Scott DeAngelo: Yes. I would simply just add to that. We take a very vigilant approach of unlike air, where you really lose your chance to sell third party and/or certain ancillary when you go through OTA, the hotel, right? As soon as you’re there, F&B, golf, spa, all of those things are sold directly. And so we grab that revenue without any chunk out there. Also a very vigilant strategy to — at Allegiant or an airline, it’s not as highly as an engaged purchase as a resort, of course. And so capturing someone’s information and being able to target them directly for their second trip. That’s something that is obviously going to be done throughout your resort stay, right? We know who you are. We have information. So we feel good about our chance. Even if you booked through a third party, your first say that you’ll be coming back and booking directly through Allegiant or sunseekerresorts.com your second.
Greg Anderson: And Michael, just one — just to answer one of your questions. The airline, there’s no plan or intention for the airline to be listed on the OTAs. That will remain direct distribution. And the package were to take place with the airlines, that would go through allegiantair.com to get that package.
Mike Linenberg: I think it makes a lot of sense what you’re doing.
Maurice Gallagher: Yes. No, we agree. It’s a good short-term thing. And just a little tidbit, we started back in the early ’20s. 2000s. Customers on our airplanes used to be buying a hotel. We don’t get 1/3 of the customers now because the MGMs of the world have got their data and they go direct to them which is — will be a tactic we’ll use.
Operator: Your next question comes from the line of Ravi Shanker with Morgan Stanley.
Ravi Shanker: So I think you guys have done a really good job on the airline side of improving operational reliability and kind of basically getting the service back in the air. When do you think we get back to like a normalized level of EPS? And kind of where does that look like compared to what you guys did in 2023? Is that 2024 thing? Is it 2025? When does the normalization occur?
Greg Anderson: Ravi, it’s Greg. Why don’t I kick it off here. And then the restoration, I think we have a clear path to restore margins back to pre-pandemic levels. Labor costs, that’s a big headwind that we’re facing today, not just us, the industry. But we think a lot of the tailwinds. Utilization that we talked, about peaking the peaks, we think that can offset and then maybe even some on the labor cost. You talked about Max aircraft, bringing those on. They have 20% economic advantage, fuel burn advantage that we think will be helpful in that regard. Several revenue initiatives, co-brand, the insurance that Drew talked about, trip insurance, the PolyOne [ph], Navitaire, there’s some enhanced efficiencies that we’re working through that we think will be meaningful.
So I think all in all. Yes. Viva as well which we’ll see the timing on that. I think all in all, managing costs as well is key in our variable cost components where we can make sure that we’re matching capacity with demand. But the short answer is, I think we step up, we continue to step up. And by ’25, ’26, I think those are years that we were peaking the peak, that really shows the power of the model. And we think by ’25 in those peak periods, we can be back to that based on what we see today. And that’s where we’re going to get there.
Ravi Shanker: Got it. That’s really helpful. On topic of Viva and there were some headlines that of Mexico recently. Kind of any thoughts on what that does with the Viva related trip.
Greg Anderson: No, let me take it off, Maury. Yes. I’d say we’re still very confident that our ATI approval will take place, not a matter of if but when. It’s very pro competition pro consumer. And we’re working as diligently as we can to get it approved as soon as possible but it’s getting caught up in some of the — heavy politics between Mexico and the DOT and everything. But Maury, you’re pretty close as well. If you want to add.
Maurice Gallagher: No. I think the U.S. government and the Mexican government are swabbing over technical things, candidly, a good bottle of tequila and I sit down at the table, we’ll get it solved. But that doesn’t seem to be in the works in the next week or 2. So — we also have a labor front where we have to deal with it. So hopefully, we’ll get it by the back half of the year but don’t take that as a forecast. But I’d like to see us move forward. It’s going to be a terrific partnership.
Ravi Shanker: Thanks, Maury. If you do the tequila meet-up at Sunseeker, please invite some of us as well.
Operator: Your next question comes from the line of Helane Becker with TD Cowen.
Helane Becker: So as I look at the numbers for the airline only for now, can you speak to how we get back to 2018, 2019 margins?
Greg Anderson: Yes, it’s pretty similar, I say — just chatting with Ravi but I’ll try and give it from another perspective. One, I think fuel 2019, I think fuel was at $2.12 per gallon. It’s a little bit higher right now. While fuel could be somewhat of a pass through that lower price would be helpful from a margin perspective. I think on the pilot situation where we talk about 1 hour our peak in addition — sorry, 1 hour of increased utilization in those peak periods, the pilot situation is kind of — that’s been the largest constraint in all peak period, that’s loosening itself up. And so we’re able to kind of layer that in on top. And 1 hour more in peak flying is worth roughly, in a full year is worth $100 million. So that’s 4 points of margin right there that you could add back.
Keep in mind, we’re accruing for the pilot costs. We started that in May of last year. And then just some of the other initiatives that we talked about, Allegiant Extra, co-brand, I mean, those are ways — Viva — that we think those are ways that will be accretive to where we sit today and continue to grow and help us restore our pre-pandemic earnings.
Drew Wells: Since Greg, you mentioned fuel, it’s directly related to how much you want to operate the airline and off-peak periods as well. We aren’t constrained operationally but rather by that offset of demand and fuel in the off peaks. And we think there’s probably 30 to 60 minutes of 2023, overall utilization that was impacted by the high fuel price. So bringing that back down brings us more operations and often period which are going to trip to the bottom line, of course.
Maurice Gallagher: Yes. Helane, we also — if you average the first and second quarters last year, we were at 17%, 18% operating margins even with over $3 a gallon fuel in the first quarter. So we know how to play at that level but there’s just things that are going on. That are one-offs, particularly labor costs in the back half of the year that we’re having to readjust and get to and we need productivity as well to get back but we very much intend to get back to those numbers and we had a very, very good first half of the year.
Operator: Your next question comes from the line of Dan McKenzie with Seaport Global.
Dan McKenzie: Clarification on one of the prior questions here. The 20% upside in utilization. And if I heard that correctly, I think the timing was 2025 or 2026 based on the response to an earlier question. I guess, just clarifying that messaging — is it that we could potentially be looking at normalized earnings, say, in 2025 or 2026? Is it that simple? Or are there other things that you’re looking at here as well?
Greg Anderson: There’s other things. But yes, I mean, that’s the key, we think, a key driver to normalizing or restoring those earnings, Dan. Just to pay a little bit more detail, like, for example, in 2023 July, a very peak month, our average aircraft utilization was 7.5 hours compared to 9.8 hours in 2019. And so just — that’s a little over 20%. And we think we have a plan to restore that by the time we get into 2025. And in 2024, we’re going to layer in and narrow that gap. But we think by the time we get to ’25 is when we could fully restore it.
Dan McKenzie: Nice. Okay. And then in the past, you guys have called out a booking experience for Sunseeker that was not in line with the resort hotel peer set. And can you remind us of when that is remedied and — and how big the revenue penalty in 2024 is? I guess I’m just trying to reconcile the occupancy rate here in the average daily rate of $350. It just seems a little bit low. I mean I know it’s a lot higher than the $255 or so that you base the resort on but if you could maybe just add some additional color there.
Micah Richins: I would say that based on what we’re seeing right now and the sequential growth that we’re going and seeing that we feel comfortable with that guide. There’s certainly the opportunity for it to be better depending upon if we gain traction more quickly. But we wanted to present something that we felt was a good level set on expectations.
Maurice Gallagher: Just a little other comment. There’s been so many ups and downs over when we started this thing. We threw the pandemic and the pricing that went on in ’21. I remember looking $2,000 a night. Hotels were off the charts. And then the cost of construction and all of the things are — it’s just a different animal in many ways than what we talked about in the early days with John and the like. So my expectations are we’re going to have to reset and level set. But the demand should be there and we’re getting a pretty good unit revenue on a daily basis stuff. So we’ll have to — we’ll be talking to you over in the coming months as we get a baseline underneath it.
