Frontier Group Holdings, Inc.

Good day and thank you for standing by. Welcome to the Frontier Group Holdings fourth quarter 2022 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 a session, you need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. 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 the speaker today, David Erdman, Senior Director, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to our fourth quarter 2022 earnings call. Today's speakers will be Barry Biffle, President and CEO, Jimmy Dempsey, EVP and CFO, and Daniel Scherz, Senior Vice President, Commercial. Each will deliver brief prepared remarks, and then we'll get to your questions. First, though, let me cover the safe harbor provisions. During this call, we will be making forward-looking statements which are subject to risks and uncertainties. Actual results may differ materially from those predicted in these forward-looking statements. Additional information concerning risk factors which could cause such differences are outlined in the announcement we published earlier, along with reports we filed with the SEC. We will also be discussing non-GAAP financial measures which are reconciled to the nearest comparable gap measure in the appendix of the earnings announcement. And so with that, I'm going to give the floor to Barry to begin his comments. Barry?

Thank you, David, and good afternoon, everyone. Frontier posted strong fourth quarter results, achieving an adjusted pre-tax margin of 5.7%, our third straight quarterly profit. Results were underpinned on a record ancillary revenue performance along with meaningful improvements in our unit cost and utilization. followed by the winter storm Elliott during the busy holiday travel period. However, we're able to minimize impacts through the recoverability of our modular network and the dedication of Team Frontier, who work tirelessly to ensure our passengers arrive safely at their destinations. I'd like to extend my gratitude and recognize our team's efforts as they overcame treacherous weather conditions, worked extended shifts, and managed customer disruptions to get them to their destination safely. At our investor day last November, We've highlighted how leisure travel demand has undergone a fundamental shift and how we're uniquely positioned to exploit it. Customers have more flexibility and more propensity to travel than they did during the pandemic, and its compelling evidence points to the resiliency in the leisure travel sector. We expect the benefits from the resilient demand to be amplified by industry capacity constraints, but predominantly by pilot shortages and supply chain bottlenecks. But this creates a significant opportunity for Frontier. Although we're not immune to these issues, forward book, dominated by the A321EO, together with our robust pilot recruiting and training platforms, uniquely provides us the foundation to harness the growth opportunity before us. Last year, we launched our cadet and rotary programs, and both are driving strong demand for candidates who want to apply for Concierge. Over 100 pilots have already been accepted into the cadet program, and we have nearly 5,000 applications last year through all of our hiring channels. In fact, the first cadets from the program will be joining us as birth officers in just a few Although aircraft manufacturers are dealing with supply chain issues, the delays we're experiencing from Airbus are between one to five months. While we're disappointed in these delays, they've effectively represented a manageable one-quarter shift on average across our workload. Our strategy has been to focus on areas that we can control. We're focused on hitting our near-term target of $85 mandatory revenue per passenger, and we achieved $82 for the fourth quarter, enhancing our confidence that hitting the $85 in the fourth quarter will happen. Moreover, we lowered our total adjusted chasm, including interest, by 8% from the prior quarter and widened our total cost advantage with the industry to an equivalent of over $70 per pass period. Our costs are our competitive edge, and we expect to maintain this advantage for years to come. Put simply, our strong ancillary performance and industry-leading unit costs are the variables that make it possible for us to capitalize on a strong leader market and stimulate profitable growth for the rest of the decades. All of the fatigue farms here are unified in this pursuit, and it gives me confidence to reaffirm our target of returning the airline to pre-pandemic profit per plane by the second half of 2023 on a run rate basis. With that, I'll hand the call over to Daniel for a commercial update. Thank you, Barry. Good afternoon, everyone.

Full cost of revenue was $900. But there's a question of permanent authority performance that we saw throughout And lastly, we announced a command service to Puerto Rico, with additional long-stop routes to San Juan and Medellin, and new service to Plante, giving customers access to all three key destinations on the island. Of the routes launched in May, we also have more strong demand since it went on sale. We're pleased with one of the classes sold, but I'm equally encouraged by the increase in engagement this product creates with our brand, both for existing and new customers. That concludes my remarks before we yield the poll to Jim.

Thank you, Daniel. We generated a pre-tax margin of 5.5% on the GAAP basis and 5.7% on an adjusted basis during the fourth quarter. About the midpoint by higher utilization along with the timing of aircraft deliveries and aircraft returns, partially offset by higher other non-fuel expenses, particularly lease return costs. We ended the year in a strong financial position with $761 million of unrestricted cash and cash equivalents and $332 million net of total debt. In addition, as previously highlighted, we have the ability direct leases. As noted in our earnings release, and modestly above for the full year, a level which we believe is materially below the industry average. Recapping guidance, first quarter capacity is anticipated to grow 17 to 19% over the 2022 quarter, while full year 2023 is expected to grow 23 to 28% over the prior year. So with that, I'll turn the call back to Barry for closing remarks.

Thanks, Jimmy. Our objectives for 2023 are clear. All 13,000 members of Team Frontier are focused on completing the post-pandemic turnaround. I'm confident we can sustain the momentum from the last three quarters as we execute on widening our relative total cost advantage as we deliver on revenue enhancements, particularly on the ancillary front. Together, these two factors will enable us to return the airline to pre-pandemic profit levels Thanks again, everyone, for joining the call today. We're now happy to take your questions.

As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to withdraw your question. Please press star 1-1 again. Please stand by while we compile the Q&A roster.

And our first question comes from Stephen Trent from Citi. Your line is open.

Good afternoon, gentlemen, and thanks very much for taking my question. Definitely appreciate the color and everything you mentioned about the cadet program and what have you, and that's great to hear. I was wondering if you wouldn't mind giving us some color on what you're seeing in terms of mechanics and sort of availability of mechanics, and if you're seeing sort of any hiccups in terms of engine maintenance, throughput issues of any kind. Thanks again.

Yeah, thanks, Stephen. So, look, we've been talking about the mechanic shortage for years, and everyone's focused on the pilots, but actually the mechanic shortage is just as problematic. We have seen some of our business partners. As a reminder, the majority of our maintenance on the line is actually provided by business partners, and we have seen some challenges there. In particular, we've seen issues, especially in places where we have what's called on-call maintenance, where we don't do maintenance every day. Sometimes the availability, lots of times how quickly they respond has deteriorated as a result of their staffing levels. But we are working with them. We've had a lot of talks with them recently. The other thing that's been impacting us, you mentioned the engines, which hasn't been a major issue for us. However, there has been significant challenges with parts overall. And we have seen in many cases over the last several months, we've had multiple instances with aircraft out five to seven days waiting on parts. And so we've kind of seen the supply chain issues that a lot of people have had. And so we are working with all our providers and spending a lot of time on that. But the supply chain issues this year across other industries, and including our own, they are real.

Okay, that's super helpful. Really appreciate it, Barry. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Jamie Baker from J.P. Morgan.

Your line is open. Hey, good afternoon, everybody. So this first question I wasn't planning to ask until last night. Of your total ancillary take, what percentage comes from seat assignment fees on reservations with more than one traveler in the PNR?

Since seats are a really important part of our ancillary, we don't We're obviously conscious that that thing's being talked about.

Yeah, which is why I'm asking.

Well, Jamie, I know why you're asking the question. First of all, we have four years, and as the standard practice across the industry, we have shown every option available to a customer before they complete their booking, so everyone knows prices well in advance. If a flight is canceled or if they're significantly delayed, we provide prompt refunds on request. Also, as it comes to families and seeding families, we actually do that today for free, and we have high success in actually getting families seeded together. There are operational challenges. Last time, the flight's full, and there's plenty of other seeds, and the last two seeds were sold to a family. It's a little harder, but we do a really good job with that. So I think there's a lot of confusion with that.

And I appreciate that, Barry. Let me just ask, and I apologize because I'm going to give away the fact that I don't fly Frontier very often, but if I go to book a flight right now for a party of five for travel in June, you're telling me that all five of us will be able to make adjacent seat assignments for free?

No. No. We will make every, if you don't have seat assignments, we'll make every effort. Okay. to get you together, but not the whole family together. We will put an adult with the smaller children.

Okay, fair enough. I'll experiment some more with it. And second, you know, I'm sure the 5% reduction in 2023 capacity, you know, it takes some pressure off pilot hiring. And, you know, I know you made an excellent point at Investor Day emphasizing, you know, new crew bases, out and back flying, you know, as lifestyle benefits But given recent wage increases, it looks like you're now bringing up the rear in the industry in terms of pay, save, I guess, for maybe a velo and breeze. Obviously, this will change with the new pilot contract in 2024. But until then, why shouldn't we assume that the pilot shortage hurts you more than other low-cost airlines in the U.S.?

Because it hasn't. We have an aggressive... program and we're not bringing up the rear I think we've gotten the brunt of a lot of this dialogue this is a regional situation right we are significantly higher than the regionals and we are successful in all our classes and we're still getting over 10 applications a day of qualified applicants so I think you're welcome to come out Jamie I'll introduce you to recruiting you can go around the recruiting we can show you our classes It's not the problem that I think that the perception is out there. In fact, we'll have to slow our hiring in order to accommodate the Airbus delays.

Excellent. Understood. Thanks so much, gentlemen. Thank you. One moment for our next question.

Our next question comes from Elaine Baker from Calend. Your line is open.

Thanks very much, operator, for your time. Thanks, team. Appreciate the color. Just one or two questions here. I heard what you said about demand in the fourth quarter, but as you're looking at the cadence of demand in the first quarter, can you just talk about what you saw in January and what you're seeing for the rest of this quarter into maybe the second quarter?

Yeah, so look, we've seen continued robust demand for leisure travel, and it continues to do very well. In fact, I think if you look at our results, you can see in the fourth quarter, I think we were second place in terms of capacity compared to 2019, and we put up an impressive RASM number against that. And in Q1, we continue to see that trend continue. We're going to be in a really good RASM position, even though we are now the largest carrier in terms of size relative to our 2019 size. So even with significant growth in capacity, we are seeing continued strength in leisure demand, and especially when we look to the peaks. We've got President's Day right around the corner, and we've got the spring break period. We see really robust demand, probably the best we've ever seen. And I expect at the current rate, we will have never seen a spring break that is as good as this year.

That's hugely helpful. Thank you for that. I don't know if it's the last earnings call or the one before that. You talked about seeing trade down from other carriers to you guys. Are you still seeing that among maybe a non-traditional Frontier customer?

We've seen a significant uptick in customers that did not fly us before. As a growing carrier, you're always seeing you know, new customers because you're in new markets and so forth. And you're always adding new customers in cities even if you already apply to. But we did see a significant uptick in customers over the past year that had not flown us before. We've seen a significant uptick in customers that are buying our Go Wild Pass, for example, who we've never seen before at Frontier. It's hard to say if that's a price pressure of them being priced out of a legacy carrier. Or is it just simply that our brand's getting that much stronger? It's hard to say. But yes, we continue to see a significant amount of new customers.

That's very helpful guidance or commentary. Thank you very much. Thanks, Lynn.

Thank you. One moment for our next question. Our next question comes from the line of Michael Lindenberg from Deutsche Bank. Your line is open.

Oh, hey. Good afternoon, everyone. Hey, I guess to Barry, I guess you're sort of in a unique position in the sense that you're one of the few carriers that I think you have both the LEAP engine on your A320neo, and I believe you're bringing in the GTF on your A321neos. Curious if you're seeing anything now, or is it just because you just started getting the GTFs in your fleet? And from maybe conversations that you're having with the OEMs, What is the issue? What do you think is the root cause so that when a year or two or three down the road, you're not taking engines off the wing?

Well, I think that's a question for the engine manufacturers. But, yes, we operate both engines. In fact, it seems like yesterday, but we've been operating the NEO now for, oh, gosh, seven years. And we had a lot of teething challenges with the – With the leak, there were shroud issues. There were a number of challenges, fuel nozzles, all types of things, as there is with every new technology that has come in. We are past most of those issues now. There's maybe still a few lingering. We're not as familiar with the GPF, as you pointed out. We just started operating this aircraft basically in the fourth quarter, and so we're very new to it. We haven't had many of the issues. A lot of the issues, as we understand them, are earlier production series parts and designs. And we're fortunate to have many of those upgrades later. But there obviously could be challenges. I think the biggest issue is not if the reliability is there, but the turnaround time on the engines themselves. So how long it takes, if you have an engine come off wing, how long it takes to get that engine overhauled and back. And I think what we're seeing, not just in engines, but in all types of components, we're seeing it take longer to get components repaired and back to the airlines. This is one of the challenges we're seeing with our provider on parts. It's just things are taking longer to get repaired, and so it takes longer to get them back on the shelf. And I do know, yes, there's another airline that called this out recently in the United States, but there's several around the world that have, in the engine space, that actually have aircraft sitting without engines. And so we're watching this closely, but, yes, we're pretty good ways away from having any of these challenges, and hopefully given the improvements that they've already made in the engines, it's not as profound a crunch yet.

Okay, that's helpful. It kind of reinforces the adage that you kind of never want to be first in line for the new technology. Let it teethe and be airline number four or five. So that's good. And then my second question, and maybe this is Barry to you and Jimmy, the comment in the release about second half of 2023 getting back to a profitability per aircraft, I go back to 2019 and I see 14% pre-tax margins that makes me salivate, probably makes you guys salivate as well. Is it a margin? Is it EBITDA per aircraft? What are you referring to? What metric do you hope to hit in the back half of the year? Thank you. Thanks.

Yeah, Michael, we have an internal target of getting back to pre-pandemic profit levels, obviously. I think the entire industry is trying to do that. back to pre-profit per plane on a net income basis, on a run rate basis, second half of the year. Obviously, there's a lot of work to do to get there. Moving our unit costs and widening the cost advantage against the competition gives us a real runway to moving margins higher. Obviously, we want to move margins higher, but it's not necessarily a margin rate. It's more of a profit level per plane.

Okay. Okay. Very good. Thanks. Thanks, Jimmy. Thanks, everyone.

Yeah, so Mike, it's total dollars of net income per plan.

Okay.

And again, and just what we did with the fourth quarter kind of illustrates, if you look sequentially at the last three quarters, you can see the cost trajectory is clear. And so you can see that the ancillary revenue trajectory is clear. And so it's just math. And if you look, we're already back pretty close to pre-pandemic utilization. We got maybe a half hour to go, but we already did 11 and a half hours just in the fourth quarter. So it's all systems go, and then we have a clear path. It's not a maybe someday. It's right upon us.

Great. Thanks. Thanks, Barry.

Thanks, everyone. Thank you. One moment for our next question. Our next question will come from the line of Dwayne Fenningworth. from Evercore ISI. Your line is open.

Hey, thanks. The take down on full year growth makes sense. More near term, can you just speak to the March quarter? How much of this is just short on deliveries in the here and now versus some increased conservatism in your planning assumptions?

Dwayne, it's all delays in aircraft deliveries. We have been working with Airbus for some time on understanding the supply chain issues that they have in their business. And we've been notified recently of significant delays across this year that we're previously unaware of. What we have been seeing is delays of between four and six weeks in aircraft deliveries. We've now seen that extend out between, as we said in the release, between one and and five months. So the change in capacity is really driven by those aircraft deliveries of those.

And in Q1 in particular... Sorry, go ahead. Well, in Q1 in particular, this is the first time we've had kind of this close in, this many aircraft be late. But we had to pull four lines out as a result. So it's pretty significant, even close in.

How many are you short, like right now? Where did you think you would be, and where are you?

Whereas what we're seeing, Duane, is aircraft delays start to extend it. So you're seeing delays that were occurring months, six weeks, two months, now going to three, four months. And so that's what you're seeing cascading across the year. And so if you go all the way to the end of the year, given the profile, As Barry said, four lines of specs before.

And there was already one. So we're actually down five now into this quarter, and it grows to nine by the end of the year.

Okay, that's helpful. And then just maybe a hypothetical, maybe more than a hypothetical. On Spirit, slots, and gates, if there was a package that became available, can you comment on your willingness to bid on that? Any thoughts on that conceptually?

No, we can't comment.

Okay, thank you. One moment for our next question. Our next question will come from the line of Brandon Oglanski from Barclays. Your line is open.

Hey, good evening, everyone, and thanks for taking the question. Barry, can you talk to, I guess, the resiliency of your network and your operation? I mean, I know I hear you on the pilot issue. maybe that's uh you know not really one that's fair to apply to you guys but last summer you did have constraints across the network whether it was like airport capacity or faa atc capacity so what are you doing to mitigate uh those challenges this year and what gives you the confidence you can grow at the levels you think you are yeah so actually it wasn't the summer it was actually in the spring um we saw some challenges particularly in florida um some carriers got

I guess a bigger brunt of it than we did, but what we did is we reoriented our flying on crew pairings that actually cross Jacksonville Center. And so effectively, you don't have any aircraft or any crew that actually crosses Jacksonville more than twice. And so this helps mitigate, you know, if we end up with three- and four-hour ground delay programs again, we can just trim the flying, and unfortunately we'll have to cancel for ATC, but it doesn't disrupt the aircraft for the next several days, right? So you don't get in these situations where these carriers that have airplanes that are, you know, kind of do these daisy chain, multi-leg all across the United States that lead through in all these different cities. We're not impacted by that. And so that's one of the reasons why I think, you know, you look at the storm. We did so much better, I think, recovering after the fact, even though we were much more impacted than most when you look at our geography.

Daniel, you want to talk about schedule construction? Well, I was going to say, one thing that's changed since last spring and summer is we've increased the level of modularity. We've further tightened up in terms of we've got a higher percentage of crews just doing a one-day pairing. We've got almost all are flying in one- and two-day pairings from a crew perspective. We've got more aircraft We've simply created more resiliency with the further increase in the modularity of the network that sets us in a good place going into the summer of 2021. Great.

Okay, guys. Appreciate that. I guess I appreciate the outlook as well for second half profitability, just like the earlier question, but Barry, what's the view, or Jimmy maybe, right now that you can't generate that profitability? Because you have got your costs down here recently. Aircraft utilization is coming up. Is it really just the outlook for lower fuel prices that's the difference?

I mean, there is a relationship between fuel prices and revenue that you've seen over the course of the last year. So, I mean, no, it's not just lower oil prices. If you look in our guide today, given you what the curve is for that we're seeing for oil prices for the year and that's reflected in what we believe we can achieve throughout the year you know what we've seen so far this year and particularly going actually towards the end of last year and going into the peak parts of this quarter is a real strength in demand coming through into the business and that allied to $82 which is really the objective that we're working towards.

But specifically to your question, Brandon, about why not now, well, look, your seasonally Q1 is actually the worst, you know, for our network, the lowest RAB in time. So the seasonality does come back, but also your costs continue to sequentially go down. And so it's just mechanical. I mean, as the revenue comes up seasonally and the costs continue to go down, and we've also got further tailwinds coming in through the ancillary that Daniel kind of mentioned, you know, 82 going to 85 by year end. Those things come together to put us back to pre-pandemic profitability.

Thanks, Barry. Thanks, Jimmy. Thank you. One moment for our next question. Our next question comes from the line of Connor Cunningham from Mellius Research. Your line is open.

Everyone, thank you. Maybe to talk a little bit more about just the pilots in general and staffing. Some of the other airlines have talked about needing to have 5% more pilots to hit their prior production levels. You appear to be overstaffed right now, but I assume that has to do with delays and hopes of growth. Just long term, do you think that there's a structural change in staffing and maybe employee productivity at Frontier?

We don't completely understand that. We've heard that commentary, but we do not have more pilots per plane. We have not seen a need for more pilots per plane. There is slightly higher pilot costs because we do have attrition that we've talked about in the past. We have a higher level of attrition, which causes you to have to train more. But if you look at like credit to block, for example, that's the main source. In fact, we see more efficiencies. As Daniel kind of talked about the modularity network, we actually see more efficiencies coming to this. We're not sure what those businesses, what other things they're doing, but we don't understand why they would need more pilots per plane.

Okay. I'll take that. And then just on crew bases in general, you've opened up a lot, and I understand the idea around you know, the modularity of your network and I get the benefits to the operational side of the business. But, you know, when a crew base is opened, why shouldn't we just turn around and assume that there's an additional cost to frontier, you know, like a structurally higher cost? The fact that, I mean, it is a much different stance than you had pre-pandemic. So just curious on how you think about crew bases and the impact to your overall profitability. Thank you.

Yes, we spend a lot of time on this, and Daniel can spend hours with you explaining it, but as long as we have a minimum amount of sizing, in fact, today we're in Phoenix hosting this call, and we just opened a base here, and we're already at the minimum scale that we need. So the only inefficiencies, if you will, that you get with a base are in reserves. And so as long as your reserve ratios don't get too high as a result of your base coverages, it's not a big deal. Sometimes what we have learned is depending upon the windows that you cover for your reserves, you can end up with percentages that don't make sense if the base gets too small. But we believe we've largely cracked the nut on this and we are not opening bases that we don't believe will fit our that are efficiency on a ratio perspective. And then when we think about from a reliability perspective and a resiliency, there's not a better way to operate.

Appreciate it. Thank you.

One moment for our next question. Our next question comes from the line of Christopher Stathopoulos from Susquehanna Investments Group.

Your line is open.

Good afternoon, everyone. Barry, going back to the outlook for pre-pandemic profitability per plane, what are the assumptions around seasonality there and utilization? Does the outlook assume any macro softening or is seasonally in line plus or worse? Any color here in how you're thinking about demand as we move through the quarters and utilization? Thank you.

Yeah, so from a utilization perspective, we look to be at 12 hours. We were actually at 11 and a half in the fourth quarter. We've been operating close to that level now, so there's not much more to go in utilization. So utilization will be what it is. The big leverage that you get is the delivery of the 321 in the O. I mean, with 240 seats, it just simply delivers a major CASM advantage. We actually do assume, as a result of that, that RASM is going down. I mean, we actually have assumed that those incremental seats will come at a marginal fare. So we expect that there will be a kind of ability to withstand any kind of weakness, if you will, in the economy by us further reducing our cost levels. And so, but we plan on a major 2009 type event? No. But we can withstand a medium to mild recession.

Okay. And my follow-up, so November's outlook modestly above six, I think it was, to or today's outlook modestly above six to November's less than six. I understand the slippage here. But if there are more delays, you called out the four to six weeks, it's moved to one to five months. What are some of the levers that you could pull here? Because it sounds like at 11 and a half or 12, there's not much more you can do on utilization. to offset what could be perceived as upward pressure on unit costs should the additional tails slip? Thank you.

Well, let's just clarify. Our trajectory on unit costs is heading in a really good direction. What's happening with the Airbus delays is a delay in that benefit of the 321neo coming into the fleet. And that's maybe a quarter. And so you're on a very strong trajectory on a unit cost benefit and efficiency benefit in the business. In order to mitigate the delays, I mean, we've certainly looked at infilling some capacity by extending leases or looking at distressed aircraft around the world to replace some of the capacity. What we believe is that this is not a single year event where the manufacturer has delays and supply chain issues in deliveries. We believe this is a multi-year event, so we're looking to plan our business accordingly. So we may look to infill some capacity from outside of the business or from within the business by extending some leases in order to manage the capacity profile of the business, because the changes that we're seeing in deliveries break some lumpiness in capacity compliance in the business, and we may choose to smooth that out.

And just to clarify on what we thought versus November, I mean, we were looking at sub-six, and now we're talking low six for the year, right? And we expect it to still be below six in the second half, even with delays.

Okay, thank you.

One moment for our next question. Our next question is from Raymond James.

Your line is open.

Hey, good afternoon, everyone. Just for the first question, just a follow-up on fourth quarter. You know, your cost came in much better than you had thought, even though you had these storms. I was just curious what was driving that and just trying to gauge, you know, what level of conservatism might be there in your kind of non-field guide here for 2023.

I mean, look, the big driving force in our business, as you know, is overcoming the fixed overhead that exists and moving utilization to 11 and a half hours for the full quarter as it has a big impact on unit cost metrics if you measure or something like that. And I mean, look, I mean, we are giving you what we know today in terms of our outlook on cost for the year. Where the business is very focused is ensuring that we That's sustainable. And so, you know, as we move towards the six cents zone, you know, that puts us in a very strong place versus the competition. I mean, if we come in at six cents or 6.1, I mean, it still puts us in a place overall on total cost plus net interest, you know, somewhere in the mid-30s percent. lower cost than the industry average in the last quarter. And that's moving higher as your unit costs come down. So that's been a great place to grow the business in the short term and the medium term. And that's something that we're very focused on achieving. What we're trying to do with you guys is educate you on how we get there. And in the fourth quarter, you're seeing a really good move towards That's where we get our competitive edge.

And just to clarify, too, just to clarify, we were over $70 advantage for the full year of 2022. And by the fourth quarter, that has expanded to over $80 for Baxter. So with this cost advantage, this is what gives us the confidence that the momentum is going to continue and we'll be back to a pre-pandemic profit per plane in the second half.

That makes sense. Thanks. And then if I might, At the investor day, you talked about, you know, some of the moving from high touch to self-service and some of those things should drive some cost benefits as well, not as much as a 321s. But I was curious on how the kind of the switch and call center and saw how some of those initiatives are being kind of accepted by customers.

Yeah, so look, I think contrary to maybe some of the news reports, we've actually seen really good performance. In fact, we're just reviewing it this morning. We've seen NPS go up dramatically compared to the call center. And the reality is, I mean, if you just think about it in your personal life, how often do you text versus how often do you call? And I think, you know, this is the way people want to interact. And as long, what we see is the biggest driver, can you solve their issue and do you do it properly? And when I think when you compare to some of these other carriers that recently have had, you know, 10, 20, 30 minute waits to get a hold of an agent, that's why we're seeing such an advantage. And so, look, Customers like it, and it's working well.

Thanks.

One moment for our next question. Our next question will come from the line of Scott Group from Wolf Research.

Your line is open.

Hey, thanks. Afternoon, guys. So if I look in the fourth quarter, capacity is up about 15% versus 19%, and CASMX is up low 20s. If I look at Q1, capacity is now going to be up about 40% versus 2019, but CASMX is still up low 20s. I guess my question is, why aren't we seeing better sort of unit cost leverage as capacity is really already ramping up pretty meaningfully?

Well, Q1, you have a lower utilization quarter than is typical in our business. So you've got to see that progression throughout the year where utilization is higher in the second, third, fourth quarter than it is in Q1. So just purely comparing Q4 and Q1 puts a challenge on your unit metric. But we haven't hidden behind the fact that the 321 The 321neo, just to remind you, has 240 seats. Our fleet today is dominated by the 320neo with 186 seats. So your average seats for a departure move quite dramatically, creating a lot of efficiency in the business. So the more deliveries of those, the more that they operate in our business, the more efficiency that comes into our airline. So that's a large part of it. down to where our targets are.

Okay. And then any thoughts on... Sorry, Scott.

And look, we like to look at total unit costs. And so one of the things that we've watched in our business as a metric is watching our comparison total costs versus the industry. And that includes... That is Chasm. plus also net interest. And so if you're looking at just purely our Casonex fuel, and you're ignoring the ownership costs that a lot of the other airlines have in their business, and also the investment that we've made in our business on fuel-efficient aircraft over the last seven years, and continues to be.

Yeah, that's a good point. Can you just talk about, within your view of... getting back to the margins you were at or the profitability you were at per plane. How should we think about full-year revenue growth or RASM, just what's in the plan? We don't guide unit revenues.

Obviously, it's a function of what happens with oil prices across the year. We're giving you a sense of where we see oil prices at the moment based on, I think it was January 30th that occurred. But we're not guiding unit revenues across the year.

Okay. All right. Thank you, guys. Thanks, John.

Thank you. I'm not showing any further questions in the queue. I'd like to turn the call back over to the company for any closing remarks.

I want to thank everybody for joining our call today. I especially want to thank the Phoenix Airport for hosting our call. And we look forward to talking again after the first quarter. That concludes our call. Thanks, everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.

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