Scott Group: So, you are seeing some of it already in October.
Andrew Harrison: Yes.
Scott Group: Okay. And then, Shane, you talked about working on some pushing out some deliveries. What does that mean for overall CapEx next year?
Shane Tackett: Yes. Thanks Scott. Just for color, so you guys sort of understand, and I had mentioned this high level in the prepared remarks. We are going to be at $1.7 billion this year, down from our original thoughts about CapEx in 2023. And it’s going to be under that next year. I think we are not quite ready to say how much, but I would think in the couple of hundred million dollar range minimally. We will say more about that in the January call. Matt can just very briefly speak to what we are doing with on the great partners in this. And it speaks to the flexibility that we were able to build into this order book with them.
Matt Grady: Hey Scott. We are working with Boeing just to reshape ‘24 and even into ‘25 a bit to a capacity level that we think maximizes profitability. One of the other variables that we are managing is the MAX 10 certification. So, better playing, originally scheduled to come to us next year. Certification, obviously, is its own story and pushing out to the right. So, good common ground with us and Boeing to sort through when does that airplane come. The economics, we have been really clear on how much we like the MAX 10, and we want to take as many of those as we can. So, it gave us to join impetus to then let’s reshape ‘24 and as a result, manage our capacity down a little bit. You have heard us talk before, we leveraged the proximity with Boeing. We talk to them all the time, and it’s really good partnership with great flexibility.
Scott Group: Thank you.
Matt Grady: Thanks Scott.
Operator: And we will take our next question from Brandon Oglenski with Barclays Capital.
Brandon Oglenski: Hi. Thanks for taking my question. So, I heard some comments earlier about trying to be disciplined around growth. And I know you guys have mentioned that you are going to try to slow growth in the first quarter next year. But I guess just thinking through some of these trends that you are talking about with lower corporate shoulder demand being a little bit less than you would have thought. Is this just – looking forward, should we expect margins at Alaska are just going to be lower in 4Q and 1Q structurally? I mean they have historically, but should we expect even more volatility in the future? And does that reshape your commercial focus, I guess during your peak periods? Do you take more price then? I mean how do you reshape the formula to get the prior margin targets that you guys have set out?
Shane Tackett: Yes. Thanks Brandon. I actually think about it a little bit the opposite. I think the work that Andrew is doing and his team are doing in the first quarter is meant to improve the margin profile of the first quarter. I think we talked two calls ago that Ben had given the commercial team a challenge over the course of a few years, move back towards breakeven in the first quarter. We are the most seasonal airline, the sort of peakest airline. We have been through basically all cycles. So, we understand when and where we make all of our money. And I think we are really good at managing capacity in the peak environments. Q4, honestly, I think this Q4 is a bit of an aberration. I think the results are really a consequence of this refining margin differential in fuel price and the continued but normalizing surge in international demand.
And I think once that normalized business we are set up really well to do good. In Q4, we will probably be somewhat lower than some of the other carriers who tend to have less peakiness in the year, but I think we will be more competitive on a relative basis as we move forward.
Brandon Oglenski: Okay. I appreciate that response. But I guess as you reshape the first quarter, that’s kind of at odds with the prior view that long-term CASM could actually decline in the out years, right? Is that why I heard you say it’s going to be – take a couple of years to get back to those productivity targets.
Shane Tackett: Well, look, I think it’s very correct to think that there is a correlation between capacity deployment and unit costs. The more we deploy capacity, the easier it is to see the cost decline. But we haven’t lifted it off of the idea of unit cost ultimately going down over time. We will say more about 2024 and the trajectory when we are talking about guidance for next year, Brandon, but this is something we are thinking about a lot. I will just reiterate as we come out of all of this, we are going to have exposure to all segments of demand, including premium. We are going to increasingly be attractive from an international perspective to our partners. And I think we are going to have the best relative cost structure story of anybody in the industry. And so I think our setup is really good to continue to be a margin and financial performance leader over the long-term.
Brandon Oglenski: Alright. Thank you, Shane.
Shane Tackett: Thanks Brandon.
Operator: And your next question comes from Catherine O’Brien with Goldman Sachs.
Catherine O’Brien: Hey. Good afternoon everyone. Thanks for the time. So, we have heard from two of your peers so far that the tech sector in San Francisco in particular have seen a recent uptick in corporate travel. It sounds like you didn’t see that in the third quarter. I think your comment was stable. But then just mentioned to Ravi, there has been some momentum in October. Can you just help us size order of magnitude, that that improvement you have seen? And is that coming from San Francisco in tech or anything else you would want to highlight the recent improvement? Thanks.
Andrew Harrison: Thanks Katie. Yes, I mean and certainly some of the larger technology companies have seen quite a significant movement in volume. And of course, it depends where they fly. As I have said, some of the yield environment right now has offset some of those volumes. But for sure, there has been positive movement in California, Pacific Northwest, these big techs cover both regions actually. So, some promising signs there.
Catherine O’Brien: Okay. Great. And then maybe for Shane, pardon the modeling question, but just trying to get a sense of the aircraft rent tailwind into next year. Is there further downside to 3Q, $48 million in aircraft rent and some of those aircraft exit in September? Can you just help us think about what the right exit rate is for this year on that line item? And are there any additions on lease aircraft, we should be thinking about into next year? Thanks so much.
Emily Halverson: Hey Katie, this is Emily. What you saw this quarter in terms of aircraft point was a pretty good normalized level. We have now removed all the Airbus leased aircraft from the book, so you are not seeing that rent come through. We have taken delivery of all the MAX lease aircraft that we are going to have, which is the 13, I believe, 13 over the last year. So, that’s pretty normalized now. You will start to see from an ownership perspective, depreciation will tick up to offset some of that as we have taken on so many new MAX aircraft and those will start depreciating through the book.
