Q1 2021 Allegiant Travel Co Earnings Call

May 4, 2021

[music].

Yeah.

Good afternoon, and thank you.

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 Speakers' presentation, and there will be a question and answer session. You'll ask a question. During the session you will need to press star one on your telephone keypad. If you require any further assistance. Please press star zero and I would now like to hand, the conference and we're very Dear 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 Redmond, The company's President, Greg Anderson, our EVP and Chief Financial Officer, Scott Sheldon, our EVP and Chief operating Officer Scott.

And 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 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 plan and 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 Dot Allegiant Air Dot com with that I'll turn it over to Maurice.

Thank you Sharon 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.

And our spouses and families.

And continue for passengers and these difficult times.

<unk>.

Orders for our slowed and the house. So thank you again.

And I'm extremely excited about our future.

And our had been in previous quarters on expert profit to continue to grow in the coming months.

Based on the data, we're seeing I would say we are done.

2021 and beyond I believe will be as good or better and I could've hoped and.

On the Q1, we had EPS.

And 42.

And the EBIT and a total of $68 million for the quarter, but.

And that was very positive as each month of the quarter was a positive EBIT and a number understand both of these numbers include our PSP mounts from $92 million.

I want to share with you some interesting facts.

I've seen and concerning the impact from the pandemic and how it's affected us and others. One our balance sheet is and much better shape and before we entered the pandemic, particularly as it relates to cash from the end of Q2, our cash balance will have more than doubled.

On the $1 billion.

And this is measured since the end of 2019.

While our cash balance has been growing our net debt balance and has actually declined over $50 million by the end of the year, we could be approaching 500 million and net debt down from $950 million at the end of 2019.

And interesting stat and I was taken with last year was we generated $235 million.

Positive cash from our operational statement off on cash flow things for 2020 as a whole the industry. During this time last $18 billion from operations.

And I might add this includes $800 million of losses from the other <unk>.

Lastly, as the factoid during our Q1 without any PSP, we only had a $15 million EBITDA loss from a negative five 5% margin.

And there are the industry's EBITDA loss for this quarter, just standard was $9 billion on $15 billion of revenues on 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're the first to get back to positive growth. We did this just this previous quarter. We were the first to achieve positive EBITDA and late last year and we.

We were among the first to achieve positive EPS and we did that again this quarter.

And we're fortunate to be a domestic leisure oriented carrier leisure is king today.

And international traffic continued to substantially underperform.

Profile of our customer and their behaviors and then.

And important distinction and our model our leisure customers, who made up of millions of individuals' family small independent units to 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 and travel in most cases is ultimately controlled by the company's senior management, namely given dramatic circumstances company business travel has stopped.

We have seen this phenomenon of three times in the past 20 years 911, obviously, the great financial crisis shut down a good chunk of business traffic and obviously this past year with the pandemic. These.

These have been full tilt stopped traveling business travel decisions from business customers. This has been devastating to the airlines and travel industries, particularly those focused on that business customer.

<unk> has lived through two of these massive shutdowns and while we were certainly impacted by the pandemic. This past year, we candidly didnt even feel the GMC.

Our leisure customer profile and our flexible model allows us to bounce back faster than everyone else, including our other you OCC compatriots. This has been the backbone of how we have built this great company. We've got a terrific 2019, and we're off to an excellent start in early 2020, we've just had to wait.

And a year, so we could get back to it <unk> been a terrific catalysts as we all know and combined with people strong desire to get out and go is made from a really nice rebound that we're seeing these days, we believe our income levels for the remainder of 2021 and 'twenty two and beyond we will meet or exceed our last full year.

And 19.

And we want to be a leader in this effort and take advantage of our great model and the coming years and plant flags as we attack more than one target markets that we have.

Ross we have targeted.

We've upped our game substantially in the past three years to four years, our brand is extremely well positioned we made some bold moves that have worked out extremely well as well.

Allegiant Stadium has been all we could have hoped for and more and continue beating the drum for our model and its flexibility, which allows us to both shrink and rebound.

<unk> 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% and operating margin. During this 20 year period on the next closest carriers, Alaska and southwest have been at 10% margins.

Perhaps the best highlighted in the past few months has been the elevation of our status from unknown to a verb.

From what I've heard we were the standard on comparison from our recent IPO roadshow efforts as well as from the group of startups that are showing up at this 0.1.

20 years ago, and most of the airline space didn't consider us and airline which is fine by me no one and paying attention to us but today we are.

The model and follow up 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 from carried the water on the front lines. This past year. They have been the true heroes and are part of the World every day to day aborted their airplanes and carried our passenger safely and on time during these trying days.

John.

And thank you very much Maury and good afternoon, everyone as I did and the previous earnings call I thought it would be helpful to provide some directional data points sales to understand how we see things and 2021.

Given our domestic leisure focused business model, we are and a better positioned and other carriers to look beyond the month.

Hope and a prayer of being part of the commentary.

And you said that these directional guidance assumes no significant changes to the environment, we're operating and the.

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 a day adjusted basis, which excludes of course the benefits from the cares Act and PSP.

And more fuels 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 'twenty, one and of course, we'll and ever improving net debt.

And looking at cost, we see full year CASM ex less in Q1 'twenty one.

Supporting net you our ftes per 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 ex would be less and six Greg will provide further commentary on Q1.

On CASM ex.

Every quarter and 'twenty, one should have positive EBITDA in Q2 EBITDA.

We will be around $100 million.

EPS every quarter for 'twenty, one should be positive as well.

And regards to airline growth I mentioned and my comments on the last earnings call. We have never been more excited about the growth opportunities and 21 and beyond.

To that and it is our intention to grow the airline by the end of 2020 forward to north of 145 planned.

It goes without saying, there's a lot of planning and it goes into such growth and we have been working on that and earn us 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.

And regards to sunseeker.

<unk> 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 to fund the transaction could shake out.

Or look like would be premature.

While the speed of our recovery may be surprising to some if not all of that has come about due to the dedication and passion and hard work from our incredible employees you are simply the best and our results are proving this.

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 from the first quarter were terrific. Despite some unique challenges.

And 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 and congrats.

Moving on what a difference a quarter makes volume production continue to build as we turn the page on 2020.

For the first time and what seems like forever, we experienced our first normalized operating quarter and more than a year as we ended up with just over 3% capacity growth compared to the first quarter of 19, our core operating operational performance metrics were up virtually across the board with the exception on controllable completion, which I'll touch on that and the second.

Our team's execution produced seasonal seasonal best for <unk>, and <unk> at 72% and 87% respectively. Once again on a full schedule as compared to the first quarter of <unk> 19.

Excluding the impact of and extended weather delays, which was particularly bad this quarter. Our controllable a 2014 was exceptional at 93% on.

Total refining activity returned to pre COVID-19 levels and the first quarter. It wasn't without significant challenges our controllable completion percentage, which ended up just north of 99, 5% for the quarter was far below our historical norms the key driver.

A key driver of this where bottlenecks encountered and bringing fly and assets back on the line to match first quarter capacity demand, particularly from 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.

And so there was a much better line of sight on demand.

These deferrals created much and youre 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 part suppliers and logistic companies have been slow to ramp back to full capacity and.

And the result was north of 85 maintenance cancellations due to lack of aircraft and drove just over $6 million on a regular ops cost.

In closing I am excited to maintain the momentum we built and as we move into the second quarter and into the back half of the year with weather the induction and heavy maintenance constraints from the first quarter and we appear to be back on our normal cadence, which is critical and although the back half of the year as aggressively scheduled and MRO pipelines are getting tighter and our plan is largely done and de risks thing to that.

<unk> efforts and creativity of our maintenance planning induction and 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 per.

The majority of our ground handling service providers.

Our experiencing staffing challenges, namely they are finding and difficult to recruit and retain and necessary head count to run their businesses at pre COVID-19 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 and extended voluntary time off programs have been recalled and were pushing them through our respective pipelines as we speak training classes for all disciplines.

We'll begin mid summer and into the fall to meet March peak and summer of 'twenty, two flying and with that I'll turn it over to Scott.

Thanks, Scott building on prior comments this past quarter, clearly marked a positive turning point and customer sentiment and demand for leisure travel back and 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 per.

<unk> said things were getting better.

And 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 and 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 and then.

And purchase timing for the first week of 2021 was nearly half of what it was in 2019, yet as we finished the quarter and advanced purchase timing for the last week of March had greatly increased and was virtually identical to that same week and 2019.

Further to this dynamic the volume of flight search is being performed by customers and Allegiant Dot Com continues to outpace 2019 levels, especially from mid to late summer months, suggesting additional waves of leisure travel demand are continuing to reenter the market and are searching for travel time period that there are more.

Comfortable with.

Those customers, who have already fallen or booked allegiant this year more than 70% reported having already been vaccinated.

As mentioned last call staying close to and winning back those customers, who flow Allegiant and 2019, but haven't loans since the pandemic began and our priority focus and I'm pleased to report that we have already recaptured nearly 20% of these customers and our itineraries and that those two are still non book.

Overwhelmingly that they have and following no other airline during this time and consider allegiant their top choice by a wide margin overall other airlines considered for their next trip.

And once again, our direct to consumer approach has remained a critical differentiator not only for selling directly to but also communicating directly with our customers, enabling us to stay closed this past year.

Our approach to capturing demand continues to be rooted and 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, achieving incredibly low sales and marketing costs.

On a per booking basis, and we're 80% below pre pandemic levels.

And lastly, with our enhanced digital commerce assets and place that is both our new website and new mobile App, we turn on our focus to launching our broad based non card loyalty program later, this year and youre expanding our leisure offerings at Allegiant Dot com not only on existing hotel and rental car categories, but also.

And launching in vacation rental inventory more than 80000 properties nationwide with our newest partner booking Pal Dot com.

And of course, we look forward to soon operating travel packages for Allegiant Stadium events. This fall.

Moreover, we continue to explore asset light co marketing and sales channel partnerships.

And enable us to broaden our leisure travel ecosystem, and then give us privileged partner relationships that enable us to reach millions and new customers and markets that we and those partners collectively serve.

With that I'll turn it over to Jeremy Thank.

Thank you Scott and thanks, everyone for joining us this afternoon.

We continue to see sequential revenue improvement and 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 <unk>, 2% against the same timeframe and remains a great story, considering and it's half of the scheduled service revenue.

This contributed and a large weighed on our total fair per passenger and being downs of eight 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 it is due to what Morry 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.

Loans had improved and each of the last eight weeks.

Furthermore, most of those weeks were also positive ASM year over two year I think ramped into the peak.

And total April and May will be roughly flat capacity versus 2019 before the growth resumed in earnest during June and producing the <unk> ASM guide of plus 2% to plus 6% versus 2019.

Some of that growth is slated for the newest Allegiant city of Portland, Oregon, which began service in April along with Jackson hole, Wyoming, and key West, Florida, which take flight in June and those.

Among the 51, new routes beginning service and the quarter.

We are thrilled with the booking performance of our new contingent and browse and what they add to the Allegiant network.

Along with the ASM guidance, we are guiding to Q scheduled revenue scheduled service revenue to be between down six and down 10% versus 2019.

I'm ecstatic to see numbers and the single digits and I really look forward to flipping net site and time.

Fixed fee margin have been greatly impacted by the amount of supply and lower demand and 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.

And that is certainly more of a one off benefit for 2021 and fixed fee revenues are likely to remain under pressure.

The strength and demand, we're seeing continues to give us conviction and 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 scheduled from mid December reflects that attention.

Net selling schedule includes the announcement of our newest based in Austin, Texas.

Often since October 2013 that had success growing a wide range of opportunities and are related to make it a stronger presence and the future of our network.

And with that I'd like to pass it over to Greg.

And he drove and and good afternoon, good afternoon, everyone.

We continue on our path of leading the way and 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.

And our long term focus bunge and talked to think like owners, particularly when the tone is set at the top by Maury, who since our company's inception.

And have not only been at the helm, but also our single largest shareholder.

One of our key focus metric is restoring our EBITDA production to pre pandemic levels, which is more than $6 million and 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 and average daily revenue of $3 million.

The quarter ended strong as March came in like aligned with average daily bookings exceeding $6 5 million per day ahead of 2019 levels and driving more cash flow is our <unk> increased by 100 million or 33% from December to March. This despite the travel voucher portion being down 19%.

Additionally, we saw a couple of key metrics during the first quarter, which already outperformed 2019 results.

One is capacity.

Our focus on 100% leisure, 100% domestic and our only non stop flight plus strength and demand resulted in March capacity of nearly $1 9 billion ASM, the highest single month and our history and other.

And there is cost our first quarter, adjusted CASM mix, which excluded PSP benefit is six three fixed.

Or 5% below the same period and 2019.

And perhaps worth noting our adjusted CASM ex for the quarter is by far the lowest reported by a carrier.

And as half of the industry's reported average of $12 seven.

We are excited and getting back to pre pandemic results and the catalyst that enables us to lead the way and the flexibility of the business model.

Our one of a kind of low utilization and high variable cost structure aided us from generating $168 million cash from operations. During the first quarter, which is more than the first quarter and 2019 and helped to push our ending March cash balance up to $730 million.

Additionally, we have $260 million and cash that comes in after March roughly $150 million from our Nols $98 million from PSP, III and a 14 million top up for PSP too.

Pro forma the $260 million and 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 <unk>, 33% reduction from year end 2019 balance.

Moving to our second quarter outlook.

We expect to index five aircraft during the quarter to bring our total and service fleet count to 105 by June and and.

And increase of 19 aircraft compared to June of 2019.

These additional aircrafts are already being put to work and capacity during the second quarter is expected to be up around 4% year over two years.

And is also notable.

Second quarter daily bookings haven't skipped a beat April continued Aurora with average daily bookings around $6 5 million per day, which is 8% higher than April 2019.

The strong rebound, we are seeing and our business supports our second quarter scheduled service revenue guide of down 6% to 10% share over two year, which translates into revenue per day, and $4 8 million nearly 60% higher per day, and the first quarter and within striking distance of 2019 average rig revenue per day and.

And based on the midpoint of our capacity guide, we expect our adjusted CASM X to come in under six during the second quarter. So combining our expected daily revenue of $4 8 million and the second quarter with our expected cost performance suggests and an adjusted EBITDA margin of around 20, 25% for the June quarter.

25% EBITDA margin excludes the benefit of PSP. If you include the benefit of PSP and suggests and 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 tell these aircrafts were paid for with cash and remain unencumbered, which brings our current unencumbered aircraft count to 29.

And the used <unk> hundred 20 market, our fleet team and no short supply of deals coming across their desk 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, aircrafts, which supports our ability to increase capacity and the back half of 'twenty, one by as much as 20% as drew and his team see no shortage and opportunities to put aircraft to work.

This level of capacity suggests our adjusted CASM ex for the back half of the year should be around the low <unk> level.

And the event, we come across sustained weakness and demand and the demand environment, our highly variable cost structure, along with our fleet flexibility provides us a built and safety valve to let off the gas is 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 leveraged significantly more than we have.

Our expected full year 'twenty, one interest expense should be around 14% less and full year 19 and.

And Additionally, our full year 'twenty, one scheduled debt maturity and interest payments using our 2019 passenger counts.

Actually $6 per passenger less and it was in 2019.

And 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 'twenty, One guide remains largely unchanged with the exception of our other capex category and that we increased by $20 million per the opportunistic purchase of spare parts and an average price per part of 50% and less and pre pandemic levels and.

And I'll close with T 's net reach.

Recently, we completed the sale of 85% of our T snaps subsidiary <unk> capital and had an undisclosed amount.

We are excited to partner with <unk> and they are committed to positioning T snap for a bright future with plans to further invest and accelerate growth of the business and.

And I would 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 <unk>. Good stewardship, the future will be very bright and with that I will turn it over to <unk>.

Questions.

Moving.

Operator.

Yes.

As a reminder, everyone. If you ask question. Please press star one on your telephone to Bob.

I'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Mike Lean and break from Deutsche Bank. Your line is now open.

Oh, Hey, good afternoon, everyone good quarter.

Question, probably Maurice <unk> John.

You alluded to.

Competition out there and what does it indicate shiniest and serious.

Form of Flattery, and you know the.

The fact is we do have.

On a fairly you know.

Several new entrants it seems like Theres more and the.

Weighting and the wings and.

And they are targeting your market segments and Theyre not.

We're getting any carriers that are going to start flying say, San Francisco, Tokyo, It's all about Austin, and Nashville, and Florida, and Vegas et cetera et cetera.

I'm curious about.

How youre thinking about it and even just in the last couple of weeks I think we've had two airlines announced new service to Phoenix Mesa, and we've seen somewhat announced additional state and new service and to Clinton Gorda, St. Pete either sort of the Allegiant mainstays and so how do you think about long term opportunities do you think that.

This area, becoming more fragmented the LCC space, becoming more fragmented that maybe consolidation is more likely over the next few years, a fairly broad question to one or both of you and however, you want to answer it.

And that's about four and we got half an hour.

Yeah.

I'll catch up later, we'll call it.

Yes.

Certainly.

And I think I'd classify this last year and ironically, as a financial year, rather and operational year Youll see and opportunistic financial plays that are.

The market has been very receptive to a.

With the Ipos you have a lot of money that got their known quantities there from the most part but.

On the new front.

They're each have their own personality.

Drew has been following them very quickly and he may have some opinions and the near term but.

Andrew.

We know each other and he knows how to do what we do.

But.

We've gotten a very big while we're certainly there to.

Pay attention to people, where thats not our first.

First thing we look at at this point and time.

So with Bruce side of the house.

They have and ambitious growth scheduled but with their airplane size and some things on I.

And I'm not terribly concerned about flying against the 110 seat airplanes they'll start with over 120 is a good airplane.

But they claim to be good interest and longer haul thinner markets. So, we'll just have to wait and see.

I don't think its so much us I think the really interesting play as hard on the big three react.

I just looked at this data they have got a ton of depth.

The cost structure is twice what day of ours are.

And I just don't know how those guys kind of come down the hill not to say they won't.

Long term.

So the issue I don't know isn't so much worried about startups and as I think youre going to see the LCC side table really gave a lot of market share potentially over the next couple of years and that's why we are so bullish on because we can really stand alone and what we do and how we've done it and.

And we were ready for this and.

2019 and into 2020 and like I said, we just took a year off and we are stepping on the gas Jon and if you have any thoughts.

And 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 no more and made it in his comments, we all kind of alluded to it but we've never been stronger with a stronger balance sheet and history of the company frankly, so we're well positioned to take on any one when you look at the startups there literally don't have a breath.

And no one knows that brand and the marketplace. So they are coming in with a brand that no one's ever heard of and as Maurice points out maybe with the plane type that's not as cost effective as ours and some cases. So I think we're very comfortable with where we stand going forward were in great position to do it.

And growing quickly.

Great Great. Thanks, and just a quick one and Greg aircraft rent expense, Greg It's a fairly new concept for you guys as I think about you mentioned that the law.

Last three sales were financed out of cash Youre, taking a few more later this year is are they operating leases or should we assume kind of March quarter is a good run rate.

For the rest of the year on aircraft rental expense. Thank you.

Thanks, Michael for the question, yes, the three that we acquired.

And our first quarter and not op leases. So those are <unk>.

Purchases, we do have a couple of off lease and that we'll be bringing on the next coming 12 months or so but what I'd say is that number that you saw on the March quarter on where we sit today from a.

Rental expense perspective is a good number for the remainder of the year.

Great. Thanks, everyone.

Michael.

And.

Your next question comes from the line of and you won.

<unk> <unk> from Evercore ISI. Your line is now open.

Hey, good afternoon. Thanks.

Thanks for the time.

So your guidance implies a nice sequential improvement and RASM.

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 and you noted that 10 point improvement in April.

But the balance between load factor and yields because it does feel like.

Perhaps your average fares.

Don't drop off as much as as they might normally would from from <unk>.

Yes, Thanks, Duane and drew here I think we're kind of in the middle of the inflection point.

And we predominantly tried to keep.

Fares and yields relatively in line under the theory that and.

And what we experienced dropping a fair wasn't stimulating enough incremental load.

And for it to make sense for us.

As the demand pool, and general is growing and more seats are out there, we're seeing more and more in roads to wear dropping fare and creating a stimulation makes more sense for us.

And I think right now and kind of the inflection point, there where youll 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 an aversion to take place.

Don't worry and kind of alluded to some of the.

On the cadence of load there, but I do expect to see as crest 70, and June may and continued kind of that steady improvement that we've seen from March to April.

Yes, sequential improvement and RASM and and sequentially and <unk>.

So that feels like.

It feels like a good outcome.

Okay.

But can you talk about your growth.

Look.

For the balance of the year.

And maybe Relatedly what would it take for you all to think about bringing back EPS guidance because.

We're going to have to think about positive EPS here again really the first one to contemplate that.

Well and on EPS from.

And we've had some conversations about that I would imagine we'd start looking at that probably with next quarter.

Yep.

Yes.

That's a nice transition back to a really positive way to look at the business, So, yes, Greg and I.

It did mention to you that it can be positive every quarter.

For the full balance of the year.

You did John Thanks, and then just with respect to.

And that kind of a growth outlook you gave us two two.

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 and the.

January February call.

If anything I think.

We have a bit more conviction and what the back half of the year can bring and feel stronger about our ability to be near that 20% mark to not providing an official guidance, but you can look toward our selling scheduled at least from what we intend to be able to fly.

So just from a very macro event.

Comment Blake.

And I think Clos Vegas.

Is exemplary of the leisure marketplace and the country is any place and.

We go down to the strip I was down on their last weekend I had to wait on a green light to break a left her and again I haven't seen traffic like that and a long time.

Headline today, when opens and 100%.

80% of their people are inoculated 88, or something like that 28.

And you just didn't steal and our talent here that the leisure the leisure world's back and frankly and Las Vegas has been on one of the weaker cities over.

Over the last year, just because it's been shut down so much I think Orlando, obviously comes back stronger with the disease of the world. So.

The idea that we're back as a statement of the day I think is theres not today, if not tomorrow or the next day.

Thank you very much.

Your next question comes from the line of and Judy Duara from Bank of America. Your line is now open.

Hi, good afternoon, everyone. Thanks for the questions.

And just my first question is for drew I guess with what Youre seeing interest and broader leisure travel and your booking curve lengthening and everything.

You think youre at an inflection point and your business, where it kind of reverts to more normal seasonality with <unk>.

<unk> strongest <unk> weakest or do you do you continue to see the ability to continue to grow revenue sequentially from here based on what Youre seeing from a leisure traveler.

Sure I think we still have the ability to grow sequentially.

Obviously, what 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.

As we saw item last September October we had great shoulder and off peak demand and I think we will see that at least share the shorter term as as all leisure travel patterns are a little bit different VFR patterns are a little bit different and they have been in the past.

I do think that there is at least from short term runway to kind of maybe get some incremental lift and then what would normally be and off peak or shoulder before presumably returning to more normality and.

And maybe a year or two.

Got it interesting and then yes.

Yes, Maury and.

And strategic question here, but.

And what <unk> seen from a from a leisure traveler.

Do you have any regrets for not finishing sunseeker on your original timetable and I guess, what would have what would you have to see per unit go through with it on your own again. Thanks for the question I've got a lot of regret wish you, let them finish that we'd be in great shape right now with what's going on and southwest Florida on it.

Do all of the experiment and were seeing the numbers down there, but a couple of weeks ago I was looking at a hotel rooms. They were three factor higher can't get rental cars down there and it's.

The people, we have down there or just I've 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 and will stand on its own with its own debt and things like that.

And John can talk about we're seeing some good activity on that part of the world is definitely being recognized from what it is and as a vacation destination.

It's unbelievably we knew it made sense some time ago of course, when we made the decision and makes it even more.

More sense now as everyones seen.

Already earlier in my comments made the comment that we.

Expect to start that project backup again before the end of the year given the conversations we're having to date there is quite a bit of interest and.

And see net project.

And it get completed so stay tuned and I'll have more to report down the road.

Now there is too many different directions.

And this opportunity can take from me to make any particular comments on any one but thats why it 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.

Yeah.

Your next question comes from the line comes from the line and Becker from Cowen. Your line is now open.

And thanks, very much operator, hi, everybody and thank you also from the time just two questions. One is as you think about it.

Passengers coming back and.

And airfares versus ancillary.

Obviously without the passenger is youre not getting the ancillary so are you.

Is it is there a percent that youre thinking about that you on ancillary is to grow too.

First it's there and and I think and the amps.

The answer to my next question, maybe Dwayne question about loans for Ccs and you talked a little bit about it but how are you thinking about ancillary.

Sure.

Would love ancillary to be 100% of the portfolio.

Yes.

And to be there.

We've been fairly solidly at or above 50% now for a brief last five six quarters, even including all pandemic time.

I certainly want to see that continue to grow.

And we've launched our bundled ancillary programs shortly before the pandemic and frankly haven't had as much.

Each time to see that grow as we would like as we were kind of back into the more scramble mode.

And I think there are several evolutions of that that will help boost as well as performance from the new website and a lot of things that Scott. The Angelo mentioned during his remarks and other things he's working on and so theres not necessarily a.

Targeted percentage in mind other than let's get that thing is high and we can get and will be and the best overall position.

And then my follow up question is.

You are talking about and I think just lost share maybe it was Scott Sheldon and talking about.

Finding it hard to attract people are.

And are the Oems and your MRO subdue your maintenance arent day.

Finding that they have to raise.

K to attract people or are they sending the work outside the country and I don't know.

And what percent of your own maintenance.

And of your maintenance Youre doing and the United States versus outside but.

And I know most vendors and.

And third party.

I think my comments on the on the.

On the labor rate itself is Ms Moore above and below wing and our ground service providers.

Our MRO business was spread upwards of nine different locations and <unk>.

Six different countries. So it was it was difficult.

They were slow to ramp up.

And just parts and logistics and that was probably the long pole and the 10, if you look at.

<unk> that we would use to converts and Max packs.

Bad weather and May not played into it but it's more on the ground handling side is is the near term.

Right.

Great.

And for US, it's not on the MRO side.

Okay, and then are you play and just as a follow up to that are you finding it hard to find people to work in the airports for you.

And that's your lower wage workers versus Europe.

And the higher wage workers, maybe not so hard.

No I think that youre seeing across the board.

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.

And so at some point youre going to have to start creeping up that that direction.

Florida right now if you look at Sanford St Pete.

Nashville is really tough and some of these larger cities that we operating into.

And our service providers are having a hard time finding bodies and so we're having to chase rate up here.

And here in the near term.

Other that's sticky long term and CSB scene.

And I think you have to look at this happening and all industries to pursue at the lower wage levels, just because of the unemployment benefits and whatnot. So we could we could be seeing this problem and the U S through September and frankly, just because of some of these policies. So.

We'll have to wait and see but you see it across industries.

These rates you can't even find and <unk> driver.

[laughter].

Very true and finding that out and.

Okay. Thank you very much everybody.

Your next question comes from the line of Joseph de Nardi from Stifel. Your line is now open.

Thanks, Good afternoon.

And maybe prefer Mario or drew just.

Want to talk about kind of your bullishness on the outlook the performance of the business through COVID-19.

And yet kind of the goal of getting to 145 aircrafts by the end of 'twenty four.

Fairly measured growth.

And so is that kind of what you think is appropriate over the next few years is that.

And the base case or are there kind of things that throttle growth in terms of aircraft availability or things like that and can you grow more than that.

Yes, we can certainly grow more than that.

We want to be measured one other interesting things. We are finding is as we get to the <unk>.

<unk> we have.

And you will not have to go find 15 20 airplanes a year on used and.

And we think that over time that could present some problems. So we don't want to get out ahead of our skus too much.

Other piece of this is on if you go back and look at southwest and overtime. They have grown 10% to 15% a year and when you have very chunky growth, where you accelerate and then you try and back off.

And the resources to accelerate quickly where you need to trade and the crews you need to have.

All the stuff, particularly with used airplanes.

And it's one thing to order a new airplanes, we have to be more measured and are planning at that rate. So there is a side of me too that says the regional optimally goes through the toward us.

That's been the southwest story and continuously from 50 years.

So we can certainly grow more we think thats a good rebound of growth for us and 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.

Yes, it comes out to about just over a 10% CAGR there.

And the short term and you were talking about 20% or so on the back half of this year that would.

Likely continue into the beginning of next year, just because the counts and changed that dramatically. So.

So we think there is a lot of near term.

<unk> two to grow and it and it certainly the market presence to do that and we're.

Built structurally right now with the aircraft with the crew the head count to be able to accomplish that.

And kind of to Echo Marty's comments, let's let's get to the back half of this year right now and continue to push forward at a measured rate that the entire enterprise is comfortable with.

And I'll give one shout out to Chris and on my team, who has told Vijay on the flip side. If you buy it will fly it so we're ready to spool up.

Okay.

It does.

And as the governor or the accelerator.

And depending on how you want to look at it is really the rate of retirement.

Right. So we can push them up or slowing down.

Pending on how we feel and what the market feels like so that's always a governor or an accelerator.

Okay, and then Scott day Angelo you ran through some of the third party revenue opportunities Youre looking at I think you all are doing around $5 per passenger and third party products. Excluding the air portion, what's the opportunity there longer term mix call. It three or four years, when you consider kind of better selling what you're already selling and then.

And the vacation properties, whatever sunseeker turns into kind of what's the medium term opportunity there.

Yes, so I think day.

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 and getting the right.

Staying in front of the right person and then the third leg on that still will be emailed.

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.

Loyalty program layered on top of that and then the ability to as I like to put it and are we the leaching brand and to the things that people love and whether Thats. The resort if they stay out whether that's a sporting event or concert that they go to.

And or whatever other leisure activity.

And they need air travel too.

It does all of the same work that a traditional advertising would do but brings with it.

On a much.

Tougher way too to dislodge and think of Allegiant and just as an airline that goes up against these are new entrants and <unk> income and so.

No number there, but we are now have the platform and certainly are going that direction.

And the medium term for that day improve materially, yes, Joel I just feel free.

Add on to that.

Our ability to improve our brand and the last couple of years and has really been exceptional.

And that's really important for we want to go with the third party revenues.

And hats off to Scott and his team has gone out there from that but the other piece and he is pushing which is very important I think as we're moving towards as much frictionless efforts and as you can do to get into this tough and we've all shop on Amazon and we know how friction free that is.

And.

It's amazing to me today, you can't buy on airplane ticket without having to put your credit card and and every time.

About that and today's technical world.

And it's just an amazing thing that you still have that type of customer.

Engagement, if you will and part of it and its fractional lives.

<unk> got and Expedia and people going through there you've cut the airlines don't control their customers nearly as well and a lot of other people do and Thats. Our goal is to have that direct control flow.

Those are just the subtleties that become very powerful long term and bringing on the Scotts Big things is once you've got that guide on lose them.

And having to keep coming back so that's been a big piece of what we're doing as well and it looks okay.

That's helpful. John if I could just squeeze in the commentary around Sunseeker is an option now that you will put allegiant capital and to that project to get that restarted.

And again.

We're having so many different conversations and so many different term sheets being exchanged that.

Auto on the I don't want to jump out too far and.

Give any kind of direction and up being somewhat misleading when you look at the final deal.

No.

Alright, you have a good feeling that something is going to happen and thats going to allow us to get started before and ended the year. There is there's enough interest there.

I'm, making a lot of progress on having conversations with these folks.

But they all have different.

<unk> designs on have put something together, so I think stay tuned and I don't think youll have to wait that long and hear more out of us but.

But I just have some give them our sales till the end of the year.

But it could be much sooner, yes, Joe just the word reviews and no meaningful capital will go into it at this point.

And that's not to say, we won't do some but.

Where we are 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 from the line up on John Mckenzie from Seaport Global Securities. Your line is now open.

Yeah, Hey, thanks for the time you guys.

This actually.

And I'm trying to ask Joe's question, maybe a little bit differently here, but the <unk>.

Scott the asset light partnerships, where allegiant benefits from a privileged relationship.

Just wondering what does that mean exactly is that a reference to sunseeker by any chance or something else and.

Yeah, Okay, no I'm happy to expand on a high level without any any spoiler alert and we look for partners that can come to the table they give us.

Something and the leisure ecosystem to sales.

But Moreover that have a bunch of customers or one other one that led and the markets that we serve that they can introduce us to so the partnerships here to fore.

Anything thats bigger than a bread box likely has both yes, it's something that we can sell.

Sell on an asset light fashion.

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 are buying their products. They can send them our way. So a perfect world is everyone on our ecosystem.

Wherever you go to first.

Yes.

Sent around the carousel and and the most technically elegant environment right.

And what have and integration where someone can certainly buy and all those things and elite and dot com, but at the same way when you booked and hotel somewhere else when you buy that game and our concert ticket.

Digitally we know where you are and we know by definition of what you bought that take a point, where you're going and to be able to present allegiant and the right option for air travel to that that's that's what that implied certainly sunseeker will be one of those things as it will introduce itself, but no that was no.

No.

Allusion to that that was other partnerships that we hoped to.

<unk> announced and the upcoming future debt on.

Our true what I would characterize it.

Business and and channel distribution relationships.

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

Yes, I mean.

And secondly.

And not here and there is no number I could give you break and kick out and it'll translate and it'll translate certainly and.

On the new visitors, we get to the west side times that conversion, which will manifest themselves and both tax counts going up and then the average transaction size.

And more to sell and people attached to those things so tax counts and then net third party.

Revenue per per Ian Pinner per pack.

And that Joe referenced would be the two metrics that you would expect to be impacted by that.

And I see Okay second question here it looks like from the scheduled data 40% of the ASM and the second quarter are going to fall on the month of June.

Which has implications for revenue and CASM ex for the for the quarter. So.

It looks like June could maybe account for 50% or more of the revenue and the quarter, but please correct me on that but more interesting is the CASM X. So what.

And what kind of capacity up 16% and June I think is what the schedules are saying versus 19, and youre, saying the CASM sub six for the full second quarter and I guess.

And I'm wondering is that that seems to imply a CASM ex close to $5 perhaps.

For the month of June and.

And I'm, just kind of wondering how that wrinkles out through the.

Phases out through the remainder of the year and I guess, where I'm going with this is Steve.

June CASM X being impacted by heavy maintenance and just wonder if you can just provide a little bit more perspective, because it seems like there should be a step down and CASM ex in the month of June net debt.

And essentially get straight line through the rest of the year.

Maybe I'll kick it off very high level, you're right, we're looking at about 40% of.

And <unk> to happen in the month of June.

So I think the quarter basically is going to come down a lot of wasted how June is variable from now and I don't know if Greg wants to handle any parts of the cost components.

Yes, Dan Thank you for the question and.

The June quarter will come and really strong from a CASM ex perspective I think.

And when I look 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 on year.

And we're anticipating a couple of things one.

Increased profitability, which would roll through.

And the profit sharing so thats going to drive it up a little bit more as compared to what we are.

Projected right now for the first half of the year.

And then you also you're gearing up and we are anticipating gearing up for growth into the into 2022 and the back half of the year. So I think that to provide a little more unit cost pressure as compared to the second quarter.

But we feel good about where we're coming in at the second quarter, I think and interesting data point, perhaps worth noting is like on.

On the DNA front are the fixed costs as you look on a unitize basis, perhaps from the first quarter that had a little bit of a headwind, but as you pick up utilization a little bit more and thats going to drive it down and provide some strength there and I think and the first quarter from a salary and benefits perspective, you saw that's toffee and the first quarter, just because and I think I mentioned this on the last call.

We have with our pilots, we recognize our PTO upfront and the very in the first quarter and then you just you run that out to the rest of the year. So it's almost $12 million and the first quarter alone and PTO and then you'll get some benefit on that and the second quarter, but then once you get into the back half of the year again, you're starting to hire or expecting to hire some.

Crew members to support that 'twenty two 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 and what some other pressure points or tailwind maybe yes. Thank you for that clarification and it is if I can just squeeze in one last quick house cleaning question.

Percentage of second quarter flying that's and new routes less than 12 months I think there is 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 is always a little bit of difference as you can imagine that youre trying to introduce youll have varying levels of confidence by route as you move in but either way.

And the core goal and the first year is to ensure that you can fill the plane and.

And so we'll sacrifice yield initially in order to make sure we can accomplish that so.

And so youll see a little bit of a headwind.

From that I don't know that Youll see and at the system level.

Just shy of 13% or so of our ASM <unk> will be on routes and their first 12 months.

So happy with where it's at but we're focused more on being able to fill the play and to build load on on that and that we are on gaining yield initially.

Very good thanks for the time you guys.

Your next question comes from the line of Hunter Keay from Wolfe Research. Your line is now open.

Hi, everybody.

You're looks like you're guiding revenue, excluding charter and other.

Obviously, you mentioned you sold.

And the majority of T snap.

But.

What does this say about charter what why are you guiding excluding charter with charter revenues and first quarter looks pretty fine to me or are you, saying that we should.

Expect that business ultimately to go away at some point and are you deemphasizing it and why don't you exclude that from the guidance.

The reason why I wanted to go with a scheduled service only as we're putting our growth of ASM into the scheduled service World, That's where we're seeing the better return on that I wanted to ensure a lot of focus on on that piece of it.

Fixed fee realm, and I mentioned this in my opening comments margins are down fairly significantly across the board there and first quarter, we had a solid amount of March madness, flying which boosted that.

Fixed number at March.

And like I mentioned, I think Thats, a one off for 'twenty, one we won't get a lot of great insight into what fixed fee will do and the back half of the year until we get a little bit further along with college football contracts.

So for now.

Wanted to keep focus on.

Scheduled service ASM to growing here why here's the scheduled service Rev Guide.

And kind of move with that.

To your point the other Rev line will largely moved to zero as we move forward with the <unk> sales that become de Minimis.

Fixed fee is not going away I think we're just trying to be good stewards of our assets and the short term and the better returns on the service side right now.

Alright, that's pull through and then.

Maury I realize a little bit of and offer question, but we've been talking about this for years and I'm wondering how you might talk about succession planning I know you can't really quick and the middle of a crisis, but you sound. So excited that look may be even harder to leave and given the opportunity and Chinese so.

And how are you thinking about your on future CEO.

Paul it's guaranteed on going to leave.

And that party without plastic.

Question on web, assuming my succession and sitting around the table here someplace, so I'm going to do and we'll get the spin the unparalleled and and.

And sit down on one day and do it that way or something non.

And that's it.

And certainly been a long run and.

Couldnt be happier with the management team that's here and.

I am still and largest shareholder intend on being that so.

So I don't know and I will ever go away, but I don't have to be her day to day certainly.

And this group peers are good stewards.

Of this discrete business so yes.

Stay tuned.

Okay Mark Thank you.

Yeah.

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

Hey, good afternoon, everyone and thanks for the time.

And maybe a bit of a follow up and the medium term more metered growth story.

And it looks spare parts and aircraft available at pretty.

Attractive prices versus pre COVID-19 you guys noted earlier in the prepared remarks.

Is there not more of an opportunity to add to your fleet here and just lock and lower ownership costs, the coming years or is it really just like those maintenance bottleneck, you mentioned earlier and that that call that or you guys really think the current fleet plan is sufficient for what demand is going to be.

Thanks, guys.

Hey, Katy, it's Craig, perhaps I'll kick it off and maybe others will jump in.

<unk>.

And I think I think a way to describe it when John gave that 2024 aircrafts guide.

Is that 10 percentage I mean, we're still going to be opportunistic and BJ and his fleet team. They are seeing what we just did.

A lot of opportunities to bring on used <unk> hundred <unk> and Theres, a bunch out there that fit our and.

Our profile and make a lot of sense to bring on and.

I would think of those as incremental kind of growth and maybe it's above 10%, but.

But we're certainly looking at that and we see a lot of opportunity there I think from a spare parts perspective. Similarly.

And similarly, we've seen some opportunistic purchases there were off of 50% of pre pandemic levels. So we're excited about that will start bringing those and to help support our ramp up of growth I think Scott Sheldon and his maintenance team and organization has done a great job of.

Positioning us to be able to get these aircraft into the pipeline moving forward and a good amount of time.

But I wouldn't I guess ultimately what I'm, saying is we're going to be opportunistic and as we see nice to aircraft sales 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 you're on our ownership costs given what we're seeing here and stay tuned, but we have quite a few irons and the fire.

That's great and if I could maybe just sneak two quick or modeling ones and Dan here.

And I guess first just really quick clarification did you say two half CASM X is going to be low 6% range.

And I hear anything.

No you heard that right Katie so I think that second half should be just from the low six range 600 range Alright, great and then maybe the second little modeling on here.

And it looks like on in terms of your NPL.

Current quarter you saw.

Positive impact of new bookings outpace some of the drawdown of credits used from prior periods.

Thoughts on how we should expect that to try and going forward just based on your current forward bookings and thanks, so much for that.

Hi.

Yes, I mean, you're on.

Going to kick it off but we're seeing drove.

From an accounting perspective, and maybe if you see any forward but.

What we saw on this last quarter Kt in terms of redemptions. It was just and gross numbers I think it was like $40 million, which reduced it by 19% that credit Boucher level. So.

What I would say is we're not issuing nearly as many as we did last year and youre starting to see that.

Those will be redeemed at a nice rate and we did extend our expiry during the middle of the pandemic early on and the pandemic I should say to two years, so thats keeping them out a little bit longer, but the cadence of them coming down it's pretty nicely, whereas I think by the mid of mid 2022, Youll kind of get back to that normal percentage of ATL in terms of credit vouchers and.

And then.

Do you want to talk change feature.

Jeremy or if you can touch on it on a quickly.

Change these back and have mitigated on May one so they came back at $25 versus our original previous number $75 and stuff it was.

Really John's idea and bring back something that was not zero, but not all the way to.

Kind of help one with the threshold that on on our side, but but to restore some normalcy there and thus far very very early on.

A real pushback on that from.

Got it thank you so much.

Okay.

And Steven.

Okay.

Come on line.

[laughter].

Operator.

And there are you bringing fabienne.

And to book.

Go ahead sorry.

And.

Could you hear me.

Yes, yes.

Okay.

Thanks and good.

And everybody.

[laughter].

Greg if I can.

Ask a little bit demand on the CASM next question you reach the upper end of that CASM ex that you were looking to achieve and could you kind of walk through your expectations for your major qualify <unk> line items over the next couple of years.

And if a longer term view and I'm trying to understand like what Mike and each of the lower end of that target or perhaps what Mike and cause you to move up from that low six six loans that you are seeing and the second half.

Sure. Thanks for the question Savi, I think I think and area that I get pretty excited about is in terms of helping improve or a tailwind to our unit costs. As I mentioned earlier was on the ownership side just some of the deals that we're seeing are potential aircraft sales, we're seeing coming our way and as a result of the pandemic could mean.

And if we help us drive that down.

In addition to that from another tailwind perspective, I gave pretty excited of what Sheldon and his team is doing on the op side of the house.

Doing things to make sure we're running a good airline it's expensive when you're running a good airline. So thats always helpful. We've talked about sky wise, and the investment and Sky Wise, which is our predictive maintenance platform.

I think the team today, we have about 25 aircrafts, they're retrofitted with the complete capabilities of Sky wise by the end of the year, we think that'll be up to 75% of our fleet and on that.

Mid next year that would be about 95% and I mentioned that savi because that not only helps us run and better airline with dispatch reliability and things of that nature had also allows us to handle maintenance when we want to not and an unscheduled type environment again saving on costs and that's a really big deal for us and where we're seeing some headwinds.

And that we're looking at currently and I don't know if this is here to stay and candidly Savi is on the station front.

Given that with the pandemic and a few of our airports and which.

Perhaps there was a budget deficit that theyre going back and trying to reclaim net for the moment.

We're seeing some pressures there, but I think as industry capacity picks back up potentially that could help on a level that backup and but what I would say ultimately savi is I think where we're at from a cost perspective, we're in a good spot or not here at the team we need to be at 5% Im sorry on a five handle a CASM ex that's a nice to have.

And candidly if that was like <unk> and <unk>, we would just increased utilization from eight hours a day to 12 hours per day, and we've been talked to look at this from a profitability perspective, and Theres two sides to the equation and 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 if down the road, we need to spend above to make two or three where we'll.

And to do that because that's where we're going to be keenly measured on but I know that's kind of a lot of information maybe I'll pause there if I hopefully I answered on help to answer your question or provide any other detail.

No that was great right. Thank you and if I might ask.

Scott just quickly quarry side with the new rental inventory that youre talking about.

How meaningful is that and just what are you doing that maybe your competitors can't do and just similar to <unk>.

And being better with kind of putting people and hotels because the other direct relationship or is that something differentiated about the human.

Opportunity.

So at the moment, obviously is going to be crawl walk run, but I think what's differentiated about it and the booking window for vacation rentals is much different and hotels on average third three to six months, whereas we see with hotels is much shorter specifically on Las Vegas hotels, which could be hey, you want to go grab on this weekend type bookings.

And 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 and real quick is.

Our hotels have been and great story here in Las Vegas, but increasingly as you look around all the coastal markets that we fly and <unk> and all the national parks that we apply to both.

Both very big success stories.

During and coming out of the pandemic on increasingly.

<unk> and rentals are a big part of <unk>.

Now you can sell to those customers right and Theres not a lot of park Hyatt sitting right inside of Yellowstone and so I think that.

Those are the strategic thing that it gives us and us being able to sell and sell it at scale. That's something that comes over time as we just optimize the digital channel and to do that so hopefully that's helpful and I think the other thing that's worth so it's worth pointing out too is the average trans size on.

And that kind of transaction is much higher and it's due to the length of safety and much longer on vacation rental so we make a lot more money on a long length of stay pipe product than you do a short length of stay product, yes, even in the early days of thin.

Several thousand person and hotels, which will be.

Q1 2021 Allegiant Travel Co Earnings Call

Request a DemoDemo

ALGT

Allegiant Travel

Earnings