Q1 2020 Earnings Call
It is we intend to be in a position to best capitalize on the opportunities that clearly lie ahead.
And now I'll hand, it back over to Ted.
Thanks, Matt.
Going into this crisis, we were in a very strong liquidity position at a healthy balance sheet over $900 billion of unencumbered assets, which will assist us as we managed through what is likely to be an extended period of low travel demand.
As Matt described we are taking a conservative view in the context of planning for the recovery. This will allow us to grow into the demand, we see rather than using hope as a strategy.
We believe this approach sets us up well to conserve resources, but allow us to react quickly to the economic recovery.
When we look past this crisis the fundamentals of our business remain intact demand will return and we believe that our product and cost structure will be key drivers of our performance during the recovery phase.
The next couple of years it may be that we are smaller than we had planned before the current economic situation developed.
However, we believe there are plenty of new market opportunities to support our growth once demand begins to recover including perhaps some opportunities in constrained markets that didnt exist before.
In fact, we strongly believe that we will emerge from this crisis, even better positioned than we were previously.
If history is any indicator low cost low fare travel is where the recovery comes first and it is our belief there is no other airline in our space with the cost structure brand reliability and network to take advantage of that better than us cost control and low costs have always been core to spirit.
But it will matter, even more as the leisure travel over in terms to the market.
Thankfully, we have never relied on high yields to justify higher costs, we stimulate demand with low fares and we believe that will be the hallmark of the post cobot 19 traveler.
In the meantime, we rely on our years of conservatism with our balance sheet, our LOE costs and improving brand to carry us through this period.
The focus now is on making sure our guests and team members feel safe and can rely on spirit to take care of them.
I sincerely believe that this period is a good test of our strategy to build one of the best low cost airlines in the world.
While it may be hard to see the end right now I'm sure that spirit will be part of that new opportunity.
With that back to Dan. Thank you Ted we're now ready take lesson sending analysts.
The limit yourself to one question with one related follow up Rebecca we are ready to begin.
Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone if you wish to be removed from the Q. Please press the pound fine asking if you're using a speaker phone you meaning to pick up the handset first before passing the numbers there will be a delay before the first question is announced.
So again, if you have a question. Please press Star then one one moment.
Okay.
Glenn Your line is open.
Hey, Thank you.
Thanks for taking the questions.
Wanted to say.
Really good detail in the 10-Q, it's unusual to have that before the earnings call.
But it but it did trigger some questions.
And I wanted just check my math your remaining aircraft Capex for this year stood at 700 million.
But you're negotiating with Airbus to get that down by 185 million and just just check that 185 million pertains to this year.
And how much of that is financed at this point.
Hey delay of the remaining Capex, you're talking about assumed to be financed.
Yes. So is the 185 reduction related to the 700 million you have left.
So I would get us to call it 500 million and how much of that is financed at this point.
Yes, the anticipated reduction.
His is we'll say it said another way of the aircraft we plan to take this year it will be financed.
The remaining component of what we expect to differ with Airbus.
As part of that 185.
So where would you peg capex for the remainder of the year from an aircraft perspective relative to the 700, that's in the Q.
Yes, we have.
Finance amount of Capex.
Probably around.
98 200 million ish.
Unfinanced leaves about 375, Blaine I'll, let Mike now you afterwards.
Okay.
And then.
It said debt principal repayments for the rest of this year of 300 million is that still a good number there was a lot of.
We've been back and forth with the credit lines and so that may be a steel number but is 300 still a good assumption in terms of principal for the rest of the year.
Yes, Thats right direct doing no change in the principal payments.
Okay, and then can you just remind us I know historically you guided to heavy maintenance.
Over and above that where does that stand for the rest of 2020.
We had initially discussed around $110 million of maintenance Capex.
That number right now is down to about $80 million of maintenance Capex and will likely come down a little bit further as we go through the year of a right now it's about a.
Okay, that's great and then just lastly.
Maybe one for Matt you know the sequential improvement in load factor.
Good to see it get off the map here.
Or start to any way can you talk about what level of fair stimulation.
That required so that may actually be some improvement in other words demand was not responding to lower fares. Maybe this is evidenced that it's starting to so any color around the fares required to get that in any trends regionally where folks going.
As we wait for big leisure destinations to open backup thanks for taking the questions guys.
Yes, sure thing Duane so.
You're correct yields were very low as we bottomed out there is still low we have had the opportunity to begin to test some higher fare levels, which again for us are still very low stimulus of levels, but definitely off the bottoms of where we were so we are encouraged by some of the movement in fares.
From where it was even as recently as a few weeks ago. So that is definitely a positive that we're starting to see but again, it's on a relative basis, let's keep that in mind.
Thanks, guys.
We are ready for the next question.
Okay. Your line is open.
Thanks, operator.
Until you know most cherilyn generally talk about cost advantage unit basis, Scott do you know what your non unit absolute cost advantages normalizing for for growth in utilization.
You mean on an absolute her departure basis, I mean, obviously side, yes will that here different totally.
Yes, no we haven't done the math on a per departure basis for the other airlines, but I assume on a percentage basis, it's probably about the same.
As as our departures are.
Big driver of our utilization advantage.
Okay.
And then again I read the Q like Blaine did but I didn't seem to the and then hold backs that seem to incremental but can you. Just tell me Scott did you say something that changes of subsequent event about the hold back after the quarter ended or you. Just can you just tell me what you said I think I missed what your comment on the whole back.
The whole the whole back in regards to the credit card.
We have.
In regard to that the ATM balance has moved around a little bit as the amount of refunds has impacted after the credit card holdback trigger has it changed what he changed what he's mention Hunter was that on he gave the April and it's in the 10-Q as well.
Listen to this 30 wanting to stay stable April balances.
Okay got it alright, thanks, everybody.
We're active in Atlanta.
Savi Your line is open.
Hi, Good morning, Thank you Oliver and I realize there in survival mode here, but as you know.
You can even contemplated what things that look like when demand returns.
It's kind of curious if you could talk a little bit more about what costs might look at.
Im guessing there'll be some difficult decisions around the size of their organization and the network as I'm guessing you'll be able to maintain American a high utilization rates in whatever the new normal is that just how should we think about if you're going to have a seniors are slow that grows what that means from a cost structure standpoint, and competitiveness standpoint.
Sure. Thanks Avi so.
I mentioned multiple times in the script that that costs are key to who we are that doesnt change.
As we evaluate the recovery.
As we've indicated we expect the leisure component of the marketplace from the cover sooner than than corporate demand or even long haul in long haul domestic and long haul international and for that reason, what we're really talking about is some of our cost advantages related to our utilization of the assets in our capacity growth.
In the near term, we would expect capacity growth would be a little muted because I think theres going to be.
Macroeconomic effects.
In both the leisure marketplace as well as the the corporate marketplace, but as that starts to recover we would expect that our advantage to continue to widen.
Vis-a-vis our peers because the growth will be at the leisure.
Leisure side of things so.
You can think about it on a capacity basis. It doesn't necessarily certainly have to be utilization or anything like that it's really just wherever the demand exists that's where the capacity will be and we feel that in our segment capacity will follow that demand a little bit strongly more strongly because that demand will exist. So cost for us will be about widening.
Our advantage.
And in the near term maintaining our current cost structure as much as we can we're going to see pressure when there is less growth.
But we're going to be managing that as best we can as well and and we havent made a specific decision yet on as Matt indicated on what the size of the airline will be for the remainder of the year, but.
Amongst the range of outcomes would be that we're we're maybe not growing as much or perhaps a little smaller for a period of time and that means we'll have to make some decisions about rightsizing the airline at that point.
That's helpful and just a follow up on on on the comment about Rightsizing just how much of your fleet is kind of fully unencumbered or maybe.
The leases coming off this year, where where you had the flexibility if you need to kind of downsize that with minimal impact.
Yes.
Got you want to yes, Hey, Savi. This is Scott. So today, we have 29 unencumbered aircraft 25 of which are Athree 1943 twentys.
And we do have one lease that will come due at the end of 2022.
So thats the extent of or.
Okay and upcoming leases multi flexibility perspective.
So rough numbers on about about 20% of the fleet right now.
Gives us some level of flexibility.
Yes.
Great. Thanks.
Thank you.
Our next question is from Mike Linenberg. Your line is open.
Hey, good morning, everyone, just I guess to liquidity related questions here.
I guess Ted in Scott when I look at the potential size of what is available to you under the loan program.
The 741 million itself, it's roughly.
Double of of your PSP payment and I'm, just curious sort of the calculus. There because most to applied are getting a number that is much less and I'm not sure. If maybe you were just first in line I realize maybe there was a bit of land grab here for people to get earmarks, but if you can just talk about that because it is interesting it did standout as.
And it's obviously a good backstop.
Yeah, Hey, Mike. This is Scott So I think it's really the calculus behind it.
The Grant program was based off of 2019 payroll.
So I think the number and that in that perspective was a little bit depressed.
As as a growth carrier, yes, we are 19 payroll at increase into 2020 and then the low program is based on Asms.
And so your utilization produces a pretty good amount of asms relative to the size of the airline.
So I think thats, where the disconnects likely sets.
That's very interesting and then.
Super helpful Too and then just my second question you know under the Cares Act can you this ability to to go back.
With your.
Thanks to carry backs that carry back losses and get the benefit.
Actually took at this quarter, presumably this discrete tax benefit we will see this continues through the year with additional losses. If you could answer that number one number two sort of ties into is that cash or is that just an accounting construct.
No it is actually going to be cash.
And it will be anticipated later in the year likely in the fourth quarter.
So we'll apply for those admitted tax tax returns.
And receive cash payment of the later part of the year its actual cash.
So Scott, but and then just so I know that that goes can you can go back five five is it five years that you can go back.
Yes, it's a five year tax carry back sort of 2018 image return can go back to 2013 in 2014 cash tax payments Wow, Okay. Because you generated a lot of profit over those years. So very good. Thanks, thanks for the head.
Good and we leased a lot of aircraft back in so we recast ex fair.
Very good thank you.
Our next question is from Brendan ill get Censky. Your line is open.
Hey, good morning, everyone. Thanks for taking my question. So I guess on the cash burn of about 120 million a month right now that you guys spoke about.
No less robust than going back later this year, where do you think you could get that too, especially as we lap. Some other restrictions on employee reductions later this year I know it's difficult topic.
Hey, Brian Scott I'll start on Dec can chime in too so the 4 million in it really sort of where we sit today, we would consider to be the trough, it's sort of the bottom as we progress through.
The summer and into September.
The things that are going to move that are obviously going to be bookings.
And a little bit more.
As we think about capacity manipulations and doing a handful of things around the edges.
But until then we're going to be around that number.
And the flexibility would be able to come post September thirtyth.
Brand the only thing I'd add as Scott mentioned bookings, the big levers, our bookings and Rightsizing the airline.
So we'll be using this time to evaluate how those trends are going and so.
So as as we start to see traction from a demand perspective in bookings start to recover that's going to have a material impact on on the burn rate.
And then.
Post September thirtyth to the extent that bookings do not recover and were forced to make decisions that would actually reduce the burn rate as well. So in either case, we're looking at longer runway to the extent there is a protracted demand.
Decline, but we know that that the way the industry is looking at it right now is what's the worst case scenario and Thats the 4 million today.
Okay, and then I just want to commence the questions around the order book here. The 185 million reduction I think you said that would be to 2020 capital outlays right.
But it also mentioned that this is impacting the 2021 order book I guess are those discussions just initial are you still expecting to take as many aircraft as you thought three cobot 19.
Yeah, Hey, Brandon 185 is related to 2020.
We are in discussions with Airbus as we speak around the back half of 2020 deliveries in the front half of 2021 deliveries.
The primary component of our discussions so we do expect those delivery positions to move.
And then it is the end 185 million includes not only what would be for aircraft, but also.
As we move the delivery stream of course, the phasing predelivery to payments.
Okay, all right. Thank you guys.
Our next question Jamie Baker Your line is open.
Hey, good morning, everybody Yum also some cash burn question. So in the release you said that you're working on voluntary lead program can you give us an update on that.
And whether there.
Structural reason to your take rate given wouldn't be similar leased in the ballpark.
Others have achieved in the how that relates to potentially drawing down that.
Formally the LIBOR.
Sure.
Thanks, Jamie it's Ted So we've worked with our partners.
And I'm, referring principally to our flight attendants and pilots right now just because those are the vast majority of the company's workforce as you know it on the ground service personnel, we have spirit employees at Fort Lauderdale Airport both.
On the ramp as well as of the ticket caliber everywhere else. We have contract service provider. So those those are a different discussion, but as it relates to our pilots and flight attend specifically, we were able to work with them to come up with reduced minimum voluntarily programs and the take rate in the month of May was was it was very good we maxed out what we were looking for.
So our team has responded very well, which which we like to see.
And I think it's consistent with what you what you've been hearing from other.
Other members of the industry.
So it's already captured in the current numbers, that's that's fine that's great.
Unclear to me.
Also just on the aircraft side, you mentioned, obviously working with Airbus and the deliveries have you also saw deferrals on aircraft leases. If the answer is yes any color on terms would duration would be appreciated. Thanks.
Hi, Jamie This has got the vast majority of our discussions around the positions will be with aircraft. The aircraft that are taken directly from Airbus.
Given the complexity of the number of parties, it's the easiest way to think about moving.
Deliveries and the vast majority of our deliveries or are we.
Airbus directly.
Well I wasn't thinking so much in terms of aircraft unit.
I mean, our channel checks suggest that anywhere between 80 and 99% of the world's airlines have raised their hand, and so at some level of lease deferral and I didn't know if you should be counted in that assumption or if that is still under negotiation or not a consideration of your.
Jamie So if you're talking about payment deferrals.
We are in discussions with our less orders of lenders and all of our significant vendors about payment deferrals, Okay has a jim.
Okay, so to be determined alright, thanks very much appreciate it.
Thanks.
Our next question is from Helane Becker Your line is open.
Thanks, very much operator, hi, everybody on thank you very much for the time. So you have two questions one is.
You know the model is a high density model and people are talking about social distancing onboard planes and clearly that's not sustainable to keep the middle seats empty for an indefinite period of time, but can you just talk about how you're thinking about the model in light of some protracted period of time.
Where.
You have to.
You know ensure safety onboard the aircraft beyond what you already do.
Hey, good morning, Alain instead so.
As I mentioned in my comments, Hi, as I mentioned in my comments, we have made we already had a number of things in place and we've made a number of adjustments to ensure the safety our guests and our team members on more the airplane that include.
Enhance cleaning procedures on high touch items, disenchanted fogging and requiring faced coverings.
14 members and gas.
We think that that's the solution to help ensure that people view air travel as as a.
Clearly the air quality onboard airplane is amongst the best in the in the World.
And every circulates quicker than in any other fixed facility that you would be in so I think overtime that will prove to be the most important component is ensuring that the gas feel comfortable being on board airplanes with these initiatives that we've taken.
And and and that's that's the way that the industry will start to lead the recovery.
So that's that's where we've been focused actually.
Okay. That's very helpful. And then my other question is.
Are you able to do any to capture well enough you know people's information for contact tracing and and you know you can't stop someone for from writing on their email duct. There you know Mickey mouse at Disney Dot Com, but.
You know is it are you able to do that.
And then the other question is since Florida is one of the first states to open are you noticing at all and increase in bookings for later in this summer from your local residents.
So helane as it relates the first half of the question, obviously, there's PII information and the company is exploding and of that in.
To the extent that there were government regulation and or legislation around contract tracing we would be when active listener I guess at that point so.
So I think that Thats probably.
The ongoing discussion with regard to bookings I'll, let match up in a second but you're right, Florida has begun the process of loosening some some restriction in the non.
The not larger county, so Miami Dade, Broward and West Palm, which are the three largest counties in the state are still in the in the phase zero.
Some of the process, but the rest of the state has started to open which is encouraging.
And it is early by the way that process just started within the last seven days. So Matt I'll, let you comment anymore, if you're seeing any trends you want to share not dish or so helane I would I would actually characterize what we're seeing as as relatively broad it's not specific to any given geography.
Or or region in many cases.
In driving some of that extra demand so I wouldn't classified as any given region per se. It's just it's it's going to take some time and as things like states and beaches and attractions and other kinds of venue start to open up we do expect we'll see.
Sorry to see some more confidence overall in the economy, which will lead to just overall confidence in traveling whether it's to certain state or not so I think thats the best way for me to characterize it.
Thanks aligned with excellent.
Our next question is from Joel Edelstein Your line is open.
Hey, good morning, just a couple of quick ones here.
Can you just give us an update please on on the relief that you have or have not been granted from from minimum service requirements, how much you're still seeking there and is the on the plant capacity cuts here for the balance as of Q2 is that contingent on getting more exemptions there.
Sure Joe So we did.
Initially go out with a relatively large list of exemption requests. They were initially denied with the exception of of one in Puerto Rico and AG with deal, which was in fact closed. So that was that was granted. We then subsequently came back with a request for a number of large airport.
That have a significant amount of service in them from other airlines already so we were granted a big set exemptions for six large cities across the country.
We have then subsequently applied for a handful of other assays medium size cities that we are in discussions with now often on receiving those assumptions.
If we were to receive then we would have some schedule changes to make right. Now we are planning on serving serving those communities if granted we would make those adjustments.
I would tell you that the way that we added back the service for some of those minimum service requirements Didnt really out a whole lot of flying into the network I'd say it was minimal the bigger issue that we have in some of those with some with some of that flying is this more around how limited the flying is.
And whether or not it's providing the best service. So we can be providing in this in this critical time right now so that's the reason for the secondary service exemption request.
Okay got it and then just real quick on the Capex reductions.
Can you describe more precisely what what discount discretionary capex, you're deferring what those projects are and then on the aircraft side are you actively exploring sale leaseback opportunities to further reduce that that burden. Thanks, everyone.
Hey, Joe on the non discretionary capex, yet we were deferring almost all of our discretionary capex minus a few.
Adams, though there will continue to be completed, but we expect that number two dropped dramatically.
Through the year I think we have about a $50 million reduction in non discretionary capex.
And in relation to the to the sale leaseback component.
That is a financing possibility for go forward deliveries.
We're not looking at sale leaseback for currently owned aircraft at this point.
Right, Yes, thats, what I meant for future deliveries.
The the piece of the aircraft Capex that that isn't finance, okay got it. Thank you everyone.
Our next question is from Kevin I know, Brian Your line is open.
Hi, good morning, everyone. Thanks to the time.
Morning.
Good morning.
One follow up on the on the main load factor.
An encouraging sign but just wanted to dig into a little deeper.
On channels, that's on just can't say passenger numbers.
Okay any lift the bottom yet month today versus April I realized early days here could you talk about.
What your load factor on flights looks like today.
Is that above 50% load factor, maybe more back half weighted or or or you're seeing that today and then if it is more back half loaded how confident are you in the booking.
Maybe versus any trends on on cancellations, you've seen over that Kevin that'd be helpful. Thank you.
Sure, Jeff It's Matt so.
I would tell you that.
In in day in day, we've been starting to see some improvements.
In in the load factors part of it has to do with with our schedule adjustments part of it has to do with the way that we've been of pricing the product and what we're seeing in May was definitely more than what we saw in April and we do anticipate that as we move through May and go into June.
The load factors will continue to improve now we're also making sure that were pricing the product properly and seeing where we can best take advantage of any demand that's out there keep in mind, we're talking about significantly depressed flying schedule right now as well so in terms of the TSA.
Checkpoint numbers things of that nature, the the amount of capacity that's come out, especially for us is significant and us seeing some improvement on those loads and then subsequently, which we anticipate the C. On fares down the line is going to be not a big number in the Grand scheme of things.
Right now as we move through this month, we will then be able to anticipate we'll we'll be able to.
Review trends and then see what we think is going to happen from an anticipation perspective towards the end of June So I would love to be able to tell you exactly what is going to happen between now and the ended June and into the summer but for from what we can tell right now things are improving slightly.
Although we were at relatively low base and we are starting to have more confidence and thinking about how we price. So some of that some of the products that we have out there. So to me I would tell you that we are improving if you had asked me. This question three weeks ago I would have had a different answer probably that I have today. So it is nice to see things are starting to move out a little bit.
Understood maybe one quick follow up on that one I have one more on the unencumbered assets.
Where is your book load factor about 50% or or that's more you know you're starting to see some movement in booking channels and feeling good about your pricing strategy, just trying to get a sense of.
How much of that commentary is actually locked in booking versus.
What's expected based on on a on pricing retinopathy. Thanks, Greg sure. So just just to be more just be more clear on I apologize for that earlier. We are we are seeing a shortened to booking curve.
For sure compared to what would be normal for for spirit. So we are seeing demand come in its coming in closer to departure than what we have seen historically and I think that makes a lot of sense. It's I think as people gain more confidence in what they're hearing and seeing and feeling.
Than than they are having confidence in booking some of that some of that travel. So the booking curve has has come in quite a bit we anticipate that is going to stay muted like that for a period of time and as again from a prior question I think maybe Helane asked as we move forward through this.
Summer, we anticipate the booking curve is going to push back out as people get more confidence and being able to go on their July 4th holiday season, picnics and seeing their family friends that they haven't seen for what is now months.
I'd add Katy this Ted though the loads were seeing or what were experiencing today.
Okay understood. Thank you that's clear.
I'd like to sneak one quick one in on unencumbered asset.
The 650 remaining.
After.
That is that all the assets is there anymore, you could potentially adds up pool that you're not including your current definition and then.
Given the level of unencumbered assets.
Do you expect eligible for the entire portion of the Caribbean. Thanks, So much in time.
Hey, guys or this is Scott. So the 650 is our tangible asset base. We do have other intangible assets that are not included in that number and in regards to the the loan program.
We've got a limited discussions with the Treasury in regards to this love the Wednesday, but that has been made is that they intend to be flexible on the types of collateral.
Including lifting frequent flyer program as one of the possibilities. Obviously, we have a frequent flyer program. We also have paid loyalty program that acts very similar to that.
So there is an expectation that there will be some type of flexibility, we don't really know how much yet.
We haven't been down the path of discussing that with the treasury.
So we'll update you win when we do have a done deal.
Thanks appreciate that.
Our next question is from Stephens, Sir Your line is open open.
Thank you very much everybody and double thanks for taking my question. So I just had one or two quick ones. One we think about.
Well Youre a ticket refund policy for example.
Maybe totally flexible coach ticket you have to pay a cash refund versus other tickets.
Just refresh my memory kind of.
What's the broad mix and how you expect that might evolve going forward.
Sure Steve It's Matt.
So right now our policy has been has been relaxed from our our pre cobot 19 policies and right now if if guests are impacted the travels impacted then we have the ability to issue credit shells for them for used within 12 months of the data.
Issue, which is different our previous policy was that you had 60 days.
To book your future travel so in many cases that covered you out maybe eight 910 months in this case, though weve relax that where you have 12 months to decide.
To travel and that use but you must be completed your travel within that same 12 month period. So in terms of policy for spirit. Its greatly relaxed in fact is probably one of the most relax in the industry compared to our previous credit show policy. So that's something that we anticipate to be out there for some period of time.
And in terms of I think you know the question with regards to maybe our mix of refunds versus credit shells.
Thus far we've we've had quite a few credit shells that have been created as we go through some schedule change activity. The refund number does increase it's very specific to when we have to reduce some of our futures schedules.
So those those refunds happen for a finite period of time and then they kind of go away as we move through the summer we anticipate right now that our reductions to the schedule won't be as heavy as they are right now so that would have a muting muting effect.
On on that number as we move through the summer spring and summer.
Very helpful. Not thank you very much and just one other quick follow up I.
I know that the department of Treasury direct line, you're right to do.
To sum flights where are you saw some relief.
Okay touch briefly on you know what might be the opportunity to.
A lot of additional air cargo on those flat if any.
Assuming that.
Hello.
Our loan.
Hey, Steven its Ted we don't carry any cargo today, so thats not part of our our operating certificate. So.
That's that's not what we're doing today.
To the extent that we were to evaluate that as a future opportunity we would but today, we're not carrying cargo.
Okay. Thanks, Ted let me leave it there and hope you and your families are well.
Likewise, thank you Steven Thanks.
Our next question is from Chris Your line is open.
Thanks for taking my question. Thank you for all the detail on the liquidity.
Early Q release, so going back to an earlier question on how the.
You will see see model might have to evolve in its pre vaccine.
World.
And you spoke about increasing traveler confidence hygiene kids and you cleaning of the aircraft et cetera, but could you give us a little bit more sort of detail in the interim you know how that works with respect to structurally speaking whether it's with.
Load factors or or flight frequencies, and then thinking about that how that might evolve as we look about think about cash crop its per flight system ROIC and then tying that back to you mentioned in your prepared remarks about.
Opportunities potentially to go into markets.
But you know that you didn't have a presence for before because of.
Constrained capacity. Thank you.
Sure. Thanks, Chris I'm, it's had again so.
In the near term, obviously people are getting familiar with.
With that the effects of the of the virus and then what that is having on their travel behavior. So there are things happening in the near term here that that are an attempt to kind of get people more comfortable and that can include some of the items. We already discussed we're obviously onboard offering some seeding flexibility as well and need to the said the people request that.
Yeah.
But to the broader question.
We do not believe that this is a secular shift in the airline business there will take some time.
For people to regain their confidence and to get comfortable.
Traveling generally.
But we don't think it represents a change in the way the business will work down the road and so our expectation is that utilization will return to normal once we start to recover and and our guests will be focused on how do I do I have the necessary protections make myself comfortable and what are the fare levels that makes me comfortable to get back on the road.
So that's where we're focused on that is our belief and that has been the case and other you know crises type recoveries as well post 911, there was a lot of fear as to whether or not the airline business would be the same and I think we proved to each other that it was actually.
Recoverable and strong business coming out of that so it is our expectation there will be some time required in there for that to happen with regard to the growth opportunity down the road.
As we alluded to there is a possibility at least that we're going to see windows of opportunity in places where today there is constraint.
And.
And as I've said multiple times throughout the course of this call the leisure traveler.
We'll be the vast majority of the recovery and so to the extent that those places open up we want to be ready to be able to pursue that opportunity, which is part of our establishing a strong balance sheet, maintaining resiliency and being they're ready to capitalize on those opportunities when they occur.
Rebecca we have time for one more question.
Hi, My last question is from Joseph Your line is open.
Okay.
Thanks, Good morning.
Matt just on the commentary about.
You know some early signs of demand recovery like how fluid is that how quickly are things changing like would you have said, what you said a week ago or two weeks ago.
Joe They are they are moving a lot with what the news is that that's going on stepped up people that people are are hearing and experiencing themselves and and it is moving I'd say, probably a little quicker than what I had personally anticipated even from.
A few weeks ago, but again I just have to caution by saying it's on a relatively low base. So.
That's it in my prepared remarks, we talked about taking our our June schedule. We've added a we've added some.
It's more flying back into where we had initially started so we are seeing some more movement on that the fares are still low as you would have asked me like I said earlier three weeks ago I would've had a different answer to this question. So we are we are starting to see some signs.
Of of some traction again I just have to caution that it's on a low base.
Okay. That's fair and then Scott just given the conversations you're having with Airbus can you just kind of level set like what that means in terms of fleet count.
Like sometime middle of next year, where do you see a sleep just based on the discussions you're having now.
Yeah, Hey, Joe I can't give.
Correct numbers here, we're still in the in the midst of the discussion.
But I would expect our new deliveries over this.
I'll call. It 18 month period from the middle of this year through 2021, those new deliveries to be down around 40% or so.
Give or take.
You can do the math, there is sort of figure out where the where the number is but thats about the extent of the detail I can give at this point.
Okay with with no aircraft, leaving the leaving the fleet.
Thats it yet a different different discussion, but but as we talk about with Airbus that thats. The way, we're thinking about the number of deliveries coming in.
Most earlier about the number of unencumbered aircraft, we have in that kind of flexibility. So those will be different dalton discussions about how we either exit that fleet or on encumber that in some type of financing facility.
Or not.
Okay. Thank you very much.
Thank you very much.
I wouldn't have a nice day. Thank you. Thank you.
Thank you ladies and gentlemen, this concludes today's comp.