Spirit Airlines, Inc.

Ladies and gentlemen, good morning. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the Spirit Airlines fourth quarter 2022 earnings conference call. Today's conference is being recorded and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one once again. Thank you, and I will now turn the conference over to Deanne Gabel, Senior Director of Investor Relations. You may begin.

Thank you, Abby, and welcome everyone to Spirit Airlines' fourth quarter 2022 earnings call. This call is being recorded and simultaneously webcast. A replay of this call will be archived on our website for a minimum of 60 days. Presenting on today's call are Ted Christie, SPIRIT's Chief Executive Officer, Matt Klein, our Chief Commercial Officer, and Scott Harrelson, our Chief Financial Officer. Also joining us in the room are other members of our senior leadership team. Today's discussion contains forward-looking statements that are based on the company's current expectations and are not a guarantee of future performance. There could be significant risks and uncertainties that cause actual results to differ materially from those contained in our forward-looking statements. including but not limited to various risks and uncertainties related to the acquisition of Spirit by JetBlue and other risk factors as discussed in our reports on file with the SEC. We undertake no duty to update any forward-looking statements, and investors should not place undue reliance on these forward-looking statements. In comparing results today, we will be adjusting all periods to exclude special items. For an explanation and reconciliation of these non-GAAP measures to GAAP, Please refer to the reconciliation tables provided in our fourth quarter 2022 earnings release, a copy of which is available on our website. And with that, I'll now turn the call over to Ted Christie, SPIRIT's Chief Executive Officer.

Thanks, Deanne. And thanks to everyone for joining us on the call today. And a special thanks to everyone on the SPIRIT team. Together, we overcame many challenges throughout the year. And thanks to our team members' dedication, we made excellent progress on the steps necessary to return SPIRIT to sustained profitability. Demand was robust during 2022, and our team did a great job maximizing revenue production, including achieving another record for non-ticket revenue per segment. Operationally, the team delivered solid results with an overall mid-pack performance for both DOT on-time performance and completion factor, despite our network being impacted by multiple weather events and infrastructure bottlenecks. We are positioned well to build upon our 2022 successes. And I'll share more about our 2023 goals before we get to Q&A. Before discussing our fourth quarter results, just a quick update about the pending merger with JetBlue. We announced in December 2022 that Spirit and JetBlue had certified substantial compliance with the DOJ's second request and are now waiting to see whether the DOJ files suit to block the deal or allows us to proceed. We anticipate hearing from the DOJ in the next 30 days or so. And that's really all we have to say on that topic for now. Turning now to our fourth quarter 2022 performance, operationally, the quarter started off with the tail end of Hurricane Ian impacting our operations, followed by Tropical Storm Nicole, and then by severe winter weather across the U.S. during the peak holidays. As a result of these weather events, we canceled over 1.5 percentage points of our anticipated fourth quarter capacity. The good news is that our team did a great job mitigating the downline impact from these events and took excellent care of our guests. I am grateful for their efforts and I'm honored to be part of the team. The revenue environment in the fourth quarter remained strong and total RASM for the quarter was up 17% as compared to the fourth quarter of 2019 on 22.7% more capacity. This was even stronger than we had anticipated. In fact, adjusting for capacity increases, our unit revenue performance was amongst the best in the industry compared to 2019. Costs also came in better than expected and as a result, our adjusted operating income for the fourth quarter was $57.6 million, resulting in an adjusted operating margin of 4.1%. While our fourth quarter results were better than expected, we continue to face headwinds in returning to normalized margins and full utilization. As you may have seen in our release yesterday, we have once again trimmed our capacity expectations for 2023. Over the last six months, the GTF NEO engine has experienced diminished service availability, an issue that has been steadily increasing over this period. This is not just a spirit issue. Pratt & Whitney continues to struggle to support its worldwide fleet of NEO aircraft as MRO capacity remains constrained, and turnaround times for engines in the shop have been nearly three times longer than the historical averages for CO engines. To put this in perspective, within a two-week period, we went from having two A320 NEO aircraft parked without operable engines to having seven A320neo aircraft sidelined due to these issues. When operating, the NEO engine performance and fuel efficiency is great, but the engine's time on wing performance has once again declined. We are working with Pratt & Whitney on finding a solution that will increase time on wing performance, but it is frustrating that this has become an issue again. In addition, we have been notified by Airbus that a number of our expected 2023 deliveries will be delayed until 2024. which may cascade some aircraft into 2025, all reducing the number of aircraft delivered from Airbus and our lessor partners by seven shells in 2023. In the fourth quarter of 2022, we made the decision to accelerate the retirement of our A319 fleet, which Scott will share more details about. We have had some good news. Florida operational constraints have been gradually improving. However, we will remain methodical and deliberate in building back Florida and relaxing the crew buffers that we've been forced to add until we have more confidence in the infrastructure that supports the airline industry. With that, I'll hand it over to Matt and Scott to share additional details about our fourth quarter performance, as well as some color around our first quarter outlook, before I close with some thoughts on full year 2023. Matt, over to you.