Allegiant Travel Company

Good afternoon and thank you for standing by and welcome to the Q1 2021 Allegiant Travel Company earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Ms. Sherry Wilson. Thank you. Please go ahead.

Thank you, Sherry. Welcome to the Allegiant Travel Company's first quarter 2021 earnings call. On the call with me today are Maury Gallagher, the company's chairman and chief executive officer, John Redman, the company's president, Greg Anderson, our EVP and chief financial officer, Scott Sheldon, our EVP and chief operating officer, Scott D'Angelo, our EVP and Chief Marketing Officer, Drew Wells, our SVP of Revenue and Planning, and a handful of others to help answer questions. We've scheduled today's call for 75 minutes to ensure sufficient time for questions. We will start with some commentary and then open it up for questions. We ask that you please limit yourself to one question and one follow-up. The company's comments today will contain forward-looking statements concerning our future performance and strategic plans. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the SEC. Any forward-looking statements are based on information available to us today. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information, or otherwise. The company cautions investors not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize. To view this earnings release, as well as the rebroadcast of the call, feel free to visit the company's investor relations site at ir.allegiantair.com. With that, I'll turn it over to Maury.

Thank you, Sherry, and good afternoon, everyone. Thank you again for joining our Q1 call. First, let me take a moment and thank all of our team members. their spouses, families, as they continue to fly our passengers in these difficult times. They've been the true warriors for our side of the house here, so thank you again. I'm extremely excited about our future, more so than I have been in previous quarters. I expect traffic to continue to grow in the coming months. Based on the data we're seeing, I would say we are back. 2021 and beyond, I believe, will be as good or better than I could have hoped. In Q1, we had EPS of 42 cents and EBITDA total of 68 million for the quarter. But the thing that was very positive is each month of the quarter was a positive EBITDA number. Understand both of these numbers include our PSP amounts of $92 million. I want to share with you some interesting facts that I've seen concerning the impact of the pandemic and how it's affected us and others. our balance sheet is in much better shape than before we entered the pandemic, particularly as it relates to cash. By the end of Q2, our cash balance will have more than doubled to a billion dollars. And this is measured since the end of 2019. While our cash balance has been growing, our net debt balance has actually declined over $50 million. By the end of the year, we could be approaching $500 million of net debt down from $950 million at the end of An interesting stat I was taken with last year was we generated $235 million of positive cash from our operational statement off our cash flow things for 2020 as a whole. The industry during this time lost $18 billion from operations. And I might add this includes $800 million of losses from the other ULCCs. Lastly, as a factoid, during Q1, without any PSP, we only had a $15 million EBITDA loss or a negative 5.5% margin. The remainder of the industry's EBITDA loss for this quarter just ended was $9 billion on $15 billion of revenues or a 60% negative margin. My conclusion from that is our personnel, our model, and our excellent management team have done yeoman's work during this difficult year. We were the first to get back to positive growth. We did this just this previous quarter. We were the first to achieve positive EBITDA late last year, and we were among the first to achieve positive EPS, and we did that again this quarter. We were fortunate to be a domestic leisure-oriented carrier. Leisure is king today. Business and international traffic continue to substantially underperform. Profile of our customer and their behavior is an important distinction in our model. Our leisure customers are made up of millions of individuals, families, small independent units that make personal, individual decisions to travel and spend their funds. Business traffic has a different decision process. While there are millions of business travelers, as we know, their decision to travel in most cases is ultimately controlled by the company's senior management. Namely, given dramatic circumstances, company business travel is stopped. We have seen this phenomenon three times in the past 20 years. 9-11, obviously, a great financial crisis shut down a good chunk of business traffic, and obviously this past year with the pandemic. These have been full-tilt stop traveling business, traveling decisions for business customers. This has been devastating to the airline and travel industries, particularly those focused on that business customer. Allegiant has lived through two of these massive shutdowns, and while we were certainly impacted by the pandemic this past year, We candidly didn't even feel the GFC. Our leisure customer profile and our flexible model allow us to bounce back faster than everyone else, including our other ULCC compatriots. This has been the backbone of how we have built this great company. We had a terrific 2019, and we're off to an excellent start in early 2020. We've just had to wait a delay of a year so we could get back to it. Vaccines have been a terrific catalyst, as we all know, and combined with people's strong desire to get out and go, has made for a really nice rebound that we're seeing these days. We believe our income levels for the remainder of 2021 and 22 and beyond will meet or exceed our last full year of 19. We want to be a leader in this effort and take advantage of our great model in the coming years and plant flags as we attack more than 1,000 markets that we have, routes we have targeted. We've upped our game substantially in the past three to four years. Our brand is extremely well positioned We made some bold moves that have worked out extremely well as Legion Stadium has been all we could have hoped for and more. I continue beating the drum for our model, its flexibility, which allows us to both shrink and rebound. It continues to demonstrate its benefits, allowing us to separate ourselves from the competition. This is particularly evident when you review the industry's operating margin results for the past 20 years. From our beginning in 2001, we've averaged over 15% in operating margin during this 20-year period, while the next closest carriers, Alaska and Southwest, have been at 10% margins. Perhaps the best highlight of the past few months has been the elevation of our status from a noun to a verb. From what I've heard, we were the standard of comparison for the recent IPO roadshow efforts, as well as for the group of startups that are showing up at this point. Twenty years ago, most in the airline space didn't consider us an airline, which was fine by me. No one paid attention to us, but today we are the The model will follow. This is the ultimate compliment from your industry peers. In closing, I can't tell you how proud I am again of this group of team members, particularly those who have carried the water on the front lines this past year. They've been the true heroes in our part of the world. Every day they have boarded their airplanes and carried our passengers safely and on time during these trying days. John?

Thank you very much, Maury. Good afternoon, everyone. As I did in the previous earnings call, I thought it would be helpful to provide some directional data points to help you understand how we see things in 2021. Given our domestic leisure-focused business model, we are in a better position than other carriers to look beyond a month without hope and a prayer being part of the commentary. Having said that, these directional guides assume no significant changes to the environment we are operating in. The industry and the country are seeing a slow and steady return to normalcy and expect that to continue as more restrictions are lifted. All financial data provided is on an adjusted basis, which excludes, of course, the benefits from the CARES Act and PSPs. Furthermore, fuel is assumed at $1.99 a gallon. We expect our cash balance to be around $1 billion at the end of each quarter going forward for the balance of 2021 and, of course, with an ever-improving debt. And looking at cost, we see full-year CASMACs less than Q1 2021. Supporting that view, our FTEs for aircraft should be down more than 10% versus 2019, even though our average number of aircraft are expected to be up over 20% by year-end. Furthermore, our Q2 CASM-X would be less than 6. Greg will provide further commentary on Q1 CASM-X. Every quarter and 21 should have positive EBITDA and Q2 EBITDA will be around $100 million. EPS every quarter for 21 should be positive as well. In regards to airline growth, I mentioned in my comments in the last earnings call, we have never been more excited about the growth opportunities in 21 and beyond. To that end, it is our intention to grow the airline by the end of 2024 to north of 145 planes. It goes without saying there's a lot of planning that goes into such growth, and we have been working on that in earnest for the last several months. Our deep knowledge of the domestic leisure customer coupled with our aircraft acquisition experience and strong and getting stronger balance sheet allows us to execute on such a strategy better than anyone. In regards to Sunseeker, we've been getting quite a bit of interest of late and would hope to get something done that would allow the project to start before the end of the year. We are exploring many different approaches as to how the additional funds will be raised, so to comment on how a financial transaction could shake out or look like would be premature. While the speed of our recovery may be surprising to some, if not all, it has come about due to the dedication, passion, and hard work from our incredible employees. You are simply the best, and our results are proving it. With that, I'll turn it over to Scott Sheldon.

Thank you, John, and good afternoon, everyone. Thanks for joining the call. Let me first start off by saying thanks and expressing how proud I am of the entire Allegiant team and all of our partners throughout the network. Our operational results in the first quarter were terrific despite some unique challenges. It goes without saying our team members and partners are truly the ones that make this business successful, and this entire management team salutes you each and every day. Congrats. Moving on, what a difference a quarter makes. Flying production continued to build as we turned the page on 2020. For the first time in what seems like forever, we experienced our first normalized operating quarter in more than a year, as we ended up with just over 3% capacity growth compared to the first quarter of 2019. Our core operational performance metrics were up virtually across the board, with the exception of controllable completion, which I'll touch on that in a second. Our team's execution produced seasonal bests for D0 and A14, at 72% and 80.7% respectively. Once again, on a full schedule as compared to the first quarter of 19. Excluding the impact of extended weather delays, which was particularly bad this quarter, our controllable A14 was exceptional at 93%. Although our flying activity returned to pre-COVID levels in the first quarter, it wasn't without significant challenges. Our controllable completion percent, which ended up just north of 99.5% for the quarter, was far below our historical norms A key driver of this were bottlenecks encountered in bringing flying assets back on the line to match first quarter capacity demand, particularly for the ramp up in late February and March. As with most carriers throughout 2020, we deferred as much heavy maintenance and induction work as possible to minimize cash burn until there was a much better line of sight on demand. All these deferrals created much needed cash savings. It also created a significant backlog of aircraft with enhanced work scope requirements required to return to service. During the quarter, we inducted five used aircraft and had as many as 32 separate heavy maintenance events. Not an ideal scenario as our core MRO partners, OEM and parts suppliers and logistic companies have been slow to ramp back to full capacity. The end result was north of 85 maintenance cancellations due to lack of aircraft. and drove just over $6 million in irregular ops costs. In closing, I'm excited to maintain the momentum we've built as we move into the second quarter and into the back half of the year. We've weathered the induction and heavy maintenance constraints from the first quarter, and we appear to be back on a normal cadence, which is critical. Although the back half of the year is aggressively scheduled and MRO pipelines are getting tighter, our plan has largely been de-risked thanks to the tireless efforts and creativity of our maintenance, planning, induction, and engineering teams. Equally as important is looking forward to having all of our third-party suppliers and partners back online and operating at full capacity. Currently, the majority of our ground handling service providers are experiencing staffing challenges, namely they're finding it difficult to recruit and or retain the necessary headcount to run their businesses at pre-COVID labor rates, which is a direct result of the multiple stimulus rounds. On the direct labor front, our pilots, flight attendants, mechanics who are either furloughed or on extended voluntary time off programs have been recalled, and we are pushing them through respective pipelines as we speak. Training classes for all disciplines will begin mid-summer and into the fall to meet March peak and summer of 22 flying. And with that, I'll turn it over to Scott D. Thanks, Scott.

Building on prior comments, this past quarter clearly marked a positive turning point in customer sentiment and demand for leisure travel. Back in the first week of January, only one-third of our customers said they believed things were getting better in terms of COVID-19. Yet by mid-March, that number had nearly tripled, and around 90% said things were getting better. This fundamental customer sentiment, driven by a combination of vaccine progress and destination reopening, was highly correlated with when and with how we saw demand return. That is to say, each month of the quarter showed marked improvement, With March booking levels, as already mentioned, performing around 2019 levels. However, it's worth calling out that while demand is increasing upward, it's also expanding outward, and we're beginning to see more normalized leisure travel search and booking behaviors. Advanced purchase timing for the first week of 2021 was nearly half of what it was in 2019. Yet as we finished the quarter, advanced purchase timing for the last week of March had greatly increased and was virtually identical to that same week in 2019. Further to this dynamic, the volume of flight searches being performed by customers at Allegiant.com continues to outpace 2019 levels, especially for mid to late summer months, suggesting additional waves of leisure travel demand are continuing to reenter the market and are searching for travel time periods that they're most comfortable with. Of those customers who have already flown or booked a Legion this year, more than 70% report having already been vaccinated. As mentioned last call, staying close to and winning back those customers who flew a Legion in 2019 but haven't flown since the pandemic began is our priority focus. And I'm pleased to report that we've already recaptured nearly 20% of these customers and their itineraries, and that those who have still not booked report overwhelmingly that they have flown no other airline during this time and consider Allegiant their top choice by a wide margin over all other airlines considered for their next trip. Once again, our direct-to-consumer approach has remained a critical differentiator for not only for selling directly to, but also communicating directly with our customers, enabling us to stay close this past year. Our approach to capturing demand continues to be rooted in cost discipline by heavily leveraging our owned media channels, namely our website and email marketing, both of which achieved first quarter web traffic increases versus 2019. This helped us once again achieve incredibly low sales and marketing costs on a per-booking basis that were 80% below pre-pandemic levels. And lastly, with our enhanced digital commerce assets in place, that is both our new website and new mobile app, we turn our focus to launching our broad-based non-card loyalty program later this year and to expanding our leisure offerings at Allegiant.com, not only in existing hotel and rental card categories, but also through launching vacation rental inventory, more than 80,000 properties nationwide with our newest partner, BookingPal.com. And, of course, we look forward to soon offering travel packages for Allegiant Stadium events this fall. Moreover, we continue to explore asset-like co-marketing and sales channel partnerships that enable us to broaden our leisure travel ecosystem and that give us privileged partner relationships that enable us to reach millions of new customers and markets that we and those partners collectively serve. With that, I'll turn it over to Drew.

Thank you, Scott, and thanks, everyone, for joining us this afternoon. We continue to see sequential revenue improvement in the first quarter with scheduled service and total revenues each down 38.2% versus the first quarter of 2019. Our ancillary revenue per passenger was down just 0.2% against the same timeframe, and remained a great story considering it is half of the scheduled service revenue. This contributed in a large way to our total fare per passenger being down just 8.9%. We ended the quarter with significant momentum through the back half of March that carried into April. April revenue will be quite close to the March number, even despite less capacity for the first time in company history. A lot of this is due to what Maury mentioned. Our April load factors were roughly 10 points higher than March. And in fact, despite moving beyond the peak spring break and Easter timeframe, loads have improved in each of the last eight weeks. Furthermore, most of those weeks were also positive ASMs year over two year as we ramped into the peak. In total, April and May will be roughly flat capacity versus 2019 before the growth resumes in earnest during June, producing the 2Q ASM guide of plus 2 to plus 6% versus 2019. Some of that growth is slated for the newest Allegiant cities of Portland, Oregon, which began service in April, along with Jackson Hole, Wyoming, and Key West, Florida, which takes flight in June. Those are among the 51 new routes beginning service in the quarter. We are thrilled with the booking performance of our new contingent of routes and what they add to the Allegiant network. Along with the ASM guide, we are guiding 2Q scheduled service revenue to be between down 6% and down 10% versus 2019. I'm ecstatic to see numbers in the single digits, and I really look forward to flipping that sign in time. Fixed fee margins have been greatly impacted by the amount of supply and lower demand in the market, and we responded by looking to deploy more flying, and in particular, valuable peak day flying, to the better current returns on the scheduled service side. While we had a great run of fixed fee flying through the College Basketball March Madness Tournament, it is certainly more of a one-off benefit for 2021. and fixed-year revenues are likely to remain under pressure. The strength and demand we're seeing continues to give us conviction in the potential for the back half of the year. We have the crew and the aircraft in place to grow approximately 20%, and our current selling schedule through mid-December reflects that intention. That selling schedule includes the announcement of our newest base in Austin, Texas. We've served Austin since October 2013 and have had success growing a wide range of route opportunities and are elated to make it a stronger presence in the future of our network. And with that, I'd like to pass it over to Greg.

Thank you, Drew, and good afternoon, everyone. We continue on our path of leading the way in restoring earnings power as we deliver on our tried and true business model that provides affordable, convenient, and reliable air travel to residents of underserved cities. Over the years, we have consistently produced industry-leading returns for our shareholders. We are a long-term focused bunch and taught to think like owners, particularly when the tone is set at the top by Maury, who since our company's inception has not only been at the helm, but also our single largest shareholder. One of our key focus metrics is restoring our EBITDA production to pre-pandemic levels, which is more than $6 million in annual EBITDA per aircraft. So starting with the current tone of the business. During the first quarter, our average daily bookings came in just under $5 million per day, which translated into an average daily revenue of $3 million. The quarter ended strong as March came in like a lion, with average daily bookings exceeding $6.5 million per day, ahead of 2019 levels, and driving more cash flow as our ATL increased by $100 million, or 33% from December to March, this despite the travel voucher portion being down 19%. Additionally, we saw a couple key metrics during the first quarter, which already outperformed 2019 results. One is capacity. Our focus on 100% leisure, 100% domestic, and our only nonstop flights plus strength in demand resulted in March capacity of nearly 1.9 billion ASMs, the highest single month in our history. Another is cost. Our first quarter adjusted CASMX, which excluded PSP benefits, is 6.36 cents, or 5% below the same period in 2019. And perhaps worth noting, Our adjusted CASMX for the quarter is by far the lowest reported by a carrier. It is half of the industry's reported average at 12.7 cents. We are excited in getting back to pre-pandemic results and the catalyst that enables us to lead the way is the flexibility of the business model. Our one-of-a-kind low utilization and high variable cost structure aided us in generating 168 million cash from operations during the first quarter, which is more than the first quarter in 2019, and helped push our ending March cash balance up to $730 million. Additionally, we have $260 million in cash that comes in after March, roughly $150 million from our NOLs, $98 million from PSP3, and a $14 million top-up for PSP2. Pro forma, the $260 million in these cash proceeds brings our first quarter cash balances to nearly $1 billion, thus resulting in a March pro forma net debt position of roughly $630 million, or a 33% reduction from year end 2019 balance. Moving to our second quarter outlook, we expect to induct five aircraft during the quarter to bring our total in-service fleet count to 105 by June's end, an increase of 19 aircraft compared to June of 2019. These additional aircraft are already being put to work if capacity during the second quarter is expected to be up around 4% year over two year. It is also notable second quarter daily bookings haven't skipped a beat April continued to roar with average daily bookings around $6.5 million per day, which is 8% higher than April of 2019. The strong rebound we are seeing in our business supports our second quarter scheduled service revenue guide down 6% to 10% year over two year, which translates into revenue per day of $4.8 million, nearly 60% higher per day than the first quarter, and within striking distance of 2019's average revenue per day. And based on the midpoint of our capacity guide, we expect our adjusted CASMX to come in under $0.06 during the second quarter. So combining our expected daily revenue of $4.8 million in the second quarter with our expected cost performance suggests an adjusted EBITDA margin of around 25% for the June quarter. That 25% EBITDA margin excludes the benefit of PSP. If you include the benefit of PSP, it suggests an EBITDA margin of more than 35%. Turning to fleet, during the first quarter, we acquired three aircraft at an average all-in price of $16.5 million per tail. These aircraft were paid for with cash and remain unencumbered, which brings our current unencumbered aircraft count to 29. In the used A320 market, our fleet team is in no short supply of deals coming across their desks at prices that reflect a 30% discount on average to pre-pandemic levels. Based on current commitments, we expect to end the year with 108 aircraft. which supports our ability to increase capacity in the back half of 21 by as much as 20% as Drew and his team see no shortage in opportunities to put aircraft to work. This level of capacity suggests our adjusted CASMX for the back half of the year should be around the low 6 cent level. In the event we come across sustained weakness in the demand environment, our highly variable cost structure along with our fleet flexibility provides us a built-in safety valve to let off the gas as needed. Not only is our industry-leading cost structure advantage expanded due to the structural cost savings removed during the pandemic, other carriers have increased their leverage significantly more than we have. Our expected full-year 21 interest expense should be around 14% less than full-year 19. And additionally, our full-year 21 scheduled debt maturity and interest payments using our 2019 passenger counts is actually $6 per passenger less than it was in 2019. You don't have to take our word on how well positioned we are. Recently, S&P upgraded our corporate rating and changed our outlook to stable. I believe among the first rated U.S. airlines to see such a change. And in terms of CapEx, our full year 21 guide remains largely unchanged with the exception of our other CapEx category. And that we increased by 20 million for the opportunistic purchase of spare parts at an average price per part of 50% less than pre-pandemic levels. And I'll close with T-SNAP. Recently, we completed the sale of 85% of our T-Snap subsidiary to Teleo Capital and at an undisclosed amount. We are excited to partner with Teleo as they are committed to positioning T-Snap for a bright future with plans to further invest and accelerate growth of the business. And I'd like to take a moment to thank our T-Snap team members who have done an incredible job building the platform, creating a deep and growing customer base, and bringing the program to its next evolution. With this team and Tele-O's good stewardship, the future will be very bright. And with that, we'll turn it over to questions.

As a reminder, everyone, if you have a question, please press star one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes to the line of Mike Linenberg from DoucheBank. Your line is now open.

Oh, hey. Good afternoon, everyone. Good quarter. This is a question probably Maury and or John. You know, look, Maury, you alluded to, you know, competition out there. What is it? You know, imitation is the sincerest form of flattery, and You know, the fact is we do have, you know, a fairly, you know, several new entrants. It seems like there's more in the, you know, waiting in the wings. And they are targeting, you know, your market segments. You know, they're not, I don't think we're getting any carriers that are going to start flying, say, San Francisco, Tokyo. It's all about Austin and Nashville to Florida and Vegas, etc., etc., I'm curious about how you're thinking about it. And even just in the last couple of weeks, I think we've had two airlines announce new service to Phoenix Mesa. We've seen someone announce additional new service into Punta Gorda, St. Pete. These are sort of the allegiant mainstays. And so how do you think about long-term opportunities? Do you think that with this area becoming more fragmented, the ULCC space becoming more fragmented, that maybe consolidation is more likely over the next few years? Fairly broad question to, you know, one or both of you, however you want to answer it. Thanks.

That's a mouthful. We got half an hour. We'll catch up later. We'll call later. Certainly, you know, I think I classify this last year, ironically, as a financial year rather than an operational year. You're seeing opportunistic financial plays that are, you know, the market's been very receptive to them. You know, with the IPOs, you have a lot of money that got there, known quantities there for the most part. But on the new front, you know, they each have their own personality. Drew's been following them very quickly, and he may have some opinions in the near term. But, you know, Andrew, we know each other. He knows how to do what we do. But, you know, we've gotten very big while we're certainly – We've got to pay attention to people. That's not our first thing we look at at this point in time. With the Breeze side of the house, they have an ambitious growth schedule, but with their airplane size and some things, I'm not terribly concerned about flying against a 110-seat airplane that they'll start with. The 220 is a good airplane, but they claim to be interested in longer haul, thinner markets. So we'll just have to wait and see. I don't think it's so much us. I think the really interesting play is how does the big three react? You know, I just looked at this data. They've got a ton of debt. They cost structures twice what any of ours are. I mean, I just don't know how those guys kind of come down the hill, not to say they won't, but, you know, long term. So the issue I don't know isn't so much worried about startups is I think you're going to see the ULCC side able to really gain a lot of market share potentially over the next couple years. And that's what we are so bullish on because we can really stand alone in what we do and how we've done it. And, you know, we were ready for this in 2019 and into 2020. And like I said, we just took a year off, but we're stepping on the gas. I don't know, John, if you have any thoughts.

You know, I think when you look at it, we've never been afraid of competition. But financially, where we stood some time ago versus where we stand now, you know, Maury made it in his comments. We all kind of alluded to it. But we've never been stronger with a stronger balance sheet in the history of the company, frankly. So we're well-positioned to take on anyone. When you look at the startups, they're literally – they don't have a brand. No one knows that brand in the marketplace. So they're coming in with a brand. that no one's ever heard of, and as Maury points out, made with a plane type that's not as cost-effective as ours in some cases. So I think we're very comfortable with where we stand going forward. We're in great position to do it and growing quickly.

Great. Great. Thanks. And just a quick one to Greg. Aircraft run expense, Greg, it's a fairly new concept for you guys. As I think about, you mentioned that the last three shuttles were financed out of cash. You're taking a few more later this year. Are they operating leases or should we assume kind of March quarter is a good run rate, you know, for the rest of the year on aircraft rental expense? Thank you.

Thanks, Michael, for the question. Yeah, the three that we acquired in the first quarter are not op leases. So those are purchases. We do have a couple op leases that we'll be bringing on, you know, in the next, you know, coming 12 months or so. Well, what I'd say is that that number that you saw in the March quarter where we sit today from a rental expense perspective is a good number for the remainder of the year.

Great. Thanks, everyone. Michael.

Your next question comes to the line of Juwan Spanigward from EveryCore RCI. Your line is now open.

Hey, good afternoon. Thanks. Thanks for the time. So your guidance implies a nice sequential improvement in RASM. We really haven't had an opportunity for a while to talk about RASM, so it's nice to see sequential improvement there. I wonder if you could comment on the balance between load factor. I mean, you noted that 10-point improvement in April, but the balance between load factor and yields, because it does feel like perhaps your average fairs don't drop off as much as they might normally would from one Q to two Q. Yeah, thanks, Dwayne.

Drew here. I think we're kind of in the middle of the inflection point. You know, we predominantly tried to keep fares and yields relatively in line under the theory that, and what we experienced, that dropping a fare wasn't stimulating enough incremental load for it to make sense for us. As the demand pool in general is growing, more seats are out there, we're seeing more and more inroads to where dropping fare and creating that stimulation makes more sense for us. And I think right now is kind of the inflection point there where you'll see yields hold up really, I think, fairly well over the first probably half of this month before, as we get into summer, seeing that kind of inversion take place. I know Maury kind of alluded to some of the the cadence of loads there, but I do expect to see us crest 70 in June and continue kind of that steady improvement that we've seen from March to April.

Yes, sequential improvement in RASM and sequential improvement in CASM, so that feels like a good outcome. Can you talk about your growth outlook for the balance of the year and maybe relatedly, what would it take for you all to think about bringing back EPS guidance? Because, you know, we're going to have to think about, you know, positive EPS here again, really the first one to contemplate that.

Well, on the EPS front, I mean, we've had some conversation about that. I'd imagine we'd start looking at that probably next quarter.

Yep, that's right. that's a nice transition back to a really positive way to look at the business. So, yes.

Agreed. I did mention to you that it's going to be positive every quarter for the balance of the year.

You did, John. Thanks. And then just with respect to, you know, kind of the growth outlook, you gave us 2Q, you know, have your expectations about the second half kind of changed relative to past calls?

No, I think we're still very much in line with what we suggested in the January-February call. If anything, I think we have a bit more conviction in what the back half of the year can bring. I feel stronger about our ability to be near that 20% mark. So not providing an official guide, but you can look toward our selling schedule, at least for what we intend to be able to fly.

No, just a comment. I think Las Vegas is as exemplary of a leisure marketplace in the country as any place, and You know, we go down to the Strip. I was down there last weekend. I mean, I had to wait on a green light to make a left turn again. I haven't seen traffic like that in a long time. Headline today, wind opens 100%. Eighty percent of their people are inoculated, 88 or something like that. You're just getting this feel in our town here that the leisure world is back. And thankfully, Las Vegas has been one of the weaker cities over the last year just because it's been shut down so much. I think Orlando obviously comes back stronger with the Disneys of the world. So, you know, the idea that we're back is a statement of the day, I think, is if it's not today, it's tomorrow or the next day.

Thank you very much.

Your next question comes to the line of Andrew DeDora from Bank of America. Your line is now open.

Hi, good afternoon, everyone. Thanks for the questions. I guess my first question is for Drew. I guess with what you're seeing just in broader leisure travel in your booking curve lengthening and everything, do you think you're at an inflection point in your business where it kind of reverts to more normal seasonality with 2Q strongest, 3Q the weakest, or do you continue to see the ability to continue to grow revenues sort of sequentially from here based on what you're seeing from a leisure traveler?

Sure. I think we still have the ability to grow sequentially. Obviously, we're making it harder and harder on ourselves with each quarter. But I don't think we're back to a fully normalized world there. You know, as we saw even last September, October, we had great shoulder and off-peak demand. And I think we'll see that at least here in the shorter term as all leisure travel patterns are a little bit different, VFR patterns are a little bit different than they've been in the past. So I do think that there's at least some short-term runway to kind of maybe get some incremental lift in what would normally be an off-peak or shoulder before presumably returning to more normality in maybe a year or two.

Got it. Interesting. And then, Maury, kind of strategic question here, but with what you've seen from the leisure traveler, Do you have any regret for not finishing Sunseeker on your original timetable? And I guess what would you have to see for you to go through with it on your own again? Thanks for the question.

I've got a lot of regret. I wish we would have finished it. We'd be in great shape right now with what's going on in Southwest Florida. I don't know if you all have seen the numbers down there, but a couple weeks ago I was looking at hotel rooms. They were three-factor higher. Can't get rental cars down there. It's The people we have down there just have never seen anything like this. So having said that, we made the right decision not to do it, and our go-forward approach is going to be it'll stand on its own with its own debt and things like that. But John can talk about, you know, we're seeing some good activity, and that part of the world is definitely being recognized for what it is as a vacation destination.

It's unbelievable. We knew it made sense some time ago. Of course, we made the decision. It makes even a hell of a lot more sense now as everyone's seeing. I already earlier in my comments made the comment that we expect to start that project back up again before the end of the year given the conversations we're having to date. There's quite a bit of interest in seeing that project get completed. So stay tuned and I'll have more to report down the road. But just now there's too many different directions they this opportunity can take for me to make any particular comments on any one, but that's why I just made pretty much a global one that we think we're going to get started back up before the end of the year. Thank you.

Thanks, Andrew.

Your next question comes in the line of Helena Becker from Colway. Your line is now open.

Thanks very much, Operator. Hi, everybody, and thank you also for the time. Just two questions. One is, as you think about you know, passengers coming back and airfares versus ancillaries, you know, obviously without the passengers, you're not getting the ancillary. So are you, you know, is there a percent that you're thinking about that you want ancillaries to grow to versus fare? And I think in the answer to somebody's question, maybe Duane's question about loads versus yields, you talked a little bit about it, but how are you thinking about ancillaries?

Sure. I would love ancillary to be 100% of the portfolio. I mean, that's never going to be there. We've been fairly solidly at or above 50% now for I believe the last five, six quarters, even including pandemic time. I certainly want to see that continue to grow. We launched our bundled ancillary program shortly before the pandemic and frankly haven't had as much time to see that grow as we would like as we were kind of back into more scramble mode. I think there's several evolutions of that that will help boost as well as performance from the new website. A lot of things that Scott D'Angelo mentioned during his remarks, other things he's working on. So there's not necessarily a targeted percentage in mind other than let's get that thing as high as we can get and we'll be in the best overall position.

Gotcha. And then my follow-up question is, you were talking about, and I think this I'm not sure, maybe it was Scott Sheldon talking about finding it hard to attract people. Are the OEMs and your MROs that do your maintenance, are they finding that they have to raise pay to attract people, or are they sending the work outside the country? I don't know what percent of your own maintenance, you know, or of your maintenance you're doing in the United States versus outside, but I know most of it is third party.

I think my comments on the labor rate itself is more above and below Wayne and our ground service providers. Our MRO business was spread upwards of nine different locations in six different countries. It was difficult. They were slow to ramp up. Just parts and logistics, that was probably the long pole in the tent. If you look at You know, kits that we would use to convert to MaxPax, bad weather, I mean, that played into it. But it's more on the ground handling side is the near-term rate constraint for us. It's not on the MRO side.

Okay. And then are you finding, just as a follow-up to that, are you finding it hard to find people to work in the airports for you or some of your lower-wage workers versus your high, you know, I imagine the higher-wage workers maybe not so hard?

No, I think that you're seeing across the board. I mean, obviously it's a part-time workforce. There's a lot of companies out there that are starting well north of what our hourly rates would be even if we outsource it. So at some point, you know, you're going to have to start creeping up that direction. Florida right now, if you look at Sanford, St. Pete, Nashville is really tough. I mean, some of these larger cities that we're operating into, our service providers are having a hard time, you know, finding bodies. And so we're having to chase rate up here in the near term. You know, whether that's sticky long term, that's yet to be seen.

Yeah, Elaine, I think you have to look at, you know, what's happening in all industries, especially at the lower wage levels, just because of the unemployment benefits and whatnot. So we could be seeing this problem in the U.S., you know, through September, frankly, just because of some of these policies. So, you know, we'll have to wait and see. But you see it across industries at these rates. You can't even find an Uber driver.

Very true. I'm finding that out. Okay. Thank you very much, everybody.

Your next question comes from the line of Joseph Gennardi from CFO. Your line is now open.

Thanks. Good afternoon. Maybe for Mari or Drew, just want to talk about kind of your bullishness on the outlook, the performance of the business through COVID and and yet kind of the goal of getting to 145 aircraft by the end of 24, that's fairly measured growth. And so is that kind of what you think is appropriate over the next few years? Is that the base case or are there kind of things that throttle growth in terms of aircraft availability or things like that? Can you grow more than that?

Yeah, we can certainly grow more than that. We want to be measured. One of the interesting things we are finding is as we get to the size we have, you know, you now have to go find 15, 20 airplanes a year unused. And we think that over time that could present some problems. So we don't want to get out ahead of our skis too much. The other piece of this is if you go back and look at Southwest over time, they've grown 10% to 15% a year. And when you have very chunky growth where you accelerate and then you try and back off, getting the resources to accelerate quickly where you need to train the crews. You need to have all the stuff, particularly with used airplanes. It's one thing to order a new airplane. We have to be more measured in our planning at that rate. So there's a side of me, too, that says the race ultimately goes to the tortoise. That's been the Southwest story continuously for 50 years. So we can certainly grow more. We think that's a good amount of growth for us in the coming years. I'll let Drew talk about markets and our ability to grow into them, but it's a good number to put out there at this point.

Yeah, I mean, it comes out to about, you know, just over a 10% CAGR there. You know, in the short term, we're talking about 20% or so in the back half of this year that would likely continue into the beginning of next year just because, you know, fleet counts didn't change that dramatically. So we think there's a lot of near-term growth. availability to grow in it. There's certainly the market presence to do that. We're built structurally right now with the aircraft, with the crew, the headcount to be able to accomplish that. To echo Maury's comments, let's get to the back half this year right now and continue to push forward at a measured rate that the entire enterprise is comfortable with. I'll give one shout out to Kristen on my team who told BJ on the fleet side, if you buy it, we'll fly it. We're ready to spool up.

You know, one way to look at that, too, either the governor or the accelerator, depending on how you want to look at it, is really the rate of retirement, right? So we can push them up or slow them down depending on how we feel and what the market feels like. So that's always a governor or an accelerator.

Okay. And then, Scott D'Angelo, you ran through some of the third-party revenue opportunities you're looking at. I think you all are doing around $5 per passenger in third-party products, excluding the air portion. What's the opportunity there longer term, the next three or four years, when you consider kind of better selling what you're already selling and then the vacation properties, whatever Sunseeker turns into, kind of what's the medium-term opportunity there?

Yeah, so I think the medium opportunity now with the digital commerce platform that enables us to showcase more inventory across hotel, rental car, and now vacation rental, But as or more importantly, take a more personalized approach to that. So having more to sell, being better at getting the right thing in front of the right person. And then the third leg on that still will be, you know, to stay tuned for bringing on additional things that we can make part of that ecosystem. I know traditionally we think about marketing and all of the traditional advertising, but if you think about what I just said, a loyalty program layered on top of that, and then the ability to, as I like to put it, interweave the Allegiant brand into the things that people love, whether that's the resort they stay at, whether that's a sporting event or concert that they go to, and or whatever other leisure activity they need air travel to. It does all the same work that a traditional advertising would do, but brings with it a much tougher way to dislodge and think of Allegiant just as an airline that goes up against either new entrants and or incumbents. So, you know, no number there, but we now have the platform and certainly are going in the direction in the medium term for that to improve materially.

Joe, just to add on to that, you know, our ability to, improve our brand in the last couple of years has really been exceptional. And that's really important for where we want to go with the third-party revenues. And hats off to Scott and all what his team's done out there for that. But the other piece that he's pushing, which is very important, I think, is we're moving towards as much frictionless efforts as you can to get into this stuff. And we all shop at Amazon, and we know how friction-free that is. And, you know, it's amazing to me today, you can't buy an airplane ticket without having to put your credit card in every time. Think about that in today's technical world, you know, where it's just an amazing thing that you still can't have that type of customer engagement, if you will. And part of it, it's fractionalized. You know, you've got Expedia people going through there. You've got the airlines don't control their customers nearly as well as a lot of other people do. And that's our goal is to have that direct control. Those are just the subtleties that become very powerful long-term. One of Scott's big things is once you've got that guy, don't lose him. Have him keep coming back. That's been a big piece of what we're doing as well.

That's helpful. John, if I could just squeeze. The commentary around Sunseeker, is an option now that you will put Allegiant Capital into that project to get that restarted?

Again, we're having so many different conversations and so many different term sheets being exchanged that I don't want to jump out too far and give any kind of direction. It might end up being somewhat misleading when you look at a final deal. I just know you have a good feeling that something's going to happen that's going to allow us to get started before the end of the year. There's enough interest there. We're making a lot of progress on having conversations with these folks but they all have different designs on how to put something together. So I think stay tuned. I don't think you'll have to wait that long to hear more out of us, but I just thought to have some give them ourselves until the end of the year, but it could be much sooner.

Joe, just a word we've used, no meaningful capital will go into it at this point. So that's not to say we won't do some, but before it was going to be all off our balance sheet or a good piece of it. That's not going to be the case this time.

Okay, thank you.

Your next question comes in the line of Dan McKenzie from Seaport Global Securities. Your line is now open.

Yeah, hey, thanks for the time, you guys. This actually, I'm going to try to ask Joe's question maybe a little bit differently here, but, you know, Scott, the asset-light partnerships where Allegiant benefits from a privileged relationship, I'm just wondering, what does that mean exactly? Is that a reference to Sunseeker by any chance or something else?

No.

Okay.

No, I'm happy to explain at a high level without any spoiler alerts. We look for partners that can come to the table that give us something in the leisure ecosystem to sell, but moreover, that have a bunch of customers of their own that live in the markets that we serve that they can introduce us to. So the partnerships heretofore, anything that's bigger than a bread box likely has both, yes, it's something that we can sell in an asset-like fashion, a high-margin fashion, but also then kicks back on the other side and brings with it millions of new customers that we can go co-market to, and when they're buying their products, they can send them our way. So a perfect world is everyone in our ecosystem Whoever you go to first gets sent around the carousel, and in the most technically elegant environment, right, you would have an integration where someone certainly buys all those things at Allegiant.com, but in the same way, when you book that hotel somewhere else, when you buy that game and or concert ticket, digitally we know where you are, and we know by definition of what you bought that ticket for, where you're going, and to be able to present Allegiant as the right option for air travel to that, that's what that implies. Certainly Sunseek will be one of those things that will introduce itself, but no, that was no allusion to that. That was other partnerships that we hope to announce in the upcoming future that are true, what I would characterize as partnerships business and channel distribution relationships.

Just following up on that, can you translate that into some aspirational metrics and, you know, how they might roll up to the system metrics just to try and bring that home somewhat?

Yeah, I mean, the answer is not here. There's no number I could give you, but I can tell you how it will translate. It will translate certainly in, you know, the new visitors we get to the website, times the conversions, which will manifest themselves in both PAX counts going up and in the average transaction size as you have more to sell and people attach those things. So PAX counts and then that third-party revenue per ITIN or per PAX that Joe referenced would be the two metrics that you would expect to be impacted by that.

I see. Okay. Second question here, you know, it looks like, you know, from the schedules data, 40% of the ASMs in the second quarter are going to fall in the month of June, you know, which has implications for revenue in Chasm X for the quarter. So, you know, it looks like June could maybe account for 50% or more of the revenue in the quarter, but, you know, please correct me on that. But more interesting is the Chasm X. So, You know, with capacity up 16% in June, I think is what the schedules are saying, versus 19, and, you know, you're saying the chasm subs $0.06 for the full second quarter. And I guess what I'm wondering is that, you know, that seems to imply a chasm X close to $0.05 for the month of June. And, you know, I'm just kind of wondering how that, you know, wrinkles out through the phases out through the remainder of the year. And I guess, you know, where I'm going with this is, you know, is June CASM-X being impacted by heavy maintenance? And, you know, I'm just wondering if you can just, you know, provide a little bit more perspective because it seems like there should be a step down in CASM-X in the month of June that, you know, essentially gets straight-lined through the rest of the year.

Maybe, Drew, I'll kick it off very high level. You're right. We're looking at about 40% of the ASMs to happen in the month of June. So I think... The quarter basically is going to come down a lot of ways to how June is variable from now. I don't know if Greg wants to handle any parts of the cost component.

Yeah, Dan, thank you for the question. And, you know, the June quarter will come in really strong from a CASMX perspective. I think, you know, when we look at the cadence quarter by quarter, I would think the June quarter would actually be the lowest. And I say that because as we look into the back half of the year, we're anticipating a couple things. One, increased profitability, which would roll through, you know, into profit sharing. So that's going to drive it up a little bit more as compared to what we're, you know, projecting right now for the first half of the year. And then you also, you're gearing up or we're anticipating gearing up for growth into 2022 in the back half of the year. So I think that, too, will provide a little more unit cost pressure as compared to the second quarter. But, I mean, we feel good about where we're coming in at the second quarter. I think an interesting data point perhaps worth noting, you know, is like on the DNA front or the fixed costs, as you look on a unitized basis, perhaps in the first quarter that had a little bit of a headwind, but as you take up utilization a little bit more, that's going to drive it down and provide some strength there. I think in the first quarter, from a salary and benefits perspective, you saw that's toppy in the first quarter just because, and I think I mentioned this on the last call, we have with our pilots, we recognize our PTO up front, in the first quarter, and then you run that out for the rest of the year. So it's almost $12 million in the first quarter alone in PTO, and then you'll get some benefit on that in the second quarter. But then once you get into the back half of the year again, you're expecting to hire some crew members to support that 22 growth. So I'm happy to add some more detail if that's helpful, but I think just at a high level, that should be a good indicator of the cadence when it comes to unit cost by quarter and what some of the pressure points or tailwinds may be.

Yeah, thank you for that clarification. It is. If I can just squeeze in one last quick house cleaning question. The percent of second quarter flying that's in new routes less than 12 months, I think there's 51 new markets. I'm just curious how those yields are spooling up versus the system average. I'm thinking there's probably not a whole lot of difference, actually.

There's always a little bit of difference, as you can imagine, as you're trying to introduce. You'll have varying levels of confidence by route as you move in, but either way, You know, the core goal in the first year is to ensure that you can fill the plane, and so we'll sacrifice yield initially in order to make sure we can accomplish that. So you'll see a little bit of a headwind from that. I don't know that you'll see it at the system level, you know, just shy of 13% or so of our ASMs. 2Q will be on routes in their first 12 months. So, you know, happy with where it's at, but we're focused more on being able to fill the planes and build load on that than we are on gaining yield initially.

Very good. Thanks for the time, you guys.

Your next question comes from the line of Hunter Key from Wolf Research. Your line is now open.

Hey, everybody. It looks like you're guiding revenue, excluding charter and other. Obviously, you mentioned you sold the majority of T-Snap. But what does this say about charter? Why are you guiding excluding charter? Charter revenues in first quarter looks pretty fine to me. Are you saying that we should expect that business ultimately to go away at some point? Are you de-emphasizing it? Why did you exclude that from the guide?

Yeah, Hunter, the reason why I wanted to go with the scheduled service only is we're putting our growth of ASM – into the scheduled service world. That's where we're seeing the better returns, and I wanted to ensure a lot of focus on that piece of it. The fixed fee realm, and I mentioned this in my opening comments, margins are down fairly significantly across the board there. In first quarter, we had a solid amount of March Madness flying, which boosted the fixed fee number in March. But like I mentioned, I think that's a one-off for 2021. We won't get a lot of great insight into what fixed fee we'll do in the back half of the year until we get a little bit further along with college football contracts. So for now, I wanted to keep focus on, you know, scheduled service ASMs are growing. Here's why. Here's the scheduled service rev guide. And kind of move with that. To your point, the other rev line will largely move to zero as we move forward with the T-SNAP sale. So that becomes de minimis. Yeah. 60 is not going away. I think we're just trying to be good stewards of our assets in the short term, and the better returns are on the scheduled service side right now.

All right. That's cool, Drew. And then, Maury, I realize a little bit of an awkward question, but we've been talking about this for years. I'm wondering how you might talk about succession planning. I know you can't really quit in the middle of a crisis, but you sound so excited. Now it's maybe even harder to leave, given the opportunity you have in front of you. So, How are you thinking about your own future, CEO?

Well, it's guaranteed I'm going to leave. Really? Yeah. It's a question of when. My succession is sitting around the table here someplace. We'll get to spin the arrow out, and we'll sit down one day and do it that way or something. No, it's certainly been a long run, and I couldn't be happier with the management team that's here. And, you know, I'm still a large shareholder and intend on being that – So I don't know that I'll ever go away, but I don't have to be here day to day, certainly. And this group here are good stewards of this great business. So, yeah, stay tuned.

Okay, Maury, thank you.

Your next question comes in the line of Catherine O'Brien from Goldman Sachs. Your line is now open.

Hey, good afternoon, everyone. Thanks for the time. know maybe a bit of a follow-up to the medium term more metered growth story um you know with spare parts and aircraft available at the pretty attractive prices versus pre-covered you guys know it earlier in the prepared remarks um is there not you know more of an opportunity to add to your fleet here and just lock in lower ownership costs for the coming years or is it really just like those maintenance bottlenecks you mentioned earlier um that call that or it's just, you know, you guys really think the current fleet plan is sufficient for what demand is going to be. Thanks, guys.

Hey, Katie, it's Craig. Perhaps I'll kick it off and maybe others will jump in if they like. I think a way to describe when, you know, John gave that 2024 aircraft guide is that 10% is, I mean, we're still going to be opportunistic. And BJ and his fleet team, you know, they're seeing a lot of opportunities to bring on used A320s, and there's a bunch out there that fit our profile and make a lot of sense to bring on. I would think of those as incremental kind of growth, and maybe it's above 10%, but we're certainly looking at that, and we see a lot of opportunity there. I think from the spare parts perspective, similarly, we've seen some opportunistic purchases there where off of 50% of pre-pandemic levels, so we're excited about that. We'll start bringing those in to help support you know, ramp up of growth. I think Scott Sheldon and his maintenance team and organization, they've done a great job of positioning us to be able to get these aircraft into the pipeline moving forward in a good amount of time. But I mean, I wouldn't, I guess ultimately what I'm saying is we're going to be opportunistic. And as we see nice aircraft deals come our way, we're going to continue to look at those. I think it's a great opportunity for us to continue to look to average down our ownership costs, given what we're seeing here. And, you know, stay tuned, but we have quite a few irons in the fire.

That's great. If I could maybe just sneak two quicker modeling ones in at the end here. I guess first, just a really quick clarification. Did you say two-half CASMX is going to be low six-cent range? Or did I – am I hearing things?

No, you heard that right, Katie. So I think that just the second half should be just in the low six-cent range.

All right, great. And then maybe just the second little modeling one here. You know, it looks like in terms of your ATL current quarter, you saw positive impact of new bookings outpaced some of the drawdown of credits used from prior periods. Any thoughts on how we should expect this to trend going forward just based on your current forward booking? And thanks so much for the time.

Yeah, I mean, I'm going to kick it off what we're seeing, Drew, from an accounting perspective and maybe if you see any forward, but You know, what we saw in this last quarter, Katie, in terms of redemptions, it was just in gross numbers, I think it was like $40 million, which reduced it by 19% that credit voucher level. So what I would say is we're not issuing nearly as many as we did last year. You're starting to see that those be redeemed at a nice rate. We did extend our expiry during the middle of the pandemic, or early on in the pandemic, I should say, to two years. So that's keeping them out a little bit longer, but the cadence of them coming down is pretty nicely, whereas You know, I think by the mid-2022, you'll kind of get back to that normal percentage of ATL in terms of credit vouchers. And then I think, do you want to talk change fees? Sure, we can touch on it quickly.

Yeah, we brought change fees back in a mitigated sense on May 1. So they came back at $25 versus our original previous number of $75. Something was, you know, it was really John's idea of bringing back something that was not zero, but not all the way to kind of help one, with the thrash a little bit on our side, but two, restore some normalcy there. And thus far, very, very early, see no real pushback on that front.

Got it. Thank you so much.

Go ahead, Savi. Could you hear me? Yes. Yes.

Greg, if I can, you know, ask a little bit more on the CASM-X question. You know, you reached the upper end of that CASM-X that you were looking to achieve. And can you kind of walk through your expectations for your major cross-line items over the next couple of years, or just a bit of a longer-term view? I'm trying to understand, like, what might get you to the lower end of that target or perhaps what might kind of cause you to move up from that low six cents that you're seeing in the second half.

Sure. Thanks for the question, Savi. You know, I think an area that I get pretty excited about is in terms of helping improve a tailwind to our unit cost, as I mentioned earlier, was on the ownership side. Just some of the deals that we're seeing or potential aircraft deals we're seeing are coming our way as a result of the pandemic could meaningfully help us drive that down. In addition to that, from another tailwind perspective, I get pretty excited of what Sheldon and his team are doing on the ops side of the house, doing things to make sure we're running a good airline. It's expensive when you're running a not as good airline, so that's always helpful. We talked about SkyWise and the investment in SkyWise, which is our predictive maintenance platform. I think the team today, we have about 25 aircraft that are retrofitted with the complete capabilities of Skywise. By the end of the year, we think that'll be up to 75% of our fleet. And then next year, that'll be about 95%. I mention that, Savi, because that not only helps us run a better airline with dispatch reliability and things of that nature, it also allows us to handle maintenance when we want to, not in an unscheduled type environment. Again, saving on costs, that's a really big deal for us. You know, where we're seeing some headwinds that we're looking at currently, and I don't know if this is here to stay, candidly, Sabi, is on the stations front. You know, given that, you know, with the pandemic and a few of our airports in which perhaps, you know, there was a budget deficit that they're going back and trying to reclaim that for the moment. But we're, you know, we're seeing some pressures there. But I think as industry capacity picks back up, potentially that could help kind of level that back off. But what I'd say ultimately, Savi, is I think, you know, where we're at from a cost perspective, we're in a good spot. We're not here saying we need to be at 5%, I'm sorry, you know, in a five-handle of Casamax. That's a nice to have, you know, but candidly, if that was like our end-all be-all, we would just increase utilization from eight hours a day to 12 hours per day. Now, we've been taught to look at this from a profitability perspective, and there's two sides to the equation. You have the revenue and the cost side. And so, ultimately, that's what we're doing, and we're going to focus on maximizing our profitability and And if down the road we need to spend a buck to make two or three, we're willing to do that because, you know, that's where we're going to be keenly mentored on. But I know that's kind of a lot of information. Maybe I'll pause there. Hopefully I answered or helped answer your question or provide any other detail.

No, that was great. Great. Thank you. And if I might, for Scott, just quickly clarify with the new rental inventory that you're talking about, You know, how meaningful is that? And just, you know, what are you doing that maybe your competitors can't do? Is this similar to just Allegiant being better with kind of putting people in hotels because you have a direct relationship, or is there something differentiated about this new opportunity?

Yeah, so at the moment, obviously, it's going to be crawl, walk, run. But I think what's differentiated about it is the booking window for vacation rentals is much different than hotels. On average, there's three to six months, whereas we see – With hotels, it's much shorter, specifically Las Vegas hotels, which could be, hey, you want to go grab one this weekend type booking window. So I think strategically going forward, the big thing to think about is it gives us something to both attract and sell to a customer much further out than our hotel inventory. The second thing real quick is hotels have been a great story here in Las Vegas, but increasingly as you look around all the coastal areas, markets that we fly into and or all the national parks that we fly to, both very big success stories during and coming out of the pandemic, increasingly vacation rentals are a big part of how you can sell to those customers, right? There's not a lot of Park Hyatt sitting right inside of Yellowstone. And so I think that, you know, those are the strategic things that it gives us. and us being able to sell it, sell it at scale, that's something that comes over time as we just optimize the digital channel to do that. So hopefully that's helpful.

I think the other thing that's worth pointing out, too, is the average trans size on that kind of transaction is much higher, and it's due to the length of stay being much longer on a vacation rental. So we make a lot more money on a long length of stay type product then you do a short length of stay product.

Yeah, even in the early days, it's in the several thousands versus hotels, which, you know, be, you know, more in the hundreds to low single digit thousands. So to John's point, the margins are the same. And of course, for us, meaning the net revenue margin, over 90% of that, virtually all of it falls to the bottom line. So just a highly accretive piece of business that has no real carrying cost, just The ability to get in front of the right customer to buy it from Allegiant.com.

Perfect. All right. That answers my question. Thank you.

Sorry. She quit. She had to go home. We're on our own.

The call went past an hour. She didn't.

Brandon, are you on the line?

Yeah. Hey, this is Brandon. Can you guys hear me? Yep. Thanks. I don't know what happened to the operator. Join the crowd. I'll just ask one because I know it's been a long call, and I did join late, so apologies if this was already discussed. But I think you guys said income in the remaining quarters of 21 that should exceed 2019 levels. I just wanted to confirm that. And then I guess as a follow-up to that question, you know, you guys did throw out some margin guidance in the second quarter. You know, how do you think about margin progression in the back half of the year, especially in relation to the ability to potentially be growing, you know, 20% above where you were in 19? Thank you.

Hey, Brandon. It's Greg. Why don't I, maybe on your first question, just, you know, as we're seeing the positivity in the back half, and I think the way we're thinking about it, and I'll start. Maybe Drew wants to come in on the revenue front. But, you know, as we look at kind of where our guide gets you on the second quarter, and I think that gets you, let's just call it roughly two bucks in EPS. I think if we look at the back half of the year, though, when you see that growth that we're talking about and the team has conviction around is, you know, 20% year over two year, you're entering into the back half of the year at 70% load factors. And so I think what Drew and team, you know, are getting excited about is the ability to yield up and drive revenues there. I mean, we're certainly not trying to put a forecast out there, but what we're saying is we're cautiously optimistic on where we're going to go on that front. You know, I think on the cost side, you know, we're just, we feel good where we're at there. We're pretty baked in. So, yeah, it'd be on the revenue side that I think would bring that home. And then on your second question, I'm sorry, was this on margins second quarter and how they would compare to the rest of the year? Yeah, that's right. Okay. Yeah, I mean, you know, I think, again, I think this is one where I'm not trying to go out and give a guide or a forecast. But I do think, you know, the second quarter will have a strong, you know, margin. We talked about on an unadjusted basis, 35% on an adjusted basis. So adjusted excluding the benefit of the PSP here at a 25% margin. Can we hold that for the rest of the year? I mean, we see line of sight and an ability to do that. but again, I just want to be careful and cautious that we're not, I don't want to come out here and forecast, but we like where we sit, and Drew and his team are seeing, you know, a lot of strength in the back half, I think, but I don't want to put words in your mouth, Drew, so maybe I'll pause, and anything you want to add on the revenue front or anything else?

I think seeing the strength now and seeing the booking curve normalize is giving us more and more conviction toward the back half. I wouldn't say that we have a significant line of sight to what October and November are going to look like at this point, but trying to extrapolate forward the strength we've seen in the cadence kind of gives us that conviction towards the end.

Just to be clear, this is a climb out still without a reference to last year, which will bring us back to more of a normalized. We're pretty comfortable on cost. We know what we can do. They're going to spend that money to fly. So you just have to be careful. Even if you hesitate a little, you could be underneath because we just don't have that ability to look back the year or two years back. So

Yep. And then Brandon, maybe just the housekeeping item, all that assumed like two bucks per gallon in fuel too. So fuel could be a big, you know, variable in that.

Really appreciate the response. Thank you.

Maury, do you have closing remarks?

I think we're all done, folks. Appreciate your time, this call, and we'll have follow-up conversations, I'm sure. So thank you again. We'll talk to you in a couple of months. Bye-bye.