Operator: The next question will come from Scott Group of Wolfe Research.
Scott Group: So pretty much everyone else has given us some thoughts on full year. I’m wondering if you could do the same. I understand Q1 will seasonally be the best margin quarter. But do you feel good about double-digit operating margins this year? Can we get back to the 12%, 12.5% we did in 2019? Just any thoughts?
Dave Davis: Yeah, we’ve obviously not given full year guidance yet. But we feel very good about the entire year. Our 2023 plan is very strong. I don’t want to give specific operating income information, but we’ll be largely back on track in 2023, is our plan, to historical margin levels.
Scott Group: As other airlines get their labor deals done, do you worry that as rates reset higher that maybe some attrition issues start to emerge again?
Dave Davis: I think it’s a concern. Maybe less attrition issues and more like availability issues. But there’s been a number of new deals. We haven’t really had any problems so far attracting folks. So we’re not overly concerned about that. And actually, our attrition figures continue to underperform what we forecast them to be. So, attrition is actually lower than we’ve been planning. So, intuitively, you would say yes, that as others increase wages, there’s going to be some competitive pressure. We haven’t seen any impact of that so far.
Scott Group: To the extent it emerges at some point, are there mechanisms in place where you can make adjustments if needed? Would you think about that?
Dave Davis: We just signed a new deal at the end of 2021. We’d make spot tweaking here and there, if we needed to, to solve particular issues, but we don’t contemplate any wholesale changes.
Jude Bricker: And also, the contract that we have has rate escalators embedded in and rate changes as well. So, our pilots will get raises irrespective of amendments to the contract.
Operator: . The next question will come from Brandon Oglenski of Barclays.
Brandon Oglenski: You guys, I’m not looking for a specific guidance, but coming out of the IPO, we understood the business mix here. You guys do have a unique model relative to your competitors, with the Amazon fine and the charter fine. Hypothetically, you guys should probably be generating margins towards the top end of the group. I guess what is the impediment as you look forward in 23? Or do you think getting the pilot deal done last year was the biggest issue?
Jude Bricker: Yeah, I would call two things to your attention. One is that Amazon has low margins right at the moment because we increased pilot pay rates faster than the escalation in the contract. So those margins were compressed. That’ll be a temporary issue. And it will be better this year. And it’ll be even better in 2024, et cetera.
Dave Davis: There’s escalators built into the Amazon contract.
Jude Bricker: Exactly. The second thing is, right now, the highest margin opportunities are constrained mostly today by pilots. And as we’ve talked about, as we bring our staffing up, then we’ll be able to add particularly during those periods of time. So, that was what impacted us most strongly during the summer 2022, which we talked about, as we’re kind of under allocated into the markets that saw the biggest rises, namely, big city connectivity, Minneapolis and our network. We’re under allocated there because we didn’t have a crew. That’ll be different this summer. And I think margins will continue to expand as we move forward into 2024.
