Barry Biffle: Well, we plan on, as we outlined earlier, we plan on saving over $200 million on 2023 size with the simplification of the operation. So we believe we have adequate capacity to more than cover any pilot labor cost increase.
Jamie Baker: Okay, perfect. Thank you very much.
Operator: Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Andrew Didora with Bank of America. Your line is open. Please go ahead.
Andrew Didora: Hi, good morning everyone. Barry or Mark, maybe two-parter for you. What are the buckets of the cost opportunities within that $200 million that you cited in your prepared remarks? And then, Barry, the road back to profitability or stopping the margin degradation, can it really just be accomplished on the cost side and utilization side, particularly with pilots coming? Or is it really just a revenue issue whereby you just kind of have to rethink your longer-term capacity plans in the high teams? Just trying to dissect those two parts. Thanks.
Mark Mitchell: Yes, so this is Mark. So from, the $200 million that we highlighted, so, broad strokes, as we simplify, the schedule and the operational design, you’re going to have, as a benefit of that, lower crew travel, a better ability to utilize reserves, and just, better predictability of people and parts, that are going to drive cost benefits through the organization. And then with that, you’re also going to position the organization to drive higher utilization. And so I think that’s really the foundation of the $200 million.
Barry Biffle: Yes, and as far as the growth rate, I don’t see a challenge with that. I think if you look under the hood, we feel confident with the cost savings that we’re going to have, even net of the pilot cost. Like I said, you’re going to see the uneven deployment of capacity and the market saturations start to normalize. That’s a huge benefit to us. You’re going to see the rebalance. You’re going to see people come back and travel more domestic than they did on a relative basis to Europe. That’s just going to happen. And so those two together are a massive benefit. And then you’ve got our own self-help that we’re going to grow in places that are also underserved ourselves. So I think you couple that with the better reliability, what we’re doing with our loyalty on the revenue side, and we believe that we will get back to profitability and get back to great margins, and therefore we don’t have a challenge with the broker.
Andrew Didora: Got it. And then Barry, I’m just curious if you have any updated thoughts. I know there have been continued articles out there in the press just with regards to the government and kind of the excise tax on ancillary revenues. How do you think that plays out? And at what point, what would trigger kind of a change in terms of how you account for that? Thank you.
Barry Biffle: I didn’t see that. I apologize, I didn’t see the article that he’s referencing. But what specifically would you see?
Andrew Didora: Just the excise tax on ancillary revenues, the potential of putting tax on that stream of revenue on that.
Barry Biffle: Oh that’s, yes, so that actually has been out there for a long time. And I think there’s really good, I think, kind of precedent on this that goes back, I think, to the 1950s, actually. So, look, if it’s optional and it’s not part of the core service, I think the statute was very clear.
Andrew Didora: Okay, thank you.
Operator: Thank you, and one moment for our next question. And our next question is going to come from the line of Conor Cunningham with Melius Research. Your line is open. Please go ahead.
Conor Cunningham: Hi everyone. Thank you. A couple questions on revenue. There’s been a lot of discounting happening right now in the U.S. domestic market. As you run fare sales, I’m just curious if the uptake rate has been any different than it has been in the past. Just trying to understand the difference between load factor and so on as you kind of go forward. Thank you.
Barry Biffle: I’m going to let James Finner [ph], our Vice President of Revenue Management speak to that.
Jimmy Dempsey: Yes. As we look at the results, certainly we saw a bit of a slowdown in the second half of August and the September, but we’ve been pleased with the results as we’ve continued to run promotional activity through the last six, eight weeks and are optimistic as we see a trend, activity through the last six, eight weeks and are optimistic as we see a trend, particularly for the peak period, as Barry mentioned, are more resilient here in the fourth quarter. We believe low fare stimulation is fundamental to run the ULCC and remain focused on that.
Conor Cunningham: Okay. And then on these new markets that are underserved, when I think about that, I kind of think that they’re underserved for a reason. So as you guys look into those markets, is your expectation that the spooling period is going to be a lot quicker than it probably has been in the past? Just trying to understand if there’s going to be a drag on RASM as we start to add these new markets and so on, because new market development tends to be at the margin to live, just trying to understand that. Thank you.
Barry Biffle: Well, so yes, I’ve read some things about this. I think there’s some misunderstandings in the marketplace in this. So when you’re always growing, right, you always have a percentage of your airline that’s immature. And that is kind of a permanent, if you will, kind of degradation to your RASM that you take on. And this is why some airlines you see, and there’s one in particular you can go look at, that stopped their growth this year and people have slowed it down or even contracted and they’ve popped the RASM. The challenge with that is it’s temporary because once they go back to growing, they take the drag on RASM. Now in our case, what we’re seeing is that, yes, new growth in the oversaturated market I’ll continue to use Las Vegas as an example the new growth is actually not performing at levels that we’re accustomed to, but we’re also seeing our mature markets seeing significant incursion and reduction in RASM on mature markets.
So, I think there’s this confusion about it that it’s the growth that’s the problem. It’s not our growth that’s the problem. It’s the uneven deployment of capacity into a lot of our core markets in Las Vegas and certain Florida markets as an example that has caused the degradation.
Conor Cunningham: Okay. Thank you.
Operator: Thank you, and one moment for our next question. Our next — our last question comes from the line of Christopher Stathoulopoulos with Susquehanna Financial Group. Your line is open. Please go ahead.
Christopher Stathoulopoulos: Hi, good morning. Thanks for taking my question. So, Barry, your prepared remarks. You spoke about your belief that industry capacity is going to rationalize next year. And there are fewer carriers today in the US than there were 10, 15 years ago. So perhaps less of an opportunity here for some irrational behavior. But the marginal cost per seat is such where well capitalized carriers can continue to add inventory into the market here. So just help us, or if you could kind of explain your view there, particularly when we look at Southwest this morning, looks like their order book is growing, and of course you have a full order book. So just kind of want to better understand the comments around it. I appreciate the history and analogy, I think, to Europe, but here in the US here is perhaps a little bit of a different dynamic. Thanks.
