Operator: Your next question comes from Scott Group with Wolfe.
Scott Group: Hey, thanks. Good morning. So I just want to make sure I’m understanding some of the monthly commentary. I get sort of some weaker close-in in March, April at Easter, but as you look at May and June, are things getting incrementally worse? Is it stabilizing? And any signs of things getting better? I know June seasonally is a better month, but just seasonally adjusted, do you feel like things are getting incrementally better or worse?
Jude Bricker: Well I guess it depends Scott, on what the expectation basis is. So when we went into the quarter — when we built the quarter last year, we’re way below that. And then we had this period of resetting through late February and March for selling fares into the second quarter. And now in the last couple of weeks, they’ve come up slightly. So it’s been an evolution. But I’d say, fares — our selling fare expectation has bottomed and is recovering slightly. But we’re talking about a recovery that is small numbers relative to where we expected to be when we built the schedule.
Scott Group: Okay. That’s helpful. And then where do you ultimately think you’re going to take capacity in the second half? And did I hear right that you think that your margins in Q3 will be higher than Q2?
Jude Bricker: On the second part, yes, because typically second and third quarter had produced about the same margin. And in this particular second quarter will be handicapped by the Easter shift and some overcapacity in April and May. I don’t — yeah, and that first part of your question is difficult to say at this point. I mean, we have some time to make these adjustments. But post Labor Day, I would expect us to be mostly focused on scheduled service flying in markets that typically have a good third quarter. There’s about a handful of those. And then scheduled service flying in support of positioning airplanes and crews for our charter business. So there’s not a whole lot opportunity in September. So it’s going to be pretty small.
David Davis: Yeah. So Scott, just let’s say from a planning perspective, we had sort of in the scheduled service segment, year-over-year capacity growth peaking in the second quarter, tapering in the third quarter, and then tapering significantly more into the fourth quarter. So second quarter was our peak year-over-year growth. And as we pointed out here, we’ll kind of revisit that, given this off-peak weakness. So it’s probably going to be even more dramatic than it was in our plan.
Scott Group: Okay, great. And then just last question, I thought I heard $65 million of CapEx. Is that the rest of the year comment or is that a full year comment and then does — is ’25 a similar, it sounds like it’s another very low number. I just wanted to make sure we’re thinking about it right.
Jude Bricker: That’s right. Yeah, so my commentary was about a run rate basis. So we completed an aircraft purchase couple of months ago. That’s the last airplane that we’re committed to buy. We’ll still be in the market also for engines. So I’m just trying to give a little bit of a sense of what we would expect on maintenance CapEx, $50 million to $75 million. And the lumpiness is largely going to be about opportunistic buys for engines that would replace an overhaul.
David Davis: Yeah, Scott. So this year, we will be on pace to do well, sub-$100 million in CapEx. I would expect ’25, barring what Jude say in here in terms of some opportunistic purchases here and there, to be less than ’24. From a cash flow perspective, the calls on cash around CapEx are minimal for several years to come–
Jude Bricker: Yeah, with growth too, which is unusual.
Operator: [Operator Instructions]. Your next question comes from Brandon Oglenski with Barclays.
Brandon Oglenski: Hey, gentlemen. Good morning and thanks for taking my question. Jude, I want to come back to the comment about Delta adding capacity in Minneapolis and the challenges you guys have seen in off-peak. Because I thought that was kind of a strength in your model that you guys tried to target the peak travel periods. So can you just put this thing in [Technical Difficulty]. Can you guys go after a little bit more off-peak this summer and it just didn’t play out the way you thought it. And maybe longer term, does this change your view on the opportunity set in Minneapolis in any way?
Jude Bricker: Well in the first part, that’s exactly what happened. So our percentage growth five months year over year in the second quarter is smallest in June. And that’s just — because when we came into the year, we’re looking at the fares of the previous comp months. So April of ’23, and it looked like it could support incremental growth. And we have the capacity, we have the pilots. So it’s really low-cost incremental flying. And yeah, I mean, I think that the market just couldn’t support that kind of growth. And so the fare pressure was beyond what we expected. And that’s because we were adding seats as along with side of all the OAs in Minneapolis. We’re a pretty Minneapolis-centric airline in the first quarter in particular, because that’s sort of the bright spot in the US network.
As we move into the summer. I mean, we’re not cutting in June and July, those months look really good. August is probably mostly like we planned it to be. There’s no real change in the long-term opportunity in Minneapolis. I think long term where I’ve reset it, is an aircraft utilization. In 2019, we were producing about nine block hours per aircraft per day. We kind of set out with the fleet age and our focus on reliability. We probably need to be around eight hours a day per aircraft in a steady-state environment, just based on operational restrictions. And now based on off-peak performance, I think we’re probably lower than that. But these things change pretty rapidly as we’ve been talking about, and it could easily reverse itself. So the key for us is flexibility.
