December had the best of all calendar setups in December of ’19, and it’s going to be a little bit of a more difficult comp. It will still be a lot better in 2023, but it won’t be at that 35% level. So that — in the quarter — the fourth quarter for us kind of goes as December goes.
Dave Davis: Yeah. And just maybe I didn’t say it clearly enough, but the number I quoted was six consecutive quarters of 25%-up plus, and we expect that trend to continue.
Catherine O’Brien: Very clear. Thank you for the time.
Operator: Thank you. Please standby for our next question. Our next question comes from the line of Helane Becker of TD Cowen. Your line is now open.
Helane Becker: Thanks, operator. Hi, team. Thank you for the time here. Just two questions. One is the scheduled service revenue in the third quarter looked like a sequential decline that was bigger than what we’ve seen in prior quarters, notwithstanding Dave’s comment about being up 25%. And we saw a smaller increase in ancillaries. I’m just wondering if there’s anything going on there.
Jude Bricker: Hey, Helane. Dave is looking at some numbers. But I just want to caution you on sequential for us because we’re just really, really seasonal. So, the year-over-year change in the second quarter versus in the third quarter certainly settled down. That was a function of two things. One, we’re growing a lot faster. But also, the comps in ’22 were really challenging. And they lasted well into the fall season, which is something that’s pretty rare for us. And that was focused on big city connectivity into Minneapolis, like I call out Boston, Seattle, big markets like that, that were really strong in the third quarter. And those have since settled down into a more permanent increase versus pre-COVID levels, but flat on the year-over-four basis.
Helane Becker: Got it. That’s helpful. And then my follow-up question is the announcement that you made regarding the ads, and it wasn’t today, right, the ads out of Minneapolis for, I guess, next maybe winter and next summer. Have you seen any — I mean, do you think of yourself as a spill carrier so you wouldn’t see much pushback from Delta? Or do you see them saying, “Hey, if they’re doing a good job in this market, maybe we should be there, too?”
Jude Bricker: Helane, let me give you a couple of thoughts, and I’ll call Grant in here to add. So first, we have a strong brand in the Minneapolis market. We’re certainly a spill carrier in some of our non-Minneapolis scheduled service flying opportunities. But in Minneapolis, we invest in the brand. We market to the community. We have a vibrant loyalty program. So, I don’t view us as — at all as a spill carrier in the Minneapolis metroplex. And that shows up in the way that we plan that schedule specifically for these reliable demand patterns. We announced 10 new markets. A lot of those markets support our MLS partnership with sched service, and I think this is going to be a theme for us. We’re going to continue to connect Minneapolis to domestic and international markets focused on VFR traffic in the summer months between Memorial Day and Labor Day.
And then in the winter time, it’s going to be a little bit of new markets but mostly same-store sales growth as we continue to expand out into the peak opportunities with fleet growth and pilot work group expansion. So — and that’s in real contrast to what we do, say, to the Mexican and Caribbean markets out of Texas in the summer. In the past, we’ve flown the Hawaiian markets off the West Coast, and that is certainly being a spill carrier. But we’re just very strategic about when we apply capacity so that we can deliver high unit revenues. Do you have anything else?
Grant Whitney: The only thing I’d add to that, Jude, is, yes, being the leisure carrier of choice up here, we added 15 new markets this year. They all work. They’re all coming back. We extended — or we added these new 10. Delta is a formidable carrier. They have a really strong hub here. We never expect to have uncontested non-stops. But the business is — we feel very comfortable that we’ll be successful, and we have sort of past examples to back up that framework.
Jude Bricker: One more thing on Delta. We want Delta to be successful in the market because it serves business customers, and we want a vibrant business community here in the Twin Cities. So I think we serve completely different segments of the market. And we launched these 10 new — announced these 10 new markets, and they did change their schedule in a few of the markets to add some non-stop opportunities. Most of it’s on regional connectivity. I think that’s consistent with everything we’ve seen with them since the Sun Country transition began in 2018 or so.
Helane Becker: Got it. Okay, that’s really helpful. Thanks, team.
Operator: Thank you. Please standby for our next question. Our next question comes from the line of Michael Linenberg of Deutsche Bank. Your line is now open.
Michael Linenberg: Hey, good afternoon, guys. Dave, you had called out…
Dave Davis: Hey, Michael.
Michael Linenberg: Hey. You had called out fourth quarter. You talked about, I guess, a large number of heavy checks, I guess, on maintenance. What would be the impact of that maybe on a margin basis? And what are some of the other sort of pressure points? If I think about margins down year-over-year, fuel is a good guy. What are some of — is it labor? Is it maintenance? Any color on that would be great.
Dave Davis: Yeah. So, the number of checks in the fourth quarter are about 3 times what they were in the fourth quarter of 2022. So that is a significant driver, and it’s just the timing of checks. It’s probably a $4 million to $5 million issue for us in Q4. So it is not small. That’s probably the only one that sort of stands out for me there. But that’s just — that’s airframe heavy checks. It’s on our schedule, and we can’t do much about it.
Michael Linenberg: Okay. Good. And then just my second question, it was interesting, one of your fellow low-fare competitors was talking about refocusing on different markets and maybe allocating more of their flying to underserved markets versus overserved. And Minneapolis came up at least, I think, twice on that call. And I think you guys know Minneapolis better than anyone, Jude, you and Grant. Your thinking on that? Is it an underserved market? Is there gate availability? Should we be concerned that we’re going to see more low-fare competition in that market? I know you’ve dealt with low-fare competitors in the past. Any thoughts on that comment? Thank you.
Jude Bricker: Yeah. I think what’s interesting is how the U.S. market has kind of differentiated itself. And I think largely, the success of U.S. carriers over the last quarter has been about how they deal with off-peak demand. And there’s kind of three ways they do it. One is the network carriers, which focus on business customers. They’ve also largely been able to take advantage of a longer Atlantic season this year. Or the ULCC guys, one of which you’re talking about there, they just discount into that environment and try to stimulate some demand. Or there’s guys like us and we just cut out those flights. And I think our method is the best, obviously. And what I’d say is like — and that makes us kind of uniquely capable of serving this, in particular, the Minneapolis, but also, I think it applies to some other markets as we grow demand profile that’s really volatile.
