Sun Country Airlines Holdings, Inc.

Good day, and thank you for standing by. Welcome to the Sun Country Airlines fourth quarter 2023 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 this session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your handage rates. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Christopher Allen, Director of Investor Relations. Please go ahead.

Thank you. I'm joined today by Jude Bricker, our Chief Executive Officer, Dave Davis, President and Chief Financial Officer, and a group of others to help answer questions. Before we begin, I'd like to remind everyone that during this call, the company may make certain statements and constitute forelooking statements. Our remarks today may include forelooking statements that are based upon man's current beliefs, expectations, and assumptions, and are subject to risk and uncertainty. Actual results may differ materially. We encourage you to review risk factors and cautionary statements outlined in our earnings release and our most recent SEC filings. We assume no obligation to update any forward-looking statements. You can find our fourth quarter and full year 2023 earnings press release on our website at ir.suncountry.com. With that said, I'd like to turn the call over to Jude.

Thanks, Chris. Good morning, everyone. Thanks for joining us today. Our diversified business model is unique in the airline industry. Due to the predictability of our charter and cargo businesses, we are able to deliver the most flexible scheduled service capacity in the industry. The combination of our schedule flexibility and low fixed cost model allows us to respond to both predictable leisure demand fluctuations and exogenous industry shocks. We believe due to our structural advantages, we'll be able to reliably deliver industry leading profitability throughout all cycles. We have much to be proud of in the way we finished 2023. Many of the challenges of the post-COVID period are fading as we move into 2024. Our operations in the third quarter showed significant year-on-year improvement across every major operating metric, D0, A14, completion factor, and mishandled bag rate. For completion factor, we only canceled one scheduled service flight during the entire quarter. A14 increased 13 percentage points year-on-year without an increase in target block times. In 4Q, we produced a declining year-on-year CASMX for the first time since COVID. One of the main contributors to our improving cost and operational performance is that we've been able to staff the airline closer to optimal. In fact, we've seen better staffing metrics across every major labor group. Improved staffing has allowed us to allocate additional peak capacity in scheduled service and to take advantage of close-in charter demand. Maintaining peak schedule allocations has allowed us to fly almost 15% more ASMs in 4Q with adjusted TRASM declining only 8%. We continue to operate in a strong demand environment across all three segments of our business with scheduled service continuing to receive the majority of our growth capacity, a trend we expect to continue into 2024. Congratulations to the entire Sun Country team that delivered record full-year 2023 revenue, full-year passenger volume, and full year operating margin. I wanted to highlight a few things that I'm excited about in 2024. I feel like we have good control of our unit costs. While we will continue to face headwinds, particularly with the heavy check cycle of our fleet, we should be able to continue to lead the industry in cost trends going into 2024. Demand is holding up really well. For 1Q, we face challenging comps as we lap the exceptional yield environment of winter 22-23. For 1Q, we are currently scheduled to fly over 15% more ASMs than prior year with only an expected mid-single-digit decline in unit revenues. These positive revenue trends are mostly a result of growth being heavily weighted to peak period due to lessening staffing constraints. A few examples. In December 2023, we flew 120% more ASMs In scheduled service during the last 14 days of the month as compared to the first 14 days, industry capacity shifted about 3%. In 1Q 2024, March will have about 60% more scheduled service ASMs than January. This was 47% in 1Q of 23. This schedule variability, along with our cost structure, is the mode around our business and is made possible by our multi-segment model. On the fleet side, we have three aircraft in various stages of delivery. These aircraft will be part of our controlled fleet of 63 airplanes by the end of 2Q. We expect to be able to grow ASMs by around 40% versus 2023 levels with lease returns, utilization increases, and up gauging in addition to these airplanes. That should give us two to three years of growth while simultaneously producing exceptional free cash flow yields. That combination rarely happens in our industry. We have many projects that should help us keep momentum on operational costs and revenue trends into 2024. To highlight a few, in 2024, we are able to rebid our credit card agreement, which we expect to result in materially better economics. In 2023, we launched bag scanning technology that has had a material impact on MBR. That solution will be rolled out to outstations in the coming months. We automated our passenger re-accom process, which allows us to take more scheduled service risk during peak periods. We'll launch our app in a few months. Our crew rostering system will transition to PBS later this year. And all the investments we've made in crew training are starting to pay off with the lowest training footprints we've seen since COVID. Finally, our growth trends have very little risk. We have high confidence in our Minneapolis expansion based on prior success. Further, based on ongoing discussions with charter and cargo customers, I expect those segments to be able to keep growth pace with our scheduled service opportunities. And with that, I'll turn it over to Dave.