Allegiant Travel Company (NASDAQ:ALGT) Q4 2022 Earnings Call Transcript

Allegiant Travel Company (NASDAQ:ALGT) Q4 2022 Earnings Call Transcript February 1, 2023

Operator: Good day and thank you for standing by. Welcome to the Full Year and Fourth Quarter 2022 Allegiant Travel Company Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. 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, Justin. Welcome to the Allegiant Travel Company’s full year and fourth quarter 2022 earnings call. On the call with me today are John Redmond, the Company’s Chief Executive Officer; 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 plan. 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, feel free to visit the Company’s Investor Relations site at ir.allegiantair.com. With that, I’ll turn it over to John.

John Redmond: Thank you very much, Sherry, and good afternoon, everyone. I’d like to begin by taking a moment to thank our team members for all their efforts this past year. 2022 was yet another difficult year. The operation was hit with countless challenges from COVID spikes to hurricanes and most recently, winter storms, but you stepped up and made sure our customers were taken care of. Your commitment to safety and service is remarkable, and I am proud of how you responded to these challenges. You likely heard the news that our COO, Scott Sheldon has made the decision to resign to pursue other opportunities. I want to thank Scott for his many years of service and dedication to our airline, and we wish him all the best in his future endeavors.

With Scott’s departure, Greg Anderson will continue to serve as President and will assume oversight of the Company’s operational teams. As you all know, Greg has been with the Company for more than a decade. There is no better person to take on this role. He is highly respected both internally and within the industry, and I have the utmost phase he will execute on the numerous strategic initiatives we have in store this year. I’m pleased to report that despite the operational difficulties during the first half of the year, the last half of 2022 is a testament to the success of the challenges we implemented. We exited the year with a controllable completion percentage of 99.5%. Earlier this year, I noted we are a margin-focused company, and with operational improvements, margins would grow.

This is exactly what happened we saw during the fourth quarter. We recorded an operating margin, excluding employee recognition bonus and Sunseeker special charges, just shy of 16% for the quarter. In addition, we generated more than $140 million in EBITDA during the quarter. Underpinning this strong financial performance is a robust demand environment that shows no signs o slowing. Fourth quarter TRASM of just about $0.14 with the highest quarterly TRASM in company history. This helped contribute to a record-setting total revenue for 2022 of $2.3 billion. We have great momentum heading into 2023. In regards to our ongoing negotiations with our flight attendants and pilots, it is our expectation to have an agreement in principle done with our flight attendants by midyear.

To date, we have reached tentative agreements on 2/3 of open sections. The pilot negotiations are progressing as well with tentative agreements reached on about half the open sections. In an effort to expedite the bargaining process and secure an agreement in principle, the Company and the union jointly requested NMD mediation. We look forward to working collaboratively on an agreement that our pilots are proud to support while providing the Company with the ability to continue to fly a safe, reliable operation and remain positioned to grow profitably. It is our expectation to have an agreement in principle done by midyear. Touching on Sunseeker, we continue to make progress towards completion. Construction crews are back in full force. Much of the remediation work related to Hurricane Ian is now behind us.

Further investigation necessitated an increase in total estimated damage related to Ian resulting in additional special charges of $5 million in losses. We continue to believe all Hurricane Ian damage will be fully recoverable by insurance. In addition, a significant thunderstorm followed Hurricane Ian in early November prior to Ian damage being fully remediated, resulting in additional damage as well as a small elevator fire in November. Losses related to these events were recorded in the amount of $10 million and $1.2 million, respectively. Both events are covered by insurance. Recorded losses were offset by $18 million insurance proceeds related predominantly to Ian damages. As insurance recoveries are received during the coming months, we will record these special charges offsetting the recorded losses.

Also worth pointing out again, we have business interruption insurance, which we believe will cover the period May ’26 and the pre-hurricane scheduled opening date to the opening date of the resort. Given the delays caused by Ian in the subsequent storm, we pushed the first accepted reservation date to October 15 of this year. We are still working through remediation time lines related to the recent storms, but intend to provide a firm opening date at our next earnings call in April. We have not provided any guidance in the release on Sunseeker operations due to uncertainty at this early stage on the opening date. In the Q1 2023 earnings call in April, we will provide guidance on preopening expenses leading up to opening the resort, revenue, EBITDA and operating income for the year 2023.

We will also update final construction budget numbers and a business interruption update to the extent we have information. We also intend to extend to any of you who are interested, the opportunity to tour the resort in early May. Sherry Wilson will be happy to coordinate with you dates and times in April this year. In regards to our partnership with Viva Aeorbus, we still expect all the necessary approvals will be in place, including category one status in Mexico in the first half of this year. As you saw in the release, we are returning to providing annual guidance as we did in 2019. At the end of each quarter, we will update the annual guidance, if appropriate, given the results to date and future forecasts. As a reminder, we will be segment reporting as it relates to Sunseeker in 2023.

In addition, we will be comparing to 2022 and not 2019. We have progressed beyond 2019 results and field moving to prior year or 2022 is a more comparable and relevant going forward. In closing, Allegiant has a strong history of shareholder returns, and I am pleased to report we bought back 377,529 shares during the fourth quarter at an average price of $78.94 a share, totaling $29.8 million. Furthermore, our Board approved increasing our repurchase authority to $100 million. This authorization reaffirms the Board’s conviction in both future results and balance sheet strength. With that, I will turn it over to Greg.

Greg Anderson: John, thank you, and I echo your sentiment around wishing Scott the best of luck in his future endeavors. He and I have worked shoulder to shoulder for nearly 15 years here, which has been an amazing and fun ride. One of the best compliments I can provide, Scott, is the organization is in terrific hands. We have an incredibly strong team with an incredibly bright future. As announced, Keny Wilper will take on the interim COO role. Over the past 20 years, Keny has demonstrated his strength as an operator and as an exceptional leader. Additionally, Tracy Tulle will serve as our Chief Experience Officer. Tracy has vast operations experience overseeing both flight ops and in-flight as well as sharing our customer experience leadership team.

In this new role, she will focus on improving the customer-centric experience for our team members while also helping to develop leaders internally and drive organizational alignment. Finally, and I have to admit it’s pretty awesome to be able to say, Robert Neal is now our Chief Financial Officer; and Drew Wells is our Chief Revenue Officer. BJ and Drew are both A plus leaders, the best of what they do, and I feel no further introduction is needed, given they are already well known to our investors. I look forward to working even closer with and supporting each of them in their expanded roles. While I have mentioned only a few names, the depth and breadth throughout this organization is the best and strongest it has ever been. As we look forward to the amazing opportunities in front of us, I can speak for the team when I say we are fired up in establishing Allegiant as the most exciting story in the space.

While 2022 brought its unique — its own unique challenges, we achieved a lot during the past year. We added more than 900 team members, bringing our total team member count to more than 5,630. These team members enabled us to grow our fleet by 13 aircraft and fly 14% more ASMs as compared to 2019. The first half of 2022 experienced unique challenges with the Omicron spikes. This resulted in labor constraints and unplanned absences during peak leisure travel periods, which led to elevated cancellations. The operating environment had a significant financial impact. This operating environment had a significant financial impact of over $100 million in IROP costs, including fuel and crew costs, lost revenue and going above and beyond by providing cash compensation to those customers impacted by canceled flights.

To combat these challenges, our planning and operational teams worked closely together in refining the schedule to adjust for this environment. While this came at a cost to aircraft productivity, our operations strengthened quickly as the second half of ’22 saw a meaningful improvement controllable completion was 99.5%, more than 2 points better than the first half of ’22 and near our industry-leading controllable completion results of 2019. I am pleased to report these much improved operational results had a positive impact on our financial results. The impact from our irregular operations in the back half of the year had a total financial impact of $30 million. This is $70 million less than the first six months of ’22. These improvements showed up in our financial report as we closed out the December quarter with a 16% adjusted op margin and this is substantially higher than our initial adjusted operating margin guide of 8%.

These impressive results were achieved despite the impact to the quarter from the winter storm over the holidays. Another important element of 2022 is a significant progress we made towards our systems transformation. In 2021, we made the decision to move from certain core proprietary software systems to best-in-class systems such as SAP, Navitaire, Trax and NAVBLUE. We remain on track to go live with the first three of these key systems in 2023. NAVBLUE should follow shortly after. Such systems have been key investments to more efficiently scale the organization. In addition, we continue to track ahead of schedule on the incorporation of our new Boeing MAX aircraft as we expect our first delivery near the end of the year. We intend to place these MAX deliveries at these early MAX deliveries at our Orlando Sanford base.

And as John touched on, one of our highest priorities remains finalizing labor contracts that our crew members deserve. So far, we have put a great amount of effort into updating our agreements with both our flight attendant and pilot unions. It is our goal to get both of these deals across the finish line as soon as possible. While we are unsure around the exact timing of getting these deals done, we have incorporated the potential cost in the back half of the year within our 2023 guidance. Please realize that the actual increases in cost will depend on the economic terms reached and the timing of the agreements. As a reminder, although these contracts will be cost headwinds, we expect them to increase momentum towards restoring staffing levels and optimizing aircraft utilization, but we are not assuming any improved productivity in our full year ’23 capacity guide, BJ will provide more full year guidance detail momentarily.

We will continue our focus on strengthening the operation and are excited about what’s in front of us in ’23. As we’ve highlighted on prior calls, we have laid the foundation for executing on these items and our teams across the organization are making steady progress on the implementations of the new systems and other initiatives such as labor contracts, Sunseeker, Viva and Boeing. These leadership changes announced will further support these initiatives. As we progress further into ’23 and have better vision on the completion time frames, we expect to host an Investor Day to more specifically outline expected contributions from these strategic initiatives. More information will follow on that front. And with that, I’ll turn it over to Scott DeAngelo, our Chief Marketing Officer.

Scott DeAngelo: Thanks, Greg. Fourth quarter saw continued strong leisure travel demand for Allegiant across both web and app traffic to allegiant.com as well as passenger segments bulk, capping off a record-setting year for Allegiant on both measures. Surging awareness and preference for the Allegiant brand, along with our direct-to-consumer distribution approach, continues to give us an advantage in capturing demand by being able to satisfy the two most important buying factors for leisure travelers, low fares and non-stop flights. For full year 2022, 136 million web users came to allegiant.com, up 24% from 2019. And notably, despite the fact that no new route — that new route grows limited, excuse me, new web users to allegiant.com were up by nearly 40% from 2019.

Why? Because as I referenced the past two quarters, our addressable customer audience continues to grow as more new customers enter the ULCC category and consider Allegiant for their leisure travel needs. Their seeking relief from sky high fares and looking to avoid the risk inconvenience and time associated with connecting flights through crowded airport hubs. What’s more, 77% of our allegiant.com users came via our most direct and lowest-cost channels. That’s direct URL, our app, e-mail marketing or organic search. That’s up 37% from 2019. It means we’re relying less and less on paid advertising as awareness of and preference for the Allegiant brand continues to grow in a scalable fashion based on our fixed investments like Allegiant Stadium and our Live Nation partnership as well as our Always Rewards loyalty programs, both co-brand credit card and non-card.

We continue to outperform expectations with our co-brand card program, ending the year with more than 400,000 active cardholders and more than 150,000 new cardholders acquired in 2022. That’s more than 40% higher than we had acquired the previous highest year, which is 2021. As a result, the co-brand card program drove total compensation of more than $100 million in 2022. In addition, our non-card loyalty program, Always Rewards, added 2 million new members last year and now totals 15 million members. In 2022, 3.2 million customers, nearly 70% of our total unique transacting customers were active members of the Always Rewards program. And on average, they exhibited 39% greater booking frequency than non-members and an average spend per booking that was 36 higher — 36% higher than non-members.

This left in average spend was driven by higher take rates in air ancillary products as well as higher attachment of third-party products like hotel and rental car. This customer behavior reinforces the continued opportunity that Allegiant has to sell beyond the aircraft in order to achieve greater revenue per passenger growth that can outpace and is not constrained solely by capacity growth. In terms of our customer makeup, Alecensa elite subset of Always Rewards members and cardholders, just over 0.5 million customers, which is about 15% of our total unique transacting customers for the year, fly three or more times with us and drive roughly 60% of both total passenger segments booked and total revenue for the year. In the past week, we surveyed a representative sample with more than 3,000 respondents from this group of frequent flyers to understand why they traveled with us and what their future and travel intention was.

And the news keeps getting better for Allegiant. Of these Allegiant frequent flyers, nearly 80% travel for leisure only and nearly 20% traveled for bleisure, both business and leisure. More than 40% said they stayed with family or friends and nearly 40% said they stayed at their second or vacation home. That means around 80% fall into types of travel that are the most resilient during negative economic climates. To validate this, we ask these customers the extent to which they expected their travel plans with Allegiant to be impacted given the prospect of worsening economic conditions. And here’s what they told us. Basically, have said that economic considerations would have no impact on their flying behavior with Allegiant in the next 12 months and nearly one quarter said that they would be more likely to fly with Allegiant in the next 12 months.

It’s common for many to think that ULCCs have an infrequent and transitory customer base. But that’s not the case for Allegiant. We have a core base of loyal frequent flyers who drive a majority of our revenue, while at the same time, we continue to add new customers that are defecting from other airlines, namely Southwest and legacy carriers to our customer base and record numbers. And in looking forward at forward-looking searches for travel at allegiant.com searches for our all-important travel season during spring break and summer are up by 40% to 75% versus last year, which, as we all know, was a historic high year for bookings and revenue. Put simply and in conclusion, Allegiant has a trifecta when it comes to our balanced customer base.

We have a solid core of frequent flyers who show no signs of retracting their travel behavior with us in the upcoming year regardless of the economic climate. And at the same time, we are also showing lift across all existing repeat customers that are members of our loyalty programs. And we’re seeing a continued surge in new customers that are coming to Allegiant in record numbers from other airlines because they’re seeking low fares and non-stop flights along with our strong and growing assortment of asset-light, high-margin third-party leisure products that we make available at allegiant.com. Put another way, all of these customer segments are seeking to live what we at Allegiant refer to as the non-stop life. And with that, I’ll turn it over to Drew Wells, our Chief Revenue Officer.

Drew Wells: Thank you, Scott, and thanks, everyone, for joining us this afternoon. I’m extremely pleased to close out the year with a record $2.3 billion in total revenue, easily the best number in company history and 25% higher than the previous best in 2019. When accounting for seasonality, nearly all metrics improved sequentially through the year to produce the record results. And while we remain flexible through a lot of the year to find the right capacity levels, the teams continue to optimize incredibly well within shifting constraints to produce great results. The fourth quarter had the most stability throughout the year, and our results reflect that. Fourth quarter revenue came in nicely above the range at $612 million and 32.6% above the fourth quarter of 2019, despite ASMs ending approximately 2.5 points lower at the system level and 3 points lower for scheduled service.

We did take a benefit of approximately $9.6 million associated with updated guidance on breakage factors for the co-branded credit card and the initial guidance for the Always Rewards program. Even excluding that benefit, the divergence between revenue and ASMs produced an all-time best TRASM just under $0.14 and nearly 20% higher than 4Q 2019. The yield performance in the quarter was the major upside catalyst, particularly in December. The roughly 75% sequential improvement exceeded our expectations and drove almost 6.5 points of upside to the quarter. Total ancillary per passenger exceeded $70 for the first time at the quarter level and total revenue per passenger of 151 was also an all-time high. On the weather disruption front, Winter Storm Elliott saw a revenue loss of $8 million and nearly 2 points of lost capacity.

The close-in demand, some of which was rebooking of impacted customers and some incremental was exceptional around the holidays to round out the year. Further, while the rest of Florida bounced back quickly from Hurricane Ian, Monte Gordo did see continued softness through the quarter and was a headwind of just under the expected 3 points. The impact should temper a bit into the first quarter but we still expect a roughly 1.5 point headwind to total revenue as the region continues to recover. In November, we opened our 24th aircraft, crew and maintenance base in Provo, Utah. Since our entry to the market in 2013, we’ve been the low-cost option for Provo and the surrounding areas. We began serving our 13th route Nashville on February 15, which is coincidentally our 10-year anniversary in the city.

As we turn toward the New Year, we have a somewhat different than usual story. Our midpoint year-over-year ASM growth rate of 4% would be lower than any full year other than 2011. First and foremost, continuing the successes of the second half of 2022 and ensuring a stable and solid operation is paramount to 2023. Second, our EPS guide includes a continued elevated fuel cost per gallon, which will temper the amount of off-peak growth as we continue to balance fuel and demand in non-peak periods. First quarter growth will be close to 1% year-over-year. The second and third quarter should be a bit higher than the first before a high single fourth quarter growth rate. Perhaps worth reminding that the first quarter is still slated to be 20% larger than the first quarter of 2019.

The Omicron real comparison of 1Q ’22, coupled with a continued robust demand environment and low growth rate should provide some runway for great unit revenue metrics. I’m expecting year-over-year TRASM growth in the mid-20% for the first quarter, and I’m extremely encouraged by the peak spring break outlook. Load factors are higher and the discrepancy between the search volumes Scott and Angela mentioned and available inventory bodes well for yield results. Through the rest of the year, we are not contemplating material changes broadly to the economy. While we read and hear the same headlines, we have not seen any booking impact from our leisure customer base and have forecasted as such. Additionally, the network will be the most mature of any time in Allegiant’s history in terms of markets in their first 12 months.

Approximately only 4% of the on-sale scheduled for the first half of ’23 is in that maturing window. We should also see the rollout of our Navitaire commercial platform and the expansion of our Allegiant Extra program, both providing air ancillary tailwinds weighted more heavily to the second half of the year. Collectively, this leads to expect unit revenues in the positive mid-single-digit percent range over the last nine months as we hit more reasonable and challenging comps. There are significant catalysts for Allegiant’s revenue capabilities through 2023 and beyond. We are setting an incredible foundation for us to continue to capitalize on what remains a truly remarkable leisure demand environment. And with that, I’d like to turn it over to BJ.

Robert Neal: Thanks, Drew, and thank you to everyone on the call for joining us today. This afternoon, we reported fourth quarter net income of $52.5 million. Adjusting to exclude the 2022 employee recognition bonus, special charges related to Sunseeker, earnings per share was $3.17 in the quarter, well above our initial guidance. Catalysts behind the strength of our fourth quarter results included, of course, the sustained strong demand environment, operational improvements, which brought decreased irregular ops costs, a favorable — more favorable fuel cost than we had anticipated and a better-than-expected non-fuel cost performance. Fourth quarter unit costs, excluding fuel, employee recognition bonus and the Sunseeker special charge was 7.56 cents, up 12.2% as compared with the fourth quarter of 2019 on 10.9% more ASM capacity.

The cost increase as compared to fourth quarter ’19 was primarily comprised of 5.5 points for reduced aircraft utilization, 3.8 points in labor productivity and 1.5 points related to Winter Storm Elliott. As you’ve seen in our release, we will temper capacity growth in ’23 to ensure that operational integrity is prioritized. Even with this reduced capacity, we are forecasting full year airline only earnings per share of approximately $7. On an assumed average fuel cost of $3.60 per gallon and increased labor cost assumptions related to pilot and flight attendant contracts, which for our guidance purposes, would begin midyear. With respect to Sunseeker, we expect to record our normal quarterly operating expense run rate of roughly $5 million to $7 million in each of the first two quarters of the year.

We are not prepared today to provide — to guide full year preopening expenses or operating income associated with the property until we have a firm opening date on our next earnings call. Turning to CapEx. We expect total CapEx for the airline in 2023 to be roughly $700 million, comprised of roughly $560 million related to aircraft, engines, PDPs and induction costs and the remaining $140 million coming from other airline CapEx. In addition, we expect deferred heavy maintenance costs similar to levels observed in 2022 or roughly $55 million. We expect to receive 2737 MAX 8200 aircraft during late 4Q ’23. While it’s certainly possible for these aircraft to be in service by year-end, we are not — we are planning conservatively for operational requirements of onboarding a new fleet type at the end of the year and have chosen not to plant ASM capacity for these aircraft until the early weeks of 2024.

We remain in discussions with Boeing to finalize our 2024 delivery schedule, but we can share that directionally, we’re planning to take roughly two aircraft per month throughout next year based on what we know today. For 2023, we plan to induct 7 A320 aircraft into the operating fleet throughout the year, two of which have already entered revenue service in January and three of which were owned a non-property at the end of 2022. We expect the bulk of our CapEx spend during 2023 to be debt financed and have been pleased with the level of financing support and attractive terms proposed to us thus far. Although 2023 will be a heavy CapEx year for Allegiant, we plan to maintain total available liquidity of roughly 2x our ATL balance and expect to end the year with roughly $1 billion in cash and investments.

In closing, I’d like to add my thanks to our more than 5,600 team members for their incredible efforts during 2022. After a very challenging first half of the year, the team came together in the back half to deliver results, which reduced the financial impact of the regular operations by over 70% as compared to the first two quarters. We’re extremely proud of how the team turned the story around, particularly in the fourth quarter and excited about the momentum we have stepping into 2023. With that, thank you, Justin. We can begin taking analyst questions.

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Q&A Session

Operator: Our first question comes from Catherine O’Brien from Goldman Sachs. Your line is now open.

Catherine O’Brien: I just wanted — so I just wanted to think about some of the puts and costs — putting things across this year. Trying to think about what the impact adding the flight attendant and pilot contract for half a year and then slowing capacity growth will mean I think the last time we talked about cost was kind of flattish on high single-digit growth ex-labor contracts. So just trying to think about the walk from there, underlying your current EPS guidance?

Greg Anderson: Hey, Catie, it’s great to hear you. This is Greg. Why don’t I kick it off here? So just on your point on the — as BJ mentioned, beginning in the back half of the year, so July 1, we’ve incorporated labor deals, both CBA deals for our pilots and flight attendants. And for a half year basis, what I would expect this to be about 1/3 of CASM hit for a half year again basis. In terms of some of the other puts and takes, IROP, I think that would be a tailwind. So call it about two to 3 points year-over-year on the IROP side, we’ll see there a slight headwind in inflation, the D&A, I think there’s going to be a slight headwind there from about a point or two based on lower productivity. I mean you called out the ASMs being lower than what maybe we are anticipating at that 10%.

I think that’s worth roughly 4 points to year-over-year. But the other thing that’s probably just worth mentioning is the bonus this year — I’m sorry, last year ’22. We carved out that recognition bonus, but this year, that — in ’23 that will be included in so that too will be a headwind. But really, if you kind of compare those two year-over-year, I think they kind of wash each other out. But I’ll pause there. Obviously, we’re not giving formal guidance, if anyone else wants to add anything or if that help to answer some of your questions there, Catie?

Catherine O’Brien: Yes, that was great unless anything else to add. I do have a follow-up. So this might be front running some of the initiatives you’re going to talk about at Investor Day. But now you set a new record ancillary per passenger over $70, should we think about growth from here being a little bit more tempered going forward? Like you hit a lot of little fruit or some of the new levers that get along with Navitaire? You think there’s upside to that? Just kind of like, I don’t know, blue sky like next couple of years type number, if you have it.

Greg Anderson: Yes. Thanks, Catie. Glad to have you back. Yes, I do think that there are more step-ups to come. We have not yet rolled out Navitaire that will come likely in the second quarter. And I would expect a little bit of a tapering as that kind of builds into what it could become. Additionally, we talked about Allegiant Extra. There are only seven tails in that LOPA at the end of ’22, we’ll be up to 14 by the end of ’23. A lot of these things would be back half loaded, but really — fully pronounced at 24 stories. We will certainly get into those more at an Investor Day in terms of valuation and whatnot. Scott, I don’t know if you would like to add any more?

Scott DeAngelo: Yes. No. And I would say that even — still to just say, as we think about our bundled ancillary, which has been a big driver of people being able to not just buy a la carte, but have that fuller ancillary. We are still at levels of penetration that we think have plenty of room for upside. And last but not least, as we just continue to leverage the technology foundation that Greg mentioned would be going in to create just a better user interface and user experience. We think there’s small but material gains along the way as we make it easier to merchandise and easier for our customers to add these things to their card.

Operator: Our next question comes from Daniel McKenzie from Seaport Global. Your line is now open.

Daniel McKenzie: Congrats to Drew and BJ. I’ve got a few questions here. I guess, first, just RASM up mid-single digits, second quarter through fourth quarter. Obviously, that’s pretty strong. I’m just wondering if you can elaborate on that a bit. How big is the benefit that you just spoke to Navitaire and the, I guess, the Extra comfort, is there more from Navitaire that can help drive that? And then, I guess, secondly, related to that, if there is a mild recession, to what extent would that potentially change the forecast?

Drew Wells: Yes. Thanks, Dan. Maybe I have a slightly different perspective. I didn’t view mid-single-digit positive and overly aggressive given kind of the growth cadence we have in place. It’s been a long time since we had a series of quarters in the low to mid-single digits. And historically, we’ve had some really strong revenues along with that. If you remember back to last summer, we did have to pull out a material amount of our capacity. We actually did in April and took out 15% to 20% of our summer ASM, which did contribute some thrash as we think about final results, and I think that will be able to buoy this year a little bit more. Navitaire coming online will certainly support. Like I mentioned, we’ll get into a bit more in terms of valuation, whatnot through Investor Day, but that will provide a little bit of upside there. So all in all, I do think it’s a reasonable revenue target and not something particularly aggressive.