Q3 2021 Allegiant Travel Co Earnings Call

October 27, 2021

Okay.

Good afternoon, everyone and welcome to the Q3 2021 Allegiant travel company earnings Conference call.

At this time all participants are in a listen only mode.

Later, we'll conduct a question and answer session and instructions will follow at that time.

If anyone should require any assistance during the conference you May press Star zero.

I would now like to turn the conference over to your host Ms Shari Bullshit.

Thank you Kirby welcome to the Allegiant travel company's third 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 The Angelo R E D.

And Chief Marketing Officer drew wells, our SVP of revenue and planning and a handful of others to help answer. Your question. We will start the call with commentary and then open it up to 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.

These 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.

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.

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 Maury.

Thank you Sherry and good afternoon, everyone. Thank you for joining us again.

Another very good quarter, as we saw loads and yields improve versus earlier. This year in Q1 and two are scheduled services increased 17% this year versus the same quarter in 2019.

As I mentioned in our release, we are the only carrier this year, but I am aware of who has both grown their system compared to $2 19, 2019 and unprofitable subs.

Subsequently this was this.

This was a substantial increase versus the sequential four 5% growth in Q2, and three 1% growth in Q1.

While our third quarter's results were profitable they were impacted by our operational challenges. This spring many in the industry were rubbing their motors for the drag race to restart their airlines.

Common theme was flag planting and get there before someone else.

Majors had to refocus much of their flying to leisure oriented oriented destinations given the lack of business and international passengers and we the low cost carriers were feeling our oaks as well and looking to get out and plan from flags.

We all were looking to get out of the gates quickly and state the new turf, regardless the focus on leisure traffic can be associated airports by all concerned.

As a result, the operational demands on leisure destination airports, particularly in Florida, where substantial comparatively.

Is this focused airports and most of your larger NFL cities, we're operating at a fraction of their traditional volumes. Some of our destination airports had operational increases of up to 100 per cent compared to 2020 in 2019, respectively.

This added leisure flight activity.

Just had a leisure flight activity was hampered by a difficult labor environment as well.

Airports with these increases in activity does not have the necessary personnel for this substantial growth.

Wall Street is an example of this unprecedented leisure effect with southwest comments about their recent operational problems tied to ATC issues in Florida.

Stating that half of their flights now touch Florida each day.

This amazing evolution of of the network of one of the major carriers in the U S is indicative of the substantial shift and where airplanes were flying this past summer.

My label for this phenomena is leisure destination overload.

I said, we were not immune to the challenges that the industry was experiencing this past summer.

Over the past few years, we have implemented a generous compensation program, if and when we interrupted customers trip. Our approach in this advantage to provide a better than average amount of plc to help make takes the sting out of this bad situation.

If we were to add back these interrupted trip costs and other onetime associated operational expenses, our unit cost would have been on the mark.

We'll have more comments in a few minutes.

<unk> heard every carrier so far comment on increasing fuel prices. Some carriers are still hedging but understand this will only provide short term relief.

The reductions are the only remedy long term for fuel price increases.

We have a firsthand.

And knowledge in this area in 2008 in the first half of the year, we made substantial capacity cuts.

Offset the death skyrocketing energy cost.

While we plan on growing this coming year by at least low double digit percentages, increasing fuel cost could put a damper on this growth.

As we told you repeatedly our models flexibility allows us to flex up and down better than others. We have shown a consistent ability to grow over the years, but we've also been able to quickly retreat if needed as we did in early 2008 in last year's pandemic.

I'm excited about where we're at we're in excellent shape, our balance sheet has improved substantially during these difficult times the quarter end, we had over $1 $1 billion of cash and only $500 million of net debt.

We've restarted sunseeker and we recently completed a $350 million financing line.

Thanks to the construction and John will have some additional comments.

Our third party revenue efforts are paying dividends. They are increasing nicely. These incremental revenues have been a difference maker through the years, providing us with industry, leading unit revenues and associated profits.

This is all part of our Allegiant two <unk> strategy that we've talked about previously Scott the Angela will have further comments as well.

But we have seen demand continue to increase nicely in the past few months in spite of the Delta variant outbreak.

We were the first to profitability from Covid, our model and our non competitive routes structure continued to be industry leaders and I believe 2022, we'll continue this return to normalcy and we will lead the industry out of the service of the past year and a half.

Lastly, as usual I want to thank our team members, who have been the difference maker in our success through the years and now is no different they.

<unk> been warriors on the frontline this entire times in the past year and a half consistently transporting our passengers' day in and day out to their destinations. Thank you to everyone.

John.

Thank you very much more and good afternoon, everyone like Maury I'd like to take this opportunity to thank all of our incredible team members.

Who go above and beyond every day to help this company move forward out of this pandemic.

The challenges brought on by the pandemic Shockwave has led to supply chain upheaval and labor shortages, creating operational challenges throughout the company.

None of us have ever seen or experienced before you were all rising to the occasion and we are getting through it as painful as it may be again I am thankful for your continued efforts and understanding.

Given these unprecedented challenges, we still had a great financial quarter after adjusting for one off costs associated with irregular ops.

As we adjust to and fix these challenges our results will continue to improve.

Revenue was strengthening exceeding Q3, 19, and we expect Q4 to exceed 2019 Q4 as well.

In regards to the sunseeker here of a couple of updates.

As previously announced the 350 million financing transaction with Catholic has been completed we expect the first 175 million tranche to fund in the next couple of days.

<unk> has been a great partner and Allegiant travel looks forward to a long term relationship.

Construction has resumed on the resort was approximately 250 people working on the project today.

Trucks on the golf course has resumed as well we expect these projects to be completed in Q1 2023.

The hotel towers should we topped off by the end of this year. The two suite towers as expected will top off in Q1 of 'twenty two.

We expect to begin taking reservations in Q1 of 'twenty two as well.

And also beginning Q1 'twenty two we will resume segment reporting show on Sunseeker data separately as we did in the past pre pandemic.

As I've done on past earnings calls I thought it would be helpful to provide some directional data points to help you understand how we see things are for full year 2021.

All of these data points I'm, providing or on an adjusted basis, which exclude COVID-19 related special charges. The net benefit from the payroll support programs and bonus accruals.

Furthermore, all data points provided assumes fuel at $2 17, a gallon for the full year.

EBITDA is expected to be in excess of $275 million with a margin of around 17%.

Also would expect fully diluted EPS in excess of $1 50 a share.

Again these are all on an adjusted basis and.

In addition to the above we expect year end cash balance of around $1 3 billion and net debt of around $300 million.

And Greg will provide more detail around these data points in his commentary and with that I'll turn it over to Scott Sheldon.

Thank you John and good afternoon, everyone.

Perhaps a comment or two on our third quarter operations.

Without stating the obvious our operational results and corresponding headwinds were similar to that of our industry peers, who have released during this earnings cycle from a capacity standpoint, we had perhaps one of the more ambitious summer schedules in the domestic U S market third quarter 'twenty, one departures were scheduled to be up nearly.

17% year over two years average aircraft growth up nearly 20% and destination and rent growth were expected to be up 25, and 29% respectively.

Furthermore, the distribution and departure growth among our crew basis has continued to shift to some of our smaller and midsized markets, which push which puts additional strain on infrastructure and labor staffing challenges.

Despite the added complexities, we were seeing enough improvement in the operating environment.

And of course, as we exited June and we felt we had all the necessary complement of flight crews and frontline employees to execute the back half of our summer schedule.

Unfortunately that Delta Varian surge in late July and early August was simply too much to recover and we took an abnormally high number of cancellations. In addition, our core operating performance metrics were down as compared to historical trends, but we're starting to see those trend up.

Over the course of summer, we had as many as much as 30% of our frontline workforce impacted by Covid and or other types of leaves with a definitive spike as we turned the calendar from July to August Greg will have more commentary on IRA ops.

Looking into the back half of the year and into 'twenty, two drew and team remain optimistic on the demand and revenue environment that being said, we're trying to build in some safety nets from them.

For a number of higher risk operational areas. Our ops team continues to work with planning to ensure we establish appropriate buffers to execute a more consistent schedule to help mitigate passenger disruptions and that I believe mine labor and MRO supply chain challenges are the number one and two focus areas as we.

To support our March 'twenty two fine one.

One quick comment on labor before I sign off I'd like to congratulate all of our maintenance technicians maintenance control staff quality in stores personnel represented by the IGT ratifying. The first collective bargaining agreement disagreement helps make us competitive in the marketplace.

As we look to fill a much needed positions for our 20 excuse me 2022 scheduled.

I know this is a long time coming and was restricted by our 2020 COVID-19 pause, but I very much appreciate everyone's effort involved to get this to the finish line and in closing I'd like to thank all of our team members across the network for their streaming service and professionalism in the face of our latest Delta variant Spike your efforts have been tremendous.

Our team members and partners are the backbone in the face of our organization and their unwavering commitment and loyalty to our consumers is why our organization has and will continue to be successful and with that I'll turn it over to Scott manageable. Thank Scott from a marketing perspective, despite the headwinds we've called out the Allegiant brand continued to shine.

Attracting more visitors to allegiant dot com and more bookings among both first time and repeat customers.

Any third quarter in our history.

In late August while the Delta variant drove customer sentiment as we measure on a weekly tracking survey to its lowest level. Since early January it has since returned to its highest level since mid July and while the delta variant negatively impacted bookings during August and September the degree of that negative impact was far more.

And that has seen its similar customer sentiment levels during 2020 and the beginning of this year.

Put allegiant customer demand is showing increased resiliency. Despite continued bumps along the pandemic road to recovery.

Despite the delta varying headwinds during a considerable portion of the quarter, we still managed to increase visitation to allegiant dot com by 1% and more importantly increased bookings at Allegiant dot com by 5% versus 2019 levels.

<unk> transactions increased at five times the rate of web as it points to Allegiant heightened brand awareness increased marketing efficacy at attracting the right visitors to our site and enhanced web and App experience, which makes it easier for those visitors to find and buy what they want.

All of these enhancements again, combining to attract and convert more new and more returning customers and the lowest cost ways.

Specifically, our lowest cost channels that is customers coming to us via our mobile app or by directly entering the allegiant dotcom urls or by clicking on a link and one of the $50 million targeted E. Mails, we send each week now account for 80% of total visits to Allegiant dotcom and <unk>.

Nearly 20% more website visitors than they did in 2019.

And those visitors translated into a healthy balance of both first time and repeat allegiant customer bookings bookings from first time customers saw a nearly 2.5% increase and those from repeat customers.

Nearly 3% increase compared to 2019.

We also continued to achieve deeper levels of customer engagement across everything.

Everything we offer at Allegiant Dot com.

Overall third party revenue, which comprises co brand credit card hotel stays and car rentals was up nearly 35% for the quarter versus 2019 compared to scheduled service passenger growth in the quarter of just over 2% versus 2019.

Greater portion of customers are spending more of their leisure wallet at Allegiant dotcom on products beyond just air travel.

And enhancements to our co brand credit card acquisition approach that launched during this past quarter.

The Allegiant World Mastercard, which is now being branded under the always rewards umbrella was once again voted the top airline co branded credit card in the nation for the third consecutive year in USA Today's readers' Choice Awards you.

You may recall that our second quarter saw the number one and then number three best months, a new cardholder acquisition and the program history and this quarter. Despite various headwinds in the traditional decline of leisure travel in early fall, we achieved the number four and number five best months of New Cardholder acquisition in the program.

History.

In total new card sign ups in the quarter were up by more than 12% versus 2019.

Contributing to the continued growth in new card holders was the introduction of instant credit enrollment in our mobile App. Historically this has been the top performing way that we acquire new cardholders on our web site until we expanded this functionality to our mobile app for 20% of our bookings are now made and the results are exceeding our.

Mutations.

Building off the success of our co brand credit cards simple popular point, earning and redemption model and combining that with inspiration from winning tech forward consumer friendly programs like Apple card and target circle rewards, we launched always rewards this past quarter.

Already always rewards members spend 23% more per transaction than non members left that is driven primarily by their increased attachment of air ancillary and third party products to their itineraries.

These loyalty programs combined with the redesigned website and mobile app and soon to be joined by other technology enhancements in the upcoming year are all playing a meaningful role in helping us sell beyond the aircraft and we've allegiant enter the most important and highest margin aspects of leisure travel, including third party distribution of hotel.

<unk> rental car and even sports and entertainment events and to that end Allegiant Stadium. In addition to driving more than 60 million viewers across light bright light broadcast during this season's first four games at the stadium as well as driving web visits and bookings up by as much as 39%.

About 2019 levels on the days of and after these games has now joined our portfolio of third party products as the NFL season kicked off we launched Allegiant Stadium travel packages that include air travel hotel stay and game tickets.

While these packages don't represent a material revenue driver they do serve as a high profile way to showcase our ability to sell beyond the aircrafts and to that point for 80% of Allegiant Stadium package customers. It's the first time, they had ever booked a hotel to Allegiant dotcom and for nearly one third.

These customers. It's the first time, they've flown to Las Vegas on a Legion.

Beyond the wildly positive impact were seeing directly from this partnership Allegiant Stadium has become a crown jewel of sorts for broader nationwide Las Vegas advertising, but the destination itself is doing Allegiant stadium is central to the destinations claim that Las Vegas is now the entertainment and sports capital.

In summary, the Allegiant brand, it's thriving share headwinds exist, but they will ultimately subside and as they do we believe we are best positioned with the increased demand we continue to see from new and repeat customers for allegiance brand of affordable accessible leisure travel to maximize our share.

Not only are there nonstop leisure air travel, but also of their spending on the increasing array of leisure products, we're able to offer at Allegiant dot com and with that I'll pass it over to Joe. Thank.

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

I'm immensely pleased with the third quarter's revenue results total revenue came in at five 3% higher than <unk> 2019 on scheduled service ASM growth of 17%.

We are among the first carriers to restore revenues above 2019 levels and likely the first U S carrier to do so on the scheduled service site.

We hit the ground running with the July load factor over 80% and finished with a pandemic that 76, 6% load factor for the quarter.

The ancillary performance once again led the charge for US is bundled in the redesigned website impact on take rates continue to generate positive results.

The RM team continues to do a remarkable job of handling the complex task of balancing loads and yields on a market level EBIT as the environment changes rapidly.

As is always the case with the bulk of <unk> in the first half of the quarter before we dramatically pull down our schedule for the off peak fall <unk> goes as the summer goes.

This scheduling flexibility is key to our model and the upcoming quarters. We will continue to put that to the test with rising fuel costs supply chain disruption potential TSA staffing issues and the potential for additional seasonal COVID-19 spikes.

And we'll continue to work in lockstep with the organization to maintain this flexibility and ensure enterprise success.

After inaugurating seven routes in the third quarter and several successful hypersthene, an old one and two weekend event specific route we will launch 52, new markets in the fourth quarter was 75% of those connecting the dots between existing Allegiant city.

Despite that we will have a lower percentage of markets in their first 12 months that we previously communicated down roughly four points from the third quarter and one point in the fourth.

Similarly, we expect our fourth quarter growth rates also come in lower than previously communicated and part as we react to rising fuel we plan capacity with a typical cost per gallon buffer of 50 <unk>.

Only the third time in the last nearly decade, we've hit or exceeded that buffer.

With that we now expect scheduled service ASM up 12% to 16% and system ASM up 10% to 14%.

We are positioned similarly today to where we were 12 months ago, So with Thanksgiving, having more revenue on the books today. The same holiday period finished with last year on a considerably higher base.

The booking cadence has research to be inline seasonally adjusted with the peaks of the summer and holiday demand looks quite strong.

The reopening of cross border travel for vaccine travelers starting next month has shown a meaningful impact to our near border airports.

Normally I would be quite bullish on the fourth quarter prospects. However, the seven day average U S. New case count of 70000 is hovering around it you really similar number to late October 2020 granted on a different trajectory over the past several weeks as such on a bit wary of running away with the excitement of <unk> potential and are built into the expectation of spike related headwinds.

That said I believe we will continue to lead the recovery in our forecasting another positive total revenue quarter, plus a half to plus 4% and with some positive variance believe we can achieve an 80% booked load factor in both November and December.

As we look to 2022, we have some fairly low comps in the first half of the year and growth was limited to 3% versus 2019 that will provide a catalyst for headline growth and help set the stage for the rest of the year.

We are still working through June and beyond to ensure we are setting up the company for success in finding the proper balance between growth and operational integrity.

We'll have much more detail to provide in three months time.

With that I'd like to pass over to Greg.

Thank you and good afternoon, everyone.

So on the current tone of our business for the third quarter, we reported adjusted earnings per share of <unk> 66.

Our second consecutive quarter of positive adjusted net income.

While this quarter's adjusted results fell below initial expectations, we experienced a nonrecurring and unusual irregular operations.

Incidents are not unique to allegiant, nor do we believe they are systemic.

The total cost impact during the third quarter for these elevated Iraq events was around $28 million.

Roughly half of this $28 million was driven by areas such as incremental contract labor supply chain constraints and incremental ferry plates.

The other half of our <unk> costs, and as Maury teed up relate to our compensation program for customers in which we aspire to do more to take care of them, if we significantly interrupt their trips.

This past quarter, we paid $15 million to these impacted passengers. For example in addition to credit vouchers issued to our customers. We may also compensate them between 100 to $300 per eligible passenger to provide immediate support for re accommodations.

The purpose and attendant impact of providing the additional compensation is twofold first and of course to better assist our customers when unusual and difficult circumstances disrupt their plans, but second and equally important to our bigger picture it drives greater accountability to the financial as well as the human impact of flight disruptions by really making its steam for Legion.

With that backdrop, our third quarter adjusted total costs increased 17, 5% year over two year. However, excluding the $28 million in Iraq cost has just outlined this cost increase would have been under 10% of total system capacity growth of 14, 2% year over two year.

Turning towards the fourth quarter, despite expected capacity growth of 12%, we expect unit cost excluding fuel to be slightly down to flat year over two year. This is largely driven by the increased cost pressure in our airports and ground service providers.

Our expected <unk> CASM ex implies a full year 'twenty, one adjusted CASM X at around 2019 levels.

As noted earlier fuel costs continue to rise as we are currently paying $2 50.

<unk> 55 per gallon of fuel.

Sequential quarterly increase of 35 per gallon however.

However, even at these elevated fuel costs, we expect our fourth quarter financial results to remain profitable and exceed third quarter's adjusted EPS.

Based on our fuel consumption and increase of 10 cents per gallon fuel equates to roughly 5 million per quarter.

Moving to the balance sheet as of today, we have $1 2 billion in total cash and improvement from the <unk> <unk> as earlier. This month, we received the remaining $116 million in cash from our NOL refund.

And as of today, our net debt is around $400 million a decrease of 60% since the beginning of the pandemic.

For the full year 'twenty, one we expect to reinvest $240 million back into the airline and increasing our guide by $20 million and this increase is primarily driven by our strategic parts purchasing initiatives along with some other non aircraft capex.

Year to date, we have paid down more than $200 million of our debt balances $50 million of which was in the form of prepayments and this brings our current total debt to roughly one 5 billion a decrease of 5% since the beginning of the year.

Looking towards 2022, we are in the mid innings of finalizing our 'twenty two capacity plans and expect to provide an update next time we speak.

We are actually exploring a possible investor days last call in December and we will keep you apprised of status in the coming weeks.

Given the uncertainties with rising fuel labor and supply chain constraints, we intend to establish a baseline of capacity growth for 2022 in the low double digits area and.

And harnessing the unique flexibility of our model, we are confident in our ability to spring up capacity, if and when appropriate.

In addition, we have action working towards getting a couple of steps ahead of the growth by bringing on 300 frontline team members ahead of what we normally would namely pilots flight attendants and mechanics, and this estimate about $15 million in incremental costs during 'twenty, two when compared to historical staffing levels.

Advancing these higher should greatly aid the quality of our performance by getting team members trained and experienced and as the choppy environment Abates, we expect can actually grow into these incremental heads.

We are mindful of the looming inflationary pressures, where we can we are offsetting such pressures and examples of a few are as follows since the onset of the pandemic, we have acquired aircraft and spare engine their prices significantly discounted when compared to pre pandemic levels to date, we estimate $150 million in direct savings here.

Similarly, we strategically purchased $40 million with a square spare parts at an average discount of 50% another $20 million in savings and finally for these examples are most carriers in our industry significantly increase their debt during the pandemic. We did not as a result, our full year 'twenty, one interest expense should be around 20% down year over two year.

In closing with fleet, we expect our full year 'twenty two airlines gross Capex, which includes capital leases to be around $350 million. This is primarily driven by $200 million in aircraft gross capex with the remaining $150 million roughly split between other and heavy maintenance categories.

As a reminder, our fleet plan includes 19 incremental aircraft to be placed into service throughout 2022, bringing our total expected fleet count by the end of the year to 127.

19 aircraft to be placed in service next year 11 have or will be acquired in 2021 and are already included in that 'twenty, One Capex guide.

Eight aircrafts are slated to close next year of which six have been structured under a capital lease.

And as a result of these capital leases are full year 'twenty two committed net aircraft cash capex is expected to be only $55 million.

By year end 2022, more than 50% of our fleet will be comprised of 186 seat aircrafts, which compares favorably to 2019 composition of roughly 25% to 180 600 aircrafts.

The larger gauge 186 seat aircraft have additional benefit in a rising fuel environment and they are the most efficient in our fleet on an ASM per gallon basis, we expect full year 'twenty two ASM per gallon to increase by 5% year over three year.

At $2 55 per gallon. This increased efficiency efficiency is worth roughly $30 million in fuel savings compared to 2019 fuel efficiency levels.

And with that we'll open it up to Q&A.

If you have questions at this time. Please press Star then the number one on your tax tone telephones and if your question has been answered or you wish to remove yourself from the queue. You May press the pound key anvil.

We will pause for a moment to compile the roster.

First question comes from the line of Savi Smith from Raymond James Savi. Your line is now open.

Hey, good afternoon, everyone.

Just actually a quick question to start with Greg you talked about.

The liquidity right now being a casting right now one point too.

I think the cat guidance is two one point change by the end of the year is there something kind of different the way of cash building is building in the fourth quarter. This year than fantast or are there other kind of inputs coming in.

No I don't think theres any other inputs savi.

We're a little bit over $1 $2 billion right now and I think just the influences that were going to build cash through operational cash flow.

Okay.

And then just.

Little bit more clarity on on 22 planning.

So it sounds like the hiring is done for operations.

Operations levels above the kind of low single digits is that how youre thinking about it and then.

Then you'll kind of grow into it if youre comfortable with that operations are you just looking for a little bit more clarity on how you're thinking about hiring and then operating in 2022.

Yes.

<unk>.

Yes, we have.

We have obviously our pipeline is full we hired upwards of 270 pilots.

And these would sort of dovetail into March peak flying in addition to the summer.

We're seeing a little bit of a spike in.

And attrition.

Particularly on the <unk> side.

Not terribly material yet.

But I think those sort of numbers would give you little slow double digit growth for the summer.

Flight attendants.

The attrition is fairly stable right now.

<unk> is the big one I mean, we were just very very underwater when it came to being competitive and so.

Out of any of the areas, that's probably where we have to catch up the most.

So I may just to clarify.

Low double digits.

Oriented not low singles, which I think I heard you make these days I just wanted to clarify on that front.

Alright, yes.

Thank you.

Thanks Tommy.

Next question comes from the line of Conor Cunningham.

MTM partners caller. Your line is now open.

Hi, everyone. Thank you.

Just on the budget for Sunseeker I don't think that's been finalized yet. So just curious curious where that may sit today, given all the supply chain issues and inflationary cost pressures I, just would think tenants and it's higher than what you had previously kind of soft guided to which was like I think $5 10 to $5 50, So just curious.

On on where that May set right now are or maybe why you haven't finalized there.

In general.

I think.

It's a good point I think we and the rest of the world is experiencing the supply chain disruptions.

I don't think there is an industry that's immune to it our product that is so.

We know that the costs are going to be higher.

We're still working through.

Exactly how much higher but it could be in the 10% to 15% range on the total project may be even slightly higher but I think a lot of that we will understand as we move more into the end of this year and probably into Q3.

So it's not only understanding better the impact of that supply chain disruption on cost, but also on timing.

We were of course pre pandemic, where pace to open April of 'twenty, one now where everything is kind of an thrown into turmoil in that regard. So it's those two issues both cost and timing that we're working through but as I've mentioned before we know we're going to be over.

We were at five the carrying cost if you will throughout the pandemic took us to like 510, and now just working through the order of magnitude about five to 10, but we know it's going to be.

Call. It in the 10, maybe even 15% range and could be slightly higher but it's just too early to give any degree of specificity on what that number will eventually be.

Okay. Okay. That's helpful and then.

Maury I know you talked about the potential of slowing growth to maintain that historical fueled a fair ratio that everyone always talks about but but a lot of the other airlines need to bring back capacity and just the satellite bear non fuel cost pressures that they're dealing with Kevin nowhere made any infrastructure changes during the pandemic. So I'm just I'm just curious on what.

Gives you the confidence that the industry is going to follow what has historically been a good idea to cut capacity.

I think the risk you run is like you caught growth and no one else does.

No.

The reason why I bring it up I just think it's <unk>.

Point that basically everyone is struggling with right now so if you could just speak to the high level dynamics that you see playing out in general.

Well.

You're spot on everybody.

Sitting here today, if they had the.

And the decisions. They made last December January and February for the summer of 'twenty, one, we'd probably do it differently at times, we were facing 10%, 15% of our personnel and maintenance in our MRO is where we're having our airplanes were worked on they werent in COVID-19.

Just rippled all through the summer.

So we've got a bit of uncertainty.

In the new organization right now as to what what can we count on Scott.

As Scott mentioned in labor problems with our maintenance personal lot of COVID-19 issues with them and the different bases, we have going through it so.

We're assessing where the personnel.

Need to be we're hiring very actively.

The irony of it is I mean, everybody in this business is hiring yet they still haven't gotten back to full capacity. So there is some.

Congruity as to what you have.

Long term.

<unk> always run.

Turning to our own the beat of our own drum first and foremost as you heard Scott to Angela to talk about the quality of our brand and the <unk> is really going to be thought up very appropriately.

Iraq's or just not long term acceptable to us and the irony of it is this industry ran like a Swiss watch in 2019 and now it's almost like we've forgotten how to run on time.

Deal with interruptions, but.

Our case, we're definitely focused on getting back to a really solid operation.

Something we can count on and that's going to be a short term. The next through the first quarter I think we'll have a good handle on what we're doing as we go into January February March and then we'll reassess growth at that point could we grow more than the low double digits, but.

But do we have to know again, while others may be growing the beauty of our business model is we're still 75%.

Uncompetitive noncompetitive in our route structure and that's always been the case and we don't see that changing materially so I'd like to get there quicker if we can but we're not going to sacrifice.

Our customers and our own personnel that come with operational problems, but.

As I said in my comments I'm very bullish on the business model and where we're at Scott. These revenues that are coming through these third party stuff you guys should really take a look at that stuff thats very meaningful long term repetitive revenue thats going to be.

Very very powerful for us.

I appreciate it thank you.

Next question comes from the line of Dan Mckenzie of Seaport Global Securities. Dan. Your line is now open.

Oh, Hey, Thanks, Good afternoon, guys, a few questions here going back to the supply chain challenges being the number one number two areas of focus.

Just wondering if you can clarify that a little bit more what is within your control what isn't and what is the level of confidence that the infrastructure's in place to protect the down.

The operations over the holidays. So I'm, just hoping you can elaborate a little bit more on that.

Let me give you an overview and I'll turn it over to Scott.

What are they are certainly supply chain problems for us. The airline is bad I think as construction and I think Jonathan probably say sunseeker is a little more difficult than ours.

At this point the main thing is to make sure we don't hold reschedule the airline and we have the sufficient pilots flight attendants maintenance can do their job. So we're very focused.

On that for the next 60 days.

Yes.

We'll get through the holidays, we have a couple of sales that might bleed into Thanksgiving, but when you think about it thinking about 'twenty two with 19 inductions were going to have 24 heavy maintenance events a lot of the materials that are sourced as is.

Is coming from outside the country, we operate out of <unk> and a number of different countries.

I mean, the list is long when you think about each one has its own little corner case.

We're definitely trying to simplify it given.

Our execution in the first nine months, if you guys remember the first first quarter hit us as we're trying to wait claims up.

Borrows for scrambling to get their operations back online. So we're trying to have either build in additional buffers.

That will just allow us to make sure we have the iron that we need.

And then Greg and Bj's teams are trying to get ahead as much as I can on the supply chain we.

We have a bunch of my tax conversion.

Or is that correct.

Everything should be on site onsite O'connor's I know that was a big piece is just getting Airbus kids for our Max tax conversions.

We're opening up some of these claims.

And a larger structural package that we're finding a little bit of corrosion like anything can really increase the spam, but it's a very much a high priority for us to sort of building buffers.

Just to finish that everybody when we came into the first quarter. We felt we were back in 2019 demand was back we just turn on the switch and it all runs like we thought it would.

All the variables death by a thousand cuts. So I think everybody is probably walking around on egg shells trying to make sure they don't over promise and under deliver.

So we're going to pull it back accordingly, and variables, we can control, we obviously will but.

We're learning as we go.

And Dan its Greg I May just add one more comment to that on the supply chain really around parts and alike and thats.

And now we have a mantra is we want to make sure that the right parts and tools are at the right place at the right time.

Just given the constraints that we experienced this past year that wasn't always the case, but we have been proactively in for some time now trying to get ahead of that we've talked about the strategic parts initiative, where we've gone out and acquired $20 million, we spent $20 million for $40 million worth of parts and getting those and we increased a little bit more on our Capex guide this year to continue to try and get ahead. So that we can.

<unk> support the operations and the increased like Max levels from an inventory this was bearing perspective.

Hum.

Yes, thanks for that comprehensive answer Thats very helpful.

And then I guess second question here drew.

What I can see it looks like over 50% of the overall capacity in at least in November and December comes from holiday flying but.

Please correct me on that I guess, so a couple of questions in the fourth quarter here what percent of the fine is peak versus off peak.

And then just with respect to the revenue forecast what have you factored in.

For children, getting vaccinated and I guess, what I'm getting at is just given the level of level of capacity. That's the scheduled over the holidays. It just seems like a small change in holiday command demand pardon me could really move the revenue dine.

Dynamic by tens of millions of dollars.

Yes, you're spot on with the last part there in the fourth quarter.

My peers would agree that's one of the hardest to forecast because it is still backloaded. So much more time in their ability built into that particularly when there are environmental concerns like we see today.

I'm not building in upside for children being vaccinated at this point, Alex I'll take that upside as it comes in as we see it kind of be effective in prevailing so thats not something im currently contemplating.

In terms of peak and off peak, if youre just thinking day of week.

We're looking about 23% of our ASM as being on off peak days.

What I would caution is that an off peak day in the heart of Christmas is not the same as an off peak day in October for example, so there's a little bit of a probably misleading in that as it pertains to holiday in particular.

Okay very good thanks for the time you guys.

Thanks, Dan.

Next question comes from the line of Helane Becker of Cowen Helane. Your line is now open.

Thanks, very much hi, everybody. Thank you very much for your time, so not sure who this is for it but as you think about Inducting aircraft into the network. I think you said 19 aircraft are coming in next year and I thought it was 24 aircrafts going into heavy maintenance.

Should we think about.

The level of aircraft that you are comfortable and ducting I mean, you're getting ahead of it on hiring I guess.

But what are you forecasting for total attrition for next year.

Hailing I Should've mentioned this and BJ just reminded me of the 19 inductions, all but two are coming from FAA trace which makes the induction that much easier.

Obviously labor yards.

And that's really the these are less complex reductions that we would historically otherwise have.

And Scott, maybe I can add to that we setup Melbourne, right, where introduction facility, where we just went out and this is a facility that we have helane that.

100% focused on reduction aircrafts nose to tail to it all the time and so we.

This was unique when we went out and did this earlier this year in anticipation to make sure that for the introduction pipelines and these aircraft that we have coming that we we have some buffer built in there.

Gotcha, and then on the labor.

Labor contract that was announced today I think you said that the cost increase associated with that is included in the guidance, but Ken if it's not can you just give us some help on that one.

It may not be meaningful I don't remember, how many people that contract covers.

Yes, Helane its Greg. It is included in the kind of directional guidance that we provided and.

The way I guess I would frame it is that maintenance makes up roughly 10% to 12% of our salary and wages.

And the contracts worth roughly $12 million per year, it's a five year contract and then it's a little bit frontloaded.

Are you, having actually are you having to pay signing bonuses to attract people.

Yes.

Alright.

That's kind of what I thought, but no that's I'm hearing that okay. Tim Thanks for your help.

Thanks Helane.

Next question comes from the line of Duane <unk> Evercore.

Evercore ISI Duane your line is now open.

Yes.

Hey, thanks.

Just with respect to the sequential.

Move in chasm from <unk> to <unk>.

Obviously, it was more than just Iraq that impacted you in <unk> with suboptimal operation So.

How much of that do you get back or are you baking in getting back in the fourth quarter.

And then I apologize if you mentioned it I know you've given us a lot of.

Qualitative.

Guidance here, but on that low double digit on that low double digit capacity how are you thinking about CASM.

X year over year.

Hey, Duane it's Greg.

Ill.

I'll knock off the second part of your question first and I think on that low double digits, we think that.

Our CASM ex to be around the 2019 levels. So six five.

And then sequential costs and perhaps just worth excluding Iraq, because we don't anticipate also be at the same level.

Pretty close on a gross basis keep in mind, I think fourth quarter, ASM or down a couple of percentage points versus third quarter. So you've got a little bit of pressure there.

And then there is some headwinds in a couple of different areas pilot training. So that other line item to pilot training coming through there so that put a little bit of pressure on that along with sunseeker getting ramped up and some some op expense. There I think we've talked about it on a quarterly basis, we think sunseeker op expenses roughly to $2 5 million.

And then with the hiring to we mentioned those 300 incremental.

Frontline employees trying to bring those in and things like that so I think that too would add a little bit but on off I think roughly it'll be slightly on a gross basis fourth quarter higher than third quarter.

But then just take into account the reduction in ASM.

Okay I can follow up with you.

Offline, maybe you lost me a little bit.

The.

Yes, just I guess the punchline.

Rob do you think CASM will be up.

Sequentially, because the smbs are lower.

Yes, with two pressure points one.

One being the the labor that we talked about the 300 incremental crew members coming on board more quickly there and then the other being the.

The sunseeker, it's starting to ramp up their op cost on that so that's about $2 5 million and then the training pipeline associated with that labor that I just mentioned, so that would put slight pressure on that as compared to the third quarter.

Okay. Thank you.

Next question.

<unk> comes from the line of Brandon Glinski of Barclays. Brandon. Your line is now open.

Hey, guys. Thanks for taking the question Greg can we just follow up there I thought I also heard you say that profitability could be better in the fourth quarter or was that a comment backwards looking sorry, I just wanted to clarify that.

Sequentially I think profitability, we expect to be higher in the fourth quarter as compared to the third quarter. That's based on the revenue guide and capacity guide that we put out there and then we just kind of walk through the framework on the costs.

Okay, and then if I'm hearing you correctly next year Youre thinking CASM can be close to 19 levels. It sounds like maybe if you didn't have disruptions you could be targeting something lower and is that just.

<unk> driven.

Yes.

We certainly expect that we're not going to have these disruptions next year. So that's not included in that number that I talked about the six 5%.

Think you will see some benefit.

If there is an increase in capacity, but we're not planning on that we're planning on the low double digits and thats. The number I provided but however, if you do increase that would take that up slightly I think for every two percentage points increase in ASM, that's worth about <unk> zero cents of CASM ex if you will but.

But yes, I think the short answer is we do expect right now where we sit based on the capacity guidance that directional guidance, we put out there that we could be roughly six five cents in 2022 CASM ex.

Okay I appreciate that if I can just sneak in one more strategic question I guess, how do you guys.

The third party travel sales the ramp up that you're seeing there.

Compare that to the strategy with sunseeker.

Are these complementary to one another and should we be thinking. These are both avenues of growth that you could be looking at other property development opportunities in the future as well.

I appreciate it.

Sure I'll start there Scott the Angelo here Theres certainly complementary.

Sunseeker as it stands today is in constant Gordon Thats one of right.

120, some odd places you go out and we want to sell a hotel and the other 119, let's say so by and large they steer clear of each other I think over time and I'll, let John Redmond speak to this.

And as there is an asset light play that gets a lot of these properties that belong to other major brands to say, Hey, I want the sunseeker name on my hotel and by the way I wanted to Sunseeker restaurant brands in there.

And then one by one we're able to steer our turn on or off.

Any given product that we sell so we can keep the lanes, if you will nice and clear.

In addition to what Scott said when you look at sunseeker beyond the Standalone opportunities, which are which are obvious.

Synergy there is you've got a load factor impact on the airline with the sunseeker being opened down there it's kind of like when you look at Orlando or Las Vegas, and what happens with the demand in these markets with the products. They have here so.

So there is the opportunity there as well as credit card opportunities sign ups et cetera, I mean, Scott.

Some amazing sign-up activity, we're getting now but once you open for resort and the additional opportunities you can drive as a credit card. So those are two major synergy opportunities you can see offer resort as well.

I don't know.

There is another part of your question I may have missed I'm sorry.

No I think you guys. Okay. Thank you okay.

Next question comes from the line of Andrew The Dora of Bank of America. Andrew Your line is now open.

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

Guess Maury bigger picture here right.

You've built an airline that generates good returns <unk>.

<unk> been focused on buying used aircraft.

<unk> deals on spare parts like you talked about earlier with sunseeker and the budget increases and everything that we're seeing in the construction market.

Spend here and at what point does the budget get too much and you decide to either stop or change plans here.

Broke up a little bit there, Andrew I think you're asking.

Would we stop building sunseeker, if it got too expensive. That's your question, yes, that's right and I've given you a return you built such an airline generating pretty strong returns at what point does the budget just get too much that you can maybe.

Change direction, a little bit.

Based on what we know now it's certainly not even close to that the opportunity down there what we saw this spring.

Just to Florida, and everything else leisure demand you heard my comments that everybody's.

With leisure southwest now is half of their flights touching Florida everyday Florida.

Lake Wobegone, it's where people want to go.

We couldnt be in a better place.

Okay.

I guess drew.

Revenue.

Revenue will conquer any budget increases here.

Okay.

No.

I guess drew I think you gave the the off peak ASM commentary about what 23% or so in <unk>.

But we.

We've been hearing a lot about kind of the <unk> peak versus off peak environment I've been getting a lot of fare sale emails from a lot of different airlines of late can you maybe talk.

Maybe quantify what that gap is between peak and off peak can you maybe give us some sense on sort of where Thanksgiving Thanksgiving week is booking up right now versus say, maybe first half of November anything to try to help triangulate what that differences between those peak versus off peak times.

Sure I can maybe take us at a high level, but I don't know that youll have to go to the answer that youre looking for here, but.

Ballpark Youre, probably looking at your Thanksgiving slides running somewhere at 33% higher revenue per flight than you would've northern.

Earlier in November.

And I expect that will grow a little bit by the time departures head, so theres a pretty sizable gap.

Operator are you still there.

Sure Andrew.

Yes should we foresee then the next question.

Yes.

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

Good afternoon, everyone. Thanks for your time.

Hmm.

Kind of a multipart question on the third party great to see that strength, continuing I guess.

Scott or too, but can you walk us through how third party per Pax was up significantly when rental car days in hotel room nights are down so materially is that just pricing.

And over 100% of the increase co brand driven.

Today's pricing is that driven by lower supply of these products or is there something different about your partnerships now than the 2019, thanks for that.

You bet. This is Scott I'll start and drew <unk>.

So certainly.

The lion's share of it is co brand and the continued surge that we've mentioned over the last two quarters. There. However rental car revenue is also up materially and that is.

Average daily rate.

I'm not going to sit here is up about 50%.

Versus 2019 levels up of course, lower rental days, but that is.

Our supply demand thanks.

And then those are the main drivers right now.

And last time, we have identified a lot of.

Technicals.

<unk> solves for increasing.

Throughput for our hotel.

Right now you may recall that for every 15 hotels that get put in a shopping card only one person checks out with them.

But there's a variety of things that otas and hotels at their own site can do that.

We will be able to do that we expect.

<unk> unlocked that Bud co brand and then rental car based not on.

Dave but on price per day are the big drivers there, yes, not a lot to add here, we talked about it a little bit in the July call and it's part of the thesis for why we thought fall would actually have a bit of a higher floor because of.

Wear daily rates were on both hotels at railcars kind of pushing some people out of.

The high price summer and into the fall now with the adult expect that didn't manifest, but the underlying piece of high margin railcars still.

Persevering through the entire quarter and probably into the foreseeable future until inventory right sizing.

Let me let me just give some background overview. This was a long term relationship with enterprise that started in 2005.

And we're the only carrier carrier I know in fact, we sell more than virtually every other airline if not the most and this kind of space.

We do that because we're so tightly integrated with the enterprise is a good chunk of it and so their pricing engine is able to drive our pricing. There is no manual activities. So I think we are.

Abstention <unk> ahead of the industry.

Your line side that has an offering cars and putting packages together that are very seamless and with the best opportunity to maximize revenues and you're seeing that with unit revenues today Youre seeing car I'm sure if youre going out to buy a car youre seeing sticker price plus 10000 same things flowing through in the railcar side.

Yeah, it's remarkable.

Maybe just a quick one on a little bit of a follow up to <unk> question on the sunseeker budget.

Just on the Catholic financing closed on.

In the case of budget moves around it sounds like you could maybe draw lessons.

350, but correct me if I'm wrong do you also have the ability to upsize that agreement in the case the budget does increase thanks.

I'll take that one.

We don't anticipate.

Having to go back with castle, we haven't had any conversations with them about upsizing, nor does the existing agreement provide for being able to upsize. It having said that we don't see if a budget.

North of what we expected to be a significant dollar amount, which is beyond our capability to finance. We're in a very liquid position as you know we're in great shape. It's not like this budget is going to run but passed us by hundreds of millions, we're talking or looking at numbers like that as I mentioned before it could be.

10, or 15%, but we're not hearing or seeing or experiencing anything beyond those types of.

Percentages, so we don't see anything like that ever materializing going forward.

Okay. So would that most likely just come out of cash on hand, or you look to do another financing deal. Thanks, Thanks for that extra one.

We would just look at that as being something that comes out of cash on hand.

Great. Thanks.

Yeah.

Next question comes from the line of Shannon Doherty Deutsche Bank Shannon. Your line is now open.

Oh, Hey, it's Mike Lindenberg here.

Asking a question on behalf of Shannon.

Excellent.

Brian.

Finally, the heavier Michael XOMA too soon.

[laughter] I'm getting ready to retire Maury and go work for you.

Alright.

Okay.

This is actually John on your.

The point about the.

CCAR opening March I guess, you said first quarter, 2023, and youre going to start selling.

First quarter of 2022 up when I kind of look at you know lesions schedule. You takes you typically sort of sell out I don't know six seven months 200, 220 days or so <unk> historically been a standard are you planning to open and just sell hotel resort night and not.

Bundle with the airline piece are you considering maybe extending the.

The schedule for Allegiant and selling out 300, 330, maybe even beyond this year I think we're seeing that with frontier in some countries.

We're not.

Drew and I in the past this is before all utilities pandemic stuff, we had conversations regarding that and we know it's an opportunity and it's something that we could explore.

It's not a requirement frontier.

Not a requirement for us to go on sale. So if we wanted to go on sale is Atlanta only product if you will without the ability to package.

There, we would definitely we would definitely do that.

Yes.

Our quite as far as we would like to be in more rate historically been so what we're trying to push that back further out to that 10 to 11 months window.

I expect we'll be able to get there in the next year, So I would say without consulting.

Sure.

But I expect we'll be pushing back out further than we have over the last 18 to 24 months. One other thing I would add because we're also exploring tactics like this and major sporting events and music events that may be.

We sold <unk>.

Six 912 months in advance.

At the time of buying that Theres a lot of interest I can tell you from our partners in those areas of having one in effect would be.

Credit might say, if you get an F&B credit when you book a hotel room well in this case when you book a hotel room 12 months out at Sunseeker, you're getting and Allegiant flight credit that as you get closer to year stay and that scheduled out that drives you back to Allegiant Dot com to book your flight at that time. So there is a variety of ways to make the.

A connection versus needing to have both the hotel inventory and the flight schedule and perfect zinc.

Hi, Ken.

Well one of the thing that we're showing 40 to 50 million emails a week out to our audience. So the <unk>.

<unk> of the direct to consumer is going to come into play a big time here, while the airplanes are good.

We've just seen it over and over and all the new hotels here in Vegas, They get to love right out of the box. So it's going to be I'm, not saying, we won't use the airlines I don't know that we have to we certainly don't have to have an airline in my opinion no.

To fill this thing up.

During the first 12 months to 24 months and beyond.

Yes look and I know you guys have probably better than I, but I know John had mentioned the opportunity to build load factor points and I think that one of the things. We do find interesting is that when you go very far out and people want to have everything settled that in many cases, you know the way the pricing curve as you'd think fares hurt a lot.

Further out and you are the lower they are but when you go out call. It a year or more what we'll see is that for the planners youll get a better fair whether it's for the college at the college graduation, weddings, etcetera, and so you may be able to tap into that with the exception being that if youre in a situation that's inflationary and youre concerned.

Maybe input costs being a lot higher down the road, that's where I think you could get hurt but.

But I think getting that on the books and allowing people to plan that far out.

See a nice nice build thereof.

Revenue in load factor.

Thank you guys.

We don't disagree with you at all I think we always hesitate to take a step back and remember is.

2023 won't be the only year, where operating the hotel. So we know it's going to be a transitory year, where we're probably going to get more land only transactions. Then then package type transactions, but as you get into 'twenty four for the back end of 'twenty three moving into 'twenty four and out there is more traction.

The brand with the awareness I mean, thats when the package activity will accelerate.

It was not something that we ever looked at as being an absolute requirement or necessary to fill a hotel.

Of this lag we know it's something that it's part of our longer term strategy, but not a requirement for first year of operations.

Okay, Great and then just a follow up I know this is.

As a strategic one here and I'm going to make it quick.

When the <unk> came out with kind of a new ruling with respect to Newark I thought it was very interesting that you guys were at least on record and maybe I misheard, but very quick to say, we're not interested in I think about your even your own trade group talking about carriers like yourself, not having opportunities to get into airports.

That are congested, whether it's new York, Laguardia and DCA and you could argue would make the point that's an expensive airport top rate from on one hand on the other hand, you're in the airport and you've done pretty well and you've done well in airports like la <unk> and others I'm. Just curious why you went out on record and it seemed like it was pretty quick to say, we're not interested in again, maybe I misheard.

Hey, Michael its Christine.

Hey, Chris.

So the main reason that we came out really quick on that was just with the size of Brazil.

It wasn't something that we'd be able to pick up and then to operate in a timely fashion. So we have worked with our trade group on maybe other options for that but for such a large swath all at once it just was not.

It wasn't going to work for US then we wouldn't be able to fulfill the requirements.

Fair enough. Thanks Christian thanks, everyone.

That's helpful.

Okay.

Yes.

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

Thank you.

The kind of square Scott Angelo.

The commentary around low cost customer acquisitions with the $22 million you spent on sales and marketing.

Is up about 25% from pre Covid with passenger counts only up about two I understand the whole ecosystem. The card acquisitions were up in the rental cars and all that stuff that's great, but I guess the real question is should I think about the sales and marketing line item as being a $100 million annual cost item starting next year just going forward.

No. It's definitely not the latter there are a couple of things you mentioned in there and really call out incentives associated with card holder.

Cardholder sign ups or certainly in there there absolutely are some increased costs.

We.

I think it came out of the pandemic and battled both otas and certain competitors in and around paid search.

<unk>.

And Theres also some one time things just associated with production items unrelated.

And advertising and marketing, but as a general rule no that shouldnt necessarily be just straight lined in there got it alright. Thank you and then.

When you think about the operational challenges Maury that you guys. Just had how do you think about this once the once sunseeker opens.

Yes.

They're going to be a requirement to be number one number two and the operations relative to your peers every single months, because youre not just asking for someone to give you their business because you have the lowest fare.

Asking for someone to give you their entire vacation.

Have a bad experience in the flight they may not book Sunseeker again, so have you thought about the importance of being.

The best in the industry on the ops once sunseeker opens in any sort of expense that might have to come with that.

Yes, no we've definitely considered it.

Connor.

I think what youre seeing in the industry and if you go back and look at 2019 numbers.

Whole industry was still tightly bunched as far as reliability and on time I mean, the whole group was like 80, 889% on time I think we've in 2014 and you just everybody was running a 99 mid high 99 reliability factor. So the industry can do it and we were right there.

Ascribe to perhaps a delta.

It would be the best on time, because a lot of our two times a week markets. We don't want to leave people. So we may run a touch late historically there but.

We certainly have to have a good product in today's.

Social media World.

Putting aside sunseeker, you just can't afford to.

I have bad excursions, and bad flights and things like that because.

And so irrespective of sunseeker, we need a good solid operation and you know what.

Hunter, it's cheaper to run a good operation than it is a bad one.

At the end of the day.

The investments you do what you have to do in <unk>.

When youre growing as you can always have a few extra people in there because personnel seem to be the.

The problem child these days.

All the different <unk>.

Aspects of pilots in.

Just the whole world.

And transportation truck drivers anything involved with logistics or whatever is just tough to come by so youre going to have to make investments to stay ahead of that track I don't care, if you're us Delta American United Everybody's going to have personnel issues for the next few years I think so yes, no we're going to run a good operation regardless.

Will it help sunseeker, absolutely, but that's just a good quality product that we think we can get in and once again when you are running.

Unit revenue is 20% better than most of your competitors that gives you a little bit of cover up room to and so the revenue side is really where youre hearing us continuously beat the drum to be better and get more unit revenue in on a flight by flight person by person basis.

Thanks Maury.

Yes.

Next question comes from the line of Chris <unk> of Susquehanna International Group, Chris Your line is now open.

Thanks for taking my questions. So I realize you're still setting our plans for next year, but as we think about.

Youre routes and what's happening here is the pressures in Q.

Labor and the need to stabilize the network.

Should we expect a sort of.

At this point is the idea to.

To grow year routes perhaps.

Historically, you've done the low teens.

<unk> got routes with or without competition, but just the idea at this point given these pressures here fuel labor and stabilizing and that work is the idea to.

Grow the network in a similar fashion that we've seen pre pandemic or is it about spilling out the schedule.

And or is it a little bit of both.

Sure Yes.

It will be a little bit of both as it traditionally is.

Our planning process revolves around trying to achieve margin targets that slowed a little bit depending on.

On the strength of the period.

I would say that we're probably we'll probably talk a little bit more toward filling out the schedule and right sizing existing than new over the first part of 'twenty two into the summer.

And Thats just based on decisions, we have to make here in the short term, but by the time against the back half.

Could that can convert one of the main staples here is flexibility and we will be making real time calls on this into into the first part of next year. So the answer I gave you today it could very well change by the end of January based on on housing environment shifting.

Okay and the second question. So you described I think in your prepared remarks, as running a well oiled machine here.

But as you are coming out of.

The.

Sure.

Pressures here in the network and Youre looking to stabilize operations relative to what you've done in the past, which has been good is there what have you learned here and what do you think could ultimately carryforward.

Into 2022, 20 screening and recovery.

Where we could see.

I think a more efficient airline or perhaps a tailwind ultimately to CASM.

CASM ex.

Yeah.

Well first and foremost NFL to people who are on the airplanes and.

Make sure they are maintained at the gate on time.

You also had the what.

What I call the operational overload or leisure overload, we faced a lot of.

Station problems PSA Blackcomb TSA people.

Our Destin station had 10 pounds for a five pound bag.

Southwest showed up and put 12 flights and so on.

<unk>.

That was it was just a lot of.

Dislocation.

We're getting we're back we're getting so we can get a handle on this but our first job in the next 90 days 120 days to get the personnel, we need and we know that we can show up every day and fly those airplanes without missing.

Other people to get the job done Scott.

I think the only thing I'll add is.

We could've taken a hard line approach.

Certain especially when the Delta hit pretty hard I mean, we are losing 28 points of on time performance uncontrollable.

A lot of people at the gate.

We could've done a lot of things and I think some of our peers took a harder line than we did.

Some of the market three five we took we've take the delay in order to get more people on the plane, but its going to push downstream issues such as crews timing out.

But yes, I think I think in general you need stable labor.

You need to know people can show up they are not going to be on leave theyre not going to be impacted by more COVID-19 related issues. It's just going to take a long time.

Airlines aren't designed to start and stuff like this and ultimately that's what you are seeing.

Okay, Alright, thank you for the time.

Thank you.

And there are no further questions at this time Maury you may continue.

Thank you all very much appreciate your time and we'll talk to you in the.

End of this quarter sometime in January early February Thank you again.

Thank you so much to our presenters and to everyone who participated this concludes today's conference call. You may now disconnect have a great thing.

Yes.

Okay.

Yes.

[music].

Okay.

[music].

Yes.

Sure.

Thanks.

Okay.

[music].

Yeah.

Yes.

Sure.

[music].

Good afternoon, everyone and welcome to the Q3 2021 Allegiant travel company earnings Conference call.

At this time all participants are in a listen only mode.

Later, well conduct a question and answer session.

Truck fleets will follow at that time.

If anyone could require any assistance during the conference you May press Star zero.

I would now like to turn the conference over to your host Ms.

Sherri bullshit.

P and Chief Marketing Officer drew wells, our SVP of revenue and planning and a handful of others to help answer. Your question. We will start the call with commentary and then open it up to 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 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.

We 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 Maury.

Thank you Sherry and good afternoon, everyone. Thank you for joining US again, we had another very good quarter as we saw loads and yields improve versus earlier. This year in Q1 and two are scheduled service Asm's increased 17% this year versus the same quarter in 2019.

As I mentioned in our release, we are the only carrier this year, but I am aware of who is both growing their system compared to $2 90 in 2019 and been profitable and.

Subsequently this is.

This was a substantial increase versus the sequential four 5% growth in Q2, and three 1% growth in Q1.

While our third quarter's results were profitable they were impacted by our operational challenges. This spring many in the industry. We're revving their motors for the drag race to restart their airlines.

A common theme was flag planting and get there before someone else.

Majors had to refocus much of their flying to leisure oriented oriented destinations given the lack of business and international passengers and we had a low cost carriers were feeling our oats.

Well and looking to get out and plan from flags.

We all were looking to get out of the gates quickly and state the new turf, regardless the focus on leisure traffic can be associated airports by all concerned.

As a result, the operational demands on leisure destination airports, particularly in Florida, where substantial comparatively.

Business focused airports and most of your larger NFL cities, we're operating at a fraction of their traditional volumes some of our destination airports had operational increases of up to 100% compared to 2020.

2019, respectively.

This added leisure flight activity.

Just had a leisure flight activity was hampered by a difficult labor environment as well.

Airports with these increases in activity does not have the necessary personnel for the substantial growth in <unk>.

Australia is an example of this unprecedented leisure effect with southwest comments about their recent operational problems tied to ATC issues in Florida, stating that half of their flights now touch Florida. Each day. This amazing evolution of of the network of one of the major carriers in the U S is indicative of the substantial shift.

And where airplanes were flying this past summer.

Label for this phenomena is leisure destination overload.

As I said, we were not immune to the challenges the industry was experiencing this past summer.

Over the past few years, we have implemented a generous compensation program, if and when we interrupted customers trip. Our approach in this advantage to provide a better than average amount of TLC to help make takes the staying out of this bad situation.

If we were to add back these interrupted trip costs and other onetime associated operational expenses. Our unit cost would have been on the Mark Greg will have more comments in a few minutes.

You have heard every carrier so far comment on increasing fuel prices. Some carriers are still hedging but understand this will only provide short term relief capacity reductions are the only remedy long term for fuel price increases.

We have firsthand knowledge in this area in 2008 in the first half of the year, we made substantial capacity cuts to offset the then skyrocketing energy costs and while we plan on growing this coming year by at least low double digit percentages, increasing fuel costs could put a damper on this growth.

As we told you repeatedly our models flexibility allows us to flex up and down better than others.

We have shown a consistent ability to grow over the years, but we've also been able to quickly retreat if needed as we did in early 2008 in last year's pandemic.

I am excited about where we're at we're in excellent shape, our balance sheet has improved substantially during these difficult times the quarter end, we had over $1 $1 billion of cash and only $500 million of net debt.

We've restarted sunseeker and we recently completed a $350 million financing line to finish the construction and John will have some additional comments.

This is all part of our Allegiant two <unk> strategy that we've talked about previously Scott the agile will have further comments as well.

We are continuing our climb back from the depths of the pandemic and this climb out has not been a straight line has been complicated by the volatility of the labor markets as well as Covid related absences that we experienced this past summer, but we are seeing demand continue to increase nicely in the past few months in spite of the Delta variant outbreak.

We were the first to profitability from Covid, our model and our noncompetitive routes structure continue to be industry leaders and I believe 2022, we'll continue this return to normalcy and we will lead the industry out of this abyss over the past year and a half.

Lastly, as usual I want to thank our team members, who have been the difference maker in our success through the years and now is no different.

They have been warriors on the frontline this entire times in the past year and a half consistently transporting our passengers' day in and day out to their destinations. Thank you to everyone.

John.

Thank you very much Maury and good afternoon, everyone like Maury I'd like to take this opportunity to thank all of our incredible team members.

Go above and beyond every day to help this company move forward out of this pandemic.

The challenges brought on by the pandemic Shockwave has led to supply chain upheaval and labor shortages, creating operational challenges throughout the company none of us have ever seen or experienced before.

All rising to the occasion, and we are getting through it as painful as it may be again I am thankful for your continued efforts and understanding.

Given these unprecedented challenges, we still had a great financial quarter after adjusting for one off costs associated with irregular ops.

As we adjust to and fix these challenges our results will continue to improve our revenue is strengthening exceeding Q3, 19, and we expect Q4 to exceed 2019 Q4 as well.

In regards to the Sunseeker here are a couple of updates.

As previously announced the $350 million financing transaction with Castle peak has been completed we expect the first 175 million tranche to fund in the next couple of days.

<unk> has been a great partner and Allegiant travel looks forward to a long term relationship.

Construction has resumed on the resort was approximately 250 people working on the project today.

<unk> on the golf course has resumed as well we expect these projects to be completed in Q1 2023.

The hotel towers should be topped off by the end of this year. The two suite towers as expected will top off in Q1 of 'twenty two.

We expect to begin taking reservations in Q1 of 'twenty two as well.

And also beginning Q1 'twenty two we will resume segment reporting so on sunseeker data separately as we did in the past pre pandemic.

As I've done on past earnings calls I thought it would be helpful to provide some directional data points to help you understand how we see things are for full year 2021.

All of these data point in time, providing are on an adjusted basis, which exclude COVID-19 related special charges.

The net benefit from the payroll support programs and bonus accruals.

Furthermore, all data points provided assumes fuel at $2 17, a gallon for the full year.

EBITDA is expected to be in excess of $275 million with a margin of around 17%.

Also would expect fully diluted EPS in excess of $1 50 a share.

Again these are all on an adjusted basis and.

In addition to the above we expect year end cash balance of around one 3 billion and net debt of around $300 million and.

And Greg will provide more detail around these data points in his commentary.

With that I will turn it over to Scott Sheldon.

Thank you John and good afternoon, everyone, perhaps a comment or two on our third quarter operations.

Without stating the obvious our operational results.

And corresponding headwinds were similar to that of our industry peers, who have released during this earnings cycle from a capacity standpoint, we had perhaps one of the more ambitious summer schedules in the domestic U S market.

Third quarter 'twenty, one departures were scheduled to be up.

Nearly 17% year over two years average aircraft growth up nearly 20% and destination and rent growth were expected to be up 25% and 29% respectively.

Despite those added complexities, we were seeing enough improvement in the operating environment to stay the course as we exited June and we felt we had all the necessary complement of flight crews and frontline employees to execute the back half of our summer schedule on.

Unfortunately that Delta variant surge in late July and early August was simply too much to recover and we took an abnormally high number of cancellations. In addition, our core operating performance metrics were down as compared to historical trends, but we are starting to see those trend up.

For a number of higher risk operational areas. Our ops team continues to work with planning to ensure we establish appropriate buffers to execute a more consistent schedule to help mitigate passenger disruptions undoubtedly mine labor and MRO supply chain challenges are the number one and two focus areas.

As we look to support our March 'twenty two flying.

One quick comment on labor before I sign off I'd like to congratulate all of our maintenance technicians maintenance control staff quality in stores personnel represented by the IGT for ratifying. The first collective bargaining agreement disagreement helps make us competitive in the marketplace.

As we look to fill much needed positions for our 2000 excuse me 2022 scheduled.

No. This is a long time coming and was disrupted by our 2020 COVID-19 pause, but I very much appreciate everyone's effort involved to get this to the finish line and in closing I'd like to thank all of our team members across the network for their outstanding service and professionalism in the face of our latest Delta variant Spike your efforts have been tremendous.

Our team members and partners are the backbone in the face of our organization and their unwavering commitment and loyalty to our consumers is why our organization has and will continue to be successful and with that I'll turn it over to Scott the Anglo Thanks, Scott from a marketing perspective, despite the headwinds we've called out the Allegiant brand continued to shine.

Attracting more visitors to allegiant dot com and more bookings among both first time and repeat customers than in any third quarter in our history.

In late August while the Delta Varian drove customer sentiment as we measure on a weekly tracking survey to its lowest level since early January it essentially returned to its highest level since mid July and while the delta variant negatively impacted bookings during August and September the degree of that negative impact was far more mark.

Than that seen at similar customer sentiment levels during 2020, and the beginning of this year simply put allegiant customer demand is showing increased resiliency. Despite continued bumps along the pandemic road to recovery.

<unk> transactions increased at five times the rate of web visits points to Allegiant heightened brand awareness increased marketing efficacy at attracting the right visitors to our site and enhanced web and App experience, which makes it easier for those visitors to find and buy what they want.

All of these enhancements again, combining to attract and convert more new and more returning customers and the lowest cost ways.

Specifically, our lowest cost channels that is customers coming to us via our mobile app or by directly entering the allegiant dot com URL or by clicking on a link and one of the $50 million targeted E. Mails, we send each week now account for 80% of total visits to our Legion dot com and that.

Nearly 20% more website visitors than they did in 2019.

And those visitors translated into a healthy balance of both first time and repeat allegiant customer bookings bookings from first time customers saw nearly two 5% increase and those from repeat customers.

Nearly 3% increase compared to 2019.

We also continued to achieve deeper levels of customer engagement across.

Everything we offer at Allegiant Dot com.

Greater portion of customers are spending more of their leisure wallet at a lesion dot com on products beyond just air travel.

The continued growth in our asset light third party product revenue stream was aided not only by the web and App redesign launched earlier this year, but also by the introduction of our first ever non credit card loyalty program always rewards and enhancements to our co brand credit card acquisition approach that launched during this past quarter.

The Allegiant World Mastercard, which has now been branded under the always rewards umbrella was once again voted the top airline co brand credit card in the nation for the third consecutive year in USA today's readers' choice Awards.

You may recall that our second quarter saw the number one and then number three best months, a new cardholder acquisition and the program's history and this quarter. Despite various headwinds in the traditional decline of leisure travel in early fall, we achieved the number four and number five best months of New Cardholder acquisition in the program.

History.

In total new card sign ups in the quarter were up by more than 12% versus 2019.

Contributing to the continued growth in new card holders was the introduction of instinct credit enrollment in our mobile App. Historically this has been the top performing way that we acquire new cardholders on our website. So we expanded the functionality to our mobile app for 20% of our bookings are now made and the results are exceeding our.

Patients.

Building off the success of our co brand credit card simple popular point, earning and redemption model and combining that with inspiration from winning tech forward consumer friendly programs like Apple card and target circle rewards, we launched always rewards this past quarter.

These loyalty programs combined with our redesigned website and mobile app and soon to be joined by other technology enhancements in the upcoming year are all playing a meaningful role in helping us sell beyond the aircraft and we've allegiant enter the most important and highest margin aspects of leisure travel, including third party distribution of hotel.

Rental car and even sports and entertainment events and to that end Allegiant Stadium. In addition to drawing more than 60 million viewers across live rice like broadcast during this season's first for gains at the stadium as well as driving web visits and bookings up by as much as 39%.

<unk> above 2019 levels on the days off and after these games has now joined our portfolio of third party products as the NFL season kicked off we launched Allegiant Stadium travel packages that include air travel hotel stay and game tickets.

While these packages don't represent a material revenue driver they do serve as a high profile way to showcase our ability to sell beyond the aircraft and to that point for 80% of Allegiant Stadium package customers. It's the first time, they had ever booked a hotel through Allegiant dot com and for nearly one third.

These customers. It's the first time, they've flown to Las Vegas on a Legion.

Beyond the wildly positive impact were seeing directly from this partnership Allegiant Stadium has become a crown jewel of sorts for broader nationwide Las Vegas advertising that the destination itself is doing Allegiant stadium is central to the destinations claim that Las Vegas is now the entertainment and sports capital.

<unk> of the world. Thanks in large part to Allegiant Stadium, elevating Las Vegas as the destination to what they adopt the greatest arena on Earth.

In summary, the Allegiant brand is thriving share headwinds exist, but they will ultimately subside and as they do we believe we are best positioned with the increased demand we continue to see from new and repeat customers for allegiance brand of affordable accessible leisure travel to maximize our share.

Not only are there non stop leisure air travel, but also of their spending on the increasing array of leisure products, we're able to offer at Allegiant dot com and with that I'll pass it over to Joe. Thank.

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

I'm immensely pleased with the third quarter's revenue results total revenue came in at five 3% higher than <unk> 2019 on scheduled service ASM growth of 17%.

We are among the first carriers to restore revenues above 2019 levels and likely the first U S carrier to do so on the scheduled service side.

We hit the ground running with the July load factor over 80% and finished with a pandemic Beth 76, 6% load factor for the quarter.

As Larry performance once again led the charge for us as bundled and the redesigned website impact on take rates continue to generate positive results.

The RM team continues to do our marketable job handling the complex task of balancing loads and yields on a market level EBIT as the environment changes rapidly.

As is always the case with the bulk of ASM in the first half of the quarter before we dramatically pull down our schedule for the off peak fall <unk> goes as the summer goes.

This scheduling flexibility is key to our model and the upcoming quarters will continue to put that to the test with rising fuel costs supply chain disruption potential TSA staffing issues and the potential for additional seasonal COVID-19 spikes.

And we will continue to work in lockstep with the organization to maintain this flexibility and ensure enterprise success.

After inaugurating seven routes in the third quarter and several successful hypersthene, an old one and two weekend event specific route.

We'll launch 52, new markets in the fourth quarter was 75% of those connecting the dots between existing Allegiant city.

Despite that we will have a lower percentage of markets in their first 12 months that we previously communicated down roughly four points from the third quarter and one point in the fourth.

Similarly, we expect our fourth quarter growth rates also come in lower than previously communicated and part as we react to rising fuel we plan capacity with a typical cost per gallon buffer of 50.

And for only the third time in the last nearly decade, we've hit or exceeded that buffer.

With that we now expect scheduled service ASM is up 12% to 16% and system ASM of 10% to 14%.

We are positioned similarly today to where we were 12 months ago, So with Thanksgiving, having more revenue on the books today than the same holiday period finished with last year on a considerably higher base.

The booking cadence has research to be inline seasonally adjusted with the peaks of the summer and holiday demand looks quite strong.

The reopening of cross border travel for vaccine travelers starting next month has shown a meaningful impact to our near border airports.

Normally I would be quite bullish on the fourth quarter prospects. However, the seven day average U S. New case count of 70000 is hovering around an eerily similar number to late October 2020 granted on a different trajectory over the past several weeks as such on a bit wary of running away with the excitement of <unk> potential and a built in some expectation of spike related headwinds.

That said I believe we will continue to lead the recovery in our forecasting another positive total revenue quarter, a plus a half to plus 4% and with some positive variance believe we can achieve an 80% booked load factor in both November and December.

As we look to 2022, we have some fairly low comps in the first half of the year and growth was limited to 3% versus 2019 that will provide a catalyst for headline growth and helps set the stage for the rest of the year.

We are still working through June and beyond to ensure we are setting up the company for success in finding the proper balance between growth and operational integrity will.

We will have much more detail to provide in three months time.

With that I'd like to pass over to Greg.

Thank you and good afternoon, everyone.

So on the current tone of our business for the third quarter, we reported adjusted earnings per share of <unk> 66.

Our second consecutive quarter of positive adjusted net income.

While this quarter's adjusted results fell below initial expectations, we experienced a nonrecurring and unusual irregular operations.

These incidents are not unique to allegiant, nor do we believe they are systemic.

The total cost impact during the third quarter for these elevated <unk> events was around $28 million.

Roughly half of this 28 million was driven by areas such as incremental contract labor supply chain constraints and incremental <unk>.

The other half of our <unk> cost and as Maury teed up related to our compensation program for customers in which we aspire to do more if you take care of them, if we significantly interrupt their trips.

The purpose and intended impact of providing the additional compensation is twofold first and of course to better assist our customers were unusual and difficult circumstances disrupt their plans, but second and equally important to our bigger picture it drives greater accountability to the financial as well as the human impact of flight disruptions by really making its steam for Legion.

Our expected <unk> CASM ex implies a full year 'twenty, one adjusted CASM X at around 2019 levels.

As noted earlier fuel costs continue to rise as we are currently paying $2 50.

<unk> 55 per gallon appeal, a sequential quarterly increase of 35 per gallon. However.

However, even at these elevated fuel costs, we expect our fourth quarter financial results to remain profitable and exceed third quarter's adjusted EPS.

Based on our fuel consumption and increase of 10 cents per gallon fuel equates to roughly 5 million per quarter.

Moving to the balance sheet as of today, we have $1 $2 billion in total cash and improvement from the end of <unk> as earlier. This month, we received the remaining $116 million and our cash and cash from our NOL refund.

And as of today, our net debt is around $400 million a decrease of 60% since the beginning of the pandemic for.

For the full year 'twenty, one we expect to reinvest $240 million back into the airline and increase in our guide by $20 million and this increase is just primarily driven by our strategic parts purchasing initiative along with some other non aircraft capex year.

Looking towards 2022, we are in the mid innings of finalizing our 'twenty two capacity plans and expect to provide an update next time we speak.

We are actually exploring a possible investor days last call in December and we will keep you apprised of status in the coming weeks.

Given the uncertainties with rising fuel labor and supply chain constraints, we intend to establish a baseline of capacity growth for 2022 in the low double digits area and.

And harnessing the unique flexibility of our model, we are confident in our ability to spring up capacity, if and when appropriate.

And this estimates about a $15 million in incremental costs during 'twenty, two when compared to historical staffing levels.

Advancing these hires should greatly aid the quality of our performance by getting team members trained and experienced that as the choppy environment Abates, we expect can actually grow into these incremental heads.

Similarly, we strategically purchased $40 million with spare parts at an average discount of 50% another $20 million of savings and finally for these examples are most carriers in our industry significantly increase their debt during the pandemic. We did not as a result, our full year 'twenty, one interest expense should be around 20% down year over two year.

As a reminder, our fleet plan includes 19 incremental aircraft will be placed into service throughout 2022, bringing our total expected fleet count by the end of the year to 127 of.

These 19 aircraft to be placed in service next year 11 have or will be acquired in 2021 and are already included in that 'twenty, One Capex guide.

Eight aircrafts are slated to close next year of which six have been structured under a capital lease.

As a result of these capital leases are full year 'twenty two committed net aircraft cash capex is expected to be only $55 million.

By year end 2022, more than 50% of our fleet will be comprised of 186 seat aircraft, which compares favorably to 2019 as composition of roughly 25% to 160 aircrafts.

The larger gauge 186 seat aircraft have additional benefit in a rising fuel environment. They are the most efficient in our fleet on an ASM per gallon basis, we expect full year 'twenty two ASM per gallon to increase by 5% year over three year.

At a $2 55 per gallon. This increased efficiency efficiency is worth roughly $30 million in fuel savings compared to 2019 fuel efficiency levels.

And with that we'll open it up to Q&A.

If you have questions at this time. Please press Star then the number one on your tax phone telephone and if your question has been answered or you wish to remove yourself from the queue. You May press the pound key NGO.

We will pause for a moment to compile the <unk> roster.

And first question comes from the line of Savi Smith from Raymond James Savi. Your line is now open.

Hey, good afternoon, everyone.

Just actually a quick question to start with Greg you talked about.

The liquidity right now being a casting right now one point too.

I think the cat guidance is two one point change by the end of the year is there something kind of defend the way of cash building is building in the fourth quarter. This year than past or are there other kind of inputs coming in.

No I don't think theres any other inputs savi.

We're a little bit over $1 $2 billion right now and I think just the influences that were going to build cash through operational cash flow.

And then just.

A little bit more clarity on 22 planning.

So it sounds like the hiring is done for our operations.

Operations levels above the kind of low single digits is that how youre thinking about it and then.

Then you'll kind of grow into it.

Youre comfortable with that operations are you just looking for a little bit more clarity on how you're thinking about hiring and then operating in 2022.

Yes.

<unk>.

Yes, we have.

We have obviously our pipeline is full we hired upwards of 270 pilots and these would sort of dovetail into March peak flying in addition to summer.

We are seeing a little bit of a spike in <unk>.

And attrition.

Particularly on the <unk> side.

Terribly materially.

But I think those sort of numbers would give you low low double digit growth for the summer.

Flight attendants.

That attrition is fairly stable right now.

<unk> is the big one I mean, we were just very very underwater when it came to being competitive and so.

Out of any of the areas, that's probably where we have to catch up the most.

If I may just to clarify the low double digits as what Maury did not low singles, which I think I heard you made these days I just wanted to clarify on that front.

Alright, yes.

No that makes sense. Thank you.

Thanks Savi.

Next question comes from the line of Conor Cunningham.

MTM partners Conor Your line is now open.

Everyone. Thank you.

Just on the budget for Sunseeker I don't think Thats been finalized yet so just curious curious where that may sit today, given all the supply chain issues and inflationary cost pressures I just would think tenants.

It's higher than what you had previously kind of soft guided to which was like I think $5 10 to $5 50. So just curious on where that may set right now or or maybe why you haven't finalized.

In general.

I think.

It's a good point I think we and the rest of the world is experiencing new supply chain disruptions.

I don't think there is an industry that's immune to it our product that is so.

We know that the costs are going to be higher.

We're still working through it.

Exactly how much higher but it could be in the 10% to 15% range on the total project, maybe even slightly higher but I think a lot of that we will understand as we move more into the end of this year and probably into Q3.

So it's not only understanding better the impact of that supply chain disruption on cost, but also on timing.

We were of course pre pandemic, where pace to open April of 'twenty, one now where everything is kind of been thrown into a turmoil in that regard. So it's those two issues both cost and timing that we're working through but as I've mentioned before we know we're going to be over.

We were at five the carrying cost if you will throughout the pandemic took the select $5 10, and now it's just working through the order of magnitude above <unk> 10, but we know it's going to be.

Call. It in the 10, maybe even 15% range and could be slightly higher but it's just too early to give any degree of specificity on what that number will eventually be.

Okay. Okay. That's helpful and then.

Maury I know you talked about the potential of slowing growth to maintain historical fueled a fair ratio that everyone always talks about but with a lot of the other airlines need to bring back capacity and just the satellite <unk> non fuel cost pressures that they're dealing with given no one made any infrastructure changes during the pandemic.

I'm just I'm just curious what gives you the confidence that the industry is going to follow what has historically been a good idea to cut capacity to drive.

I think the risk you run is like new card growth and no one else does.

The reason why I bring it up I just think it's.

Point that basically everyone is struggling with right now so if you could just speak to the high level dynamics that you see playing out in general.

Well you're spot on everybody.

Sitting here today, if they had the.

The decisions I made last December January and February for the summer of 'twenty, one, we'd probably do it differently at times, we were facing 10%, 15% of our personnel and maintenance in our MRO is where we're having our airplanes work worked on they werent in Covid.

Rippled all through the summer.

And so we've got a bit of uncertainty.

In the new organization right now as to what what can we count on Scott.

Scott mentioned labor problems with our maintenance personnel.

Covid issues with them and the different basins, we have going through it so.

We are assessing where the personnel we need to be we're hiring very actively.

The irony of it is I mean, everybody in this business is hiring yet they still haven't gotten back to full capacity. So there is some.

<unk> as to what you have.

Long term.

We've always run.

Run through our own the beat of our own drum first and foremost as you heard Scott to Angela to talk about the quality of our brand and the like is he has really got to be thought out very appropriately.

IRA so just not long term acceptable to us and the irony of it is this industry ran like a Swiss watch in 2019 and now it's almost like we've forgotten how to run on time and deal with interruptions, but.

Our case, we're definitely focused on getting back to a really solid operation.

Something we can count on and that's going to be a short term. The next through the first quarter. We will I think we'll have a good handle on what we're doing as we go into January February March and then we'll reassess growth at that point could we grow more than the low double digits, but.

But do we have to know again, while others may be growing the beauty of our business model is we're still 75%.

Uncompetitive noncompetitive in our route structure and Thats always been the case and we don't see that changing materially so I'd like to get there quicker if we can but we're not going to sacrifice.

Our customers and our own personnel that come with operational problems, but.

As I said in my comments I'm very bullish on the business model and where we're at Scott. These revenues that are coming through these third party sources you guys should really take a look at that stuff thats very meaningful long term repetitive revenue that's going to be.

Very very powerful for us.

I appreciate it thank you.

Next question comes from the line of Dan Mckenzie of Seaport Global Securities. Dan. Your line is now open.

Oh, Hey, Thanks, Good afternoon, guys few questions here going back to the supply chain challenges being the number one number two areas of focus.

Just wondering if you can clarify that a little bit more what is within your control what isn't and what is the level of confidence that the infrastructure is in place to protect.

The operations over the holidays. So I'm, just hoping you can elaborate a little bit more on that.

Let me give an overview and I'll turn it over to Scott.

What are they are certainly supply chain problems for us. The airline is bad I think as construction and I think Jonathan probably say sunseeker is a little more difficult than ours.

At this point the main thing is to make sure. We don't know reschedule the airline and we have the sufficient pilots flight attendants maintenance can do their job.

So we're very focused on that for the next 60 days Scott.

Yes.

We'll get through the holidays, we have a couple of sales that.

Might bleed into Thanksgiving, but when you think about I think about 'twenty two with 19 inductions were going to have 24 heavy maintenance events a lot of the materials that are sourced as is.

<unk> is coming from outside the country, we operate out of six <unk> and a number of different countries.

I mean, the list is long when you think about each one has its own little corner case.

We're definitely trying to simplify is given.

Our execution through the first nine months, if you guys remember the first first quarter hit us as we're trying to wait claims up MRO as we're scrambling to get their operations back online. So we're trying to have either build in additional buffers.

Thats.

That will just allow us to make sure we have the iron that we need.

And then Greg and Bj's teams are trying to get ahead as much as I can on the supply chain.

We have a bunch of my tax conversion.

Thats correct.

Everything should be on site onsite our priority right now that was a big piece is just getting Airbus kits for our Max tax conversions.

We're opening up some of these claims.

And a larger structural package that we're finding a little bit of corrosion like anything can really increase the spam, but it's a very much a high priority for us to sort of building buffers.

Just to finish that everybody when we came into the first quarter. We felt we were back in 2019 demand was back we just turn on the switch and it all runs like we thought it would.

All the variables death by 1000 cuts. So I think everybody is probably walking around on egg shells trying to make sure they don't over promise and under deliver.

So we're going to pull it back accordingly, and variables, we can control, we obviously will but.

What we're learning as we go.

And Dan its Greg I May just add one more comment to that on the supply chain really around parts and alike and thats.

And now we have a mantra is we want to make sure that the right parts and tools at the right place at the right time.

Just given the constraints that we experienced this past year that wasn't always the case, but we have been proactively in for some time now trying to get ahead of that we've talked about the strategic parts initiative, where we've gone out and we acquired $20 million. We spent 20 million for $40 million worth of parts and getting those and we increased a little bit more on our Capex guide this year to continue to try and get ahead. So that we can be.

Support the operations and increased like Max levels from an inventory this was bearing perspective.

Got it.

Yes, thanks for that comprehensive answer Thats very helpful.

And then I guess second question here drew.

From what I can see it looks like over 50% of the overall capacity in at least November and December comes from holiday flying but.

Please correct me on that I guess, a couple of questions in the fourth quarter here what percent of the fine is peak versus off peak.

And then just with respect to the revenue forecast what have you factored in.

Dynamic by tens of millions of dollars.

Yes, you're spot on with the last part there in the fourth quarter.

My peers would agree that's one of the hardest to forecast snow Backloaded.

Much more time and variability built into that particularly when there are environmental concerns like we see today.

Im not building in upside for children being vaccinated at this point, Alex I will take that upside as it comes in as we see it kind of be effective in prevailing so thats not something im currently contemplating.

In terms of peak and off peak, if youre just thinking day of week.

We're looking about 23% of our ASM as being on off peak days.

What I would caution is that an off peak day in the heart of Christmas is not the same as an off peak day in October for example, so there there is a little bit of a probably misleading in that as it pertains to holiday in particular.

Okay very good thanks for the time you guys.

Thanks, Dan.

Next question comes from the line of Helane Becker of Cowen Helane. Your line is now open.

Thanks, very much hi, everybody. Thank you very much for your time, Sir so not sure who this is for but as you think about Inducting aircraft into the network. I think you said 19 aircraft are coming in next year and I thought it was 24 aircrafts going into heavy maintenance.

How should we think about.

On the level of aircraft that Youre comfortable Inducting I mean, youre getting ahead of it on hiring I guess.

What are you forecasting for total attrition for next year.

Hailing I Should've mentioned this and BJ just reminded me of the 19 inductions, all but two are coming from FAA trace which makes the induction that much easier.

Obviously labor yards.

That's really the these are less complex reductions that we would historically otherwise have.

And Scott, maybe I can add to that we setup Melbourne for introduction facility, where we just went out and this is a facility that we have helane that.

100% focused on production aircraft nose to tail to that all time and so we this was unique when we went out and did this earlier this year in anticipation to make sure that for the introduction pipelines and these aircraft that we have coming that we we have some buffers built in there.

Gotcha and then on the.

Labor contract that was announced today I think you said that the cost increase associated with that is included in the guidance, but Ken if it's not can you just give us some help on that one and it may not be meaningful I don't remember how many people that contract covers.

Yes, Helane its Greg. It is included in the kind of directional guidance that we provided and.

The way I guess I would frame it is that maintenance makes up roughly 10% to 12% of our salary and wages.

And the contracts worth roughly $12 million per year, it's a five year contract and then it's a little bit frontloaded.

Okay.

Are you, having actually are you having to pay signing bonuses to attract people.

Yes.

Alright.

That's kind of what I thought.

No that's I'm hearing that okay, Tim Thanks for your help.

Thanks Elena.

Next question comes from the line of Duane <unk> Evercore ISI Duane Your line is now open.

Hey, thanks.

Just with respect to the sequential.

Move in chasm from <unk> to <unk> <unk>.

It was more than just Iraq that impacted you in <unk> with the sub optimal operation so.

How much of that do you get back or are you baking in getting back in the fourth quarter.

And then I apologize if you mentioned it I know you've given us a lana.

Qualitative.

Guidance here, but on that low double digit on that low double digit capacity how are you thinking about CASM.

X year over year.

Hey, Duane it's Greg.

Ill.

I'll knock off the second part of your question first and I think on that low double digits, we think that our CASM ex to be around 2019 levels. So six five.

And then sequential costs and perhaps it's worth excluding Iraq, because we don't anticipate those to be at the same level.

It's pretty close on a gross basis keep in mind I think fourth quarter ASM are down a couple of percentage points versus third quarter. So you've got a little bit of pressure there.

And then there is some headwinds in a couple of different areas pilot training. So that other line item you'll have some pilot training coming through there so that put a little bit of pressure on that along with sunseeker getting ramped up and some some op expense. There I think we've talked about it on a quarterly basis, we think sunseeker op expenses roughly to $2 5 million.

And then with the hiring to we mentioned those 300 incremental.

Frontline employees trying to bring those in and things like that so I think that too would add a little bit but on off I think roughly it will be slightly on a gross basis fourth quarter higher than third quarter.

But then just take into account the reduction in ASM.

Okay.

I can follow up with you.

Offline, maybe you lost me a little bit.

The.

Yes.

The punchline.

Ex Iraq, you think CASM will be up.

Sequentially, because asm's or lower.

Yes, with two pressure points one.

One being the.

The labor that we talked about the 300 incremental crew members coming on board more quickly there and then the other being the.

Okay. Thank you.

Next question comes from the line of Brandon Glinski of Barclays. Brandon. Your line is now open.

Okay, and then if I'm hearing you correctly.

Next year Youre thinking CASM can be close to 19 levels. It sounds like maybe if you didn't have any disruptions you could be targeting something lower and is that just gauge driven.

Yes, I mean, thats, what we would certainly expect that.

We're not going to have these disruptions next year. So that's not included in that number that I talked about the six 5%.

I think youll see some benefit.

If there is an increasing capacity, but we're not planning on that we're planning on the low double digits and thats. The number I provided but however, if you do increase that would take that up slightly I think for every two percentage points increase in ASM Thats worth about <unk> zero cents of CASM ex if you will.

Okay I appreciate that if I can just sneak in one more strategic question I guess, how do you guys look.

The third party travel sales and the ramp up that you're seeing there.

Compare that to the strategy with sunseeker.

Are these complementary to one another and should we be thinking. These are both avenues of growth that you could be looking at other property development opportunities in future as well.

I appreciate it.

Sure I'll start there Scott the Angelo here Theres certainly complementary.

The sunseeker as it stands today is in <unk> and Thats one of right.

120, some odd places you go out and we want to sell hotels and the other 119, let's say so by and large they steer clear of each other I think over time and I'll, let John Redmond speak to this.

And as there is an asset light play that gets a lot of these properties that belong to other major brands to say, Hey, I want the sunseeker name on them.

<unk> hotel and by the way I want the Sunseeker restaurant brands in there.

Then one by one right, we're able to steer our turn on or off.

Any given product that we sell so we can keep the lanes, if you will nice and clear.

In addition to what Scott said when you look at Sunseeker beyond the stand alone opportunities, which are which are obvious.

Synergy there is you've got a load factor impact on the airline with the sunseeker being opened down there kind of like when you look at Orlando or Las Vegas, and what happens with the demand in these markets with the products. They have here so.

So there is an opportunity there as well as credit card opportunities sign ups et cetera, I mean, Scott.

Some amazing sign up activity, we're getting now, but once you open for resort and the additional opportunities you can drive its credit card. So those are two major synergy opportunities you can see offer resort as well.

Yes.

There is another part of your question I may have missed I'm sorry.

No I think you guys are thinking thank you okay.

Next question comes from the line of Andrew The Dora of Bank of America. Andrew Your line is now open.

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

Maury bigger picture here right.

You've built an airline that generates good returns.

<unk> been focused on buying used aircraft you.

Good deals on spare parts like you talked about earlier with sunseeker and the budget increases and everything that we're seeing in the construction market.

Spend here and at what point does the budget get too much and you decide to either stop or change plans here.

Broke up a little bit there Andrew I think you were asking.

Would we stop building sunseeker, if it got too expensive. That's your question, Yes, that's right I mean, given your return you've built such an airline generating pretty strong returns at what point does the budget just get too much that maybe.

Change direction, a little bit.

Based on what we know now it's certainly not even close to that the opportunity down there what we saw this spring.

Just to Florida, and everything else leisure demand you heard my comments that everybody's up with leisure southwest now is half of their flights touching Florida everyday Florida.

Lake Wobegone, it's where people want to go.

We couldnt be in a better place.

Okay.

I guess drew.

Revenue rate.

We will conquer any budget increases here.

Okay.

Drew I think you gave.

The off peak ASM commentary about what 23% or so in <unk>.

But.

We've been hearing a lot about kind of the <unk> peak versus off peak environment I've been getting a lot of <unk>.

Fair sell emails from a lot of different airlines of late can you maybe talk.

Quantify what that gap is between peak and off peak can you maybe give us some sense on sort of where things. Your Thanksgiving week is booking up right now versus say, maybe first half of November anything to try to help triangulate what that differences between those peak versus off peak times.

I am sure I can maybe take us at a high level.

I know that you'll necessarily get an answer that youre looking forward here, but.

Ballpark Youre, probably looking at your Thanksgiving flights running somewhere at 33% higher revenue per flight and northern.

Earlier in November.

And I expect that will grow a little bit by the time departure said, so there is a pretty sizable gap.

Yes.

Operator are you still there.

For Andrew.

Yes should we proceed in the next question.

Yes.

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

Hey, good afternoon, everyone. Thanks for your time.

Kind of a multipart question on the third party great to see that strength, continuing I guess.

Scott or two.

Can you walk us through how third party per Pax was up significantly on rental car days in hotel room nights are down so materially is that this pricing.

And over 100% of the increased co brand driven.

It is pricing is that driven by lower supply of these products or is there something different about your partnerships now than the 2018, thanks for that.

You bet. This is Scott I'll start and drew you can add in so certainly.

A lion's share of it is co brand in.

The continued surge that we've mentioned over the last two quarters there.

Rental car revenue is also up materially.

That is.

Average daily rate.

I'm not going to sit here is up about 50%.

Versus 2019 levels up of course, lower rental days, but that is.

Our supply demand thanks.

Then.

Those are the main drivers right now I mentioned last time, we've identified a lot of.

Technical.

Solves for increasing.

Throughput per hotel.

Right now you may recall that for every 15 hotels that get put in a shopping card only one person checks out with them.

But there is a variety of things that otas and hotels at their own site can do.

That we will be able to do that we expect.

<unk> unlocked that Bud co brand and then rental car based not on.

Dave but on price per day are the big drivers there, yes, not a lot to add here, we talked about it a little bit in the July call and it was part of the thesis for why we thought fall would actually have a bit of a higher floor because of.

Where daily rates were on both hotels at railcars kind of pushing some people out of the.

The high price summer and into the fall now with the adult inspect that didn't manifest, but the underlying piece of high margin railcars still.

Persevering through the entire quarter and probably in the foreseeable future until inventory right sizing.

Let me let me just give some background overview. This was a long term relationship with enterprise it started in 2005.

And we're the only carrier carrier I know in fact, we sell more than virtually every other airline if not the most and this kind of space.

We do that because we're so tightly integrated with the enterprise is a good chunk of it and so their pricing engine is able to drive our pricing. There is no manual activities. So I think we are.

Abstention <unk> ahead of the industry.

Airline side that has an offering cars and putting packages together that are very seamless and with the best opportunity to maximize revenues and you're seeing that with unit revenues today.

We incur I am sure if youre going out to buy a car youre seeing sticker price plus 10000 same things flowing through on the railcar side.

Yeah, it's remarkable.

Maybe just a quick one on a little bit of a follow up to <unk> question on the sunseeker budget.

Just on that Catholic financing you closed on.

In the case of budget boos around it sounds like you could maybe draw lesson.

350 BOE correct me if I'm wrong do you also have the ability to upsize that agreement in the case of budget does increase thanks.

I'll take that one.

We don't anticipate.

Hey.

Having to go back with casually, we haven't had any conversations with them about upsizing, nor does the existing agreement provide for being able to upsize that having said that we don't see if a budget.

North of what we expect it to be a significant dollar amount, which is beyond our capability to finance we're in a very liquid position as you know we're in great shape. It's not like this budget is going to run but passed us by hundreds of millions we're talking what we're looking at numbers like that as I mentioned before it could be.

10, or 15%, but we're not hearing or seeing or experiencing anything beyond those types of.

All percentages, so we don't see anything like that ever materializing going forward.

Okay. So with that most likely have just come out of cash on hand, or you would look to do another financing deal. Thanks, thanks for that extra one.

I would just look at that as being something that comes out of cash on hand.

Great. Thanks.

Next question comes from the line of Shannon Doherty of Deutsche Bank Shannon. Your line is now open.

Oh, Hey, it's Mike Lindenberg here.

Asking a question on behalf of Shannon.

Excellent.

Finally.

Finally, as a heavier Michael XOMA too soon.

[laughter] I'll get ready to retire Maury and go work for you.

Alright.

Okay.

Oh.

This is actually John on your.

The point about the.

Sunseeker opening March I guess, you said first quarter, 2023, and youre going to start selling.

First quarter of 2022 up when I kind of look at.

Legions schedule you take you typically sort of sell out I don't know six seven months into 200 220 days or so historically been the standard are you planning to open and just sell hotel and resort night and not bundle with the airline piece are you considering maybe extending the.

The schedule for Allegiant and selling out 300, 330, maybe even beyond this year I think we're seeing that with frontier in some countries.

We're not.

Drew and I in the past this is before all obviously all this pandemic stub we had conversations regarding that and we know it's an opportunity and it's something that we could explore.

It's not a requirement for us it.

It's not a requirement for us to go on sale. So if we wanted to go on sale is Atlanta only product if you will without the ability to package.

There, we will definitely we would definitely do that.

Yes.

Our quite as far as we would like to be more rate historically been so what we're trying to push that back further out to that 10 to 11 months window.

Expect we'll be able to get there in the next year or so.

Say without consulting.

But I expect we'll be pushing back out further than we have over the last 18 to 24 months.

One other thing I would add because we're also exploring tactics like this and major sporting events and music events that may be sold.

Six 912 months in advance.

At the time of buying that Theres a lot of interest I can tell you from our partners in those areas of having one in effect would be a credit my thank you get an F&B credit when you book a hotel room well in this case when you book a hotel room 12 months out at Sunseeker, you're getting and Allegiant flight credit that as you get closer to year.

And that's scheduled out that drives you back to Allegiant Dot com to book your flight at that time. So there is a variety of ways to make the connection versus needing to have both the hotel inventory and the flight schedule and perfect zinc.

Hi, Kevin.

Well one other thing that we're showing 40 to 50 million emails a week out to our audience. So the power of the direct to consumer is going to come into play a big time here, while the airplanes are good.

We've just seen it over and over and all the new hotels here in Vegas that gets a love right out of the box. So it's going to be I'm, not saying, we won't use the airline, but I don't know that we have to we certainly don't have to have an airline in my opinion.

To fill this thing up.

During the first 12 months to 24 months and beyond.

Yes look and I know you guys are probably better than I, but I know John had mentioned the opportunity to build load factor points and I think that one of the things. We do find interesting is that when you go very far out and people want to have everything settled that in many cases, you know the way the pricing curve as you'd think fares are further out and you are the lower they are but when you go out.

Call it a year or more what we'll see is that for the planners youll get a better fair whether it's for the college the college graduation, weddings, etcetera, and so you may be able to tap into that with the exception being that if you're in a situation that's inflationary and youre concerned about maybe input cost being a lot higher down the road Thats where I.

Thank you could get hurt but.

But I think getting that on the books and allowing people to plan that far out.

See a nice nice build era.

Revenue in load factor.

Yes.

We don't disagree with you at all I think we always hesitate to take a step back.

And remember is.

The brand with the awareness.

That's when the package activity will accelerate.

It was not something that we ever looked at as being an absolute requirement or necessary to fill a hotel.

Of this lag we know it's something that is part of our longer term strategy, but not a requirement for first year of operations.

Okay, Great just a follow up I know this is a strategic one here and I'm going to make it quick.

When the <unk> came out with kind of the new ruling with respect to Newark.

I thought it was very interesting that you guys were at least on record and maybe I misheard, but very quick to say, we're not interested in I think about even your own trade group talking about carriers like yourself, not having opportunities to get into airports that are congested, whether it's new York Laguardia and DCA and you could argue would make the point.

<unk> airport to operate from on one hand on the other hand, you're in the airport and you've done pretty well and you've done well in airports like la <unk> and others I'm. Just curious why you went out on record and it seemed like it was pretty quick to say, we're not interested in again, maybe I misheard.

Hey, Michael its Christine.

Hey, Chris.

So the main reason that we came out really quick on that was just with the size of that.

No it.

It wasn't something that we'd be able to to pick up and then to operate in the timely fashion. So we have worked with our trade group on I mean, the other options for that but for such a large swath all of it.

It just was not.

It wasn't going to work for US then we wouldn't be able to fulfill the requirements.

Fair enough. Thanks, Kristen thanks, everyone.

That's helpful.

Okay.

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

Thank you.

The kind of square Scott the Angelo.

The commentary around low cost customer acquisitions with the $22 million you spent on sales and marketing, which is up about 25% from pre COVID-19 with passenger count only up about two.

Understand the whole ecosystem the card acquisitions are up in the rental cars and all that stuff that's great, but I guess the real question is should I think about the sales and marketing line item as being $100 million annual cost by them starting next year just going forward.

No. It's definitely not the latter there are a couple of things you mentioned in there and really call out incentives associated with card holder.

New cardholder sign ups or certainly in there.

Absolutely are some increased costs as we've.

And then it came out of the pandemic and battled both otas and certain competitors in and around paid search.

<unk>.

And Theres also some one time things just associated with production items and related.

And advertising and marketing but.

As a general rule no that that shouldnt necessarily be just straight lined in there got it alright.

And then yes.

So when you think about the operational challenges Maury that you guys. Just had how do you think about this once the once sunseeker opens.

Is there going to be a requirement to be number one number two and the operations relative to your peers every single month, because youre not just asking for someone to give you their business because you have the lowest fare youre asking for someone to give you their entire vacation.

That experience in the flight they may not book Sunseeker again, so have you thought about the importance of being.

The best in the industry on the ops once sunseeker opens and any sort of expense that might have to come with that.

Yes, no we've definitely considered.

Hunter and I.

Think what youre seeing in the industry and if you go back and look at 2019 numbers. The whole industry was so tightly bunched as far as reliability and on time I mean, the whole group was like 80, 889% on time I think we are in 2014.

Everybody, who is running a 99 mid high 99 reliability factor. So the industry can do it and we were right there.

We ascribed to perhaps a delta wanting to be the best on time, because a lot of our two times a week markets. We don't want to leave people. So we may run a touch late historically, there, but you certainly have to have a good product in today's.

Social media World.

Putting aside sunseeker, you just can't afford to.

How bad excursions and bad flights and things like that because.

The slides and so irrespective of sunseeker, we need a good solid operation and you know what.

Hunter, it's cheaper to run a good operation than it is a bad one.

The end of the day you make the.

Once you do what you have to do.

When youre growing as you can always have a few extra people in there who is personnel seem to be the.

The problem child these days.

All of the different <unk>.

Aspects of pilots.

Just the whole world.

In transportation truck drivers anything involved with logistics or whatever it is.

Tough to come by so youre going to have to make investments to stay ahead of that track I don't care, if you're us Delta American United everybody is going to have personnel issues for the next few years I think so yes, we're going to run a good operation regardless.

Well it helps answer Youre absolutely.

It's just a good quality product that we think we can get in and once again when you.

You are running.

Slide by slide person by person basis.

Thanks Maury.

Okay.

Next question comes from the line of Chris <unk> of Susquehanna International Group, Chris Your line is now open.

Thanks for taking my question so.

I realize you're still setting our plans for next year, but as we think about.

Youre routes and what's happening here is the pressures in fuel.

Labor and the need to stabilize the network.

Should we expect this sort of.

At this point is the idea to.

To grow year routes perhaps.

Historically, you've done the low teens.

Hands on routes with or without competition, but is the idea at this point given these pressures here fuel labor and stabilizing the network is the idea to grow the network in a similar fashion that we've seen pre pandemic or is it about filling out the schedule.

And or is it a little bit of both.

Sure, Yes, I think it will be a little bit of both as it traditionally is.

Our planning process revolves around trying to achieve margin targets that slowed a little bit depending on.

On the strength of the period.

I would say that we're probably we'll probably talk a little bit more toward filling out the schedule and right sizing existing then we will new over the first part of 'twenty two into the summer.

And Thats just based on decisions, we have to make here in the short term, but by the time, we get to the back half.

Could that can convert one of the.

The main staple here is flexibility and we will be making real time calls on this into into the first part of next year. So the answer I gave you today it could very well change by the end of January based on how the environment shifting.

Yes.

Okay and the second question. So you've described I think in your prepared remarks, as running a well oiled machine here.

But as you are coming out of the.

<unk>.

<unk> 2022, 20 screening and recovery.

There we could see.

Became more efficient airline or perhaps a tailwind ultimately to <unk>.

CASM ex.

Well first and foremost you have to other people that are on the airplanes and.

Make sure they're maintained or at the gate on time.

<unk> also had the.

What I call the operational overload or leisure overload, we faced a lot of.

Station problems PSA Blackcomb TSA people.

Our Destin station had 10 pounds for a five pound bag southwest showed up and put 12 flight Sim.

No unannounced.

Theres just a lot of this.

Dislocation and.

We're having we're back we're getting so we can get a handle on this but our first job in the next 90 days 120 days to get the personnel, we need and we know that we can show up every day and fly those airplanes without missing.

The people to get the job done Scott.

I think the only thing I'll add is.

We could've taken a hard line approach.

And certain especially when the delta there.

Pretty hard I mean, we are losing 28 points of on time performance uncontrollable we.

A lot of people at the gate.

We could've done a lot of things and I think some of our peers took a harder line than we did.

Some of the markets three five we took we've take the delay in order to get more people on the plane, but its going to push downstream issues such as crews timing out.

But yes, no I think I think in general you need stable labor.

You need to know people can show up they're not going to be on leave theyre not going to be impacted by COVID-19 related issues.

Just going to take a long time.

Airlines are designed to start and stuff like this and ultimately that's what you are seeing.

Okay, Alright, thank you for the time.

Thank you.

And there are no further questions at this time Maury you may continue.

Thank you all very much appreciate your time and we'll talk to you in the.

End of this quarter sometime in January early February Thank you again.

Thank you so much to our presenters and to everyone who participated this concludes today's conference call. You may now disconnect have a great day.

Q3 2021 Allegiant Travel Co Earnings Call

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