Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________

FORM 10-Q

____________________


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 001-34584

____________________

HARBOR DIVERSIFIED, INC.

(Exact name of registrant as specified in its charter)

____________________


Delaware						13-3697002
(State of incorporation)						(I.R.S. Employer Identification No.)

W6390 Challenger Drive, Suite 203 Appleton, WI						54914-9120
(Address of principal executive offices)						(Zip Code)

(920) 749-4188

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

____________________

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: None.

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

None

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

As of November 7, 2023, the registrant had 43,319,412 shares of common stock, $0.01 par value per share, outstanding, and 4,000,000 shares of Series C Convertible Redeemable Preferred Stock, $0.01 par value per share, outstanding, which are immediately convertible into an additional 16,500,000 shares of common stock. The registrant does not have any class of securities registered pursuant to Section 12(b) or Section 12(g) of the Exchange Act.

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HARBOR DIVERSIFIED, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023

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			Page
Cautionary Note Regarding Forward-Looking Statements			(i)
Part I. Financial Information			1
Item 1. Financial Statements			1
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Stockholders’ Equity			3
Condensed Consolidated Statements of Cash Flows			5
Condensed Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures about Market Risk			35
Item 4. Controls and Procedures			35
Part II. Other Information			36
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			49
Item 3. Defaults Upon Senior Securities			49
Item 4. Mine Safety Disclosure			49
Item 5. Other Information			50
Item 6. Exhibits			50
Signatures			51

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2023 (this “Quarterly Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements are subject to considerable risks and uncertainties. Forward-looking statements relate to matters such as our industry, business plans and strategies, material contracts, key relationships, consumer behavior, flight schedules and completed flight activity, revenues, expenses, margins, profitability, tax liability, capital expenditures, liquidity, capital resources, outcome of legal proceedings, and other business and operating information. Forward-looking statements include all statements that are not statements of historical facts, and can be identified by words such as “anticipate,” “approximately,” “assume,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and similar terms and phrases in this Quarterly Report. All of our forward-looking statements include assumptions underlying or relating to such statements that may cause actual results to differ materially from those that we are currently expecting and are subject to considerable risks and uncertainties, including without limitation:

•the supply of qualified pilots and mechanics to the airline industry, attrition, and the increasing costs associated with hiring, training and retaining qualified pilots and mechanics;

•the dependence of the business of our subsidiary, Air Wisconsin Airlines LLC (“Air Wisconsin”), on a capacity purchase agreement (the “American capacity purchase agreement”) with American Airlines, Inc. (“American”), since all Air Wisconsin’s aircraft have been withdrawn from the capacity purchase agreement (the “United capacity purchase agreement”) with United Airlines, Inc. (“United”), which agreement expired in early June 2023;

•the possibility that Air Wisconsin receives an unfavorable result from the arbitration initiated by United in October 2022 related to certain amounts owed to Air Wisconsin pursuant to the United capacity purchase agreement or that United prevails on its claim that Air Wisconsin wrongfully terminated the agreement;

•aircraft and engine maintenance costs;

•the amounts Air Wisconsin is paid or reimbursed under the American capacity purchase agreement or any future agreement may be less than the costs incurred, particularly as labor costs increase in response to pilot and mechanic shortages;

•the possibility that American could provide Air Wisconsin with inefficient flight schedules, or American could change the expected utilization of Air Wisconsin’s aircraft under the American capacity purchase agreement;

•the extent to which Air Wisconsin’s current growth opportunities and strategic operating plan are restricted based on factors impacting the airline industry;

•the significant portion of Air Wisconsin’s workforce that is represented by labor unions and the terms of its collective bargaining agreements;

•Air Wisconsin’s reliance on only one aircraft type, aircraft manufacturer and engine manufacturer, and the potential issuance of operating restrictions on this aircraft or engine type or occurrence of any aviation incident involving either this aircraft or engine type;

•Air Wisconsin’s ability to obtain additional financing on acceptable terms and when required;

•developments associated with fluctuations in the economy, including increased inflation, which may negatively impact our costs, create additional wage pressures, and impact the financial stability of Air Wisconsin’s major airline partner;

•the impact of losing key personnel or inability to attract additional qualified personnel;

•the negative impact of information technology security breaches and other such infrastructure disruptions on Air Wisconsin’s operations; and

•the duration and spread of infectious diseases, and the related impact on the business, results of operations, financial condition and liquidity of Air Wisconsin and American in particular, and the airline industry in general.

The forward-looking statements contained in this Quarterly Report are based on management’s current plans, estimates and expectations in light of information currently available to us, and they are subject to uncertainty and changes in circumstances. Actual results may differ materially from our expectations due to changes in global, regional or local

(i)

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political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control, as well as the other factors described in the section entitled “Risk Factors” in this Quarterly Report and in the other reports we file with the Securities and Exchange Commission (“SEC”).

Additional factors or events that could cause our actual results to differ may also emerge from time to time, and it is not possible for us to predict all of them. Should one or more of these risks or uncertainties materialize, or should any of our assumptions or estimates prove to be incorrect, our actual results may be different from, and potentially materially worse than, what we may have expressed or implied by these forward-looking statements. Comparisons of results for any current or prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

Investors should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us in this Quarterly Report speaks only as of the date hereof. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by applicable securities laws. We qualify all of our forward-looking statements by these disclaimers.

(ii)

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Part I. Financial Information

Item 1. Financial Statements

Harbor Diversified, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (in thousands, except shares and par value)


	September 30, 2023		December 31, 2022
	(unaudited)
Assets
Current Assets
Cash and cash equivalents	$	15,839	$	33,333
Restricted cash	707		849
Marketable securities	136,562		153,827
Receivables, net	40,391		40,341
Notes receivable	21,093		19,452
Spare parts and supplies, net	5,029		4,579
Contract costs	108		143
Contract assets, net	1,618		—
Prepaid expenses and other	2,594		3,732
Total Current Assets	223,941		256,256
Property and Equipment
Flight property and equipment	265,636		263,970
Ground property and equipment	8,596		8,055
Less accumulated depreciation and amortization	(190,606)		(169,766)
Net Property and Equipment	83,626		102,259
Other Assets
Operating lease right-of-use asset	9,708		13,480
Intangibles	5,300		5,300
Long-term investments	4,275		4,275
Long-term contract costs	613		—
Other	969		1,077
Total Other Assets	20,865		24,132
Total Assets	$	328,432	$	382,647
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	14,295	$	20,165
Accrued payroll and employee benefits	13,235		12,989
Current portion of operating lease liability	3,649		5,091
Other accrued expenses	166		137
Contract liabilities	—		1,985
Deferred revenues	—		16,561
Current portion of long-term debt (stated principal amount of $48,600 at September 30, 2023 and $3,500 at December 31, 2022)	52,554		9,154
Total Current Liabilities	83,899		66,082
Other Long-Term Liabilities
Long-term debt (stated principal amount of $0 at September 30, 2023 and $48,600 December 31, 2022)	—		52,068
Long-term promissory note	4,275		4,275
Deferred tax liability	4,424		7,990
Long-term operating lease liability	3,659		5,849
Long-term contract liabilities, net	2,792		—
Other	1,755		1,977
Total Long-Term Liabilities	16,905		72,159
Total Liabilities	100,804		138,241
Commitments and Contingencies (Note 8)
Mezzanine Equity (Note 10)
Series C Convertible Redeemable Preferred Stock, $0.01 par value per share, 4,000,000 shares authorized, issued and outstanding at September 30, 2023 and December 31, 2022	13,200		13,200
Stockholders’ Equity
Common Stock, $0.01 par value per share, 100,000,000 shares authorized, 55,481,140 shares issued at September 30, 2023 and December 31, 2022, 43,456,071 shares outstanding at September 30, 2023 and 45,219,737 shares outstanding at December 31, 2022	555		555
Additional paid-in capital	284,753		285,668
Retained deficit	(52,009)		(40,034)
Treasury stock	(18,871)		(14,983)
Total Stockholders’ Equity	214,428		231,206
Total Liabilities and Stockholders’ Equity	$	328,432	$	382,647

See accompanying condensed notes to unaudited condensed consolidated financial statements.

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Harbor Diversified, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (in thousands, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(unaudited)				(unaudited)
Operating Revenues
Contract revenues	$	49,958	$	68,389	$	159,965	$	213,280
Contract services and other	98		21		295		35
Total Operating Revenues	50,056		68,410		160,260		213,315
Operating Expenses
Payroll and related costs	29,444		26,801		89,165		81,096
Aircraft fuel and oil	115		49		438		134
Aircraft maintenance, materials and repairs	11,175		17,494		48,393		48,331
Other rents	1,459		1,617		4,527		4,887
Depreciation, amortization and obsolescence	6,398		6,639		19,125		19,957
Purchased services, legal and other	6,537		3,310		18,511		10,589
Total Operating Expenses	55,128		55,910		180,159		164,994
(Loss) Income from Operations	(5,072)		12,500		(19,899)		48,321
Other Income (Expense)
Interest income	1,540		1,732		4,335		3,898
Interest expense	—		—		(12)		—
Loss on marketable securities	(955)		(3,749)		(10)		(9,774)
Gain on extinguishment of debt	—		53		70		53
Other, net	—		(7)		(14)		(10)
Total Other Income (Expense)	585		(1,971)		4,369		(5,833)
Net (Loss) Income Before Taxes	(4,487)		10,529		(15,530)		42,488
Income Tax (Benefit) Expense	(799)		2,507		(3,555)		10,122
Net (Loss) Income	(3,688)		8,022		(11,975)		32,366
Preferred stock dividends	358		198		915		594
Net (loss) income available to common stockholders	$	(4,046)	$	7,824	$	(12,890)	$	31,772
Basic (Loss) Earnings per share	$	(0.09)	$	0.17	$	(0.29)	$	0.68
Diluted (Loss) Earnings per share	$	(0.09)	$	0.13	$	(0.29)	$	0.50
Weighted average common shares:
Basic	43,654		45,776		44,299		46,637
Diluted	43,654		62,276		44,299		63,268

See accompanying condensed notes to unaudited condensed consolidated financial statements.

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Harbor Diversified, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (in thousands)


	Mezzanine Equity - Series C Convertible Redeemable Preferred Stock			Common Stock
	Shares	Amount		Shares	Treasury Stock	Amount		Additional Paid-In Capital		Retained Deficit		Cost of Treasury Stock		Total Stockholders’ Equity
Balance, December 31, 2022	4,000	$	13,200	45,220	10,261	$	555	$	285,668	$	(40,034)	$	(14,983)	$	231,206
Net loss	—	—		—	—	—				(11,975)		—		(11,975)
Preferred stock dividends	—	—		—	—	—		(915)		—		—		(915)
Treasury stock purchases	—	—		(1,764)	1,764	—		—		—		(3,888)		(3,888)
Balance, September 30, 2023 (unaudited)	4,000	$	13,200	43,456	12,025	$	555	$	284,753	$	(52,009)	$	(18,871)	$	214,428


	Mezzanine Equity - Series C Convertible Redeemable Preferred Stock			Common Stock
	Shares	Amount		Shares	Treasury Stock	Amount		Additional Paid-In Capital		Retained Deficit		Cost of Treasury Stock		Total Stockholders’ Equity
Balance, June 30, 2023	4,000	$	13,200	43,830	11,651	$	555	$	285,111	$	(48,321)	$	(18,055)	$	219,290
Net loss	—	—		—	—	—				(3,688)		—		(3,688)
Preferred stock dividends	—	—		—	—	—		(358)		—		—		(358)
Treasury stock purchases	—	—		(374)	374	—		—		—		(816)		(816)
Balance, September 30, 2023 (unaudited)	4,000	$	13,200	43,456	12,025	$	555	$	284,753	$	(52,009)	$	(18,871)	$	214,428

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Harbor Diversified, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (in thousands)


	Mezzanine Equity - Series C Convertible Redeemable Preferred Stock			Common Stock
	Shares	Amount		Shares	Treasury Stock	Amount		Additional Paid-In Capital		Retained Deficit		Cost of Treasury Stock		Total Stockholders’ Equity
Balance, December 31, 2021	4,000	$	13,200	53,316	2,165	$	555	$	287,429	$	(79,144)	$	(3,280)	$	205,560
Net income	—	—		—	—	—				32,366		—		32,366
Dividends	—	—		—	—	—		(594)		—		—		(594)
Cancellation of stock option	—	—		—	—	—		(969)		—		—		(969)
Treasury stock purchases	—	—		(7,664)	7,664	—		—		—		(10,733)		(10,733)
Balance, September 30, 2022 (unaudited)	4,000	$	13,200	45,652	9,829	$	555	$	285,866	$	(46,778)	$	(14,013)	$	225,630


	Mezzanine Equity - Series C Convertible Redeemable Preferred Stock			Common Stock
	Shares	Amount		Shares	Treasury Stock	Amount		Additional Paid-In Capital		Retained Deficit		Cost of Treasury Stock		Total Stockholders’ Equity
Balance, June 30, 2022	4,000	$	13,200	46,016	9,465	$	555	$	286,064	$	(54,800)	$	(13,214)	$	218,605
Net income	—	—		—	—	—				8,022		—		8,022
Dividends	—	—		—	—	—		(198)		—		—		(198)
Treasury stock purchases	—	—		(364)	364	—		—		—		(799)		(799)
Balance, September 30, 2022 (unaudited)	4,000	$	13,200	45,652	9,829	$	555	$	285,866	$	(46,778)	$	(14,013)	$	225,630

See accompanying condensed notes to unaudited condensed consolidated financial statements.

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Harbor Diversified, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (in thousands)


	Nine Months Ended September 30,
	2023		2022

	(unaudited)
Cash Flows from Operating Activities
Net (loss) income	$	(11,975)	$	32,366
Adjustments to reconcile net (loss) income to net cash (used) in/provided by operating activities:
Depreciation, amortization and obsolescence allowance	19,125		19,957
Amortization of contract costs	(1,654)		(3,314)
Amortization of engine overhauls	2,485		2,098
Deferred income taxes	(3,566)		(118)
Loss on disposition of property and equipment	219		62
Loss on marketable securities	10		9,774
Gain on extinguishment of debt	(70)		(53)
Changes in operating assets and liabilities:
Receivables, net	(51)		(25,850)
Notes receivable	(1,641)		(12,747)
Spare parts and supplies	(450)		(149)
Prepaid expenses and other	471		3,699
Operating lease right-of-use asset	140		41
Accounts payable	(5,870)		(3,467)
Accrued payroll and employee benefits	246		(1,828)
Other accrued expenses	29		81
Long-term deferred revenue	—		(9,046)
Contract liabilities	843		(2,534)
Deferred revenues	(16,561)		(13,474)
Income taxes payable	—		4,633
Other long-term liabilities	(222)		35
Net Cash (Used) in/Provided by Operating Activities	(18,492)		166
Cash Flows from Investing Activities
Additions to property and equipment	(3,017)		(2,963)
Proceeds on disposition of property and equipment	19		10
Purchase of marketable securities	(2,745)		(1,921)
Sale of marketable securities	20,000		—
Net Cash Provided by/(Used) in Investing Activities	14,257		(4,874)
Cash Flows from Financing Activities
Repayment of long-term debt	(8,598)		(2,184)
Dividends paid on preferred stock	(915)		(594)
Cancellation of stock option	—		(969)
Repurchased stock	(3,888)		(10,733)
Net Cash Used in Financing Activities	(13,401)		(14,480)
Decrease in Cash, Cash Equivalents and Restricted Cash	(17,636)		(19,188)
Cash, Cash Equivalents and Restricted Cash, beginning of period	34,182		38,619
Cash, Cash Equivalents and Restricted Cash, end of period	$	16,546	$	19,431

See accompanying condensed notes to unaudited condensed consolidated financial statements.

See Note 11 for supplemental cash flow information.

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Harbor Diversified, Inc. and Subsidiaries Condensed Notes to Condensed Consolidated Financial Statements (in thousands, except shares and per share amounts) (Unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements (the "condensed consolidated financial statements") have been prepared, without audit, in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Harbor Diversified, Inc. (“Harbor”) and its subsidiaries (collectively, the “Company”).

Harbor is a non-operating holding company that is the parent of a consolidated group of subsidiaries, including AWAC Aviation, Inc. (“AWAC”), which is the sole member of Air Wisconsin Airlines LLC (“Air Wisconsin”), which is a regional air carrier. Harbor is also the direct parent of three other subsidiaries: (1) Lotus Aviation Leasing, LLC (“Lotus”), which leases flight equipment to Air Wisconsin, (2) Air Wisconsin Funding LLC, which provides flight equipment financing to Air Wisconsin, and (3) Harbor Therapeutics, Inc., which is a non-operating entity with no material assets.

The condensed consolidated financial statements have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly in all material respects the financial condition and results of operations for the interim periods presented. All adjustments are of a normal recurring nature, unless otherwise disclosed. All of the dollar and share amounts set forth in these condensed notes to condensed consolidated financial statements are presented in thousands except per share and par value amounts.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Harbor’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on April 3, 2023 (“2022 Annual Report”). As a result of numerous factors, including those discussed throughout this Quarterly Report, the results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for any other reporting period.

Description of Operations

The Company has principal lines of business focused on (1) providing regional air services through Air Wisconsin (airline business), (2) acquiring flight equipment for the purpose of leasing the equipment to Air Wisconsin, and (3) providing flight equipment financing to Air Wisconsin. Additionally, Air Wisconsin is continuing to explore aircraft leasing opportunities.

The airline business is operated entirely through Air Wisconsin, which is an independent regional air carrier. For the three months ended September 30, 2023, Air Wisconsin was engaged in the business of providing scheduled passenger service for American Airlines, Inc. ("American") under a capacity purchase agreement ("American capacity purchase agreement") which was entered into in August 2022. Prior to early June 2023, Air Wisconsin was also engaged in the business of providing scheduled passenger service for United Airlines, Inc. (“United”) under a capacity purchase agreement (“United capacity purchase agreement”) which was entered into in February 2017 and which terminated in early June 2023. Air Wisconsin has provided scheduled passenger service for American since March 1, 2023. Pursuant to the American capacity purchase agreement, Air Wisconsin agreed to provide up to 60 CRJ-200 regional jet aircraft for regional airline services for American. The American capacity purchase agreement also provides that the parties may discuss the possibility of adding CRJ-700 regional jets to Air Wisconsin’s fleet for the purpose of providing regional airline services under the agreement, but neither party is currently under any obligation with respect to these aircraft.

American became Air Wisconsin’s sole airline partner when all its aircraft were removed from United’s flying operations in early June 2023. As of September 30, 2023, Air Wisconsin had 45 aircraft in service for American under the American capacity purchase agreement.

For additional information, refer to Note 3, Capacity Purchase Agreements with United and American.

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Contract Revenues

For the three and nine months ended September 30, 2023, approximately 0.1% and 50.1%, respectively, of the Company’s operating revenues were derived from operations associated with the United capacity purchase agreement and approximately 99.7% and 49.7%, respectively, of the Company’s operating revenues were derived from operations associated with the American capacity purchase agreement.

In performing an analysis of the United capacity purchase agreement and the American capacity purchase agreement within the framework of Accounting Standards Update (“ASU”) No. 2016-02, Leases (“Topic 842”) and Financial Accounting Standards Board (“FASB”) ASU No. 606, Revenue from Contracts with Customers (“Topic 606”), the Company determined that a portion of the payments it receives under the capacity purchase agreements that is designed to reimburse Air Wisconsin for use of a certain number of aircraft, which is referred to as “right of use,” is considered lease revenue. All other revenue received by Air Wisconsin under the capacity purchase agreements is considered non-lease revenue. After consideration of the lease and non-lease components, within the context of Topic 842, the Company determined the non-lease component to be the predominant component of each capacity purchase agreement and elected a practical expedient to not separate the lease and non-lease components. Therefore, all compensation received by Air Wisconsin pursuant to the United capacity purchase agreement and the American capacity purchase agreement has been accounted for under Topic 606.

The Company has recognized revenue under each capacity purchase agreement over time as services are provided. Under each agreement, Air Wisconsin is entitled to receive a fixed rate for each departure and block hour (measured from takeoff to landing, including taxi time), and a fixed amount per covered aircraft per day (subject to Air Wisconsin’s ability to meet certain block hour utilization thresholds), in each case subject to annual increases during the term of the agreement. Air Wisconsin’s performance obligation is met and revenue is recognized over time, which is then reflected in contract revenues. Each agreement also provides for the reimbursement to Air Wisconsin of certain direct operating expenses, such as certain insurance premiums and property taxes.

Prior to the termination of the United capacity purchase agreement in early June 2023, United made provisional cash payments to Air Wisconsin during each month of service based on projected flight schedules. These provisional cash payments were then subsequently reconciled with United based on actual completed flight activity. As of the date of this filing, these payments were reconciled through June 2023, the last month of United operations. As of September 30, 2023, Air Wisconsin believes, but United disputes, that United owes Air Wisconsin $30,149, of which $29,509 is recorded in receivables, net on the condensed consolidated balance sheets. For additional information, refer to Note 3, Capacity Purchase Agreements with United and American and Note 8, Commitments and Contingencies.

American makes provisional cash payments to Air Wisconsin during each month of service based on projected flight schedules. These provisional cash payments are subsequently reconciled with American based on actual completed flight activity. As of the date of this filing, payments through September 2023 have been reconciled. As of September 30, 2023, American owed Air Wisconsin approximately $608, which is recorded in receivables, net, on the condensed consolidated balance sheets.

Prior to the termination of the United capacity purchase agreement in early June 2023, Air Wisconsin was eligible to receive incentive payments, or was required to pay penalties, upon the achievement of, or failure to achieve, certain performance criteria primarily based on flight completion, on-time performance, and customer satisfaction ratings. The incentives were defined in the agreement, and performance was measured on a monthly basis. At the end of each month during the term of the agreement, Air Wisconsin calculated the incentives achieved, or penalties payable, during that period and recognized revenue accordingly, subject to the variable constraint guidance under Topic 606. Final reconciliations have been completed with United through June 2023. Air Wisconsin has received net payments of $(6) and $1,236 for the three and nine months ended September 30, 2023, respectively, as compared to $2,137 and $5,443 for the three and nine months ended September 30, 2022, respectively. As of September 30, 2023, Air Wisconsin had no amount recorded as part of receivables, net, on the condensed consolidated balance sheets related to net incentive amounts. As of December 31, 2022, Air Wisconsin recorded $2,307 as part of receivables, net, in the condensed consolidated balance sheets related to net incentive amounts.

Commencing in September 2023, Air Wisconsin became eligible under the American capacity purchase agreement to receive bonus payments, and may be required to pay rebates, upon the achievement of, or failure to achieve, certain performance criteria primarily based on flight completion, on-time performance, and customer satisfaction ratings. The bonus and rebate amounts are defined in the agreement, and performance will be measured on a monthly or quarterly basis. At the end of each month or quarter, Air Wisconsin will calculate the bonus amounts achieved, or rebates payable, during that period and recognize revenue accordingly, subject to the variable constraint guidance under Topic 606. As of

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September 30, 2023, Air Wisconsin had not recorded any bonus or rebate amounts under the American capacity purchase agreement.

Under the United capacity purchase agreement, Air Wisconsin was entitled to receive a fixed amount per aircraft per day for each month during the term of the agreement. In accordance with GAAP, the Company recognized revenue related to the fixed payments on a proportional basis taking into account the number of flights actually completed in that period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement. Air Wisconsin deferred fixed revenues between April 2020 and June 2021 due to the significant decrease in its completed flights as a result of the COVID-19 pandemic. Beginning in July 2021, due to an increase in completed flights and based on projected future completed flight activity, Air Wisconsin began reversing this deferral of fixed revenues, and it continued to do so until the termination of the agreement in early June 2023. Accordingly, during the three and nine months ended September 30, 2023, Air Wisconsin recognized $0 and $16,561 of fixed revenues that were previously deferred, respectively, compared to a recognition of $5,180 and $22,548 of fixed revenues in the three and nine months ended September 30, 2022, respectively. As of September 30, 2023 and December 31, 2022, deferred fixed revenues in the amount of $0 and $16,561, respectively, were recorded as part of deferred revenues on the condensed consolidated balance sheets.

Under the United capacity purchase agreement, Air Wisconsin also recognized decreased non-refundable upfront fee revenues and increased fulfillment costs, both of which were amortized over the remaining term of the United capacity purchase agreement in proportion to the number of flights completed in the period relative to the number of flights expected to be completed in subsequent periods. During the three and nine months ended September 30, 2023, Air Wisconsin recorded $0 and $1,335 of revenue from upfront fees, respectively, and $0 and $143 of fulfillment costs, respectively, compared to $932 and $3,314 in revenue from upfront fees, respectively, and $100 and $355 of fulfillment costs for the three and nine months ended September 30, 2022, respectively. As of September 30, 2023 and December 31, 2022, deferred upfront fee revenue in the amount of $0 and $1,335, respectively, is recorded as part of contract liabilities on the condensed consolidated balance sheets.

Under the American capacity purchase agreement, Air Wisconsin is entitled to receive a fixed amount per aircraft per day for each month during the term of the agreement based on a formula which takes into account pilot availability for any given month. Air Wisconsin will recognize this revenue related to the specific flight activity for the month in which the flights occur.

Under the American capacity purchase agreement, Air Wisconsin is also entitled to be reimbursed for certain startup costs ("non-refundable upfront fee revenue"), such as livery changes to the aircraft, to prepare the aircraft for American flight services. Through September 30, 2023, Air Wisconsin had incurred $3,998 in reimbursable costs, and it estimates that it will incur an additional $602 in reimbursable costs over the term of the American capacity purchase agreement. In accordance with GAAP, the Company will recognize revenue related to the total estimated non-refundable upfront fee revenue of $4,600 on a proportional basis taking into account the number of flights actually completed in the period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement. Accordingly, during the three and nine months ended September 30, 2023, Air Wisconsin recognized $193 and $319 of non-refundable upfront fee revenues, respectively, compared to a recognition of $0 of non-refundable upfront fee revenues in the three and nine months ended September 30, 2022. As of September 30, 2023 and December 31, 2022, Air Wisconsin deferred $3,680, and $0, respectively, in non-refundable upfront fee revenues under the American capacity purchase agreement. Air Wisconsin’s deferred revenues related to the non-refundable upfront fee revenues under the American capacity purchase agreement will adjust over the remaining contract term, based on the actual expenses incurred that will be reimbursed and recognized based on the number of flights actually completed in the period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement. As of September 30, 2023 and December 31, 2022, deferred non-refundable upfront fee revenues in the amount of $641 and $0, respectively, were netted as part of short-term contract assets, and $3,039 and $0, respectively, were recorded as part of long-term contract liabilities on the condensed consolidated balance sheets.

As noted above, Air Wisconsin incurred certain startup costs ("fulfillment costs") prior to the start of flying operations for American on March 1, 2023. These costs included changes to the livery, fuel costs, and certain training expenses. The total fulfillment costs incurred were $774. These costs will be amortized on a proportional basis taking into account the number of flights actually completed in the period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement. For the three and nine months ended September 30, 2023, Air Wisconsin recorded $33 and $54, respectively, and $0 for the three and nine months ended September 30, 2022 for amortization expense related to fulfillment costs. As of September 30, 2023 and December 31, 2022, fulfillment costs of $108 and $0, respectively, are recorded as part of short-term contract costs, and $613 and $0, respectively, are recorded as part of long-term contract costs on the condensed consolidated balance sheets.

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Under the American capacity purchase agreement, Air Wisconsin will also receive a monthly support fee and be reimbursed for heavy maintenance expenses based on the fixed covered per aircraft per day rate over the term of the agreement. In addition, amendments to the American capacity purchase agreement entered into by Air Wisconsin and American in February 2023 and November 2023 ("Amendment No. 1" and "Amendment No. 3", respectively) provided for a one-time payment to assist with increased costs related to pilot compensation and revised compensation rates assessed under the agreement from 2023 to 2028 to assist Air Wisconsin with pilot compensation and retention.. In accordance with GAAP, the Company recognizes revenue related to the monthly support fee, heavy maintenance revenue, and one-time pilot compensation assistance payment on a proportional basis taking into account the number of flights actually completed in the period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement. Accordingly, during the three and nine months ended September 30, 2023, Air Wisconsin recognized $1,946 and $3,206, respectively, of revenue related to the one-time assistance payment, the estimated monthly support fee and the heavy maintenance revenues, compared to $0 for the three and nine months ended September 30, 2022. As of September 30, 2023 and December 31, 2022, revenues related to the monthly support fee and anticipated heavy maintenance reimbursements in the amounts of $2,259 and $0, respectively, were recorded as part of short-term contract assets, and $247 and $0, respectively, were netted in long-term contract liabilities on the condensed consolidated balance sheets. Air Wisconsin’s contract liabilities related to the one-time assistance payment and estimated monthly support fee and heavy maintenance revenues under the American capacity purchase agreement will adjust over the remaining contract term, based on the actual reimbursement of the monthly support fee and heavy maintenance revenues and on the number of flights actually completed in each reporting period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement. For additional information regarding Amendment No. 3, refer to Note 14, Subsequent Events, and Part II, Item 5, Other Information, in this Quarterly Report.

As part of an October 2020 amendment to the United capacity purchase agreement (“CPA Amendment”), United made a cash settlement payment of $670 and issued a note receivable to Air Wisconsin in the amount of $11,048, of which $4,410 was deferred as of December 31, 2020, with the remaining portion recognized in proportion to the number of flights completed in subsequent periods through the end of the wind-down period. In October 2021, in accordance with the CPA Amendment, Air Wisconsin received $294 from United for the opening of a crew base, of which $73 was deferred as of December 31, 2021, with the remaining portion recognized in proportion to the number of flights completed in subsequent periods through the end of the wind-down period. For the three and nine months ended September 30, 2023, Air Wisconsin recorded $0 and $649 of revenue related to these items, respectively, compared to $453 and $1,611 of revenue related to these items for the three and nine months ended September 30, 2022, respectively. As of September 30, 2023, there was no deferred CPA Amendment revenue recorded as part of contract liabilities on the condensed consolidated balance sheets.

The timing of the recognition under the American capacity purchase agreement of non-refundable upfront fee revenue, fulfillment costs, monthly support fee revenues, heavy check maintenance revenues and one-time support fee revenues in future periods is subject to considerable uncertainty due to a number of factors, including the estimated revenue amounts to be received and the number of flights actually completed in the period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement. The amount of revenues recognized for the three and nine months ended September 30, 2023, that were related to the United capacity purchase agreement and previously recorded as contract liabilities was $0 and $1,985, respectively. During the three and nine months ended September 30, 2023, there were no revenues recognized that were previously recorded as contract liabilities related to the American capacity purchase agreement.

The CPA Amendment provided, among other things, for the payment or accrual of certain amounts by United to Air Wisconsin based on certain scheduling benchmarks. In conjunction with the significant reduction in departures and block hours resulting from the COVID-19 pandemic in 2020, and consistent with the terms of the CPA Amendment, management determined that, from an accounting perspective, a new performance obligation was created by United, requiring Air Wisconsin to stand ready to deliver flight services. Air Wisconsin determined, using the expected cost plus a margin method, that the United “stand ready” rate represented the relative stand-alone selling price of the performance obligation. The stand ready performance obligation was recognized over time on a straight-line basis based on the number of unscheduled block hours below a minimum threshold at the stand ready rate as determined in a manner consistent with the CPA Amendment. For the three and nine months ended September 30, 2023, Air Wisconsin recorded $0 and $1,641, respectively, in revenue related to this performance obligation compared to $5,138 and $12,746 for the three and nine months ended September 30, 2022, respectively. Under the CPA Amendment, United was required to accrue this amount and, upon request by Air Wisconsin, deliver a note evidencing this amount each quarter. Therefore, this amount is recorded in notes receivable on the condensed consolidated balance sheets. The notes receivable contain a significant financing component and any interest income is separately reported on the condensed consolidated statements of operations. United has disputed that it owes these amounts in respect of certain quarters and has refused to deliver notes for those quarters. On November 4, 2022, United prepaid to Air Wisconsin $50,126 to satisfy all of the outstanding, undisputed notes receivable, including all accrued interest, pursuant to the CPA Amendment in respect of the period from the second quarter of 2020 through the third quarter of 2021 and the $11,048 note receivable described above. The unpaid disputed notes came due on

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February 28, 2023. As of September 30, 2023, the principal amount of the unpaid disputed notes totaled $21,093. Prior to February 28, 2023, the unpaid disputed notes bore interest at the rate of 4.5% per annum. After February 28, 2023, the notes bear interest at the default interest rate of 12% per annum. As of September 30, 2023, interest receivable on the disputed notes, calculated at the pre-default contractual rate without any default interest, totaled $1,034 and is recorded in receivables, net, on the condensed consolidated balance sheets. For additional information, refer to Note 8, Commitments and Contingencies, in this Quarterly Report.

Other Revenues

Other revenues primarily consist of the sales of parts to other airlines and aircraft lease payments. These other revenues are immaterial in all periods presented. The transaction price for these other revenues generally is fair market value.

Cash and Cash Equivalents

Money market funds and investments and deposits with an original maturity of three months or less when acquired are considered cash and cash equivalents.

Restricted Cash

As of September 30, 2023 and December 31, 2022, the Company had a restricted cash balance of $707 and $849, respectively. A portion of the balance secures a credit facility for the issuance of letters of credit guaranteeing the performance of Air Wisconsin’s obligations under certain lease agreements, airport agreements and insurance policies. The remaining portion is cash held for the repurchase of shares under Harbor’s stock repurchase program. For additional information, refer to Note 8, Commitments and Contingencies and Note 13, Stock Repurchase Program, in this Quarterly Report.

Receivables, net

Subsequent to June 30, 2023, the Company changed the description of Accounts receivable, net to Receivables, net on its condensed consolidated balance sheets. The change did not result in the reclassification of items presented in prior periods. As of September 30, 2023 and December 31, 2022, the Company had a receivables, net balance of $40,391 and $40,341, respectively. The table below sets forth the major categories that make up the balances:


	September 30, 2023	December 31, 2022
Trade receivables	31,151	30,019
Insurance and warranty claim receivables	3,385	2,710
Federal and state tax receivables	3,022	3,901
Other industry related receivables	2,843	3,729
Allowance for expected credit losses	(10)	(18)
Receivables, net	40,391	40,341

Marketable Securities

The Company’s equity security investments, consisting of exchange-traded funds and mutual funds, are recorded at fair value based on quoted market prices (Level 1) in marketable securities on the condensed consolidated balance sheets, in accordance with the guidance in ASC Topic 321, Investments-Equity Securities, with the change in fair value during the period included on the condensed consolidated statements of operations. As of September 30, 2023 and December 31, 2022, the fair value of the Company’s marketable securities was $136,562 and $153,827, respectively. For additional information, refer to Fair Value of Financial Instruments in this Note 1, in this Quarterly Report.

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The calculation of net unrealized gains and losses that relate to marketable securities held as of September 30, 2023 is as follows:


	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
Unrealized (losses) gains recognized during the period on equity securities held as of the end of the period	$	(925)	$	102
Plus: Net losses recognized during the period on equity securities sold during the period	(30)		(112)
Net losses recognized during the period on equity securities	$	(955)	$	(10)

The calculation of net unrealized gains and losses that relate to marketable securities held as of September 30, 2022 is as follows:


	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Unrealized losses recognized during the period on equity securities held as of the end of the period	$	(3,749)	$	(9,774)
Plus: Net gains (losses) recognized during the period on equity securities sold during the period	—		—
Net losses recognized during the period on equity securities	$	(3,749)	$	(9,774)

Property and Equipment

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


Assets	Depreciable Life	Current Residual Value
Aircraft	7 years	$	50
Spare engines	7 years	$	25
Rotable parts	7 years	10		%
Ground equipment	up to 10 years	0		%
Office equipment	up to 10 years	0		%
Leasehold improvements	Shorter of asset or lease life	0		%

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The table below sets forth the original cost of the Company’s fixed assets and accumulated depreciation or amortization as of the dates presented:


	September 30, 2023				December 31, 2022
Assets	Original Cost		Accumulated Depreciation/ Amortization		Original Cost		Accumulated Depreciation/ Amortization
Aircraft	$	70,779	$	47,655	$	70,089	$	40,544
Spare engines	164,706		117,372		163,708		103,834
Rotable parts	27,412		18,406		27,936		18,655
Ground equipment	2,850		2,217		2,718		2,063
Office equipment	4,692		4,331		4,519		4,218
Leasehold improvements	1,052		625		818		452
Total	$	271,491	$	190,606	$	269,788	$	169,766

The amounts in the table exclude construction in process of $2,741 and $2,237 at September 30, 2023 and December 31, 2022, respectively. Construction in process primarily relates to the cost of parts that are not capitalized until the parts are placed into service.

Air Wisconsin’s capitalized engine maintenance costs are amortized over their estimated useful life measured in remaining engine cycles to the next scheduled shop visit. Lotus’ engine maintenance costs are expensed.

Depreciation expense in the three and nine months ended September 30, 2023 was $6,365 and $18,928, respectively, compared to $6,224 and $18,656 for the three and nine months ended September 30, 2022, respectively, and is included in depreciation, amortization, and obsolescence in the accompanying condensed consolidated statements of operations.

Impairment of Long-Lived Assets and Indefinite-Lived Intangible Assets

The Company evaluates long-lived assets and indefinite-lived intangible assets for potential impairment and records impairment losses when events and circumstances indicate the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. Impairment losses are measured by comparing the fair value of the assets to their carrying amounts. In determining the need to record impairment charges, the Company is required to make certain estimates and assumptions regarding such things as the current fair market value of the assets and future net cash flows to be generated by the assets.

If there are subsequent changes to these estimates or assumptions, or if actual results differ from these estimates or assumptions, such changes could impact the financial statements in the future. The Company conducted a qualitative impairment assessment of its long-lived assets and indefinite-lived intangible assets and determined that no quantitative impairment tests were required to be performed as of September 30, 2023 and December 31, 2022. Air Wisconsin in the future may include aircraft other than the CRJ-200 as part of its flying operations. Such an event would likely lead Air Wisconsin to conduct quantitative tests for impairment of the CRJ-200 fleet and related assets.

Income Taxes

The Company utilizes the asset and liability method for accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based upon the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities, as measured by the current applicable tax rates. Deferred tax expense represents the result of changes in deferred tax assets and liabilities.

As required by the uncertain tax position guidance, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the condensed consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company has applied the uncertain tax position guidance to all tax positions for which the statute of limitations remains open.

The Company is subject to federal, state and local income taxes in the United States. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require the application of significant

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judgment. The Company is no longer subject to U.S. federal income tax examinations for the years prior to 2019. With a few exceptions, the Company is no longer subject to state or local income tax examinations for years prior to 2018. As of September 30, 2023, the Company had no outstanding tax examinations.

Concentration of Credit Risk and Customer Risk

Financial instruments that potentially expose the Company to a concentration of credit risk consist principally of cash and cash equivalents that are held by financial institutions in the United States and accounts receivable. The Company at times has had bank deposits in excess of the Federal Deposit Insurance Corporation insurance limit. The Company maintains its cash accounts with high credit quality financial institutions and, accordingly, the Company believes it has minimal credit risk with respect to these financial institutions. As of September 30, 2023, in addition to cash and cash equivalents of $15,839, the Company had $707 in restricted cash, which relates to a credit facility used for the issuance of cash collateralized letters of credit supporting Air Wisconsin’s obligations under certain lease agreements, airport agreements and insurance policies, as well as cash held for the repurchase of shares under Harbor’s stock repurchase program. Restricted cash includes amounts escrowed in an interest-bearing account that secures the credit facility. Since a significant portion of Air Wisconsin’s revenues has been derived from United and American, a significant portion of the receivables, net balance has been derived from United and American as well. For the three and nine months ended September 30, 2023, United and American made up $30,543 and $608 of the receivables, net balance of $40,391, respectively. As of December 31, 2022, United made up $29,770 of the receivables, net balance of $40,341.

Significant customers are those which represent more than 10% of the Company’s total revenue or receivables, net balance at each respective balance sheet date. Approximately 0.1% and 50.1% of the Company’s consolidated revenues for the three and nine months ended September 30, 2023, respectively, and 99.9% for both the three and nine months ended September 30, 2022, and a substantial portion of receivables, net and notes receivable at the end of the three and nine months ended September 30, 2022 were derived from the United capacity purchase agreement.

Air Wisconsin entered into the American capacity purchase agreement in August 2022 and commenced flying operations for American in March 2023. Approximately 99.7% and 49.7% of the Company’s consolidated revenues for the three and nine months ended September 30, 2023, respectively were from the American capacity purchase agreement. American became Air Wisconsin’s sole airline partner when all of Air Wisconsin’s aircraft were removed from United’s flying operations in early June 2023. After this time, substantially all of the Company’s revenues and receivables, net will be derived from the American capacity purchase agreement.

Neither United’s nor American’s obligations to pay Air Wisconsin the amounts required to be paid under the applicable capacity purchase agreement are collateralized.

For additional information, refer to Note 3, Capacity Purchase Agreements with United and American, in this Quarterly Report.

Estimates and Assumptions

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, restricted cash, marketable securities, receivables, net, long-term investments, accounts payable, and long-term debt. The Company believes the carrying amounts of these financial instruments, with the exception of marketable securities, are a reasonable estimate of their fair value because of the short-term nature of such instruments, or, in the case of long-term debt, because of fixed interest rates on such debt. Marketable securities are reported at fair value based on quoted market prices. Long-term investments are held-to-maturity debt securities and are reported at amortized cost.

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (that is, an exit price). Fair Value Measurement (“Topic 820”) establishes a three-tier fair value hierarchy, which prioritizes inputs used in fair value. The tiers are as follows:

Level 1 - Quoted market prices in active markets for identical assets or liabilities.

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Level 2 - Inputs other than Level 1 inputs that are either directly or indirectly observable.

Level 3 - Unobservable inputs developed using the Company’s estimates and assumptions, which reflect those that market participants would use.

The determination of where an asset or liability falls in the hierarchy requires significant judgment. The Company evaluates these determinations each reporting period, and it is possible that an asset or liability may be classified differently from year to year.

The tables below set forth the Company’s classification of marketable securities and long-term investments as of the dates presented:


	September 30, 2023
	Total		Level 1		Level 2		Level 3
Marketable securities – exchange-traded funds	$	110,992	$	110,992	$	—	$	—
Marketable securities – mutual funds	25,570		25,570		—		—
Long-term investments – bonds (see Note 6)	4,275		—		4,275		—
Total	$	140,837	$	136,562	$	4,275	$	—


	December 31, 2022
	Total		Level 1		Level 2		Level 3
Marketable securities – exchange-traded funds	$	109,178	$	109,178	$	—	$	—
Marketable securities – mutual funds	44,649		44,649		—		—
Long-term investments – bonds (see Note 6)	4,275		—		4,275		—
Total	$	158,102	$	153,827	$	4,275	$	—

Reclassification

Certain non-operating income amounts were previously recorded in other, net, on the condensed consolidated statements of operations in the amounts of $892 and $1,796 for the three and nine months ended September 30, 2022, respectively, have been reclassified to interest income to conform to the presentation for the three and nine months ended September 30, 2023, with no effect on net income. The reclassification relates to certain income received on the investments in marketable securities.

Recently Adopted Accounting Pronouncement

On January 1, 2023 the Company adopted ASU No. 2016-13, Financial Instruments-Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”). ASU No. 2016-13 introduces a new accounting model known as Current Expected Credit Losses (“CECL”). CECL requires earlier recognition of credit losses, while also providing transparency about credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaces the multiple existing impairment models in current GAAP, which generally require that a loss be incurred before it is recognized. The new standard will also apply to receivables arising from revenue transactions such as contract assets and accounts receivable. There are other provisions in the standard affecting how impairments of other financial assets may be recorded and presented, as well as expanded disclosures. The Company determined that amounts in dispute with United do not fall within the standard. The Company further determined that its receivables are primarily the result of its relationship with United and American, or insurance related receivables. These receivables are payable by credit-worthy companies and any resulting adjustment related to the adoption of CECL was determined to be immaterial. Therefore, the adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements. Further, no adjustment was made to opening retained earnings as a result of the adoption of the accounting standard using the modified retrospective method. The Company does continue to maintain an allowance for expected credit losses primarily related to employee receivables. The allowance for expected credit losses was $10 and $18, as of September 30, 2023 and December 31, 2022, respectively. The Company will continue to monitor its financial instruments for expected credit losses under the newly adopted standard.

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2. Liquidity

The Company’s ability to meet its liquidity needs is dependent upon its cash, cash equivalents and marketable securities balances and its ability to generate cash flows from operations in the future in amounts sufficient to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company currently believes its available working capital and anticipated cash flows from operations will be sufficient to meet the Company’s liquidity requirements for at least the next 12 months from the date of this filing. However, there can be no assurance that the Company will be able to generate sufficient cash flows from operations, or that additional funds will be available, to meet its future liquidity needs, particularly if Air Wisconsin receives an adverse determination in the arbitration with United.

Reduced Block Hours

Since the beginning of the COVID-19 pandemic, Air Wisconsin has experienced significantly reduced block hours relative to historical levels, both as a result of the pandemic and the prevailing industry-wide pilot shortage. Although the disruption in passenger demand due to the pandemic has largely subsided, the pilot shortage is expected to continue for the foreseeable future and is currently the leading factor preventing Air Wisconsin from consistently achieving block hours in line with pre-pandemic levels.

As of September 30, 2023, Air Wisconsin had 45 aircraft in service for American under the American capacity purchase agreement.

For additional information, refer to Part I, Item 1, “Business—American Capacity Purchase Agreement” within the 2022 Annual Report.

3. Capacity Purchase Agreements with United and American

In February 2017, Air Wisconsin entered into the United capacity purchase agreement. That agreement terminated and Air Wisconsin ceased flying for United in early June 2023. Although the agreement has terminated, a dispute exists under the agreement. Air Wisconsin has claimed that United owes it certain amounts under the capacity purchase agreement. United has denied that it owes those amounts and has claimed that Air Wisconsin improperly terminated the agreement and that Air Wisconsin owes it certain amounts for the alleged wrongful termination. In October 2022, United initiated arbitration under the agreement. An arbitration hearing commenced in July 2023 before three arbitrators. Air Wisconsin expects the arbitrators will issue their decision and award in the first quarter of 2024. Since the arbitration decision has not yet been issued, Air Wisconsin cannot reasonably estimate the likely outcome of the arbitration including any potential award of the disputed amounts. Air Wisconsin, however, maintains that it has a strong position, that it was entitled to terminate the agreement and that it is entitled to the disputed amounts, including the amounts recorded in the condensed consolidated balance sheets, under the terms of the agreement. For additional information, refer to Note 1, Summary of Significant Accounting Policies—Contract Revenues and Note 8, Commitments and Contingencies, in this Quarterly Report.

In August 2022, Air Wisconsin entered into the American capacity purchase agreement, pursuant to which Air Wisconsin agreed to provide up to 60 CRJ-200 regional jet aircraft for regional airline services for American. Air Wisconsin commenced flying operations for American in March 2023. American became Air Wisconsin’s sole airline partner when the last remaining aircraft covered by the United capacity purchase agreement were removed from United’s flying operations in early June 2023. In February 2023 and November 2023, American and Air Wisconsin entered into Amendment No. 1 and Amendment No. 3, respectively, to the American capacity purchase agreement which, among other things, provided for a one-time payment to assist with increased costs related to pilot compensation and revised compensation rates for 2023 through 2028 and obligated American to make a payment to assist Air Wisconsin with current pilot compensation and retention. For additional information regarding Amendment No. 3, refer to Note 14, Subsequent Events, and Part II, Item 5, Other Information, in this Quarterly Report.

4. Property and Equipment

As of September 30, 2023, Air Wisconsin owned 64 CRJ-200 regional jets.

5. Income Taxes

The Company’s effective tax rate for the three and nine months ended September 30, 2023 was 17.8% and 22.9%, respectively, which varied from the federal statutory rate of 21.0% primarily due to the impact of the increase of the valuation allowance on federal and state deferred tax assets that are capital in nature due to the unrealized losses on marketable securities during the periods, state income taxes, and permanent differences between financial statement and taxable income.

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The Company’s effective tax rate for the three and nine months ended September 30, 2022 was 23.8%, which varied from the federal statutory rate of 21.0% primarily due to the impact of state income taxes and permanent differences between financial statement and taxable income.

6. Debt

Debt

Debt consists of the following (with interest rates, as of the dates presented):


	September 30, 2023		December 31, 2022
Aircraft Notes, due December 31, 2025 (4.0%)	$	52,554	$	61,222
Less: current maturities	52,554		9,154
Long-term debt	$	—	$	52,068

On August 4, 2023, Air Wisconsin received a notice of default and reservation of rights ("Notice") related to certain credit agreements ("Aircraft Credit Agreements") Air Wisconsin entered into with a senior lender and loan trustee. The Notice alleges a default under the Aircraft Credit Agreements relating to Air Wisconsin's failure to pay certain amounts thereunder. If the Notice were correct, the total outstanding principal balance of $48,600 would have been due and payable. Air Wisconsin believes the alleged default is without merit and intends to contest the claims in the Notice. However, Air Wisconsin has notified the lender that it would be willing to prepay the entire outstanding principal balance of the loans subject to certain terms and conditions and is negotiating a prepayment agreement with the lender. If such an agreement were entered into, the agreed upon amount of the balance of the loans outstanding under the Aircraft Credit Agreements would likely become due within the next 12-month period. Although there can be no assurance that the parties will enter into an agreement, given its receipt of the Notice and the existence of the negotiations regarding the proposed prepayment, the Company has reclassified, as of September 30, 2023, the entire balance of the loans outstanding under the Aircraft Credit Agreements as current portion of long-term debt on the condensed consolidated balance sheets.

In June 2023, Air Wisconsin prepaid approximately $3,500 of the principal amount outstanding under the Aircraft Notes due December 31, 2025 (the "Aircraft Notes"). The prepayment resulted in a $70 gain on extinguishment of debt due to the decrease in previously expected future interest that was capitalized.

Maturities of debt for the periods subsequent to September 30, 2023, are as follows:


Fiscal Year	Amount
October 2023 through December 2023	$	486
2024	52,068
2025	—
Total	$	52,554

The debt agreements include certain covenants. At September 30, 2023 and December 31, 2022, Air Wisconsin believes it was in compliance with all of the covenants in its debt agreements.

As of September 30, 2023, all of the Company’s debt was subject to fixed interest rates.

For additional information, refer to Note 6, Debt, in the audited consolidated financial statements within the 2022 Annual Report.

Long-Term Promissory Note

In July 2003, Air Wisconsin financed a hangar through the issuance of $4,275 City of Milwaukee, Wisconsin variable rate Industrial Development Bonds. The bonds mature November 1, 2033. Prior to May 1, 2006, the bonds were secured by a guaranteed investment contract, which was collateralized with cash, and interest was payable semiannually on each May 1 and November 1. In May 2006, Air Wisconsin acquired the bonds using the cash collateral. The bonds are reported as long-term investments on the condensed consolidated balance sheets. The hangar is accounted for as a right-of-use asset with a value of $2,373 and $2,547 as of September 30, 2023 and December 31, 2022, respectively.

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7. Lease Obligations

The Company reviews all contracts and service agreements for criteria meeting the definition of a lease within the frameworks of Topic 842 and Topic 606. Those that were determined to be a lease may contain both a lease and a non-lease component. In those instances, the Company elected to account for such components as a single lease component.

The Company’s operating lease activities are recorded in operating lease right-of-use assets, current portion of operating lease liability, and long-term operating lease liability on the condensed consolidated balance sheets. Air Wisconsin has operating leases with terms greater than 12 months for training simulators and facility space including office space and maintenance facilities. The remaining lease terms for training simulators and facility space vary from three months to 10.3 years. For leases of 12 months or less, the Company elected a short-term lease practical expedient for all leases, regardless of the underlying class of asset, that allows the lessee to not recognize a lease right-of-use asset or lease liability. As a result, the Company recognized lease payments for short-term leases as an expense on a straight-line basis over the lease term. For leases with durations longer than 12 months, the Company recorded the related operating lease right-of-use asset and operating lease liability at the present value of the lease payments over the lease term. The Company used Air Wisconsin’s incremental borrowing rate to discount the lease payments based on information available at lease inception. Air Wisconsin’s operating leases with lease rates that are variable based on operating costs, use of the facilities, or other variable factors were excluded from the Company’s right-of-use assets and operating lease liabilities in accordance with the applicable accounting guidance. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.

Certain leases contain an option to extend or terminate the lease agreement. The Company evaluates each option prior to its expiration and may or may not exercise such option depending on conditions present at the time. At the inception of the lease, if it is reasonably certain that the Company will exercise an option to extend or terminate a lease, the Company considers the option in determining the classification and measurement of the lease. The Company expects that in the normal course of business operating leases that expire will be renewed or replaced by other leases.

As of September 30, 2023, the Company’s right-of-use assets were $9,708, the Company’s current maturities of operating lease liabilities were $3,649, and the Company’s long-term operating lease liabilities were $3,659. During the nine months ended September 30, 2023, the Company paid $4,285 in operating lease payments, which are reflected as a reduction to operating cash flows.

The table below presents operating lease related terms and discount rates as of:


	September 30, 2023
Weighted-average remaining lease term	2.62 years
Weighted-average discount rate	6.15	%

Components of lease costs were as follows for the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease costs	$	1,467	$	1,477	$	4,425	$	4,423
Short-term lease costs	81		77		207		306
Variable lease costs	(89)		63		(105)		158
Total Lease Costs	$	1,459	$	1,617	$	4,527	$	4,887

Certain leases are subject to non-cancellable lease terms or may include variable rate increases tied to the consumer price index. One of our leases also provides that Air Wisconsin reimburse the lessor for Air Wisconsin’s pro-rata share of taxes and other operating expenses applicable to the leased property. During the second and third quarters of 2023, Air Wisconsin received a temporary rent concession due to construction at a leased facility, which is being recorded as negative variable rent. Rent expense recorded under all operating leases, inclusive of engine leases, was $1,459 and $1,617 in the three months ended September 30, 2023 and September 30, 2022, respectively. Rent expense recorded under all operating leases, inclusive of engine leases, was $4,527 and $4,887 for the nine months ended September 30, 2023 and September 30, 2022, respectively.

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The following table summarizes the future minimum rental payments required under operating leases that had initial or remaining non-cancelable lease terms greater than 12 months as of September 30, 2023:


Fiscal Year	Amount
October 2023 through December 2023	$	1,369
2024	3,328
2025	2,596
2026	202
2027	75
Thereafter	358
Total lease payments	7,928
Less imputed interest	620
Total Lease Liabilities	$	7,308

8. Commitments and Contingencies

Legal Matters

From time to time, the Company is involved in various legal proceedings, regulatory matters, and other disputes or claims arising from or related to claims incident to the normal course of the Company’s business activities. Although the results of such legal proceedings and claims cannot be predicted with certainty, as of September 30, 2023, the Company believes that it is not currently a party to any legal proceedings, regulatory matters, or other disputes or claims for which a material loss is considered probable and for which the amount (or range) of loss was reasonably estimable. However, regardless of the merit of the claims raised, legal proceedings may have an adverse impact on the Company as a result of adverse determinations, defense and settlement costs, diversion of management’s time and resources, and other factors.

Dispute with United

Although the United capacity purchase agreement terminated in early June 2023, a dispute exists under that agreement. Air Wisconsin has claimed that United owes it certain amounts under the capacity purchase agreement. United has denied that it owes those amounts and has claimed that Air Wisconsin improperly terminated the agreement and that Air Wisconsin owes it certain amounts for the alleged wrongful termination. As of September 30, 2023, the aggregate amount in dispute recorded in the condensed consolidated financial statements was approximately $52,276. In October 2022, United initiated arbitration under the agreement. An arbitration hearing commenced in July 2023 before three arbitrators. Air Wisconsin expects the arbitrators will issue their decision and award in the first quarter of 2024. Air Wisconsin cannot reasonably estimate the likely outcome of the arbitration including any potential award of the disputed amounts. Air Wisconsin, however, maintains that it has a strong position, that it was entitled to terminate the agreement and that it is entitled to the disputed amounts, including the amounts recorded in the condensed consolidated balance sheets, under the terms of the agreement. For additional information, refer to Note 1, Summary of Significant Accounting Policies – Contract Revenues, and Note 3, Capacity Purchase Agreements with United and American, in this Quarterly Report.

Treasury Payroll Support Program Audit

In April 2020, Air Wisconsin entered into a Payroll Support Program Agreement (“PSP-1 Agreement”) with respect to payroll support (“Treasury Payroll Support”) from the U.S. Department of Treasury (“Treasury”) under a program (“Payroll Support Program”) provided by the Coronavirus Aid, Relief, and Economic Security Act, pursuant to which Air Wisconsin received approximately $42,185 (“PSP-1”). In September 2020, the Treasury’s Office of Inspector General (“OIG”) commenced a routine audit in connection with Air Wisconsin’s receipt of funds under the PSP-1 Agreement. The audit focused on, among other things, certain calculations used to determine the amount of Treasury Payroll Support Air Wisconsin was entitled to receive under the program. Air Wisconsin has disputed in good faith the Treasury’s interpretation of certain provisions of the application for Treasury Payroll Support and the PSP-1 Agreement, as well as the Treasury’s guidance regarding the Payroll Support Program. Air Wisconsin received preliminary results from the OIG of the audit in June 2023. Those results are subject to Air Wisconsin’s opportunity to contest the findings and the OIG releasing its final determination. The OIG initially determined that Air Wisconsin overstated its awardable amount on its PSP-1 application; however, Air Wisconsin does not believe this results in any amounts due back to the Treasury and the Treasury has not required Air Wisconsin to repay any PSP-1 amounts. As part of Air Wisconsin’s application for a Payroll Support Program Agreement 2 ("PSP-2 Agreement", and such award granted thereunder, "PSP-2"), Air Wisconsin was required to recertify its PSP-1 application and amend portions of the application pursuant to further guidance by the

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Treasury. Air Wisconsin’s recertified PSP-1 application resulted in a reduction to its PSP-2 award to reconcile the difference between its initial PSP-1 award and a recalculated award based on its PSP-1 recertification. Based on the OIG’s audit results, Air Wisconsin believes the Treasury may have reduced its PSP-2 award by more than it should have; however, Air Wisconsin does not reasonably believe it will be able to recover any underpayment from the Treasury.

Subsequent to the September 2020 audit, the Treasury entered into the PSP-2 Agreement and a Payroll Support Program Agreement 3 ("PSP-3 Agreement") with Air Wisconsin and has paid to Air Wisconsin the amounts to be paid under the PSP-2 Agreement and the PSP-3 Agreement.

Standby Letters of Credit

As of September 30, 2023, Air Wisconsin had six outstanding letters of credit in the aggregate amount of $372 to guarantee the performance of its obligations under certain lease agreements, airport agreements and insurance policies, and it maintained a credit facility with a borrowing capacity of $377 for the issuance of such letters of credit. A significant portion of Air Wisconsin’s restricted cash balance secures the credit facility.

Cash Obligations

The following table sets forth the Company’s cash obligations for the periods presented:


	Payment Due for Year Ending December 31,
	Total		2023 (October through December)		2024		2025		2026		2027		Thereafter
Aircraft Notes Principal	$	48,600	$	—	$	48,600	$	—	$	—	$	—	$	—
Aircraft Notes Interest	3,954		486		3,468		—		—		—		—
Operating Lease Obligations	7,928		1,369		3,328		2,596		202		75		358
Total	$	60,482	$	1,855	$	55,396	$	2,596	$	202	$	75	$	358

The principal amount of the Aircraft Notes is payable in semi-annual installments of $3,500, and certain additional amounts may be payable based on excess cash. In June 2023, Air Wisconsin prepaid the semi-annual installment due December 31, 2023. As of September 30, 2023, all of the Company’s debt was subject to fixed interest rates.

For additional information, refer to Note 6, Debt, in the audited consolidated financial statements, and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Debt and Credit Facilities” within the 2022 Annual Report, and Note 14, Subsequent Events, in this Quarterly Report.

9. Related-Party Transactions

Resource Holdings Associates (“Resource Holdings”) provides AWAC and Air Wisconsin with financial advisory and management services pursuant to an agreement entered into in January 2012. AWAC paid a total of $60 and $180 to Resource Holdings for the three and nine months ended September 30, 2023 and September 30, 2022, respectively, plus the

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reimbursement of certain out-of-pocket expenses. In June 2021, the board of directors agreed to require Harbor to pay Resource Holdings an annual fee of $150, payable monthly, which amount is in addition to the amount paid to Resource Holdings by AWAC. Harbor paid an aggregate of $38 and $113 to Resource Holdings for the three and nine months ended September 30, 2023 and September 30, 2022, respectively. For additional information, refer to the section entitled “Certain Relationships and Related Transactions, and Director Independence” within the 2022 Annual Report.

10. Earnings Per Share and Equity

Calculations of net (loss) income per common share for the periods presented were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net (loss) income	$	(3,688)	$	8,022	$	(11,975)	$	32,366
Preferred stock dividends	358		198		915		594
Net (loss) income applicable to common stockholders	$	(4,046)	$	7,824	$	(12,890)	$	31,772
Weighted average common shares outstanding
Shares used in calculating basic earnings per share	43,654		45,776		44,299		46,637
Stock option	—		—		—		131
Series C Preferred	—		16,500		—		16,500
Shares used in calculating diluted earnings per share	43,654		62,276		44,299		63,268
(Loss) earnings allocated to common stockholders per common share
Basic	$	(0.09)	$	0.17	$	(0.29)	$	0.68
Diluted	$	(0.09)	$	0.13	$	(0.29)	$	0.50

Basic earnings per share of common stock is computed by dividing the net loss or income applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period.

Diluted earnings per share is computed by dividing loss or income by the weighted average number of shares outstanding assuming the conversion of the Series C Preferred into an aggregate of 16,500 shares of common stock under the if-converted method, and the exercise of a stock option granted in 2015 (2015 Option) into 198 shares of common stock under the treasury stock method for the nine months ended September 30, 2022. In March 2022, Harbor entered into an agreement with the holder to cancel the 2015 Option in exchange for $969. The shares underlying the 2015 Option are included in computing diluted earnings per share under the treasury stock method for the portion of the reporting period during which it was outstanding. Further, during loss periods, the conversion of shares under the Series C Preferred or the 2015 Option (for the period it was outstanding) would be anti-dilutive and thus is not assumed for purposes of computing diluted earnings per share.

Series C Convertible Redeemable Preferred Stock

In January 2020, Harbor issued 4,000 shares of the Series C Preferred. The rights, preferences, privileges, qualifications, restrictions and limitations relating to the Series C Preferred are set forth in the Certificate of Designations, Preferences and Rights of Series C Convertible Redeemable Preferred Stock (“Certificate of Designations”), which Harbor filed with the Secretary of State of the State of Delaware.

The Series C Preferred accrues cumulative quarterly dividends at the rate per share of 6.0% of the Series C Issue Price per annum, which are cumulative and compound quarterly to the extent dividends have not been declared by the board of directors (“Preferential Dividends”). From and after December 31, 2023, upon the election of holders of a majority of the outstanding Series C Preferred, the rate of the Preferential Dividends shall be increased by an additional 1.0% per annum per share for each and every six-month period following such election (“Dividend Ratchet”). At the option of the board of directors, in lieu of paying the Preferential Dividends and the Conversion Cap Excess Dividends (as defined below) in cash, all or some of such dividends may be paid in additional shares of Series C Preferred (“PIK Dividends”).

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below) by $0.80, subject to certain adjustments set forth in the Certificate of Designations (“Conversion Price”). The Conversion Price as of the date of this filing is $0.15091. The Conversion Price may be subject to further adjustment as described in the Certificate of Designations.

The conversion of Series C Preferred is subject to a limitation on the number of shares of the common stock that may be issued upon conversion of Series C Preferred equal to the sum of (a) 16,500, plus (b) the quotient of (i) the aggregate amount of all accrued and unpaid Preferential Dividends divided by (ii) $0.80, plus (c) the quotient of (i) the number of shares of Series C Preferred issued as PIK Dividends multiplied by the Series C Issue Price, divided by (ii) $0.80. Any outstanding shares of Series C Preferred that may not be converted into common stock pursuant to the limitation described herein (“Conversion Cap Excess Shares”), from and after December 31, 2022, in addition to the Preferential Dividends, shall accrue cumulative quarterly dividends in an amount per share equal to 0.5% of the Series C Liquidation Amount of each outstanding Conversion Cap Excess Share in the first quarter after December 31, 2022, and increasing an additional 0.5% of the Series C Liquidation Amount in each subsequent quarter (“Conversion Cap Excess Dividends”). As of September 30, 2023, 755 shares of the Series C Preferred were immediately convertible into 16,500 shares of common stock (representing 27.5% of the fully diluted shares of capital stock of Harbor), and the remaining 3,245 shares of the Series C Preferred are deemed Conversion Cap Excess Shares. Harbor may redeem all, but not less than all, of the Conversion Cap Excess Shares at any time upon notice to the holders for a cash payment in an amount equal to the Series C Liquidation Amount per share.

In the event of any liquidation, dissolution or winding up of Harbor or a sale of Harbor, the Series C Preferred shall be entitled to receive, prior and in preference to any distribution of any assets of Harbor to the common stock or other junior capital stock, an amount equal to the Series C Issue Price, plus an amount equal to all accrued but unpaid Preferential Dividends, Conversion Cap Excess Dividends and any other accrued but unpaid dividends (“Series C Liquidation Amount”).

On March 31, 2023, June 30, 2023, and September 27, 2023, the board of directors declared a Preferential Dividend of $198 and a Conversion Cap Excess Dividend of $54, $107, and $160, respectively, on the Series C Preferred, which were paid on March 31, 2023, June 30, 2023, and September 29, 2023, respectively. On March 30, 2022, June 30, 2022, and September 30, 2022, the board of directors declared a dividend of $198 on the Series C Preferred, which was paid on March 31, 2022, June 30, 2022, and September 30, 2022, respectively.

Based on the applicable accounting guidance, Harbor is required to apply the “if-converted” method to the Series C Preferred to determine the weighted average number of shares outstanding for purposes of calculating the net income (loss) per share of common stock. However, conversion is not assumed for purposes of computing diluted earnings per share if the effect would be anti-dilutive.

Harbor accounts for its Series C Preferred in accordance with the guidance in ASC Topic 480, Distinguishing Liabilities from Equity. Based on the applicable accounting guidance, preferred stock that is conditionally redeemable is classified as temporary or “mezzanine” equity. Accordingly, the Series C Preferred, is presented at redemption value as mezzanine equity outside of the stockholders’ equity section of the condensed consolidated balance sheets.

11. Supplemental Cash Flow Information

Cash payments for interest for the nine months ended September 30, 2023 and September 30, 2022 were $1,598 and $1,784, respectively. Cash payments for income taxes for the nine months ended September 30, 2023 and September 30, 2022 were $46 and $3,348, respectively. Cash payments included in the measurement of lease liabilities related to operating leases were $4,285 and $4,484 for the nine months ended September 30, 2023 and September 30, 2022, respectively.

The following table provides a reconciliation of all cash and cash equivalents and restricted cash reported on the condensed consolidated balance sheets that sum to the total of those same amounts shown on the condensed consolidated statements of cash flows:


	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	15,839	$	33,333
Restricted cash	707		849
Total cash, cash equivalents, and restricted cash	$	16,546	$	34,182

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12. Intangible Assets

Intangible assets consist of the following indefinite-lived assets as of the dates presented:


	September 30, 2023		December 31, 2022
	Gross Carrying Amount		Gross Carrying Amount
Trade names and air carrier certificate	$	5,300	$	5,300
Total	$	5,300	$	5,300

13. Stock Repurchase Program

On March 30, 2021, the board of directors adopted a stock repurchase program pursuant to which Harbor was initially authorized to repurchase up to $1,000 of shares of its common stock during the first calendar month of the program, subject to an automatic increase of $1,000 per calendar month thereafter. Harbor is not obligated under the program to acquire any particular number or value of shares and can suspend or terminate the program at any time. In January 2023, a federal corporate stock repurchase excise tax of 1% took effect once share repurchases exceed $1,000. Harbor accrued an excise tax liability of $8 and $38 during the three and nine months ended September 30, 2023,respectively, which is included in the cost of Treasury stock on the condensed consolidated statements of stockholders’ equity. Harbor acquired a total of 374 and 1,764 shares of its common stock pursuant to the stock repurchase program in the three and nine months ended September 30, 2023, respectively, compared to 364 and 7,664 in the three and nine months ended September 30, 2022, respectively. As of September 30, 2023 and December 31, 2022, total cash of $329 and $475, respectively, was held for the repurchase of shares under Harbor’s stock repurchase program. This amount is included in restricted cash.

For additional information, refer to Part II, Item 2, “Purchases of Equity Securities by the Issuer and Affiliated Purchasers” in this Quarterly Report.

14. Subsequent Events

The Company evaluated its condensed consolidated financial statements included in this Quarterly Report for subsequent events through November 14, 2023, the date the condensed consolidated financial statements were available to be issued and determined that there were none, other than those discussed below.

On October 11, 2023, Air Wisconsin and its pilot group, as represented by the Air Line Pilots Association, executed a new collective bargaining agreement that includes pay rate increases and quality of life improvements for Air Wisconsin pilots. The new agreement expires October 10, 2026, with the agreement becoming amendable on October 10, 2025.

On November 10, 2023, Air Wisconsin and American entered into Amendment No. 3, effective as of November 10, 2023, to the American capacity purchase agreement. Amendment No. 3, among other things, amended (i) the schedule of certain pass-through costs; (ii) the calculation and timing of certain compensation-related payments; (iii) the compensation rates and bonus and rebate reconciliation; and (iv) the period and payment of a fixed amount from American to Air Wisconsin for pilot compensation and retention. The foregoing description of Amendment No. 3 does not purport to be complete and is qualified in its entirety by reference to Amendment No. 3, a redacted copy of which will be filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2023.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements (the "condensed consolidated financial statements") and the related condensed notes included in this Quarterly Report, and with the audited consolidated financial statements, accompanying notes, and the other financial information included within our Annual Report on Form 10-K for the year ended December 31, 2022 (our “2022 Annual Report”). The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those expressed or implied by the forward-looking statements below. Factors that could cause or contribute to those differences in our actual results include, but are not limited to, those discussed below and elsewhere in this Quarterly Report, particularly in the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”

Overview

Harbor Diversified, Inc. (“Harbor”) is a non-operating holding company that is the parent of a consolidated group of subsidiaries, including AWAC Aviation, Inc. (“AWAC”), which is the sole member of Air Wisconsin Airlines LLC (“Air Wisconsin”), which is a regional air carrier. Harbor is also the direct parent of three other subsidiaries: (1) Lotus Aviation Leasing, LLC, which leases flight equipment to Air Wisconsin, (2) Air Wisconsin Funding LLC, which provides flight equipment financing to Air Wisconsin, and (3) Harbor Therapeutics, Inc., which is a non-operating entity with no material assets. Because Harbor consolidates Air Wisconsin for financial statement purposes, disclosures relating to activities of Air Wisconsin also apply to Harbor unless otherwise noted. When appropriate, Air Wisconsin is named specifically for its individual contractual obligations and related disclosures. Where reference is intended to include Harbor and its consolidated subsidiaries, they may be jointly referred to as the “Company,” “we,” “us,” or “our.” Where reference is intended to refer only to Harbor Diversified, Inc., it is referred to as “Harbor.”

American Capacity Purchase Agreement

In August 2022, Air Wisconsin entered into a new five-year capacity purchase agreement (the “American capacity purchase agreement”) with American Airlines, Inc. (“American”), which was subsequently amended in February 2023, March 2023, and November 2023, pursuant to which Air Wisconsin agreed to provide up to 60 CRJ-200 regional jet aircraft for regional airline services for American. Air Wisconsin commenced flying operations for American in March 2023. American became Air Wisconsin’s sole airline partner when all Air Wisconsin’s aircraft were removed from United’s flying operations in early June 2023. As of September 30, 2023, Air Wisconsin had 45 aircraft in service for American.

Under the American capacity purchase agreement, Air Wisconsin is entitled to receive from American a fixed daily amount for each aircraft covered under the agreement (subject to Air Wisconsin’s ability to meet certain block hour utilization thresholds), a fixed payment for each departure, and a fixed payment for each block hour flown, in each case subject to annual increases during the term of the agreement. Beginning in September 2023, Air Wisconsin became eligible to receive bonus compensation, and may be required to pay rebates, upon the achievement of, or failure to achieve, certain pre-established performance criteria. Air Wisconsin is responsible for certain customary costs relating to the flight operation and maintenance of the covered aircraft along with other customary controllable expenses, including expenses associated with flight crews, line maintenance and overhead. American will reimburse Air Wisconsin for certain customary costs and expenses incurred in connection with Air Wisconsin’s flight operations, including fuel, ground handling, landing and air traffic control, changes to livery and branding, aircraft and passenger liability insurance, property taxes and systems support. American has the right to schedule all aircraft covered by the agreement, including determining route selection and frequency, and the timing of scheduled arrivals and departures, in each case subject to certain scheduling parameters. American also has the right to determine and publish fares and to establish seat inventories, overbooking levels, and allocation of seats among fare categories. Furthermore, under the agreement, American provides all ground handling services, including gate and ticket counter services, baggage handling, cargo handling, aircraft loading/unloading services, passenger ticketing, and aircraft cabin cleaning. American has the right to all revenues resulting from the sale of passenger tickets associated with the covered aircraft and all other sources of revenue associated with the operation of the covered aircraft, including revenues relating to baggage charges, food and beverage sales and ticket change fees. The American capacity purchase agreement protects Air Wisconsin, to an extent, from many of the elements that typically cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in the number of passengers.

The American capacity purchase agreement provides that the parties may discuss the possibility of adding CRJ-700 regional jets to Air Wisconsin’s fleet for the purpose of providing regional airline services under the agreement, but neither party is currently under any obligation with respect to these additional aircraft. Should Air Wisconsin in the future include

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aircraft other than the CRJ-200 as part of its flying operations, such an event would likely lead Air Wisconsin to conduct quantitative tests for impairment of the CRJ-200 fleet and related assets.

For additional information, refer to the section entitled “Business – American Capacity Purchase Agreement” within our 2022 Annual Report, and Note 1, Summary of Significant Accounting Policies --Contract Revenues, and Note 3, Capacity Purchase Agreements with United and American, in this Quarterly Report.

United Capacity Purchase Agreement

Prior to early June 2023, Air Wisconsin provided regional airline services to United Airlines, Inc. (“United”) pursuant to a capacity purchase agreement (the “United capacity purchase agreement”) which was entered into in February 2017 and which terminated in early June 2023. Prior to the commencement of services on March 1, 2023 under the American capacity purchase agreement described below, more than 99.9% of our operating revenues was derived from operations associated with the United capacity purchase agreement. For additional information, refer to Note 1, Summary of Significant Accounting Policies – Contract Revenues, and Note 3, Capacity Purchase Agreements with United and American, in this Quarterly Report.

Dispute with United

Although the United capacity purchase agreement has terminated, a dispute exists under the agreement. Air Wisconsin has claimed that United owes it certain amounts under the agreement. As of September 30, 2023, the aggregate amount in dispute recorded in the condensed consolidated financial statements was approximately $52.3 million. United has denied that it owes this amount and has claimed that Air Wisconsin improperly terminated the agreement and that Air Wisconsin owes it certain amounts for the alleged wrongful termination. In October 2022, United initiated arbitration under the agreement. An arbitration hearing commenced in July 2023 before three arbitrators. Air Wisconsin expects the arbitrators will issue their decision and award in the first quarter of 2024. Since the arbitration decision has not yet been issued, Air Wisconsin cannot reasonably estimate the likely outcome of the arbitration including any potential award of the disputed amounts. Air Wisconsin, however, maintains that it has a strong position, that it was entitled to terminate the agreement and that it is entitled to the disputed amounts, including the amounts recorded in the condensed consolidated financial statements, under the terms of the agreement. For additional information, refer to the section entitled “Risk Factors” in this Quarterly Report.

Labor Shortages

Historically, the airline industry has experienced periodic shortages of qualified personnel, particularly pilots and mechanics. As flight demand has increased during the recovery from the COVID-19 pandemic, labor shortages within the airline industry have become acute, particularly for regional airlines such as Air Wisconsin. The shortage is particularly critical at the captain level, since it can take as long as two years to replace a captain, taking into account training time and experience required at the first officer level before a pilot can be elevated to the rank of captain.Pilot shortages within the airline industry are the result of a number of factors, including personnel seeking opportunities with larger airlines where compensation may be substantially higher, the number of pilots at major airlines reaching retirement age, upward pressure on wages and bonuses at other regional carriers and within other industries, and the proliferation of cargo and low-cost carriers that have increased demand for pilots. While Air Wisconsin has pursued efforts to mitigate the impacts of these pressures on its financial condition and results of operations, including through

amendments to the American capacity purchase agreement entered into by Air Wisconsin and American in February 2023 and November 2023, which provided for a one-time payment to assist with increased costs related to pilot compensation and revised compensation rates assessed under the agreement from 2023 to 2028 to assist Air Wisconsin with pilot compensation and retention, these and other factors have caused our pilot attrition rates to be higher than our ability to hire and retain replacement pilots, resulting in our inability to consistently achieve block hours in line with pre-pandemic levels. In addition, although Air Wisconsin pilots ratified a new contract in October 2023 that includes competitive wages and quality of life improvements, Air Wisconsin is continuing to negotiate with its other bargaining groups for further wage increases and quality of life improvements. Further, Air Wisconsin is continuing to monitor changes within the regional airline market directed at addressing the diminished supply of qualified pilots, and any changes it may need to implement as a result of those changes may negatively impact our results of operations and financial condition. If we are unable to maintain a sufficient number of qualified pilots to operate our scheduled flights, it could lead to reduced flight schedules and possibly reduced fixed payments for aircraft, either of which could further impact our financial condition.

In addition to pilots, Air Wisconsin’s operations rely on the availability of other qualified personnel, including mechanics. As a result of global supply chain constraints and inflationary pressures, as well as increased flying levels, Air Wisconsin has experienced increased costs of certain maintenance activities and delays in obtaining third-party maintenance services, which has been compounded by difficulty recruiting and retaining qualified mechanics. Mechanic

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shortages within the industry have resulted from several factors, including larger airlines offering higher salaries and more extensive benefit programs, greater demand for mechanics across the airline industry, and upward pressure on wages in other industries. We anticipate these drivers will continue to place upward pressure on our operating costs.

Economic Conditions, Challenges and Risks Impacting Financial Results

For a discussion of the general and specific factors and trends affecting our business and results of operations, refer to the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our 2022 Annual Report.

Results of Operations

Comparison of the Three Months Ended September 30, 2023 and September 30, 2022

The following table sets forth our major operational statistics and the associated percentage changes for the periods presented:


	Three Months Ended September 30,
	2023		2022		Change
Operating Data:
Available Seat Miles (“ASMs”) (in thousands)	226,190		305,363		(79,173)		(25.9	%)
Actual Block Hours	22,185		25,676		(3,491)		(13.6	%)
Actual Departures	16,110		16,771		(661)		(3.9	%)
Revenue Passenger Miles (in thousands)	192,732		263,899		(71,167)		(27.0	%)
Average Stage Length (in miles)	287		372		(85)		(22.8	%)
Contract Revenue Per Available Seat Mile (in cents)	22.09	¢	22.40	¢	(0.31)	¢	(1.4	%)
Passengers	659,909		699,678		(39,769)		(5.7	%)

The decrease in ASMs, block hours, departures, and passengers during the three months ended September 30, 2023, compared to the three months ended September 30, 2022, was primarily due to the industry-wide pilot shortage.

Operating Revenues

The following table sets forth our operating revenues and the associated dollar and percentage changes for the periods presented:


	Three Months Ended September 30,
	2023		2022		Change
Operating Revenues (in thousands):
Contract Revenues	$	49,958	$	68,389	$	(18,431)	(27.0	%)
Contract Services and Other	98		21		77		366.7	%
Total Operating Revenues	$	50,056	$	68,410	$	(18,354)	(26.8	%)

Total operating revenues decreased $18.4 million, or 26.8%, during the three months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily due to a decrease in block hours and departures as a result of the pilot shortage. The operating revenue decrease includes an overall decrease in revenue of $68.4 million under the United capacity purchase agreement, offset by $49.9 million of revenue recorded pursuant to the American capacity purchase agreement which started in March 2023.

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Operating Expenses

The following table sets forth our operating expenses and the associated dollar and percentage changes for the periods presented:


	Three Months Ended September 30,
	2023		2022		Change
Operating Expenses (in thousands):
Payroll and Related Costs	$	29,444	$	26,801	$	2,643	9.9	%
Aircraft Fuel and Oil	115		49		66		134.7	%
Aircraft Maintenance, Materials and Repairs	11,175		17,494		(6,319)		(36.1	%)
Other Rents	1,459		1,617		(158)		(9.8	%)
Depreciation, Amortization and Obsolescence	6,398		6,639		(241)		(3.6	%)
Purchased Services, Legal and Other	6,537		3,310		3,227		97.5	%
Total Operating Expenses	$	55,128	$	55,910	$	(782)	(1.4	%)

Our consolidated operating expenses consist of the following items:

Payroll and Related Costs. Payroll and related costs increased $2.6 million, or 9.9%, to $29.4 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. The increase was primarily driven by increases in maintenance employee wages of $0.8 million, pilot wages of $0.5 million related to instructors and training, employee benefits and taxes of $0.5 million, general management wages of $0.4 million, union and management employee bonuses of $0.2 million, and other payroll and employee expenses of $0.3 million. This is offset by decreases in flight attendant wages of $0.1 million.

Aircraft Fuel and Oil. Substantially all of the fuel costs incurred as a result of flying pursuant to the United capacity purchase agreement and the American capacity purchase agreement during the three months ended September 30, 2023 and September 30, 2022 were directly paid to suppliers by United or American, as applicable. Aircraft fuel and oil expense primarily reflects the costs associated with fuel purchased for maintenance flights. These expenses were immaterial for the three months ended September 30, 2023 and September 30, 2022.

Aircraft Maintenance, Materials and Repairs. Aircraft maintenance, materials and repairs costs decreased $6.3 million, or 36.1%, to $11.2 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily as a result of a decrease in airframe repairs and parts scrapped of $2.5 million. The decrease was largely driven by a reduction in flying due to the ongoing labor shortage resulting in a decreased need for heavy maintenance. Other decreases included $2.0 million in engine repair costs, materials used of $1.6 million, and a decrease in shop supplies, tool purchases and repairs, freight costs, and parts rebates of $0.4 million. These decreases were offset by an increase in engine overhaul costs of $0.2 million.

Other Rents. Other rents expense decreased $0.2, or 9.8%, to $1.5 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily due to a short-term rent abatement for a flight simulator during construction at the facility.

Depreciation, Amortization and Obsolescence. Depreciation, amortization and obsolescence expense decreased $0.2 million, or 3.6%, to $6.4 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily related to a $0.3 million decrease in obsolescence reserves, offset by $0.1 million increase in depreciation due to capitalized aircraft modifications, facility improvements, and IT projects.

Purchased Services, Legal and Other. Purchased services, legal and other expense increased $3.2 million, or 97.5%, to $6.5 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The increase was primarily due to an increase of $2.7 million in legal fees related to the United dispute, $0.3 million for professional and technical fees, and $0.2 million for Canadian landing fees.

Other Income (Expense)

Interest Income. Interest and dividend income decreased $0.2 million, or 11.1%, to $1.5 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. Interest and dividend income related

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to marketable securities and money market funds increased by $0.2 million and was offset by a decrease in notes receivable interest income of $0.4 million.

Interest Expense. Interest expense was immaterial and relatively unchanged for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

Loss on Marketable Securities. Loss on marketable securities decreased $2.8 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, due to an increase in the market value of marketable securities. There were $1.0 million in recognized losses for the three months ended September 30, 2023 compared to a recognized loss of $3.7 million for the three months ended September 30, 2022.

Gain on Extinguishment of Debt. There was no gain on extinguishment of debt recorded for the three months ended September 30, 2023 and a $0.1 million gain recorded in the three months ended September 30, 2022. This gain recorded in the third quarter of 2022 was related to a prepayment of $0.4 million of debt. The gain is due to the decrease in previously expected future interest that was capitalized.

Other, Net. Other income and expense was immaterial and relatively unchanged for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

Net (Loss) Income

Net loss for the three months ended September 30, 2023 was $3.7 million, or $0.09 per basic share and $0.09 per diluted share, compared to net income of $8.0 million, or $0.17 per basic share and $0.13 per diluted share, for the three months ended September 30, 2022. For additional information, refer to Note 10, Earnings Per Share and Equity, in this Quarterly Report.

The decrease in net income for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily resulted from a decrease in operating revenue. This is partially offset by a decrease in overall operating expenses consisting primarily of aircraft maintenance costs which were offset by increases in payroll expenses and other expenses, including legal fees. The decrease in net income was also partially offset by non-operating income primarily resulting from a decrease in unrealized losses on marketable securities.

Income Tax (Benefit) Expense

In the three months ended September 30, 2023, our effective tax rate was 17.8%, compared to 23.8% for the three months ended September 30, 2022. Our tax rate can vary depending on changes in tax laws, adoption of accounting standards, the amount of income we earn in each state and the state tax rate applicable to such income, as well as any valuation allowance required on our deferred tax assets.

We recorded an income tax benefit of $0.8 million and income tax expense of $2.5 million for the three months ended September 30, 2023 and September 30, 2022, respectively.

The income tax benefit for the three months ended September 30, 2023 resulted in an effective tax rate of 17.8%, which differed from the U.S. federal statutory rate of 21.0%, primarily due to the impact of the increase of valuation allowances on federal and state deferred tax assets that are capital in nature due to the unrealized losses on marketable securities during the period, state income taxes, and permanent differences between financial statement and taxable income.

The income tax expense for the three months ended September 30, 2022 resulted in an effective tax rate of 23.8%, which differed from the U.S. federal statutory rate of 21.0%, primarily due to the impact of state taxes and permanent differences between financial statement and taxable income.

For additional information, refer to Note 5, Income Taxes, in our audited consolidated financial statements included within our 2022 Annual Report.

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Comparison of the Nine Months Ended September 30, 2023 and September 30, 2022

The following table sets forth our major operational statistics and the associated percentage changes for the periods presented:


	Nine Months Ended September 30,
	2023		2022		Change
Operating Data:
Available Seat Miles (in thousands)	707,526		964,499		(256,973)		(26.6	%)
Actual Block Hours	67,332		82,470		(15,138)		(18.4	%)
Actual Departures	47,219		53,865		(6,646)		(12.3	%)
Revenue Passenger Miles (in thousands)	593,418		802,218		(208,800)		(26.0	%)
Average Stage Length (in miles)	308		366		(58)		(15.8	%)
Contract Revenue Per Available Seat Mile (in cents)	22.61	¢	22.11	¢	0.50	¢	2.3	%
Passengers	1,904,565		2,172,492		(267,927)		(12.3	%)

The decrease in ASMs, block hours, departures, and passengers during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, was primarily due to the industry-wide pilot shortage, the wind-down schedule with United, and the removal of certain aircraft from service in order to paint them in the American livery and otherwise prepare them for service under the American capacity purchase agreement, which resulted in a significantly lower number of flights relative to the prior year period.

Operating Revenues

The following table sets forth our operating revenues and the associated dollar and percentage changes for the periods presented:


	Nine Months Ended September 30,
	2023		2022		Change
Operating Revenues (in thousands):
Contract Revenues	$	159,965	$	213,280	$	(53,315)	(25.0	%)
Contract Services and Other	295		35		260		742.9	%
Total Operating Revenues	$	160,260	$	213,315	$	(53,055)	(24.9	%)

Total operating revenues decreased $53.1 million, or 24.9%, during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, primarily due to a decrease in block hours and departures as a result of the pilot shortage and the wind down schedule with United as Air Wisconsin removed aircraft from service to be painted in the American livery. The operating revenue decrease includes an overall decrease in revenue of $132.9 million under the United capacity purchase agreement, offset by an increase of $79.6 million of revenue recorded pursuant to the American capacity purchase agreement which started in March 2023.

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Operating Expenses

The following table sets forth our operating expenses and the associated dollar and percentage changes for the periods presented:


	Nine Months Ended September 30,
	2023		2022		Change
Operating Expenses (in thousands):
Payroll and Related Costs	$	89,165	$	81,096	$	8,069	9.9	%
Aircraft Fuel and Oil	438		134		304		226.9	%
Aircraft Maintenance, Materials and Repairs	48,393		48,331		62		0.1	%
Other Rents	4,527		4,887		(360)		(7.4	%)
Depreciation, Amortization and Obsolescence	19,125		19,957		(832)		(4.2	%)
Purchased Services, Legal and Other	18,511		10,589		7,922		74.8	%
Total Operating Expenses	$	180,159	$	164,994	$	15,165	9.2	%

Our consolidated operating expenses consist of the following items:

Payroll and Related Costs. Payroll and related costs increased $8.1 million, or 9.9%, to $89.2 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The increase was primarily driven by increases in union employee bonuses of $4.3 million, most of which was related to increased pilot bonuses, as well as increased pilot wages of $2.5 million, maintenance employee wages of $1.6 million, management wages of $1.3 million, and payroll taxes of $0.6 million. The increase was offset by decreases in employee benefits of $1.3 million, flight attendant wages of $0.5 million, and other employee expenses of $0.4 million.

Aircraft Fuel and Oil. Substantially all of the fuel costs incurred as a result of flying pursuant to the United capacity purchase agreement and the American capacity purchase agreement during the nine months ended September 30, 2023 and September 30, 2022 were directly paid to suppliers by United or American, as applicable. Aircraft fuel and oil expense primarily reflects the costs associated with fuel purchased for maintenance flights. These expenses were immaterial for the nine months ended September 30, 2023 and September 30, 2022.

Aircraft Maintenance, Materials and Repairs. Aircraft maintenance, materials and repairs costs remained relatively unchanged. There was an increase of 0.1%, to $48.4 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily as a result of an increase in airframe repairs of $2.9 million, engine overhaul amortization of $0.4 million, and $0.2 million in scrapped aircraft parts. The increase was largely driven by higher maintenance rates and a greater reliance on third-party maintenance providers due to the ongoing labor shortage. The increase was offset by decreases of $2.8 million in engine repair costs, $0.3 million in materials used, $0.4 million in shop supplies, tool purchases and repairs, parts rebates and freight costs.

Other Rents. Other rents expense decreased $0.4 million, or 7.4%, to $4.5 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to a short-term rent abatement for a flight simulator during construction at the facility.

Depreciation, Amortization and Obsolescence. Depreciation, amortization and obsolescence expense decreased $0.8 million, or 4.2%, to $19.1 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily related to a $0.9 million decrease in obsolescence reserves, offset by a $0.1 million increase in depreciation due to capitalized aircraft modifications, facility improvements, and IT projects.

Purchased Services, Legal and Other. Purchased services, legal and other expense increased $7.9 million, or 74.8%, to $18.5 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase was primarily due to an increase of $7.4 million in legal fees related to the United dispute, $0.1 million for professional and technical fees, a $0.1 million increase in the loss on disposal of assets, and a $0.4 million overall increase in miscellaneous supplies and other expenses. This increase was partially offset by a decrease of $0.1 million for general and liability insurance.

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Other Income (Expense)

Interest Income. Interest and dividend income increased $0.4 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase was primarily due to an increase of $1.5 million in interest and dividends earned on marketable securities and money market funds, partially offset by a decrease of $1.1 million in interest earned on the notes receivable due from United.

Interest Expense. Interest expense was immaterial and relatively unchanged for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Loss on Marketable Securities. Loss on marketable securities decreased $9.8 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, due to an increase in the market value of marketable securities. There were $0.1 million in unrealized gains offset by $0.1 million of realized losses recorded for the nine months ended September 30, 2023 compared to an unrealized loss of $9.8 million for the nine months ended September 30, 2022.

Gain on Extinguishment of Debt. Gain on extinguishment of debt was immaterial and relatively unchanged for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Other, Net. Other income and expense was immaterial and relatively unchanged for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Net (Loss) Income

Net loss for the nine months ended September 30, 2023 was $12.0 million, or $0.29 per basic share and $0.29 per diluted share, compared to net income of $32.4 million, or $0.68 per basic share and $0.50 per diluted share, for the nine months ended September 30, 2022. For additional information, refer to Note 10, Earnings Per Share and Equity, in this Quarterly Report.

The decrease in net income for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, primarily resulted from a decrease in operating revenue, and an increase in overall operating expenses consisting primarily of payroll and legal expenses. The decrease in net income was partially offset by non-operating income primarily resulting from a decrease in the unrealized loss on marketable securities.

Income Tax (Benefit) Expense

In the nine months ended September 30, 2023, our effective tax rate was 22.9%, compared to 23.8% in the nine months ended September 30, 2022. Our tax rate can vary depending on changes in tax laws, adoption of accounting standards, the amount of income we earn in each state and state tax rate applicable to such income, as well as any valuation allowance required on our deferred tax assets.

We recorded an income tax benefit of $3.6 million and income tax expense of $10.1 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

The income tax benefit for the nine months ended September 30, 2023 resulted in an effective tax rate of 22.9%, which differed from the U.S. federal statutory rate of 21.0%, primarily due to the impact of the increase of valuation allowance on federal and state deferred tax assets that are capital in nature due to the unrealized losses on marketable securities during the period, state income taxes, and permanent differences between financial statement and taxable income.

The income tax expense for the nine months ended September 30, 2022 resulted in an effective tax rate of 23.8%, which differed from the U.S. federal statutory rate of 21.0%, primarily due to the impact of state income taxes and permanent differences between financial statement and taxable income.

For additional information, refer to Note 5, Income Taxes, in our audited consolidated financial statements included within our 2022 Annual Report.

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Liquidity and Capital Resources

Sources and Uses of Cash

Our principal sources of liquidity are our cash and cash equivalents balance, our marketable securities, and Air Wisconsin’s cash flows from operations. As of September 30, 2023, our cash and cash equivalents balance was $15.8 million, and we held $136.6 million of marketable securities. For the nine months ended September 30, 2023, cash used in operations was $18.5 million. In the near term, we expect to fund our liquidity requirements through cash generated from operations, as well as our existing cash, cash equivalents, and marketable securities balances.

Air Wisconsin requires cash to fund its operating expenses and working capital requirements, which include outlays for capital expenditures, labor and maintenance costs, and payment of debt service obligations, including principal and interest payments. Our cash needs vary from period to period primarily based on the timing and costs of significant maintenance events and increased labor costs due to shortages of qualified pilots and mechanics. During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust operating and capital expenditures to reflect current market conditions and our projected demand. Our capital expenditures are typically used to acquire or maintain aircraft and flight equipment for Air Wisconsin. During the nine months ended September 30, 2023, we had $3.0 million in capital expenditures primarily related to aircraft modifications, facilities updates, and IT projects. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.

Air Wisconsin’s ability to service its debt obligations and business development efforts depends, in part, on its ability to generate cash from operating activities as well as other factors, some of which may be beyond our control. If Air Wisconsin fails to generate sufficient cash from operations, it may need to obtain additional debt financing, restructure its current debt financing or liquidate its marketable securities, to achieve its longer-term objectives. As of September 30, 2023, Air Wisconsin had $52.6 million of short-term debt and no long-term debt, all of which is secured indebtedness incurred in connection with the Aircraft Notes. For additional information, refer to Note 6, Debt, in our audited consolidated financial statements, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Debt and Credit Facilities” within our 2022 Annual Report.

Air Wisconsin’s credit agreements with the holder of the Aircraft Notes contain restrictions that limit Air Wisconsin’s ability to pay dividends or distributions to Harbor.

We believe our available working capital and anticipated cash flows from operations will be sufficient to meet our liquidity requirements for at least the next 12 months from the date of this filing. To the extent that results or events differ from our financial projections or business plans, our liquidity may be adversely impacted.

Restricted Cash

As of September 30, 2023, in addition to cash and cash equivalents of $15.8 million, the Company had $0.7 million in restricted cash, which relates to a credit facility used for the issuance of cash collateralized letters of credit supporting Air Wisconsin’s obligations under certain lease agreements, airport agreements and insurance policies, as well as cash held for the repurchase of shares under Harbor’s stock repurchase program. Restricted cash includes amounts escrowed in an interest-bearing account that secures the credit facility.

Cash Flows

The following table presents information regarding our cash flows for each of the periods presented (in thousands):


	Nine Months Ended September 30,
	2023		2022		Change
Net Cash (Used) in/ Provided by Operating Activities	$	(18,492)	$	166	$	(18,658)	(11,239.8	%)
Net Cash Provided by/ (Used) in Investing Activities	14,257		(4,874)		19,131		392.5	%
Net Cash Used in Financing Activities	(13,401)		(14,480)		1,079		7.5	%

Cash Flows (Used) in/Provided by Operating Activities

During the nine months ended September 30, 2023, our cash flows used in operating activities were $18.5 million. We had a net loss of $12.0 million. Net cash flows are further adjusted for increases in cash primarily related to depreciation, amortization and obsolescence of $20.0 million, $0.8 for contract liabilities, prepaid expenses of $0.5 million,

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$0.2 million for loss on disposition of property and equipment, and $0.2 million in accrued payroll and employee benefits, and decreases in cash primarily related to deferred revenue of $16.6 million, accounts payable of $5.9 million, deferred income taxes of $3.6 million, notes receivable of $1.6 million, and spare parts and supplies of $0.5 million.

During the nine months ended September 30, 2022, our cash flows provided by operating activities were $0.2 million. We had net income of $32.4 million. Net income is further adjusted for increases in cash primarily related to depreciation, amortization and obsolescence of $18.7 million, loss on marketable securities of $9.8 million, income taxes payable of $4.6 million, and prepaid and other expenses of $3.7 million, offset by decreases in cash primarily related to deferred revenues of $13.5 million, notes receivable of $12.8 million, receivables, net of $25.9 million, long-term deferred revenue of $9.0 million, accounts payable of $3.5 million, and contract liabilities of $2.5 million.

Cash Flows Provided by/(Used in) Investing Activities

During the nine months ended September 30, 2023, our cash flows provided by investing activities were $14.3 million of which $20.0 million was from the sale of marketable securities, offset by $3.0 million for additions to property and equipment and $2.7 million from the purchase of marketable securities.

During the nine months ended September 30, 2022, our cash flows used in investing activities were $4.9 million resulting primarily from $3.0 million for additions to property and equipment and $1.9 million for investments in marketable securities.

Cash Flows Used in Financing Activities

During the nine months ended September 30, 2023, our cash flows used in financing activities were $13.4 million, reflecting $8.6 million for repayments of long-term debt, $3.9 million to repurchase shares of our common stock, and $0.9 million of dividends paid on preferred stock.

During the nine months ended September 30, 2022, our cash flows used in financing activities were $14.5 million, reflecting $2.2 million in repayments of long-term debt, $0.6 million of dividends paid on preferred stock, $1.0 million for the cancellation of a stock option, and $10.7 million to repurchase shares of our common stock.

Commitments and Contractual Obligations

As of September 30, 2023, Air Wisconsin had $52.6 million of debt (including principal and projected interest obligations) and operating lease obligations (including current maturities). This amount consisted of $48.6 million in principal amount of the Aircraft Notes related to owned aircraft used in continuing operations and $4.0 million of projected interest on the Aircraft Notes. As of September 30, 2023, Air Wisconsin also had $7.9 million of operating lease obligations primarily related to certain training simulators and facilities.

The following table sets forth our cash obligations relating to debt and contractual obligations for the periods presented:


			Payment Due for Year Ended December 31, (in thousands)
	Total		October through December 2023		2024		2025		2026		2027		Thereafter
Aircraft Notes Principal	$	48,600	$	—	$	48,600	$	—	$	—	$	—	$	—
Aircraft Notes Interest	3,954		486		3,468		—		—		—		—
Operating Lease Obligations	7,928		1,369		3,328		2,596		202		75		358
Total	$	60,482	$	1,855	$	55,396	$	2,596	$	202	$	75	$	358

The principal amount of the Aircraft Notes is payable in semi-annual installments of $3.5 million, and certain additional amounts may be payable based on excess cash. In June 2023, Air Wisconsin prepaid the semi-annual installment

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due December 31, 2023, resulting in a gain on extinguishment of debt of $0.1 million. As of September 30, 2023, all of the Company’s debt was subject to fixed interest rates.

For additional information, refer to Note 6, Debt, in our audited consolidated financial statements included within our 2022 Annual Report and Note 14, Subsequent Events, in this Quarterly Report.

Series C Convertible Redeemable Preferred Stock

In January 2020, Harbor completed an acquisition from Southshore Aircraft Holdings, LLC and its affiliated entities (“Southshore”) of three CRJ-200 regional jets, each having two General Electric (“GE”) engines, plus five additional GE engines, in exchange for the issuance of 4,000,000 shares of Harbor’s Series C Convertible Redeemable Preferred Stock (the “Series C Preferred”) with an aggregate value of $13.2 million, or $3.30 per share (the “Series C Issue Price”). Air Wisconsin had leased each of these CRJ-200 regional jets and GE engines from Southshore. In January 2020, Harbor filed a Certificate of Designations, Preferences, and Rights of Series C Convertible Redeemable Preferred Stock (“Certificate of Designations”) with the Secretary of State of the State of Delaware, which establishes the rights, preferences, privileges, qualifications, restrictions and limitations relating to the Series C Preferred.

The Series C Preferred accrues cumulative quarterly dividends at the rate per share of 6.0% of the Series C Issue Price per annum, which are cumulative and compound quarterly to the extent dividends have not been declared by the board of directors (the “Preferential Dividends”). From and after December 31, 2023, upon the election of holders of a majority of the outstanding Series C Preferred, the rate of the Preferential Dividends shall be increased by an additional 1.0% per annum per share for each and every six-month period following such election (the “Dividend Ratchet”). At the option of the board of directors, in lieu of paying the Preferential Dividends and the Conversion Cap Excess Dividends (as defined below) in cash, all or some of such dividends may be paid in additional shares of Series C Preferred (the “PIK Dividends”).

Each share of Series C Preferred was initially convertible at the election of the holders, at any time after issuance, into that number of shares of common stock determined by dividing the then applicable Series C Liquidation Amount (as defined below) by $0.80, subject to certain adjustments set forth in the Certificate of Designations (the “Conversion Price”). The Conversion Price as of the date of this filing is $0.15091. The Conversion Price may be subject to further adjustment as described in the Certificate of Designations.

The conversion of Series C Preferred is subject to a limitation on the number of shares of the common stock that may be issued upon conversion of Series C Preferred equal to the sum of (a) 16,500,000, plus (b) the quotient of (i) the aggregate amount of all accrued and unpaid Preferential Dividends divided by (ii) $0.80 (the “Conversion Cap”), plus (c) the quotient of (i) the number of shares of Series C Preferred issued as PIK Dividends multiplied by the Series C Issue Price, divided by (ii) $0.80. Any outstanding shares of Series C Preferred that may not be converted pursuant to the limitation described herein (the “Conversion Cap Excess Shares”), from and after December 31, 2022, in addition to the Preferential Dividends, shall accrue cumulative quarterly dividends equal to an amount per share equal to 0.5% of the Series C Liquidation Amount of each outstanding Conversion Cap Excess Share in the first quarter after December 31, 2022, and increasing an additional 0.5% of the Series C Liquidation Amount in each subsequent quarter (the “Conversion Cap Excess Dividends”). As of September 30, 2023, 754,550 shares of the Series C Preferred are immediately convertible into 16,500,000 shares of common stock (representing 27.5% of the fully diluted shares of capital stock of Harbor), and the remaining 3,245,450 shares of the Series C Preferred would be deemed Conversion Cap Excess Shares. Harbor may

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redeem all, but not less than all, of the Conversion Cap Excess Shares at any time upon notice to the holders for a cash payment in an amount equal to the Series C Liquidation Amount per share.

On September 27, 2023, the board of directors declared a Preferential Dividend of $198 and a Conversion Cap Excess Dividend of $160 on the Series C Preferred, which were paid on September 29, 2023.

Harbor accounts for its Series C Preferred in accordance with the guidance in ASC Topic 480, Distinguishing Liabilities from Equity. Based on the applicable accounting guidance, preferred stock that is conditionally redeemable is classified as temporary or “mezzanine” equity. Accordingly, the Series C Preferred is presented at redemption value as mezzanine equity outside of the stockholders’ equity section of the condensed consolidated balance sheets included in this Quarterly Report.

Debt and Credit Facilities

For information regarding our debt and credit facilities, refer to Note 6, Debt, in this Quarterly Report and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Debt and Credit Facilities” within our 2022 Annual Report.

Maintenance Commitments

For information regarding our maintenance commitments, refer to the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Maintenance Commitments” within our 2022 Annual Report.

Off-Balance Sheet Arrangements

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (i) made guarantees, (ii) a retained or a contingent interest in transferred assets, (iii) an obligation under derivative instruments classified as equity or (iv) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing, hedging or research and development arrangements with us.

We have no off-balance sheet arrangements that would have or are reasonably likely to have a material current or future effect on our financial condition, results of operations or liquidity.

Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements in accordance with generally accepted accounting principles. Critical accounting policies are those policies that are most important to the preparation of our condensed consolidated financial statements and require management’s subjective and complex judgments due to the need to make estimates about the effect of matters that are inherently uncertain. In doing so, we must make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. To the extent there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies. Our critical accounting policies relate to revenue recognition, long-lived assets and income tax. The application of these accounting policies involves the exercise of judgment and the use of assumptions as to the future uncertainties and, as a result, actual results will likely differ, and may differ materially, from such estimates. For additional information, refer to the section entitled “Management’s Discussion

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and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” within our 2022 Annual Report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to the information regarding market risk provided in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” within our 2022 Annual Report.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As required by Rule 15d-15(b) under the Exchange Act, our management, including our principal executive officer, principal financial officer and principal accounting officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Exchange Act) as of September 30, 2023, the last day of the period covered by this Quarterly Report. Based on this evaluation, our management, including our principal executive officer, principal financial officer and principal accounting officer, concluded that, as of September 30, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

Limitations on Effectiveness of Controls

Our management, including our principal executive officer, principal financial officer and principal accounting officer, does not expect that our disclosure controls and procedures, or our system of internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act), will prevent or detect all errors and all fraud. A control system, no matter how well designed or operated, can provide only reasonable, but not absolute, assurance that the objectives of the system are met. The design of our control system reflects the fact that there are resource constraints, and that the benefits of such control system must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control failures and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the intentional acts of individuals, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part on certain assumptions about the likelihood of future events, and there can be no assurance that the design of any particular control will always succeed in achieving its objective under all potential future conditions.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2023 that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

As of September 30, 2023, we do not believe we are currently a party to any legal proceedings, regulatory matters, or other disputes or claims that are likely, individually or taken together, to have a material adverse effect on our business, financial condition, results of operations, liquidity or future prospects. However, regardless of the merits of the claims raised, the ultimate resolution of legal proceedings, regulatory matters, and other disputes and claims is inherently uncertain, and they may have an adverse impact on us as a result of an adverse outcome, defense and settlement costs, diversion of management’s time and resources, and other factors. For additional information, including with respect to the arbitration with United, refer to Note 8, Commitments and Contingencies, in this Quarterly Report.

Item 1A. Risk Factors

Our short- and long-term success is subject to numerous risks and uncertainties, many of which involve factors that are difficult to predict or beyond our control. As a result, investing in Harbor’s common stock involves substantial risk. Harbor’s stockholders should carefully consider the risks and uncertainties described below, in addition to the other information contained in or incorporated by reference into this Quarterly Report, as well as the other information we file with the SEC from time to time. If any of these risks are realized, our business, financial condition, results of operations, liquidity and prospects could be materially and adversely affected. In that case, the value of Harbor’s common stock could decline, and stockholders may lose all or part of their investment. Furthermore, additional risks and uncertainties of which we are currently unaware, or which we currently consider to be immaterial, could have a material adverse effect on our business. Certain statements made in this section constitute “forward-looking statements,” which are subject to numerous risks and uncertainties including those described in this section. For additional information, refer to “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report.

Risks Related to Our Business

Air Wisconsin may experience difficulty hiring, training and retaining a sufficient number of qualified pilots and mechanics, which may negatively affect Air Wisconsin’s operations and our financial condition.

Historically, the supply of qualified pilots to the airline industry has been limited, which has created difficulty hiring, training and retaining a sufficient number of qualified pilots. In July 2013, the Federal Aviation Administration (the “FAA”) issued stringent pilot qualification and crew member flight training standards, which increased the required training time for new airline pilots (the “FAA Qualification Standards”), and the FAA also mandated stricter rules to minimize pilot fatigue, increasing the number of pilots required to be employed for Air Wisconsin’s operations and correspondingly increasing Air Wisconsin’s labor costs.

During the first two years of the COVID-19 pandemic, for many reasons, such as reduced flying opportunities, early retirement benefits offered by some airlines, travel restrictions and COVID-19 vaccine mandates, many pilots decided to retire or seek employment in other industries. As passenger demand for air travel has increased since then, Air Wisconsin and other airlines have experienced challenges hiring and maintaining sufficient numbers of qualified pilots due to a number of factors, including the increased flight hour requirements under the FAA Qualification Standards, the statutory mandatory retirement age of 65, and attrition resulting from voluntary retirement decisions. Air Wisconsin has also experienced challenges with pilot attrition to other airlines, including United. In addition, now that Air Wisconsin is no longer flying for United, United could increase the number of Air Wisconsin pilots it hires, which could restrict the number of flights Air Wisconsin could fly for American. The pilot shortage is particularly critical at the captain level. Air Wisconsin has historically expended significant resources to recruit and train pilots, including as a result of recent significant upward pressure on pilot compensation at certain regional airlines and limited availability of flight simulators and instructors. As part of the collective bargaining agreement entered into by Air Wisconsin and its pilot group in October 2023, Air Wisconsin has increased its pilot compensation substantially, but it continues to evaluate the pilot market and may continue to experience additional cost increases in the future. Since the American capacity purchase agreement does not require an increase in the amounts paid to Air Wisconsin as Air Wisconsin increases the amount of pilot compensation, these increases could have an adverse impact on our financial condition and operating results.

Under the American capacity purchase agreement, American is required to pay Air Wisconsin a fixed amount each month for each covered aircraft. However, no monthly payment is required for aircraft that do not meet certain minimum block hour utilization thresholds. Accordingly, if Air Wisconsin is not able to hire and retain a sufficient number of pilots, it will not be paid for all aircraft otherwise covered by the American capacity purchase agreement, which could have an adverse impact on our business and operations.

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Air Wisconsin has also recently experienced difficulty hiring and retaining qualified mechanics to service its aircraft, due to a variety of factors, including voluntary retirement decisions, decisions not to return after furloughs during the COVID-19 pandemic, decisions to leave the airline industry, and the hiring needs of other airlines. There is also a risk that more mechanics may decide to leave the airline industry. Air Wisconsin has increased its mechanic wages, along with offering other hiring incentives, and may continue to experience additional cost increases in the future. If Air Wisconsin is unable to hire and retain a sufficient number of qualified mechanics, it could have an adverse impact on our business and operations.

If future pilot or mechanic attrition rates outpace Air Wisconsin’s ability to hire and retain qualified pilots and mechanics, Air Wisconsin may need to continue to increase its labor costs to attract and retain sufficient qualified pilots and mechanics or it may be unable to fly the number of flights scheduled under the American capacity purchase agreement, which would negatively impact Air Wisconsin’s operations and our financial condition.

Our business is highly dependent on the American capacity purchase agreement because American is now Air Wisconsin’s sole airline partner.

Prior to March 2023, we derived nearly all of our operating revenues from the United capacity purchase agreement because United was Air Wisconsin’s sole airline partner. Air Wisconsin ceased flying for United in early June. As of September 30, 2023, we derive nearly all of our operating revenues from the American capacity purchase agreement because American is Air Wisconsin’s sole airline partner.

Pursuant to the American capacity purchase agreement, American is permitted to terminate the agreement or remove aircraft that would otherwise be covered under the agreement prior to the expiration of its term in certain circumstances, including upon Air Wisconsin’s material breach of the agreement, Air Wisconsin’s inability to operate a certain number of aircraft, Air Wisconsin’s failure to meet certain operating performance benchmarks for specified periods and certain changes of control of Air Wisconsin. In addition, American and Air Wisconsin each have the right to terminate the agreement for any reason after a certain date prior to the specified termination date. If American terminates the American capacity purchase agreement, our business, financial condition, results of operations and liquidity could be significantly negatively impacted, unless Air Wisconsin is able to enter into satisfactory substitute arrangements for the utilization of its aircraft.

Any events that negatively impact the financial or operating performance of American could have a material adverse effect on our business, financial condition and results of operations. American could be materially and adversely impacted, directly or indirectly, by new variants of COVID-19 or other infectious diseases, by worldwide political or economic changes or instability, including those associated with the outbreak of war or hostilities, government sanctions, travel restrictions, rising fuel and other commodity prices, currency exchange rate fluctuations, increasing interest rates and inflation. If American were to experience significant financial difficulties as a result of these or other reasons, it could negatively impact American’s ability to meet its financial obligations under the American capacity purchase agreement or alter its business strategy as it applies to regional airlines. Further, if American were to become bankrupt, the American capacity purchase agreement may not be assumed in bankruptcy and could be terminated, and such termination would have a material adverse effect on our business, financial condition and results of operations.

Disagreements regarding the interpretation of our capacity purchase agreements could have an adverse effect on our operating results and financial condition.

Contractual agreements, such as our capacity purchase agreements, are subject to interpretation, and disputes may arise if the parties apply different interpretations to such agreements. Although the United capacity purchase agreement terminated in early June of 2023, a dispute exists under that agreement. Air Wisconsin has claimed that United owes it certain amounts under the capacity purchase agreement. United has denied that it owes those amounts and has claimed that Air Wisconsin improperly terminated the agreement and that Air Wisconsin owes it certain amounts for the alleged wrongful termination. In October 2022, United initiated arbitration under the agreement. An arbitration hearing commenced in July 2023 before three arbitrators. Air Wisconsin expects the arbitrators will issue their decision and award in the first quarter of 2024. The arbitration has resulted in substantial costs and a diversion of management’s attention and resources. An adverse determination by the arbitrators that United owes less than Air Wisconsin claims or that Air Wisconsin owes United amounts for the alleged wrongful termination could harm our business, financial condition and results of operations.

It is also possible that a dispute could arise with respect to the American capacity purchase agreement, which could also have an adverse effect on our business, financial condition and results of operations.

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Maintenance costs and delays may increase further, and out-of-service periods may result in aircraft being unavailable for flying.

The average age of Air Wisconsin’s CRJ-200 regional jets as of September 30, 2023 was approximately 21.1 years. As Air Wisconsin’s fleet continues to age, its maintenance costs may increase, both on an absolute basis and as a percentage of its operating expenses. Maintenance issues may result in out-of-service periods during which aircraft are dedicated to maintenance activities and unavailable for flying under the American capacity purchase agreement. There are also industry-wide supply chain issues and parts shortages that have lengthened the time to complete required maintenance. These industry-wide issues could increase Air Wisconsin’s costs for maintenance and parts and possibly require it to renegotiate contracts with third-party providers to ensure their continued support of our programs. In addition, as noted above, there is an industry-wide shortage of aircraft mechanics. Air Wisconsin has increased its labor costs to attract and retain qualified mechanics. However, as passenger demand for air travel has increased and additional aircraft are brought back into service to address the increased demand, the turnaround time for routine and heavy maintenance has lengthened. As a result, Air Wisconsin has experienced, and may continue to experience, delays and increased costs in obtaining both in-house and third-party maintenance services. Any continued increase in Air Wisconsin’s maintenance costs or decreased revenues or delays resulting in out-of-service periods could have a further adverse effect on our financial condition and operating results.

Air Wisconsin has entered into agreements with third-party service providers to provide various services required for its operations, including airframe, engine and component maintenance and IT services, and it expects to enter into additional similar agreements in the future. If its third-party service providers terminate their contracts, or do not provide timely or consistently sufficient parts or high-quality maintenance and support services, Air Wisconsin may not be able to replace them in a cost-efficient manner or in a manner timely enough to support its operational needs, which could have a material adverse effect on our business, financial condition, and results of operations.

If American provides Air Wisconsin with inefficient flight schedules, or makes certain changes to the expected utilization of Air Wisconsin’s aircraft under the American capacity purchase agreement, our business, financial condition and results of operations may be adversely affected.

Under the terms of the American capacity purchase agreement, American has the ability to schedule Air Wisconsin’s flights in any manner that serves its purposes, subject to certain scheduling procedures which do not prevent it from scheduling Air Wisconsin’s flights in a manner Air Wisconsin deems inefficient. From time to time in the past, United scheduled Air Wisconsin’s flights in a manner that created operational inefficiencies for Air Wisconsin, such as building in long crew layovers or overnights, which caused crew staffing issues and resulted in limited crew availability to fly other scheduled Air Wisconsin flights, or providing Air Wisconsin with flight schedules that were inconsistent with Air Wisconsin’s existing operational footprint. It is possible that American will also schedule flights in a manner that Air Wisconsin deems inefficient. These actions could have a material adverse effect on our business, financial condition and results of operations.

Certain factors may lead American to modify the anticipated utilization of Air Wisconsin’s aircraft, some of which are beyond Air Wisconsin’s control. Any factors that cause American to schedule the utilization of Air Wisconsin’s aircraft on routes or at frequencies materially different than we have forecasted could further reduce our ability to realize operating efficiencies, which would continue to negatively impact our financial condition and operating results. The actual number of flights American schedules under the American capacity purchase agreement in any particular period may be significantly different from the number of flights we initially anticipated or which American initially communicated for the period.

Air Wisconsin’s current and future growth opportunities may be limited by a number of factors impacting American or the airline industry generally.

Growth opportunities within American’s current flight network may be limited by various factors, including “scope” clauses in its collective bargaining agreements with its pilots that restrict the number and size of regional aircraft that may be operated in its flight systems that are not flown by its pilots. These clauses could limit Air Wisconsin’s ability to operate additional aircraft for American, which would limit Air Wisconsin’s expansion opportunities. American is under no obligation to provide Air Wisconsin with an opportunity to fly additional aircraft within its system or to otherwise expand its relationship with Air Wisconsin.

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Air Wisconsin’s ability to expand its operations in the future may be limited by a number of factors impacting the airline industry, including pilot and mechanic shortages, access to airport terminals and facilities, capital expenditures required to maintain or expand fleet operations, significant changes in fuel prices or other variable costs, regulatory changes, changes in the availability of necessary parts and equipment, and intense competition and pricing pressure. Given the competitive nature of the airline industry, we believe limited growth opportunities exist and as a result Air Wisconsin may be required to accept less favorable contract terms in order to secure new or additional flying opportunities.

The amounts Air Wisconsin receives under the American capacity purchase agreement may be less than the corresponding costs Air Wisconsin incurs.

Under the American capacity purchase agreement, a portion of the revenues Air Wisconsin receives is based upon predetermined rates calculated by reference to certain factors, such as the number of covered aircraft, the number of block hours flown and the number of departures. As noted above, American is not required to pay certain amounts in respect of aircraft that do not meet certain minimum block hour utilization thresholds. The primary operating costs intended to be compensated by the predetermined rates include, among other things, salaries and benefits, training costs, crew room costs, maintenance expenses, simulator and spare parts costs, and overhead costs. If Air Wisconsin’s costs for those items exceed the compensation paid under the agreement, our financial position and operating results will be negatively affected. For example, Air Wisconsin has experienced, and may continue to experience, upward pressure on pilot and mechanic compensation as it seeks to attract and retain qualified staff. The American capacity purchase agreement does not provide for adjustments for any resulting compensation increases and, therefore, such increases could negatively impact our operating results.

A significant portion of Air Wisconsin’s workforce is represented by labor unions, and the terms of Air Wisconsin’s collective bargaining agreements may increase our operating expenses and negatively impact our financial results.

A significant majority of Air Wisconsin’s employees are represented by labor unions, including the Air Line Pilots Association, International (“ALPA”), the Association of Flight Attendants (“AFA”), the International Association of Machinists and Aerospace Workers AFL-CIO (“IAMAW”), and the Transport Workers Union of America (“TWU”). The terms and conditions of future collective bargaining agreements may be affected by the results of collective bargaining negotiations at other airlines that may have a greater ability, due to larger scale, greater efficiency, or other factors, to bear higher costs than Air Wisconsin, which are likely to result in higher industry wages and increased pressure on Air Wisconsin to increase the wages and benefits of its employees. Future agreements may be on terms that are less favorable to Air Wisconsin than its current agreements or not comparable to agreements entered into by its competitors. Moreover, we cannot predict the outcome of any future negotiations relating to union representation or collective bargaining agreements. Any future agreements reached in collective bargaining may increase our operating expenses and negatively impact our financial results. If Air Wisconsin is unable to reach agreement with any of its unionized work groups in current or future negotiations regarding the terms of their collective bargaining agreements, it may be subject to work interruptions, stoppages or shortages.

Air Wisconsin currently operates only one aircraft type, and relies on one aircraft manufacturer and one engine manufacturer, and any operating restrictions or safety concerns applicable to this aircraft or engine type, or any failure to receive sufficient maintenance and support services from these manufacturers, would negatively impact our business and financial condition.

Air Wisconsin currently relies on a single aircraft type, the CRJ-200 regional jet, and a single engine type, the General Electric (“GE”) CF34-3B1 engine. The issuance of FAA or manufacturer directives restricting or prohibiting the use of this aircraft type or engine type, or Air Wisconsin’s inability to obtain necessary parts and services related to this aircraft type or engine type, would negatively impact our business and financial results. In addition, any concerns raised regarding the safety or reliability of the CRJ-200 regional jet or the GE CF34-3B1 engine, whether or not directly associated with Air Wisconsin’s fleet, could result in concerns about Air Wisconsin’s fleet that could negatively impact our business.

Air Wisconsin has been highly dependent upon Bombardier, as the sole manufacturer of Air Wisconsin’s aircraft, and GE, as the sole manufacturer of Air Wisconsin’s aircraft engines, to provide sufficient parts and related maintenance and support services to it in a timely manner. In June 2020, Bombardier consummated an agreement with Mitsubishi Heavy Industries, Ltd (“Mitsubishi”), pursuant to which Mitsubishi purchased Bombardier’s regional jet program, including all aspects of the CRJ-200 regional jet, such as type certificates, maintenance, support, refurbishment, marketing and sales activities. Air Wisconsin’s operations could be materially and adversely affected by the failure or inability of Mitsubishi or GE to provide required maintenance or support services, or as a result of unscheduled or unanticipated maintenance requirements for Air Wisconsin’s aircraft or engines.

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The residual value of our aircraft, engines and parts may be less than estimated in our depreciation policies.

In accounting for long-lived assets, we make estimates about the expected useful lives of the assets, the expected residual values of certain of these assets, and the potential for impairment based on the fair value of the assets and the cash flows they generate. Factors indicating potential impairment include, but are not limited to, significant decreases in the market value of the long-lived assets, a significant change in the condition of the long-lived assets and operating cash flow losses associated with the use of the long-lived assets. For example, any of the following circumstances could cause us to reduce our estimates as to the useful life, residual value or cash flow potential of our aircraft or engines, which could require an impairment charge:

•we add a new aircraft type to our fleet and reduce the number of our operating CRJ-200 aircraft;

•the pilot shortage causes us to permanently retire some aircraft; or

•a lack of demand for our aircraft or engine types reduces the proceeds we receive on disposition to less than we estimated.

Should Air Wisconsin in the future include aircraft other than the CRJ-200 as part of its flying operations, such as the CRJ-700, Air Wisconsin would likely need to conduct quantitative tests for impairment of the CRJ-200 fleet and related assets. If the estimated residual value of any of our aircraft, engines or parts is determined to be lower than the residual value assumptions used in our depreciation policies, the aircraft, engines or parts may be impaired and may result in a material reduction in their book value, or we may need to prospectively modify our depreciation policies. An impairment on any of the aircraft, engines or parts or an increased level of depreciation expense resulting from a change to our depreciation policies could result in a material negative impact to our financial results.

Air Wisconsin’s ability to obtain additional financing may be limited, and, in the event Air Wisconsin is unable to repay its debt and other contractual obligations, our business, results of operations and financial condition may be adversely impacted.

The airline business is capital intensive. As of September 30, 2023, Air Wisconsin had approximately $52.6 million in total third-party debt, which was incurred in connection with the acquisition of aircraft and which is secured by substantially all of Air Wisconsin’s aircraft, engines and parts. Air Wisconsin is currently negotiating with its secured lender a prepayment of the entire outstanding principal balance of the debt under the Aircraft Credit Agreements. Air Wisconsin believes that it will have sufficient liquidity after making such prepayment, but its current liquidity will be significantly reduced. Air Wisconsin has financed its operations primarily from cash flow. However, to the extent Air Wisconsin finances its activities or its pursuit of new opportunities with additional debt, it would become subject to additional debt service obligations, as well as additional covenants that may restrict its ability to pursue its business strategy or otherwise constrain its growth and operations. Air Wisconsin’s ability to pay its debt service obligations, in addition to the high level of fixed costs associated with operating a regional airline, will depend on its operating performance, cash flows and ability to secure adequate financing, which will in turn depend on, among other things, the success of its current business strategy, availability and cost of financing, as well as general economic and political conditions and other factors that may be beyond its control. We cannot be certain Air Wisconsin’s working capital and cash flows from operations will be sufficient to make required payments under its debt and other contractual arrangements.

If Air Wisconsin is unable to pay its debts as they come due or fails to comply with its obligations under the agreements governing its debt, and is unable to obtain waivers of such defaults, its secured lender could foreclose on any of Air Wisconsin’s assets securing such debt. Additionally, a failure to pay Air Wisconsin’s property leases, debt or other fixed cost obligations, or a breach of its other contractual obligations, could result in a variety of further adverse consequences, including the exercise of remedies by its creditors and lessors, such as acceleration. In such a situation, Air Wisconsin may not be able to cure its breach, fulfill its contractual obligations, make required lease payments or otherwise cover its fixed costs, which could have a material adverse effect on our business, results of operations and financial condition. Like other contractual obligations, the agreements covering our debt are subject to interpretation, and disputes may arise if the parties apply different interpretations to such agreements. For example, a dispute currently exists with Air Wisconsin's lender as to the interpretation of certain prepayment provisions in the Aircraft Credit Agreements. We cannot predict the outcomes of any such disputes and, even if such disputes do not result in litigation or are resolved in our favor, the time and resources necessary to resolve them could divert the resources of our management and harm our business, financial condition, and results of operations, which could also have an adverse effect on our business, financial condition, and results of operations.

In addition, the agreements that Air Wisconsin entered into with the Treasury for payroll support contained various covenants. If the Treasury determines that Air Wisconsin failed to comply with its obligations under those agreements, it

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may be required to repay the funds provided to it under those agreements. Any such default, acceleration, insolvency or failure to comply would likely have a material adverse effect on our business.

The loss of key personnel upon whom Air Wisconsin depends to operate its business or the inability to attract additional qualified personnel could adversely affect our business.

Our future success depends on our ability to retain or attract highly qualified management, technical and other personnel. We may not be successful in retaining key personnel or in attracting other highly qualified personnel. Any inability to attract or retain qualified management personnel and other employees, or any significant increases in the costs associated with recruiting or retaining qualified employees, could have a material adverse effect on our business, results of operations and financial condition.

Information technology security breaches, hardware or software failures, or other information technology infrastructure disruptions may negatively impact Air Wisconsin’s business, operations and financial condition.

The performance and reliability of Air Wisconsin’s technology, the technology of American, and the technology of our third-party service providers, are critical to Air Wisconsin’s ability to compete effectively. Any internal technological error or failure or large-scale external interruption in the technological infrastructure we depend on, such as power, telecommunications or the internet, may disrupt Air Wisconsin’s internal network. Any individual, sustained or repeated failure of Air Wisconsin’s technology, or that of American or our third-party service providers, could impact Air Wisconsin’s ability to conduct its business, lower the utilization of Air Wisconsin’s aircraft and result in increased costs and penalties. Air Wisconsin’s technological systems, software and related data, those of American, and those supplied by our third-party service providers, may be vulnerable to a variety of sources of interruption or exploitation due to events beyond our control, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues.

In addition, as a part of Air Wisconsin’s ordinary business operations, it collects and stores, and will collect and store, sensitive data, including personal information of its employees and information of American. Air Wisconsin’s information systems are subject to an increasing threat of evolving cybersecurity attacks. Unauthorized parties may attempt to gain access to Air Wisconsin’s systems or information through fraud or other means of deception. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or to detect for long periods of time. Air Wisconsin may not be able to prevent all data security breaches or misuse of data. The compromise of Air Wisconsin’s technology systems resulting in the loss, disclosure, misappropriation of, or access to, employees’, passengers’ or business partners’ information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information and disruption to its operations, any or all of which could adversely affect our business and financial condition.

Risks Related to Our Industry

The airline industry is often negatively impacted by numerous factors that could have a material adverse effect on our business, results of operations and financial condition.

The airline business is affected by numerous factors, many of which are beyond Air Wisconsin’s control, including air traffic congestion at airports, air traffic control inefficiencies, adverse weather conditions, natural disasters, facility disruptions, acts of war or terrorism, cancellations, increased security measures, and the outbreak of disease. Factors that cause flight delays frustrate passengers, increase operating costs and decrease revenues, which in turn adversely affect profitability. Because Air Wisconsin’s revenues (other than the portion of its revenues based on the number of aircraft covered under the American capacity purchase agreement) depend primarily on Air Wisconsin’s completion of flights, and secondarily on service factors such as timeliness of departure and arrival, customer satisfaction, cancellations or delays, any of these factors could have a material adverse effect on our business, results of operations and financial condition.

In addition to the factors noted above, Air Wisconsin’s operations and our financial condition are currently affected, and may in the future be affected, by many other factors and conditions beyond Air Wisconsin’s control, including, among others:

•the acute on-going shortage of qualified pilots and mechanics, and resulting increases in compensation and the continuing pressure to significantly increase wages in the industry;

•actual or potential changes in political conditions, including wars, outbreak of hostilities, terrorism, or government sanctions;

•air traffic control delays or disruptions;

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•changes in demand for airline travel or tourism, consumer preferences, or demographic trends;

•changes in the competitive environment due to pricing, industry consolidation, or other factors;

•labor disputes, strikes, work stoppages, or similar matters impacting employees; and

•actual or potential changes in economic conditions, including rising fuel and other commodity prices, currency exchange rate fluctuations, increasing interest rates, inflation and changes in discretionary spending and consumer confidence.

The effect of the foregoing factors or conditions on Air Wisconsin’s operations is difficult to forecast; however, the occurrence of any or all of such factors or conditions could materially and adversely affect its operations and our financial condition.

The COVID-19 pandemic, and the outbreak of any other disease or similar public health threat that we may face in the future, could result in additional adverse effects on the business, operating results, financial condition and liquidity of Air Wisconsin and American.

With the onset of the COVID-19 pandemic, airlines experienced a significant decline in domestic and international demand. A further outbreak of COVID-19 or an outbreak of another disease or similar public health threat, or any other event that would affect consumer demand for air travel or impose travel restrictions, could have a material adverse impact on our business, operating results, financial condition and liquidity, and those of American.

Several regional and larger carriers have ceased operations as a direct or indirect result of the COVID-19 pandemic. ExpressJet Airlines, Inc., Miami Air International, Trans States Airlines and Compass Airlines, each of which are or were domestic regional or charter airlines, have either filed for Chapter 11 or Chapter 7 bankruptcy or ceased or severely limited operations due, at least in part, to the COVID-19 pandemic’s impact on their business.

High and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel could have a material adverse impact on Air Wisconsin’s operating results and financial condition and liquidity.

Although the American capacity purchase agreement provides that American sources, procures and directly pays third-party vendors for substantially all fuel used in the performance of the agreement, aircraft fuel is critical to Air Wisconsin’s operations. The timely and adequate supply of fuel to meet operational demand depends on the continued availability of reliable fuel supply sources as well as related service and delivery infrastructure. Air Wisconsin can neither predict nor guarantee the continued timely availability of aircraft fuel throughout Air Wisconsin’s system. Supplies and prices of fuel are also impacted by factors, such as geopolitical events, economic growth indicators, fiscal/monetary policies, fuel tax policies, changes in regulations, environmental concerns and financial investments in energy markets. Both actual changes in these factors, as well as changes in related market expectations, have and may continue to drive rapid changes in fuel prices in short periods of time. Rising fuel prices may lead to increases in airline fares or fees that may not be sustainable, may reduce the general demand for air travel and may eventually impact the amount of flying that American schedules Air Wisconsin to perform. Any such schedule reductions may impact Air Wisconsin’s operating results. In addition, since single class 50-seat aircraft, such as those in Air Wisconsin’s fleet, are less fuel efficient than certain larger aircraft, increased fuel costs affects Air Wisconsin’s competitiveness in the industry.

The airline industry is highly competitive and has undergone a period of consolidation and transition leaving fewer potential major airline partners.

The airline industry is highly competitive. Air Wisconsin competes primarily with other regional airlines, some of which are owned or operated by major airlines. The airline industry has undergone substantial consolidation, including the mergers between Alaska Airlines and Virgin America, American Airlines and US Airways, Southwest and AirTran Airways, United and Continental Airlines and Delta and Northwest Airlines. Any additional consolidation or significant alliance activity within the airline industry could further limit the number of potential airline partners with whom Air Wisconsin could enter into commercial agreements. In addition, any further consolidation activity involving American, reduction in the size of its network or decision to reduce single class 50-seat aircraft such as the CRJ-200 regional jet could alter its business strategy or its perception of the value of its relationship with Air Wisconsin, which could limit opportunities for Air Wisconsin to continue to provide service to American. Similarly, any further consolidation or restructuring of any major air carrier’s regional jet programs, including as a result of long-term fleet strategy changes announced by several major carriers, could negatively impact Air Wisconsin’s future growth opportunities.

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Terrorist activities or warnings have dramatically impacted the airline industry and will likely continue to do so.

The terrorist attacks of September 11, 2001 and their aftermath negatively impacted the airline industry in general. If additional terrorist attacks are launched, there may be lasting consequences, which may include loss of life, property damage, increased security measures, higher insurance costs, increased concerns about future terrorist attacks and additional government regulation, among other factors. Additional terrorist attacks, and warnings that such attacks may occur, could negatively impact the airline industry and result in decreased passenger traffic, increased flight delays or cancellations, as well as increased security, fuel and other costs and whether or not involving Air Wisconsin’s aircraft, could have a material adverse impact on our business and operations. Increased global political instability, including the outbreak of war and hostilities, could result in an increased risk of terrorist activities.

The occurrence of an aviation accident or incident involving Air Wisconsin or its aircraft or engine type could negatively impact our business, financial condition and operating results.

An accident or incident involving Air Wisconsin’s aircraft could result in significant potential claims of injured passengers and others, as well as negative impacts on its operations resulting from the repair or replacement of a damaged aircraft and its consequential temporary or permanent loss from service. If substantial claims resulting from an accident are made in excess of our related liability insurance coverage, then our operational and financial results would be harmed. Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that Air Wisconsin’s operations are less safe or reliable than other airlines, which could negatively impact our business, financial condition and operating results.

Given that Air Wisconsin currently operates a single aircraft and engine type, any accident or incident involving the CRJ-200 regional jet aircraft type or the GE CF-34 engine type, whether or not operated by Air Wisconsin, may result in Air Wisconsin temporarily or permanently suspending service on all or a large portion of its fleet. Any grounding of Air Wisconsin’s aircraft could have an adverse impact on Air Wisconsin’s operations, its relationship with American, and our financial results. In addition, certain groundings of Air Wisconsin’s aircraft would provide American the right to terminate the American capacity purchase agreement.

Further, any accident or incident involving a CRJ-200 regional jet, regardless of the operator or geographic location of the incident, could cause a public perception that the aircraft type is less safe and reliable than other aircraft types, which could negatively impact our business, financial condition and operating results. Any such accident or incident could result in an acceleration of the implementation of fleet strategy changes by major air carriers that would reduce or eliminate the use of 50-seat aircraft, including the CRJ-200 regional jet.

Air Wisconsin is subject to significant governmental regulation and potential regulatory changes.

All air carriers, including Air Wisconsin, are subject to regulation by the U.S. Department of Transportation (“DOT”), the FAA and other governmental agencies. Regulations promulgated by the DOT primarily relate to economic aspects of air service. The FAA is responsible for regulating and overseeing matters relating to the safety of air carrier flight operations, including the control of navigable air space, the qualification of flight personnel, flight training practices, compliance with FAA airline operating certificate requirements, aircraft certification and maintenance requirements. In addition, airports and municipalities enact rules and regulations that affect Air Wisconsin’s operations. A decision by the FAA to ground, or require time consuming inspections of or maintenance on, all or any of Air Wisconsin’s aircraft for any reason may have a material adverse effect on Air Wisconsin’s operations and our financial condition. Further, Air Wisconsin’s business may be subject to additional costs as a result of potential regulatory changes, which additional costs could have an adverse effect on our operating results.

Air Wisconsin is subject to various environmental and noise laws and regulations, which could have a material adverse effect on our business, results of operations and financial condition.

Air Wisconsin is subject to federal, state, local and foreign laws, regulations and ordinances relating to the protection of the environment and noise, including those relating to emissions to the air, discharges to surface and subsurface waters, safe drinking water and the use, management, disposal and release of, and exposure to, hazardous substances, oils and waste materials. Certain legislative bodies and regulatory authorities are increasingly focused on climate change and have taken actions to implement additional laws, regulations, and programs intended to protect the environment. For example, the federal government, as well as several state and local governments, have implemented legislative and regulatory proposals and voluntary measures intended to reduce greenhouse gas emissions. Compliance with laws, regulations, and other programs intended to reduce emissions or otherwise protect the environment may require Air Wisconsin to reduce its emissions, secure carbon offset credits or otherwise pay for emissions, or make capital investments to modify certain aspects of its operations to reduce emissions. Future policy, legal, and regulatory developments relating to the protection of

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the environment could have a direct effect on Air Wisconsin’s operations (or an indirect effect through its third-party providers of parts or services or airport facilities at which it operates) and increase its costs and have a material adverse effect on its operations. Any such developments could have an adverse impact on our business, results of operations and financial condition.

Air Wisconsin is also subject to environmental laws and regulations that require it to investigate and remediate soil or groundwater to meet certain remediation standards. Under certain laws, generators of waste materials, and current and former owners or operators of facilities, can be subject to liability for investigation and remediation costs at locations that have been identified as requiring response actions. Liability under these laws may be strict and joint and several, meaning that Air Wisconsin could be liable for the costs of cleaning up environmental contamination regardless of fault or the amount of contamination directly attributable to it, which liability could have an adverse impact on our results of operations and financial condition.

The requirement that Air Wisconsin remain a citizen of the United States limits the potential purchasers of Harbor’s common stock.

Under DOT regulations and federal law, Air Wisconsin must be owned and controlled by citizens of the United States as that term is defined in the Federal Aviation Act and interpreted by the DOT. The restrictions imposed by federal law and regulations limit who can purchase Air Wisconsin’s equity securities in the following ways:

•at least 75% of Air Wisconsin’s voting equity securities must be owned and controlled, directly and indirectly, by persons or entities who are citizens of the United States;

•at least 51% of Air Wisconsin’s total outstanding equity securities must be owned and controlled by U.S. citizens and no more than 49% of Air Wisconsin’s equity securities may be held, directly or indirectly, by persons or entities who are not U.S. citizens and are from countries that have entered into “open skies” air transport agreements with the U.S. which allow unrestricted access on air service routes between the United States and the applicable foreign country and to points beyond the foreign country on flights serving the foreign country; and

•citizens of foreign countries that have not entered into “open skies” air transport agreements with the U.S. may hold no more than 25% of Air Wisconsin’s total outstanding equity securities.

The restrictions on foreign ownership of Air Wisconsin’s equity securities may impair or prevent a sale of common stock by a stockholder of Harbor and may adversely affect the trading price or trading volume of Harbor’s common stock.

General Risk Factors

Because the trading market for Harbor’s common stock is limited, the common stock may continue to be illiquid.

Although Harbor’s common stock is traded under the symbol “HRBR” on the OTC Market, the trading volume for the common stock has been and continues to be limited. Harbor has not listed, and does not currently intend to list, Harbor’s common stock for trading on any national securities exchange. Accordingly, we expect the common stock to continue to be illiquid for the foreseeable future. Investors should be aware that an active trading market for the common stock may never develop or be sustained.

The price of Harbor’s common stock has been and may continue to be volatile.

The trading price of Harbor’s common stock has been volatile. We believe Harbor’s stock price will be subject to wide fluctuations in response to a variety of factors, including the following:

•the outcome of the current arbitration of the dispute between United and Air Wisconsin;

•market perceptions and speculation as to differences between the United capacity purchase agreement and the American capacity purchase agreement;

•the industry-wide pilot and mechanic shortages;

•future announcements regarding fleet strategy changes by major air carriers, including any decision to reduce or eliminate single class 50-seat aircraft;

•actual or anticipated fluctuations in our financial and operating results from period to period;

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•actual or potential changes in economic conditions, including rising fuel and other commodity prices, currency exchange rate fluctuations, increasing interest rates, inflation, and changes in discretionary spending and consumer confidence;

•the impact of the COVID-19 pandemic or other pandemics and widespread outbreaks of communicable diseases on passenger demand for air travel, consumer behavior and tourism;

•the repayment, restructuring or refinancing of Air Wisconsin’s debt obligations and our actual or perceived need for additional capital;

•market perceptions about our financial stability and the financial stability of Air Wisconsin’s business partners;

•market perceptions regarding Air Wisconsin’s operating performance, reliability and customer service, and the operating performance, reliability and customer service of its business partners and competitors;

•factors and perceptions impacting the airline industry generally, including future passenger demand for air travel;

•announcements of significant contracts, acquisitions or divestitures by us or Air Wisconsin’s competitors;

•bankruptcies or other financial issues impacting Air Wisconsin’s business partners or competitors;

•threatened or actual litigation and government investigations;

•changes in the regulatory environment impacting Air Wisconsin’s business and industry;

•purchases or sales of shares of Harbor’s common stock pursuant to Harbor’s publicly announced stock repurchase program or otherwise;

•the illiquidity of Harbor’s common stock;

•speculative trading practices of Harbor’s stockholders and other market participants;

•perceptions about securities that are traded on the OTC Market;

•the impact of the application of accounting guidance; and

•actual or potential changes in political conditions, including wars, outbreak of hostilities, terrorism, or government sanctions.

In recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by companies across industries. These changes may occur without regard to the financial condition or operating performance of the affected companies. Accordingly, the price of Harbor’s common stock could fluctuate based upon factors that have little or nothing to do with Harbor, and these fluctuations could materially reduce the trading price of Harbor’s common stock.

The concentration of ownership of Harbor’s capital stock among a small number of stockholders could allow such stockholders to exert significant influence over the Company’s business plans and strategic objectives, control all matters submitted to Harbor’s stockholders for approval, or deter a change in control transaction, any of which could negatively affect the trading price or trading volume of its common stock.

As of September 30, 2023, Harbor had 43,456,071 shares of common stock outstanding. As of the same date, Amun LLC (“Amun”) held 20,000,000 shares of Harbor’s common stock, representing approximately 33.4% of the fully diluted shares of capital stock of Harbor, and Southshore Aircraft Holdings, LLC, through its affiliates (together, “Southshore”), held shares of Harbor’s Series C Convertible Redeemable Preferred Stock (“Series C Preferred”), which are immediately convertible into 16,500,000 shares of common stock, representing approximately 27.5% of the fully diluted shares of capital stock of Harbor (in each case assuming the full conversion of the Series C Preferred into common stock).

The shares of Series C Preferred are generally authorized to vote with Harbor’s common stock. As a result, Amun and Southshore collectively control a majority of the voting power of Harbor’s outstanding capital stock and, therefore, are able to exercise significant influence over the establishment and implementation of the Company’s business plans and strategic objectives, as well as to control all matters submitted to Harbor’s stockholders for approval. These stockholders may manage the Company’s business in ways with which certain investors may disagree and may be adverse to their interests. This concentration of ownership may also have the effect of delaying, deterring or preventing a change in control transaction, depriving Harbor’s stockholders of an opportunity to receive a premium for their investment, or otherwise negatively affecting the trading price or trading volume of Harbor’s common stock.

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Mr. Bartlett, one of Harbor’s directors, may be deemed to be the beneficial owner of the shares of Harbor’s common stock held by Amun due to his status as a member of the board of managers of Amun and his ownership of equity interests in Amun. In addition, Mr. Bartlett may be deemed to be the beneficial owner of the shares of the Series C Preferred held by Southshore due to his status as a member of the board of managers of Southshore and his ownership of equity interests in Southshore. Accordingly, Mr. Bartlett may be able to exercise influence over decisions involving the voting or disposition of shares of Harbor’s capital stock. However, Mr. Bartlett does not control voting or investment decisions made by either Amun or Southshore.

Harbor may suspend its obligation to comply with SEC filing requirements in future periods and thereby cease filing reports and other information with the SEC, which could have the effect of reducing the trading volume and trading price of Harbor’s common stock.

In February 2012, Harbor’s predecessor, Harbor Biosciences, Inc., filed a Form 15 with the SEC to deregister its common stock pursuant to Section 12(g) of the Exchange Act. The filing of the Form 15 had the effect of suspending Harbor’s obligation, pursuant to Section 15(d) of the Exchange Act, to file reports and other information with the SEC. As a result, prior to the filing of our Annual Report on Form 10-K for the year ended December 31, 2019, the last periodic report filed by Harbor was the Annual Report on Form 10-K for the year ended December 31, 2011. As of January 1, 2020, Harbor no longer met the eligibility criteria under Rule 12h-3 of the Exchange Act to suspend its reporting obligations under Section 15(d) of the Exchange Act, requiring Harbor to resume filing reports and other information with the SEC pursuant to the Exchange Act.

The Company has incurred, and expects to continue to incur, significant direct and indirect costs, and diversion of management’s time and resources, as a result of the requirement to comply with certain reporting obligations under the Exchange Act, including those incurred in connection with the preparation and filing of Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, the audit of the consolidated financial statements contained within its Annual Reports in accordance with SEC rules and Public Company Accounting Oversight Board (United States) standards, and compliance with certain provisions of the Sarbanes-Oxley Act of 2002 (“SOX”).

Harbor would again become eligible to suspend its public reporting obligations if it: (i) determines in accordance with applicable SEC rules it has fewer than 300 stockholders of record as of certain points in time, (ii) does not file registration statements pursuant to the Securities Act (which it does not currently intend to do), and (iii) meets certain other requirements under applicable SEC rules. If Harbor becomes eligible to suspend its public reporting obligations in future periods, it may elect to take the actions necessary to suspend those obligations, which would result in Harbor no longer being required to file SEC reports. If Harbor ceases filing reports and other information with the SEC, it would significantly reduce the amount of publicly available information about the Company and its business and operations, which could have the effect of reducing the trading volume and price of Harbor’s common stock.

Further, notwithstanding that Harbor is currently required to file certain reports and information with the SEC pursuant to Section 15(d) of the Exchange Act, Harbor does not have a class of securities registered pursuant to Section 12 of the Exchange Act. As a result, Harbor is not required to comply with, and does not intend to follow, certain disclosure requirements typically applicable to public reporting companies, including the requirement to file proxy statements, information statements, tender offer disclosures, and beneficial ownership filings. Accordingly, there may be significantly less information available about the Company, including its governance policies and ownership structure, than is available for other public reporting companies, which could have the effect of further reducing demand for Harbor’s common stock and the trading price.

Provisions in Harbor’s governing documents and the American capacity purchase agreement might deter acquisition bids, which could adversely affect the value of Harbor’s common stock.

Harbor’s amended and restated certificate of incorporation, as amended, and amended and restated bylaws, as amended, contain provisions that, among other things:

•prohibit the transfer of any shares of Harbor’s capital stock that would result in: (i) any person or entity becoming a “Five-Percent Stockholder” (as defined under Treasury Regulation Section 1.382-T(g)) of Harbor’s then- outstanding capital stock, or (ii) an increase in the percentage ownership of any person or entity who is already a “Five-Percent Stockholder” of Harbor’s then-outstanding capital stock;

•authorize the board of directors, without stockholder approval, to authorize and issue preferred stock with powers, preferences and rights that may be senior to Harbor’s common stock, that could dilute the interest of, or impair the voting power of, holders of Harbor’s common stock and could also have the effect of discouraging, delaying or preventing a change of control;

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•establish advance notice procedures that stockholders must comply with in order to nominate candidates to the board of directors and propose matters to be brought before an annual or special meeting of Harbor’s stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company;

•give the board of directors exclusive authority to set the number of directors and increase or decrease the number of directors by one or more resolutions, which may prevent stockholders from being able to fill vacancies on the board of directors;

•authorize a majority of the board of directors to appoint a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which may prevent stockholders from being able to fill vacancies on the board of directors; and

•restrict the ability of stockholders to call special meetings of stockholders.

In addition, the American capacity purchase agreement provides that certain changes of control of Air Wisconsin give American the right to terminate the agreement.

These provisions may have the effect of delaying or preventing a change in control of the Company, creating a perception that a change in control cannot occur, or otherwise discouraging takeover attempts that some stockholders may consider beneficial, any of which could also adversely affect the trading price of Harbor’s common stock.

Harbor’s amended and restated certificate of incorporation, as amended, and amended and restated bylaws, as amended, limit certain transfers of Harbor’s stock in order to preserve Harbor’s ability to use net operating loss carryforwards, which could adversely affect the trading price of its common stock.

To reduce the risk of a potential adverse effect on Harbor’s ability to use net operating loss carryforwards for federal income tax purposes, Harbor’s amended and restated certificate of incorporation, as amended, and amended and restated bylaws, as amended, prohibit certain transfers of shares of Harbor’s capital stock that could result in adverse tax consequences by impairing Harbor’s ability to utilize net operating loss carryforwards. These transfer restrictions are subject to a number of rules and exceptions, and generally may only be repealed or amended by the affirmative vote of the holders of at least two-thirds of the outstanding shares of Harbor’s capital stock. These transfer restrictions apply to the beneficial owners of the shares of Harbor’s capital stock. The transfer restrictions contained in Harbor’s amended and restated certificate of incorporation, as amended, and amended and restated bylaws, as amended, may limit demand for Harbor’s common stock, which may adversely affect the trading price. In addition, this limitation may have the effect of delaying or preventing a change in control of the Company, creating a perception that a change in control cannot occur, or otherwise discouraging takeover attempts that some stockholders may consider beneficial.

Harbor currently does not intend to pay dividends on its common stock and, consequently, the only opportunity to achieve a return on an investment in Harbor’s common stock may be the appreciation in value of Harbor’s common stock.

Harbor has not historically paid dividends on shares of its common stock and does not expect to pay dividends in the foreseeable future. Air Wisconsin’s credit agreements contain restrictions that limit Air Wisconsin’s ability to pay dividends to Harbor. Any future determination by Harbor to pay dividends will be at the discretion of the board of directors and will depend on our results of operations, financial condition, capital requirements, restrictions contained in current or future credit agreements or capacity purchase agreements (or similar agreements), business prospects and such other factors as the board of directors deems relevant. Consequently, investors should consider that their only opportunity to achieve a positive return on their investment in Harbor’s common stock may be the appreciation in value of the common stock. However, as a result of numerous risks and uncertainties described in this Quarterly Report, the trading price may not appreciate and may decline significantly.

As a “smaller reporting company,” Harbor has availed itself of reduced disclosure requirements, which may make Harbor’s common stock less attractive to investors.

Harbor is a “smaller reporting company” under applicable SEC rules and regulations, and it will continue to be a “smaller reporting company” for so long as either: (i) the market value of Harbor’s common stock held by non-affiliates as of the end of its most recently completed second quarter is less than $250 million or (ii) the market value of Harbor’s common stock held by non-affiliates is less than $700 million and the annual revenues of Harbor are less than $100 million during the most recently completed fiscal year. Because Amun and Southshore collectively hold a significant percentage of the fully diluted shares of capital stock of Harbor, it would require a significant increase in the market value of Harbor’s common stock for Harbor to no longer qualify as a “smaller reporting company.”

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As a “smaller reporting company,” Harbor has relied on exemptions from certain disclosure requirements that are applicable to other public reporting companies. These exemptions include reduced financial disclosure and disclosure regarding executive compensation. Investors may find Harbor’s common stock less attractive because it relies on these exemptions, which could lead to a less active trading market for Harbor’s common stock and negatively impact the trading price.

Complying with the requirements of public reporting companies under the Exchange Act, including the requirement for management to assess our disclosure controls and procedures and internal control over financial reporting, could increase our operating costs and divert management’s attention from executing our business strategy.

We are subject to the reporting requirements of Section 15(d) of the Exchange Act, which requires, among other things, that we file annual, quarterly, and current reports with the SEC with respect to our business, financial condition and results of operations. In addition, pursuant to SOX, we are required to assess the effectiveness of our disclosure controls and procedures and our internal control over financial reporting. Compliance with these various reporting and compliance obligations has substantially increased our legal and financial compliance costs and increased demands on our management team. Significant additional resources and management oversight may be required to maintain and, as required, enhance our disclosure controls and procedures and internal control over financial reporting, which could have an adverse impact on our business and operating results. Further, Harbor’s status as a public reporting company and the risks associated with being a public reporting company, could make it more difficult for us to attract and retain qualified members of the board of directors and executive officers, and it may increase the cost of their services.

We could identify material weaknesses or significant deficiencies in future periods.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis. We cannot be certain that we will be successful in identifying, preventing or remediating future material weaknesses or significant deficiencies in internal control over financial reporting, which failure could result in material misstatements of our annual or interim consolidated financial statements. Any such misstatements of our financial statements could lead to restatements of our financial statements, which could result in an adverse impact to our financial results and a decline in the trading price of Harbor’s common stock.

Stock repurchases could increase the volatility of the trading price of Harbor’s common stock, and we cannot guarantee that our stock repurchase program will enhance long-term stockholder value.

The board of directors has adopted a stock repurchase program pursuant to which Harbor may repurchase shares of its common stock from time to time. From the inception of the program through September 30, 2023, Harbor has purchased approximately 11.4 million shares of its common stock pursuant to the program. Although the board of directors has authorized the repurchase program, and Harbor has completed the purchase of shares of common stock, it does not obligate us to repurchase any additional dollar amount or number of shares, and the program may be modified, suspended or terminated at any time and for any reason. The additional number of shares to be repurchased, and the timing of any such repurchases, will depend on a number of factors, including the trading price of the common stock, the Company’s financial performance and liquidity position, general market conditions, applicable legal requirements and other factors. Our ability to repurchase shares may also be limited by restrictive covenants in future borrowing arrangements or capacity purchase agreements (or similar agreements) we may enter into from time to time. Repurchases of Harbor’s common stock could increase the volatility of the trading price and reduce the trading volume of the common stock, either of which could have a negative impact on the trading price. Similarly, the future announcement of the termination or suspension of the repurchase program, or our decision not to utilize the full authorized repurchase amount under the repurchase program, could result in a decrease in the trading price. There can be no assurance that any repurchases we do elect to make will enhance stockholder value because the market price of Harbor’s common stock may decline below the levels at which we repurchased shares. We cannot guarantee that the repurchase program will enhance long-term stockholder value.

Harbor may be at increased risk of securities class action and other litigation.

In the past, securities class action litigation has been instituted against companies following periods of volatility in the overall market and in the price of a company’s securities. If Harbor faces such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business, financial condition and results of operations. As a result of our compliance with Exchange Act reporting obligations, a significant amount of information regarding our business and operations, including our financial condition and operating results, is publicly available, which may result in threatened or actual litigation or other disputes with our stockholders, employees or other constituents. If such claims are successful, our business and results of operations could suffer and, even if the claims do not

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result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business, financial condition and results of operations.

If securities or industry analysts do not publish reports about our business, an active trading market for Harbor’s common stock may not develop.

The extent of any trading market for Harbor’s common stock will depend, in part, on any research and reports that securities or industry analysts publish about us or our business. Analyst coverage of the Company is limited and does not appear to be consistently produced, and investors should not purchase Harbor’s common stock with the expectation that we will have analyst coverage, or that an active trading market for Harbor’s common stock will be developed or sustained.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On March 30, 2021, the board of directors adopted a stock repurchase program pursuant to which Harbor was initially authorized to repurchase up to $1.0 million of shares of its common stock during the first calendar month of the program, subject to an automatic increase of $1.0 million per calendar month thereafter. The number of shares to be repurchased, and the timing of any such repurchases, depends on a number of factors, including the trading price of the common stock, the Company’s financial performance and liquidity position, general market conditions, applicable legal requirements and other factors. Repurchases may be affected through open market transactions, privately negotiated transactions, or any other lawful means. Harbor may, but is not required to, effect repurchases under a trading plan adopted pursuant to Rule 10b5-1 under the Exchange Act, or subject to Rule 10b-18 under the Exchange Act. Harbor is not obligated under the program to acquire any particular number or value of shares and can suspend or terminate the program at any time.

No “affiliated purchaser” of Harbor acquired any shares of Harbor’s equity securities during the three months ended September 30, 2023.

Below is a summary of Harbor’s stock repurchase activity during the three months ended September 30, 2023:


Period	Total number of shares repurchased(1)	Average price paid per share		Dollar value of shares repurchased(2)		Approximate dollar value of shares remaining available under stock repurchase program
July 1 – July 31, 2023	125,191	$	2.25	$	281,244	$	7,362,167
August 1 – August 31, 2023	99,254	$	2.14	$	212,840	$	8,149,327
September 1 – September 30, 2023	149,520	$	2.10	$	313,505	$	8,835,822
Total	373,965	$	2.16	$	807,589

(1)All of the reported shares were repurchased pursuant to Harbor’s publicly announced stock repurchase program. In addition, all of the reported shares were purchased pursuant to a trading plan adopted pursuant to Rule 10b5-1 under the Exchange Act and in compliance with Rule 10b-18 under the Exchange Act.

(2)These amounts do not reflect the 1% federal corporate stock repurchase excise tax, which went into effect in January 2023, once repurchases exceeded $1.0 million.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not applicable.

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Item 5. Other Information

Item 6. Exhibits

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

File

No.

Exhibit

Filing

Date

Provided

Herewith

31.1*

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**

Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*Filed herewith.

**The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of SOX, shall not be deemed “filed” by the registrant for purposes of Section 18 of the Exchange Act, and shall not be incorporated by reference into any of the registrant’s filings under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report, irrespective of any general incorporation language contained in any such filing.

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SIGNATURES

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.


	HARBOR DIVERSIFIED, INC.

Date: November 14, 2023	By:	/s/ Christine R. Deister
		Christine R. Deister
		Chief Executive Officer and Secretary
		Harbor Diversified, Inc.
		(Principal Executive Officer)

Date: November 14, 2023	By:	/s/ Liam Mackay
		Liam Mackay
		Chief Financial Officer Air Wisconsin Airlines LLC
		(Principal Financial Officer)

Date: November 14, 2023	By:	/s/ Gregg Garvey
		Gregg Garvey
		Senior Vice President, Chief Accounting Officer and Treasurer
		Air Wisconsin Airlines LLC
		(Principal Accounting Officer)

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christine R. Deister, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Harbor Diversified, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 14, 2023	By:	/s/ Christine R. Deister
		Christine R. Deister
		Chief Executive Officer and Secretary
		Harbor Diversified, Inc.
		(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Liam Mackay, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Harbor Diversified, Inc.;

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 14, 2023	By:	/s/ Liam Mackay
		Liam Mackay
		Chief Financial Officer
		Air Wisconsin Airlines LLC
		(Principal Financial Officer)

Exhibit 32.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER

AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The following certifications are hereby made in connection with the Quarterly Report on Form 10-Q of Harbor Diversified, Inc. (the “Company”) for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”):

I, Christine R. Deister, Principal Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“SOX”), that, to my knowledge, (i) the Report fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented.


Date: November 14, 2023	By:	/s/ Christine R. Deister
		Christine R. Deister
		Chief Executive Officer and Secretary
		Harbor Diversified, Inc.
		(Principal Executive Officer)

I, Liam Mackay, Principal Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of SOX, that, to my knowledge, (i) the Report fully complies with the requirements of Section 15(d) of the Exchange Act, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented.


Date: November 14, 2023	By:	/s/ Liam Mackay
		Liam Mackay
		Chief Financial Officer
		Air Wisconsin Airlines LLC
		(Principal Financial Officer)

The preceding certifications accompany the Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of SOX, shall not be deemed “filed” by the Company for purposes of Section 18 of the Exchange Act, and shall not be incorporated by reference into any of the Company’s filings under the Securities Act or the Exchange Act, whether made before or after the date of the Report, irrespective of any general incorporation language contained in any such filing. A signed original of this written statement required by Section 906 of SOX has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Cover - shares	9 Months Ended
Cover - shares	Sep. 30, 2023	Nov. 07, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
Document Transition Report	false
Entity File Number	001-34584
Entity Registrant Name	HARBOR DIVERSIFIED, INC.
Entity Incorporation State Country Code	DE
Entity Tax Identification Number	13-3697002
Entity Address Address Line1	W6390 Challenger Drive
Entity Address Address Line2	Suite 203
Entity Address City Or Town	Appleton
Entity Address State Or Province	WI
Entity Address Postal Zip Code	54914-9120
City Area Code	920
Local Phone Number	749-4188
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		43,319,412
Entity Central Index Key	0000899394
Current Fiscal Year End Date	--12-31
Amendment Flag	false
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Current Assets
Cash and cash equivalents	$ 15,839	$ 33,333
Restricted cash	707	849
Marketable securities	136,562	153,827
Receivables, net	40,391	40,341
Notes receivable	21,093	19,452
Spare parts and supplies, net	5,029	4,579
Contract costs	108	143
Contract assets, net	1,618	0
Prepaid expenses and other	2,594	3,732
Total Current Assets	223,941	256,256
Property and Equipment
Flight property and equipment	265,636	263,970
Ground property and equipment	8,596	8,055
Less accumulated depreciation and amortization	(190,606)	(169,766)
Net Property and Equipment	83,626	102,259
Other Assets
Operating lease right-of-use asset	9,708	13,480
Intangibles	5,300	5,300
Long-term investments	4,275	4,275
Long-term contract costs	613	0
Other	969	1,077
Total Other Assets	20,865	24,132
Total Assets	328,432	382,647
Current Liabilities
Accounts payable	14,295	20,165
Accrued payroll and employee benefits	13,235	12,989
Current portion of operating lease liability	3,649	5,091
Other accrued expenses	166	137
Contract liabilities	0	1,985
Deferred revenues	0	16,561
Current portion of long-term debt (stated principal amount of $48,600 at September 30, 2023 and $3,500 at December 31, 2022)	52,554	9,154
Total Current Liabilities	83,899	66,082
Other Long-Term Liabilities
Long-term debt (stated principal amount of $0 at September 30, 2023 and $48,600 December 31, 2022)	0	52,068
Long-term promissory note	4,275	4,275
Deferred tax liability	4,424	7,990
Long-term operating lease liability	3,659	5,849
Long-term contract liabilities, net	2,792	0
Other	1,755	1,977
Total Long-Term Liabilities	16,905	72,159
Total Liabilities	100,804	138,241
Commitments and Contingencies (Note 8)
Mezzanine Equity (Note 10)
Series C Convertible Redeemable Preferred Stock, $0.01 par value per share, 4,000,000 shares authorized, issued and outstanding at September 30, 2023 and December 31, 2022	13,200	13,200
Stockholders’ Equity
Common Stock, $0.01 par value per share, 100,000,000 shares authorized, 55,481,140 shares issued at September 30, 2023 and December 31, 2022, 43,456,071 shares outstanding at September 30, 2023 and 45,219,737 shares outstanding at December 31, 2022	555	555
Additional paid-in capital	284,753	285,668
Retained deficit	(52,009)	(40,034)
Treasury stock	(18,871)	(14,983)
Total Stockholders’ Equity	214,428	231,206
Total Liabilities and Stockholders’ Equity	$ 328,432	$ 382,647

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Current portion of long-term debt, stated principal amount	$ 48,600	$ 3,500
Long-term debt, stated principal amount	$ 0	$ 48,600
Common Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, shares authorized (in shares)	100,000,000	100,000,000
Common Stock, shares issued (in shares)	55,481,140	55,481,140
Common Stock, shares outstanding (in shares)	43,456,071	45,219,737
Mezzanine Equity Series C Convertible Redeemable Preferred Stock
Series C Convertible Redeemable Preferred Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Series C Convertible Redeemable Preferred Stock, shares authorized (in shares)	4,000,000	4,000,000
Series C Convertible Redeemable Preferred Stock, shares issued (in shares)	4,000,000	4,000,000
Series C Convertible Redeemable Preferred Stock, shares outstanding (in shares)	4,000,000	4,000,000

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Operating Revenues
Total Operating Revenues	$ 50,056	$ 68,410	$ 160,260	$ 213,315
Operating Expenses
Payroll and related costs	29,444	26,801	89,165	81,096
Aircraft fuel and oil	115	49	438	134
Aircraft maintenance, materials and repairs	11,175	17,494	48,393	48,331
Other rents	1,459	1,617	4,527	4,887
Depreciation, amortization and obsolescence	6,398	6,639	19,125	19,957
Purchased services, legal and other	6,537	3,310	18,511	10,589
Total Operating Expenses	55,128	55,910	180,159	164,994
(Loss) Income from Operations	(5,072)	12,500	(19,899)	48,321
Other Income (Expense)
Interest income	1,540	1,732	4,335	3,898
Interest expense	0	0	(12)	0
Loss on marketable securities	(955)	(3,749)	(10)	(9,774)
Gain on extinguishment of debt	0	53	70	53
Other, net	0	(7)	(14)	(10)
Total Other Income (Expense)	585	(1,971)	4,369	(5,833)
Net (Loss) Income Before Taxes	(4,487)	10,529	(15,530)	42,488
Income Tax (Benefit) Expense	(799)	2,507	(3,555)	10,122
Net (Loss) Income	(3,688)	8,022	(11,975)	32,366
Preferred stock dividends	358	198	915	594
Net (loss) income available to common stockholders	$ (4,046)	$ 7,824	$ (12,890)	$ 31,772
Basic (Loss) Earnings per share (in dollars per share)	$ (0.09)	$ 0.17	$ (0.29)	$ 0.68
Diluted (Loss) Earnings per share (in dollars per share)	$ (0.09)	$ 0.13	$ (0.29)	$ 0.50
Weighted average common shares:
Basic (in shares)	43,654	45,776	44,299	46,637
Diluted (in shares)	43,654	62,276	44,299	63,268
Contract revenues
Operating Revenues
Total Operating Revenues	$ 49,958	$ 68,389	$ 159,965	$ 213,280
Contract services and other
Operating Revenues
Total Operating Revenues	$ 98	$ 21	$ 295	$ 35

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Mezzanine Equity Series C Convertible Redeemable Preferred Stock	Mezzanine Equity - Series C Convertible Redeemable Preferred Stock Mezzanine Equity Series C Convertible Redeemable Preferred Stock	Common Stock	Treasury Stock	Additional Paid-In Capital	Retained Deficit	Cost of Treasury Stock
Mezzanine Equity - Series C Convertible Redeemable Preferred Stock, beginning balance (in shares) at Dec. 31, 2021			4,000,000
Beginning Balance at Dec. 31, 2021	$ 205,560		$ 13,200	$ 555		$ 287,429	$ (79,144)	$ (3,280)
Common Stock, beginning balance (in shares) at Dec. 31, 2021				53,316,000
Treasury Stock, beginning balance (in shares) at Dec. 31, 2021					2,165,000
Net (loss) income	32,366						32,366
Dividends	(594)					(594)
Cancellation of stock option	(969)					(969)
Treasury stock purchases (in shares)				7,664,000	7,664,000
Treasury stock purchases	(10,733)							(10,733)
Mezzanine Equity - Series C Convertible Redeemable Preferred Stock, ending balance (in shares) at Sep. 30, 2022			4,000,000
Ending Balance at Sep. 30, 2022	225,630		$ 13,200	$ 555		285,866	(46,778)	(14,013)
Common Stock, ending balance (in shares) at Sep. 30, 2022				45,652,000
Treasury Stock, ending balance (in shares) at Sep. 30, 2022					9,829,000
Mezzanine Equity - Series C Convertible Redeemable Preferred Stock, beginning balance (in shares) at Jun. 30, 2022			4,000,000
Beginning Balance at Jun. 30, 2022	218,605		$ 13,200	$ 555		286,064	(54,800)	(13,214)
Common Stock, beginning balance (in shares) at Jun. 30, 2022				46,016,000
Treasury Stock, beginning balance (in shares) at Jun. 30, 2022					9,465,000
Net (loss) income	8,022						8,022
Dividends	(198)					(198)
Treasury stock purchases (in shares)				364,000	364,000
Treasury stock purchases	(799)							(799)
Mezzanine Equity - Series C Convertible Redeemable Preferred Stock, ending balance (in shares) at Sep. 30, 2022			4,000,000
Ending Balance at Sep. 30, 2022	225,630		$ 13,200	$ 555		285,866	(46,778)	(14,013)
Common Stock, ending balance (in shares) at Sep. 30, 2022				45,652,000
Treasury Stock, ending balance (in shares) at Sep. 30, 2022					9,829,000
Mezzanine Equity - Series C Convertible Redeemable Preferred Stock, beginning balance (in shares) at Dec. 31, 2022		4,000,000	4,000,000
Beginning Balance at Dec. 31, 2022	$ 231,206		$ 13,200	$ 555		285,668	(40,034)	(14,983)
Common Stock, beginning balance (in shares) at Dec. 31, 2022	45,219,737			45,220,000
Treasury Stock, beginning balance (in shares) at Dec. 31, 2022					10,261,000
Net (loss) income	$ (11,975)						(11,975)
Preferred stock dividends	(915)					(915)
Dividends	(915)
Treasury stock purchases (in shares)				1,764,000	1,764,000
Treasury stock purchases	(3,888)							(3,888)
Mezzanine Equity - Series C Convertible Redeemable Preferred Stock, ending balance (in shares) at Sep. 30, 2023		4,000,000	4,000,000
Ending Balance at Sep. 30, 2023	$ 214,428		$ 13,200	$ 555		284,753	(52,009)	(18,871)
Common Stock, ending balance (in shares) at Sep. 30, 2023	43,456,071			43,456,000
Treasury Stock, ending balance (in shares) at Sep. 30, 2023					12,025,000
Mezzanine Equity - Series C Convertible Redeemable Preferred Stock, beginning balance (in shares) at Jun. 30, 2023			4,000,000
Beginning Balance at Jun. 30, 2023	$ 219,290		$ 13,200	$ 555		285,111	(48,321)	(18,055)
Common Stock, beginning balance (in shares) at Jun. 30, 2023				43,830,000
Treasury Stock, beginning balance (in shares) at Jun. 30, 2023					11,651,000
Net (loss) income	(3,688)						(3,688)
Preferred stock dividends	(358)					(358)
Dividends	(358)
Treasury stock purchases (in shares)				374,000	374,000
Treasury stock purchases	(816)							(816)
Mezzanine Equity - Series C Convertible Redeemable Preferred Stock, ending balance (in shares) at Sep. 30, 2023		4,000,000	4,000,000
Ending Balance at Sep. 30, 2023	$ 214,428		$ 13,200	$ 555		$ 284,753	$ (52,009)	$ (18,871)
Common Stock, ending balance (in shares) at Sep. 30, 2023	43,456,071			43,456,000
Treasury Stock, ending balance (in shares) at Sep. 30, 2023					12,025,000

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Cash Flows from Operating Activities
Net (loss) income	$ (11,975)	$ 32,366
Adjustments to reconcile net (loss) income to net cash (used) in/provided by operating activities:
Depreciation, amortization and obsolescence allowance	19,125	19,957
Amortization of contract costs	(1,654)	(3,314)
Amortization of engine overhauls	2,485	2,098
Deferred income taxes	(3,566)	(118)
Loss on disposition of property and equipment	219	62
Loss on marketable securities	10	9,774
Gain on extinguishment of debt	(70)	(53)
Changes in operating assets and liabilities:
Receivables, net	(51)	(25,850)
Notes receivable	(1,641)	(12,747)
Spare parts and supplies	(450)	(149)
Prepaid expenses and other	471	3,699
Operating lease right-of-use asset	140	41
Accounts payable	(5,870)	(3,467)
Accrued payroll and employee benefits	246	(1,828)
Other accrued expenses	29	81
Long-term deferred revenue	0	(9,046)
Contract liabilities	843	(2,534)
Deferred revenues	(16,561)	(13,474)
Income taxes payable	0	4,633
Other long-term liabilities	(222)	35
Net Cash (Used) in/Provided by Operating Activities	(18,492)	166
Cash Flows from Investing Activities
Additions to property and equipment	(3,017)	(2,963)
Proceeds on disposition of property and equipment	19	10
Purchase of marketable securities	(2,745)	(1,921)
Sale of marketable securities	20,000	0
Net Cash Provided by/(Used) in Investing Activities	14,257	(4,874)
Cash Flows from Financing Activities
Repayment of long-term debt	(8,598)	(2,184)
Dividends paid on preferred stock	(915)	(594)
Cancellation of stock option	0	(969)
Repurchased stock	(3,888)	(10,733)
Net Cash Used in Financing Activities	(13,401)	(14,480)
Decrease in Cash, Cash Equivalents and Restricted Cash	(17,636)	(19,188)
Cash, Cash Equivalents and Restricted Cash, beginning of period	34,182	38,619
Cash, Cash Equivalents and Restricted Cash, end of period	$ 16,546	$ 19,431

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Basis of Presentation

Description of Operations

For additional information, refer to Note 3, Capacity Purchase Agreements with United and American.

Contract Revenues

September 30, 2023, Air Wisconsin had not recorded any bonus or rebate amounts under the American capacity purchase agreement.

Other Revenues

Cash and Cash Equivalents

Money market funds and investments and deposits with an original maturity of three months or less when acquired are considered cash and cash equivalents.

Restricted Cash

Receivables, net


	September 30, 2023	December 31, 2022
Trade receivables	31,151	30,019
Insurance and warranty claim receivables	3,385	2,710
Federal and state tax receivables	3,022	3,901
Other industry related receivables	2,843	3,729
Allowance for expected credit losses	(10)	(18)
Receivables, net	40,391	40,341

Marketable Securities

The calculation of net unrealized gains and losses that relate to marketable securities held as of September 30, 2023 is as follows:


	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
Unrealized (losses) gains recognized during the period on equity securities held as of the end of the period	$	(925)	$	102
Plus: Net losses recognized during the period on equity securities sold during the period	(30)		(112)
Net losses recognized during the period on equity securities	$	(955)	$	(10)

The calculation of net unrealized gains and losses that relate to marketable securities held as of September 30, 2022 is as follows:


	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Unrealized losses recognized during the period on equity securities held as of the end of the period	$	(3,749)	$	(9,774)
Plus: Net gains (losses) recognized during the period on equity securities sold during the period	—		—
Net losses recognized during the period on equity securities	$	(3,749)	$	(9,774)

Property and Equipment

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


Assets	Depreciable Life	Current Residual Value
Aircraft	7 years	$	50
Spare engines	7 years	$	25
Rotable parts	7 years	10		%
Ground equipment	up to 10 years	0		%
Office equipment	up to 10 years	0		%
Leasehold improvements	Shorter of asset or lease life	0		%

The table below sets forth the original cost of the Company’s fixed assets and accumulated depreciation or amortization as of the dates presented:


	September 30, 2023				December 31, 2022
Assets	Original Cost		Accumulated Depreciation/ Amortization		Original Cost		Accumulated Depreciation/ Amortization
Aircraft	$	70,779	$	47,655	$	70,089	$	40,544
Spare engines	164,706		117,372		163,708		103,834
Rotable parts	27,412		18,406		27,936		18,655
Ground equipment	2,850		2,217		2,718		2,063
Office equipment	4,692		4,331		4,519		4,218
Leasehold improvements	1,052		625		818		452
Total	$	271,491	$	190,606	$	269,788	$	169,766

Impairment of Long-Lived Assets and Indefinite-Lived Intangible Assets

Income Taxes

Concentration of Credit Risk and Customer Risk

Neither United’s nor American’s obligations to pay Air Wisconsin the amounts required to be paid under the applicable capacity purchase agreement are collateralized.

For additional information, refer to Note 3, Capacity Purchase Agreements with United and American, in this Quarterly Report.

Estimates and Assumptions

Fair Value of Financial Instruments

Level 1 - Quoted market prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 inputs that are either directly or indirectly observable.

Level 3 - Unobservable inputs developed using the Company’s estimates and assumptions, which reflect those that market participants would use.

The tables below set forth the Company’s classification of marketable securities and long-term investments as of the dates presented:


	September 30, 2023
	Total		Level 1		Level 2		Level 3
Marketable securities – exchange-traded funds	$	110,992	$	110,992	$	—	$	—
Marketable securities – mutual funds	25,570		25,570		—		—
Long-term investments – bonds (see Note 6)	4,275		—		4,275		—
Total	$	140,837	$	136,562	$	4,275	$	—


	December 31, 2022
	Total		Level 1		Level 2		Level 3
Marketable securities – exchange-traded funds	$	109,178	$	109,178	$	—	$	—
Marketable securities – mutual funds	44,649		44,649		—		—
Long-term investments – bonds (see Note 6)	4,275		—		4,275		—
Total	$	158,102	$	153,827	$	4,275	$	—

Reclassification

Recently Adopted Accounting Pronouncement

Liquidity	9 Months Ended
Liquidity	Sep. 30, 2023
Risks and Uncertainties [Abstract]
Liquidity	Liquidity The Company’s ability to meet its liquidity needs is dependent upon its cash, cash equivalents and marketable securities balances and its ability to generate cash flows from operations in the future in amounts sufficient to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company currently believes its available working capital and anticipated cash flows from operations will be sufficient to meet the Company’s liquidity requirements for at least the next 12 months from the date of this filing. However, there can be no assurance that the Company will be able to generate sufficient cash flows from operations, or that additional funds will be available, to meet its future liquidity needs, particularly if Air Wisconsin receives an adverse determination in the arbitration with United. Reduced Block Hours Since the beginning of the COVID-19 pandemic, Air Wisconsin has experienced significantly reduced block hours relative to historical levels, both as a result of the pandemic and the prevailing industry-wide pilot shortage. Although the disruption in passenger demand due to the pandemic has largely subsided, the pilot shortage is expected to continue for the foreseeable future and is currently the leading factor preventing Air Wisconsin from consistently achieving block hours in line with pre-pandemic levels. As of September 30, 2023, Air Wisconsin had 45 aircraft in service for American under the American capacity purchase agreement. For additional information, refer to Part I, Item 1, “Business—American Capacity Purchase Agreement” within the 2022 Annual Report.

Capacity Purchase Agreements with United and American	9 Months Ended
Capacity Purchase Agreements with United and American	Sep. 30, 2023
Extractive Industries [Abstract]
Capacity Purchase Agreements with United and American	Capacity Purchase Agreements with United and American In February 2017, Air Wisconsin entered into the United capacity purchase agreement. That agreement terminated and Air Wisconsin ceased flying for United in early June 2023. Although the agreement has terminated, a dispute exists under the agreement. Air Wisconsin has claimed that United owes it certain amounts under the capacity purchase agreement. United has denied that it owes those amounts and has claimed that Air Wisconsin improperly terminated the agreement and that Air Wisconsin owes it certain amounts for the alleged wrongful termination. In October 2022, United initiated arbitration under the agreement. An arbitration hearing commenced in July 2023 before three arbitrators. Air Wisconsin expects the arbitrators will issue their decision and award in the first quarter of 2024. Since the arbitration decision has not yet been issued, Air Wisconsin cannot reasonably estimate the likely outcome of the arbitration including any potential award of the disputed amounts. Air Wisconsin, however, maintains that it has a strong position, that it was entitled to terminate the agreement and that it is entitled to the disputed amounts, including the amounts recorded in the condensed consolidated balance sheets, under the terms of the agreement. For additional information, refer to Note 1, Summary of Significant Accounting Policies—Contract Revenues and Note 8, Commitments and Contingencies, in this Quarterly Report. In August 2022, Air Wisconsin entered into the American capacity purchase agreement, pursuant to which Air Wisconsin agreed to provide up to 60 CRJ-200 regional jet aircraft for regional airline services for American. Air Wisconsin commenced flying operations for American in March 2023. American became Air Wisconsin’s sole airline partner when the last remaining aircraft covered by the United capacity purchase agreement were removed from United’s flying operations in early June 2023. In February 2023 and November 2023, American and Air Wisconsin entered into Amendment No. 1 and Amendment No. 3, respectively, to the American capacity purchase agreement which, among other things, provided for a one-time payment to assist with increased costs related to pilot compensation and revised compensation rates for 2023 through 2028 and obligated American to make a payment to assist Air Wisconsin with current pilot compensation and retention. For additional information regarding Amendment No. 3, refer to Note 14, Subsequent Events, and Part II, Item 5, Other Information, in this Quarterly Report.

Property and Equipment	9 Months Ended
Property and Equipment	Sep. 30, 2023
Property, Plant and Equipment [Abstract]
Property and Equipment	Property and Equipment As of September 30, 2023, Air Wisconsin owned 64 CRJ-200 regional jets.

Income Taxes	9 Months Ended
Income Taxes	Sep. 30, 2023
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes The Company’s effective tax rate for the three and nine months ended September 30, 2023 was 17.8% and 22.9%, respectively, which varied from the federal statutory rate of 21.0% primarily due to the impact of the increase of the valuation allowance on federal and state deferred tax assets that are capital in nature due to the unrealized losses on marketable securities during the periods, state income taxes, and permanent differences between financial statement and taxable income. The Company’s effective tax rate for the three and nine months ended September 30, 2022 was 23.8%, which varied from the federal statutory rate of 21.0% primarily due to the impact of state income taxes and permanent differences between financial statement and taxable income.

Debt

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Debt

Debt consists of the following (with interest rates, as of the dates presented):


	September 30, 2023		December 31, 2022
Aircraft Notes, due December 31, 2025 (4.0%)	$	52,554	$	61,222
Less: current maturities	52,554		9,154
Long-term debt	$	—	$	52,068

Maturities of debt for the periods subsequent to September 30, 2023, are as follows:


Fiscal Year	Amount
October 2023 through December 2023	$	486
2024	52,068
2025	—
Total	$	52,554

The debt agreements include certain covenants. At September 30, 2023 and December 31, 2022, Air Wisconsin believes it was in compliance with all of the covenants in its debt agreements.

As of September 30, 2023, all of the Company’s debt was subject to fixed interest rates.

For additional information, refer to Note 6, Debt, in the audited consolidated financial statements within the 2022 Annual Report.

Long-Term Promissory Note

Lease Obligations

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

Lease Obligations

The table below presents operating lease related terms and discount rates as of:


	September 30, 2023
Weighted-average remaining lease term	2.62 years
Weighted-average discount rate	6.15	%

Components of lease costs were as follows for the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease costs	$	1,467	$	1,477	$	4,425	$	4,423
Short-term lease costs	81		77		207		306
Variable lease costs	(89)		63		(105)		158
Total Lease Costs	$	1,459	$	1,617	$	4,527	$	4,887


Fiscal Year	Amount
October 2023 through December 2023	$	1,369
2024	3,328
2025	2,596
2026	202
2027	75
Thereafter	358
Total lease payments	7,928
Less imputed interest	620
Total Lease Liabilities	$	7,308

Commitments and Contingencies

9 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Legal Matters

Dispute with United

Treasury Payroll Support Program Audit

Standby Letters of Credit

Cash Obligations

The following table sets forth the Company’s cash obligations for the periods presented:


	Payment Due for Year Ending December 31,
	Total		2023 (October through December)		2024		2025		2026		2027		Thereafter
Aircraft Notes Principal	$	48,600	$	—	$	48,600	$	—	$	—	$	—	$	—
Aircraft Notes Interest	3,954		486		3,468		—		—		—		—
Operating Lease Obligations	7,928		1,369		3,328		2,596		202		75		358
Total	$	60,482	$	1,855	$	55,396	$	2,596	$	202	$	75	$	358

Related-Party Transactions	9 Months Ended
Related-Party Transactions	Sep. 30, 2023
Related Party Transactions [Abstract]
Related-Party Transactions	Related-Party Transactions Resource Holdings Associates (“Resource Holdings”) provides AWAC and Air Wisconsin with financial advisory and management services pursuant to an agreement entered into in January 2012. AWAC paid a total of $60 and $180 to Resource Holdings for the three and nine months ended September 30, 2023 and September 30, 2022, respectively, plus the reimbursement of certain out-of-pocket expenses. In June 2021, the board of directors agreed to require Harbor to pay Resource Holdings an annual fee of $150, payable monthly, which amount is in addition to the amount paid to Resource Holdings by AWAC. Harbor paid an aggregate of $38 and $113 to Resource Holdings for the three and nine months ended September 30, 2023 and September 30, 2022, respectively. For additional information, refer to the section entitled “Certain Relationships and Related Transactions, and Director Independence” within the 2022 Annual Report.

Earnings Per Share and Equity

9 Months Ended

Sep. 30, 2023

Earnings Per Share [Abstract]

Earnings Per Share and Equity

Calculations of net (loss) income per common share for the periods presented were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net (loss) income	$	(3,688)	$	8,022	$	(11,975)	$	32,366
Preferred stock dividends	358		198		915		594
Net (loss) income applicable to common stockholders	$	(4,046)	$	7,824	$	(12,890)	$	31,772
Weighted average common shares outstanding
Shares used in calculating basic earnings per share	43,654		45,776		44,299		46,637
Stock option	—		—		—		131
Series C Preferred	—		16,500		—		16,500
Shares used in calculating diluted earnings per share	43,654		62,276		44,299		63,268
(Loss) earnings allocated to common stockholders per common share
Basic	$	(0.09)	$	0.17	$	(0.29)	$	0.68
Diluted	$	(0.09)	$	0.13	$	(0.29)	$	0.50

Series C Convertible Redeemable Preferred Stock

Supplemental Cash Flow Information

9 Months Ended

Sep. 30, 2023

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information


	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	15,839	$	33,333
Restricted cash	707		849
Total cash, cash equivalents, and restricted cash	$	16,546	$	34,182

Intangible Assets

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible assets consist of the following indefinite-lived assets as of the dates presented:


	September 30, 2023		December 31, 2022
	Gross Carrying Amount		Gross Carrying Amount
Trade names and air carrier certificate	$	5,300	$	5,300
Total	$	5,300	$	5,300

Stock Repurchase Program	9 Months Ended
Stock Repurchase Program	Sep. 30, 2023
Stock Repurchase Program [Abstract]
Stock Repurchase Program	Stock Repurchase Program On March 30, 2021, the board of directors adopted a stock repurchase program pursuant to which Harbor was initially authorized to repurchase up to $1,000 of shares of its common stock during the first calendar month of the program, subject to an automatic increase of $1,000 per calendar month thereafter. Harbor is not obligated under the program to acquire any particular number or value of shares and can suspend or terminate the program at any time. In January 2023, a federal corporate stock repurchase excise tax of 1% took effect once share repurchases exceed $1,000. Harbor accrued an excise tax liability of $8 and $38 during the three and nine months ended September 30, 2023,respectively, which is included in the cost of Treasury stock on the condensed consolidated statements of stockholders’ equity. Harbor acquired a total of 374 and 1,764 shares of its common stock pursuant to the stock repurchase program in the three and nine months ended September 30, 2023, respectively, compared to 364 and 7,664 in the three and nine months ended September 30, 2022, respectively. As of September 30, 2023 and December 31, 2022, total cash of $329 and $475, respectively, was held for the repurchase of shares under Harbor’s stock repurchase program. This amount is included in restricted cash. For additional information, refer to Part II, Item 2, “Purchases of Equity Securities by the Issuer and Affiliated Purchasers” in this Quarterly Report.

Subsequent Events	9 Months Ended
Subsequent Events	Sep. 30, 2023
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events The Company evaluated its condensed consolidated financial statements included in this Quarterly Report for subsequent events through November 14, 2023, the date the condensed consolidated financial statements were available to be issued and determined that there were none, other than those discussed below. On October 11, 2023, Air Wisconsin and its pilot group, as represented by the Air Line Pilots Association, executed a new collective bargaining agreement that includes pay rate increases and quality of life improvements for Air Wisconsin pilots. The new agreement expires October 10, 2026, with the agreement becoming amendable on October 10, 2025. On November 10, 2023, Air Wisconsin and American entered into Amendment No. 3, effective as of November 10, 2023, to the American capacity purchase agreement. Amendment No. 3, among other things, amended (i) the schedule of certain pass-through costs; (ii) the calculation and timing of certain compensation-related payments; (iii) the compensation rates and bonus and rebate reconciliation; and (iv) the period and payment of a fixed amount from American to Air Wisconsin for pilot compensation and retention. The foregoing description of Amendment No. 3 does not purport to be complete and is qualified in its entirety by reference to Amendment No. 3, a redacted copy of which will be filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2023.

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Basis of Presentation

Description of Operations

For additional information, refer to Note 3, Capacity Purchase Agreements with United and American.

Contract Revenues

September 30, 2023, Air Wisconsin had not recorded any bonus or rebate amounts under the American capacity purchase agreement.

Other Revenues

Other Revenues Other revenues primarily consist of the sales of parts to other airlines and aircraft lease payments. These other revenues are immaterial in all periods presented. The transaction price for these other revenues generally is fair market value.

Cash and Cash Equivalents

Cash and Cash Equivalents Money market funds and investments and deposits with an original maturity of three months or less when acquired are considered cash and cash equivalents.

Restricted Cash

Restricted Cash As of September 30, 2023 and December 31, 2022, the Company had a restricted cash balance of $707 and $849, respectively. A portion of the balance secures a credit facility for the issuance of letters of credit guaranteeing the performance of Air Wisconsin’s obligations under certain lease agreements, airport agreements and insurance policies. The remaining portion is cash held for the repurchase of shares under Harbor’s stock repurchase program. For additional information, refer to Note 8, Commitments and Contingencies and Note 13, Stock Repurchase Program, in this Quarterly Report.

Marketable Securities

Marketable Securities The Company’s equity security investments, consisting of exchange-traded funds and mutual funds, are recorded at fair value based on quoted market prices (Level 1) in marketable securities on the condensed consolidated balance sheets, in accordance with the guidance in ASC Topic 321, Investments-Equity Securities, with the change in fair value during the period included on the condensed consolidated statements of operations.

Property and Equipment

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


Assets	Depreciable Life	Current Residual Value
Aircraft	7 years	$	50
Spare engines	7 years	$	25
Rotable parts	7 years	10		%
Ground equipment	up to 10 years	0		%
Office equipment	up to 10 years	0		%
Leasehold improvements	Shorter of asset or lease life	0		%

The table below sets forth the original cost of the Company’s fixed assets and accumulated depreciation or amortization as of the dates presented:


	September 30, 2023				December 31, 2022
Assets	Original Cost		Accumulated Depreciation/ Amortization		Original Cost		Accumulated Depreciation/ Amortization
Aircraft	$	70,779	$	47,655	$	70,089	$	40,544
Spare engines	164,706		117,372		163,708		103,834
Rotable parts	27,412		18,406		27,936		18,655
Ground equipment	2,850		2,217		2,718		2,063
Office equipment	4,692		4,331		4,519		4,218
Leasehold improvements	1,052		625		818		452
Total	$	271,491	$	190,606	$	269,788	$	169,766

Impairment of Long-Lived Assets and Indefinite-Lived Intangible Assets

Income Taxes

Concentration of Credit Risk and Customer Risk

Neither United’s nor American’s obligations to pay Air Wisconsin the amounts required to be paid under the applicable capacity purchase agreement are collateralized.

For additional information, refer to Note 3, Capacity Purchase Agreements with United and American, in this Quarterly Report.

Estimates and Assumptions

Fair Value of Financial Instruments

Level 1 - Quoted market prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 inputs that are either directly or indirectly observable.

Level 3 - Unobservable inputs developed using the Company’s estimates and assumptions, which reflect those that market participants would use.

Recently Adopted Accounting Pronouncement

Recently Adopted Accounting Pronouncement On January 1, 2023 the Company adopted ASU No. 2016-13, Financial Instruments-Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”). ASU No. 2016-13 introduces a new accounting model known as Current Expected Credit Losses (“CECL”). CECL requires earlier recognition of credit losses, while also providing transparency about credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaces the multiple existing impairment models in current GAAP, which generally require that a loss be incurred before it is recognized. The new standard will also apply to receivables arising from revenue transactions such as contract assets and accounts receivable. There are other provisions in the standard affecting how impairments of other financial assets may be recorded and presented, as well as expanded disclosures. The Company determined that amounts in dispute with United do not fall within the standard. The Company further determined that its receivables are primarily the result of its relationship with United and American, or insurance related receivables. These receivables are payable by credit-worthy companies and any resulting adjustment related to the adoption of CECL was determined to be immaterial. Therefore, the adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements. Further, no adjustment was made to opening retained earnings as a result of the adoption of the accounting standard using the modified retrospective method. The Company does continue to maintain an allowance for expected credit losses primarily related to employee receivables. The allowance for expected credit losses was $10 and $18, as of September 30, 2023 and December 31, 2022, respectively. The Company will continue to monitor its financial instruments for expected credit losses under the newly adopted standard.

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Summary of Receivables, Net

The table below sets forth the major categories that make up the balances:


	September 30, 2023	December 31, 2022
Trade receivables	31,151	30,019
Insurance and warranty claim receivables	3,385	2,710
Federal and state tax receivables	3,022	3,901
Other industry related receivables	2,843	3,729
Allowance for expected credit losses	(10)	(18)
Receivables, net	40,391	40,341

Summary of Net Unrealized Gains and Losses That Relate To Marketable Securities

The calculation of net unrealized gains and losses that relate to marketable securities held as of September 30, 2023 is as follows:


	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
Unrealized (losses) gains recognized during the period on equity securities held as of the end of the period	$	(925)	$	102
Plus: Net losses recognized during the period on equity securities sold during the period	(30)		(112)
Net losses recognized during the period on equity securities	$	(955)	$	(10)

The calculation of net unrealized gains and losses that relate to marketable securities held as of September 30, 2022 is as follows:


	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Unrealized losses recognized during the period on equity securities held as of the end of the period	$	(3,749)	$	(9,774)
Plus: Net gains (losses) recognized during the period on equity securities sold during the period	—		—
Net losses recognized during the period on equity securities	$	(3,749)	$	(9,774)

Schedule of Property and Equipment Useful Lives

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


Assets	Depreciable Life	Current Residual Value
Aircraft	7 years	$	50
Spare engines	7 years	$	25
Rotable parts	7 years	10		%
Ground equipment	up to 10 years	0		%
Office equipment	up to 10 years	0		%
Leasehold improvements	Shorter of asset or lease life	0		%

Summary of Original Cost of Company's Fixed Assets and Accumulated Depreciation or Amortization

The table below sets forth the original cost of the Company’s fixed assets and accumulated depreciation or amortization as of the dates presented:


	September 30, 2023				December 31, 2022
Assets	Original Cost		Accumulated Depreciation/ Amortization		Original Cost		Accumulated Depreciation/ Amortization
Aircraft	$	70,779	$	47,655	$	70,089	$	40,544
Spare engines	164,706		117,372		163,708		103,834
Rotable parts	27,412		18,406		27,936		18,655
Ground equipment	2,850		2,217		2,718		2,063
Office equipment	4,692		4,331		4,519		4,218
Leasehold improvements	1,052		625		818		452
Total	$	271,491	$	190,606	$	269,788	$	169,766

Summary of Classification of Marketable Securities And Long Term Investments

The tables below set forth the Company’s classification of marketable securities and long-term investments as of the dates presented:


	September 30, 2023
	Total		Level 1		Level 2		Level 3
Marketable securities – exchange-traded funds	$	110,992	$	110,992	$	—	$	—
Marketable securities – mutual funds	25,570		25,570		—		—
Long-term investments – bonds (see Note 6)	4,275		—		4,275		—
Total	$	140,837	$	136,562	$	4,275	$	—


	December 31, 2022
	Total		Level 1		Level 2		Level 3
Marketable securities – exchange-traded funds	$	109,178	$	109,178	$	—	$	—
Marketable securities – mutual funds	44,649		44,649		—		—
Long-term investments – bonds (see Note 6)	4,275		—		4,275		—
Total	$	158,102	$	153,827	$	4,275	$	—

Debt (Tables)

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Long-Term Debt

Debt consists of the following (with interest rates, as of the dates presented):


	September 30, 2023		December 31, 2022
Aircraft Notes, due December 31, 2025 (4.0%)	$	52,554	$	61,222
Less: current maturities	52,554		9,154
Long-term debt	$	—	$	52,068

Maturities of Long-Term Debt

Maturities of debt for the periods subsequent to September 30, 2023, are as follows:


Fiscal Year	Amount
October 2023 through December 2023	$	486
2024	52,068
2025	—
Total	$	52,554

Lease Obligations (Tables)

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

Summary of Operating Lease Related Terms and Discount Rates

The table below presents operating lease related terms and discount rates as of:


	September 30, 2023
Weighted-average remaining lease term	2.62 years
Weighted-average discount rate	6.15	%

Schedule of Components of Lease Costs

Components of lease costs were as follows for the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease costs	$	1,467	$	1,477	$	4,425	$	4,423
Short-term lease costs	81		77		207		306
Variable lease costs	(89)		63		(105)		158
Total Lease Costs	$	1,459	$	1,617	$	4,527	$	4,887

Schedule of Future Minimum Lease Payments Under Non-Cancelable Operating Leases


Fiscal Year	Amount
October 2023 through December 2023	$	1,369
2024	3,328
2025	2,596
2026	202
2027	75
Thereafter	358
Total lease payments	7,928
Less imputed interest	620
Total Lease Liabilities	$	7,308

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Cash Obligations

The following table sets forth the Company’s cash obligations for the periods presented:


	Payment Due for Year Ending December 31,
	Total		2023 (October through December)		2024		2025		2026		2027		Thereafter
Aircraft Notes Principal	$	48,600	$	—	$	48,600	$	—	$	—	$	—	$	—
Aircraft Notes Interest	3,954		486		3,468		—		—		—		—
Operating Lease Obligations	7,928		1,369		3,328		2,596		202		75		358
Total	$	60,482	$	1,855	$	55,396	$	2,596	$	202	$	75	$	358

Earnings Per Share and Equity (Tables)

9 Months Ended

Sep. 30, 2023

Earnings Per Share [Abstract]

Schedule of Calculations of Net (Loss) Income Per Common Share

Calculations of net (loss) income per common share for the periods presented were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net (loss) income	$	(3,688)	$	8,022	$	(11,975)	$	32,366
Preferred stock dividends	358		198		915		594
Net (loss) income applicable to common stockholders	$	(4,046)	$	7,824	$	(12,890)	$	31,772
Weighted average common shares outstanding
Shares used in calculating basic earnings per share	43,654		45,776		44,299		46,637
Stock option	—		—		—		131
Series C Preferred	—		16,500		—		16,500
Shares used in calculating diluted earnings per share	43,654		62,276		44,299		63,268
(Loss) earnings allocated to common stockholders per common share
Basic	$	(0.09)	$	0.17	$	(0.29)	$	0.68
Diluted	$	(0.09)	$	0.13	$	(0.29)	$	0.50

Supplemental Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2023

Supplemental Cash Flow Elements [Abstract]

Summary of Cash and Cash Equivalents


	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	15,839	$	33,333
Restricted cash	707		849
Total cash, cash equivalents, and restricted cash	$	16,546	$	34,182

Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

Intangible assets consist of the following indefinite-lived assets as of the dates presented:


	September 30, 2023		December 31, 2022
	Gross Carrying Amount		Gross Carrying Amount
Trade names and air carrier certificate	$	5,300	$	5,300
Total	$	5,300	$	5,300

Summary of Significant Accounting Policies - Additional Information (Detail) $ in Thousands		1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 01, 2023 USD ($)	Oct. 31, 2020 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2023 USD ($) aircraft	Sep. 30, 2022 USD ($)	Dec. 31, 2022 USD ($)	Feb. 28, 2023	Feb. 27, 2023	Nov. 04, 2022 USD ($)	Oct. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Summary of Significant Accounting Policies [Line Items]
Concentration risk					10.00%
Revenue from contract with customers amount of consideration receivable due for settlement			$ 30,149		$ 30,149
Receivables, net			40,391		40,391		$ 40,341
Payments for proceeds from incentives and penalties			(6)	$ 2,137	1,236	$ 5,443
Contract liabilities			0		0		1,985
Deferred fixed revenue			0		0		16,561
Fulfillment costs	$ 774
Reimbursable costs			6,537	3,310	18,511	10,589
Amortization expense related to fulfillment costs			33	0	54	0
Short-term contract assets			1,618		1,618		0
Cash settlement payment		$ 670
Note receivable		$ 11,048	11,048		11,048
Cash received for opening of a crew base											$ 294
Revenue related to performance obligation			0	5,138	1,641	12,746
Undisputed notes receivables										$ 50,126
Interest rate								12.00%	4.50%
Interest receivable			1,034		1,034
Restricted cash			707		707		849
Marketable securities			136,562		136,562		153,827
Construction in process			2,741		2,741		2,237
Depreciation expense			6,365	6,224	18,928	18,656
Cash and cash equivalents			15,839		15,839		33,333
Operating expenses			55,128	55,910	180,159	164,994
Allowance for expected credit losses			10		10		18
Air Wisconsin
Summary of Significant Accounting Policies [Line Items]
Deferred upfront fee revenue							0
Customer Concentration Risk
Summary of Significant Accounting Policies [Line Items]
Receivables, net			40,391		40,391
United Airlines
Summary of Significant Accounting Policies [Line Items]
Receivables, net			30,543		30,543		29,770
American Airlines
Summary of Significant Accounting Policies [Line Items]
Receivables, net			608		608
October 2020 Amendment
Summary of Significant Accounting Policies [Line Items]
Fixed revenues previously deferred			0	453	649	1,611
Deferred upfront fee revenue			0		0		1,335
Deferred payment												$ 4,410
Deferred revenue											$ 73
Related Party
Summary of Significant Accounting Policies [Line Items]
Notes receivable			21,093		21,093
Related Party \| Air Wisconsin
Summary of Significant Accounting Policies [Line Items]
Receivables, net			29,509		29,509
Contract liabilities			0		0		2,307
Fixed revenues previously deferred			0	5,180	16,561	22,548
Upfront fee			0	932	1,335	3,314
Fulfillment costs			0	100	143	355
Deferred upfront fee revenue			3,680		3,680
Reimbursable costs					602
Estimated non-refundable upfront fee revenue					4,600
Non-refundable upfront fee revenues			193	0	319	0
Revenue related to one-time assistance payment, estimated monthly support fee and heavy maintenance revenues			$ 1,946	$ 0	$ 3,206	$ 0
Revenue Benchmark
Summary of Significant Accounting Policies [Line Items]
Concentration risk			0.10%	99.90%	50.10%	99.90%
Revision of prior period, reclassification, adjustment
Summary of Significant Accounting Policies [Line Items]
Operating expenses				$ 892		$ 1,796
American Capacity Purchase Agreement
Summary of Significant Accounting Policies [Line Items]
Contract with customers liability revenue recognized			$ 0		$ 0
American Capacity Purchase Agreement \| Monthly Support Fee And Anticipated Heavy Maintenance Reimbursements
Summary of Significant Accounting Policies [Line Items]
Short-term contract assets			2,259		2,259		0
Accounts receivable set off against contract with customers liability non current			247		247		0
American Capacity Purchase Agreement \| Related Party \| Air Wisconsin
Summary of Significant Accounting Policies [Line Items]
Receivables, net			$ 608		608
Reimbursable costs					$ 3,998
American Capacity Purchase Agreement \| Revenue Benchmark
Summary of Significant Accounting Policies [Line Items]
Concentration risk			99.70%		49.70%
American Capacity Purchase Agreement \| Revenue Benchmark \| Customer Concentration Risk
Summary of Significant Accounting Policies [Line Items]
Concentration risk percentage			99.70%		49.70%
American Capacity Purchase Agreement \| American Airlines \| Related Party \| Air Wisconsin
Summary of Significant Accounting Policies [Line Items]
Number of aircrafts operated \| aircraft					45
United Capacity Purchase Agreement
Summary of Significant Accounting Policies [Line Items]
Contract with customers liability revenue recognized			$ 0		$ 1,985
United Capacity Purchase Agreement \| Revenue Benchmark
Summary of Significant Accounting Policies [Line Items]
Concentration risk			0.10%		50.10%
Short-Term Contract with Customer
Summary of Significant Accounting Policies [Line Items]
Fulfillment costs					$ 108		0
Deferred upfront fee revenue			$ 641		641		0
Long-Term Contract with Customer
Summary of Significant Accounting Policies [Line Items]
Fulfillment costs					613		0
Deferred non-refundable upfront fee revenue			$ 3,039		$ 3,039		$ 0

Summary of Significant Accounting Policies - Summary of Receivables, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Accounting Policies [Abstract]
Trade receivables	$ 31,151	$ 30,019
Insurance and warranty claim receivables	3,385	2,710
Federal and state tax receivables	3,022	3,901
Other industry related receivables	2,843	3,729
Allowance for expected credit losses	(10)	(18)
Receivables, net	$ 40,391	$ 40,341

Summary of Significant Accounting Policies- Summary of Net Unrealized Gains and Losses That Relate To Marketable Securities (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Accounting Policies [Abstract]
Unrealized (losses) gains recognized during the period on equity securities held as of the end of the period	$ (925)	$ (3,749)	$ 102	$ (9,774)
Plus: Net gains (losses) recognized during the period on equity securities sold during the period	(30)	0	(112)	0
Net losses recognized during the period on equity securities	$ (955)	$ (3,749)	$ (10)	$ (9,774)

Summary of Significant Accounting Policies - Schedule of Property and Equipment Useful Lives (Detail) $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($)
Aircraft
Property, Plant and Equipment [Line Items]
Depreciable Life (in years)	7 years
Current Residual Value	$ 50
Spare engines
Property, Plant and Equipment [Line Items]
Depreciable Life (in years)	7 years
Current Residual Value	$ 25
Rotable parts
Property, Plant and Equipment [Line Items]
Depreciable Life (in years)	7 years
Current Residual Value	10.00%
Ground equipment
Property, Plant and Equipment [Line Items]
Depreciable Life (in years)	10 years
Current Residual Value	0.00%
Office equipment
Property, Plant and Equipment [Line Items]
Depreciable Life (in years)	10 years
Current Residual Value	0.00%
Leasehold improvements
Property, Plant and Equipment [Line Items]
Current Residual Value	0.00%

Summary of Significant Accounting Policies - Summary of Original Cost of Company's Fixed Assets and Accumulated Depreciation or Amortization (Detail) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Original Cost	$ 271,491	$ 269,788
Accumulated Depreciation/ Amortization	190,606	169,766
Aircraft
Property, Plant and Equipment [Line Items]
Original Cost	70,779	70,089
Accumulated Depreciation/ Amortization	47,655	40,544
Spare engines
Property, Plant and Equipment [Line Items]
Original Cost	164,706	163,708
Accumulated Depreciation/ Amortization	117,372	103,834
Rotable parts
Property, Plant and Equipment [Line Items]
Original Cost	27,412	27,936
Accumulated Depreciation/ Amortization	18,406	18,655
Ground equipment
Property, Plant and Equipment [Line Items]
Original Cost	2,850	2,718
Accumulated Depreciation/ Amortization	2,217	2,063
Office equipment
Property, Plant and Equipment [Line Items]
Original Cost	4,692	4,519
Accumulated Depreciation/ Amortization	4,331	4,218
Leasehold improvements
Property, Plant and Equipment [Line Items]
Original Cost	1,052	818
Accumulated Depreciation/ Amortization	$ 625	$ 452

Summary of Significant Accounting Policies- Summary of Classification of Marketable Securities And Long Term Investments (Detail) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	$ 140,837	$ 158,102
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	136,562	153,827
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	4,275	4,275
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Marketable securities – exchange-traded funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	110,992	109,178
Marketable securities – exchange-traded funds \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	110,992	109,178
Marketable securities – exchange-traded funds \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Marketable securities – exchange-traded funds \| Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Marketable securities – mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	25,570	44,649
Marketable securities – mutual funds \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	25,570	44,649
Marketable securities – mutual funds \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Marketable securities – mutual funds \| Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Long-term investments – bonds (see Note 6)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	4,275	4,275
Long-term investments – bonds (see Note 6) \| Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Long-term investments – bonds (see Note 6) \| Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	4,275	4,275
Long-term investments – bonds (see Note 6) \| Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	$ 0	$ 0

Liquidity (Detail)	9 Months Ended
Liquidity (Detail)	Sep. 30, 2023 aircraft
Related Party \| American Airlines \| American Capacity Purchase Agreement \| Air Wisconsin
Liquidity Uncertainty And Going Concern [Line Items]
Number of aircrafts operated	45

Capacity Purchase Agreements with United and American (Detail)	1 Months Ended
	Jul. 31, 2023 arbitrator	Aug. 31, 2022 aircraft
Pending Litigation \| Air Wisconsin v. United
Types Of Commercial Aircraft [Line Items]
Number of arbitrators \| arbitrator	3
CRJ-200 \| Maximum \| American Airlines
Types Of Commercial Aircraft [Line Items]
Number of aircrafts operated \| aircraft		60

Property and Equipment (Detail)	9 Months Ended
Property and Equipment (Detail)	Sep. 30, 2023 aircraft
CRJ-200
Property, Plant and Equipment [Line Items]
Number of aircraft acquired	64

Income Taxes (Detail)	3 Months Ended		9 Months Ended
Income Taxes (Detail)	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Tax Disclosure [Abstract]
Effective tax rate	17.80%	23.80%	22.90%	23.80%
Federal statutory rate	21.00%	21.00%	21.00%	21.00%

Debt - Long-Term Debt (Detail) - USD ($) $ in Thousands	Sep. 30, 2023	Feb. 28, 2023	Feb. 27, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Interest rate		12.00%	4.50%
Total	$ 52,554
Less: current maturities	52,554			$ 9,154
Long-term debt	$ 0			52,068
Aircraft Notes Due December 31, 2025
Debt Instrument [Line Items]
Interest rate	4.00%
Total	$ 52,554			$ 61,222

Debt - Additional information (Detail) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Jun. 30, 2023	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Aug. 04, 2023	Dec. 31, 2022	Jul. 31, 2003
Extinguishment of Debt [Line Items]
Total outstanding balance		$ 52,554		$ 52,554
Gain on extinguishment of debt		0	$ 53	70	$ 53
Operating lease right-of-use asset		9,708		9,708			$ 13,480
Hangar
Extinguishment of Debt [Line Items]
Operating lease right-of-use asset		2,373		2,373			2,547
Aircraft Notes Principal
Extinguishment of Debt [Line Items]
Total outstanding balance		48,600		48,600		$ 48,600
Aircraft Notes Due December 31, 2025
Extinguishment of Debt [Line Items]
Total outstanding balance		$ 52,554		$ 52,554			$ 61,222
Extinguishment of debt principal amount	$ 3,500
Gain on extinguishment of debt	$ 70
City of Milwaukee, Wisconsin variable rate Industrial Development Bonds
Extinguishment of Debt [Line Items]
Aggregate principal amount								$ 4,275

Debt - Maturities of Long-Term Debt (Detail) $ in Thousands	Sep. 30, 2023 USD ($)
Debt Disclosure [Abstract]
October 2023 through December 2023	$ 486
2024	52,068
2025	0
Total	$ 52,554

Lease Obligations - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Lessee, Lease, Description [Line Items]
Operating lease right-of-use asset	$ 9,708		$ 9,708		$ 13,480
Current portion of operating lease liability	3,649		3,649		5,091
Long-term operating lease liability	3,659		3,659		$ 5,849
Cash payments included in the measurement of lease liabilities related to operating leases			4,285	$ 4,484
Operating lease rent expense	$ 1,459	$ 1,617	$ 4,527	$ 4,887
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease terms	3 months		3 months
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease terms	10 years 3 months 18 days		10 years 3 months 18 days

Lease Obligations - Summary of Operating Lease Related Terms and Discount Rates (Detail)	Sep. 30, 2023
Leases [Abstract]
Weighted-average remaining lease term	2 years 7 months 13 days
Weighted-average discount rate	6.15%

Lease Obligations - Schedule of Components of Lease Costs (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Leases [Abstract]
Operating lease costs	$ 1,467	$ 1,477	$ 4,425	$ 4,423
Short-term lease costs	81	77	207	306
Variable lease costs	(89)	63	(105)	158
Total Lease Costs	$ 1,459	$ 1,617	$ 4,527	$ 4,887

Lease Obligations - Schedule of Future Minimum Lease Payments Under Non-Cancelable Operating Leases (Detail) $ in Thousands	Sep. 30, 2023 USD ($)
Leases [Abstract]
October 2023 through December 2023	$ 1,369
2024	3,328
2025	2,596
2026	202
2027	75
Thereafter	358
Total lease payments	7,928
Less imputed interest	620
Total Lease Liabilities	$ 7,308

Commitments and Contingencies - Additional Information (Detail) $ in Thousands	1 Months Ended
	Jul. 31, 2023 arbitrator	Apr. 30, 2020 USD ($)	Sep. 30, 2023 USD ($) letter_of_credit	Aug. 04, 2023 USD ($)
Other Commitments [Line Items]
Number of outstanding letters of credit \| letter_of_credit			6
Total outstanding balance			$ 52,554
Air Wisconsin v. United \| Pending Litigation
Other Commitments [Line Items]
Number of arbitrators \| arbitrator	3
Treasury Payroll And Support Programme
Other Commitments [Line Items]
Proceeds from other long term debt		$ 42,185
Accounts And Notes Receivable \| United Capacity Purchase Agreement
Other Commitments [Line Items]
Loss contingency receivable			52,276
Related Party \| Air Wisconsin
Other Commitments [Line Items]
Outstanding credit facility			377
Aircraft Notes Principal
Other Commitments [Line Items]
Semi-annual installments			3,500
Total outstanding balance			48,600	$ 48,600
Letter of Credit
Other Commitments [Line Items]
Outstanding credit facility			$ 372

Commitments and Contingencies - Cash Obligations (Detail) - USD ($) $ in Thousands	Sep. 30, 2023	Aug. 04, 2023
Contractual Obligation Fiscal Year Maturity [Line Items]
Total	$ 52,554
2023 (October through December)	486
2024	52,068
2025	0
Total lease payments	7,928
2023 (October through December)	1,369
2024	3,328
2025	2,596
2026	202
2027	75
Thereafter	358
Total cash obligations	60,482
2023 (October through December)	1,855
2024	55,396
2025	2,596
2026	202
2027	75
Thereafter	358
Aircraft Notes Principal
Contractual Obligation Fiscal Year Maturity [Line Items]
Total	48,600	$ 48,600
2023 (October through December)	0
2024	48,600
2025	0
2026	0
2027	0
Thereafter	0
Aircraft Notes Interest
Contractual Obligation Fiscal Year Maturity [Line Items]
Total	3,954
2023 (October through December)	486
2024	3,468
2025	0
2026	0
2027	0
Thereafter	$ 0

Related-Party Transactions (Detail) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Jun. 30, 2021	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Related Party Transaction [Line Items]
Financial advisory and management services payments		$ 38	$ 38	$ 113	$ 113
Annual recurring fee payable monthly	$ 150
Related Party \| Financial Advisory And Management Services \| AWAC Aviation Inc
Related Party Transaction [Line Items]
Financial advisory and management services payments		$ 60	$ 60	$ 180	$ 180

Earnings Per Share and Equity - Schedule of Calculations of Net (Loss) Income Per Common Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Earnings Per Share [Abstract]
Net (loss) income	$ (3,688)	$ 8,022	$ (11,975)	$ 32,366
Preferred stock dividends	358	198	915	594
Net (loss) income available to common stockholders	$ (4,046)	$ 7,824	$ (12,890)	$ 31,772
Weighted average common shares outstanding
Shares used in calculating basic earnings per share (in shares)	43,654	45,776	44,299	46,637
Stock option (in shares)	0	0	0	131
Series C Preferred (in shares)	0	16,500	0	16,500
Shares used in calculating diluted earnings per share (in shares)	43,654	62,276	44,299	63,268
(Loss) earnings allocated to common stockholders per common share
Basic (in dollars per share)	$ (0.09)	$ 0.17	$ (0.29)	$ 0.68
Diluted (in dollars per share)	$ (0.09)	$ 0.13	$ (0.29)	$ 0.50

Earnings Per Share and Equity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands								1 Months Ended	3 Months Ended		9 Months Ended
	Sep. 27, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Mar. 30, 2022	Jan. 31, 2020	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Class of Stock [Line Items]
Stock option (in shares)									0	0	0	131,000
Preferred stock, liquidation preference (in dollars per share)									$ 0.80		$ 0.80
Common stock, convertible, conversion price (in dollars per share)											$ 0.15091
Percentage of the diluted capital stock											27.50%
Dividend declared									$ 358		$ 915
Treasury Stock
Class of Stock [Line Items]
Cash received for cancellations of options						$ 969
Mezzanine Equity Series C Convertible Redeemable Preferred Stock
Class of Stock [Line Items]
Common stock converted (in shares)											16,500,000
Issuance of stock (in shares)								4,000,000
Cumulative quarterly preferred stock dividend rate percentage											6.00%
Increase or decrease in rate of preferential dividends											1.00%
Period of increase in rate of preferential dividends (in months)											6 months
Series C Preferred Stock, outstanding (in shares)									4,000,000		4,000,000		4,000,000
Dividend declared	$ 198	$ 198	$ 198	$ 198	$ 198		$ 198
Temporary equity conversion cap excess dividend	$ 160	$ 107	$ 54
Series C Preferred Stock
Class of Stock [Line Items]
Issuance of stock (in shares)											3,245,000
Cumulative quarterly preferred stock dividend rate percentage											0.50%
Series C Preferred Stock, outstanding (in shares)									755,000		755,000

Supplemental Cash Flow Information - Additional Information (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Supplemental Cash Flow Elements [Abstract]
Cash payments for interest	$ 1,598	$ 1,784
Cash payments for income taxes	46	3,348
Cash payments included in the measurement of lease liabilities related to operating leases	$ 4,285	$ 4,484

Supplemental Cash Flow Information - Summary of Cash and Cash Equivalents (Detail) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Supplemental Cash Flow Elements [Abstract]
Cash and cash equivalents	$ 15,839	$ 33,333
Restricted cash	707	849
Total cash, cash equivalents, and restricted cash	$ 16,546	$ 34,182

Intangible Assets (Detail) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Trade names and air carrier certificate	$ 5,300	$ 5,300
Total	$ 5,300	$ 5,300

Stock Repurchase Program (Detail) - Common Stock - Stock Repurchase Program - USD ($) shares in Thousands, $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Jan. 31, 2023	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Mar. 30, 2021
Equity, Class of Treasury Stock [Line Items]
Authorized amount of repurchase, up to							$ 1,000
Automatic increase per calendar month							$ 1,000
Federal corporate excise tax repurchase percentage	1.00%
Share repurchase value minimum threshold exempt from tax	$ 1,000
Stock repurchased (in shares)		374	364	1,764	7,664
Treasury Stock
Equity, Class of Treasury Stock [Line Items]
Excise tax liabilities incurred during the period and capitalized		$ 8		$ 38
Restricted Cash
Equity, Class of Treasury Stock [Line Items]
Total cash		$ 329		$ 329		$ 475