Allegiant Travel Company (NASDAQ:ALGT) Q3 2023 Earnings Call Transcript

Allegiant Travel Company (NASDAQ:ALGT) Q3 2023 Earnings Call Transcript November 2, 2023

Operator: Good morning, and thank you for standing by. Welcome to the Q3 2023 Allegiant Travel Company Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Sherry Wilson. Please go ahead.

Sherry Wilson: Thank you, Lisa. Welcome to the Allegiant Travel Company’s Third Quarter 2023 Earnings Call. On the call with me today are Maurice Gallagher, the company’s Executive Chairman and CEO, Greg Anderson, President; Scott DeAngelo, our EVP and Chief Marketing Officer; Drew Wells, our SVP and Chief Revenue Officer; Robert Neal, SVP and Chief Financial Officer and a handful of others to help answer questions. We will start the call with commentary and then open it up to questions. We ask that you please limit yourself to one question and one follow-up. The company’s comments today will contain forward-looking statements concerning our future performance and strategic plans. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements.

These risk factors and others are more fully disclosed in our filings with the SEC. Any forward-looking statements are based on information available to us today. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise. The company cautions investors not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize. To view this earnings release, as well as the rebroadcast of the call, please feel free to visit the company’s Investor Relations site at ir.allegiantair.com. And with that, I’ll turn it over to Maurice.

Maurice Gallagher: Thank you, Sherry, and well, hello again. Some of you may recognize my voice. I hope you’ve all been well the past 1.5 years. It’s good to be back. As you saw in our release, Allegiant Airlines generated an operating profit in Q3 after adjustments of our 11th quarter in a row of airline operating profits beginning in Q1 of ’21. Our year-to-date 2023, 13% airline operating margin leads the industry for those that have reported. And we have achieved these results while continuing to invest for the future. During the past quarter, we’ve installed two substantial management systems, SAP and Navitaire, both are operating as I write this. As you saw at the top of our release Sunseeker will open December 15. It’s been a five-year effort, almost three years longer than planned, but the wait will be worth it.

Micah Richins, our Sunseeker President and his cohorts, Jason Shkorupa and Paul Berry, all MGM Las Vegas veterans are putting the final touches on this magnificent project. The critical reason I endorsed Sunseeker was the quality of this management group. Our ability to attract these gentlemen to convince them to work for a startup, move their families to Florida, speaks volumes of their belief in this project. And Micah is here with us today, I’m happy to announce to answer any questions. Our first MAX 8200 is scheduled for delivery in early 2024. Our MAX fleet will have a premium seating of just over 50 of our 190 seats. And we’ll improve our economics in the coming years, besides the benefits from the quality and number of seats that will have a substantially improved fuel burn compared to the Airbus, improved reliability, maintenance time, while maintaining a comparable Airbus ownership expense.

We’re excited about onboarding the MAX in coming years and beyond. During the past few months, there have been discussions concerning the structural shift in our industry, particularly as it pertains to the ULCCs. We stirred in Frontier invented this industry segment during the past 20 years, focusing on low cost and high growth for our leisure customers. There’s been and still are differences between our business model and the Frankie-centric model. At the end of the day, you judge us on our profitability. Costs are a part of the equation, but having the lowest cost does not guarantee success. We at Allegiant have a flexible model focused on flying when the customers want to fly. Or said differently, we minimize our flying in off-peak periods and peak up for the peak periods.

That has been our model for over 20 years. In addition, our direct-to-customer sales approach is less expensive and allows us to capture important customer information. I might add we have over 18 million names in our customer database at this point. It also allows us to capture more of a leisure customers wallet with our third-party revenue program. During the past five years, we have prioritized enhancing our brand as well. These efforts include adding Allegiant Stadium, our soon to be open Sunseeker Resort, our best in show completion percentage, and our number one ranked credit card program. All are difference makers. These investments have allowed us to maintain unit revenues that have been consistently higher than the high utilization ULCCs. Today, as much as 40% higher.

As we all know, revenue production is the issue of the day. Our revenue production is one of the critical differences that separates us from the ULCC crowd. Our network structure is also different. We have operated in an out and back schedule since our earliest days. It’s much simpler to manage than the traditional hub and spoke. Each route stands alone. We monitor what we believe its capacity should be and hence its profitability. We are diligent in managing individual route earnings. We have had a 22-year history of consistent profits and growth with this scheduling approach, industry-leading profits, I might add. Additionally, with our focus on smaller cities to sun and find destinations, we’ve been able to own the majority of our markets.

75% of our routes have no direct competition. As I said, we own these markets. This contrasts with the 90% overlap the high utilization ULCC is having in our networks. Lastly, we have identified as many as 1,400 new domestic routes that we could add in the coming years, plus the addition of our international partnership with Viva. More subtle difference has been the pace of growth. During our 22 years, we’ve grown to 127 aircraft or an average of 5.7 per year. Others in this space have grown at a much faster pace. To date, adding aircraft almost 3x faster per year than we have. Still others have planned deliveries in the coming years that have double digit yearly ads with a three handle if you do the math. Fast growth while attractive to the audience on the phone here creates potential operational problems including a concentrated fleet of the same aircraft type which has historically been desired but today has become a burden with the Pratt Motor problem.

Operational size and complexity that most likely outpaces management experience, and lastly a pronounced competitive response given the network overlap with the larger incumbent carriers. We are built for the long haul for consistency. We have a bright future. I understand there’s a new label as well for ULCC circulating LMAs or low margin airlines. That description does not define nor fit our model. At this time, given the names seem to be involved, given new names, I’m proposing a new label for us. No more ULCC and certainly no LMA. Our new label is PLFC, Profitable Leisure Focus Carrier. That’s what we’re going to be called from now on. We are in a class of our own. Lastly, let me thank our team members. There’s been a difficult 3 to 4 years.

They have been supporting our passengers with safe, reliable, and friendly service during this time. They have run the best airline this year, an industry leading 99.8% completion factor. In today’s era of poor service and canceled flights, they have put us back where we belong, at the top of the pack. Thank you very much. Greg?

Greg Anderson: Maury, thank you. Great to have you back. As we experience broader macro uncertainty around geopolitical risk inflation and high interest rates there also appear to be signs of structural changes happening in our industry. In the face of these uncertainties, Allegiant is uniquely set up to continue to reshape the leisure travel sector. We have been strengthening our foundation to do just that. Operational excellence underpins everything we do and our year-to-date controllable completion of 99.8% demonstrates that also resulting in a staggering reduction of nearly $100 million or 75% in total IROP costs year-over-year. Our disciplined approach to costs and particularly our variable cost model gives us a competitive advantage as we adjust capacity to the environment.

Whether day of week month of year or route by route, our planning teams are expertly matching capacity with leisure demand. As leisure demand seasonality has more normalized we are working towards a measured approach to take utilization higher during the peak demand periods or in other words peak the peaks. For instance, average aircraft utilization was seven hours during this past summer increasing that by one hour would drive roughly $50 million more in earnings. The composition of our mix fleet balanced with both low per seat and low per trip costs will further benefit us by deploying the right gauge aircraft in the right markets at the right time. Our 737 MAX aircraft will strengthen our fleet flexibility. It’s nearly 20% fuel burn advantage yet similar ownership cost profile translates into incremental earnings power of more than two million more per Max aircraft when compared to our existing fleet.

Furthermore, we are excited to expand premium sittings for our customers. Every MAX aircraft delivered will enter into service in the Allegiant extra configuration while the retrofit of the in-service A320 has already begun and will complete over time. Our Allegiant Extra product continues to deliver as it is in high demand with our customers and driving meaningful value. During 2023, we expect to fly nearly 18 million customers. Notably, we were the most convenient and only nonstop option available on approximately 75% of the routes from the communities we serve. Our direct distribution strategy coupled with our continued ascension of our brand is unlocking deep and long-standing relationships with our customers. On an annual basis nearly two-thirds of our customers are repeating their experience with us 12 million of whom are members of our award-winning Allways rewards fueling the amazing growth of our aspirational loyalty program that Scott will discuss momentarily.

Our continued investments in technological upgrades to our foundational systems such as SAP Navitaire, Trax and NAVBLUE not only optimize scale and provide new capabilities they also free up development resources for strategic differentiated products to drive more revenue or reduce costs. Furthermore Navitaire will unlock international expansion for us into coveted beach destinations in Mexico alongside our joint venture partner Viva Aerobus once we can secure the necessary government approvals. Each of these initiatives mentioned have or should provide significant long-term benefits for the company. However, none have near as creative impact as Team Allegiant. As we listen and learn from our team members across the system, I am constantly energized by their commitment and their passion.

They are dedicated to taking care of our customers and each other. And while earlier this year we ratified and extended two of our four labor agreements we still have two to go one with flight attendants and one with pilots. I want to reiterate management’s commitment to getting agreements in place that our flight crews will be proud to support. What Team Allegiant has accomplished this year is truly remarkable. While today our broad footprint serves 125 cities with over 550 routes throughout the United States we are positioning to grow our airline profitably as the environment allows. Allegiant’s business model and the role we play in the communities we serve has netted us into the fabric of the nation’s leisure travel industry. We have identified 1400 plus incremental routes that fit beautifully into the Allegiant network.

As we expand in those markets we further solidify the important and necessary part we play in the travel industry throughout the US. And in closing I want to extend my sincere thanks to all of our team members. Together we are running a great airline. Together we have meaningfully strengthened our foundation and together Team Allegiant has proven to be unstoppable. Thank you. Scott?

Scott DeAngelo: Thanks, Greg. Third quarter saw a continued post-pandemic normalization of domestic leisure travel demand. We saw peak demand levels during July when we top bookings and load factor versus last year’s historic highs we saw slight demand decline during August versus prior year as back to school came mid-month for many of the cities we serve and summer vacation season came to an end. And we saw further modest demand decline in September versus prior year as we officially entered the off-peak leisure travel season. As you all know our business model has always focused on the domestic leisure traveler and these peak versus off-peak ebbs and flows in domestic leisure travel demand regularly existed before the pandemic and a year removed from unprecedented levels of pent-up revenge travel demand in 2022 the same familiar ebbs and flows have returned this year.

That said, there are two areas of potential domestic leisure travel demand headwinds that are being talked about a lot in the industry and that I’d like to address based on what we’re seeing and hearing from our customers at Allegiant. The first is the economy. We conduct a weekly customer sentiment tracking survey where we ask our customers how they feel about the state of the economy. At the beginning of the third quarter about 50% said they felt the economy was getting somewhat or much worse. In the past several weeks, that number has grown to nearly 70%. However, during that same time span as captured within the same survey the portion of customers saying they intend to book air travel in the next 90 days has remained virtually unchanged.

We believe this seeming contradiction can be easily explained by the majority of our customers who say they are traveling to visit friends or family as well as by the material portion of our customers who say they are traveling between a primary residence and a second vacation home. As we’ve stated in the past, it’s been our experience that these remain the most reliable and resilient forms of leisure travel during economic downturns. The second area is international travel. For the past quarter, we’ve also surveyed our customers weekly on this topic. Consistently, up to 20% of our customers do say that they either had traveled or planning to travel abroad this year. However, the vast majority of those nearly 90% said that their international travel is in addition to not in substitution of their domestic leisure travel plans.

While these observations may be different than what other airlines are seeing or saying it likely speaks to Allegiant’s differentiated low-utilization business model with a focus on selling our all-nonstop route network direct to consumers under a surging brand and winning loyalty programs that are unique and their ability to engage and reward the domestic leisure traveler. Speaking of our loyalty programs, our most lot and engage segment within the Allways Rewards program is of course our co-brand credit card holders. Third quarter year-to-date these cardholders have exhibited 11% greater spend on the card on a per cardholder basis versus last year. In addition, our co-brand cardholders continue to exhibit strong travel frequency and spend with net revenue burped up 10% versus prior year.

Through third quarter total co-brand credit card program compensation has been $88 million which is 14% higher than last year and puts us well on our way to surpassing $100 million in total program compensation for the full year. Our Allways Rewards noncredit card program also continues to show strong positive impact on customer behavior. Third quarter year-to-date nearly 13 million Allways Rewards member passenger segments have been booked that’ 17% more than last year and for the same time period spend per member is about 5% greater than last year. Finally as Maurice mentioned completion of enterprise-wide systems implementations that provide a modern technology foundation for all areas of our business will free up technology development capacity for smaller but nonetheless critical strategic enhancements to our website mobile app and loyalty programs helping us supercharge our ability to drive greater revenue outside the aircraft and high-margin third-party products and loyalty program partnerships.

We believe that these enhancements enable us to further differentiate Allegiant and further diversify the ways we drive revenue. And with that, I’ll turn it over to our Chief Revenue Officer, Drew Wells.

Drew Wells: Thank you, Scott, and thanks, everyone, for joining us this morning. I’m extremely pleased with the record third quarter performance of $565 million in total revenue, growth of nearly 1% on system ASM reduction of 0.4%. This combination produced a TRASM of $12.78, which vested any previous third quarter and grew year-over-year by 1.4%. Our commitment to matching capacity and demand set us up for success in the third quarter with nearly 45% of our scheduled ASMs coming in July and in September having just more than half of July flying. However, we are still meaningfully constrained in the best demand period, limiting our ability to truly match with appropriate capacity. Despite the relatively outweighted July level of flying, our utilization is almost 2.5 hours per aircraft per day lower than 2019, lower than any years since 2015 when MD-80s grew over 60% of our ASMs. We have proven the ability to achieve peak line and as we will always schedule peak periods to the first operational constraint, either aircraft or crew, expect to restore utilization alongside the release of those constraints.

As we continue to learn what the new normal means for the travel industry, one component of pre-pandemic travel has firmly returned, the gap between peak and off-peak performance. By way of example, Saturdays and post Labor Day, September 2023 were approximately 30% worse than July Saturdays in terms of unit revenue and in line with 2019’s peak trough variance. Last year, that figure was just 15% worse. And as one would expect, the combination of outperforming off-peak periods in late 2022 and current year demand normalizing creates a tough environment for year-over-year figures. This makes me even prouder of the results we generated. A significant part of this was continued success of our air ancillary products, which grew approximately 10% on a per passenger basis year-over-year.

First and foremost, our learning and experimenting with bundled ancillaries continue to show incredible strides. Additionally, Allegiant extra contribution on a per flight basis has improved year-over-year in every quarter despite increasing the number of configured aircraft. We will end the year with roughly 11% of the fleet configured for Allegiant Extra and expect that to grow to nearly 30%, of the year-end 2024 fleet. Underscoring both in air ancillary at large are the expected improvements of Navitaire, one of the ramifications of specific use case internal development is some mismatch of existing capabilities versus the off-the-shelf products. I truly believe this is a significant signal of strength for our internal capabilities that will become supercharged in the future state.

So while we still have immense confidence in the upside to come with Navitaire, we actually expect to see some slight headwinds into the fourth quarter due to a short-term small loss of functionality. I believe it’s worth reminding that the entire leisure demand ecosystem remains well above pre-pandemic levels with July roughly flat with 2022 and high teen percent above 2019. In fact among carriers reporting thus far Allegiant is the only carrier of double digits in both capacity and unit revenue year-over-year both in the third quarter and year-to-date through the third quarter. We are also seeing some normalcy as we shift into 4Q and expect a TRASM reasonably in line with pre-pandemic historic median sequential change while certainly off from the extraordinary 4Q 2022 comp it should still produce a better 4Q TRASM than any pre-pandemic fourth quarter and the last nine months 2023 TRASM higher than the last nine months 2022.

Additionally, there is some growth through the fourth quarter around 5%. This should put full year scheduled service capacity up approximately 1.5% versus full year 2022 while system capacity should be approximately plus 1.8%. The growth in the quarter is focused in two areas: weeks with large forecasted cost per gallon decline like in October and holiday weeks which will extend into early January 2024 as well. As I mentioned even with the growth holiday flying will still be lower than we can ultimately desire. However, we believe we struck the right balance of profitability potential and operations within the limitations present particularly after 2022’s weather impacted holiday operations across the industry. Further we are treading carefully with capacity in early 2024 with so many moving parts Boeing deliveries crew polls for transition training and persistent elevated fuel among others.

I expect the first half of the year to be fairly flat with a full year target of up mid-single digits. The holiday weeks as with all peaks have shown incredible resilience. Even Labor Day in September was a record. I maintain high expectations for holiday performance while expecting normal leisure softness around them. And with that, I’d lie to turn it over to Robert.

Robert Neal: Thanks, Drew, and good morning, everyone. This morning we reported our third quarter 2023 financial results which included an adjusted consolidated net income of $2.7 million and an adjusted earnings per share of $0.09. Included in that number is approximately $6 million in costs related to, resort operations ahead of opening our Sunseeker property later this year. Adjusted net income for the airline was $7.9 million yielding an adjusted airline earnings per share of $0.31. Total operating revenue during the quarter was $565 million up approximately 1% over the same quarter last year and the highest of any third quarter in our history. This was on a slight capacity reduction of 0.8% resulting in TRASM of $0.1278 which was 1.4% higher as compared to the same quarter last year.

Fuel costs increased sharply beginning mid-August driving a September cost per gallon 27.5% above July. This brought our third quarter cost per gallon to $3.09 15% above the prior quarter and brings our estimated full year cost per gallon to $3.12 an increase of $0.22 from the prior guide of $2.90. Adjusted non-fuel unit costs were just under $0.085 which was an increase of 9.5% over the third quarter of 2022. Our non-fuel unit cost increase was driven by approximately seven points in wage increases for frontline employees inclusive of our pilot payroll accrual which was in place for all three months during the quarter. Other drivers of the unit cost increase were 1.7 points from lower asset utilization and approximately 0.5 point related to inflationary cost in aircraft maintenance and stations and the rest from a handful of other items.

Assuming an estimated fuel cost of $3.12 per gallon for the full year we are expecting an adjusted airline earnings per share of approximately $8.15 at the midpoint down from $11.75 at the midpoint of prior guidance. Fuel costs drive a reduction of $2.40 per share and the reduced off-peak revenue makes up most of the remaining $1.20. As Maury noted, opening of Sunseeker has shifted by about two months. And as a result, we are now expecting only about two weeks of revenue production during the year, which would take our full year Sunseeker guidance to the loss per share of $1.75 as compared to our prior estimate of $1.20. Although I’m pleased to see significant improvement in 2023 over the prior year with respect to financial performance, we still have work to do to return to sustained industry-leading margins.

With the introduction of a new fleet type alongside a volatile fuel environment and the normalization of leisure demand patterns, we expect to take a conservative and measured approach to growth during next year. We’ve made significant investments in the business this year, and we remain confident these investments will deliver expanding margins in the coming years. On the balance sheet, we ended the quarter with net debt of $1.3 billion and just under $1.3 billion in available liquidity, which included $1 billion in cash and investments and $280 million in undrawn revolvers. In addition, we are pleased to have more than $400 million in committed financing for upcoming aircraft deliveries and pre-delivery deposits. We refinanced seven A320 aircraft during the quarter and used proceeds towards this morning’s prepayment of a $150 million bond, which was scheduled to mature in 2024.

With committed financing covering the vast majority of our CapEx obligations up to the second quarter of next year and our largest 2024 maturity now repaid, we expect to maintain liquidity at the greater of two times our air traffic liability or $850 million at year-end. Third quarter airline capital expenditures were $157.6 million, which included $112 million in aircraft inductions and pre-delivery deposits, $45.5 million in other airline CapEx and deferred heavy maintenance spend of $14 million. Capital expenditures related to Sunseeker were $71.6 million. Our guidance today reduces our full year 2023 estimated airline CapEx, excluding heavy maintenance to approximately $590 million largely due to the timing of aircraft deliveries shifting some of this spend into 2024 and 2025.

Turning to fleet. We inducted one A320 aircraft during the quarter, which was owned on property at the end of the second quarter. We expect two additional A320 purchases during the fourth quarter before we begin taking deliveries of our 737 MAX order book in early 2024. During the quarter, we reached agreement with Boeing on an amendment to our order for 50 737 MAX aircraft, whereby, the firm aircraft are now scheduled to deliver through the fourth quarter of 2025. We’ve converted six of our MAX seven positions to the MAX A200 variant, and we’re pleased to now have 80 options in our MAX order book, securing opportunities for fleet growth through 2029 and providing tremendous flexibility, allowing us to evaluate the results of a new fleet type in our business prior to making further commitments.

I’m pleased with our year-to-date financial performance, yielding an adjusted airline operating margin of roughly 13%, notwithstanding, the continued heightened fuel. Our loan utilization model sets us up nicely to expertly deploy capacity to meet seasonal demand trends, and we will enhance this with the introduction of more efficient aircraft next year. By the time of our next earnings call, we expect to have opened Sunseeker, taking delivery of our first MAX aircraft and starting to see the benefits of Navitaire and the systems investments we’ve made in 2023. Certainly, we’re not out of the woods on execution risk yet, but we are excited about the positive momentum we have on these initiatives heading into 2024. Thank you, Lisa, and we can now begin taking analyst questions.

Operator: Thank you. [Operator Instructions] Our first question today will be coming from Michael Linenberg of Deutsche Bank. Your line is open.

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Q&A Session

Q – Shannon Doherty: Hi, everyone this is actually Shannon Doherty on for Mike. Maury, congratulations and welcome back. If I may you guys first half results were much better than the second half. It was actually quite a meaningful deceleration in earnings into the second half. So, how does that impact your decision-making for 2024 when you think about capacity, which markets to serve fleet planning if you can give us anything — any more color here that would be helpful.

Greg Anderson: Hi, Shannon this is Greg. Why don’t I kick it off. There are some components in the first half of the year. Obviously, demand strength in the off-peak fuel that helped fuel that the higher profitability versus the second half of the year. But as we think about 2024, we’re not coming out and to give a guide this year, but I think BJ hit on it really nicely in his remarks where we should think about 2024 of unlocking a lot of the benefits and the investments that we’ve made. First and foremost from my perspective, we want to continue to work hard and get labor deals complete for our flight crews. That’s a key component systems. Both Maury and I alluded to this, as it’s Scott DeAngelo, in our opening remarks that we’ve made massive investments in new kind of next generational type systems.

And when I say investments I mean these are hundreds of thousands of man hours that we’ve been putting in on each one of these systems SAP Trax. We’ve cut those two over. We have two more to go. And what we’re going to do with those systems, now is we’re going to get better. We’re going to learn how to use them properly. We’re going to become more efficient; we can scale better. So that’s an important element as well. Obviously, Sunseeker opening bringing on the Boeing aircraft. So there’s just been a lot of investments in the business, that I think truly believe will strengthen us. The one thing I want to say is you think about capacity next year and balancing that with the environment and the normalization that we’ve seen it’s how do we get back to peak in those peaks.

And we’ve been constrained for various reasons, whether that be the broader ecosystem ATC whether that be labor. But really, if you think about 2023 and if you remember a year ago when we talked about entering 2023 we said, we needed to level set operations. We need to make sure we ran an integrity — operational excellence and integrity and we’ve done that. And now it’s how do we balance and build that back. And as we think about peaking the peaks I’m not sure if Drew or anyone wants to add any commentary there for next year or anything else on 2024 .

Drew Wells: Yes. I hit on this a little bit in my remarks, but the peaks are subject to any operational constraint all of the time, right? And right now it’s a bit more constraining than typical. We earn a significant amount of our annual earnings through those periods. There will come a time that we get some relief on those constraints and then we will be able to peak. We’ve been kept relatively similar in terms of departures per peak day in the summer for the last several years, which is not something we’ve experienced in the past. Beyond that, we’ve taken a lot of strides to maintain operational integrity and we kind of throw a lot of things at that. And now we can start to claw those back in a meaningful way we start to understand how each of those components build up to the whole.

So I think what you’re seeing is something that’s on the more conservative side relative to what we’ve thrown out before. We’ve proven that we can do peak close to 10 hours a day and then I have every bit of confidence we’ll get back there.

Maurice Gallagher: Well, one other comment. The third quarter is always our weakest quarter. And what we’ve got going on now is our fourth quarter just hasn’t shown up, because we’ve got a resetting of going back to traditional network types of things and people are trying to get back into a form factor that they’re used to. And so Drew and Greg’s point we need to now –2024 will be the first time I think when we can really look and reinstitute the 2019 model that we so well ran back then. And that we may not be hitting on all similars in 2024, but we’ll be well on our way through our typical very good first quarter very good second quarter third quarter breakeven week fourth quarter start getting ready for the next year and do the same thing.

Q – Shannon Doherty: Thank you. And did I hear you guys correctly that we should think first quarter capacity somewhat flat and still targeting mid-single digits next year capacity for the full year?

Scott DeAngelo: Generally, yes first half of the year probably roughly flat with mid-singles but full year target.

Q – Shannon Doherty: Okay. Great. And if I can squeeze one more in really quickly. Greg and you guys thank you for all the remarks on utilization, but I was intrigued by the one-hour increase in utilization that could have possibly increased profits by $50 million. If you were to just pinpoint what is limiting you the most right now on increasing your aircraft regulation? I know you guys listed a bunch of things like ETC labor. Where is the biggest pain point currently?

Greg Anderson: No, thanks for the question, Shannon. And that would be just in the summer period. So if you think about it on a full year the summers are — so longest peak period. But if you add March and you end the winter of the holidays, it’s probably more like $100 million in total if you’re able to take an hour up to utilization. I’d say, it just depends on the stuff on the as we were more aircraft constrained. In the summer it’s been more labor constraints, but also trying to balance what we’re seeing with some of the disruptions around airports or ATC. But kind of underpinning all of this Shannon though is operational integrity and we capped our peak period flying this year before we even enter it. We just said we won’t do any more than this roughly seven hours per day until we build it back.

Maurice Gallagher : And I might just add real quick, that’s the biggest components to peaking the peaks. But we probably launched between half hour an hour of utilization simply with elevated fuel and kind of the demand versus fuel bake-offs happened in off-peak periods. But there’s still value to be had in of piece despite all of this, but it’s much harder to find at $3.50 a gallon than it is at $2.15, kind of where we were in 2019. So I don’t want to fully lose sight of that either.

Q – Shannon Doherty: Yes. Thank you all for your time.

Operator: Thank you. While we prepare the next question. Our next question will be coming from Savi Syth of Raymond James. Your line is open.

Savi Syth: Hey, good morning. Could I ask you about your 2024 fleet plan, Boeing you said two more Airbus and then kind of is it the rest of Boeing then and hopefully, you’ll get to a month?

Robert Neal: Yes. So Savi, it’s BJ. For 2024, we are currently — we are contracted to take delivery of two airplanes per month throughout 2024. As you know, and I think you’re alluding to, there’s a lot of moving parts there. So we’re staying close to Boeing on that. And it’s for that reason that we kept a good amount of flexibility in the used fleet that we’ll keep in service for next year. Candidly, there’s a few other candidates out there that we would like to retire a little bit more quickly, but we’re going to keep those in through next year as a bit of an insurance policy. The two A320s that you’re talking about are purchased this year and inducted in, I think, January, February or sometime during the first quarter of next year. And then we have the MAX aircraft entering service late first quarter and building on that throughout the year. On the high end, I would expect the total fleet count around 141, 41, but that’s not guidance. That’s about as high as we go.