relevant provisions of the MMP into its then current airworthiness maintenance program.
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9.4.1
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Spirit shall cooperate with IAE to fulfill any reasonable administrative or other requirements of the Maintenance Center, including endorsement of Workscopes for Aviation Authority requirements within three (3) Business Days of receipt from IAE. If Spirit fails to respond, within five (5) Business Days, the Workscope will be deemed to be accepted.
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9.4.2
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Spirit shall accomplish quality audits and obtain certifications required by the Aviation Authority and IAE for accomplishment of work on the Eligible Engines at the Maintenance Center(s).
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Spirit shall not unreasonably withhold its approval of any “one time concessions” approved by IAE and the applicable FAA representative with respect to the Eligible Engines.
Spirit shall make payments as required in accordance with Section 10 of this Agreement.
The Parties shall maintain adequate records as required to meet their respective obligations and compliance with the applicable provisions of this FHA.
A Party shall not unreasonably condition or deny the other Party access to such adequate and applicable records for the administration of this Agreement. Spirit or its nominee may visit the premises of IAE or the Maintenance Center at a time mutually agreeable to the Parties and upon reasonable notice to IAE, for the purpose of quality assurance and to inspect the materials, parts, equipment and tools being used, the work being performed, and to review the quality assurance system in use by IAE and the Maintenance Center.
If IAE or its nominee requires access to the premises of Spirit under this FHA it shall provide reasonable written notice to Spirit and such visit or inspection will be at a time mutually agreeable to the Parties.
Each Party will comply and ensure that its personnel comply with the other Party’s conduct policies, rules, regulations and directions governing the conduct of visitors upon their premises.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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9.8
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Acceptance and Operation
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Spirit shall take or, as applicable, have taken delivery of all of the Aircraft and Eligible Engines in accordance with the schedule set forth in Exhibit A to this Agreement, as amended, supplemented or otherwise modified from time to time, and shall operate the Aircraft and Eligible Engines in regular commercial service as contemplated by Section 10.6 below for the duration of the Period of Cover, subject to Section 11 hereto.
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9.9
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Provision of Serviceable Accessories
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Spirit shall be responsible for ensuring that each Eligible Engine at the Maintenance Center for a Shop Visit is supported by full suite of serviceable Accessories. In the event that the repair or replacement of an Accessory for an Eligible Engine delays the completion of the Shop Visit for such Eligible Engine, such delay shall be considered an Excusable Delay. Alternatively Spirit may request the use of units provided by the Maintenance Center to permit the testing of the Eligible Engine in accordance with Section 8.1.11 above, to the extent the Maintenance Center has such capability.
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10.
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FHA Rates and Payment
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10.1.1
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The FHA Rate for Restoration Shop Visit Coverage for Eligible Engines during the Period of Cover shall be as follows:
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(a)
For V2524-A5 rated Eligible Engines ***** per Eligible Engine Flight Hour;
(b)
For V2527-A5 rated Eligible Engines ***** per Eligible Engine Flight Hour; and
(c)
For V2533-A5 rated Eligible Engines ***** per Eligible Engine Flight Hour.
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10.1.3
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The FHA Rate for Miscellaneous Shop Visit Coverage for Eligible Engines for the first ***** of each Eligible Engine’s Period of Cover shall be ***** per Eligible Engine Flight Hour.
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10.1.4
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The FHA Rate for Miscellaneous Shop Visit Coverage for Eligible Engines each year commencing with the ***** for each Eligible Engine during the Period of Cover shall be as follows:
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(a)
For V2524-A5 rated Eligible Engines ***** per Eligible Engine Flight Hour;
(b)
For V2527-A5 rated Eligible Engines ***** per Eligible Engine Flight Hour; and
(c)
For V2533-A5 rated Eligible Engines ***** per Eligible Engine Flight Hour;
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
10.1.7
*****
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10.4
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Excess Work Invoices
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10.4.1
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Charges for Excess Work shall be invoiced to Spirit by IAE as such Excess Work is performed in accordance with rates identified in Exhibit H.
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10.4.2
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In the event IAE determines that an Eligible Engine requires a Shop Visit that will be considered entirely to be Excess Work, and the Workscope for such Shop Visit is equal to or greater than a level of work that would be performed at a Restoration Shop Visit, then:
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(a)
IAE may invoice Spirit its reasonable estimate of the cost of any Excess Work prior to commencement, or during the execution, of such Excess Work. IAE shall invoice Spirit for the balance of the cost of any Excess Work upon receipt of the corresponding invoice from the Maintenance Center (or promptly issue a credit to Spirit’s account with IAE for any excess payment received from Spirit); and
(b)
the payment terms as set forth in Section 10.7.1 shall apply.
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10.6.1
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The FHA Rates are predicated upon Spirit:
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(a)
maintaining within its fleet of Aircraft an annual average flight cycle of: ***** hours for V2524-A5 powered Aircraft, ***** hours for V2527-A5 powered Aircraft, and ***** hours for V2533-A5 powered Aircraft (each calculated from the moment the wheels of an Aircraft, on which any Eligible Engine is installed, leave the ground on take-off to the moment when the wheels of such Aircraft touch the ground on landing);
(b)
maintaining an annual average utilization of ***** hours per V2524-A5 powered Aircraft, ***** hours per V2527-A5 powered Aircraft, and ***** hours per V2533-A5 powered Aircraft;
(c)
maintaining an average engine thrust derate of: ***** for V2524-A5 powered Aircraft, ***** for V2527-A5 powered Aircraft, and ***** for V2533-A5 powered Aircraft, all relative to the name plate thrust rating;
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
(d)
maintaining an average ambient temperature for take-off no greater than: ***** for V2524-A5 powered Aircraft, ***** for V2527-A5 powered Aircraft, and ***** for V2533-A5 powered Aircraft;
(e)
having its main base located at Fort Lauderdale, Florida, USA;
(f)
Spirit operating each Eligible Engine at its originally installed thrust rating (unless otherwise agreed by the Parties);
(g)
acquiring all of the Firm Aircraft and Firm Spare Engines as set forth in Section 9.8;
(h)
after taking delivery of the Spare Engines in accordance with Exhibit A, maintaining a minimum ratio of ***** Spare Engines to installed Engines for its Aircraft fleet; operating and maintaining the Aircraft and Eligible Engines in accordance with Airbus’, IAE’s, and other applicable OEM’s technical manuals and the eMMP (including Engine rebuild requirements) for the duration of the Period of Cover;
(i)
owning, operating, and maintaining the Aircraft and Eligible Engines in regular commercial airline operation for the duration of the Period of Cover;
(j)
*****; and
(k)
acquiring from IAE or its approved sources reasonably sufficient components, parts, and spare Engines at the levels mutually agreed by IAE and Spirit to maintain proper support of the Eligible Engines and Aircraft.
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10.6.2
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In the event Spirit: (i) operates the Eligible Engines contrary to the preceding conditions, or (ii) wishes to include additional aircraft powered by V2500-A5 engines or additional V2500-A5 spare engines under this Agreement, then IAE, acting in good faith and in consultation with Spirit, may make reasonable and appropriate adjustments to the FHA Rates in accordance with the FHA Rate adjustment matrices set forth in Exhibit I (the “
FHA Rate Adjustment Matrices
”), which detail the effects of variations in derate, stage length, annual average utilization, and temperature on such FHA Rates. The FHA Rate Adjustment Matrices will be applied on an engine-by-engine basis at RSV induction.
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10.6.3
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In the event that an Eligible Engine leaves this Agreement for reasons beyond the control of Spirit, for example, an Eligible Engine is deemed damaged Beyond Economic Repair and is replaced by Spirit with another Engine, subject to prior written agreement by IAE (not to be unreasonably withheld, conditioned or delayed), the FHA Rates for that Engine and not for all Eligible Engines, will be adjusted.
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10.7.2
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Subject to Section 10.7.1 above, Spirit shall pay all invoices submitted by IAE under this Section 10 within ***** of receipt by Spirit.
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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10.7.3
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Spirit undertakes that IAE shall receive the full undisputed amount of payments falling due under this Section 10, without any withholding or deduction whatsoever. If Spirit has a reasonable, good faith dispute with an Excess Work charge from IAE, Spirit will promptly notify IAE of such dispute in writing detailing the grounds for such dispute, but not later than fifteen (15) Business Days after receipt of such Excess Work charge. The Parties agree to use their reasonable, diligent and good faith efforts to reach a mutually agreeable resolution to such dispute.. The Parties agree to use their reasonable, diligent and good faith efforts to reach a final resolution of the disputed Excess Work charge including, if necessary, elevation of the issue to each Party’s senior management.
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10.7.4
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All payments under this Section 10 shall be made by electronic transfer and shall be deposited not later than the due date of payment with:
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*****
or to such other account in the United States as IAE may from time to time designate in writing, which designation shall be effective upon receipt by Spirit of such notice.
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10.7.5
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Should Spirit fail to make any material payments to IAE required as set forth in this Section 10 or should Spirit fail to make any material payments to IAE when due under any other agreement between IAE and Spirit and such amount is not subject to a good faith dispute between the Parties, then, notwithstanding any rights which IAE may have in contract or in law, IAE reserves the right to (a) assess interest on such late payment at the rate of the greater of ***** or the New York Citibank prime rate plus ***** per annum from the date the payment was due to be made until the date such payment is received by IAE, (b) suspend all work on any and all Eligible Engines then currently at the Maintenance Center pursuant to this FHA and/or (c) hold Eligible Engines in IAE’s possession or control.
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10.8
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Taxes and Other Like Charges
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10.8.1
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In addition to amounts stated to be payable by Spirit pursuant to this Agreement, Spirit shall pay any and all imposts, taxes, duties, levies, fees, assessments or other like charges (excluding any income, gains, or excess profit, franchise and similar taxes levied on the part of IAE, any Maintenance Center or their respective Affiliates and subcontractors,) which may be imposed by any government or taxing agency thereof arising from performance by IAE or its subcontractors in connection with this Agreement.
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10.8.2
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All amounts stated to be payable by Spirit pursuant to this Agreement exclude any value added tax, sales tax or similar such tax. In the event that the supply of goods or services under this Agreement is chargeable to any value added tax, sales tax or similar such tax will be borne by Spirit, subject to the receipt of any appropriate documentation that may be required to enable or assist Spirit to claim or verify any tax credit, set off, rebate or refund in respect of such taxes paid or payable in connection with supplies under this Agreement.
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10.8.3
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If either IAE or Spirit becomes aware of any taxes set forth in Sections 10.8.1 and 10.8.2 above, the relevant Party shall promptly notify the other Party, and both parties agree to consult in good faith and take such other reasonable steps in order to mitigate the tax in question.
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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12.
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Warranties; Limitation of Liability
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12.1
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IAE warrants the work performed by a Maintenance Center at the final Shop Visit for each Eligible Engine under this Agreement shall be free from defects in materials and workmanship as follows: If Spirit demonstrates to the reasonable satisfaction of IAE that a defect in the work performed on a Part has caused damage to such Part or any other Part, and Spirit provides written notice to IAE of such damage within ***** or within ***** after installation of the corresponding Eligible Engine on an Aircraft, or if not installed on an Aircraft, within ***** after delivery of the Eligible Engine from the applicable Shop Visit, whichever occurs first, IAE shall, as its sole responsibility for such defect, repair such damage at IAE’s own cost and expense. Transportation charges for the return of defectively serviced goods to IAE or the Maintenance Center, and their reshipment to Spirit and risk of loss thereof shall be borne by IAE only if such goods are returned in accordance with reasonable written shipping instructions from IAE.
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12.2
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IAE warrants to Spirit that it shall convey good title to the new Parts sold hereunder. IAE's liability and Spirit’s remedy under this warranty are limited to the removal of any title defect or, at the election of IAE, to the replacement of the new Parts or components thereof which are defective in title; provided, however, that the rights and remedies of the Parties with respect to patent infringement shall be limited to the provisions of Section 15 of this Agreement.
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Spirit warrants that title to Parts removed from Eligible Engines by the Maintenance Center shall pass immediately to IAE free and clear of all security interests and rights of Spirit or others at the time that title to the replacement Part passes to Spirit.
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12.3
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THE FOREGOING WARRANTIES TOGETHER WITH THE EXPRESS REMEDIES PROVIDED TO SPIRIT IN ACCORDANCE WITH THIS AGREEMENT, ARE EXCLUSIVE AND ARE GIVEN BY IAE IN LIEU OF (A) ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE; AND (B) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM, OR REMEDY IN STATUTE, CONTRACT, TORT OR STRICT LIABILITY AGAINST OEM OR ITS AFFILIATES, WHETHER OR NOT ARISING FROM THE NEGLIGENCE, ACTUAL OR IMPUTED (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), OF IAE OR ITS AFFILIATES, STOCKHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, PERMITTED ASSIGNS AND AGENTS.
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12.5
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For purpose of this Section 12, “
IAE
” shall be deemed to include IAE International Aero Engines AG, Pratt and Whitney, a division of United Technologies Corporation, Pratt & Whitney Aero Engines International GmbH, Japanese Aero Engine Corporation, MTU Aero Engines GmbH, and the respective directors, officers, employees and agents of each.
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IAE shall not be charged with any liability for delay in the performance of any of its obligations when such delay is caused by acts of God or the public enemy, compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
proves to be invalid, fires, riots, labor disputes, unusually severe weather, or any cause beyond the reasonable control of IAE, or by delays of IAE’s suppliers for any of the same or similar causes. To the extent that such causes actually delay performance on the part of IAE, the time for the performance shall be extended for as many days as are required to obtain removal of such causes. This provision shall not, however, relieve IAE from using its reasonable efforts to avoid or remove such causes and continue performance with reasonable dispatch whenever such causes are removed (“
Excusable Delay
”).
If Spirit fails to comply with the requirements set forth in Section
9
, and such failure or non-approval, as applicable causes the Maintenance Center to reasonably reschedule or delay the induction or completion of a Shop Visit for an Eligible Engine, then such delay shall constitute an Excusable Delay for IAE.
Spirit and IAE agree that it is not the intention to provide duplicate benefits under the terms of this Agreement and the Existing Fleet GTA or under any other arrangement between IAE or IAE’s suppliers or Airbus and Spirit. In the event of any such duplication of benefits, Spirit may, at the relevant time in respect of the relevant circumstances receive any one such benefit (at Spirit’s discretion) to the exclusion of all other duplicate benefits.
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15.
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Intellectual Property
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15.1
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IAE shall conduct, at its own expense, the entire defense of any claim, suit or action alleging that, without further combination, the use or resale by Spirit or any subsequent purchaser or user of the Parts delivered hereunder directly infringes any United States patent or any patent of any other country that is a signatory to Article 27 of the Convention of International Aviation signed by the United States at Chicago on December 7, 1944, in which Spirit is authorized to operate, but only on the condition that:
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15.1.1
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IAE receives prompt written notice of such claim, suit or action and has full opportunity and authority to assume the sole defense thereof, including settlement and appeals, and all information available to Spirit or subsequent purchaser or user for such defense; provided, however, IAE shall not agree to any settlement pursuant to which any fault is attributed to Spirit, without the prior written consent of Spirit;
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15.1.2
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such new Parts are made according to a specification or design furnished by IAE or, if a process patent is involved, the process performed with such Parts if recommended in writing by IAE; and
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15.1.3
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the claim, suit or action is brought against Spirit.
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15.2
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Provided all of the foregoing conditions have been met, IAE shall, at its own expense, either settle said claim, suit or action or shall pay all damages, excluding consequential damages and costs awarded by the court thereon, and, if the use or resale of such new Parts is finally enjoined, IAE shall, at IAE’s option:
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15.2.1
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procure for Spirit the right to use and resell the new Parts,
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15.2.2
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replace them with equivalent non-infringing Parts,
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15.2.3
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modify them so they become non-infringing but equivalent, or
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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15.2.4
|
remove them and refund the purchase price and any additional amount necessary to replace the same with equivalent, non-infringing Parts (less a reasonable allowance for use, damage and obsolescence).
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15.3
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If a claim, suit or action is based on a design or specification furnished by Spirit or on the performance of a process not recommended or approved in writing by IAE, or on the use or sale of the Parts delivered hereunder in combination with other new parts not delivered to Spirit by IAE, Spirit shall indemnify and save IAE harmless therefrom.
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This Agreement shall not be amended, changed, or modified in any way other than by agreement in writing, signed by the Parties hereto after the date of this Agreement, which is expressly stated to amend this Agreement.
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17.1
|
Except as other agreed herein, Spirit may not assign in whole or part any of its rights or obligations under this Agreement without the written consent of IAE (such consent not to be unreasonably withheld).
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17.4
|
IAE may, without recourse, assign its rights and/or delegate its obligations under this Agreement to any subsidiary or affiliate of IAE or United Technologies Corporation, or in connection with a merger, consolidation, reorganization, or voluntary sale or transfer of its assets; provided that such assignee/delegate is: (i) solvent at the time of such transfer and (ii) authorized by the applicable regulatory authorities, as necessary, to perform or procure the performance of all obligations being delegated/assigned; and (iii) able, in IAE’s sole, reasonable discretion, to make all payments required by IAE to be made to Spirit under this Agreement.
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Any notice to be served pursuant to this Agreement shall be sent by registered mail, by internationally recognized overnight courier, or by facsimile (with the original notice sent by registered mail or internationally recognized overnight courier) to the applicable address indicated in Exhibit F.
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19.
|
Exclusion of Other Provisions and Previous Understandings
|
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19.1
|
This Agreement is the sole and entire agreement of the Parties with respect to the Eligible Engines and the subject matter hereof and shall apply to the exclusion of any other provisions on or attached to or otherwise forming part of any order form of Spirit, or any acknowledgment or acceptance by IAE, or of any other document which may be issued by either Party relating to such services and the Eligible Engines.
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19.2
|
The Parties agree that neither of them have placed any reliance whatsoever on any representations, agreements, statements or understandings made prior to the signature of this Agreement, whether orally or in writing, relating to such services, other than those expressly incorporated in this Agreement, which has been negotiated on the basis that its
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
provisions represent their entire agreement relating to such services and shall supersede all such representations, agreements, statements and understandings.
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20.
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Termination, Expiration and Events of Default
|
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20.1
|
Bankruptcy Insolvency
|
Either Party shall have the option, at its sole discretion, to terminate this Agreement upon the occurrence of any of the following events: (a) a receiver or trustee is appointed for any of the other Party’s property, or (b) the other Party is adjudicated or voluntarily becomes bankrupt under any bankruptcy or winding up laws or other similar legislation, or (c) the other Party becomes insolvent or makes an assignment for the benefit of creditors.
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20.2
|
Failure to Make Payments or to Meet Obligations
|
|
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20.2.1
|
If Spirit fails to make any payment of a material amount, due and owing to IAE as set forth in Section 10 of this Agreement or any other agreement between the Parties (including any late interest due thereon) and such amount is not the subject of a good faith dispute or fails to meet any other material obligation under this Agreement or any other agreement between the Parties, then, after notice to Spirit and the expiration of a ***** cure period, and without prejudice to any of IAE’s other rights which IAE may have in contract, at law, or in equity, IAE shall have the right to not to induct, to suspend all work on, or not to release from the Maintenance Center(s) any Eligible Engine until full payment is made by Spirit to IAE or such failure is corrected, as the case may be.
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20.2.2
|
If Spirit fails to take delivery of all of the Aircraft and Eligible Engines in accordance with the schedule set forth in Exhibit A to this Agreement, as amended, supplemented or otherwise modified from time to time, or fails to operate the Aircraft and Eligible Engines in regular commercial service as contemplated by Section 10.6 for the duration of the Period of Cover, in addition to any other rights which IAE may have in contract, at law, or in equity, IAE shall be entitled to make reasonable adjustments to the FHA Rates as appropriate based on the method of calculation used to derive the FHA Rates.
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20.2.3
|
A non-defaulting Party shall have the right to declare an event of default and terminate this Agreement: (i) if any default shall occur in the payment by the defaulting party of any material amount hereunder when and as the same becomes due and payable and such default continues, after notice from the non-defaulting Party for a period of ***** or more and is not the subject of a good faith dispute between the Parties, or (ii) for a failure by the defaulting Party to meet any other material obligation under this Agreement, and such failure has not been fully corrected within ***** after the non-defaulting Party has given notice of such failure to the defaulting Party and is not the subject of a good faith dispute between the Parties.
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This Agreement shall be effective from the day and year first before written until the end of the Period of Cover or until terminated pursuant to this Section 20. Notwithstanding the foregoing, Sections 20.4, 23, and 26 of this Agreement shall survive any expiration or termination of this Agreement.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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20.4
|
Effect of Termination or Expiration
|
Except as otherwise set out in this Section 20.4 and any rights or obligations arising under the applicable law, the rights and obligations of the Parties under this Agreement shall terminate upon the termination or expiration of this Agreement, and Spirit shall no longer be provided with fleet hour agreement coverage under the terms of this Agreement.
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20.4.1
|
Upon any termination or expiration of this Agreement, all liabilities and obligations (including payment obligations) that have accrued prior to such termination or expiration (including payment due for Excess Work) shall survive.
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20.4.2
|
Spirit shall pay to IAE the cost of any and all services which have been or are in the process of being carried out under the terms of this Agreement which have not been covered by payments made by Spirit under this Agreement plus a surcharge of the lesser of (i) ***** and (ii) the maximum amount allowed by law. Should Spirit terminate this Agreement under Section 20.1 or Section 20.2.3 above, IAE shall return any excess payments for services paid for, but not rendered. Such calculation shall be performed by IAE within sixty (60) Business Days of termination, shall be mutually approved by IAE and Spirit and shall be immediately due and payable by Spirit or IAE, as the case may be, upon receipt thereof.
|
Failure by either Party to enforce any term of this Agreement shall not constitute a waiver of such term.
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22.
|
Severability and Partial Invalidity
|
If any provision of this Agreement or the application thereof to either Party shall be invalid, illegal or unenforceable to any extent, the remainder of the Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law.
This Agreement shall be construed and the performance thereof determined in accordance with the laws of *****.
*****
Each Party agrees that it shall not issue any press release or make any public announcement regarding this Agreement without the written consent of the other Party. Spirit agrees that IAE may use Spirit’s authorized logo, service marks and trademarks for the purpose of confirming that Spirit is a customer of IAE. IAE agrees that Spirit may use IAE’s authorized logo, service marks and trademarks for the purpose of confirming that IAE is a supplier to Spirit. Except as expressly set forth above, neither Party may use the other Party’s logo, service marks and trademarks without the express written consent of the other Party.
Each of IAE and Spirit acknowledge and understand that certain commercial and financial information contained in or provided in connection with this Agreement is considered by the other to be
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
confidential. IAE and the Spirit each hereby agree, for the benefit of the other, that it shall treat the contents of this Agreement as confidential and shall not, without the prior written consent of the other, disclose or cause to be disclosed the terms hereof to any person except: (i) to its legal and financial advisors and auditors who are bound by written obligation of confidentiality, or (ii) as may be required by applicable law or governmental regulation, including federal and state securities laws, or pursuant to an order issued by any court or governmental authority having jurisdiction over Spirit or IAE as the case may be, provided that the Party being required to disclose shall, to the extent permitted by Applicable Law, give prior notice to the other Party in order that it may have every reasonable opportunity to contest such disclosure, and provided further that the Party being required to disclose shall use commercially reasonable efforts to assist the other to resist or narrow the required disclosure to the extent possible while still complying with such requirement.
Notwithstanding the foregoing, IAE shall be entitled to disclose the relevant terms of this Agreement on a need-to-know basis to the Maintenance Centers, provided that they are bound by similar confidentiality obligations and Spirit shall be entitled to disclose the terms of the same to its officers, directors, employees who have a need-to-know of such terms of this Agreement.
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26.
|
Compliance with All Applicable Laws and Regulations
|
|
|
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26.1
|
Export/Import. Spirit agrees that it will not, directly or indirectly, sell, export, re-export, transfer, divert, or otherwise dispose of any IAE goods, software, technical data (including products derived from or based on such technical data), or services received directly or indirectly from IAE to any Prohibited Party without obtaining prior authorization from the relevant government authorities as required pursuant to Export Laws.
|
“
Prohibited Parties
” means, collectively, those countries, and persons to whom the sale, export, re-export, transfer, diversion or other disposition of any IAE goods, software, technical data or services is prohibited by the applicable export laws and related regulations of the United States, German, British, Japanese, or European Union Governments.
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26.2
|
Other Laws and Regulations. Spirit agrees that it will abide by all applicable laws and regulations.
|
|
|
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26.3
|
Spirit shall indicate its compliance with the above on or before execution of this Agreement by completing and signing the End Use/End User Certificate form provided by IAE.
|
|
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27.
|
No Construction Against Drafter
|
This Agreement has been the subject of detailed negotiation between the Parties. If an ambiguity or question of the intent arises with respect to any provision of this Agreement, this Agreement will be construed as if drafted jointly by IAE and Spirit and no presumption or burden of proof will arise favoring or disfavoring either Party by virtue authorship of any of the provisions of this Agreement.
In no event shall either Party to this Agreement or either Party’s subsidiaries or affiliates, have any liability to any other Party hereto for any indirect, incidental, special, consequential, or punitive damages, including without limitation any damage to or loss of use, revenue or profit with respect to any Aircraft, Engines and/or Parts.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
IN WITNESS WHEREOF
the Parties hereto have caused this Agreement to be signed on their behalf by their authorized officers the day and year first before written:
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Agreed to and accepted on behalf of:
IAE International Aero Engines AG
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Agreed to and accepted on behalf of:
Spirit Airlines, Inc.
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By:
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/s/ Rick Deurloo
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By:
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/s/ Charles A. Rue
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Name:
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Rick Deurloo
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Name:
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Charles A. Rue
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Title:
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SVP Sales
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Title:
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VP Supply Chain
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit A
Aircraft and Spare Engine Delivery Schedules
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit A-1
Existing Aircraft
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Existing Aircraft No.
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Aircraft Type
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Engine Model
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Delivery Date
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Aircraft MSN
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ESN 1
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ESN 2
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1
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*****
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*****
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*****
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*****
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*****
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*****
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2
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*****
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*****
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*****
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*****
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*****
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*****
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3
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*****
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*****
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*****
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*****
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*****
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4
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*****
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5
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*****
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*****
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*****
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6
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*****
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7
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*****
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*****
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8
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*****
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*****
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*****
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*****
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*****
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*****
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9
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*****
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*****
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*****
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*****
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*****
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*****
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10
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*****
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*****
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*****
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*****
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*****
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*****
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11
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*****
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*****
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*****
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*****
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*****
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12
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*****
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*****
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*****
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13
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*****
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*****
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14
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*****
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*****
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*****
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15
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*****
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*****
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*****
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16
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*****
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*****
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*****
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*****
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17
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*****
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*****
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*****
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18
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*****
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*****
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*****
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*****
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19
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*****
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*****
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*****
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*****
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*****
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*****
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20
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*****
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*****
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*****
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*****
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*****
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21
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*****
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*****
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*****
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22
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*****
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23
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*****
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24
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25
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*****
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26
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*****
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27
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*****
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28
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*****
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29
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*****
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30
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31
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32
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33
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*****
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34
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35
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36
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37
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38
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*****
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39
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*****
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40
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*****
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41
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*****
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*****
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*****
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*****
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*****
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*****
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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42
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*****
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*****
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*****
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43
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*****
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44
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*****
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45
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*****
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46
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*****
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47
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*****
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*****
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*****
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*****
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*****
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*****
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*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit A-2
Firm Aircraft
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Existing Aircraft No.
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Aircraft Type
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Engine Model
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Delivery Date
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Aircraft MSN
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ESN 1
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ESN 2
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1
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*****
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*****
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*****
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*****
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*****
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*****
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2
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*****
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*****
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*****
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*****
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*****
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*****
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3
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*****
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*****
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*****
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*****
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*****
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*****
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4
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*****
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*****
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*****
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*****
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*****
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*****
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5
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*****
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*****
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*****
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*****
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*****
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*****
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6
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*****
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*****
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*****
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*****
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*****
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*****
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7
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*****
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*****
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*****
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*****
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*****
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*****
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8
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*****
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*****
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*****
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*****
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*****
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*****
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9
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*****
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*****
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*****
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*****
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*****
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*****
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10
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*****
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*****
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*****
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*****
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*****
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*****
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11
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*****
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*****
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*****
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*****
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*****
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*****
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12
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*****
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*****
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*****
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*****
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*****
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*****
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13
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*****
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*****
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14
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*****
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*****
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*****
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*****
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*****
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15
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*****
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*****
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*****
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*****
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*****
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*****
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16
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*****
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*****
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*****
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*****
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*****
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*****
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17
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*****
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*****
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*****
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*****
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*****
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*****
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18
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*****
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*****
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*****
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*****
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*****
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19
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*****
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*****
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*****
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*****
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20
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*****
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*****
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*****
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*****
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21
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*****
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*****
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*****
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*****
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*****
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*****
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*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit A-3
Spare Engines
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Spare Engines
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No.
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Engine Model
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Delivery Date
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ESN
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Firm Spare Engines
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1
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*****
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*****
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*****
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2
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*****
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*****
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*****
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3
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*****
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*****
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*****
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4
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*****
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*****
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*****
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5
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*****
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*****
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*****
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6
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*****
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*****
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*****
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7
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*****
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*****
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*****
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8
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*****
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*****
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*****
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9
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*****
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*****
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*****
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10
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*****
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*****
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*****
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11
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*****
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*****
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*****
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Option Spare Engines
|
1
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*****
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*****
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*****
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2
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*****
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*****
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*****
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3
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*****
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*****
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*****
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4
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*****
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*****
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*****
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*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit B
FHA Escalation Formula
1.
FHA Rates will be subject to annual escalation in accordance with the formula set forth below:
*****
Where:
FHA Rates are the applicable base values at the Base Month as set forth in the Contract;
“Base Month” shall mean the base month and year specified for the FHA rates in the Contract;
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit C
Accessories
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ATA code
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Description
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Units Per Engine
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OEM
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit D
V2500 Turbofan Engine Model Specifications
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit E
Powerplant Description
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*****
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*****
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*****
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*****
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*****
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*****
|
*****
|
*****
|
*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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*****
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*****
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*****
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*****
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*****
|
*****
|
*****
|
*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit F
Addresses
1.
SPIRIT ADDRESSES
(a)
Address for Notices:
Legal Department
Spirit Airlines, Inc.
2800 Executive Way
Miramar, Florida 33025
Fax: (954) 447-7854
(b)
Address for Invoices:
Accounts Payable Department
Spirit Airlines, Inc.
2800 Executive Way
Miramar, Florida 33025
Fax: (954) 447-7855
2.
IAE ADDRESSES
(a)
Address for Notices:
Attention: Chief Legal Officer & Company Secretary
IAE International Aero Engines AG
400 Main Street, M/S 121-10
East Hartford, CT 06108
Fax: (860) 565-4003
(b)
Address for Invoices:
Attention: Accounts Receivable Manager
IAE International Aero Engines AG
400 Main Street, M/S 121-10
East Hartford, CT 06108
Fax: (860) XXX-XXXX
(c)
Address for all Other FHA Matters:
Attention: Customer Fleet Director for Spirit
IAE International Aero Engines AG
400 Main Street, M/S 121-10
East Hartford, CT 06108
Fax: (860) XXX-XXXX
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit G
Engine Monitoring Services
1.
IAE will provide the following Engine health monitoring services (“
Services
”) through the ADEM system:
(a)
ENGINE TREND MONITORING
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(i)
|
Provide processing of in-flight engine data received from Operator into IAE’s EHM database as provided per the data input and transmission requirements set forth in Section
3
herein. All processed data will be provided to the Operator via IAE’s web portal. Daily updates require web portal access described in Section
1
(b) herein.
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(ii)
|
Provide automated mechanical exceedance reporting for those Aircraft that are equipped with required on-board hardware and software.
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(iii)
|
Provide technical analysis of EHM Eligible Engines’ performance data and report anomalies indicated by such data to designated Operator personnel as required.
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(iv)
|
Provide access to monthly EHM Eligible Engine operating trend analysis report covering post EHM Commencement Date operations to assist Operator in the planning and scheduling of EHM Eligible Engines for shop visits.
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(v)
|
Provide automated alert notification of parameters that have exceeded level and rate change limits.
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(vi)
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Provide access to alert details reports that identify Aircraft and Eligible Engines by serial number and provide the date, time, magnitude and details of occurrences when such Eligible Engine exceeds specific performance parameters and provide the ability to store comments associated with a given alert.
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(vii)
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Provide exhaust gas temperature (subject to data availability) Watch-Lists, updated monthly utilizing data received from Operator to assist Operator in scheduling Eligible Engine removals for maintenance purposes. The Watch-Lists provide an engine ranking and predicted removal date for a given Eligible Engine based on the measured parameter and deterioration rate to assist with proactive on-wing management and maintenance planning.
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(viii)
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Provide access to the following engine performance parameter trend plots that are updated real-time as new in-flight engine data is received from Operator:
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•
EGT Margin
•
Sea Level Outside Air Temperature Limits
•
N1 and N2 Shaft Speeds
•
Fuel Flow
•
Vibration
•
Oil Temperature
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
•
Oil Pressure
•
P2.5, T2.5, P3.0, T3.0, P12.5
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(ix)
|
Upon special request, raw in-flight engine data can be supplied to the Operator.
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(x)
|
Input data files and d individually processed records will be stored for a minimum period of five (5) years.
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(b)
WEB PORTAL ACCESS
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(i)
|
Provide twenty-four (24) hour per day access to reports and processed information, provided to under Section
1
herein, through a secure web portal created and maintained by IAE. Such web portal access shall be created and provided to Operator approximately thirty (30) days from the execution of this Agreement. Operator must meet IAE defined requirements for access as detailed in Section
2
herein. IAE will use all reasonable efforts to ensure a service availability target of 96% when measured on an annual basis and that down time of the system is no longer than one (1) business day for any one incident.
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(ii)
|
IAE shall provide Services under the terms of this Agreement contingent upon the timely receipt of data required by IAE from Operator. It is understood between the parties that the ability of IAE to provide timely and accurate reports and processed information through these web-based services is dependent upon the quality and timeliness of the data received from Operator.
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(iii)
|
If Email, or pager or cell phone alert notifications are required by the Operator, the Operator shall be responsible for acquiring and maintaining the required pager and cell phone hardware and software and pay any associated communications fees. It is the Operator’s responsibility to establish an alert notification contact list and advise IAE of any changes.
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2.
ACCESSIBILITY
(a)
To facilitate internet portal access, Operator is required to maintain the following:
(i)
internet access;
(ii)
Internet Explorer version 5.5 or higher; (
iii
) 128 bit Secure Socket Layer (“SSL”) encryption capability; and
(iv)
a minimum internet speed of 56K bits per second to access the internet portal.
(b)
All information being transmitted through the Internet portal will be protected using SSL encryption. In addition, each user of the Internet portal will be authenticated at logon with a unique user identification and password. Once authenticated to the Internet portal, Operator will only be allowed to access the information that Operator and IAE mutually agree a specific user may review. IAE shall review security requirements for web portal access from time to time to ensure an appropriate level of data protection. Updated security requirements shall be communicated to Operator on a timely basis.
3.
TRANSMISSION OF DATA BY OPERATOR
(a)
Operator shall provide all data requested by IAE in order to perform the Services, including but not limited to the date and time the data was recorded, aircraft and engine
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
number, engine position, altitude and mach (or air speed), total air temperature, engine pressure ratio, rotor speeds, fuel flow, oil temperature, oil pressure, mechanical exceedances and pertinent maintenance actions (EHM Eligible Engine changes, sensor changes, other items that may impact engine performance). Operator shall electronically transmit engine condition monitoring data to IAE’s designated ground station via air-to-ground service providers (e.g., ARINC and SITA) or via such other routing as the parties mutually agree.
(b)
Using the facilities available within IAE’s V2500 engine monitoring program services, the Operator shall provide feedback of on-wing maintenance actions taken as a result of an alert notification as provided in accordance with Section 1(a)(v) herein.
4.
LIMITATION OF LIABILITY
IAE MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES SET FORTH IN THIS Exhibit G. OPERATOR ACKNOWLEDGES AND AGREES THAT IT IS SOLELY RESPONSIBLE FOR MAKING ALL DECISIONS IN RESPECT TO THE SERVICES. IAE EXPRESSLY DISCLAIMS AND OPERATOR HEREBY RELEASES IAE FROM ANY LIABILITY, INCLUDING BUT NOT LIMITED TO LIABILITY FOR DIRECT, INDIRECT, CONSEQUENTIAL, OR INCIDENTAL DAMAGES ARISING OUT OF OR ASSOCIATED WITH THE SERVICES, RECOMMENDATIONS OR FAILURE TO MAKE RECOMMENDATIONS BY IAE, OR ANY DECISIONS MADE BY OPERATOR WITH RESPECT TO THE SERVICES. Should Operator fail to comply with operating and maintenance instructions or recommendations resulting from the Services, authorized or issued by IAE and current at the time, then IAE shall not be held liable for any costs associated with any Engine, Module or Part failure arising from Operator’s failure to comply with IAE’s recommendations. Any such event shall also be considered ineligible against any warranties or guarantees provided by IAE and resulting repairs and part replacements shall be carried out and charged as Excess Work under the applicable IAE Fleet Hour Agreement.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit H
Excess Work Rates
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Item
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Basis
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Rates/Fees
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*****
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*****
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*****
(4)
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*****
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*****
|
*****
|
|
*****
|
*****
(1)
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*****
(2)
|
|
*****
|
*****
|
*****
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|
*****
|
*****
|
*****
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|
*****
|
*****
|
*****
|
|
*****
|
*****
(3)
|
*****
(4)
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|
*****
|
*****
|
*****
(4)
|
Notes:
1.
*****
2.
*****
3.
Where units per Engine quantities listed in Exhibit C are greater than *****, a single ***** fee per ATA line item shall still apply. This charge will also cover the packing, one-way transportation and coordination of Accessories removed and sent for vendor repair.
4.
The above rates and fees are expressed in United States Dollars and are subject to escalation from the base month of January 2012 in accordance with the formula set forth in Exhibit B.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit I
FHA Rate Adjustment Tables
The FHA Rates have been calculated based on Spirit meeting the General Conditions detailed in Section 10.6 of the Agreement.
To the extent that any operating parameters vary, the applicable charges shall be generated from the rate change tables contained in this Exhibit I. In the event that Spirit’s actual operating conditions fall between points in the FHA Rate Adjustment Matrices, IAE shall use the Microsoft Excel spreadsheets referenced in Exhibit I hereto to calculate the applicable FHA Rate using linear interpolation (the “
FHA Rate Interpolation Tool
”). If the actual utilization parameters fall between two separate tables, the table with the higher factor shall apply.
If any of the actual operating parameters fall outside the coverage of the tables contained in this Exhibit I, the Parties shall agree a rate adjustment based on the same method of calculation used to derive the tables (and not based on simple extrapolation).
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit I-4
FHA Rate Interpolation Tool
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
400 Main Street, M/S 121-10
East Hartford, CT 06108 USA
October 1, 2013
Spirit Airlines, Inc.
2800 Executive Way
Miramar, Florida 33025
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Subject:
|
Side Letter No. 1 to the Amended and Restated V2500-A5 Fleet Hour Agreement between IAE International Aero Engines AG and Spirit Airlines, Inc., dated October 1, 2013
|
Gentlemen:
We refer to (i) the Amended and Restated Fleet Hour Agreement dated October 1, 2013 between IAE and Spirit, as amended from time to time (the “Existing Fleet FHA”) and (ii) Side Letter No. 2, dated October 1, 2013 (“
Side Letter No. 2
”) to the V2500-A5 General Terms of Sale dated October 1, 2013 between IAE and Spirit, as amended from time to time (the “New Fleet Contract”). Unless expressly stated to the contrary, and to the extent possible, terms used in this Side Letter No. 1 (“
Side Letter No. 1
”) shall have the same meaning given to them in the Existing Fleet FHA.
In consideration of Spirit purchasing fifteen (15) Incremental Aircraft, as defined in Side Letter No. 2, the Parties agree as follows:
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1.
|
Existing Fleet – *****
|
Section 11.1 of the Existing Fleet FHA shall be deleted in its entirety and shall be replaced with the following:
*****
Except as expressly amended by this Side Letter No. 1, all provisions of the Existing FHA remain in full force and effect.
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Agreed to and accepted on behalf of:
IAE International Aero Engines AG
|
|
Agreed to and accepted on behalf of:
Spirit Airlines, Inc.
|
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By:
|
/s/ Rick Deurloo
|
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By:
|
/s/ Edward Christie
|
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Name:
|
Rick Deurloo
|
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Name:
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Edward Christie
|
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Title:
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SVP Sales
|
|
Title:
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SVP & CFO
|
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Date:
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10/2/13
|
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Date:
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10/2/13
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
EXECUTION VERSION
V2500
®
GENERAL TERMS OF SALE
BETWEEN
IAE INTERNATIONAL AERO ENGINES AG
AND
SPIRIT AIRLINES, INC.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
TABLE OF CONTENTS
1. Definitions 4
2. Installed and Spare Engine Purchase Commitments 5
2.1 Agreement to Purchase Aircraft from Airbus 6
2.2 Agreement to Purchase Spare Engines from IAE 6
2.3 Type Approval and Changes in Specification 6
2.4 Inspection and Acceptance 7
2.5 Delivery, Shipping, Title and Risk of Loss or Damage 8
2.6 Price 8
2.7 Payment 8
3. Spare Parts Provisions 9
3.1 Intent and Term 9
3.2 ATA Standards 11
3.3 Stocking of Spare Parts 11
3.4 Lead Times 11
3.5 Ordering Procedure 11
3.6 Modifications to Spare Parts 12
3.7 Inspection 12
3.8 Delivery and Packing 12
3.9 Prices 13
3.10 Payment 13
3.11 Conflict 14
4. Warranties, Guarantees and Liabilities 19
5. Product Support Services 20
6. Miscellaneous 20
6.1 Delay in Delivery 20
6.2 Patents 20
6.3 ***** 22
6.4 Non-Disclosure and Non-Use 22
6.5 Taxes 22
6.6 Amendment 23
6.7 Assignment 23
6.8 Insurance 23
6.9 Exhibits 23
6.10 Headings 23
6.11 Governing Law and Forum 24
6.12 Compliance with All Applicable Laws and Regulations 24
6.13 Notices 24
6.14 Exclusion of Other Provisions and Previous Understandings 25
6.15 Conditions Precedent 25
6.16 Termination Events 26
6.17 Effect of Termination 27
6.18 No Construction Against Drafter 27
6.19 Damages 27
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit A Contract Specifications 26
Exhibit A-1 V2524-A5 Turbofan Engine Model Specification 26
Exhibit A-2 V2527-A5 Turbofan Engine Model Specification 26
Exhibit A-3 V2533-A5 Turbofan Engine Model Specification 26
Exhibit B Schedules 27
Exhibit B-1 Aircraft Delivery Schedule 28
Exhibit B-2 Spare Engine Price and Delivery 29
Exhibit B-3 Escalation Formula 30
Exhibit C Product Support Plan 31
Exhibit D Warranties 50
*****
Exhibit E Guarantees 51
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
THIS CONTRACT is made this 1
st
day of October, 2013, (together with all exhibits, schedules, appendices and side letters thereto, the “New Fleet
Contract
”),
BETWEEN
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IAE INTERNATIONAL AERO ENGINES AG
|
a joint stock company organized and existing under the laws of Switzerland, with a place of business at 400 Main Street, M/S 121-10, East Hartford, Connecticut 06108, USA, (hereinafter called “
IAE
”) and
|
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SPIRIT AIRLINES, INC.
|
a corporation organized and existing under the laws of Delaware, whose principal place of business is at 2800 Executive Way, Miramar, Florida 33025 (hereinafter called “
Spirit
”).
|
WHEREAS:
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A.
|
Spirit has firmly ordered (i) thirty (30) new A320 family aircraft from Airbus all to be powered by IAE V2500-A5 engines and (ii) four (4) new V2500-A5 spare engines from IAE all of which will, subject to Spirit’s rights hereunder, be operated by Spirit (the “
New Engine Fleet
”);
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B.
|
IAE and Spirit have entered into a V-Services
SM
Fleet Hour Agreement dated October 1, 2013 for the provision of certain off-wing maintenance for the New Engine Fleet (the “
New Engine Fleet FHA
”);
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C.
|
IAE and Spirit previously entered into the Amended and Restated V2500® General Terms of Sale dated October 1, 2013 for sale and support of certain V2500-powered Airbus A320 family aircraft and V2500 spare engines already in operation with Spirit (the “
Existing Fleet GTA
”);
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D.
|
IAE and Spirit have also previously entered into an Amended and Restated V-Services
SM
Fleet Hour Agreement dated October 1, 2013 for the provision of certain off-wing maintenance for certain V2500-A5 engines already in operation with Spirit (the “
Existing Fleet FHA
”); and
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E.
|
IAE and Spirit now wish to agree upon terms whereby IAE will supply to Spirit V2500 engines, modules, spare parts, special tools, ground equipment, and product support services for the support and operation of the New Engine Fleet.
|
NOW THEREFORE IT IS AGREED AS FOLLOWS:
In this New Fleet Contract unless the context otherwise requires:
|
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1.1
|
“
Aircraft
” shall mean the thirty (30) new Airbus A320 family aircraft powered by new Engines firmly ordered and being acquired by Spirit from Airbus for delivery as set forth in Exhibit B-1
to this New Fleet Contract, as the same may be amended from time to time in accordance herewith.
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1.2
|
“
Airbus
” shall mean Airbus SAS, with its principal place of business at 1, Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France, together with its successors and assigns.
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1.3
|
“
Certification Authority
” shall mean the United States Federal Aviation Administration.
|
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1.4
|
“
Change Order
” shall have the meaning set forth in Section 2.3.1 hereto.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
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1.5
|
“
Engine(s)
” shall mean the IAE V2500 aero engine described in the applicable Specification(s).
|
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1.6
|
“
Initial Provisioning
” shall mean the establishment by Spirit of an initial stock of Spare Parts, Support Equipment, and Vendor Parts.
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1.7
|
“
Initial Provisioning Data
” shall mean information supplied by IAE to Spirit for Initial Provisioning purposes.
|
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1.8
|
“
Initial Provisioning Orders
” shall mean orders for Spare Parts and Support Equipment for the purpose of Initial Provisioning.
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1.9
|
“
Lead Time
” shall mean the period specified in the Spare Parts Catalog that represents the minimum time required between acceptance by IAE of an order by Spirit for Spare Parts and commencement of delivery of such Spare Parts.
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1.10
|
“
Service Bulletins
” shall mean those service bulletins containing advice and instructions issued by IAE to Spirit from time to time in respect of Engines.
|
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1.11
|
“
Spare Engines
” shall mean the Firm Spare Engines as defined in Section 2.2.1.
|
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1.12
|
“
Spare Parts
” shall mean spare parts for Engines as identified in the Spare Parts Catalog, excluding the items listed in the Specification as being items of supply by Spirit.
|
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1.13
|
“
Spare Parts Catalog
” shall mean the catalog published by IAE from time to time providing a description, Lead Time and price for Spare Parts available for purchase from IAE.
|
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1.14
|
“
Specification(s)
” shall mean the IAE Engine Specification(s) set forth in Exhibit A
to this New Fleet Contract, as the same may be amended, supplemented and/or updated from time to time.
|
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1.15
|
“
Supplies
” shall mean V2500 engines (including installed Engines and Spare Engines), Spare Parts, Vendor Parts, and Support Equipment.
|
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1.16
|
“
Support Equipment
” shall mean tools, and all equipment (including handling, transportation and ground equipment) to be supplied pursuant to this New Fleet Contract for use with the Aircraft and/or Spare Engines and not for installation on the Aircraft. Support Equipment does not constitute Spare Parts.
|
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1.17
|
“
Vendor Parts
” shall mean parts not manufactured by IAE, including accessories, described as “
Vendor Parts
” in Initial Provisioning Data. Vendor Parts do not constitute Spare Parts
.
|
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2.
|
Installed and Spare Engine Purchase Commitments
|
|
|
|
|
2.1
|
Agreement to Purchase Aircraft from Airbus
|
Spirit agrees to purchase the Aircraft from Airbus powered by new Engines for delivery according to the schedule set forth in Exhibit B-1
to this New Fleet Contract and agrees with IAE that Spirit will accept delivery of the Aircraft according to the schedule set forth in Exhibit B-1
to this New Fleet Contract, as the same may be amended, supplemented and/or updated from time to time.
|
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2.2
|
Agreement to Purchase Spare Engines from IAE
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
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2.2.1
|
Subject to the terms and conditions of this Agreement, Spirit hereby places a firm order with IAE for the purchase of four (4) new spare Engines (the “
Spare Engines
”) for delivery according to the schedule set forth in Exhibit B-2
to this New Fleet Contract, as the same may be amended, supplemented and/or updated from time to time.
|
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2.2.2
|
Except as otherwise set forth in the following paragraph, Spirit shall purchase an Engine storage bag and transportation stand from IAE for delivery with each Spare Engine. The prices for such equipment shall be the then-current price as set forth in the IAE spare parts catalog.
|
In the event that Spirit elects not to purchase a storage bag and transportation stand from IAE for delivery with any Spare Engine, Spirit shall provide such equipment to IAE at least ***** prior to the scheduled delivery date of the applicable Spare Engine(s). If for any reason Spirit has not delivered such equipment to IAE at least ***** prior to the scheduled delivery date of any applicable Spare Engine, then Spirit shall purchase such equipment from IAE.
|
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2.3
|
Type Approval and Changes in Specification
|
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2.3.1
|
Each of the Spare Engines will be manufactured to the standards set forth in the applicable Specification. After the date of this New Fleet Contract, the Spare Engines may be varied from the standards set forth in the Specification and other IAE manufacturing specifications from time to time by written change orders (each a “
Change Order
”), which shall set forth in detail:
|
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(a)
|
The changes to be made in the Spare Engines; and
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(b)
|
The effect (if any) of such changes on the Specification (including but not limited to performance and weight), on interchangeability of the Spare Engines in the airframe, on prices and on dates of delivery of the Spare Engines.
|
Change Orders shall not be binding on either party until signed by IAE and Spirit but upon being so signed shall constitute amendments to this New Fleet Contract.
|
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2.3.2
|
IAE may make any changes in the Spare Engines that do not adversely affect the Specification (including but not limited to performance and weight), interchangeability of the Spare Engines in the airframe, prices or dates of delivery of the Spare Engines. In the case of such permitted changes, a Change Order shall not be required or if issued shall not be binding until signed by IAE and Spirit.
|
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2.3.3
|
At the time of delivery of the Spare Engines there is to be in existence an FAA-issued “Type Approval Certificate” for the Spare Engines in accordance with the provisions of the Specification.
|
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2.3.4
|
The Specification has been drawn with a view to the requirements of the Certification Authority and the official interpretations of such requirements in existence at the date of this New Fleet Contract (such requirements and interpretations being hereinafter referred to as “
Current Rules
”). Subject to Section 2.3.2 above, IAE and Spirit agree that they will execute an appropriate Change Order in respect of any change required to the Spare Engines to enable such Spare Engines to conform to the requirements of the Certification Authority and the official interpretations of such requirements in force at the date of delivery of such Spare Engines.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
2.3.5
|
The price of any Change Order is to be paid by IAE in the case of changes required to conform to the Current Rules and by Spirit in any other case.
|
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|
2.4
|
Inspection and Acceptance
|
|
|
|
|
2.4.1
|
IAE shall ensure that each Spare Engine delivered to Airlines is new and conforms to the applicable Specification through the maintenance of procedures, systems and records approved by the airworthiness authority. An FAA-issued “
Authorized Release Certificate
” (FAA Form 8130-3, Airworthiness Approval Tag) or “
Certificate of Conformity
” (as the case may be) will be issued and signed by personnel authorized for such purposes.
|
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|
|
|
2.4.2
|
Subject to its rights under Section 2.4.4 below, upon delivery of a Spare Engine pursuant to Section 2.5.1 below for and the issuance of an Authorized Release Certificate or a Certificate of Conformity (as the case may be), Spirit shall be deemed to have accepted the relevant Spare Engine (and Engine storage bag and transportation stand, if purchased from IAE), and that the relevant Spare Engine conforms to the applicable Specification. IAE shall, upon written request from Spirit and subject to the permission of the appropriate governmental authorities, arrange for Spirit’s personnel to have reasonable access to the appropriate premises in order to examine the Spare Engines prior to the issue of conformance documentation and to witness Engine acceptance tests.
|
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|
|
|
2.4.3
|
Spirit’s acceptance or deemed acceptance will, however, in no way prejudice its warranties and support rights under this New Fleet Contract or the New Fleet FHA.
|
|
|
|
|
2.4.4
|
Notwithstanding the foregoing, upon delivery of a Spare Engine, Spirit shall have the right to inspect (including a borescope inspection) such Engine. In the event that Spirit finds a non-conformance with the requirements set forth herein, Spirit shall report such non-conformance in writing to IAE upon or within ***** of delivery provided that IAE will use reasonable efforts to resolve such non-conformance in a reasonable timeframe to be agreed by the Parties. If Spirit does not report a non-conformance within ***** of delivery, the relevant Spare Engine will be deemed to have been accepted. If IAE is unable to resolve such non-conformance within the agreed reasonable timeframe, then Spirit may reject such Spare Engine.
|
|
|
|
|
2.4.5
|
If Spirit refuses, is unable to accept, or otherwise hinders delivery of any Spare Engine that satisfies the requirements and conditions set forth herein, Spirit shall nevertheless pay or cause IAE to be paid therefore as if, for the purposes of payment only, the Spare Engines had been delivered.
|
|
|
|
|
2.4.6
|
In any of the cases specified in Section 2.4.5 above, Spirit shall also pay to IAE such reasonable sum as IAE shall require in respect of storage, maintenance and insurance of those Spare Engines.
|
|
|
|
|
2.5
|
Delivery, Shipping, Title and Risk of Loss or Damage
|
|
|
|
|
2.5.1
|
Provided Spirit has made payment in accordance with Section 2.7 below, IAE will deliver each Spare Engine (and Engine storage bag and transportation stand, if purchased from IAE) in accordance with the delivery schedule set out in Exhibit B-2 to this New Fleet Contract. IAE will provide one-way transportation, including risk of loss, for each Spare Engine from IAE’s facilities to Spirit’s main base and deliver the same to Spirit at such location.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
2.5.2
|
Upon such delivery, title to and risk of loss of or damage to the relevant Spare Engine (and Engine storage bag and transportation stand, if purchased from IAE) shall pass to Spirit.
|
|
|
|
|
2.5.3
|
Spirit will notify IAE at least thirty (30) days before the scheduled time for delivery of each of the Spare Engines of its instructions as to the marking and shipping of each of the Spare Engines.
|
The purchase price for each of the Spare Engines shall be the unit base price set forth in Exhibit B-2 to this New Fleet Contract, amended pursuant to Section 2.3 above, if applicable, and escalated in accordance with the escalation formula contained in Exhibit B-3 t
o
this New Fleet Contract. The purchase price for the Engine storage bag and transportation stand, if purchased from IAE, shall be the current IAE price in effect at the time of Spare Engine delivery
|
|
|
|
2.7.1
|
Spirit will make payment for each Spare Engine (and Engine storage bag and transportation stand, if purchased from IAE) in United States Dollars as follows:
|
|
|
|
|
(a)
|
***** before the scheduled delivery of each of the Spare Engines, Spirit shall pay to IAE a non-refundable (unless the relevant Spare Engine shall not be delivered to Spirit as a result of any breach by IAE of this Agreement) pre-delivery payment of ***** of the Estimated Purchase Price of such Spare Engine; and
|
|
|
|
|
(b)
|
At the time of delivery of each of the Spare Engines, Spirit shall pay to IAE the balance of the net purchase price of such Spare Engine (net of all applicable credits), plus the purchase price of the Engine storage bag and transportation stand, if purchased from IAE.
|
|
|
|
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2.7.2
|
IAE shall have the right to require Spirit to make additional payments in respect of price changes arising from the provisions of Section 2.3 above on a similar basis to that specified in Section 2.7.1 above.
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2.7.3
|
Spirit shall pay the full amount of payments falling due under this Section 2.7, without any withholding or deduction whatsoever.
|
|
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|
|
2.7.4
|
All payments under this Section 2.7 shall be made by wire transfer and shall be deposited not later than the due date of payment with:
|
*****
or such other account in the United States as notified from time to time by IAE.
|
|
|
|
2.7.5
|
For the purpose of this Section 2.7 “
payment
” shall only be deemed to have been made to the extent cleared or good value funds are received in the numbered IAE bank account specified in Section 2.7.4 above or as otherwise notified to Spirit in writing by IAE.
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|
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|
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2.7.6
|
If Spirit fails to make any payment pursuant to this Section 2 on or before the date when such payment is due, then, without prejudice to any of IAE's other rights, IAE
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
will (a) be entitled to charge interest on the overdue amount, at the rate equal to the lesser of ***** per annum or the New York Citibank prime rate plus ***** per annum, from the date such payment was due to the date such payment is made and (b) have the right (but not the obligation) to suspend work on the manufacture of Spare Engines pending the remedy of such failure and to reschedule the date of delivery of such Spare Engine following the cure of such failure to a new date, using commercially reasonable efforts to reschedule to a new mutually agreeable delivery date. Notwithstanding the foregoing, Spirit shall not be liable for interest in respect of any overdue amount which is being contested in good faith.
|
|
|
|
2.7.7
|
For the purpose of this Section 2.7, the “
Estimated Purchase Price
” of any of the Spare Engines shall be calculated in accordance with the following formula:
|
*****
where:
*****.
|
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|
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3.
|
Spare Parts Provisions
|
|
|
|
|
3.1.1
|
For as long as Spirit owns and operates one or more Aircraft in regular commercial service and is not in breach of any material obligation to IAE under this New Fleet Contract, IAE shall use commercially reasonable efforts to make available adequate supplies of Spare Parts for sale to Spirit under this New Fleet Contract. In consideration thereof, except as otherwise provided under Section 3.1.2 below, Spirit shall buy from IAE, and IAE shall sell to Spirit, all of Spirit's requirements of the following:
|
|
|
|
|
(a)
|
Spare Parts and Support Equipment necessary to support Spirit’s operation of the Aircraft and/or use of the Spare Engines; and
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|
|
|
|
(b)
|
Vendor Parts for which direct supply arrangements between the manufacturers of such Vendor Parts and Spirit cannot be reasonably established. Spirit shall notify IAE in writing not less than the greater of (i) the lead time of the vendor as specified in the respective vendor manual or (ii) three (3) months before scheduled delivery requested by Spirit that Spirit intends to purchase such Vendor Parts from IAE.
|
In an emergency or upon the reasonable request of Spirit, IAE may sell to Spirit Vendor Parts which it is not obligated to sell under this New Fleet Contract, but which it has in stock or otherwise has reasonably available to it in current inventory.
|
|
|
|
3.1.2
|
Purchase by Spirit from Others
|
*****
The parties to this New Fleet Contract shall comply with the requirements of shipping procedures outlined in ATA Specifications 2000 and 300, provided that the parties shall be entitled to negotiate reasonable changes in those procedures or requirements of the
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
specifications that, if complied with exactly, would result in an undue operating burden or unnecessary economic penalty.
|
|
|
|
3.3
|
Stocking of Spare Parts
|
As soon as reasonably possible after receipt of IAE’s written request, Spirit shall provide IAE with information reasonably required to enable IAE to plan and organize the manufacture and stocking of Spare Parts.
|
|
|
|
3.4.1
|
IAE shall endeavor to deliver replenishment Spare Parts within the Lead Time specified in the IAE Spare Parts Catalog, except for certain major Spare Parts that are designated in the Spare Parts Catalog as being available at prices and lead times to be quoted upon request. Support Equipment and Vendor Parts are available at prices and Lead Times to be quoted upon request and IAE shall endeavor to deliver any such Support Agreement or Vendor Parts within such Lead Times as quoted.
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|
|
|
|
3.4.2
|
If any order for replenishment Spare Parts shall call for a quantity materially in excess of Spirit's normal requirements, IAE shall notify Spirit and may request a special delivery schedule. If Spirit confirms that the full quantity ordered is required, delivery of the order shall be effected at delivery dates mutually acceptable to IAE and Spirit and the Lead Times provided by this Section shall not apply.
|
|
|
|
|
3.4.3
|
In an emergency, IAE shall use its reasonable efforts to deliver all Spare Parts within the time limits specified by Spirit. IAE will provide notice of the action to be taken on such orders within the following time periods from IAE's receipt of such notice and based on the type of order:
|
|
|
|
|
(a)
|
AOG (Aircraft on Ground) orders - within 4 hours;
|
|
|
|
|
(b)
|
Critical (imminent AOG or work stoppage) - within 24 hours;
|
|
|
|
|
(c)
|
Expedited (less than published or quoted lead time) - within 7 days.
|
|
|
|
|
3.5.1
|
Orders for Spare Parts and Support Equipment may be placed by Spirit from time to time on an as-needed basis. Spirit shall give IAE as much notice as practicable of any change in its operation, including, but not limited to, changes in maintenance or overhaul arrangements affecting its requirements of Spare Parts, Support Equipment and including Vendor Parts.
|
|
|
|
|
3.5.2
|
IAE shall promptly acknowledge receipt of each order for Spare Parts in accordance with ATA Specification 2000 procedure. Unless qualified, such acknowledgment, subject to variation in accordance with Section 3.4.2 above, shall constitute an acceptance of the order under the terms of this New Fleet Contract.
|
|
|
|
|
3.5.3
|
Standard package quantities shall be delivered and packed in accordance with the Spare Parts Catalog.
|
|
|
|
|
3.6
|
Modifications to Spare Parts
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
3.6.1
|
IAE shall be entitled to make modifications or changes to the Spare Parts ordered by Spirit hereunder provided that the modification has received the approval of the Certification Authority and modified Spare Parts shall be substituted for Spare Parts ordered. IAE shall promptly inform Spirit by means of Service Bulletins when such modified Spare Parts (or Spare Parts introduced by a repair scheme) become available for supply hereunder. Notification of such availability shall be given to Spirit before delivery.
|
|
|
|
|
3.6.2
|
Modified Spare Parts shall be substituted for Spare Parts ordered unless the modifications stated in Service Bulletins in the recommended or optional category are considered by Spirit to be unacceptable and Spirit so states in writing to IAE within ninety (90) days of the transmittal date of the applicable Service Bulletin, in which case Spirit shall be entitled to place a single order for Spirit’s anticipated total requirement of pre-modified Spare Parts, at a price and delivery schedule to be agreed.
|
|
|
|
|
3.6.3
|
Unless Spirit notifies IAE in writing under the provisions of Section 3.6.2 above, IAE may supply at the expense of Spirit a modification of any Spare Part ordered (including any additional Spare Part needed to ensure interchangeability), provided that the modification has received the approval of the Certification Authority. The delivery of such Spare Parts shall begin on dates indicated by the applicable Service Bulletin. The delivery schedule shall be agreed at the time when orders for modifications are accepted by IAE.
|
|
|
|
|
3.7.1
|
Conformance to the Specification of Spare Parts purchased hereunder will be assured by IAE through the maintenance of procedures, systems and records approved by the Certification Authority. Conformance documentation will be issued by IAE to Spirit and signed by IAE personnel authorized for such purpose.
|
|
|
|
|
3.7.2
|
Conformance of Support Equipment and Vendor Parts purchased pursuant to this Section 3 will be assured by IAE conformance documentation and/or Vendor conformance documentation, as applicable.
|
|
|
|
|
3.7.3
|
Upon the issuance of conformance documentation in accordance with Sections 3.7.1 or 3.7.2 above and delivery in accordance with Section 3.9.1 below Spirit shall be deemed to have accepted the applicable Spare Parts, Support Equipment, or Vendor Parts, and that such Spare Parts, Support Equipment or Vendor Parts conform to the applicable specification without prejudice to any of Spirit’s warranty and support rights under this New Fleet Contract or any other right of Spirit under applicable law.
|
|
|
|
|
3.8.1
|
IAE shall deliver Spare Parts, Support Equipment and Vendor Parts if such parts are purchased from IAE pursuant to this Section 3, Ex-Works (INCOTERMS 2000) the point of manufacture. Shipping documents and invoices shall be in accordance with ATA Specification 2000.
|
|
|
|
|
3.8.2
|
Upon such delivery as described in Section 3.8.1, title to and risk of loss of or damage to the Spare Parts, Support Equipment, and Vendor Parts shall pass to Spirit.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
3.8.3
|
In accordance with ATA Specification 2000 requirements, Spirit shall advise IAE at time of order of its instructions as to the marking and shipping of the Spare Parts, Support Equipment and Vendor Parts.
|
|
|
|
|
3.8.4
|
The packaging of Spare Parts, Support Equipment, and Vendor Parts shall be in accordance with ATA Specification 300 Category 2 standard, unless deviations are otherwise agreed pursuant to Section 3.2 and shall be free of charge to Spirit. Category 1 standard packaging, if required by Spirit, shall be paid for by Spirit.
|
|
|
|
|
3.9.1
|
Prices of all Spare Parts, Support Equipment, and Vendor Parts shall be quoted in U.S. Dollars, in the Spare Parts Price Catalog, or Initial Provisioning Data, or in individual quotations. Such prices shall represent net unit prices, Ex-Works (INCOTERMS 2000), IAE point of manufacture according to Section 3.8.1 above.
|
Prices and Lead Times in the Spare Parts Price Catalog or by individual quotations are valid for the time period as listed in the Spare Parts Catalog or as shown in the quotation.
|
|
|
|
3.9.2
|
Prices applicable to each order placed by Spirit hereunder shall be the prices in effect at the time of such order according to the terms of the Spare Parts Price Catalog. IAE will honor the Spare Parts Catalog price or the quoted price (within the applicable quote validity period) at the time of each purchase order. If Spirit makes an error in its purchase order, the price at the time of the corrected purchase order will be applicable.
|
|
|
|
|
3.9.3
|
IAE may from time to time adjust its prices for Spare Parts and Support Equipment upon not less than ninety (90) days prior written notice to Spirit. Any individual price errors in the calculation of prices may be corrected in good faith without advance notice to Spirit.
|
|
|
|
|
3.9.4
|
On request by Spirit, prices of Spare Parts, Support Equipment, or other materials not included in the Spare Parts Price Catalog shall be quoted within a reasonable time by IAE.
|
|
|
|
|
3.10.1
|
Payment for all purchases of Spare Parts, Support Equipment, and Vendor Parts under this Section 3 shall be made by Spirit to IAE *****. Payment for any other invoices arising under this New Fleet Contract shall be made by Spirit to IAE *****.
|
|
|
|
|
3.10.2
|
Spirit undertakes that IAE shall receive payment in U.S. Dollars of the full amount of payments falling due under this Section 3.10, without any withholding or deduction whatsoever.
|
|
|
|
|
3.10.3
|
All payments under this Section 3.10 shall be made by wire transfer to, and shall be deposited not later than the due date of payment with:
|
*****
or such other account in the United States as otherwise notified from time to time by IAE in writing to Spirit.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
3.10.4
|
For the purpose of this Section 3.10, payment shall only be deemed to have been made to the extent immediately available funds are received in the account specified in sub-Section 3.10.3 above or as otherwise notified by IAE in accordance with the terms of this New Fleet Contract.
|
|
|
|
|
3.10.5
|
Notwithstanding Section 3.10.1 above, payments for all purchases of Spare Parts, Support Equipment and Vendor Parts may, at IAE's option become payable prior to delivery of such items upon the occurrence and during the continuance of any of the following events: (a) a receiver or trustee is appointed for all or a substantial part
of Spirit's property, or (b) Spirit is adjudicated or voluntarily becomes a bankrupt under any bankruptcy or winding up laws or other similar legislation, or (c) Spirit becomes insolvent or makes an assignment for the benefit of creditors, or (d) Spirit is in default of any payments obligation under this New Fleet Contract, the New Fleet FHA, the Existing Fleet GTA, the Existing Fleet FHA, or *****, or (e) is in material default under any section of this New Fleet Contract after receipt of written notice of such payment or material default and the expiration of any applicable cure period in respect thereof. Notwithstanding the foregoing, Spirit shall not be deemed to be in default of any payment obligation if the validity or amount of the same is being contested by Spirit in good faith.
|
|
|
|
|
3.10.6
|
If Spirit fails to make any payment for any Spare Parts, Support Equipment, or Vendor Parts on or before the date when such payment is due, then, without prejudice to any other rights set forth herein or under applicable law, IAE will be entitled to charge interest on the overdue amount, at the rate of the lesser of ***** or the New York Citibank prime rate plus ***** per annum, from the date such payment was due to the date such payment is made. Notwithstanding the foregoing, Spirit shall not be liable for interest in respect of any overdue amount which is being contested in good faith.
|
In the event of any conflict between the provisions of this New Fleet Contract and the provisions of ATA Specifications 101, 2000 and 300, or purchase orders from Spirit the provisions of this New Fleet Contract shall prevail.
|
|
|
|
4.
|
Warranties, Guarantees and Liabilities
|
|
|
|
|
4.1
|
IAE warrants to Spirit that, at the time of delivery, the Supplies sold hereunder will be free of defects in material and manufacture, and will conform substantially to applicable specifications and the rules and regulations of the Certification Authority. IAE's liability and Spirit's remedies under this warranty are limited to the repair or replacement, at IAE's election, of Supplies or parts thereof returned to the place of manufacture in accordance with IAE’s written shipping instructions and which are shown to IAE's reasonable satisfaction to have been defective; provided, that written notice of the defect shall have been given by Spirit to IAE within ***** after the first operation or use of the relevant Supplies (or if the Supplies are installed in Spirit Aircraft, *****) after the date of delivery of such Supplies by IAE to Spirit. Transportation charges for the return of Supplies to IAE pursuant to this Section 4.1 and their reshipment to Spirit and the risk of loss thereof will be borne by IAE only if the Supplies are returned in accordance with reasonable written shipping instructions from IAE and judged by IAE, acting reasonably, to have been defective at the time of delivery to Spirit.
|
|
|
|
|
4.2
|
IAE warrants to Spirit that it shall convey good and marketable title to all Spare Engines, Parts and other goods sold to Spirit hereunder, free and clear of all liens, claims, encumbrances and other rights of third parties.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
4.3
|
In addition, IAE grants and Spirit accepts the following (all as set forth in Exhibit D, the “
Warranties
”):
|
*****
|
|
|
|
4.4
|
IAE also grants and Spirit accepts the following (all as set forth in Exhibit E, the “
Guarantees
”):
|
*****
|
|
|
|
4.5
|
The parties agree that the Warranties shall apply to any equipment that falls within the type of equipment covered by those Warranties, which are manufactured, supplied,
or inspected by IAE howsoever and whenever (whether before, on or after the date first above written) acquired by Spirit from whatsoever source including but not limited to any V2500 aero engines and any associated equipment therefor, and any parts for such engines and associated equipment that form part of any aircraft acquired from the manufacturer.
|
|
|
|
|
4.5
|
***** It is not the intent, however, to duplicate benefits or remedies provided to Spirit by IAE or another source (e.g., another equipment manufacturer or lessor) as a result of the same event or cause. Therefore, notwithstanding the terms of the Warranties and Guarantees, Spirit agrees that it shall not be eligible to receive benefits or remedies from IAE if it stands to receive or has received duplicate benefits or remedies from IAE or another source as a result of the same event or cause. Furthermore, in no event shall IAE be required to provide duplicate benefits to Spirit and any other party (such as a leasing company) as a result of the same event or cause.
|
|
|
|
|
4.6
|
IAE and Spirit agree that the following provisions shall apply to each of the Guarantees, unless otherwise expressly set forth therein.
|
4.6.1 Definitions and General Conditions
All of the Definitions and General Conditions set forth in the V2500 Engine and Parts Service Policy shall apply to the Guarantees. Exclusions set forth in the General Conditions of the V2500 Engine and Parts Service Policy shall apply to the Guarantees.
4.6.2 Specific Conditions
|
|
|
|
(a)
|
The rates and remedies in the Guarantees are predicated upon Spirit operating its Aircraft powered by Engines in accordance with the following operating conditions:
|
|
|
|
|
(i)
|
An annual average flight cycle of: ***** hours for V2524-A5 powered Aircraft, ***** hours for V2527-A5 powered Aircraft, and ***** hours for V2533-A5 powered Aircraft (each calculated from the moment the wheels of an Aircraft, on which an Engine is installed, leave the ground on take-off to the moment when the wheels of such Aircraft touch the ground on landing);
|
|
|
|
|
(ii)
|
An annual average utilization of ***** hours per V2524-A5 powered Aircraft, ***** hours per V2527-A5 powered Aircraft, and ***** hours per V2533-A5 powered Aircraft;
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
(iii)
|
An average engine thrust derate of: ***** for V2524-A5 powered Aircraft, ***** for V2527-A5 powered Aircraft, and ***** for V2533-A5 powered Aircraft, all relative to the name plate thrust rating;
|
|
|
|
|
(iv)
|
An average ambient temperature for take-off no greater than: ***** for V2524-A5 powered Aircraft, ***** for V2527-A5 powered Aircraft, and ***** for V2533-A5 powered Aircraft;
|
|
|
|
|
(v)
|
Spirit’s main bases are located at Fort Lauderdale, Florida, Detroit, MI, Atlantic City, NJ, Dallas, TX, USA;
|
|
|
|
|
(vi)
|
Spirit acquiring all of the Aircraft and Firm Spare Engines as set forth in Exhibit B-1 and Exhibit B-2, as amended, supplemented and/or updated from time to time;
|
|
|
|
|
(vii)
|
After taking delivery of all the Firm Spare Engines as set forth in Exhibit B-2, Spirit maintaining a minimum ratio of ***** Spare Engines to installed Engines for its Aircraft fleet;
|
|
|
|
|
(viii)
|
Spirit owning, operating, and maintaining the Aircraft and Engines in regular and frequent airline operation for the duration of the Guarantee period(s), in accordance with Airbus’, IAE’s, and other applicable OEM’s technical manuals, the MMP (including Engine rebuild requirements) and the New Fleet FHA, as applicable;
|
|
|
|
|
(x)
|
Spirit acquiring from IAE or IAE’s approved sources sufficient accessories, components, Spare Parts, and spare Engines at the levels recommended by IAE, to maintain proper support of the New Engine Fleet; and
|
|
|
|
|
(xi)
|
Spirit operating each Engine at its originally installed or delivered thrust rating, except as otherwise mutually agreed by the Parties.
|
|
|
|
|
(b)
|
Should any of the above operating conditions not be met or if Spirit takes delivery of additional aircraft powered by V2500 engines that the Parties agree to include such engines under this New Fleet Contract, IAE, acting in good faith and in consultation with Spirit, may make reasonable and appropriate adjustments to the Guarantees, with appropriate retroactive application, to address any deviations from such operating conditions.
|
|
|
|
|
(c)
|
Subject to Section 4.6.2(b) above, IAE agrees that, so long as Spirit does not vary the specific conditions for Engines listed in Sections 4.6.2(a)(i), 4.6.2(a)(ii), , 4.6.2(a)(iii) and 4.6.2(a)(iv) by more than ***** from their stated levels, Guarantee Rates for each Guarantee shall not be modified for such variation unless expressly stated to the contrary in such Guarantee.
|
|
|
|
|
(d)
|
Where Guarantee Rates are delineated by the applicable Engine model, such Guarantee Rates reflect the assumption that all Aircraft are delivered with the corresponding V2500-A5 Engine model. IAE agrees that the actual Guarantee Rate for Engines under such Guarantees shall fall between the highest and lowest rates, irrespective of the actual Aircraft model mix,
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
subject to the other specific conditions set forth in this Section 4.6.2. For avoidance of doubt and subject to the provisions of this New Fleet Contract, the model mix shall be determined solely by Spirit. The Guarantees Rate for all other Guarantees shall be as stated, irrespective of the actual Aircraft model mix, subject to the conditions set forth in this Section 4.6.2.
4.6.3 The Parties agree that IAE’s maximum liability, if any, associated with the Guarantees except for the ***** shall not
,
exceed ***** for the term of the New Fleet Contract. IAE’s maximum liability, if any, for ***** shall not exceed ***** for the term of the New Fleet Contract.
|
|
|
|
4.7
|
THE WARRANTIES AND GUARANTEES GRANTED TO SPIRIT
UNDER
THIS NEW FLEET CONTRACT AND/OR THE NEW ENGINE FLEET FHA, ARE EXCLUSIVE AND ARE GIVEN BY IAE IN LIEU OF (A) ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE; AND (B) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM, OR REMEDY IN STATUTE, CONTRACT, TORT OR STRICT LIABILITY AGAINST IAE OR ITS AFFILIATES, WHETHER OR NOT ARISING FROM THE NEGLIGENCE, ACTUAL OR IMPUTED (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), OF IAE OR ITS AFFILIATES, STOCKHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, PERMITTED ASSIGNS AND AGENTS.
|
|
|
|
|
4.11
|
IAE and Spirit agree that credits issued to Spirit’s account with IAE pursuant to any of the Warranties or Guarantees may be utilized for the purchase of goods and/or services from IAE. Notwithstanding the foregoing, Spirit may request IAE to pay credits issued under the Guarantees in cash, subject to:
|
4.11.1 the spare parts credits, or portions thereof, having gone unapplied for more than *****;
4.11.2 there then being no overdue invoices payable by Spirit for any IAE goods and/or services; and
4.11.3 Spirit issuing a written request to IAE authorizing the payment of such spare parts credits in cash with appropriate payment instructions.
|
|
|
|
5.
|
Product Support Services
|
|
|
|
|
5.1
|
IAE will make available to Spirit the Product Support Services described in Exhibit C to this New Fleet Contract. Except when identified in such Exhibit C as being at additional cost or as requiring separate contractual arrangements, such Product Support Services shall be supplied at no additional charge to Spirit. IAE may delegate the performance of product support services to an affiliated company or any of IAE’s shareholders.
|
|
|
|
|
5.2
|
Spirit will provide to any IAE customer support representative(s) working at its facility, free of charge:
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
5.2.1
|
reasonable, secure office accommodation including furniture and office equipment and
|
|
|
|
|
5.2.2
|
access to telephone, facsimile and secretarial services and
|
|
|
|
|
5.2.3
|
access to such first-aid and emergency assistance as is customarily provided to Spirit's own employees and
|
|
|
|
|
5.2.4
|
reasonable airfare, accommodations, and subsistence during any period in which the customer support representative(s) is required by Spirit to travel away from such customer support representative(s)' normal location at Spirit.
|
Spirit further agrees and acknowledges that such customer support representative(s) shall at all times remain employees of IAE and shall, in such capacity, be entitled to reasonable working benefits such as leaves of absence, sick days and holiday as are paid for and granted by IAE to its employees. However, such leaves shall not interfere with IAE’s provision of the Product Support Services to Spirit, and should any leave for a customer support representative extend beyond forty-five (45) days, IAE agrees to provide a substitute representative to ensure continuity of service. Notwithstanding the foregoing, at no time shall any IAE customer support representative be considered an employee or independent contractor of Spirit.
|
|
|
|
6.1.1
|
If IAE is hindered or prevented from performing any obligation hereunder including but not limited to delivering any of the Supplies within the time for delivery specified in this New Fleet Contract (as such time may be extended pursuant to the provisions of this New Fleet Contract) by reason of:
|
|
|
|
|
(a)
|
any cause beyond the reasonable control of IAE;
|
|
|
|
|
(b)
|
fires, industrial disputes or introduction of essential modifications required by the Certification Authority;
|
|
|
|
|
(c)
|
compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it proves to be invalid, except to the extent that the delay is caused by IAE’s failure to act in conformity with applicable deadlines set forth in such governmental regulation or order;
|
(any such delay an “
Excusable Delay
”) the time for delivery shall be extended by a period equal to the period for which delivery shall have been so hindered or prevented, and IAE shall not be under any liability whatsoever in respect of such delay.
|
|
|
|
6.1.2
|
If, by reason of any of the Excusable Delays embraced by Section 6.1.1 above, IAE is hindered or prevented from delivering any goods (that are the same as and include the Supplies) to purchasers (including Spirit) then IAE shall have the right to allocate in good faith such goods, as they become available, at its own discretion among all such purchasers and IAE shall not be under any liability whatsoever to Spirit for delay in delivery to Spirit resulting from such allocation by IAE and the time for
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
delivery shall be extended by a period equal to the delay resulting from such allocation by IAE. *****
|
|
|
|
6.1.4
|
The right of Spirit to claim damages shall be conditional upon Spirit (i) notifying IAE of its claim in writing within ***** from the Claim Start Date, and (ii) submitting a written claim therefor within ***** from the Claim Start Date.
|
The “
Claim Start Date
” shall be the date on which IAE notifies Spirit that the item of the Supplies so delayed is ready for delivery, or from the date on which Spirit exercises the right of cancellation in respect of such item conferred in accordance with Section 6.1.5 below, whichever date shall first occur.
|
|
|
|
6.1.5
|
Should IAE delay performance of any obligation for a reason other than an Excusable Delay hereunder including but not limited to delivery of any item of the Supplies beyond ***** from the time for delivery specified in this New Fleet Contract (as such time may be extended pursuant to the provisions of this New Fleet Contract) then, in addition to the right of Spirit under Section 6.1.3, Spirit shall be entitled to terminate the order with respect to the affected item on giving IAE notice in writing. Upon receipt of such notice IAE shall be free from any obligation in respect of such item except that IAE shall refund to Spirit any deposits made in respect of the purchase price of such item of the Supplies.
|
|
|
|
|
6.1.6
|
No escalation shall apply during any period of delay unless such period of delay is caused by any of the causes specified in Clause 6.1.1
.
|
|
|
|
|
6.2
|
Intellectual Property
|
|
|
|
|
6.2.1
|
In the event any suit, claim or action is brought against Spirit (or a person expressly indemnified by Spirit) alleging that, without further combination, Spirit’s use or resale of
(a)
goods
(b)
a part made by or under IAE’s control and in accordance with the specification or design provided by IAE or
(c)
a process embodied in the goods delivered to Spirit by IAE infringes any patents, IAE will, at its own expense, conduct the entire defense including any and all necessary court action, settlements, and appeals. IAE will either settle such claim or pay all damages and costs awarded in a non-appealable judgment, excluding indirect, incidental, special, consequential, and punitive damages. If the use or resale of such goods or part(s) is finally enjoined, IAE will, at its option:
(a)
procure for Spirit the right to use or resell such goods or parts;
(b)
replace such goods or parts with equivalent non-infringing parts;
(c)
modify such goods or parts so they become non-infringing but equivalent; or
(d)
remove such goods or part(s) and refund the purchase price (less a reasonable allowance for use, damage or obsolescence).
|
|
|
|
|
6.2.2
|
The preceding provision is applicable only if the following conditions are met:
(a)
the goods, part(s), services, or process involved in the suit, claim, or action must have been provided under this New Fleet Contract or during maintenance services in accordance with this New Fleet Contract or the New Engine Fleet FHA, as applicable;
(b)
the alleged infringement must be an infringement of any patents of the nation in which Spirit’s principal place of business is located or a jurisdiction within which the relevant Supplies were manufactured or delivered to Spirit;
(c)
Spirit must provide IAE with timely notice of such suit, claim, or action and the full opportunity to assume the entire defense thereof; and
(d)
Spirit must provide IAE
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
with all information available to Spirit and other defendants pertaining to the alleged infringement.
|
|
|
|
6.2.3
|
For the avoidance of doubt, this provision will not apply to
(a)
any alleged patent infringement in any nation other than as specified above;
(b)
any Spirit-furnished specification or design or the performance of a process not recommended in writing by IAE;
(c)
any goods or parts or components thereof manufactured according to a non-IAE specification or design;
(d)
the use or sale of goods or parts delivered hereunder in combination with other goods not delivered to Spirit by IAE; or
(e)
any instance not specified in the preceding paragraphs. In such instances, Spirit will indemnify and hold IAE harmless.
|
[Reserved]
The terms and conditions of this New Fleet Contract and any technical information provided in connection with it are confidential and proprietary to IAE and Spirit. Each Party agrees to: (a) limit disclosures of such confidential information to persons who have a need to know within their organizations; (b) keep such information confidential; and (c) not disclose to any third party other than (i) as required by applicable law or legal process; (ii) in connection with the disclosure requirements of any applicable government authority or exchange; (iii) to its legal, financial, tax or other advisors who are bound by an obligation of confidentiality or to the confidentiality requirements of this New Fleet Contract and (iv) in connection with the enforcement of its rights hereunder, without the prior written consent of the other party (not to be unreasonably withheld), provided that, in the case of (c)(i),
supra,
the Party that is to disclose such confidential information in response to such applicable law or legal process shall notify the other Party, and upon the request of the other Party, shall cooperate with the other Party in contesting such disclosure.
|
|
|
|
6.5.1
|
Subject to Section 6.5.2 below, IAE shall pay all imposts, duties, fees, taxes and other like charges levied by any tax authority or any agency thereof in connection with the Supplies prior to their delivery.
|
|
|
|
|
6.5.2
|
All amounts stated to be payable by Spirit pursuant to this New Fleet Contract exclude any value added tax, sales tax or similar such tax. In the event that the supply of goods or services under this New Fleet Contract is chargeable to any value added tax, sales tax or similar tax, such tax will be borne by Spirit. To ensure so far as possible that Spirit is not charged with European Community value added tax (“
VAT
”), Spirit will within 30 days of signature hereof, inform IAE of its VAT Code (if any) for inclusion on IAE's invoices.
|
|
|
|
|
6.5.3
|
Spirit shall pay all other imposts, duties, fees, taxes and other like charges by whomsoever levied.
|
|
|
|
|
6.5.4
|
Notwithstanding the foregoing, Spirit shall have no liability to IAE for any tax or taxes levied on IAE in connection with its gross income, or any franchise, turn-over or other similar tax or any tax levied on IAE relating to its business activities generally and not specifically arising out of or in connection with the transactions contemplated hereby and any taxes to the extent the same would not have been imposed but for
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
the gross negligence or willful misconduct of or a breach of this New Fleet Contract by IAE.
|
|
|
|
6.5.5
|
If either IAE or Spirit becomes aware of any taxes set forth in this Section 6.5, the relevant Party shall promptly notify the other Party, and both parties agree to cooperate, consult in good faith and take such other reasonable steps in order to mitigate to the full extent permitted by law, any such tax
.
.
|
This New Fleet Contract shall not be amended in any way other than by written agreement by the parties on or after the date of this New Fleet Contract, which agreement is expressly stated to amend this New Fleet Contract.
[Reserved]
|
|
|
|
6.8.1
|
IAE shall at its own cost and expense procure and maintain (or cause its subcontractors to procure and maintain) in full force and effect during the Period of Cover policies of insurance of the types and in the minimum amounts as stated below: *****
|
In the event of any unresolved conflict or discrepancy between the Exhibits (which are hereby expressly made a part of this New Fleet Contract) and Sections of this New Fleet Contract then the Sections shall prevail.
The Section headings and the Table of Contents do not form a part of this New Fleet Contract and shall not govern or affect the interpretation of this New Fleet Contract.
|
|
|
|
6.11
|
Governing Law and Forum
|
|
|
|
|
6.11.1
|
This New Fleet Contract shall be subject to and interpreted and construed in accordance with the laws of *****.
|
|
|
|
|
6.12
|
Compliance with All Applicable Laws and Regulations
|
|
|
|
|
6.12.1
|
Export/Import
Spirit agrees that it will not, directly or indirectly, sell, export, re-export, transfer, divert, or otherwise dispose of any IAE goods, software, technical data (including products derived from or based on such technical data), or services received directly or indirectly from IAE to any Prohibited Party without obtaining prior authorization from the relevant government authorities as required pursuant to Export Laws. Failure to do so will result in IAE invoking its rights to terminate this New Fleet Contract per the provisions of Sections 6.15 and 6.16 below.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
6.12.2
|
“
Prohibited Parties
” means, collectively, those countries, and persons to whom the sale, export, re-export, transfer, diversion or other disposition of any IAE goods, software, technical data or services is prohibited by the applicable export laws and related regulations of the United States, German, British, Japanese, or European Union Governments.
|
|
|
|
|
6.12.3
|
Other Laws and Regulations
Each party agrees that it will not, by act or omission, violate any applicable law or regulation of the United States or any political subdivision thereof where the violation thereof would result in the other party being deemed to be in violation of such law or regulation or would otherwise result in a criminal or an un-indemnified civil penalty on the part of such other party.
|
Any notice to be served pursuant to this New Fleet Contract shall be in the English language and is to be sent by certified mail, recognized international carrier or facsimile (with confirmation copy by any of the other means) to:
In the case of IAE:
IAE International Aero Engines AG
400 Main Street, M/S 121-10
East Hartford, Connecticut 06108, United States of America
Facsimile No. 860-565-4003
Attention: Chief Legal Officer and Company Secretary
In the case of Spirit:
Spirit Airlines, Inc.
2800 Executive Way
Miramar, Florida 33026
Facsimile No. (954) 447-7854
Attention: Legal Department
or in each case to such other place of business as may be notified from time to time by the receiving party.
|
|
|
|
6.14
|
Exclusion of Other Provisions and Previous Understandings
|
|
|
|
|
6.14.1
|
This New Fleet Contract (including all exhibits, schedules and appendices) together with the FHA and any Side Letter(s) contains the only provisions governing the sale and purchase of the Supplies and shall apply to the exclusion of any prior provisions on or attached to or otherwise forming part of any order form of Spirit, or any acknowledgment or acceptance by IAE, or of any other document that may be issued by either party relating to the sale and purchase of the Supplies.
|
|
|
|
|
6.14.2
|
The parties agree that neither of them have placed any reliance whatsoever on any representations, agreements, statements or understandings made prior to the signature of this New Fleet Contract, whether orally or in writing, relating to the Supplies, other than those expressly incorporated in this New Fleet Contract, which has been negotiated on the basis that its provisions represent their entire agreement relating to the Supplies and shall supersede all such representations, agreements, statements and understandings.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
6.15
|
Conditions Precedent
|
During the term of this New Fleet Contract, the obligations of IAE to provide, or cause to be provided Supplies or any other benefits to Spirit pursuant to the terms hereof, shall be subject to the non-existence of any of the following events on the date when such Supplies or benefits become due, and should any such event then exist IAE shall be under no obligation to provide, or cause to be provided any Supplies or any other benefits to Spirit:
|
|
|
|
6.15.1
|
A continuing event of default (taking into account any applicable grace period) by Spirit in (a) any payment due under this New Fleet Contract (including any exhibits and letter agreements thereto), or *****; or
|
|
|
|
|
6.15.2
|
Any event that is a Termination Event or would be a Termination Event, but for lapse of time, shall have occurred and be continuing.
|
|
|
|
|
6.16.1
|
Any of the following shall constitute a “
Termination Event
” under this New Fleet Contract:
|
|
|
|
|
(a)
|
Spirit commences any case, proceeding or other action with respect to Spirit or its property in any jurisdiction relating to bankruptcy, insolvency, reorganization, dissolution, liquidation, winding-up, or relief from, or with respect to, or readjustment of, debts or obligations; or
|
|
|
|
|
(b)
|
Spirit seeks the appointment of a receiver, trustee, custodian or other similar official for Spirit for all or substantially all of its assets, or Spirit makes a general assignment for the benefit of its creditors; or
|
|
|
|
|
(c)
|
Spirit otherwise becomes the object of any case, proceeding or action of the type referred to in the preceding Sections 6.16.1(a) or 6.16.1(b) that remains unstayed, undismissed or undischarged for a period of sixty (60) days; or
|
|
|
|
|
(d)
|
An action is commenced against Spirit seeking issuance of a warrant of attachment, execution, distraint or similar process against all or substantially all of its assets that remains unstayed, undismissed or undischarged for a period of sixty (60) days; or
|
|
|
|
|
(e)
|
A continuing event of default (taking into account any applicable grace period) by Spirit on any payment of principal or interest on any indebtedness hereunder or in the payment of any guarantee obligation hereunder *****.
|
|
|
|
|
(f)
|
Failure to take delivery of all of the Aircraft and Spare Engines in accordance with the delivery schedule set forth in Exhibit B, as amended, supplemented or modified from time to time.
|
In the event of the occurrence of a Termination Event, Spirit shall be deemed to be in material breach of this New Fleet Contract, and IAE shall at its option have the right to resort to any remedy under applicable law, including, without limitation, the right by written notice, effective immediately, to terminate this New Fleet Contract; provided that, no such notice need be delivered, and this New Fleet Contract shall automatically terminate upon the occurrence of a Termination Event specified in Section 6.16.1(a), 6.16.1(b), or 6.16.1(c)
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
6.16.2
|
Spirit shall have the option, at its sole discretion, to terminate this New Fleet Contract in whole or in part, upon the occurrence of any of the following events:
|
|
|
|
|
(a)
|
IAE commences any case, proceeding or other action with respect to IAE or its property in any jurisdiction relating to bankruptcy, insolvency, reorganization, dissolution, liquidation, winding-up, or relief from, or with respect to, or readjustment of, debt or obligations;
|
|
|
|
|
(b)
|
IAE seeks the appointment of a receiver, trustee, custodian, or other similar official for IAE for all or substantially all of its assets, or IAE makes a general assignment for the benefit of its creditors;
|
|
|
|
|
(c)
|
IAE otherwise becomes the object of any case, proceeding or action of the type referred to in the preceding clauses (a) or (b) which remains unstayed, undismissed or undischarged for a period of sixty (60) days;
|
|
|
|
|
(d)
|
An action is commenced against IAE seeking issuance of a warrant of attachment, execution, distraint or similar process against all or substantially all of its assets which remains unstayed, undismissed, or undischarged for a period of sixty (60) days;
|
|
|
|
|
(e)
|
A continuing event of default (taking into account any applicable grace period) by IAE on any payment of principal or interest on any indebtedness hereunder or in the payment of any guarantee obligation hereunder or under any Spirit financing agreement with IAE for the Aircraft, *****.
|
In the event of the occurrence of any of the foregoing, IAE shall be deemed to be in material breach of this New Fleet Contract, and Spirit shall at its option have the right to resort to any remedy under applicable law, including, without limitation, the right by written notice, effective immediately, to terminate this New Fleet Contract; provided that, no such notice need be delivered, and this New Fleet Contract shall automatically terminate upon the occurrence of a Termination Event specified in Section 6.16.2(a), 6.16.2(b), or 6.16.2(c)
|
|
|
|
6.17
|
Effect of Termination
|
Upon any expiration or termination of this New Fleet
Contract, the rights and obligations of the parties under this New Fleet
Contract will terminate. Notwithstanding anything herein to the contrary, all liabilities and obligations (including payment obligations) that have accrued prior to termination or expiration will survive. Notwithstanding the foregoing and for the avoidance of doubt, upon termination, as a result of a Termination Event described in Section 6.15.1, IAE shall have no obligation to deliver goods not yet delivered.
|
|
|
|
6.18
|
No Construction Against Drafter
|
This New Fleet
Contract has been the subject of negotiation between the parties. If an ambiguity or question of intent arises with respect to any provision of this New Fleet
Contract, this New Fleet
Contract will be construed as if drafted jointly by IAE and Spirit and no presumption or burden of proof will arise favoring or disfavoring either party by virtue of authorship of any of the provisions of this New Fleet
Contract.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
In no event shall either Party to this New Fleet
Contract or either party’s subsidiaries or affiliates, have any liability to any other party hereto for any indirect, incidental, special, consequential, or punitive damages, including without limitation any damage to or loss of use, revenue or profit with respect to any Aircraft and/or Supplies.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
IN WITNESS WHEREOF
the parties hereto have caused this New Fleet
Contract to be signed on their behalf by the hands of their authorized officers the day and year first before written:
|
|
|
|
|
|
|
|
|
Agreed to and accepted on behalf of:
IAE International Aero Engines AG
|
|
Agreed to and accepted on behalf of:
Spirit Airlines, Inc.
|
|
By:
|
/s/ Rick Deurloo
|
|
By:
|
/s/ Charles A. Rue
|
|
Name:
|
Rick Deurloo
|
|
Name:
|
Charles A. Rue
|
|
Title:
|
SVP Sales
|
|
Title:
|
VP Supply Chain
|
|
In the presence of:
|
|
In the presence of:
|
|
By:
|
/s/ Daniel Kirk
|
|
By:
|
/s/ Edward Christie
|
|
Name:
|
Daniel Kirk
|
|
Name:
|
Edward Christie
|
|
Title:
|
Sales Director
|
|
Title:
|
SVP & CFO
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit A
Contract Specifications
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit B
Schedules
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit B-1
Aircraft Delivery Schedule
|
|
|
|
|
|
|
|
Aircraft No.
|
Aircraft Model
|
Engine Model
|
Scheduled Delivery Date
|
|
1
|
*****
|
*****
|
*****
|
|
2
|
*****
|
*****
|
*****
|
|
3
|
*****
|
*****
|
*****
|
|
4
|
*****
|
*****
|
*****
|
|
5
|
*****
|
*****
|
*****
|
|
6
|
*****
|
*****
|
*****
|
|
7
|
*****
|
*****
|
*****
|
|
8
|
*****
|
*****
|
*****
|
|
9
|
*****
|
*****
|
*****
|
|
10
|
*****
|
*****
|
*****
|
|
11
|
*****
|
*****
|
*****
|
|
12
|
*****
|
*****
|
*****
|
|
13
|
*****
|
*****
|
*****
|
|
14
|
*****
|
*****
|
*****
|
|
15
|
*****
|
*****
|
*****
|
|
16
|
*****
|
*****
|
*****
|
|
17
|
*****
|
*****
|
*****
|
|
18
|
*****
|
*****
|
*****
|
|
19
|
*****
|
*****
|
*****
|
|
20
|
*****
|
*****
|
*****
|
|
21
|
*****
|
*****
|
*****
|
|
22
|
*****
|
*****
|
*****
|
|
23
|
*****
|
*****
|
*****
|
|
24
|
*****
|
*****
|
*****
|
|
25
|
*****
|
*****
|
*****
|
|
26
|
*****
|
*****
|
*****
|
|
27
|
*****
|
*****
|
*****
|
|
28
|
*****
|
*****
|
*****
|
|
29
|
*****
|
*****
|
*****
|
|
30
|
*****
|
*****
|
*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit B-2
Spare Engine Price and Delivery
|
|
|
|
|
|
|
|
Spare Engine No.
|
Quantity
|
Engine Model
|
Scheduled Delivery Date
|
|
1
|
1
|
*****
|
*****
|
|
2
|
1
|
*****
|
*****
|
|
3
|
1
|
*****
|
*****
|
|
4
|
1
|
*****
|
*****
|
The unit base price for Spare Engines shall be as follows and escalated in accordance with the escalation formula contained in Exhibit B-3 to this New Fleet
Contract.
|
|
|
|
|
|
Engine Model
|
Unit Base Price (Jan-12 US$)
|
|
V2524-A5
|
*****
|
|
V2527-A5
|
*****
|
|
V2533-A5
|
*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit B-3
Escalation Formula
|
|
|
|
1.
|
Any unit base price or other sum expressed to be subject to escalation from the Base Month (as defined below) to month of delivery or other date of determination in accordance with the IAE Escalation Formula will be subject to escalation in accordance with the following formula:
|
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit C
Product Support Plan
PRODUCT SUPPORT
FOR THE
V2500 ENGINE
IAE INTERNATIONAL AERO ENGINES AG
Issue No. 7
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
TABLE OF CONTENTS
1.0 INTRODUCTION 44
2.0 CUSTOMER SUPPORT 44
2.1 CUSTOMER SUPPORT MANAGER 44
2.2 CUSTOMER SUPPORT REPRESENTATIVES 45
2.3 CUSTOMER TRAINING: 45
2.4 ENGINE MAINTENANCE MANAGEMENT 47
2.5 SPECIAL PROGRAMS 48
3.0 BUSINESS SUPPORT 48
3.1 ENGINE WARRANTY SERVICES 49
3.2 MAINTENANCE CENTER SUPPORT 49
3.3 MAINTENANCE FACILITIES PLANNING SERVICE 50
3.4 ENGINE RELIABILITY AND ECONOMIC FORECASTS 50
3.5 LOGISTICS SUPPORT STUDIES 50
3.6 LEASE ENGINE PROGRAM 51
4.0 TECHNICAL SERVICES 51
4.1 TECHNICAL SERVICES 51
4.2 POWERPLANT MAINTENANCE 53
4.3 CUSTOMER PERFORMANCE 53
4.4 DIAGNOSTIC SYSTEMS 54
4.5 HUMAN FACTORS 55
4.6 FLIGHT OPERATIONS 55
4.7 REPAIR SERVICES 56
4.8 TOOLING AND SUPPORT EQUIPMENT SERVICES 57
4.9 TECHNICAL PUBLICATIONS 58
5.0. SPARE PARTS 61
5.1 SPARE PARTS SUPPORT 61
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
1.0 INTRODUCTION
IAE International Aero Engines AG (IAE) will make the following support personnel and services available to Spirit: Flight Operations, Customer Performance, Customer Support Representatives, Customer Maintenance Support, Technical Services, Powerplant Maintenance, Service Data Analysis, Human Factors, Repair Services, Warranty Administration, Maintenance Facilities Planning, Tooling and Support Equipment Services, Product Support Technical Publications, Customer Training, Spare Parts Support and Maintenance Center Support. In general, these services are provided ***** to V2500 customers, however, some specific customized services as noted in the descriptions below, may be purchased by Spirit from IAE.
To make these support services readily available to Spirit, in the most efficient manner, the Customer Support Group has been established and assigned primary responsibility within IAE for customer liaison. A Customer Support Manager is assigned to maintain direct liaison with each individual Customer. A description of the various product support services available to Spirit follows.
IAE reserves the right to withdraw or modify the services described herein at any time at its sole discretion. No such withdrawal or modification shall diminish the level of services and support which Spirit may be entitled to receive with respect to V2500 engines for which an proper order has been placed with IAE or with respect to aircraft with installed V2500 engines for which a firm order has been placed with the aircraft manufacturer, prior to the announcement of any such withdrawal or modification.
2.0 CUSTOMER SUPPORT
2.1 CUSTOMER SUPPORT MANAGER
The Customer Support Manager provides a direct liaison between the airline customer's Engineering, Maintenance, Operations, Logistics, Commercial and Financial organizations and the corresponding functions within IAE. The Customer Support Manager assigned to Spirit is responsible for coordinating and monitoring the effort of the Product Support Department functional organization to achieve timely and responsive support for Spirit.
The Customer Support Manager provides the following specific services to Spirit:
|
|
|
|
•
|
Readiness Program and planning prior to EIS
|
|
|
|
|
•
|
Technical recommendations and information.
|
|
|
|
|
•
|
Engine Maintenance Management Plans
|
|
|
|
|
•
|
Refurbishment, Modification and Conversion program planning assistance.
|
|
|
|
|
•
|
Coordination of customer repair, maintenance and logistics requirements with the appropriate Product Support functional groups.
|
|
|
|
|
•
|
Assist with critical engine warranty/service policy claims.
|
The Customer Support Manager will represent Spirit in IAE internal discussions to ensure that the best interests of Spirit and IAE are considered when making recommendations to initiate a program, implement a change or improvement in the V2500 engine.
2.2 CUSTOMER SUPPORT REPRESENTATIVES
IAE Customer Support Representatives provide the following services to Spirit:
|
|
|
|
•
|
Maintenance Action Recommendations
|
|
|
|
|
•
|
Daily Reporting on Engine Technical Situations
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
•
|
Service Policy Preparation Assistance
|
|
|
|
|
•
|
Prompt Communication with IAE
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2.2.1 Engine Maintenance Support Service:
Customer Support Representatives assist Spirit’s customer personnel in the necessary preparation for engine operation and maintenance. The Representative, teamed with a Customer Support Manager will work closely with the airplane manufacturer's support team particularly during the initial period of aircraft operation. Representatives are in frequent contact with the IAE offices on technical matters. Information and guidance received from the home office is transmitted promptly to Spirit which allows Spirit to share in all related industry experience.
The practice permits immediate use of the most effective procedures and avoidance of unsuccessful techniques. The IAE office contact ensures that IAE Representatives know, in detail, the latest and most effective engine maintenance procedures and equipment being used for maintenance and overhaul of V2500 engines. They offer technical information and recommendations to airline personnel on all aspects of maintenance, repair, assembly, balancing, testing, and spare parts support of IAE.
2.2.2 On The Job Training:
Customer Support Representatives will conduct on-the-job training for Spirit’s maintenance personnel. This training continues until the maintenance personnel have achieved the necessary level of proficiency. Training of new maintenance personnel will be conducted on a continuing basis.
2.2.3 Service Policy Administration:
Customer Support Representatives will provide administrative and technical assistance in the application of the IAE Engine and Parts Service Policy to ensure expeditious and accurate processing of airline customer claims.
2.3 CUSTOMER TRAINING:
2.3.1 IAE Customer Training offers Spirit the following support:
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Technical Training at Purpose Built Facilities
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On-site Technical Training
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Technical Training Consulting Service
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Training Aids and Materials
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2.3.2 Training Program:
The IAE Customer Training Center has an experienced full-time training staff which conducts formal training programs in English for airline customers' maintenance, training and engineering personnel. The standard training programs are designed to prepare customer personnel, prior to the delivery of the first aircraft, to operate and maintain the installed engines. Standard courses in engine operation, line maintenance, modular maintenance, performance and trouble-shooting are also available throughout the production life of the engine. The courses utilize the latest teaching technology, training aids and student handouts. IAE Customer Support
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
will coordinate the scheduling of specific courses as required. Training at the Customer Training Center is provided to a limit of fifty (50) man-days per aircraft. The following is the curriculum of standard courses available. On-site technical training, technical training consulting services and customized courses shall be provided upon Spirit’s request and subject to separate contractual arrangements.
2.3.3 General V2500 Familiarization:
This two day course is designed for experienced gas turbine personnel who will be responsible for planning, provisioning and maintenance of the V2500 engine. This course is also designed to appropriately familiarize key staff, supervisory and operations planning personnel and flight crews. Discussions are concentrated in the following subject areas:
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Engine construction features internal and external hardware.
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Engine systems operation, major components accessibility for removal/replacement.
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Performance characteristics
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Maintenance concepts, repair and replacement requirements and special tooling.
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The course is normally conducted in preparation for fleet introductory discussions in the provisioning of spares and tooling, training and line maintenance areas to acquaint the customer with the engine, its systems, operations and procedures.
2.3.4 Line Maintenance and Troubleshooting:
This course is designed for key line maintenance and troubleshooting personnel who have not received previous formal training on the V2500 engine. The classroom phases provide the student with the information essential for timely completion of line maintenance activities and the procedures for effective troubleshooting and correction of malfunctions in the V2500 engine systems and the engine/airframe interfaces. Classroom and shop training are provided for in the following areas:
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Troubleshooting Procedures
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Practical Phase Line Maintenance Tasks
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Additional courses are available in Borescope utilization and Engine Conditioning Monitoring (ECM)
2.3.5 V2500 Familiarization and Modular Maintenance:
Provides experienced heavy maintenance personnel with engine modular disassembly and assembly training. The training is concentrated in the following subject areas:
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Engine Description Overview
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Engine Systems Overview
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Heavy Maintenance Tasks
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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Course duration and “hands-on” coverage are contingent on the availability of an engine and required tooling.
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2.4 ENGINE MAINTENANCE MANAGEMENT
Planning documents, tailored for individual operators, are developed to serve as Engine Maintenance Management Program criteria and should reflect the FAA requirements under which Spirit will operate. These are directed toward the objective of ensuring cost-effective operation with acceptable post-repair test performance, providing engine reliability to achieve maximum time between shop visits, and minimizing the adverse effects to operation of inflight shutdowns and delays/cancellations. Through the institution of specific maintenance recommendations, proper engine performance, durability, and hot section parts lives can be achieved.
2.4.1 Operations Monitoring:
The following information is available to Spirit from the IAE Product Information Process (IP) 2 Group:
2.4.2 Operation Experience Reports:
IAE maintains V2500 Service Data System (SDS) data base from which selected engine operations and reliability summary reports will be developed and made available on a scheduled basis to Spirit. Data reported by IAE Customer Support Representatives serve as input to this data base. This computerized data maintenance and retrieval system will permit:
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A pooling and exchange of service experience for the benefit of the entire airline industry.
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A common statistical base.
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The selective querying of computer data files for answers to Spirit’s inquiries.
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In addition to providing operations, reliability and VIS reports, SDS serves in-house programs directed at improving engine design and enhancing overall customer support, including spare parts provisioning and warranty administration.
2.5 SPECIAL PROGRAMS
2.5.1 Engine Hardware Retrofit:
Engine Retrofits are carried out to provide modification of engine hardware configuration when required on delivered engines. This involves assisting in the marshaling of hardware, special tools, manpower and the scheduling of engine and material to modification sites.
2.5.2 Controlled Service Use Programs and Material:
IAE shall assume responsibility for the planning, sourcing, scheduling and delivery of Controlled Service Use material, warranty replacement material, service campaign material and program support material subject to the terms of special contracts with Spirit.
Urgent customer shipments, both inbound and outbound, are monitored, traced, routed and expedited as required. The receipt and movement of customer owned
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
material returned to IAE is carefully controlled, thus assuring an accurate accounting at all times.
3.0 BUSINESS SUPPORT
The Business Support Group is dedicated to providing prompt and accurate assistance to you, our V2500 airline customer. This Group provides the following categories of assistance and support to Spirit:
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Engine Warranty Services
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Engine Reliability and Economic Forecasts
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Logistic Support Studies
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3.1 ENGINE WARRANTY SERVICES
Engine Warranty Services will provide the following support for the V2500 engine airline customer:
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Prompt administration of claims concerning Engine Warranty, Service Policy, other support programs and Guarantee Plans.
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Investigation of part condition and part failure.
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Material provisioning administration for Controlled Service Use programs and other material support.
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3.1.1 Prompt Administration:
Spirit is assigned a Warranty Analyst whose job is to provide individual attention and obtain prompt and effective settlements of Warranty and Service Policy claims. A typical claim properly submitted is generally settled, including issuance of applicable credit memo, within thirty days. Experience generated by much of the data derived from such claims often enables IAE to monitor trends in operating experience and to address and often eliminate potential problems.
3.1.2 Investigation and Reports:
Parts returned to IAE pursuant to the terms of the Service Policy are investigated in appropriate detail to analyze and evaluate part condition and cause of part failure. A report of findings is prepared and forwarded to Spirit and to all IAE departments involved. In the case of vendor parts, the vendor is promptly informed. Where relevant, reports will include recommendations to preclude repetition of the problem.
3.2 MAINTENANCE CENTER SUPPORT
IAE has arranged for the establishment of Maintenance Centers which are available to accomplish repairs, modifications and conversions, as well as the complete overhaul of the V2500 engine subject to IAE's standard terms and conditions for such work.
Through the use of the IAE established Maintenance Centers and their capabilities, an operator can minimize or eliminate the need for investment in engine support areas depending on the level of maintenance he elects the Maintenance Center to perform. Savings in specific engine support areas, such as spare parts inventory, maintenance and test tooling, support equipment and test facilities, can be demonstrated. Use of Maintenance
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Centers can also minimize the need for off-wing maintenance and test personnel with their associated overhead.
3.3 MAINTENANCE FACILITIES PLANNING SERVICE
Maintenance Facilities Planning Service offers the following support to IAE customer:
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- General Maintenance Facility Planning Publications
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- Customized Facility Plans
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- Maintenance Facility and Test Cell Planning Consultation Services
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Maintenance Facilities Planning Service provides general and customized facility planning data and consultation services. Facility Planning Manuals for the V2500 engine will present the maintenance tasks, facility equipment and typical departments’ floor plans showing arrangement of equipment required to accomplish the tasks for all levels of maintenance. The Facility Equipment Manual is a catalog of standard facility equipment such as lathes, process tanks, hoists, cranes, etc., which is suitable for use in the maintenance and testing of IAE engines.
Customized facility planning services and consulting services are offered subject to separate contractual arrangements. Customized facility plans are developed to meet the requirements of customers' specific fleet sizes, activities and growth plans. The plans identify floor space, facility equipment, utilities and manpower requirements. On-site surveys are conducted as a part of customized plan development to determine the adaptability of existing facilities and equipment for the desired maintenance program. These plans provide floor plan layouts to show recommended locations for work stations, major equipment, marshaling and storage areas, workflow patterns, and structural and utility requirements to accommodate all the engine models that are maintained in the customer's shop. The Maintenance Facilities Planning Service also provides consultant services which are specifically related to the development of engine test cells, and the adaptation of existing maintenance facilities to accommodate expanding production requirements and/or new or additional IAE models.
3.4 ENGINE RELIABILITY AND ECONOMIC FORECASTS
Engine reliability and economic forecasts in the forms of predicted shop visit rates and maintenance costs can be provided to reflect the airline customers' operating characteristics. Additionally, various analyses can be conducted to establish life probability profiles of critical engine parts, and to determine optimum part configuration and engine operating procedures.
3.5 LOGISTICS SUPPORT STUDIES
As required, logistics studies are conducted to assist in the planning of engine operational support. Such studies may include spare engine and spare module requirements forecasts, level of maintenance analyses, engine type economic evaluations and life cycle cost estimates.
3.6 LEASE ENGINE PROGRAM
An engine lease program will be made available to Spirit subject to IAE's standard terms and conditions of lease as per IATA Master Short Term Lease Agreement, form 5016 00. Pool spares will be stationed at selected locations to assure emergency protection against aircraft-on-ground (AOG) situations or to provide supplemental support during “zero spares” conditions. Lease engines offered to Customer will be of a configuration and certification
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
standard acceptable to Customer. Availability will be subject to prior demand; however, the program logistics will be continually reviewed to assure the most effective deployment of available pool engines.
4.0 TECHNICAL SERVICES
4.1 TECHNICAL SERVICES
The Technical Services Group provides the following categories of technical support to the airline customer:
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Tooling and Support Equipment Services
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Technical Services is responsible for the overall technical support to the customers. The following services are provided:
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Technical Problem Identification/Corrective Action
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Technical Communication
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Engine Conversion Program Definition and Management
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Engine Upgrade and Commonality Studies
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Engine Incident Investigation Assistance
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Technical information supplied through IAE Customer Support Representatives, Customer Support Managers, customer correspondence and direct meetings with airlines' representatives permits assessment of the factors involved in technical problems and their impact on engine reliability and operating costs. Resolution of these problems is coordinated with responsible groups within IAE and the necessary corrective action is defined. In certain situations the corrective action involves the establishment of Service Evaluation programs for proposed modifications, and the establishment of warranty assistance programs in conjunction with the IAE Warranty Administration Group. Technical Services will assist customers in the implementation of recommended corrective action and improvements principally through official IAE technical communications, and direct customer contact.
4.1.1 Technical Communications:
Technical Services is responsible for the release of technical communications. Primary communication modes involves release of limits and procedures through engine and maintenance manual revisions and the requirements associated with engine upgrade and/or conversion, durability and performance improvements, and problem resolution through Service Bulletins is provided by All Operator Letters and/or wires or direct technical written response to individual customer inquiries.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
4.1.2 Engine Conversion Programs:
Technical Services defines minimum configuration levels for conversion of service engine models. They serve to assist the customer with the implementation of conversion programs into existing fleets by providing preliminary planning cost estimates and technical planning information regarding tooling, material and instructional requirements. Conversion programs are monitored for problem areas and Technical Services initiates and implements corrective action as may be necessary.
4.1.3 Engine Incident Investigation Assistance:
Assistance is provided to an airline in conducting engine incident investigations in responding to the requirements of the Certification Authority and the appropriate Airworthiness authority, as applicable.
4.1.4 Line Maintenance and Troubleshooting:
Line Maintenance and Troubleshooting Seminars can be conducted at the IAE Training Center with the objective of improving line maintenance effectiveness fleetwide. Specialized training on V2500 line maintenance and troubleshooting can be provided through on-site workshops by special contractual arrangement.
Troubleshooting support is provided primarily through powerplant troubleshooting procedures which are published in IAE and airframe manufacturer’s manuals. When an airline encounters an engine problem and corrective action taken has not been effective, more direct support in troubleshooting and maintenance can also be provided to the customer’s line maintenance personnel. Instructions on V2500 powerplant troubleshooting and maintenance shall also be provided to customer’s line maintenance personnel.
4.1.5 Airline Shop Maintenance:
Reviews of shop practices and procedures of Spirit shall be conducted, if requested by Spirit, to determine the most efficient and cost-effective methods for maintenance and repair of the V2500 in the environment in which the airline must maintain that engine.
4.2 POWERPLANT MAINTENANCE
Powerplant Maintenance covers responsibility for maximizing engine maintainability, establishing maintenance concepts and requirements and providing maintenance support plans for IAE. This group provided the following services:
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Definition of Maintenance Tasks and Resource Requirements
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Powerplant Maintenance conducts design reviews and comprehensive maintenance analysis of new engine designs and engine design changes to maximize engine maintainability consistent with performance, reliability, durability and life cycle cost considerations. Maintenance concepts, requirements and tasks are established to minimize maintenance costs. This group represents Spirit’s maintainability interests in internal IAE operations and upon request will assist Spirit in resolving specific maintenance task problems.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
4.2.1 Progressive Maintenance Planning:
Powerplant Maintenance also provides Planning Guides based upon Maintenance Task Analysis. The guides present engine maintenance requirements, their subordinate tasks and the required resources to accomplish on-aircraft engine maintenance and the off-aircraft repair of engines by modular section/build group replacement. Maintenance requirements are also presented for the refurbishment of modular section/build group by parts replacement, the complete repair of parts, the refurbishment of accessory components and for engine testing. The data in the Planning Guides is presented in a manner that is primarily intended to assist new operators by providing a phased introduction of new engines into their shops and to capitalize on the design maintainability features for the engine when they are developing their maintenance plans.
Powerplant Maintenance Engineering will assist new operators in planning a gradual, technically feasible, and economically acceptable expansion from line maintenance of installed engines through the complete repair of parts and accessory components.
4.3 CUSTOMER PERFORMANCE
Customer Performance provides for the following types of technical assistance to Spirit:
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Engine Performance Analysis Computer Programs for Test Cell Use
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Test Cell Correlation Analysis and Correction Factors
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Engine Stability Procedures and Problem Analysis
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Although much of the above support is provided in the form of procedures, data and recommendations in various publications, the group also answers inquiries of a performance nature which are forwarded to IAE by individual customers.
ENGINE PERFORMANCE ANALYSIS
Technical support is provided in a number of areas related to operational suitability including the development of the test requirements and performance limits for the Adjustment and Test Section of the Engine Manual. Computer programs that will assist Spirit in analyzing engine performance using test cell data can be provided subject to IAE’s then current standard license fees and Terms and Conditions.
4.3.1 Test Cell Correlation:
Technical assistance is provided to Spirit for developing appropriate corrections to be used for specific test configurations at Spirit’s owned test cell facilities. Reports are provided presenting correlation analyses and IAE recommended test cell corrections which permit comparison of the performance of Spirit tested engines with the respective Engine Manual limits and guarantee plan requirements.
4.3.2 Engine Stability:
Technical support is provided to ensure that engine stability and starting reliability are maintained. Service evaluation programs for proposed improvements are initiated and monitored to determine their effectiveness. In addition, problems relating to engine control systems which impact engine stability and performance are analyzed.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
4.4 DIAGNOSTIC SYSTEMS
ADEM is responsible for the technical support of Spirit’s acquisition of inflight engine data and the assessment of engine performance through the use of that data. ADEM personnel provide the following services:
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Guidance to help Spirit define their engine monitoring system requirements.
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Development of hardware specifications and computer programs (by separate contractual arrangement) to satisfy engine diagnostic requirements.
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Coordination of all IAE airborne diagnostic support activity.
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4.4.1 Guidance In Defining Engine Monitoring systems Requirements:
ADEM can provide consultation services to assist Spirit in defining its engine condition and performance monitoring requirements and in selection of appropriate hardware and software systems to meet those requirements and options between Spirit, airframe manufacturer, and Airborne Integrated Data System (AIDS) manufacturer.
4.4.2 Development and Coordination
ADEM personnel can, if requested by Spirit, develop hardware specification and make computer software available to accomplish Engine Condition Monitoring (ECM) and performance analysis of engine modules using AIDS data. Engine condition monitoring procedures, of both the manual and computerized variety can, if requested by Spirit, also be developed and provided in support of Spirit’s selected method of engine condition monitoring. Computer software will be provided to Spirit subject to IAE's then current standard license fees and Terms and Conditions.
Diagnostic Systems personnel also coordinate activities of cognizant functional groups at IAE to provide engine related information to Spirit, airframe manufacturer, and AIDS equipment vendor during the planning, installation, and operation of AIDS.
4.5 HUMAN FACTORS
Human Factors supplies data on task time and skill requirements necessary for accomplishing maintenance procedures.
Task data provided includes estimates of the man-hours, elapsed time and job skills necessary to accomplish maintenance tasks as described in IAE's Manual and Service Bulletins. Data is supplied for “on” and “off” aircraft maintenance tasks up to modular disassembly/assembly. Additional selected task data can, if requested by Spirit, be supplied on disassembly/assembly to the piece part level and on parts repair. In addition, the group can, if requested by Spirit, help solve problems related to skill requirements, body dimensions, or excessive man-hours encountered in accomplishing maintenance tasks.
4.6 FLIGHT OPERATIONS
Flight Operations provides Spirit with the following technical assistance concerning installed engine operations:
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Introduction of new equipment
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Problem resolution and assistance with in-service equipment
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Contractual commitment and development program support
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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Publication of engine operations literature and performance aids
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4.6.1 New Equipment:
In accordance with Spirit’s needs, Flight Operations can provide on-site assistance in the training of operations personnel and help in solving engine operational problems that might arise during the initial commercial service period. Such assistance can, if requested by Spirit, include participation in initial delivery flights, engine operational reviews, and flight crew training activity.
4.6.2 Problem Resolution - In-Service Equipment:
In accordance with a mutually agreed upon plan, Flight Operations can, if requested by Spirit, perform cockpit observations to identify or resolve engine operating problems and to assess installed engine performance.
4.6.3 Contractual Support and Development Programs:
As required, Flight Operations can assist in evaluating installed engine performance relative to contractual commitments and engine improvements which have an impact on engine operations.
4.6.4 Publication Support:
Flight Operations is responsible for the issuance of Propulsion System Operating Instructions and correspondence pertaining to in-flight engine operations. Such material is coordinated with the airframe manufacturers as required. Special Presentations and Reports shall also be issued, as required, to support the activity described above.
4.7 REPAIR SERVICES
Repair Services shall provide the following support to Spirit:
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Coordinated Repair Development Activity
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Customer Assistance on Repair Procedures and Techniques
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Qualification of Repair Sources
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Repair Development List
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4.7.1 Coordination of Repair Development:
Repair Services shall provide direct contact with all sources that initiate repair schemes. The Group shall coordinate with representatives of Engineering and Support Services disciplines in identifying repair needs, evaluating various repair options and establishing repair development procedures and schedules. The Group shall participate in setting repair evaluation and approval requirements. If and when the repair is approved and substantiating data is documented, Repair Services shall release the repair to the Engine Manual.
4.7.2 Technical Assistance:
Repair Services shall provide daily communications with Spirit via technical responses to inquiries direct from Spirit or through IAE’s Customer Support
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Representative office at Spirit’s facility. In addition, Repair Services shall make periodic visits to Spirit’s repair facilities to discuss new repairs under development, answer specific questions posed by the particular facility and review actual parts awaiting a repair/scrap decision. Occasionally, Repair Services make special visits to Spirit’s facilities to assist in training customer personnel in accomplishing particularly complex repairs.
4.7.3 Qualification of Repair Sources:
Repair Services shall coordinate the qualification of repair sources for repairs proprietary to IAE or to an outside repair agency. They also perform a review of the qualifications of repair sources for critical, nonproprietary repairs for which a source demonstration is deemed necessary. The group shall participate in negotiation of the legal and business agreements associated with these qualification programs.
4.8 TOOLING AND SUPPORT EQUIPMENT SERVICES
The Tooling and Support Equipment Services Group shall, as requested by Spirit, assist Spirit by providing the following services:
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Support Equipment Manufacturing/Procurement Documentation
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Engine Accessory Test Equipment and Engine Transportation Equipment Specifications
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Support Equipment Logistics Planning Assistance
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4.8.1 Support Equipment Documentation:
The tooling and Support Equipment Services Group designs the special support equipment required to disassemble, assemble, inspect, repair and test IAE engines. Special support equipment design drawings and Support Equipment Master Data Sheets, which describe how to use the support equipment, shall be supplied to Spirit in the form of 35mm aperture cards. Support equipment designs are kept current with engine growth, and tool Bulletins are issued to customers as part of continuing configuration management service. Updated Design and Master Data Sheets Aperture Cards and Tool Bulletins are periodically distributed to all IAE customers, including Spirit.
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4.8.2
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Engine Accessory Test Equipment and Engine Transportation Equipment Requirements:
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Engine accessory test equipment and engine transportation equipment general requirements and specifications are defined and made available to Spirit. If requested, the Tooling and Support Equipment Group will assist Spirit in the definition of engine accessory test and engine transportation equipment required for specific IAE needs.
4.8.3 Support Equipment Logistics Planning Assistance:
The Tooling and Support Equipment Group shall provide, at Spirit’s request, special support equipment lists which reflect the customer's unique requirements such as mix of engine models and desired level of maintenance to aid in support of equipment requirements planning.
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4.9
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TECHNICAL PUBLICATIONS
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
IAE and its subcontractors produce publications and maintenance information as described below to support the maintenance and modification requirements of the airline customer. The publications are prepared in general accordance with Air Transport Association of America (ATA) Specification No. 100. The manuals will be available to Spirit subject to IAE’s current terms and conditions.
IAE supplies the airplane manufacturer with all the necessary information required to perform “On-Aircraft” engine maintenance, troubleshooting, and servicing. This information is developed through close coordination between the airplane manufacturer and IAE and is integrated by the airplane manufacturer into its maintenance publications.
In addition, listed and described below are the publications that IAE will make available to support Spirit’s maintenance program:
4.9.1 Engine Manual
The Engine Manual is a document which will be structured in accordance with ATA 100 section 2-13-0 with JEMTOSS applied in accordance with section 2-13-14. The manual will provide, in one place, the technical data requirements for information needed to maintain the engine and the maximum potential number of parts that could, regardless of design responsibility, remain with the engine when it is removed from the airplane. Additionally the manual includes coverage of interrelated parts (e.g. thrust reverser, cowlings, mounts, etc.) that can stay with the airplane when the engine is removed or can be removed for maintenance purposes in lieu of individual component maintenance manuals.
4.9.2 Standard Practices Manual
The Standard Practices Manual supplements the Engine Manual by providing, in a single document, all IAE recommended or approved general procedures covering general torques, riveting, lockwiring, cleaning policy, inspection policy standard repairs, etc., and marking of parts.
4.9.3 Illustrated Parts Catalog
The Illustrated Parts Catalog will be structured in accordance with ATA 2-14-0 and is a document which is used in conjunction with the Engine Manual for the identification and requisitioning of parts and assemblies. Its ATA structure is to be compatible with the Engine Manual Structure. Additionally the manual includes coverage of interrelated parts (e.g. thrust reverser, cowlings, mounts, etc.) that can stay with the airplane when the engine is removed or can be removed for maintenance purpose in lieu of individual component maintenance manuals.
4.9.4 IAE Proprietary Component Maintenance Manuals
These manuals will be structured in accordance with ATA 2-5-0 and will cover data for chapters other than 71, 72, and 78.
4.9.5 Subcontractor Component Maintenance Manuals
These manuals will be structured in accordance with ATA 2-5-0 and are prepared directly by the accessory manufacturers. All accessory data is subject to IAE prepublication review and approval.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
4.9.6 Engine and Accessory Component Service Bulletins
Each Engine and Accessory Component Service Bulletin will be produced in accordance with ATA 2-7-0. They will cover planning information, engine or component effectivity, reason for Bulletin, recommended compliance, manpower requirements, and tooling information relating to parts repair or modification. Subcontractor prepared Accessory Component Service Bulletins are reviewed by IAE prior to issuance. Alert Service Bulletins will be issued on all matters requiring the urgent attention of Spirit and will generally be limited to items affecting safety. The Bulletin will contain all the necessary information to accomplish the required action.
4.9.7 Operating Instructions
Engine operating instructions are presented in the form of General Operating Instructions supplemented by V2500 Specific Engine Operating Instructions which provide operating information, procedures, operating curves and engine limits.
4.9.8 Facilities Planning and Facility Equipment Manuals
The Facilities Planning Manual outlines the requirements for engine/component overhaul, maintenance, and test facilities in terms of basic operations, processes, time studies and equipment. The Facility Equipment Manual lists and describes the facility equipment used for engine maintenance, overhaul and repair.
4.9.9 Support Equipment Numerical Index
The Indexes, prepared for each major engine model, provide a listing, in numeric sequence, by maintenance level, of all IAE ground support equipment required to maintain and overhaul the engine. The Listings are cross-indexed to the applicable engine dash model and to the chapter and section of the Engine Manual.
4.9.10 Technical Publications Index
This index contains a listing of available technical manuals and their contents.
4.9.11 Service Bulletin Index
This index will be in a format and on a revision schedule as determined by IAE.
4.9.12 Vital Statistics Logbook
The VSL provides the following information for each production engine on IAE’s interactive website.
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Identification of major engine and nacelle components by part number, serial number and ATA - location.
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Engine Test Acceptance Certificate.
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List of all incorporated serialized parts by part number, serial number and ATA - Location. This list also includes an Industry Item List to identify specific parts by part number, serial number and ATA - Location which the airline customer may choose to monitor during the engine operational life. The parts listed represent approximately 80% of engine total value.
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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List of all incorporated life limited parts by part number, serial number and ATA - location.
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List of all Service Bulletins that were incorporated during initial build of each new engine.
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4.9.13 Revision Services:
Regular, temporary, and “as required” revisions to technical publications will be made during the service life of IAE equipment. IAE’s current standard is ninety (90) days. The utilization of advanced techniques and equipment provides the airline customer with expedited revision service.
4.9.17 Distribution Media Options:
All publications are distributed via DVD or CDROM depending on the publication. Most of the publications are also available on IAE’s interactive website.
5.0. SPARE PARTS
5.1 SPARE PARTS SUPPORT
The Spare Parts Group provides the following categories of spare parts support to Spirit, as requested by Spirit:
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- Individual Customer Account Representatives
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|
•
|
- Spare Parts Inventory
|
|
|
|
|
•
|
- Effective Expedite Service
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|
•
|
- Worldwide Distribution
|
5.1.1 Account Representative:
An Account Representative shall be assigned to Spirit. This representative provides individualized attention for effective spare parts order administration, and is the customer's interface on all matters pertaining to new part planning and procurement. Each representative is responsible for monitoring Spirit’s requirements and providing effective administrative support. The Account Representatives shall be thoroughly familiar with Spirit’s spare parts ordering policies and procedures and are responsible for ensuring that all of Spirit’s new parts orders are processed in an effective manner.
5.1.2 Spare Parts Provisioning Planning:
Prior to delivery of the first Spirit aircraft, preplanning discussions will be held to determine the aircraft/engine program, and engine spare parts provisioning and order plans. Mutually agreed upon provisioning target dates are then established and on-time completion tracked by Spirit’s Account Representative with the assistance of logistics specialists in Spare Parts Provisioning and Inventory Management. Meetings are held with Spirit at a mutually agreeable time to review suggested spare parts provisioning lists prepared by Spare Parts Provisioning. These lists are designed to support Spirit’s particular fleet size, route structure and maintenance and overhaul program.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
5.1.3 Order Administration:
IAE subscribes to the general principles of Air Transport Association of America (ATA) Specification No. 2000, Integrated Data Processing - Supply. The procedures of Air Transport Association of America (ATA) Specification No. 200 may be used for Initial Provisioning (Chapter II), Order Administration (either Chapter III or Chapter VI), or Invoicing (Chapter IV).
A spare parts supply objective is to maintain a 90 percent on-time shipment performance record to Spirit’s requirements. The lead time for replenishment spare parts is identified in the IAE spare Parts Price Catalog. Initial provisioning spare parts orders should be placed at least six months prior to required delivery, while conversions and major modifications require full manufacturing lead times.
The action to be taken on emergency requests will be answered as follows:
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•
|
Aircraft-On-Ground (AOG) - within four hours (in these instances every effort is made to ship immediately).
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•
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Critical (Imminent Aircraft-On-Ground (AOG) or Work Stoppage) -- Within 24 hours.
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•
|
Stock Outage -- Within seven working days (these items are shipped as per Spirit’s request).
|
5.1.4 Spare Parts Inventory:
To ensure availability of spare parts in accordance with published lead time, spare parts provisioning maintains a modern, comprehensive requirements planning and inventory management system which is responsive to changes in Spirit’s demand, special support programs and engineering design. Organized on an engine model basis, this system is intended to maintain part availability for delivery to customers consistent with published lead times.
A majority of parts in the spare parts inventory are continually controlled by an Automatic Forecasting and Ordering System. Those parts which do not lend themselves to automatic control due to supercedure, unusual usage or conversion requirements are under the direct manual control of Spares Planning personnel. As additional protection against changes in production lead time or unpredicted demand, certain raw materials are also inventoried. Successful inventory management is keyed to accurate requirements planning. In support of the requirements planning effort, a wide ranging data retrieval and analysis program is offered. This program concerns itself both with the customer logistics and technical considerations as follows:
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•
|
Forecasts of life limited parts requirements are requested and received semi-annually from major customers. Based on the size of Spirit’s order, Spirit shall be considered a major customer.
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•
|
Engine technical conferences are held frequently within IAE to assess the impact of technical problems on parts.
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•
|
For a selected group of parts a provisioning conference system is offered which considers actual part inventory change, including usage and receipts, as reported monthly by participating customers.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
5.1.5 Packaging
All material is packaged in general compliance with Air Transport Association of America (ATA) Specification No. 300.
5.1.6 World Airline Supplier’s Guide:
IAE subscribes to the supply objectives set forth in the World Airlines Supplier's Guide published by the Air Transport Association of America (ATA). IAE requires that its proprietary component vendors also perform in compliance with the precepts of the World Airline Suppliers' Guide.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit D
Warranties
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit E
Guarantees
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
400 Main Street, M/S 121-10
East Hartford, CT 06108 USA
October 1, 2013
Spirit Airlines, Inc.
2800 Executive Way
Miramar, Florida 33025
|
|
|
|
SUBJECT:
|
SIDE LETTER NO. 1 TO THE V2500-A5 GENERAL TERMS OF SALE BETWEEN IAE INTERNATIONAL AERO ENGINES AG AND SPIRIT AIRLINES, INC., DATED OCTOBER 1, 2013
|
Gentlemen:
We refer to the V2500-A5 General Terms of Sale dated October 1, 2013 between IAE International Aero Engines AG (“
IAE
”) and Spirit Airlines, Inc. (“
Spirit
”), as amended from time to time, such agreement being hereinafter referred to as the “New Fleet
Contract
”. Unless expressly stated to the contrary, and to the extent possible, terms used in this Side Letter No. 1 (“
Side Letter No. 1
”) shall have the same meaning given to them in the New Fleet Contract.
WHEREAS:
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|
|
A.
|
Spirit has entered into a purchase agreement with Airbus to acquire thirty (30) new A320 aircraft powered by new V2500-A5 engines (the “
Aircraft
”);
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|
|
|
|
B.
|
Spirit has entered into the New Fleet Contract with IAE in support of Spirit’s agreement to acquire the Aircraft and to purchase V2500 spare parts and the Spare Engines in support of its operation of the Aircraft; and
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|
|
|
C.
|
The Parties desire to amend, supplement or replace certain provisions of the New Fleet Contract and agree to the terms hereof pursuant to which IAE shall provide certain financial and technical assistance to Spirit in support of Spirit’s selection of the V2500 engine to power its Aircraft, and in support of the integration of the Aircraft into its fleet and pursuant to which certain provisions of the New Fleet Contract are amended, supplemented or replaced in accordance with the provisions hereof.
|
NOW, THEREFORE,
in consideration of the mutual benefits and obligations set forth herein, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
|
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|
1.
|
Fleet Introductory Assistance Credits
|
|
|
|
|
1.1
|
In consideration of Spirit’s agreement to purchase the Aircraft and to assist Spirit with the introduction of the Aircraft into its fleet, IAE shall issue credit notes to Spirit’s account with IAE in the following amounts (each an “
FIA Credit
”):
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
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|
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|
|
Aircraft Type
|
Credit
(Jan-12 US$)
|
Issued at Delivery & Acceptance of:
|
|
A319 (V2524-A5)
|
*****
|
Each V2524-A5 powered Aircraft
|
|
A320 (V2527-A5)
|
*****
|
Each V2527-A5 powered Aircraft
|
|
A321 (V2533-A5)
|
*****
|
Each V2533-A5 powered Aircraft
|
|
|
|
|
1.2
|
Each FIA Credit will be issued upon delivery to Spirit of the corresponding Aircraft. Spirit agrees to provide IAE with written notice confirming acceptance of the corresponding Aircraft promptly after acceptance.
|
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|
|
|
1.3
|
Spirit agrees that IAE will assign all of the applicable FIA Credit to Airbus, to be applied toward the payment for the Engines for the corresponding Aircraft. Application of the applicable FIA Credit from IAE by Airbus on behalf of Spirit prior to or simultaneously with delivery of the corresponding Aircraft shall, for the purposes of this Side Letter No. 1, be deemed confirmation of Spirit’s acceptance of that Aircraft. In the event any FIA Credit or portion thereof under this Section 1 is assigned to Airbus, Spirit agrees that the applicable FIA Credit shall not vest in Airbus until delivery to Spirit of the respective Aircraft. In the event Spirit does not accept delivery of the corresponding Aircraft, Spirit agrees to promptly reimburse or cause Airbus to reimburse to IAE any amounts paid by IAE to Airbus on behalf of Spirit.
|
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|
|
2.
|
Spare Engine Pricing Credits
|
|
|
|
|
2.1
|
In consideration of Spirit’s purchase of the Spare Engines in accordance with the New Fleet Contract, and to assist Spirit with such purchase, IAE shall credit Spirit‘s account in accordance with the following amount for the corresponding Spare Engine (each a “
Spare Engine Credit
”):
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|
|
|
|
|
|
Engine Type
|
Credit
(Jan-12 US$)
|
Issued on Delivery & Acceptance of:
|
|
V2524-A5
|
*****
|
Each V2524-A5 Spare Engine
|
|
V2527-A5
|
*****
|
Each V2527-A5 Spare Engine
|
|
V2533-A5
|
*****
|
Each V2533-A5 Spare Engine
|
|
|
|
|
2.3
|
Each Spare Engine Credit ***** shall be issued upon delivery to Spirit of the corresponding Spare Engine. Spirit agrees to provide IAE with written notice confirming acceptance of the corresponding Spare Engine promptly after acceptance.
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|
|
|
2.4
|
Each Spare Engine Credit shall be used by Spirit for payment against the corresponding spare Engine invoice. *****.
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|
|
2.6
|
Upon written notice from Spirit, IAE will issue all or part of a Spare Engine Credit directly to Spirit as a cash payment provided that IAE has received full payment for the relevant Spare Engine.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
3.
|
Spare Parts and Tooling Credits
|
|
|
|
|
3.1
|
To assist Spirit with the procurement of V2500 spare Parts in support of the Aircraft, IAE shall credit Spirit‘s account with IAE in the fixed amount of ***** (the “
Spare Parts and Tooling Credit
”).
|
|
|
|
|
3.2
|
The Spare Parts and Tooling Credit will be issued upon delivery to and acceptance by Spirit of the first Aircraft. Spirit agrees to provide IAE with written notice confirming acceptance of the corresponding Aircraft promptly after acceptance.
|
|
|
|
|
3.3
|
The Spare Parts and Tooling Credit shall be used by Spirit for the payment of IAE invoices for V2500 Spare Parts, Modules, and tooling from IAE.
|
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|
4.
|
Credit and Engine Pricing Escalation
|
|
|
|
|
4.1
|
The FIA Credits, Spare Engine Credits *****, referenced in Sections 2 and 3 above, are subject to escalation in accordance with the IAE Escalation Formula set forth in Exhibit B-3 to the New Fleet Contract, and shall be escalated from a base month of January 2012 (the “
Base Month
”) to the earlier of the applicable scheduled delivery date as set forth in Exhibit B-1 (and B-2 if applicable) of the New Fleet Contract or the actual delivery date of the applicable Aircraft or Spare Engine (the “
Base Escalated Credit
”). *****
|
|
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|
|
4.5
|
Upon delivery of each Aircraft, IAE will, as of the respective dates of delivery of each of the Aircraft delivered to Spirit, calculate the difference (if any) between:
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|
|
|
(a)
|
The Deemed Shipset Price (as defined below) escalated in accordance with Section 4.1 above; minus
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|
|
(b)
|
The Deemed Shipset Price escalated in accordance with Section 4.1 above and capped in accordance with Section 5.2 above.
|
IAE will adjust the amount of the FIA Credit due and payable to Spirit for each such Aircraft by such difference. For the purposes of administering this provision, the “
Deemed Shipset Price
” is as follows:
|
|
|
|
|
|
Aircraft Type
|
Deemed Shipset Price (Jan-12 US$)
|
|
A319 (V2524-A5)
|
*****
|
|
A320 (V2527-A5)
|
*****
|
|
A321 (V2533-A5)
|
*****
|
|
|
|
|
4.6
|
IAE agrees that the credits provided to herein Spirit shall not expire provided that: (i) the New Fleet Contract remains in full force and effect, (ii) the credits have not been applied to overdue amounts arising under the New Fleet Contract or the New Fleet FHA under rights of set off and (iii) Spirit continues to operate at least one (1) Aircraft.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
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|
|
5.1
|
The financial support described in this Side Letter No.1 is predicated upon delivery to Spirit of the specific quantities and models of Aircraft and Spare Engines as listed in the delivery schedule set forth as Exhibit B-1 of the New Fleet Contract, as the same may be modified from time to time.
|
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8.1
|
Clause 6.3 of the New Fleet Contract, *****, is deleted in its entirety and replaced with the following:
|
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|
|
|
6.19.1
|
6.3.2 For the avoidance of doubt, IAE’s rights under this paragraph are in addition to all other rights and remedies IAE may have available under this New Fleet Contract or under law with regard to any failure to take delivery of the Firm Items in accordance with the schedules described in to the Contract, as amended, supplemented or modified from time to time.
|
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|
6.3.3
|
IAE shall have the right to set off credits from time to time made available by IAE under the New Fleet Contract either directly to Spirit or via Airbus or its subsidiaries and affiliates, in respect of the failure by Spirit, after any applicable grace period, to cure any payment default which is continuing under (i) the New Fleet Contract or *****, or (iii) the Fleet Hour Agreement.”
|
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|
11.
|
Thrust Rating Flexibility
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
11.3
|
The thrust flexibility as provided under this Section 11.3 is personal to Spirit and may not be transferred or assigned by Spirit. Prior to selling, transferring or otherwise disposing (including lease return) of any V2500 Engine, other than a sale leaseback transaction following which Spirit continues to operate the Engine, Spirit shall revert such Engine to the thrust rating at which IAE, originally delivered the Engine (the “
Original Thrust Rating
”) through the removal of the multi-rated data plate and the replacement of the original single rated plate.
|
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|
|
11.4
|
If Spirit sells, transfers or otherwise disposes of any V2500 Engine (other than a sale leaseback or similar transaction following which Spirit continues to operate the V2500 Engine) without restoring such Engine to its Original Thrust Rating and returning any multi-rated data plate to IAE. Spirit shall pay to IAE *****.
|
|
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|
|
11.5
|
IAE and Spirit agree to make reasonable adjustments to the Existing Fleet FHA to account for the V2500 Engine thrust flexibility set forth in this Section 11.
|
IAE agrees to provide Spirit training credits equivalent to ***** student training days made available ***** prior to the induction of the first Aircraft into Spirit’s fleet. In addition, IAE agrees to provide an additional ***** student training days per Aircraft delivered.
All student training days may be available at IAE’s designated customer training facility.
|
|
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|
12.2
|
Technical Publications
|
IAE will provide free of charge to Spirit technical publications necessary to operate and/or maintain the Engines. Such technical publications will be updated regularly to include all revisions of the technical publications.
|
|
|
|
12.3
|
Customer Support Manager
|
IAE will assign a Customer Support Manager for Spirit who will coordinate the business and technical services needed to support such Spirit’s Engines.
The Customer Support Manager, based at IAE’s headquarters, provides a direct liaison between the Spirit’s Engineering, Maintenance, Operations, Logistics, Commercial and Financial organizations and the corresponding functions within IAE. The Customer Support Manager assigned to Spirit is responsible for coordinating and monitoring the effort of the Product Support Department functional organization to achieve timely and responsive support for Spirit.
The Customer Support Manager provides the following specific services to the airline customer:
|
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|
|
(a)
|
Readiness Program and planning prior to EIS;
|
|
|
|
|
(b)
|
Technical recommendations and information;
|
|
|
|
|
(c)
|
Engine Maintenance Management Plans;
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
(d)
|
Refurbishment, Modification and Conversion program planning assistance;
|
|
|
|
|
(e)
|
Coordination of customer repair, maintenance and logistics requirements with the appropriate Product Support functional groups; and
|
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|
|
(f)
|
Assist with critical engine warranty/service policy claims.
|
|
|
|
|
12.4
|
Customer Support Representative
|
Customer Support Representatives are fully trained on all facets of Engine line maintenance are stationed around the world to assist operators with the introduction of the Engine into their fleets. OEM will assign a Customer Support Representative in Spirit’s area of operation to assist Spirit in preparing for Engine operation.
The Customer Support Representative will provide the following services to Spirit:
|
|
|
|
(b)
|
Maintenance Action Recommendations;
|
|
|
|
|
(c)
|
Daily Reporting on Engine Technical Situations;
|
|
|
|
|
(e)
|
Service Policy Preparation Assistance; and
|
|
|
|
|
(f)
|
Prompt Communication with OEM
|
IAE will place a dedicated Customer Support Representative at one of Spirit’s Main Bases for a period of ***** beginning ***** prior to the delivery of Spirit’s first Aircraft, subject to Spirit providing such Customer Support Representative with reasonable, secure office accommodation including furniture and office equipment, access to telephone, facsimile and secretarial services as would be customarily provided to other Spirit employees at no additional charge.
The Customer Support Representative will provide on-site technical support for Engines at Spirit’s line stations, upon Spirit’s reasonable request, on an as-required basis to be determined by IAE. Spirit agrees to provide free of charge airfare from Spirit’s Main Base to any such line station as well as a reasonable allowance for per diem and hotel expenses.
|
|
|
|
13.1
|
Clause 6.7 of the New Fleet Contract,
Assignment
, is deleted in its entirety and replaced with the following:
|
|
|
|
|
“6.7.1
|
Except as otherwise agreed herein, Spirit may not assign in whole or part any of its rights or obligations under the New Fleet Contract without the written consent of IAE (such consent not to be unreasonably withheld).
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
6.7.6
|
IAE may, without recourse, assign its rights and/or delegate its obligations under this Agreement to any subsidiary or affiliate of IAE or United Technologies Corporation, or in connection with a merger, consolidation, reorganization, or voluntary sale or transfer of its assets; provided that such assignee/delegate is: (i) solvent at the time of such transfer and (ii) authorized by the applicable regulatory authorities, as necessary, to perform or procure the performance of all obligations being delegated/assigned; and (iii) able, in IAE’s sole, reasonable discretion, to make all payments required by IAE to be made to Spirit under the New Fleet Contract.”
|
|
|
|
|
14.1
|
Entire Agreement; Conflicts
|
This Side Letter No. 1, the New Fleet Contract and the New Engine Fleet FHA constitute the sole and entire agreement between Spirit and IAE in relation to the matters set forth herein and shall supersede all previous agreements between Spirit and IAE, both oral and in writing, as of the date hereof. In the event of any conflict between the New Fleet Contract and this Side Letter No. 1, the terms of this Side Letter No. 1 shall control and the New Fleet Contract will be deemed as modified accordingly.
This Side Letter No. 1 shall not be amended, changed or modified in any way other than by agreement in writing, signed by Spirit and IAE, which is expressly stated to amend this Side Letter No. 1.
|
|
|
|
14.3
|
Proprietary Information
|
This Side Letter No. 1 shall be subject to the non-disclosure and non-use provisions of the New Fleet Contract.
This Side Letter No. 1 shall be subject to the governing law and forum provisions of the New Fleet Contract.
This Side Letter No. 1 may be executed in one or more counterparts, each of which shall be deemed a duplicate original and all of which, when taken together, shall constitute one and the same document. Execution and delivery of this Side Letter No. 1 by exchange of facsimile copies or electronic mail bearing the signatures of the parties shall constitute a valid and binding execution and delivery of this Side Letter No. 1 by the parties.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Except as expressly amended by this Side Letter No. 1, all provisions of the New Fleet Contract remain in full force and effect.
|
|
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|
|
|
|
|
|
Agreed to and accepted on behalf of:
IAE International Aero Engines AG
|
|
Agreed to and accepted on behalf of:
Spirit Airlines, Inc.
|
|
By:
|
/s/ Rick Deurloo
|
|
By:
|
/s/ Edward Christie
|
|
Name:
|
Rick Deurloo
|
|
Name:
|
Edward Christie
|
|
Title:
|
SVP Sales
|
|
Title:
|
SVP & CFO
|
|
Date:
|
10/2/13
|
|
Date:
|
10/1/13
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
400 Main Street, M/S 121-10
East Hartford, CT 06108 USA
October 1, 2013
Spirit Airlines, Inc.
2800 Executive Way
Miramar, Florida 33025
|
|
|
|
SUBJECT:
|
SIDE LETTER NO. 2 TO THE V2500-A5 GENERAL TERMS OF SALE BETWEEN IAE INTERNATIONAL AERO ENGINES AG AND SPIRIT AIRLINES, INC., DATED OCTOBER 1, 2013
|
Gentlemen:
We refer to the V2500-A5 General Terms of Sale dated October 1, 2013 between IAE International Aero Engines AG (“
IAE
”) and Spirit Airlines, Inc. (“
Spirit
”), as amended from time to time, such agreement being hereinafter referred to as the “New Fleet
Contract
”, and the V2500-A5 Fleet Hour Agreement dated October 1, 2013 between IAE and Spirit, as amended from time to time (the “New Engine Fleet FHA”). Unless expressly stated to the contrary, and to the extent possible, terms used in this Side Letter No. 2 (“
Side Letter No. 2
”) shall have the same meaning given to them in the Contract.
WHEREAS:
|
|
|
|
A.
|
Spirit has entered into a purchase agreement with Airbus to acquire fifteen (15) new A321 aircraft powered by new V2500-A5 engines (the “
Incremental
Aircraft
”), incremental to the thirty (30) A320 aircraft powered by new V2500-A5 engines that Spirit ordered under the New Fleet Contract (the “
Original
Aircraft
”); and
|
|
|
|
|
B.
|
To support the Incremental Aircraft, Spirit shall acquire, by purchase or lease from IAE, two (2) new V2533-A5 Spare Engines (the “Incremental Spare Engines”) that are incremental to the four (4) Firm Spare Engines that Spirit ordered under the New Fleet Contract (the “Original Spare Engines”); and
|
|
|
|
|
C.
|
The Parties desire to enter into an agreement on the Incremental Aircraft and the Incremental Spare Engines (if Spirit elects to purchase, rather than lease, the Incremental Spare Engines), on similar terms to those relating to the Original Aircraft and Original Spare Engines; and
|
|
|
|
|
D.
|
The Parties desire to amend, supplement or replace certain provisions of the New Fleet Contract and agree to the terms hereof pursuant to which IAE shall provide certain financial and technical assistance to Spirit in support of Spirit’s selection of the V2500 engine to power its Incremental Aircraft, and in support of the integration of the Aircraft into its fleet and pursuant to which certain provisions of the New Fleet Contract are amended, supplemented or replaced in accordance with the provisions hereof.
|
NOW, THEREFORE,
in consideration of the mutual benefits and obligations set forth herein, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
The definition of Aircraft in Section 1.1 of the New Fleet Contract shall be deleted in its entirety and shall be replaced with the following:
“
Aircraft
” shall mean any one or all, as the context requires, of (i) the thirty (30) new Airbus A320 family aircraft powered by new Engines firmly ordered and being acquired by Spirit from Airbus for delivery as set forth in Exhibit B-1 to this Contract, as the same may be amended from time to time in accordance herewith, and (ii) the fifteen (15) new Airbus A321 aircraft powered by new Engines firmly ordered and being acquired by Spirit from Airbus for delivery as set forth in Exhibit B-1 to this Contract, as the same may be amended from time to time in accordance herewith.”
The definition of “Spare Engine” in Section 1.11 of the New Fleet Contract shall be deleted in its entirety and shall be replaced with the following:
|
|
|
|
“1.11
|
“Spare Engine” shall mean the Firm Spare Engines as defined in Section 2.2.1 and any additional new Spare Engines to be purchased in accordance with Section 2.2.2.”
|
|
|
|
|
2.
|
Fleet Introductory Assistance Credits
|
The Incremental Aircraft shall be purchased in accordance with, and the Parties shall be subject to, the same terms and conditions with respect to the Fleet Introductory Assistance Credits as the Original Aircraft, as outlined in Section 1 of Side Letter 1 to the New Fleet Contact, dated October 1, 2013 (“Side Letter 1”).
|
|
|
|
3.
|
Credit and Engine Pricing Escalation
|
The Incremental Aircraft shall be purchased in accordance with, and the Parties shall be subject to, the same terms and conditions with respect to the Credit and Engine Pricing Escalation as the Original Aircraft, as outlined in Section 4 of Side Letter 1 to the New Fleet Contact, dated October 1, 2013.
To support the Incremental Aircraft, Spirit shall acquire, by purchase or lease from IAE, two (2) Incremental Spare Engines, which are incremental to the Original Spare Engines. Spirit will decide whether to purchase or lease from IAE the two (2) Incremental Spare Engines,
Section 2.2 of the New Fleet Contract will be amended by inserting the following new section 2.2.2 and renumbering the original sections 2.2.2 and 2.2.3 as 2.2.3 and 2.2.4, respectively.
|
|
|
|
“2.2.2
|
Spirit, at its option, may also purchase up to two (2) additional new V2533-A5 Spare Engines (the “
Option Spare Engines
”) on firm order with IAE, provided that Spirit gives written notice to IAE at least ***** prior to the delivery date for each such Option Spare Engine as set forth in Exhibit B-2, as the same may be amended, supplemented and/or updated from time to time. IAE and Spirit shall promptly amend this Contract to revise Exhibit B-2 to reflect the firm order of Option Spare Engines from IAE.”
|
Insert the following paragraph as new Section 2.2.5 to the New Fleet Contract:
“2.2.5 *****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
5.
|
Enhanced Service Policy
|
The Incremental Aircraft shall be purchased in accordance with, and the Parties shall be subject to, the same terms and conditions with respect to the Enhanced Service Policy as the Original Aircraft, as outlined in Section 7 of Side Letter 1 to the New Fleet Contract, dated October 1, 2013.
|
|
|
|
6.
|
Aircraft Cancellation, Credit Reimbursement and Right of Set-Off
|
The Incremental Aircraft shall be purchased in accordance with, and the Parties shall be subject to, the same terms and conditions with respect to the Aircraft Cancellation, Credit Reimbursement and Right of Set-Off as the Original Aircraft, as outlined in Article 8 of Side Letter 1 to the New Fleet Contract, dated October 1, 2013.
|
|
|
|
7.
|
Engine Upgrades and Post Delivery Improvements
|
The Incremental Aircraft shall be purchased in accordance with, and the Parties shall be subject to, the same terms and conditions with respect to the Engine Upgrades and Post Delivery Improvements as the Original Aircraft, as outlined in Article 9 of Side Letter 1 to the New Fleet Contract, dated October 1, 2013.
|
|
|
|
9.
|
Thrust Rating Flexibility
|
The Incremental Aircraft shall be purchased in accordance with, and the Parties shall be subject to, the same terms and conditions with respect to the Thrust Rating Flexibility as the Original Aircraft, as outlined in Article 9 of Side Letter 1 to the New Fleet Contract, dated October 1, 2013.
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10.
|
New Fleet – Aircraft and Spare Engine Delivery Schedule
|
The Aircraft Delivery Schedule attached to the Contract as Exhibit B-1 is deleted in its entirety, and replaced with the Aircraft Delivery Schedule attached to this Side Letter 2 as Appendix 1.
|
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11.
|
New Fleet – Spare Engine Delivery Schedule
|
The Spare Engine Delivery Schedule and Unit Base Price attached to the Contract as Exhibit B-2 is deleted in its entirety, and replaced with the new Exhibit B-2, attached to this Side Letter 2 as Appendix 2.
|
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12.1
|
Entire Agreement; Conflicts
|
This Side Letter No. 2, the Contract and the FHA constitute the sole and entire agreement between Spirit and IAE in relation to the matters set forth herein and shall supersede all previous agreements between Spirit and IAE, both oral and in writing, as of the date hereof. In the event of any conflict between the New Fleet Contract and this Side Letter No. 2, the terms of this Side Letter No. 2 shall control and the New Fleet Contract will be deemed as modified accordingly.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
This Side Letter No. 2 shall not be amended, changed or modified in any way other than by agreement in writing, signed by Spirit and IAE, which is expressly stated to amend this Side Letter No. 2.
|
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12.3
|
Proprietary Information
|
This Side Letter No. 2 shall be subject to the non-disclosure and non-use provisions of the New Fleet Contract.
This Side Letter No. 2 shall be subject to the governing law and forum provisions of the New Fleet Contract.
This Side Letter No. 2 may be executed in one or more counterparts, each of which shall be deemed a duplicate original and all of which, when taken together, shall constitute one and the same document. Execution and delivery of this Side Letter No. 2 by exchange of facsimile copies or electronic mail bearing the signatures of the parties shall constitute a valid and binding execution and delivery of this Side Letter No. 2 by the parties.
Except as expressly amended by this Side Letter No. 2, all provisions of the New Fleet Contract remain in full force and effect.
|
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Agreed to and accepted on behalf of:
IAE International Aero Engines AG
|
|
Agreed to and accepted on behalf of:
Spirit Airlines, Inc.
|
|
By:
|
/s/ Rick Deurloo
|
|
By:
|
/s/ Edward Christie
|
|
Name:
|
Rick Deurloo
|
|
Name:
|
Edward Christie
|
|
Title:
|
SVP Sales
|
|
Title:
|
SVP & CFO
|
|
Date:
|
10/2/13
|
|
Date:
|
10/2/13
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
ATTACHMENT 1
“Exhibit B-2
Aircraft Delivery Schedule
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Aircraft No.
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Aircraft Model
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Engine Model
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Scheduled Delivery Date
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1
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*****
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2
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3
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4
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5
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6
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7
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8
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9
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10
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11
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12
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13
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14
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15
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16
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17
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18
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19
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20
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21
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22
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23
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24
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25
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26
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27
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28
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29
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30
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31
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32
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33
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34
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35
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36
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37
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*****
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*****
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38
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*****
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*****
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*****
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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39
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*****
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*****
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40
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41
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42
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43
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44
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*****
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*****
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45
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*****
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*****
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*****
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
ATTACHMENT 2
“Exhibit B-2
Spare Engine Delivery Schedule
|
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|
|
|
Firm Spare Engines
|
|
Spare Engine No.
|
Quantity
|
Engine Model
|
Scheduled Delivery Date
|
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1
|
1
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*****
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*****
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2
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1
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*****
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*****
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3
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1
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*****
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*****
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4
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1
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*****
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*****
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Option Spare Engines
|
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Option Spare Engine No.
|
Quantity
|
Engine Model
|
Scheduled Delivery Date
|
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1
|
1
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*****
|
*****
|
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1
|
1
|
*****
|
*****
|
The unit base price for Spare Engines shall be as follows and escalated in accordance with the escalation formula contained in Exhibit B-3 to this Contract.
|
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|
|
|
|
Engine Model
|
Unit Base Price (Jan-12 US$)
|
|
V2524-A5
|
*****
|
|
V2527-A5
|
*****
|
|
V2533-A5
|
*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
EXECUTION VERSION
V-Services
SM
Fleet Hour Agreement
by and between
SPIRIT AIRLINES, INC.
and
IAE INTERNATIONAL AERO ENGINES AG
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
TABLE OF CONTENTS
1.
Definitions 3
2.
FHA Services 6
3.
Period of Cover 7
4.
Shop Visit Coverage 7
5.
Lease Engine Support 8
6.
Transportation 9
7.
General Fleet Hour Agreement Services 10
8.
Excess Work 11
9.
Obligations of Spirit 13
10.
FHA Rates and Payment 17
11.
Fleet Flexibility 23
12.
Maintenance Center Requirements 23
13.
Insurance 24
14.
Warranties; Limitation of Liability 25
15.
Delays 26
16.
Duplicate Benefits 26
17.
Intellectual Property 27
18.
Amendment 27
19.
Assignment 27
20.
Notices 28
21.
Exclusion of Other Provisions and Previous Understandings 28
22.
Termination, Expiration and Events of Default 28
23.
Negation of Waiver 30
24.
Severability and Partial Invalidity 30
25.
Governing Law 30
26.
Publicity 30
27.
Confidentiality 30
28.
Compliance with All Applicable Laws and Regulations 31
29.
No Construction Against Drafter 31
30.
Damages 31
|
|
|
|
Exhibit A Aircraft and Spare Engine Delivery Schedules
|
32
|
|
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|
|
Exhibit B FHA Escalation Formula
|
35
|
|
|
|
|
Exhibit D V2500 Turbofan Engine Model Specifications
|
37
|
|
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|
Exhibit E Powerplant Description
|
44
|
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|
Exhibit G Engine Monitoring Services
|
47
|
|
|
|
|
Exhibit H Excess Work Rates
|
50
|
|
|
|
|
Exhibit I FHA Rate Adjustment Tables
|
51
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
FLEET HOUR AGREEMENT
This Fleet Hour Agreement (together with all exhibits and schedules hereto, this “
Agreement
”) is made this 1
st
day of October 2013, by and between
|
|
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|
|
IAE INTERNATIONAL AERO ENGINES AG
|
A joint stock company organized and existing under the laws of Switzerland, with a place of business at 400 Main Street, M/S 121-10, East Hartford, CT 06108 (hereinafter called “
IAE
”).
|
|
AND
|
|
|
SPIRIT AIRLINES, INC.
|
A corporation organized and existing under the laws of Delaware, with a place of business at 2800 Executive Way, Miramar, Florida 33025 (hereinafter called “
Spirit
”).
|
|
Each a “
Party
” and together the “
Parties
”.
|
WHEREAS:
|
|
|
|
A.
|
Spirit has firmly ordered (i) thirty (30) new A320 family aircraft from Airbus all to be powered by IAE V2500-A5 engines and (ii) four (4) new V2500-A5 spare engines from IAE all of which will be operated by Spirit (the “
New Engine Fleet
”);
|
|
|
|
|
B.
|
IAE and Spirit have entered into a V2500
®
General Terms of Sale dated October 1, 2013, as amended from time to time, including all exhibits, schedules, appendices, side letters and amendments thereto (collectively, the “
New Engine Fleet GTA
”) for the provision of V2500-A5 engines, modules, spare parts, tools, equipment, and product support services for the support and operation of the New Engine Fleet;
|
|
|
|
|
C.
|
IAE and Spirit previously entered into the Amended and Restated V2500® General Terms of Sale dated October 1, 2013 for sale and support of certain V2500-powered Airbus A320 family aircraft and V2500 spare engines already in operation with Spirit (the “
Existing Fleet GTA
”);
|
|
|
|
|
D.
|
IAE and Spirit have also previously entered into an Amended and Restated V-Services
SM
Fleet Hour Agreement dated October 1, 2013 for the provision of certain off-wing maintenance for certain V2500-A5 engines already in operation with Spirit (the “
Existing Fleet FHA
”)
|
|
|
|
|
E.
|
IAE and Spirit now wish to agree upon terms whereby IAE shall arrange for, manage and subcontract certain maintenance of the Eligible Engines as defined herein.
|
NOW THEREFORE IT IS AGREED AS FOLLOWS:
|
|
|
|
1.1
|
“
Accessory
” or “
Accessories
” includes those items listed in Exhibit C to this Agreement.
|
|
|
|
|
1.2
|
“
Airbus
” shall mean Airbus SAS.
|
|
|
|
|
1.3
|
“
Aircraft
” shall mean all or each of the thirty (30) A320 family aircraft powered by V2500-A5 engines to be delivered in accordance with the schedule set forth in Exhibit A hereto, as
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof and of the New Fleet GTA.
|
|
|
|
1.4
|
“
Aircraft Maintenance Manual
” or “
AMM
” means the aircraft maintenance manual published by Airbus for the Aircraft.
|
|
|
|
|
1.5
|
“
Airworthiness Directive
” shall mean any applicable airworthiness directive issued by the Aviation Authority based on certification rules current as of the date of this Agreement.
|
|
|
|
|
1.6
|
“
Aviation Authority
” shall mean the FAA.
|
|
|
|
|
1.7
|
“
Beyond Economic Repair
” shall mean wear, tear or damage to an item of Eligible Equipment beyond economic repair.
|
|
|
|
|
1.8
|
“
BFE Item
” shall mean those items listed as such in Exhibit E of this Agreement.
|
|
|
|
|
1.9
|
“
Business Day(s)
” shall mean a day other than a Saturday, Sunday or holiday scheduled by law for commercial banking institutions in the City of New York, New York, United States.
|
|
|
|
|
1.10
|
“
Day
” means a calendar day.
|
|
|
|
|
1.11
|
“
EBU Item
” shall mean those items listed as such in Exhibit E to this Agreement originally installed on the Eligible Engines or acquired new and dedicated solely for the support of Eligible Engines.
|
|
|
|
|
1.12
|
“
Eligible Engine(s)
” shall mean the new Engines originally installed on the Aircraft and the Spare Engines. Exhibit A to this Agreement identifies the Eligible Engines by serial number and will be updated from time to time to: (i) add Eligible Engines and serial numbers as Spirit takes delivery of the Aircraft and the Spare Engines and (ii) to remove Eligible Engines in accordance with Section 11 hereto.
|
|
|
|
|
1.13
|
“
Eligible Engine Flight Cycles
” shall mean *****.
|
|
|
|
|
1.14
|
“
Eligible Engine Flight Hours
” shall mean *****.
|
|
|
|
|
1.15
|
“
Eligible Equipment
” shall mean Eligible Engines.
|
|
|
|
|
1.16
|
“
Eligible Removal
” shall mean *****.
|
|
|
|
|
1.17
|
“
Engine(s)
” shall mean the basic IAE V2500-A5 turbofan engine, described in the V2500 Turbofan Engine Model Specification(s) set forth in Exhibit D of the Agreement, and which excludes Accessories, EBU Items, QEC Items and Nacelle Items.
|
|
|
|
|
1.18
|
“
Engine Manual
” shall mean the IAE document which sets forth the requirements for Engine off-wing repair.
|
|
|
|
|
1.19
|
“
Excess Work
” shall mean work undertaken by the Maintenance Center during a Shop Visit pursuant to this Agreement, which is further described in Section
8
of this Agreement.
|
|
|
|
|
1.20
|
“
FAA
” shall mean the United States Federal Aviation Administration.
|
|
|
|
|
1.21
|
“Failure” shall mean *****.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
1.22
|
“
FHA
” shall mean this Fleet Hour Agreement.
|
|
|
|
|
1.23
|
“
FHA Administration Manual
” means the logistical plan and instructions described in Section
7
of this Agreement.
|
|
|
|
|
1.24
|
“
FHA Manager
” shall mean the manager provided by IAE for the support of the operation of this Agreement in accordance with the provisions of Section 7.3 of this Agreement.
|
|
|
|
|
1.25
|
“
FHA Rate(s)
” shall mean the rate(s) collectively as set forth in Section 10 below.
|
|
|
|
|
1.26
|
“
Foreign Object Damage
” shall mean *****.
|
|
|
|
|
1.27
|
“
Line Maintenance
” shall mean any work required to be carried out on an Engine in accordance with the appropriate Aircraft Maintenance Manuals and which can be accomplished either on-wing or off-wing without requiring the induction of such Engine into a Maintenance Center.
|
|
|
|
|
1.28
|
“
Life Limited Parts
” or “
LLPs
” shall mean the Parts identified in Chapter 5 of the V2500-A5 Engine Manual as having specific life limits.
|
|
|
|
|
1.29
|
“
Maintenance Center
” shall mean the IAE shareholder maintenance center designated by IAE in consultation with Spirit, from time to time to perform services under this Agreement and which is approved by the Aviation Authority as a certified repair station.
|
|
|
|
|
1.30
|
“
Maintenance Management Plan
”, “
MMP
” or “
eMMP”
shall mean the then-current V2500 engine maintenance planning document described in Section
7
of this Agreement.
|
|
|
|
|
1.31
|
“
Miscellaneous Shop Visit
” shall mean *****.
|
|
|
|
|
1.32
|
“
Nacelle Items
” shall mean those items listed in Exhibit E as “DPP” (demountable power plant) items or “PP” (positionalized power plant) items originally installed on the Eligible Engines or acquired new and dedicated solely for the support of Eligible Engines.
|
|
|
|
|
1.33
|
“
Part(s)
” shall mean *****.
|
|
|
|
|
1.34
|
“
Period of Cover
” shall mean the period in which IAE agrees to provide the services pursuant to this Agreement, as set out in Section
3
of this Agreement.
|
|
|
|
|
1.35
|
“
QEC Item
” shall mean those items listed as such in Exhibit E to this Agreement originally installed on the Eligible Engines or acquired new and dedicated solely for the support of Eligible Engines.
|
|
|
|
|
1.36
|
“
Restoration Shop Visit
” or “
RSV
” shall mean *****.
|
|
|
|
|
1.37
|
“
Service Bulletin(s)
” shall mean those V2500 service bulletins issued by IAE with categories 1 to 6 that are designated as “target” service bulletins in the MMP.
|
|
|
|
|
1.38
|
“
Shop Visit
” shall mean a Restoration Shop Visit or a Miscellaneous Shop Visit.
|
|
|
|
|
1.39
|
“
Spare Engine(s)
” shall mean all or each of the four (4) new V2500-A5 firmly ordered spare Engines either purchased or to be purchased by Spirit from IAE to be delivered in accordance with the schedule set forth in Exhibit A of this Agreement.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
1.40
|
“
Testable Engine
” shall mean *****.
|
|
|
|
|
1.41
|
“
Transportation Coverage
” shall mean the services provided to Spirit under Section
6
of this Agreement.
|
|
|
|
|
1.42
|
“
Workscope
” shall mean an IAE written repair request to the Maintenance Center(s) compliant with the MMP, approved by Spirit, such approval not to be unreasonably withheld, that authorizes the Maintenance Center(s) to undertake work on Eligible Equipment.
|
IAE shall provide to Spirit the following FHA service coverage for the Period of Cover for each Eligible Engine:
|
|
|
|
2.1
|
Engine Shop Visit Coverage in accordance with the terms of Section 4
|
|
|
|
|
2.2
|
Lease Engine Coverage in accordance with the terms of Section
5
.
|
|
|
|
|
2.3
|
Transportation Coverage in accordance with the terms of Section
6
.
|
|
|
|
|
2.4
|
General FHA Services in accordance with the terms of Section 7
.
|
|
|
|
|
2.5
|
Excess Work as required in accordance with the terms of Section 8.
|
The provision of such coverage by IAE is subject to Spirit’s fulfillment in all material respects of its obligations under Section
9
.
This FHA shall become effective on the date of first commercial service of an Eligible Engine and will remain in force and effect for a period of ***** for each such Eligible Engine.
Each Eligible Engine following an Eligible Engine Removal shall be forwarded to the Maintenance Center. IAE shall communicate the Workscope to the Maintenance Center and cause the Maintenance Center to complete the Shop Visit in accordance with such Workscope. IAE shall pay to the Maintenance Center all charges directly incurred in respect of goods, work and services carried out during the Shop Visit for the following items:
|
|
|
|
4.2
|
IAE will use commercially reasonable efforts to provide the following documentation to Spirit following the release of an Eligible Engine from a Maintenance Center following a Restoration Shop Visit:
|
|
|
|
|
4.2.3
|
provide an invoice for any Excess Work arising from such Eligible Engine’s Restoration Shop Visit as soon as practicable but no later than *****, if applicable.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
4.3
|
IAE’s obligations for an Engine Shop Visit caused by Foreign Object Damage shall be limited to the provision of repair work and Parts provided through the Maintenance Center to a maximum of ***** per event *****.
|
|
|
|
|
5.1
|
IAE or its designee will maintain a worldwide fleet of spare Engines available for lease by Spirit on an as needed basis. Should Spirit require a spare Engine (a “
Lease Engine
”) from IAE or its designee, IAE or its designee will make such Leased Engine available to Spirit under IAE or its designee’s then-current standard short term engine lease agreement for V2500 Engines (IATA Master Short Term Lease Agreement, form 5016 00 (“
IATA Agreement
”), provided that Spirit acquires and continues to operate and maintain the recommended number of Spare Engines for its Aircraft fleet.
|
|
|
|
|
5.5
|
Unless otherwise determined by the FHA Manager, acting reasonably, Spirit is to return each Lease Engine within ***** the need for such Lease Engine is alleviated.
|
|
|
|
|
6.1
|
Spirit shall deliver Eligible Engines to IAE in a Testable Engine configuration for each Shop Visit and the Accessories related to such Eligible Engines shall be in a serviceable condition.
|
|
|
|
|
6.7
|
Transportation coverage as set forth in this Section
6
, is subject to a cap of ***** per Eligible Shop Visit, escalated in accordance with Section 10.1.6.
|
|
|
|
|
7.
|
General Fleet Hour Agreement Services
|
IAE shall provide the following additional Fleet Hour Agreement services:
|
|
|
|
7.1
|
IAE shall supply Spirit with a V2500-A5 electronic Maintenance Management Plan that shall establish the maintenance requirements including LLP management, incorporation of applicable Service Bulletins and Aviation Authority Airworthiness Directive requirements and
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Eligible Engine removal planning (“
MMP
”). The MMP shall be consistent with the relevant provisions of this Agreement and shall be revised and updated at least once a year, taking into account Spirit’s then-current operation in consultation with Spirit and fleet-wide operational experience, among other considerations. Additionally, an FHA Administration Manual may be mutually agreed between the parties, which shall establish a logistical plan and instructions for Spirit to facilitate performance by Spirit and IAE under this Agreement.
*****
|
|
|
|
7.2
|
Engine monitoring data program services set forth in Exhibit G;
|
|
|
|
|
7.3
|
an FHA Manager based at IAE's offices who shall be the point of contact for Spirit, twenty four (24) hours per day seven (7) days per week, in respect of the services described in this Agreement. The following responsibilities of IAE shall normally be undertaken by the FHA Manager:
|
*****
|
|
|
|
8.1
|
Any costs incurred by IAE or the Maintenance Center not covered under this Agreement shall be Excess Work and shall be paid for by Spirit in accordance with Section 10.2 of this Agreement. Excess Work shall include any labor, material and other charges for Eligible Engines that arise from the following:
|
*****
|
|
|
|
8.2
|
In the event IAE, following consultation with Spirit, determines that an Eligible Engine requires a Shop Visit that will be considered entirely to be Excess Work, then the IAE FHA Manager shall so notify Spirit and IAE shall perform such work.
|
Spirit agrees to fulfill the following responsibilities and perform the following tasks and to reasonably cooperate with IAE in the performance of IAE’s responsibilities hereunder.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Spirit shall at its own expense maintain Eligible Engine electronic condition monitoring capabilities for each Eligible Engine, and with respect to information and data required for the performance of this Agreement, Spirit shall:
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9.1.1
|
maintain, collect and provide to IAE performance trend monitoring data on each Eligible Engine in accordance with Exhibit G, maintain timely records in form and detail sufficient for the accurate and expeditious administration of the terms of this Agreement including the assessment of operating conditions relative to those set out in Section 10.4 of this Agreement;
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9.1.2
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make available, and provide access to IAE’s provider of electronic condition monitoring data analysis, all data collected in accordance with 9.1.1 above in an electronic format agreed to by IAE, as required for the operation and administration of this Agreement;
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9.1.3
|
implement and follow the IAE reasonable recommendations resulting from analysis of the performance trend monitoring data;
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9.1.4
|
within ten (10) Business Days after the end of each month during the Period of Cover, report to IAE, in an electronic format agreed to by IAE, the hours and cycles flown, take off derate, and day temperature for each flight by each Eligible Engine during the preceding month;
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9.1.5
|
ensure that all data reasonably required by IAE (including borescope reports) to facilitate the correction of any problem causing an Eligible Engine Removal is promptly made available to IAE;
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9.1.6
|
provide for each Eligible Engine, no later than two (2) Business Days following Eligible Removal, a removal report containing the following information with respect to the Eligible Engine:
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(a)
a record of Eligible Engine total time and cycles;
(b)
position on the aircraft, aircraft number, and date of Eligible Engine removal;
(c)
reason for removal, flight and ground indications prior to and related to removal;
(d)
module rework history with time since new, time since overhaul and time since repair provided such module was serviced outside of this Agreement;
(e)
any borescope reports detailing any open discrepancies;
(f)
total LLP time, LLP part numbers, serial numbers, cycle limits, time since new, cycles since new, remaining cycles, and take-off bump cycles, if applicable;
(g)
latest build standard record;
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
(h)
records with respect to any Accessories, including part numbers, serial numbers, time and cycles since new, overhaul, Repair, or bench test, and a description of prior work performed for each item unless Spirit directs IAE where to send such Accessories;
(i)
if applicable, a non-incident certification in customary form that the Eligible Engine and all parts installed thereon:
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(i)
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have been operated and maintained in accordance with applicable IAE and Airbus instructions and manuals;
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(ii)
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have not been operated by any government or military service except as civil aircraft on the civil register; and
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(iii)
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have not been installed on any engine or module that was subject to any incident, accident, major failure, fire, extreme stress, over temperature outside normal operation, or over-speed; and
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(j)
any other data reasonably requested by IAE.
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9.1.7
|
provide the Engine serial numbers within thirty (30) Business Days of acceptance by Spirit of each applicable Aircraft covered under this Agreement as described in Exhibit A of this Agreement, as amended, supplemented or otherwise modified from time to time; and
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9.1.8
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ensure Eligible Engines are available for FHA services in a Testable Engine configuration (when inducted at the Maintenance Center).
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9.2
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Engine Preparation for Transportation
|
For the purposes of the transportation of Eligible Engines as required under this Agreement, Spirit shall:
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9.2.1
|
make Eligible Engines available for shipment at Spirit’s Main Base no later than ten (10) days prior to their scheduled induction date;
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9.2.2
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maintain in a serviceable condition one (1) IAE approved transportation stand per spare Eligible Engine plus an additional serviceable IAE approved transportation stand;
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9.2.3
|
at the time of an Eligible Engine Removal, remove the Eligible Engine from the Aircraft, mount it on an IAE approved transportation stand and prepare such Eligible Engine for shipment, all in accordance with the procedures specified in the applicable IAE manuals; and
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9.2.4
|
ensure that it does not remove from the Maintenance Center the IAE approved transportation stand on which the Eligible Engine was transported to the Maintenance Center so that such stand is available at the Maintenance Center on the day such Eligible Engine undergoes testing, to enable efficient movement of such Eligible Engine to the test cell and return transportation of such Eligible Engine to Spirit.
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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9.3
|
Operation, Maintenance and Troubleshooting of Eligible Equipment
|
Spirit shall operate, maintain and troubleshoot the Eligible Equipment compliant with the applicable Airbus operating, maintenance and troubleshooting manuals, the then current MMP for Spirit, and to the extent applicable, IAE’s written instructions, including, but not limited to, service information letters, all operator wires and non-modification service bulletins, component maintenance manuals and Airworthiness Directives. Spirit shall incorporate the relevant provisions of the MMP into its then current airworthiness maintenance program.
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9.4.1
|
Spirit shall cooperate with IAE to fulfill any reasonable administrative or other requirements of the Maintenance Center, including endorsement of Workscopes for Aviation Authority requirements within three (3) Business Days of receipt from IAE. If Spirit fails to respond, within five (5) Business Days, the Workscope will be deemed to be accepted.
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9.4.2
|
Spirit shall accomplish quality audits and obtain certifications required by the Aviation Authority and IAE for accomplishment of work on the Eligible Engines at the Maintenance Center(s).
|
Spirit shall not unreasonably withhold its approval of any “one time concessions” approved by IAE and the applicable FAA representative with respect to the Eligible Engines.
Spirit shall make payments as required in accordance with Section
10
of this Agreement.
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9.7.1
|
The Parties shall maintain adequate records as required to meet their respective obligations and compliance with the applicable provisions of this FHA.
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9.7.2
|
A Party shall not unreasonably condition or deny the other Party access to such adequate and applicable records for the administration of this Agreement. IAE shall allow or cause the Maintenance Center to allow reasonable access to work areas and Eligible Engine records for inspection by Spirit and, at the request of Spirit and subject to the reasonable rules and regulations of the relevant Maintenance Center, any relevant owner, Lessor or their respective designees. Spirit shall be permitted to perform reasonable quality control inspections of each Maintenance Center.
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9.7.3
|
If IAE or its nominee requires access to the premises of Spirit under this FHA it shall provide reasonable written notice to Spirit and such visit or inspection will be at a time mutually agreeable to the Parties.
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9.7.4
|
Each Party will comply and ensure that its personnel comply with the other Party’s conduct policies, rules, regulations and directions governing the conduct of visitors upon their premises.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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9.8
|
Acceptance and Operation
|
Spirit shall take or, as applicable, have taken delivery of all of the Aircraft and Spare Engines in accordance with the schedule set forth in Exhibit A to this Agreement, as amended, supplemented or otherwise modified from time to time, and shall operate the Aircraft and Spare Engines in regular commercial service as contemplated by Section 10.4 below for the duration of the Period of Cover, subject to Section 11 hereto.
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9.9
|
Provision of Serviceable Accessories
|
Spirit shall be responsible for ensuring that each Eligible Engine at the Maintenance Center for a Shop Visit is supported by a full suite of serviceable Accessories required to make the Eligible Engine testable. In the event that the repair or replacement of an Accessory for an Eligible Engine delays the completion of the Shop Visit for such Eligible Engine, such delay shall be considered an Excusable Delay. Alternatively Spirit may request the use of units provided by the Maintenance Center to permit the testing of the Eligible Engine in accordance with Section 8.1.11 above, to the extent the Maintenance Center has such capability.
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10.
|
FHA Rates and Payment
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|
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10.1.1
|
The FHA Rate for Restoration Shop Visit Coverage for Eligible Engines during the Period of Cover shall be as follows:
|
(a)
For V2524-A5 rated Eligible Engines ***** per Eligible Engine Flight Hour;
(b)
For V2527-A5 rated Eligible Engines ***** per Eligible Engine Flight Hour; and
(c)
For V2533-A5 rated Eligible Engines ***** per Eligible Engine Flight Hour.
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10.1.3
|
The FHA Rate for Miscellaneous Shop Visit Coverage for Eligible Engines for the first ***** of each Eligible Engine’s Period of Cover shall be ***** per Eligible Engine Flight Hour.
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10.1.4
|
The FHA Rate for Miscellaneous Shop Visit Coverage for Eligible Engines each year commencing with the ***** for each Eligible Engine during the Period of Cover shall be ***** per Eligible Engine Flight Hour.
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10.2
|
Excess Work Invoices
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10.2.1
|
Charges for Excess Work shall be invoiced to Spirit by IAE as such Excess Work is performed in accordance with rates identified in Exhibit H.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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10.2.2
|
In the event IAE determines that an Eligible Engine requires a Shop Visit that will be considered entirely to be Excess Work, and the Workscope for such Shop Visit is equal to or greater than a level of work that would be performed at a Restoration Shop Visit, then:
|
(a)
IAE may invoice Spirit its reasonable estimate of the cost of any Excess Work prior to commencement, or during the execution, of such Excess Work. IAE shall invoice Spirit for the balance of the cost of any Excess Work upon receipt of the corresponding invoice from the Maintenance Center (or promptly issue a credit to Spirit’s account with IAE for any excess payment received from Spirit); and
(b)
Spirit shall pay ***** of the estimated Excess Work invoice prior to induction of the Eligible Engine into the Maintenance Center and (ii) the entire remaining invoice balance (if any) within ***** of Spirit’s receipt of the final invoice from IAE.
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10.5.1
|
The FHA Rates are predicated upon Spirit:
|
(a)
maintaining within its fleet of Aircraft an annual average flight cycle of: ***** hours for V2524-A5 powered Aircraft, ***** hours for V2527-A5 powered Aircraft, and ***** hours for V2533-A5 powered Aircraft (each calculated from the moment the wheels of an Aircraft, on which any Eligible Engine is installed, leave the ground on take-off to the moment when the wheels of such Aircraft touch the ground on landing);
(b)
maintaining an annual average utilization of ***** hours per V2524-A5 powered Aircraft, ***** hours per V2527-A5 powered Aircraft, and ***** hours per V2533-A5 powered Aircraft;
(c)
maintaining an average engine thrust derate of: ***** for V2524-A5 powered Aircraft, ***** for V2527-A5 powered Aircraft, and ***** for V2533-A5 powered Aircraft, all relative to the name plate thrust rating;
(d)
maintaining an average ambient temperature for take-off no greater than: ***** for V2524-A5 powered Aircraft, ***** for V2527-A5 powered Aircraft, and ***** for V2533-A5 powered Aircraft;
(e)
having its main base located at Fort Lauderdale, FL, Detroit, MI, Atlantic City, NJ, or Dallas, TX;
(f)
Spirit operating each Eligible Engine at its originally installed thrust rating (unless otherwise agreed by the Parties);
(g)
acquiring all of the Aircraft and Spare Engines as set forth in Section 9.8;
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
(h)
after taking delivery of the Spare Engines in accordance with Exhibit A, maintaining a minimum ratio of ***** Spare Engines to installed Engines for its Aircraft fleet;
(i)
operating and maintaining the Aircraft and Eligible Engines in accordance with Airbus’, IAE’s, and other applicable OEM’s technical manuals and the eMMP (including Engine rebuild requirements) for the duration of the Period of Cover;
(j)
subject to the provisions of Section 11, operating, and maintaining the Aircraft and Eligible Engines in regular commercial airline operation for the duration of the Period of Cover;
(k)
*****
(l)
acquiring from IAE or its approved sources reasonably sufficient components, parts, and spare Engines at the levels mutually agreed by IAE and Spirit to maintain proper support of the Eligible Engines and Aircraft; and
(m)
*****.
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|
|
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10.5.2
|
In the event Spirit operates the Eligible Engines contrary to the preceding conditions, then IAE may make reasonable and appropriate adjustments to the FHA Rates for Restoration Shop Visit Coverage, as listed in Section 10.1.1 above, in accordance with the FHA Rate adjustment matrices set forth in Exhibit I (the “
FHA Rate Adjustment Matrices
”), which detail the effects of variations in derate, stage length, annual average utilization, and temperature on such FHA Rates. The FHA Rate Adjustment Matrices will be applied on an engine-by-engine basis at RSV induction. *****
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10.5.3
|
If Spirit acquires additional aircraft powered by V2500-A5 engines or additional V2500-A5 spare engines, then at Spirit’s option, IAE and Spirit shall use good faith efforts to negotiate appropriate pricing and conditions to include such additional engines under this Agreement.
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10.5.4
|
In the event that an Eligible Engine leaves this Agreement for reasons beyond the control of Spirit, for example, an Eligible Engine is deemed damaged Beyond Economic Repair and is replaced by Spirit with another Engine, subject to prior written agreement by IAE (not to be unreasonably withheld, conditioned or delayed), the FHA Rates for that Engine and not for all Eligible Engines, will be adjusted.
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10.6.2
|
Subject to Section 10.6.1 above, Spirit shall pay all invoices submitted by IAE under this Section 10 within ***** of receipt by Spirit.
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10.6.3
|
Spirit undertakes that IAE shall receive the full undisputed amount of payments falling due under this Section 10, without any withholding or deduction whatsoever. If Spirit has a reasonable dispute with an Excess Work charge from IAE, Spirit
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
will promptly notify IAE of such dispute in writing detailing the grounds for such dispute, but not later than fifteen (15) Business Days after receipt of such Excess Work charge. The Parties agree to use their reasonable, diligent and good faith efforts to reach a final resolution of the disputed Excess Work charge including, if necessary, elevation of the issue to each Party’s senior management at the request of the other Party.
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|
|
|
10.6.4
|
All payments under this Section 10 shall be made by electronic transfer and shall be deposited not later than the due date of payment with:
|
*****
or to such other account in the United States as IAE may from time to time designate in writing, which designation shall be effective upon receipt by Spirit of such notice.
|
|
|
|
10.6.5
|
Should Spirit fail to make any material payments to IAE required as set forth in this Section 10 or should Spirit fail to make any material payments to IAE when due under any other agreement between IAE and Spirit and such amount is not subject to a good faith dispute between the Parties, then, notwithstanding any rights which IAE may have in contract or in law, IAE reserves the right to (a) assess interest on such late payment at the rate of the greater of ***** or the New York Citibank prime rate plus ***** per annum from the date the payment was due to be made until the date such payment is received by IAE, (b) suspend all work on any and all Eligible Engines then currently at the Maintenance Center pursuant to this FHA and/or (c) hold Eligible Engines in IAE’s possession or control.
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|
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10.7
|
Taxes and Other Like Charges
|
|
|
|
|
10.7.1
|
In addition to amounts stated to be payable by Spirit pursuant to this Agreement, Spirit shall pay any and all imposts, taxes, duties, levies, fees, assessments or other like charges (excluding any income, gains, or excess profit, franchise and similar taxes levied on the part of IAE, any Maintenance Center or their respective Affiliates and subcontractors,) which may be imposed by any government or taxing agency thereof arising from performance by IAE or its subcontractors in connection with this Agreement.
|
|
|
|
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10.7.2
|
All amounts stated to be payable by Spirit pursuant to this Agreement exclude any value added tax, sales tax or similar such tax. In the event that the supply of goods or services under this Agreement is chargeable to any value added tax, sales tax or similar tax, such tax will be borne by Spirit, subject to the receipt of any appropriate documentation that may be required to enable or assist Spirit to claim or verify any tax credit, set off, rebate or refund in respect of such taxes paid or payable in connection with supplies under this Agreement.
|
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10.7.3
|
If either IAE or Spirit becomes aware of any taxes set forth in Sections 10.7.1 and 10.7.2 above, the relevant Party shall promptly notify the other Party, and both parties agree to cooperate, consult in good faith and take such other reasonable steps in order to mitigate to the full extent permitted by law, any such tax.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
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12.
|
Maintenance Center Requirements
|
|
|
|
|
12.1
|
Certification and Approval
|
|
|
|
|
12.1.1
|
IAE shall ensure that each Maintenance Center must be certificated by FAA or EASA, as applicable.
|
|
|
|
|
12.1.2
|
Each Maintenance Center utilized for Eligible Shop Visits under this Agreement shall be approved in writing by Spirit, such approval not to be unreasonably conditioned, delayed or withheld.
|
|
|
|
|
12.1.3
|
While performing services under this Agreement, IAE shall maintain and cause the Maintenance Center to maintain facilities for services hereunder on Eligible Engines, modules and Parts in accordance with the Engine Manual and IAE’s other applicable requirements.
|
|
|
|
|
12.3.1
|
The terms and obligations set forth herein shall apply regardless of the Maintenance Center utilized for services performed hereunder.
|
|
|
|
|
13.1
|
IAE shall at its own cost and expense procure and maintain (or cause its subcontractors to procure and maintain) in full force and effect during the Period of Cover policies of insurance of the types and in the minimum amounts as stated below:
|
*****
|
|
|
|
14.
|
Warranties; Limitation of Liability
|
|
|
|
|
14.1
|
IAE warrants the work performed by a Maintenance Center at the final Shop Visit for each Eligible Engine under this Agreement shall be free from defects in materials and workmanship as follows: If Spirit demonstrates to the reasonable satisfaction of IAE that a defect in the work performed on a Part has caused damage to such Part or any other Part, and Spirit provides written notice to IAE of such damage within ***** or within ***** after installation of the corresponding Eligible Engine on an Aircraft, or if not installed on an Aircraft, within ***** after delivery of the Eligible Engine from the applicable Shop Visit, whichever occurs first, IAE shall, as its sole responsibility for such defect, repair such damage at IAE’s own cost and expense. Transportation charges for the return of defectively serviced goods to IAE or the Maintenance Center, and their reshipment to Spirit and risk of loss thereof shall be borne by IAE only if such goods are returned in accordance with reasonable written shipping instructions from IAE.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
14.2
|
IAE warrants to Spirit that it shall convey good title to the new Parts sold hereunder. IAE's liability and Spirit’s remedy under this warranty are limited to the removal of any title defect or, at the election of IAE, to the replacement of the new Parts or components thereof which are defective in title.
|
Spirit warrants that title to Parts removed from Eligible Engines by the Maintenance Center shall pass immediately to IAE free and clear of all security interests and rights of Spirit or others at the time that title to the replacement Part passes to Spirit.
|
|
|
|
14.3
|
THE WARRANTIES SET FORTH HEREIN AND/OR IN THE NEW ENGINE FLEET GTA TOGETHER WITH THE EXPRESS REMEDIES PROVIDED TO SPIRIT IN ACCORDANCE WITH THIS AGREEMENT AND/OR SUCH NEW ENGINE FLEET GTA, ARE EXCLUSIVE AND ARE GIVEN BY IAE IN LIEU OF (A) ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE; AND (B) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM, OR REMEDY IN STATUTE, CONTRACT, TORT OR STRICT LIABILITY AGAINST OEM OR ITS AFFILIATES, WHETHER OR NOT ARISING FROM THE NEGLIGENCE, ACTUAL OR IMPUTED (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), OF IAE OR ITS AFFILIATES, STOCKHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES, PERMITTED ASSIGNS AND AGENTS.
|
|
|
|
|
14.5
|
For purpose of this Section 12, “
IAE
” shall be deemed to include IAE International Aero Engines AG, Pratt and Whitney, a division of United Technologies Corporation, Pratt & Whitney Aero Engines International GmbH, Japanese Aero Engine Corporation, MTU Aero Engines GmbH, and the respective directors, officers, employees and agents of each.
|
IAE shall not be charged with any liability for delay in the performance of any of its obligations when such delay is caused by acts of God or the public enemy, compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it proves to be invalid, fires, riots, labor disputes, unusually severe weather, or any cause beyond the reasonable control of IAE, or by delays of IAE’s suppliers for any of the same or similar causes. To the extent that such causes actually delay performance on the part of IAE, the time for the performance shall be extended for as many days as are required to obtain removal of such causes. This provision shall not, however, relieve IAE from using its reasonable efforts to avoid or remove such causes and continue performance with reasonable dispatch whenever such causes are removed (“
Excusable Delay
”).
If Spirit fails to comply with the requirements set forth in Section
9
, and such failure or non-approval, as applicable causes the Maintenance Center to reasonably reschedule or delay the induction or completion of a Shop Visit for an Eligible Engine, then such delay shall constitute an Excusable Delay for IAE.
Spirit and IAE agree that it is not the intention to provide duplicate benefits under the terms of this Agreement and the GTA or under any other arrangement between IAE or IAE’s suppliers or Airbus and Spirit. In the event of any such duplication of benefits, Spirit may, at the relevant time in respect
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
of the relevant circumstances receive any one such benefit (at Spirit’s discretion) to the exclusion of all duplicate benefits.
|
|
|
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17.
|
Intellectual Property
|
|
|
|
|
17.1
|
In the event any suit, claim or action is brought against Spirit (or a person expressly indemnified by Spirit) alleging that, without further combination, Spirit’s use or resale of
(a)
goods
(b)
a part made by or under IAE’s control and in accordance with the specification or design provided by IAE or
(c)
a process embodied in the goods delivered to Spirit by IAE infringes any patents, IAE will, at its own expense, conduct the entire defense including any and all necessary court action, settlements, and appeals. IAE will either settle such claim or pay all damages and costs awarded in a non-appealable judgment, excluding indirect, incidental, special, consequential, and punitive damages. If the use or resale of such goods or part(s) is finally enjoined, IAE will, at its option:
(a)
procure for Spirit the right to use or resell such goods or parts;
(b)
replace such goods or parts with equivalent non-infringing parts;
(c)
modify such goods or parts so they become non-infringing but equivalent; or
(d)
remove such goods or part(s) and refund the purchase price (less a reasonable allowance for use, damage or obsolescence).
|
|
|
|
|
17.2
|
The preceding provision is applicable only if the following conditions are met:
(a)
the goods, part(s), services, or process involved in the suit, claim, or action must have been provided under this Agreement during Maintenance Services in accordance with this Agreement, as applicable;
(b)
the alleged infringement must be an infringement of any patents of the nation in which Spirit’s principal place of business is located or a jurisdiction within which the relevant Supplies were manufactured or delivered to Spirit;
(c)
Spirit must provide IAE with timely notice of such suit, claim, or action and the full opportunity to assume the entire defense thereof; and
(d)
Spirit must provide IAE with all information available to Spirit and other defendants pertaining to the alleged infringement.
|
|
|
|
|
17.3
|
For the avoidance of doubt, this provision will not apply to
(a)
any alleged patent infringement in any nation other than as specified above;
(b)
any Spirit-furnished specification or design or the performance of a process not recommended in writing by IAE;
(c)
any goods or parts or components thereof manufactured according to a non-IAE specification or design;
(d)
the use or sale of goods or parts delivered hereunder in combination with other goods not delivered to Spirit by IAE; or
(e)
any instance not specified in the preceding paragraphs. In such instances, Spirit will indemnify and hold IAE harmless.
|
This Agreement shall not be amended, changed, or modified in any way other than by agreement in writing, signed by the Parties hereto after the date of this Agreement, which is expressly stated to amend this Agreement.
|
|
|
|
19.1
|
Except as otherwise agreed herein, Spirit may not assign in whole or part any of its rights or obligations under this Agreement without the written consent of IAE (such consent not to be unreasonably withheld).
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
19.4
|
IAE may, without recourse, assign its rights and/or delegate its obligations under this Agreement to any subsidiary or affiliate of IAE or United Technologies Corporation, or in connection with a merger, consolidation, reorganization, or voluntary sale or transfer of its assets; provided that such assignee/delegate is: (i) solvent at the time of such transfer and (ii) authorized by the applicable regulatory authorities, as necessary, to perform or procure the performance of all obligations being delegated/assigned; and (iii) able, in IAE’s sole, reasonable discretion, to make all payments required by IAE to be made to Spirit under this Agreement.
|
Any notice to be served pursuant to this Agreement shall be sent by registered mail, by internationally recognized overnight courier, or by facsimile (with the original notice sent by registered mail or internationally recognized overnight courier) to the applicable address indicated in Exhibit F.
|
|
|
|
21.
|
Exclusion of Other Provisions and Previous Understandings
|
|
|
|
|
21.1
|
This Agreement and the New Engine Fleet GTA constitute the entire agreement of the Parties with respect to the Eligible Engines and the subject matter hereof and shall apply to the exclusion of any other provisions on or attached to or otherwise forming part of any order form of Spirit, or any acknowledgment or acceptance by IAE, or of any other document which may be issued by either Party relating to such services and the Eligible Engines.
|
|
|
|
|
21.2
|
The Parties agree that neither of them have placed any reliance whatsoever on any representations, agreements, statements or understandings made prior to the signature of this Agreement, whether orally or in writing, relating to such services, other than those expressly incorporated in this Agreement, which has been negotiated on the basis that its provisions represent their entire agreement relating to such services and shall supersede all such representations, agreements, statements and understandings.
|
|
|
|
|
22.
|
Termination, Expiration and Events of Default
|
|
|
|
|
22.1
|
Bankruptcy Insolvency
|
Either Party shall have the option, at its sole discretion, to terminate this Agreement upon the occurrence of any of the following events: (a) a receiver or trustee is appointed for any of the other Party’s property, or (b) the other Party is adjudicated or voluntarily becomes bankrupt under any bankruptcy or winding up laws or other similar legislation, or (c) the other Party becomes insolvent or makes an assignment for the benefit of creditors.
|
|
|
|
22.2
|
Failure to Make Payments or to Meet Obligations
|
|
|
|
|
22.2.1
|
If Spirit fails to make any payment of a material amount, due and owing to IAE as set forth in Section 10 of this Agreement or any other agreement between the Parties (including any late interest due thereon) and such amount is not the subject of a good faith dispute or fails to meet any other material obligation under this Agreement or any other agreement between the Parties, then, after notice to Spirit and the expiration of a ***** cure period, and without prejudice to any of IAE’s other rights which IAE may have in contract, at law, or in equity, IAE shall have the right to not to induct, to suspend all work on, or not to release from the Maintenance Center(s) any Eligible Engine until full payment is made by Spirit to IAE or such failure is corrected, as the case may be.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
22.2.2
|
If Spirit fails to take delivery of all of the Aircraft and Eligible Engines in accordance with the schedule set forth in Exhibit A to this Agreement, as amended, supplemented or otherwise modified from time to time, or fails to operate the Aircraft and Eligible Engines in regular commercial service as contemplated by Section 10.5 for the duration of the Period of Cover (subject to the fleet flexibility granted in Section 11), in addition to any other rights which IAE may have in contract, at law, or in equity, IAE shall be entitled to make reasonable adjustments to the FHA Rates as appropriate based on the method of calculation used to derive the FHA Rates.
|
|
|
|
|
22.2.3
|
Spirit shall have the right to terminate this Agreement in the event that IAE fails to: (i) pay or provide any credit payable hereunder when due and such failure is not cured within ***** or (ii) perform a material obligation in accordance with the terms hereof and such failure continues unremedied for a period in excess of ***** or such failure reoccurs in at least ***** consecutive shop visits after IAE was first given written notice of such failure by Spirit, provided however that in no event shall IAE have fewer than ***** to cure such failure.
|
This Agreement shall be effective from the day and year first before written until the end of the Period of Cover or until terminated pursuant to this Section 21. Notwithstanding the foregoing, Sections 21.4, 24, and 27 of this Agreement shall survive any expiration or termination of this Agreement.
|
|
|
|
22.4
|
Effect of Termination or Expiration
|
Except as otherwise set out in this Section 21.4 and any rights or obligations arising under the applicable law, the rights and obligations of the Parties under this Agreement shall terminate upon the termination or expiration of this Agreement, and Spirit shall no longer be provided with fleet hour agreement coverage under the terms of this Agreement.
|
|
|
|
22.4.1
|
Upon any termination or expiration of this Agreement, all liabilities and obligations (including payment obligations) that have accrued prior to such termination or expiration (including payment due for Excess Work) shall survive.
|
|
|
|
|
22.4.2
|
Spirit shall pay to IAE the cost of any and all services which have been or are in the process of being carried out under the terms of this Agreement which have not been covered by payments made by Spirit under this Agreement plus a surcharge of the lesser of (i) ***** and (ii) the maximum amount allowed by law. Should Spirit terminate this Agreement under Section 20.1 or Section 20.2.3 above, IAE shall return any excess payments for services paid for, but not rendered. Such calculation shall be performed by IAE within sixty (60) Business Days of termination, shall be mutually approved by IAE and Spirit and shall be immediately due and payable by Spirit or IAE, as the case may be, upon receipt thereof.
|
Failure by either Party to enforce any term of this Agreement shall not constitute a waiver of such term.
|
|
|
|
24.
|
Severability and Partial Invalidity
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
If any provision of this Agreement or the application thereof to either Party shall be invalid, illegal or unenforceable to any extent, the remainder of the Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law.
This Agreement shall be construed and the performance thereof determined in accordance with the laws of *****.
*****
Each Party agrees that it shall not issue any press release or make any public announcement regarding this Agreement without the written consent of the other Party. Spirit agrees that IAE may use Spirit’s authorized logo, service marks and trademarks for the purpose of confirming that Spirit is a customer of IAE. IAE agrees that Spirit may use IAE’s authorized logo, service marks and trademarks for the purpose of confirming that IAE is a supplier to Spirit. Except as expressly set forth above, neither Party may use the other Party’s logo, service marks and trademarks without the express written consent of the other Party.
The terms and conditions of this Agreement and any technical information provided in connection with it are confidential and proprietary to IAE and Spirit. Each Party agrees to: (a) limit disclosures of such confidential information to persons who have a need to know within their organizations; (b) keep such information confidential; and (c) not disclose to any third party other than (i) as required by applicable law or legal process; (ii) in connection with the disclosure requirements of any applicable government authority or exchange; (iii) to its legal, financial, tax or other advisors who are bound by an obligation of confidentiality or to the confidentiality requirements of this Agreement and (iv) in connection with the enforcement of its rights hereunder, without the prior written consent of the other party (not to be unreasonably withheld), provided that, in the case of (c)(i),
supra,
the Party that is to disclose such confidential information in response to such applicable law or legal process shall if permitted by applicable law, as soon as practicable notify the other Party, and upon the request of the other Party, shall cooperate with the other Party in contesting such disclosure.
|
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28.
|
Compliance with All Applicable Laws and Regulations
|
|
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|
|
28.1
|
Export/Import. Spirit agrees that it will not, directly or indirectly, sell, export, re-export, transfer, divert, or otherwise dispose of any IAE goods, software, technical data (including products derived from or based on such technical data), or services received directly or indirectly from IAE to any Prohibited Party without obtaining prior authorization from the relevant government authorities as required pursuant to Export Laws.
|
“
Prohibited Parties
” means, collectively, those countries, and persons to whom the sale, export, re-export, transfer, diversion or other disposition of any IAE goods, software, technical data or services is prohibited by the applicable export laws and related regulations of the United States, German, British, Japanese, or European Union Governments.
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|
|
|
28.2
|
Other Laws and Regulations
. Each Party agrees that it will not, by act or omission, violate any applicable law or regulation of the United States or any political subdivision thereof where the violation thereof would result in the other Party being deemed to be in violation
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
of such law or regulation or would otherwise result in a criminal or an un-indemnified civil penalty on the part of such other Party
|
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|
|
29.
|
No Construction Against Drafter
|
This Agreement has been the subject of detailed negotiation between the Parties. If an ambiguity or question of the intent arises with respect to any provision of this Agreement, this Agreement will be construed as if drafted jointly by IAE and Spirit and no presumption or burden of proof will arise favoring or disfavoring either Party by virtue of authorship of any of the provisions of this Agreement.
In no event shall either Party to this Agreement or either Party’s subsidiaries or affiliates, have any liability to any other Party hereto for any indirect, incidental, special, consequential, or punitive damages, including without limitation any damage to or loss of use, revenue or profit with respect to any Aircraft, Engines and/or Parts.
IN WITNESS WHEREOF
the Parties hereto have caused this Agreement to be signed on their behalf by their authorized officers the day and year first before written:
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|
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|
|
|
|
Agreed to and accepted on behalf of:
IAE International Aero Engines AG
|
|
Agreed to and accepted on behalf of:
Spirit Airlines, Inc.
|
|
By:
|
/s/ Rick Deurloo
|
|
By:
|
/s/ Charles A. Rue
|
|
Name:
|
Rick Deurloo
|
|
Name:
|
Charles A. Rue
|
|
Title:
|
SVP Sales
|
|
Title:
|
VP Supply Chain
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit A
Aircraft and Spare Engine Delivery Schedules
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit A-1
Aircraft Delivery Schedule
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|
|
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Aircraft No.
|
Aircraft Model
|
Engine Model
|
Scheduled Delivery Date
|
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1
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*****
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*****
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*****
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2
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*****
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*****
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*****
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3
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*****
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*****
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*****
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4
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*****
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*****
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*****
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5
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*****
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*****
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*****
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6
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*****
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*****
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*****
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7
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*****
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*****
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*****
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8
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*****
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*****
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*****
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9
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*****
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*****
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*****
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10
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*****
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*****
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*****
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11
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*****
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*****
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*****
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12
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*****
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*****
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*****
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13
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*****
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*****
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*****
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14
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*****
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*****
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*****
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15
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*****
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*****
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*****
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16
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*****
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*****
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*****
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17
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*****
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*****
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*****
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18
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*****
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*****
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*****
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19
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*****
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*****
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*****
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20
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*****
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*****
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*****
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21
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*****
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*****
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*****
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22
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*****
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*****
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*****
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23
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*****
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*****
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*****
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24
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*****
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*****
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*****
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25
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*****
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*****
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*****
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26
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*****
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*****
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*****
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27
|
*****
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*****
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*****
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28
|
*****
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*****
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*****
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29
|
*****
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*****
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*****
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30
|
*****
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*****
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*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit A-2
Spare Engine Delivery Schedule
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Spare Engine No.
|
Quantity
|
Engine Model
|
Scheduled Delivery Date
|
|
1
|
1
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*****
|
*****
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|
2
|
1
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*****
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*****
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3
|
1
|
*****
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*****
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4
|
1
|
*****
|
*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit B
FHA Escalation Formula
1.
FHA Rates will be subject to annual escalation in accordance with the formula set forth below:
*****
Where:
FHA Rates are the applicable base values at the Base Month as set forth in the Contract;
“Base Month” shall mean the base month and year specified for the FHA rates in the Contract;
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit C
Accessories
|
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|
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|
ATA code
|
Description
|
Units Per Engine
|
OEM
|
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit D
V2500 Turbofan Engine Model Specifications
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit E
Powerplant Description
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*****
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*****
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*****
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*****
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*****
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*****
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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*****
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*****
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*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit F
Addresses
1.
SPIRIT ADDRESSES
(a)
Address for Notices:
Legal Department
Spirit Airlines, Inc.
2800 Executive Way
Miramar, Florida 33025
Fax: (954) 447-7854
(b)
Address for Invoices:
Accounts Payable Department
Spirit Airlines, Inc.
2800 Executive Way
Miramar, Florida 33025
Fax: (954) 447-7855
2.
IAE ADDRESSES
(a)
Address for Notices:
Attention: Chief Legal Officer & Company Secretary
IAE International Aero Engines AG
400 Main Street, M/S 121-10
East Hartford, CT 06108
Fax: (860) 565-4003
(b)
Address for Invoices:
Attention: Accounts Receivable Manager
IAE International Aero Engines AG
400 Main Street, M/S 121-10
East Hartford, CT 06108
Fax: (860) XXX-XXXX
(c)
Address for all Other FHA Matters:
Attention: Spirit Fleet Director for Spirit
IAE International Aero Engines AG
400 Main Street, M/S 121-10
East Hartford, CT 06108
Fax: (860) XXX-XXXX
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit G
Engine Monitoring Services
1.
IAE will provide the following Engine health monitoring services (“
Services
”) through the ADEM system:
(a)
ENGINE TREND MONITORING
|
|
|
|
(i)
|
Provide processing of in-flight engine data received from Operator into IAE’s EHM database as provided per the data input and transmission requirements set forth in Section
3
herein. All processed data will be provided to the Operator via IAE’s web portal. Daily updates require web portal access described in Section
1
(b) herein.
|
|
|
|
|
(ii)
|
Provide automated mechanical exceedance reporting for those Aircraft that are equipped with required on-board hardware and software.
|
|
|
|
|
(iii)
|
Provide technical analysis of EHM Eligible Engines’ performance data and report anomalies indicated by such data to designated Operator personnel as required.
|
|
|
|
|
(iv)
|
Provide access to monthly EHM Eligible Engine operating trend analysis report covering post EHM Commencement Date operations to assist Operator in the planning and scheduling of EHM Eligible Engines for shop visits.
|
|
|
|
|
(v)
|
Provide automated alert notification of parameters that have exceeded level and rate change limits.
|
|
|
|
|
(vi)
|
Provide access to alert details reports that identify Aircraft and Eligible Engines by serial number and provide the date, time, magnitude and details of occurrences when such Eligible Engine exceeds specific performance parameters and provide the ability to store comments associated with a given alert.
|
|
|
|
|
(vii)
|
Provide exhaust gas temperature (subject to data availability) Watch-Lists, updated monthly utilizing data received from Operator to assist Operator in scheduling Eligible Engine removals for maintenance purposes. The Watch-Lists provide an engine ranking and predicted removal date for a given Eligible Engine based on the measured parameter and deterioration rate to assist with proactive on-wing management and maintenance planning.
|
|
|
|
|
(viii)
|
Provide access to the following engine performance parameter trend plots that are updated real-time as new in-flight engine data is received from Operator:
|
•
EGT Margin
•
Sea Level Outside Air Temperature Limits
•
N1 and N2 Shaft Speeds
•
Fuel Flow
•
Vibration
•
Oil Temperature
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
•
Oil Pressure
•
P2.5, T2.5, P3.0, T3.0, P12.5
|
|
|
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(ix)
|
Upon special request, raw in-flight engine data can be supplied to the Operator.
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(x)
|
Input data files and d individually processed records will be stored for a minimum period of five (5) years.
|
(b)
WEB PORTAL ACCESS
|
|
|
|
(i)
|
Provide twenty-four (24) hour per day access to reports and processed information, provided to under Section
1
herein, through a secure web portal created and maintained by IAE. Such web portal access shall be created and provided to Operator approximately thirty (30) days from the execution of this Agreement. Operator must meet IAE defined requirements for access as detailed in Section
2
herein. IAE will use all reasonable efforts to ensure a service availability target of 96% when measured on an annual basis and that down time of the system is no longer than one (1) business day for any one incident.
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(ii)
|
IAE shall provide Services under the terms of this Agreement contingent upon the timely receipt of data required by IAE from Operator. It is understood between the parties that the ability of IAE to provide timely and accurate reports and processed information through these web-based services is dependent upon the quality and timeliness of the data received from Operator.
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(iii)
|
If Email, or pager or cell phone alert notifications are required by the Operator, the Operator shall be responsible for acquiring and maintaining the required pager and cell phone hardware and software and pay any associated communications fees. It is the Operator’s responsibility to establish an alert notification contact list and advise IAE of any changes.
|
2.
ACCESSIBILITY
(a)
To facilitate internet portal access, Operator is required to maintain the following:
(i)
internet access;
(ii)
Internet Explorer version 5.5 or higher; (
iii
) 128 bit Secure Socket Layer (“SSL”) encryption capability; and
(iv)
a minimum internet speed of 56K bits per second to access the internet portal.
(b)
All information being transmitted through the Internet portal will be protected using SSL encryption. In addition, each user of the Internet portal will be authenticated at logon with a unique user identification and password. Once authenticated to the Internet portal, Operator will only be allowed to access the information that Operator and IAE mutually agree a specific user may review. IAE shall review security requirements for web portal access from time to time to ensure an appropriate level of data protection. Updated security requirements shall be communicated to Operator on a timely basis.
3.
TRANSMISSION OF DATA BY OPERATOR
(a)
Operator shall provide all data requested by IAE in order to perform the Services, including but not limited to the date and time the data was recorded, aircraft and engine
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
number, engine position, altitude and mach (or air speed), total air temperature, engine pressure ratio, rotor speeds, fuel flow, oil temperature, oil pressure, mechanical exceedances and pertinent maintenance actions (EHM Eligible Engine changes, sensor changes, other items that may impact engine performance). Operator shall electronically transmit engine condition monitoring data to IAE’s designated ground station via air-to-ground service providers (e.g., ARINC and SITA) or via such other routing as the parties mutually agree.
(b)
Using the facilities available within IAE’s V2500 engine monitoring program services, the Operator shall provide feedback of on-wing maintenance actions taken as a result of an alert notification as provided in accordance with Section 1(a)(v) herein.
4.
LIMITATION OF LIABILITY
IAE MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES SET FORTH IN THIS
EXHIBIT G
. OPERATOR ACKNOWLEDGES AND AGREES THAT IT IS SOLELY RESPONSIBLE FOR MAKING ALL DECISIONS IN RESPECT TO THE SERVICES. IAE EXPRESSLY DISCLAIMS AND OPERATOR HEREBY RELEASES IAE FROM ANY LIABILITY, INCLUDING BUT NOT LIMITED TO LIABILITY FOR DIRECT, INDIRECT, CONSEQUENTIAL, OR INCIDENTAL DAMAGES ARISING OUT OF OR ASSOCIATED WITH THE SERVICES, RECOMMENDATIONS OR FAILURE TO MAKE RECOMMENDATIONS BY IAE, OR ANY DECISIONS MADE BY OPERATOR WITH RESPECT TO THE SERVICES. Should Operator fail to comply with operating and maintenance instructions or recommendations resulting from the Services, authorized or issued by IAE and current at the time, then IAE shall not be held liable for any costs associated with any Engine, Module or Part failure arising from Operator’s failure to comply with IAE’s recommendations. Any such event shall also be considered ineligible against any warranties or guarantees provided by IAE and resulting repairs and part replacements shall be carried out and charged as Excess Work under the applicable IAE Fleet Hour Agreement.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit H
Excess Work Rates
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|
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Item
|
Basis
|
Rates/Fees
|
|
*****
|
*****
|
*****
(3)
|
|
*****
(4)
|
*****
|
*****
|
|
*****
|
*****
|
*****
|
|
*****
|
*****
|
*****
|
|
*****
|
*****
|
*****
|
|
*****
|
*****
(2)
|
*****
(3)
|
|
*****
|
*****
|
*****
(3)
|
Notes:
1.
*****
2.
Where units per Engine quantities listed in Exhibit C are greater than *****, a single ***** fee per ATA line item shall still apply. This charge will also cover the packing, one-way transportation and coordination of Accessories removed and sent for vendor repair.
3.
The above rates and fees are expressed in United States Dollars and are subject to escalation from the base month of January 2013 in accordance with the formula set forth in Exhibit B.
4.
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit I
FHA Rate Adjustment Tables
The FHA Rates have been calculated based on Spirit meeting the General Conditions detailed in Section 10.4 of the Agreement.
To the extent that any operating parameters vary, the applicable charges shall be generated from the rate change tables contained in this Exhibit I. If the actual operation of the Eligible Engines falls between the points covered in any one of the tables, the adjustment factor can be interpolated linearly between the points to derive the applicable factor. If the actual utilization parameters fall between two separate tables, the table with the higher factor shall apply.
If any of the actual operating parameters fall outside the coverage of the tables contained in this Exhibit I, the Parties shall agree a rate adjustment based on the same method of calculation used to derive the tables (and not based on simple extrapolation).
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
400 Main Street, M/S 121-10
East Hartford, CT 06108 USA
October 1, 2013
Spirit Airlines, Inc.
2800 Executive Way
Miramar, Florida 33025
|
|
|
|
Subject:
|
Side Letter No. 1 to the V2500-A5 Fleet Hour Agreement between IAE International Aero Engines AG and Spirit Airlines, Inc., dated October 1, 2013
|
Gentlemen:
We refer to (i) the V2500-A5 Fleet Hour Agreement dated October 1, 2013 between IAE International Aero Engines AG (“
IAE
”) and Spirit Airlines, Inc. (“
Spirit
”), as amended from time to time, such agreement being hereinafter referred to as the “
New Fleet FHA
”, and (ii) Side Letter No. 2, dated October 1, 2013 (“
Side Letter No. 2
”) to the V2500-A5 General Terms of Sale dated October 1, 2013 between IAE and Spirit, as amended from time to time (the “New Fleet Contract”). Unless expressly stated to the contrary, and to the extent possible, terms used in this Side Letter No. 1 (“
Side Letter No. 1
”) shall have the same meaning given to them in the New Fleet FHA, and the New Fleet Contract and Side Letter No. 2.
In consideration of Spirit purchasing fifteen (15) Incremental Aircraft and purchasing or leasing two (2) Incremental Spare Engines, as defined in Side Letter No. 2, the Parties agree as follows:
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1.
|
New Fleet – Aircraft Delivery Schedule
|
The Aircraft Delivery Schedule attached to the New Fleet FHA as Exhibit A-1 is deleted in its entirety, and replaced with the Delivery Schedule attached to this Side Letter 1 as Appendix 1.
|
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|
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2.
|
New Fleet – Spare Engine Delivery Schedule
|
The Spare Engine Delivery Schedule attached to the New Fleet FHA as Exhibit A-2 is deleted in its entirety, and replaced with the Delivery Schedule attached to this Side Letter 1 as Appendix 2.
Except as expressly amended by this Side Letter No. 1, all provisions of the FHA remain in full force and
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Agreed to and accepted on behalf of:
IAE International Aero Engines AG
|
|
Agreed to and accepted on behalf of:
Spirit Airlines, Inc.
|
|
By:
|
/s/ Rick Deurloo
|
|
By:
|
/s/ Edward Christie
|
|
Name:
|
Rick Deurloo
|
|
Name:
|
Edward Christie
|
|
Title:
|
SVP Sales
|
|
Title:
|
SVP & CFO
|
|
Date:
|
10/2/13
|
|
Date:
|
10/2/13
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
ATTACHMENT 1
“Exhibit A-1
Aircraft Delivery Schedule
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Aircraft No.
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Aircraft Model
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Engine Model
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Scheduled Delivery Date
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1
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*****
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*****
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*****
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2
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*****
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*****
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*****
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3
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*****
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*****
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*****
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4
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*****
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*****
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*****
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5
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*****
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*****
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*****
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6
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*****
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*****
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*****
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7
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*****
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*****
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*****
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8
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*****
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*****
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*****
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9
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*****
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*****
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*****
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10
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*****
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*****
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*****
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11
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*****
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*****
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*****
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12
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*****
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*****
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*****
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13
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*****
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*****
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*****
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14
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*****
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*****
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*****
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15
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*****
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*****
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*****
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16
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*****
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*****
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*****
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17
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*****
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*****
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*****
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18
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*****
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*****
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*****
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19
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*****
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*****
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*****
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20
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*****
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*****
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*****
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21
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*****
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*****
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*****
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22
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*****
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*****
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*****
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23
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*****
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*****
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*****
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24
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*****
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*****
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*****
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25
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*****
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*****
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*****
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26
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*****
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*****
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*****
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27
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*****
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*****
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*****
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28
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*****
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*****
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*****
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29
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*****
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*****
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*****
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30
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*****
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*****
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*****
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31
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*****
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*****
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*****
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32
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*****
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*****
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*****
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33
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*****
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*****
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*****
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34
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*****
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*****
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*****
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35
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*****
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*****
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*****
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36
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*****
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*****
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*****
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37
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*****
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*****
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*****
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38
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*****
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*****
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*****
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39
|
*****
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*****
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*****
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40
|
*****
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*****
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*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
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41
|
*****
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*****
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*****
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42
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*****
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*****
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*****
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43
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*****
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*****
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*****
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44
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*****
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*****
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*****
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45
|
*****
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*****
|
*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
ATTACHMENT 2
“Exhibit A-2
Spare Engine Delivery Schedule
|
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|
|
|
|
|
|
Firm Spare Engine Delivery Schedule
|
|
Spare Engine No.
|
Quantity
|
Engine Model
|
Scheduled Delivery Date
|
|
1
|
1
|
*****
|
*****
|
|
2
|
1
|
*****
|
*****
|
|
3
|
1
|
*****
|
*****
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|
4
|
1
|
*****
|
*****
|
|
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|
|
Option Spare Engine Delivery Schedule
|
|
Spare Engine No.
|
Quantity
|
Engine Model
|
Scheduled Delivery Date
|
|
1
|
1
|
*****
|
*****
|
|
1
|
1
|
*****
|
*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
PUREPOWER
®
PW1100G-JM ENGINE PURCHASE SUPPORT AGREEMENT
AND
PW1100G-JM ENGINE FLEET MANAGEMENT PROGRAM AGREEMENT
BY AND BETWEEN
UNITED TECHNOLOGIES CORPORATION
PRATT & WHITNEY DIVISION
AND
SPIRIT AIRLINES, INC.
DATED AS OF OCTOBER 1, 2013
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
2.
|
PURCHASE OBLIGATIONS 4
|
|
|
|
|
3.
|
FINANCIAL ASSISTANCE 5
|
|
|
|
|
9.
|
PURESOLUTION
SM
FMP 14
|
|
|
|
|
10.
|
GUARANTEE PLANS AND TECHNICAL SUPPORT 14
|
|
|
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|
12.
|
TERMS AND CONDITIONS 19
|
|
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|
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16.
|
PARTICIPATION OF PARTIES 22
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
LIST OF APPENDICES
|
|
|
|
Appendix 1
|
Agreement Definitions
|
|
|
|
|
Appendix 2
|
Aircraft and Spare Engine Delivery Schedule
|
|
|
|
|
Appendix 3
|
PW1100G-JM Engine Specification
|
|
|
|
|
Appendix 4
|
PW1100G‑JM Engine Price Escalation Formula
|
|
|
|
|
Appendix 5
|
PureSolution
SM
Fleet Management Program
|
|
|
|
|
Appendix 6
|
PW1100G‑JM Engine Product Support Plan
|
|
|
|
|
Appendix 7
|
Warranties and Service Policies for the PW1100G‑JM Engine
|
|
|
|
|
Appendix 8
|
Guarantee Plan Definitions and Conditions
|
|
|
|
|
Appendix 21
|
Terms and Conditions of Sale of Goods and Services
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
This PurePower
®
PW1100G Engine Purchase Support Agreement, dated as of October 1, 2013 (this “Agreement”), is entered into by and between Spirit Airlines, Inc., having an office at 2800 Executive Way, Miramar, FL 33025 U.S.A., (hereinafter referred to as “
Spirit
”) and United Technologies Corporation, acting through its Pratt & Whitney Division, a corporation organized and existing under the laws of the State of Delaware, having an office at 400 Main Street, East Harford, CT 06108, U.S.A. (hereinafter referred to as “
Pratt & Whitney
”). Pratt & Whitney and Spirit may also hereinafter be referred to individually as a “Party” or collectively as the “Parties.”
WHEREAS:
Spirit has entered into a binding agreement with Airbus for the purchase of fifty (50) new firm A320neo family aircraft powered by new PW1100G‑JM engines, which are scheduled for delivery in accordance with the Delivery Schedule (each, a “
Firm Aircraft
”, and collectively, the “
Firm Aircraft
”); and
Spirit desires to purchase from Pratt & Whitney nine (9) new PW1100G‑JM spare engines to support the Firm Aircraft (each, a “
Firm Spare Engine
”; collectively, the “
Firm Spare Engines
”); and
Pratt & Whitney desires to provide Engines to power the Firm Aircraft and to sell to Spirit the Firm Spare Engines, and to provide the support and other assistance described in this Agreement; and
Spirit desires to have all off-wing Engine maintenance services performed exclusively by Pratt & Whitney under the PureSolution FMP (set forth in Appendix 5); and
Pratt & Whitney is willing to become Spirit’s exclusive maintenance provider for its Engine fleet through the PureSolution FMP; and
Pratt & Whitney and Spirit desire to express their complete understanding and agreement in connection with Spirit’s selection of the Engines to power the fifty (50) Firm Aircraft, Spirit’s purchase of nine (9) Firm Spare Engines, and the parties’ responsibilities and obligations under the PureSolution FMP.
NOW THEREFORE:
In consideration of the above recitals and the conditions, mutual covenants, and agreements contained in this Agreement and under the PureSolution FMP attached hereto as Appendix 5, Pratt & Whitney and Spirit mutually agree as follows:
Capitalized terms not otherwise defined in this Agreement have the respective meanings in Appendix 1.
Upon mutual execution of this Agreement, the parties agree as follows:
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
2.1
|
Spirit will place a firm order with Airbus for the fifty (50) Firm Aircraft, and will inform Airbus that it has selected Engines to power the Firm Aircraft.
|
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|
|
|
2.2
|
Spirit will take delivery of each Firm Aircraft in accordance with the Delivery Schedule, subject to the provisions of Section 6.3 and the other terms and conditions of this Agreement.
|
|
|
|
|
2.3
|
Pratt & Whitney will sell, under separate agreements with Airbus, new PurePower PW1100G-JM Engines for installation on the Firm Aircraft;
|
|
|
|
|
2.4
|
Spirit will purchase and take delivery of, and Pratt & Whitney will sell and deliver to Spirit, nine (9) Firm Spare Engines in accordance with the Delivery Schedule, subject to the provisions of Section 6.4 and the other terms and conditions of this Agreement. This Agreement constitutes Spirit’s firm and unconditional purchase order with Pratt & Whitney for the nine (9) Firm Spare Engines;
|
|
|
|
|
2.5
|
Spirit agrees that receipt of benefits under this Agreement is subject to and conditioned upon Spirit performing its obligations under the PureSolution FMP set forth in Appendix 5, which the parties agree to execute contemporaneously with this Agreement;
|
|
|
|
|
2.6
|
This executed Agreement constitutes a valid, binding, and legally enforceable contract by and between Spirit and Pratt & Whitney for the support of the Engines installed on the fifty (50) Firm Aircraft, the purchase and sale of the nine (9) Firm Spare Engines, and their performance of the PureSolution FMP.
|
In consideration of Spirit fulfilling its obligations under Article
2
of this Agreement, Pratt & Whitney agrees to provide Spirit with the financial assistance identified in this Article
3
, subject to the provisions of Section 5.5. All credits identified herein are conditioned upon:
(a)
Spirit accepting delivery of all the Firm Aircraft and Firm Spare Engines in accordance with the Delivery Schedule, subject to the terms and conditions of Article 6, and
(b)
the absence of an Event of Default which is continuing by Spirit under the PureSolution FMP.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
3.1
|
Introductory Assistance Credit
|
|
|
|
|
3.1.1
|
To assist Spirit with the introduction of the Firm Aircraft into Spirit’s fleet, Pratt & Whitney will provide Spirit with a Fleet Introductory Assistance Credit per Firm Aircraft based on the Engine/Firm Aircraft model purchased, as follows:
|
|
|
|
|
|
|
|
FLEET INTRODUCTORY ASSISTANCE CREDITS
|
|
ENGINE/AIRCRAFT MODEL
|
CREDIT AMOUNT (JAN-12$)
|
ESCALATION
|
|
PW1124G-JM powered A319 Firm Aircraft
|
*****
|
Escalated
|
|
PW1127G-JM powered A320 Firm Aircraft
|
*****
|
Escalated
|
|
PW1133G-JM powered A321 Firm Aircraft
|
*****
|
Escalated
|
|
|
|
|
3.1.2
|
The Fleet Introductory Assistance Credits are expressed in January 2012 delivery conditions and will escalate (and be subject to escalation protection) in accordance with the provisions of Article
5
.
|
|
|
|
|
3.1.3
|
The Fleet Introductory Assistance Credits shall be issued directly to Airbus, to be applied toward Spirit’s payment for the corresponding Firm Aircraft.
|
|
|
|
|
3.2
|
Firm Spare Engine Credits
|
|
|
|
|
3.2.1
|
To assist Spirit with spare Engine provisioning, Pratt & Whitney will provide Spirit with a Spare Engine Credit per Firm Spare Engine based on the Engine Model purchased, as follows:
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
|
|
|
SPARE ENGINE CREDIT
|
|
ENGINE MODEL
|
SPARE ENGINE CREDIT (JAN-12$)
|
ESCALATION
|
|
PW1124G-JM Spare Engine
|
*****
|
Escalated
|
|
PW1127G-JM Spare Engine
|
*****
|
Escalated
|
|
PW1133G-JM Spare Engine
|
*****
|
Escalated
|
|
Each Firm Spare Engine final invoice
|
*****
|
Escalated
|
|
|
|
|
3.2.2
|
The Spare Engine Credits are expressed in January 2012 delivery conditions and will escalate (and be subject to escalation protection) in accordance with the provisions of Article
5
.
|
|
|
|
|
3.2.3
|
The applicable Spare Engine Credit will be applied to each Firm Spare Engine’s final invoice.
|
|
|
|
|
3.3
|
Spare Parts and Tooling Credit
|
To assist Spirit with initial spare Parts provisioning, Pratt & Whitney will credit Spirit’s account with Pratt & Whitney in the fixed amount of ***** upon delivery of the first Firm Aircraft to Spirit (the “Spare Parts and Tooling Credit”). The Spare Parts and Tooling Credit is expressed in January 2012 United States Dollars and is subject to escalation (and escalation protection) in accordance with the provisions of Article
5
. The Spare Parts and Tooling Credit may be used by Spirit to purchase PW1100G-JM spare Parts and tooling from Pratt & Whitney.
Pratt & Whitney shall provide Spirit with training credits equivalent to ***** student training days, which will be made available for use by Spirit ***** days prior to induction of the first Firm Aircraft. In addition, Pratt & Whitney agrees to provide an additional ***** student training days per Firm Aircraft delivered to Spirit. Training credits will apply only to services offered by the Pratt & Whitney Customer Training Center, and are not convertible to cash or transferrable.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
The following table provides the Unit Base Price per Firm Spare Engine. The Unit Base Price per Firm Spare Engine is expressed in United States Dollars in January 2012 delivery conditions, and is subject to escalation (and escalation protection) in accordance with the provisions of Article
5
below.
|
|
|
|
|
|
FIRM SPARE ENGINE MODEL
|
UNIT BASE PRICE PER PW1100G-JM SPARE ENGINE
JANUARY 2012 UNITED STATES DOLLARS
|
|
PW1124G-JM
|
*****
|
|
PW1127G-JM
|
*****
|
|
PW1133G-JM
|
*****
|
|
|
|
|
4.2
|
Spare Engine Payment Terms
|
*****
|
|
|
|
4.3
|
Delivery and Acceptance of Firm Spare Engines
|
|
|
|
|
4.3.1
|
For each Firm Spare Engine purchased, Pratt & Whitney will arrange and pay for one-way transportation, and bear risk of loss during such transportation, from Pratt & Whitney’s facility to Spirit’s designated main base. For each Firm Spare Engine purchased under this Agreement, Spirit will purchase a P&W Shipping Stand or provide an Equivalent Shipping Stand, and will make each such shipping stand available at Pratt & Whitney’s designated facility at least ***** prior to each scheduled Firm Spare Engine delivery.
|
|
|
|
|
4.3.2
|
Pratt & Whitney shall ensure that each Firm Spare Engine delivered to Spirit is new and conforms to the applicable Engine Specification through the maintenance of procedures, systems and records approved by the Airworthiness Authority. An FAA-issued “Authorized Release Certificate” (FAA Form 8130-3, Airworthiness Approval Tag) or “Certificate of Conformity” (as the case may be) will be issued and signed by personnel authorized for such purposes. *****
|
|
|
|
|
4.3.3
|
Subject only to the provisions of Section 4.3.2, upon Spirit’s payment in full for the Firm Spare Engine as described in Section 4.2 above and the issue of an “Authorized Release Certificate” (FAA Form 8130-3, Airworthiness Approval Tag) or a Certificate of Conformity (as the case may be), Spirit shall be deemed to (i) have accepted the Firm Spare Engine (and Engine storage bag and transportation stand, if purchased
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
from Pratt & Whitney), and that the Spare Engine (ii) agreed that the Firm Spare Engine conforms to the applicable Engine Specification. *****
|
|
|
|
5.1
|
The Fleet Introductory Assistance Credits, Spare Engine Credits, Spare Engine Unit Base Prices, and Spare Parts and Tooling Credits are subject to escalation in accordance with the Engine Escalation Formula, and in each case, subject to the escalation protection described in Section 5.3. Credits shall be escalated from the Base Month and Year specified in this Agreement to the earlier of (a) the applicable scheduled delivery date indicated in the Delivery Schedule or (b) the actual delivery date of the corresponding Firm Aircraft or Firm Spare Engine.
|
|
|
|
|
5.4
|
With respect to installed Engines, Pratt & Whitney will, as of the respective dates of delivery of each of the Firm Aircraft delivered to Spirit, calculate the difference (if any) between:
(i)
the corresponding Deemed Shipset Price (as defined below) escalated in accordance with the Engine Escalation Formula, and
(ii)
the corresponding Deemed Shipset Price as capped in accordance with Section 5.3. Pratt & Whitney will adjust the aggregate amount of the credits due and payable to Spirit for each such Firm Aircraft by such difference. For purposes of administering this provision, the “
Deemed Shipset Price
” shall be as follows.
|
|
|
|
|
|
|
DEEMED SHIPSET PRICE
|
|
ENGINE MODEL
|
PW1100G-JM DEEMED SHIPSET PRICE JANUARY 2012 UNITED STATES DOLLARS
|
|
PW1124G-JM
|
*****
|
|
PW1127G-JM
|
*****
|
|
PW1133G-JM
|
*****
|
|
|
|
|
5.5
|
Credit and Engine Pricing Conditions
|
|
|
|
|
5.5.1
|
Except as otherwise provided in this Agreement, credits provided under Article
3
may only be used for the purchase of goods and/or services from Pratt & Whitney.
|
|
|
|
|
5.5.2
|
Pratt & Whitney agrees that the credits provided to Spirit shall not expire provided that: (i) this Agreement remains in full force and effect, (ii) the credits have not been
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
applied to overdue amounts arising under this Agreement under rights of set off and (iii) Spirit continues to operate at least one (1) Firm Aircraft under which the applicable credit was provided.
|
|
|
|
5.5.3
|
The credits described in Article
3
will be issued in accordance with the applicable provisions of Article
3
, provided that Spirit’s account with Pratt & Whitney is then current in accordance with the terms hereof. *****
|
|
|
|
|
5.5.4
|
Spirit will ensure compliance with any and all requirements (including but not limited to reporting and approval requirements) of any applicable currency control or other applicable law, rule, or regulation relating to any credits issued under this Agreement.
|
|
|
|
|
9.1
|
PureSolution
SM
Fleet Management Program
|
Spirit agrees that it will obtain all off-wing Engine maintenance services on the Engines installed on Firm Aircraft and the Firm Spare Engines exclusively from the Pratt & Whitney Network pursuant to the PureSolution Fleet Management Program attached as Appendix 5 to this Agreement.
|
|
|
|
10.
|
GUARANTEE PLANS AND TECHNICAL SUPPORT
|
Pratt & Whitney will provide Spirit with the Guarantee Plans set forth in Appendix 8 through Appendix 20, inclusive (the “Guarantee Plans”). The Guarantee Plans are subject to the terms and conditions set forth in the Guarantee Plan Definitions and Conditions attached as Appendix 8. Eligibility under the Guarantee Plans is conditioned upon all Engines installed on the Firm Aircraft and all of the
Firm Spare Engines being:
|
|
|
|
10.1.1
|
maintained exclusively in the Pratt & Whitney Network under the PureSolution FMP *****; or
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
10.2
|
PurePower PW1100G‑JM Engine Product Support Plan
|
Pratt & Whitney will provide Spirit the benefits of the Product Support Plan for First-Generation Owners/Operators Acquiring New Pratt & Whitney PurePower PW1100G‑JM Engines, attached as Appendix 6.
|
|
|
|
10.4
|
On-Site Pratt & Whitney Field Representative
|
|
|
|
|
10.4.1
|
Pratt & Whitney field representatives are fully trained on all facets of Engine line maintenance and are stationed around the world to assist operators with the introduction of the Engine into their fleets. Pratt & Whitney will assign a field representative in Spirit’s area of operation to assist Spirit in preparing for Engine operation.
|
|
|
|
|
10.4.2
|
The Pratt & Whitney field representative will provide the following services to Airline:
|
|
|
|
|
b.
|
Maintenance Action Recommendations;
|
|
|
|
|
c.
|
Daily Reporting on Engine Technical Situations;
|
|
|
|
|
d.
|
Service Policy Preparation Assistance; and
|
|
|
|
|
e.
|
Prompt Communication with Pratt & Whitney
|
|
|
|
|
10.6
|
Warranties and Service Policies for the PW1100G‑JM Engine
|
|
|
|
|
10.6.1
|
Pratt & Whitney will provide Spirit the benefits of the Warranties and Service Policies for the PW1100G‑JM Engine attached as Appendix 7
*****.
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Pratt & Whitney’s obligations under this Agreement, including Pratt & Whitney’s obligation to make PurePower PW1100G-JM Engines available for Firm Aircraft delivery in accordance with the Delivery Schedule, are contingent upon certification of the applicable model of PW1100G-JM engine-powered A320NEO aircraft by Airbus at least ***** prior to delivery of the first Firm Aircraft.
|
|
|
|
12.1
|
Terms and Conditions
|
|
|
|
|
12.1.1
|
The Terms and Conditions attached hereto as Appendix 21 govern all transactions under this Agreement
|
|
|
|
|
12.1.2
|
In the event of a conflict between a provision set forth in the main body of this Agreement and a provision set forth in an appendix or attachment to this Agreement, or if a provision in the main body of this Agreement modifies a provision set forth in an appendix or attachment to this Agreement, the provision set forth in the main body of this Agreement shall govern over the provision set forth in the appendix or attachment to this Agreement.
|
|
|
|
|
12.2
|
Incorporation of Appendices
|
All appendices and attachments attached hereto and referred to in this Agreement form an integral part of this Agreement and are hereby incorporated and made a part of this Agreement for all purposes.
|
|
|
|
12.3
|
For as long as Spirit owns and/or operates one or more Firm Aircraft in regular commercial service and is not in material breach of any of its obligations to Pratt & Whitney under this Agreement, Pratt & Whitney or its affiliate will provide adequate supplies of spare Parts available for sale to support Spirit’s commercial operation of the Engines. In consideration thereof, Pratt & Whitney or its affiliate will sell to Spirit and, except as hereinafter provided, Spirit will buy from Pratt & Whitney or its affiliate, for the period of operation of the Firm Aircraft in Spirit’s fleet, Spirit’s requirements of all new spare Parts manufactured pursuant to the detailed design and order of Pratt & Whitney where Pratt & Whitney or its affiliate is the only source from which Spirit can purchase such new spare Parts. Spirit agrees that all Parts displaced from an Engine as a result of incorporation of a Part purchased from Pratt & Whitney shall be returned to Pratt & Whitney or a Pratt & Whitney designated vendor for repair or scrap as determined by Pratt & Whitney.”
|
|
|
|
|
12.4
|
Spirit agrees to display Pratt & Whitney’s logo on the nacelle for all Firm Aircraft. Pratt & Whitney shall be responsible for properly installing the logos at its own cost for any nacelles that Pratt & Whitney chooses to have display such logo(s). The size and
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
placement of such logos on any nacelles shall be subject to Spirit’s approval to ensure that the Pratt & Whitney logo does not interfere with Spirit’s logo.
The parties agree that all demands, notices, and other communications under this Agreement must be in writing and will be deemed to be duly given when personally delivered or when deposited in the United States mail, confirmation of receipt requested, first-class postage prepaid or sent by facsimile with confirmation, addressed as follows:
To Seller: United Technologies
Corporation
Pratt & Whitney Division
400 Main Street, Mail Stop 132-21
East Hartford, Connecticut 06108
Phone: (860) 565-5852
E-mail: gppwlegalcmonotices@pw.utc.com
Attention: Associate Counsel and Director
Contracts Management (Commercial)
Pratt & Whitney
400 Main Street, Mail Stop 132‑46
East Hartford, Connecticut 06108
Telephone: (860) 557‑4737
E-Fax: (860) 755‑7058
Attention: Director, Service Programs
To Buyer: Spirit Airlines, Inc.
2800 Executive Way
Miramar
Fort Lauderdale, Florida
Telephone: 954-447-8044
Facsimile: 954-447-7854
Attention: Charlie Rue
VP Supply Chain
or at such other address as may hereafter be furnished in writing by either Party to the other.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
This Agreement, including its appendices and attachments, and the MFN Agreement, dated as of October 1, 2013 and provided under separate cover, contains the entire understanding between the parties with respect to the subject matter hereof and supersedes in their entirety all prior or contemporaneous oral or written communications, agreements or understandings between the parties with respect to the subject matter hereof. This Agreement may be executed in one or more counterparts, each of which will be considered an original but all of which together constitute one and the same instrument.
|
|
|
|
16.
|
PARTICIPATION OF PARTIES
|
The parties hereto acknowledge that this Agreement and all matters contemplated herein have been negotiated among the parties and that the parties have, from the commencement of negotiations to the execution hereof, participated in the drafting and preparation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date entered above and deem that it is executed in the State of Connecticut. The parties agree that facsimile signatures will be deemed to be of the same force and effect as an original executed document. If executed by facsimile, the parties agree to provide original signature pages upon request.
|
|
|
|
|
|
|
|
|
SPIRIT AIRLINES, INC.
|
|
|
|
|
By
|
/s/ Charles A. Rue
|
|
|
|
|
Name
|
Charles A. Rue
|
|
|
|
|
Title
|
VP Supply Chain
|
|
|
|
|
|
|
|
|
|
UNITED TECHNOLOGIES CORPORATION,
Pratt & Whitney Division
|
|
|
|
|
By
|
/s/ Rick Deurloo
|
|
|
|
|
Name
|
Rick Deurloo
|
|
|
|
|
Title
|
SVP Sales
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 1
PUREPOWER
®
PW1100G-JM ENGINE PURCHASE SUPPORT AGREEMENT AND ENGINE FLEET MANAGEMENT PROGRAM AGREEMENT
DEFINITIONS
For all purposes of this Agreement, the following capitalized terms have the meanings set forth below:
“Accepted Technical Data” means OEM data, recommendations, or information that has been provided by Pratt & Whitney that is not “Approved Technical Data” (as defined herein). This includes but is not limited to all operator wires, special instructions, illustrated parts catalogs, and CACTUS wires.
“AD” means an Aviation Authority-issued Engine airworthiness directive.
“Additional Equipment” is any item in the Engine Specification identified under the Additional Equipment section which is categorized as either Engine Build Up (EBU 1), which is provided by Pratt & Whitney with a Spare Engine, or Engine Build Up (EBU 2), which is provided separately by Airbus or its supplier.
“Airbus” means Airbus S.A.S.
“AOG Event” or “Aircraft-on-Ground Event” is a situation in which a Firm Aircraft is unavailable for operational service solely because a FMP Eligible Engine installed on such Firm Aircraft is unserviceable and/or incapable of continued operation after Spirit has performed reasonable on-wing Engine corrective action and no replacement engine is available. An AOG Event will terminate upon correction of the condition that renders the Firm Aircraft unserviceable or at the time a replacement engine becomes available for operational service, whichever first occurs.
“Approved Technical Data” is technical data that has been approved by the Aviation Authority or by an Aviation Authority DER.
“Aviation Authority” means the FAA or any other authorities, government departments, committees, or agencies which
(a)
under the laws of the State of Registration of the relevant Firm Aircraft, may from time to time, have control or supervision of civil aviation in that state; or
(b)
have jurisdiction over the registration, airworthiness or operation of, or other matters relating to a Firm Aircraft as long as it is substantially similar to the FAA requirements.
“BFE” means “Buyer Furnished Equipment“ means the aircraft manufacturer-supplied or buyer furnished engine-mounted accessories (typically including such items as integrated drive generator, quick accessory disconnect adapter, hydraulic pumps, shut-off valve, and pressure regulating valve).
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
“Build Group” means a portion of a FMP Eligible Engine that can be a non-serialized major assembly, as designated by the Air Transport Association.
“CEMP” or “Customized Engine Maintenance Program” means the program for engine maintenance established by Pratt & Whitney for Spirit, and agreed to with Spirit, in accordance with Section 5.1 of the PureSolution FMP.
“CMM” means Component Maintenance Manual.
“Commencement Date” means the date on which Spirit accepts delivery of its first PW1100G-JM Engine-powered Firm Aircraft in accordance with Appendix 2.
“Delivery Schedule” means the delivery schedule attached as Appendix 2.
“DER” means Designated Engineering Representative.
“Economically Repairable” shall generally mean that the cost of the repair, exclusive of modification and transportation costs, will be equal to or less than
*****
of the Pratt & Whitney commercial price of the relevant Part at the time the repair is considered, or shall be otherwise reasonably determined by Pratt & Whitney after consultation with Spirit.
“EIS” means the entry into service of a Firm Aircraft.
“Eligible Shop Visit” has the meaning set forth in Section 4.1 of the FMP Agreement.
“Engine” means a Pratt & Whitney PurePower
®
PW1100G-JM engine, described as Standard Equipment in the Engine Specification, attached as Appendix 3, sold by Pratt & Whitney for commercial aviation use, whether installed as new equipment on the aircraft by Airbus or delivered directly to Spirit from Pratt & Whitney for use as a spare Engine.
“Engine Build Up” or “EBU” refers to either the EBU 1 or EBU 2, as applicable, as each is described in the Additional Equipment section of the Engine Specification.
“Engine Escalation Formula” means the PW1100G‑JM Engine Price Escalation Formula for PW1100G‑JM Engines attached to this Agreement as Appendix 4.
“Engine Purchase Support Agreement” means the Agreement to which this FMP is appended.
“Engine Shipset” means two (2) new Engines delivered by Pratt & Whitney to Airbus for installation on a Firm Aircraft.
“Engine Specification” means the Engine specification attached as Appendix 3, which is subject to revision prior to Engine delivery.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
“Engine Warranty and Service Policy” or “Service Policy” means the Warranties and Service Policies for the PW1100G‑JM Engine attached as Appendix 7.
“Equivalent Shipping Stand” means, in the event Spirit elects not to purchase a P&W Shipping Stand, an operable shipping stand supplied by Spirit to Pratt & Whitney, suitable for road shipment of spare PW1100G-JM engines.
“Ex works” has the meaning set forth in Incoterms 2010, as promulgated by the International Chamber of Commerce.
“Excess Work” shall mean services provided outside of the coverage described in Section 4.3 of the FMP.
“External Equipment” means *****.
“Extreme Environmental Conditions” means *****.
“FAA” means the Federal Aviation Administration of the United States of America or any successor agency thereto.
“Failure” shall mean *****.
“Firm Aircraft”, individually, means any of the fifty (50) new firm-ordered PW1100G-JM engine-powered A320neo family aircraft identified in the Delivery Schedule as “Firm Aircraft” to be delivered to Spirit in accordance with the Delivery Schedule, and collectively, all fifty (50) of such aircraft.
“Firm Spare Engine” means any of the nine (9) new firm-ordered spare PW1100G engines identified in the Delivery Schedule as “Firm Spare Engines” to be delivered to Spirit in accordance with the Delivery Schedule.
“FMP Agreement” means the PW1100G-JM Engine Fleet Management Program Agreement set forth in Appendix 5.
“FMP Eligible Engines” has the meaning set forth in Article
1
of Appendix 5.
“FOD” means *****.
“Full Interval Shop Visit” means *****.
“Guarantee Plans” has the meaning set forth in Section 10.1 of this Agreement.
“Introductory Assistance Credit” means the credit provided by Pratt & Whitney to Spirit as described in Section 3.1 of this Agreement.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
“LLPs” or “Life Limited Parts” means those rotating Parts which have Parts Life Limit. For purposes of this Agreement, LLPs do not include static, non-rotating LLPs.
“Leased Aircraft” means any of the five (5) NEO aircraft powered by new PW1100G-JM Engines leased by Spirit from the delivery dates specified in the Leased Aircraft Delivery Schedule.
“Leased Aircraft Delivery Schedule” means the delivery schedule, set forth in Attachment 1 to the FMP, for the Leased Aircraft.
”
Missing Part” means *****.
“Optional Equipment” means any item in the Engine Specification identified under the Optional Equipment section.
“P&W Shipping Stand” means a new shipping stand purchased from Pratt & Whitney by Spirit, suitable for road shipment of spare PW1100G-JM engines.
“PAH” or “Production Approval Holder” means an entity holding a production certificate issued under the authority of the FAA.
“Parts” means *****.
“Parts Life Limit” means the maximum allowable total parts time or total parts cycles for specific Parts, including re-operation if applicable, as established by Pratt & Whitney and the applicable Airworthiness Authority. Parts Life Limits are published in the Airworthiness Limitations section of the applicable Instructions for Continued Airworthiness.
“Period of Cover” has the meaning set forth in Article
2
of the PureSolution FMP.
“PMA” or “Parts Manufacturer Approval” means the authority granted by the FAA to manufacture parts for installation in type-certificated products.
“Pratt & Whitney Network” means Pratt & Whitney’s designated network of maintenance, repair, and/or overhaul facilities.
“Product Support Plan” means the Product Support Plan for First-Generation Owners/Operators Acquiring New Pratt & Whitney PurePower® PW1100G‑JM Engines, attached as Appendix 6.
“PureSolution Escalation Formula” is the escalation formula used to escalate the PureSolution Rate as set forth in Attachment 3 to Appendix 5.
“PureSolution FMP” means the FMP Agreement set forth in Appendix 5.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
“PWEL” means Pratt & Whitney Engine Leasing, LLC, a Pratt & Whitney affiliate, which provides spare engine lease support.
“SB” means a Pratt & Whitney-issued Engine service bulletin.
“Scrapped” means those parts determined by Pratt & Whitney to be unserviceable and not Economically Repairable. Spirit shall cause such parts to be mutilated or disposed of in such a manner as to preclude any possible further use as an Engine part.
“Shop Visit” means a PureSolution Engine has been removed and inducted into a Pratt & Whitney facility within the Pratt & Whitney Network and the separation of major mating engine flanges or the removal of a disk, hub, or spool is performed on such PureSolution Engine.
“Spare Engine” means a spare Pratt & Whitney PurePower
®
PW1100G-JM engine, defined as Standard Equipment in the Engine Specification), and the applicable Additional Equipment supplied by Pratt & Whitney, as described the under Additional Equipment section of the Engine Specification. “Spare Engine Credit” means the credit provided by Pratt & Whitney to Spirit as described in Section 3.2
of this Agreement.
“Spare Engine Ratio” means the ratio of the total quantity of Spare Engines to the total quantity of installed Engines on the Firm Aircraft and Leased Aircraft.
“Specific Conditions” means the specific conditions set forth in Attachment 1 of Appendix 5, which apply to the Guarantee Plans and the PureSolution Rates.
“Spare Parts and Tooling Credit” means the credit provided by Pratt & Whitney to Spirit as described in Section 3.3
of this Agreement.
“Standard Equipment” means any item identified under the Standard Equipment section in the Engine Specification, Appendix 3.
“State of Registration” means the country in which the Firm Aircraft are registered.
“T&M Rates and Charges” are those rates and charges contained in Attachment 4, Attachment 5, and Attachment 6 for any maintenance service that is Excess Work or not otherwise covered under the PureSolution Rate, and unless otherwise stated, calculated as of the date of the invoice applicable to the Excess Work.
“TCH” or “Type Certificate Holder” means an entity holding a type certificate issued under the authority of the FAA.
“Term” means the “Period of Cover” of the PureSolution Fleet Management Program as set forth in Article
2
of Appendix 5.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
“Terms and Conditions” means the United Technologies Corporation Standard Terms and Conditions of Sale of Goods and Services, attached hereto as Appendix 21, which govern all transactions under this Agreement.
“Training Assistance Credit” represents, collectively, the credits provided by Pratt & Whitney to Spirit as described in Section 3.4
of this Agreement.
“Unit Base Price” means the respective Pratt & Whitney unit base price set forth in Article
4
, expressed in United States Dollars for a January 2012delivery.
“United States Prime Rate” means the base rate on corporate loans posted by at least seventy-five percent (75%) of the nation’s thirty (30) largest banks then in effect and listed in the eastern print edition of The Wall Street Journal.
“UTF” means UT Finance Corporation, a wholly-owned subsidiary of United Technologies Corporation and an affiliate of Pratt & Whitney.
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 2
PUREPOWER
®
PW1100G-JM ENGINE PURCHASE SUPPORT AGREEMENT
AIRCRAFT AND SPARE ENGINE DELIVERY SCHEDULE
|
|
|
|
|
|
|
|
|
SPIRIT FIRM AIRCRAFT
|
|
AIRLINE
|
AIRCRAFT MODEL
|
QUANTITY OF AIRCRAFT
|
ENGINE MODEL
|
DELIVERY DATE
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
|
|
|
|
|
SPIRIT FIRM AIRCRAFT
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
|
SPIRIT
|
*****
|
1
|
*****
|
*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
|
|
|
|
|
|
|
|
SPIRIT PW1100G-JM SPARE ENGINES
|
|
AIRLINE
|
QUANTITY OF ENGINES
|
ENGINE MODEL
|
DELIVERY DATE
|
|
SPIRIT
|
1
|
*****
|
*****
|
|
SPIRIT
|
1
|
*****
|
*****
|
|
SPIRIT
|
1
|
*****
|
*****
|
|
SPIRIT
|
1
|
*****
|
*****
|
|
SPIRIT
|
1
|
*****
|
*****
|
|
SPIRIT
|
1
|
*****
|
*****
|
|
SPIRIT
|
1
|
*****
|
*****
|
|
SPIRIT
|
1
|
*****
|
*****
|
|
SPIRIT
|
1
|
*****
|
*****
|
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 3
PUREPOWER
®
PW1100G-JM ENGINE PURCHASE SUPPORT AGREEMENT
PW1100G-JM ENGINE SPECIFICATION
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 4
PUREPOWER
®
PW1100G-JM ENGINE PURCHASE SUPPORT AGREEMENT
PW1100G‑JM ENGINE PRICE ESCALATION FORMULA
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 5
PUREPOWER
®
PW1100G-JM ENGINE *TYPE OF AGREEMENT* AGREEMENT
PURESOLUTION
SM
FLEET MANAGEMENT PROGRAM
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 6
PUREPOWER® PW1100G-JM ENGINE PURCHASE AND SUPPORT AGREEMENT
PW1100G‑JM ENGINE PRODUCT SUPPORT PLAN
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 7
PUREPOWER® PW1100G-JM ENGINE PURCHASE AND SUPPORT AGREEMENT
WARRANTIES AND SERVICE POLICIES FOR THE PW1100G‑JM ENGINE
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 8
PUREPOWER® PW1100G-JM ENGINE PURCHASE AND SUPPORT AGREEMENT
GUARANTEE PLAN DEFINITIONS AND CONDITIONS
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 9
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 10
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 11
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 12
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 13
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 14
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 15
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 16
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 17
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 18
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 19
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 20
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Appendix 21
PUREPOWER® PW1100G-JM ENGINE PURCHASE AND SUPPORT AGREEMENT
TERMS AND CONDITIONS OF SALE OF GOODS AND SERVICES
*****
*****Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.
Exhibit 31.1
CERTIFICATION
I, B. Ben Baldanza, President and Chief Executive Officer of Spirit Airlines, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Spirit Airlines, Inc. (the "Registrant");
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 described 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.
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Date: October 30, 2013
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/s/ B. Ben Baldanza
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B. Ben Baldanza
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President and Chief Executive Officer
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Exhibit 31.2
CERTIFICATION
I, Edward Christie, Senior Vice President and Chief Financial Officer of Spirit Airlines, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Spirit Airlines, Inc. (the "Registrant");
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 described 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 Company’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.
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Date: October 30, 2013
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/s/ Edward M. Christie
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Edward M. Christie
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Senior Vice President and
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Chief Financial Officer
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Exhibit 32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. § 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Spirit Airlines, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:
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(i.)
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the Quarterly Report on Form 10-Q of the Company for the quarter ended
September 30, 2013
(the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii.)
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the information contained in the Report fairly present, in all material respects, the financial condition and results of operations of the Company.
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Date: October 30, 2013
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/s/ B. Ben Baldanza
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B. Ben Baldanza
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President and Chief Executive Officer
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Exhibit 32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. § 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Spirit Airlines, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:
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(i.)
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the Quarterly Report on Form 10-Q of the Company for the quarter ended
September 30, 2013
(the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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(ii.)
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the information contained in the Report fairly present, in all material respects, the financial condition and results of operations of the Company.
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Date: October 30, 2013
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/s/ Edward Christie
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Edward Christie
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Senior Vice President and
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Chief Financial Officer
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