We expect that to come back, but the timing is taking longer than what we would have liked. So that’s still out there affecting our numbers, and domestic is definitely starting to lead this charge back for us.
Conor Cunningham: Okay. That’s very helpful. And then, I know you talked about you feel comfortable with the liquidity situation, but can you just talk about where the unencumbered asset base sits today? I feel like you got a lot of equity in your order book, just anything that you have on your current fleet. And then maybe if you could just talk about the — your current discussions with refinancing of the loyalty bond in 2025? Thank you.
Scott Haralson: Yes. I’ll mention the unencumbered assets, and really the financeable base, I guess, is what you’re getting to. So today, unencumbered assets, excluding the 319s, which are already contracted for sale, hard assets sit in the sort of $350 million range. We also have $425 million of PDPs with Airbus, and roughly $500 million of equity sitting in airplanes. And so that’s sort of $1.2 billion of financeable assets, sort of what we start with. LTVs are unknown at this point, but it also doesn’t assess the value of the order book, which is a different concept, but just sort of the financeable base is over a billion. And then the other discussions around the loyalty bonds, aren’t at a point at which we can discuss today. We’re in the early innings of thinking about how we address those, but we are aware, and that’s about all I can say about those today.
Conor Cunningham: Okay. Thank you.
Operator: Great. Thank you, Conor. And our next question comes from the line of Scott Group with Wolfe Research. Scott, please go ahead.
Scott Group: Hey. Thanks. Good morning. So just before I get to questions, just one thing I want to clarify, you made a comment that the GTF recovery is reflected in your guidance. What do you mean when you say that?
Ted Christie: Yes. The comment was around the compensation agreement with Pratt & Whitney for the AOGs. While we don’t have an agreement in place today, we do have an estimate for that compensation that will show up as a credit to non-operating expenses. That is in our guidance an assumption for that.
Scott Group: And that’s mean, you’re saying in the Q1 guide reflects some assumption for the recovery.
Ted Christie: That is what I’m saying, yes.
Scott Group: Okay. And just are you assuming that spread over the course of the year? Are you taking like the full recovery assumption in Q1? Just to understand like what’s the real starting point for Q1 costs are?
Ted Christie: Sure. Fair enough. Yes, the way the estimate will work in our guide is that we assume that we get compensated on a per AOG amount over the year. So the number of AOGs that happened in the first quarter will have a corresponding amount, as a credit to that expense in the period. So that will — it will be spread over the year, in other words.
Scott Group: Okay. Okay. That’s helpful. And then just maybe along those lines, just how are you thinking about the trajectory of CASM over the course of the year?
Ted Christie: Well, I think a lot of it will be in part to what Matt mentioned around capacity. But we’re not going to give guidance for CASM for the year. There’s a number of moving pieces around that at this point. But we do expect to be — sort of year-over-year, we’ve talked about it being up probably mid-single digits year-over-year and that’s primarily due to capacity constraints and some of the lingering sort of right-sizing components that we’ll address through the year.
Scott Group: Okay. And then just lastly, is there — I know you said $230 million or so of CapEx. Is there cash CapEx number to think about? And then have you guys publicly talked about any sort of minimum liquidity targets. Thank you.
Ted Christie: The $235 million of CapEx is cash. So that’s the cash number for CapEx. And we’ve been asked around minimum liquidity. And I’ll say a couple of things. One is that there was no specific operating minimum for us, but we do have some contractual minimum. We’ve talked about the $400 million minimum in our royalty bond. Our revolver has a similar number and people often ask about holdback of which we can’t give details on. But just as a marker, our ATL balance is just under $400 million for the end of 2023. So the holdback is usually some factor of that, in which we can’t give specifics, but those are sort of markers. But other than that, I can’t give you a specific number.
Scott Group: Very helpful. Thank you, guys.
Operator: Thank you, Scott. And our next question comes from the line of Andrew Didora with Bank of America. Andrew, please go ahead.
Andrew Didora: Hey, good morning, everyone. A lot of my questions have already been addressed. But hey Scott, with regards to your answer to the last question here is the $235 million of cash CapEx in 2024. That is before any financing, correct?
Scott Haralson: Yes. That is correct. That is not sort of the gross fleet CapEx number. That really includes or sort of aircraft-related CapEx, call it, net of PDPs and engines and those things plus other CapEx, like we have some remaining spend left on the headquarters. Some other rotable spend, a part spend and other IT projects, so to your normal run rate CapEx.
Andrew Didora: Yes. Got it. Okay. And then just going back to the GTF issues, by the time you reach the end of 2024, how much of your fleet will already be kind of through the process and done? Just trying to get a sense for what’s to come in 2025. Thank you.
Ted Christie: Well, this is a tough one. We’re sort of looking at each other. It’s the best way to answer it. It’s an excellent question, but unfortunately, we don’t have clarity on that. The number that would trigger the right answer there would be some stability in what we call the wing-to-wing turn time of the engine. So after it comes off, how long does it take for it to come back once it’s through the shop. And historically, and I’m really reaching back into my early days in the business, we used to see the engine manufacturers get wing-to-wing turn time somewhere in the 90 to 120-day range. Unfortunately, we’re seeing Pratt numbers that are in the 300 plus range. And we’re not sure whether or not that is stable, whether or not it will continue to increase or decrease.
And so until we get a feel for that, it’s hard to say how many “engines” will be through the process. The reason that they will be removed over the course of the year is because they will have reached their threshold to be removed. So this is obviously the way that the process would work. And we’ll just have to see how quickly they can either start to move that term time up and get us back engines and/or produce more spares available for the worldwide fleet to start offsetting some of the pressure. And I think Scott said earlier that it’s hard to guess on what’s going to happen in 2025 right now, and that’s one of the primary reasons is we don’t we don’t yet have clarity from them on how they’re going to — how quickly they’ll be able to move through this process.
Andrew Didora: Got it. Understood. Thanks, Ted.
Operator: All right. Thank you, Andrew. And our next question comes from the line of Jamie Baker with JPMorgan. Jamie, please go ahead.
Unidentified Analyst: Hey, good morning, guys. This is James on for Jamie. Just a couple of quick follows on liquidity. For the pre-delivery payments, my understanding is that the OEM has been breached for those to be returned. Is that correct? Or is there some negotiation that Spirit can have to reclaim them?
Scott Haralson: Well, we’re not in discussions around a return of PDP payments at this point. I think if you’re commenting on my previous words, it was around the PDP financing not on return of PDPs, but…
Unidentified Analyst: Okay. Got you. And then just a quick one. The new HQ, is that unencumbered? And if it is, or can you give a value there?
Scott Haralson: It is unencumbered. We’ve built that with cash at this point, and then we’ll probably look to use it as collateral for some sort of financing in the future. Of the $350 million hard asset number I said for unencumbered, it’s a significant portion of that in the $250 million, $300 million range.
Unidentified Analyst: Okay, thanks for the questions.
