Unidentified Analyst: Hey, good morning. This is Jake on for Duane. In your prepared remarks, you mentioned right sizing the labor cost. If that’s coming from headcount, can you quantify how overstaffed you are in what particular groups? And then just relating to commentary on the last call, are you seeing the same as the rest of the industry regarding improving pilot staffing?
Ted Christie: Thanks for the question. This is Ted. I’ll start. Maybe, Scott, you want to jump in. So as I stated, we moved full bore into hiring to hit what we thought was going to be a full utilization airline on a much bigger fleet as we were moving through the second half of 2023. And that did not materialize. We’re going to be, as Scott said, down on average 25 airplanes from where we thought we would be. By the time we hit the end of the year, it’s 40. And so, that’s a lot of staffing, and that’s across the Board. It’s everything from our frontline people, our pilots, our flight attendants, the folks at the airports, quite frankly, even the general administrative workforce has some more direct related expense associated with it when you get bigger.
So, we’re working with all those various constituents to come up with solutions. We already have some progress on that. I hesitate to give you a number right now, but last year we alluded to the fact that we’re pursuing $100 million in structural cost enhancements, and it’s sort of tied to that. So it at least gives you some guidance on the bucket. And then as to your question on pilot staffing, we saw the warm start to turn a little bit in the middle part of last year, and attrition really started to, go down for us. And I’ve heard similar comments from other airlines as well. So it sounds like all the work that the industry is doing collectively to create more opportunities for pilots to get training, to move through the process, is bearing some fruit.
And we’re starting to see, once again, the principles of supply and demand working the way it’s supposed to. Wages have gone up for pilots. There’s more opportunity for prospective pilots to find options to get trained and to become a professional pilot, and that’s beginning to bear fruit. So I think we are starting to get closer and closer in balance. You want to add anything more?
Scott Haralson: No, I think you hit on that. I think that’s the point is when we think about hiring crew, it’s well in advance of taking deliveries of airplanes. And so when the AOG issue started to materialize in the back half of last year, we had to react and the number of resources that we had internally was already embedded into the business. So, this is really all about rightsizing our cost and a lot of that is labor, as Ted mentioned to the size of the business. And that will be muted in 2024 and 2025 and maybe even beyond that. So part of what we’re going to do is figure out the right staffing levels in all components of the business to make sure they’re fit for where we are.
Unidentified Analyst: Okay. Thanks. And then just a follow-up. You talked about the timing of AOG, but do you have any insight? Or can you provide any details for the time line of GTF engine compensation?
Scott Haralson: Yes, I mean from a timing perspective, let me just give you a little history. We’ve been in discussions with Pratt & Whitney for the better part of a few months figuring out how to best negotiated structure to compensate us for the AOG aircraft. And while I think we are in the later innings, we don’t have an agreement yet. So, it’s difficult to say where we think that will hit and when. But we do have some amount of compensation embedded in our guidance. Just to be clear, I just can’t give you details on what that is. That is a commercial agreement with Pratt that we will not be able to disclose the details, but I will tell you that it’s in the guidance.
Unidentified Analyst: Thank you.
Operator: All right. Thank you for your question. And our next question comes from the line of Conor Cunningham with Melius Research. Conor, please go ahead.
Conor Cunningham: Hi, everyone. Thank you, Just as we talk about this margin recovery opportunity, some of the other domestic airlines have talked about that as well. But as you sit here today, the plans that you are currently laying out gets you back to breakeven by year-end. It just seems very unit revenue driven right now. I’m just trying to understand the building blocks of how we get there overall.
Ted Christie: Thanks Conor. It’s Ted. Yes. So look, it has to be at least, if not a portion, a significant portion driven around the recovery that we’re seeing. And I think that speaks a little bit to how bad it was in the latter part of summer and the fall of last year that didn’t feel right to anybody and it feels like it was a little bit of a demand shift and maybe some macro concern about where the economy was heading. And I think those two things are starting to stabilize. So — and if we weren’t seeing some confidence in that in the way people were booking in both the peaks and off peaks right now, we would tell you, but they are, it does appear to be moving in the right direction. So, yes, it does imply that we start to continue to see that momentum, coupled with the efforts that we’re making on the cost structure and the utilization that we’re not right in the second half of last year either.
So, it’s definitely both items, but it does require the demand environment to behave the way we’re starting to see it behave.
Scott Haralson: Hey Conor, I’ll make one other comment, and Matt will probably want to chime in too. But just mathematically, as we think about the year-over-year move, we talked about our growth rate being in the low single digits kind of flat to up mid-single digits range. That alone will provide a tailwind to unit revenue, sort of this no-growth scenario versus our historical double-digit growth rate. So, we think that the move in unit revenue for us and really the domestic landscape doesn’t have to be fantastic for us to get to the unit revenue number that we’re expecting for the year. I don’t think we’re being aggressive because we do have some puts and takes on the network changes and the sort of no growth benefits to unit revenues. So I think the assumption around the domestic recovery I think is not aggressive for us at this point.
Matthew Klein: Yes. And Conor, this is Matt. I can add a little bit of color in terms of the trends that we’ve been seeing, especially as we moved out of the fourth quarter and into January. We’re definitely starting to see, if you think about the sort of the year-over-year unit revenue production, it was very — obviously not up to where we wanted it to be in Q4. What we’re seeing now as we head into January, it’s still January, but the year-over-year unit revenue change from what we saw in Q4 as we head into January and into the first quarter, we’re seeing significant unit revenue improvement on a year-over-year basis. Still down in Q1, but significantly less down, if that makes sense, for what we expect in Q1 relative to what we saw in Q4.
And a domestic is leading that charge back, which is what we were expecting to see, and it’s good to see it starting to come through that way. One other piece I think it’s worth noting geographically, and everybody has some amount of geographic diversity, it just so happens right now, we talked in the past, I think it was like last summer into the fall, how Cancun really took a turn in the wrong way as we headed into the summer and exited the summer. We’re still seeing some issues there. So, Cancun and some of our Caribbean leisure routes, think of that as like Montego Bay, Punta Cana, we’re still seeing material unit revenue declines there. So some of our numbers here are including, of course, including that part of the network, which might be worth at least a couple of margin points right there, just from some geographic issues that we’re having.
