Q1 2022 Sun Country Airlines Holdings Inc Earnings Call

Yeah.

Welcome to the Sun country or alliance first quarter 'twenty to 'twenty two earnings call. My name is Jerry and I will be your operator for today's call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

A few question. During this session you will need to press star one on your telephone please be advised that today's conference call is being recorded.

And no further assistance. Please press star Zero I will now turn the call over to Chris Allen Director of Investor Relations. Mr. Allen you may begin.

Thank you I'm joined today by Jude Bricker, our Chief Executive Officer, Dave Davis, President and Chief Financial Officer, and Toddler group of others. They will answer questions before we begin I'd like to remind everyone that during this call. The company may make certain statements that constitute forward looking statements.

They may include forward looking statements that are based on management's current beliefs expectations and assumptions and the subjects are subject to risks and uncertainty actual results may differ materially. We encourage you to review the risk factors and cautionary statements outlined in our earnings release and our most recent SEC filings.

No obligation to update any forward looking statements you can find our first quarter earnings press release on the Investor Relations portion of our website at IR Dot Sun country Dot com with that said I'd like to turn the call over to Jerry.

Thanks, Chris Good morning, everyone. After nearly two years since the onset of the Covid pandemic demand for air travel in the first quarter returned to pre pandemic levels, while it's been a long and challenging time for our industry and its employees. The last two years have shown the resiliency of Sun country, and what makes us truly unique we believe we.

Have the best people in the industry and I'm proud of them on a daily basis, serving our growing leisure charter cargo customer base, while the industry now face a certain challenge I want to take a few minutes.

To highlight some differences here at Sun country versus the broader industry first we're already profitable we were profitable in the first quarter, we've been profitable through most of the pandemic. Although we're tremendously excited about our growth prospects were not reliant on growth to deliver consistent profitability and cash flow second our charter and cargo segments.

<unk> strong results in predictable cash flow in all demand and fuel environments. These businesses are primarily under long term contracts with Premier partners, such as major League Soccer's, Caesars and Amazon, we pass through fuel cost to the consumer.

Third and importantly, the synergies between our cargo charter and scheduled service segments have never been more apparent as they are today because of the consistency of charter and cargo we have the flexibility to adjust our scheduled service operations to deliver in all circumstances. So in the.

Quarter in response to the fuel environment, we've been able to focus our growth on peak periods, where fares can be achieved that compensate us for our fuel cost and because of that peak focus we expect to be able to deliver much stronger scheduled service unit revenue growth in <unk> versus the industry well, it's great. The industry is seeing a resurgence in demand our <unk>.

Moved unit revenue will be as much a result of our own doing and design.

Fourth we deleverage through the pandemic, our future Capex can be adjusted for aircraft prices interest rates and the opportunity to deploy the asset.

Pandemic produced many opportunities for us to purchase growth aircraft at attractive prices today, we have seven aircrafts that had been purchased and finance that will enter the fleet over the next nine months.

In the first quarter, we grew black hours by 30% versus the same quarter in 2019 through this time next year, we expect to continue to deliver over 20% growth without future capex, while deleveraging as our debt amortizing and producing positive cash flow, adding to our already strong liquidity position.

Finally, as you all know we ratified a contract with our pilot group in December This has allowed us to attract the quality and quantity of talented aviators needed to support our growth, but it also gives us more certainty in our costs as compared to having an open contract in this environment.

Again, I'm so proud of all our team members here in some country in what we've achieved to date and excited about the future with that I'll turn it over to Dave.

Thanks, Jude Q1 was another profitable quarter at Sun country, including our sixth consecutive quarter of greater than 15% EBITDAR margins. We're very pleased with these results given high fuel prices throughout the quarter and omicron driven demand softness prior to Presidents' day, our numbers demonstrate again the benefit of benefits of Suncor.

<unk> unique and highly resilient business model.

We can quickly adjust our capacity and the allocation of our flying between segments and reaction to exogenous factors like the much higher fuel cost that we're experiencing today.

Adjusted pre tax earnings for the quarter were $15 7 million and adjusted EPS was <unk> 20, a share on revenue of $226 5 million a record for Sun country Q.

Q1, adjusted operating margin was 10%, which we believe to be industry leading.

Our total Q1 block hours were up 30% and <unk> were up six 3% versus Q1 of <unk> 19, a quarter was a tale of two halves bookings were soft in January but since President's day, we have seen some of the strongest demand in our history. Our total average fare in Q1 of $183.

<unk> was 7% higher than the comparable number in Q1 of 19 included in this is ancillary revenue per passenger of $49, which was the highest in the history of our company.

In terms of quarterly unit revenue scheduled service <unk> was down 1% on a 10% increase in scheduled service ASM when compared to the first quarter of 19.

However, scheduled service Trasimene March increased 4% versus 2019, while scheduled service capacity was up 8%.

Charter revenue for the quarter was $32 $9 million Q1 was the third consecutive quarter, where charter revenue per block hour was higher than in 2019 and flying done under longer term contracts made up over 70% of the charter flying we did during the quarter.

Flying under our agreements with MLS and Caesars was ramping up during the during Q1 and it will be fully operating in Q2.

Charter block hours for the quarter were down 14, 3% in total versus Q1 of <unk> 19, due to reduced AD hoc flying as we chose to prioritize scheduled service and cargo, while we ramp up pilot hiring under our new contract.

For example, we're typically one of the largest charter carrier for the NCAA basketball tournament, but we didnt participate this year due to capacity constraints will return to this type of flying in the future as our staffing picture steadily improves again illustrating the unique optionality that our three pronged model affords us.

Cargo revenue in the quarter of $21 1 million was down slightly when compared to the first quarter of last year due to the timing of planned heavy maintenance checks.

Paul we did not begin cargo flying until may of 2020.

On the cost front, we continued to maintain solid cost discipline in the first quarter. Despite Q1 being the first full quarter of operating under our new pilot agreement, our adjusted CASM of $6. Two one was only <unk>, 6% higher than Q1 of 19.

Excluding fuel and special items total cost per block hour in the first quarter was five 9% below Q1 of 19, despite the cost of our new pilot agreement.

We paid an average of $3 20 per gallon for fuel during the quarter, which was significantly higher than our initial Q1 plan and almost $1 per gallon higher than it was in the first quarter of <unk> 19.

In March which was our heaviest flying months of the quarter fuel costs were $3 58 per gallon yet we still produced an operating margin of greater than 20%.

As we enter our seasonally weaker second quarter, we're pleased with how the quarter is shaping up demand continues to be robust with historically strong revenue trends, we expect total revenue to be up 24% to 30% versus the second quarter of 2019, and 22% to 26% higher block hours.

These growth trends in place scheduled service Travis <unk> growth, a remarkable 25% to 34% over the same period.

We expect operating margin to be in the plus 5% to 9% range for the quarter. Even in spite of forecasting a fuel price of $3 50 per gallon and facing some unit cost headwinds in Q2.

We're right sizing our capacity to maximize profitability in a high fuel environment, while responding to staffing challenges.

We continue to see strong application numbers from prospective new pilots and we are filling all of our new hire classes.

As we implement our new agreement, we're expanding our training capacity and plan to increase the size of our new hire classes, allowing us to grow faster in future quarters.

Finally, our balance sheet remains very strong we closed the quarter with $297 million in liquidity and completed a double ATC aircraft financing for $188 million with an average interest rate of just over 5%.

We expect the refinancing to save us over $2 million per year and ownership costs.

We had approximately $15 million of positive free cash flow during the quarter. Excluding aircraft Capex, we expect to generate strong free cash flow for the year.

Of the eight aircraft we plan to acquire this year, we've already closed on seven Additionally, no significant non aircraft capital expenditures for the remainder of 2022 are expected.

With that I'll open it up to questions.

As a reminder to ask a question you will need to press star one on your telephone.

Again that started a number one on your telephone.

Your first question comes from the line of Ravi Shanker from Morgan Stanley . Your line is now open.

Hi, Thanks, good afternoon gentlemen.

First question on the on the cargo side, obviously, we heard from your primary cargo customer recently that they may actually have some excess capacity and therefore Feldman network for the first time in a long time.

Does this have any impact on kind of the schedule. They are flying with you guys and how fully at cross sell et cetera.

No we fly the same amount now as we did when we.

Fully stood up the airplanes to 12 aircraft and for and for the foreseeable future the schedule that we see continue.

Continue to have the same volume a little commentary on cargo, though is keep in mind, it's a long term contract with escalation annually that's fixed.

One of the biggest costs associated with it as fuel is passed through then as pilots and our pilot contract went into effect in January .

So.

The margins of that business are tighter now than they were last year, and we will widen as the escalation outpaces pilot rate increases and the juniors nation as we hire more pilots and so we expect that those margins to widen as we look forward into the future.

Thanks for that detail.

What is the timing of the escalator going into effect like what time of the yours that.

The calendar year.

Got it okay.

And then follow up question is just on the charter side. I mean, you said that you didn't fly be the NCAA plans. This time because of availability and that makes sense.

Just wondering kind of how <unk>.

Much flexibility you guys have in your charter contract because I think one of the good things about those contracts that are long term contracts and they are pretty sticky.

But do you guys do have the flexibility to not fly them. If you didn't want to.

I think I think hey, Robyn, it's Dave I think the way to think about it is this way.

Remember our charter business is composed of a fixed component basically a component under contract I'll call, It, which we fly and we want to continue to fly and we will and then we have this AD hoc segment.

The NCWA basketball for instance fell in the AD hoc segment that stuff, we pick up on a near term basis, that's where all of our flexibility resides and as we're prioritizing the use of our resources, let's say pilots whenever the constraining resources as it is at any time, that's sort of the last thing on the totem pole because we don't.

Debated if we don't have the pilot hours available.

Yeah, a little bit more on that so we have 17 airplanes and track and cargo those are fixed.

Production margin businesses, and then the rest of it we adjust for the yield environment or for fuel prices most of that's been scheduled.

And then AD hoc, which comes at the very end of our planning horizon, we can adjust for that.

The staffing situation at the time the opportunity costs from sketch service.

Anything really.

Got it that makes sense. Thank you.

Okay.

Your next question comes from the line of Roger One word.

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

Hey.

Do one here and nice to see.

Just on the just on the block hours can you can you put a finer point on on the composition within their understand <unk> is a bigger quarter for you historically.

On a scheduled service, but wonder if you could sort of give any color on the composition sequentially.

And I guess any any high level thoughts about the balance of the year.

I actually just happened to have a couple of those numbers in front of me Dawn.

So our scheduled service block hours were 66% of our total in the first quarter charter was 11% in cargo was 22%.

As we move into the year I mean.

Remember Q1 is our big quarter, particularly from our scheduled service perspective, so as we move into the year, particularly in Q2, there will be a modest shift away from the scheduled service business into the charter business.

As we reallocate resources there.

Also our MLS and Caesars contracts I think Caesars didn't get really started until March.

So that's really ramping up now and that'll that'll be a bigger piece of our flying in the second quarter as well the cargo business. The number I gave you, it's plus or minus a percent or two on a quarterly basis.

Okay. That's that's helpful and then just on.

On scheduled service you know it it's natural in the face of like what fuel did that that you'd pull back on that and protect your margins and obviously the.

The revenue environment has played out such that you know it's been a lot stronger certainly a lot stronger than than what we were looking for.

So if it's possible can you can you talk about you know.

The growth that we see in the schedules how much of that was sort of proactively protecting your margins and maybe in an ideal world you would actually have you know.

More of that out there than than what's been cut.

Versus you know the this idea of constraint is it is it constrained that's driving Watson Sked service or was it just maybe being overly aggressive in taking it down growth.

Well.

So first I mean keep in mind that we're still having a distribution of opportunities that include weakened strong flight.

So the response to higher fuel prices is now and will always be that we cut these weaker right now we're seeing broad based demand improvements.

So weak is better but peak periods or even better and so.

Most of the cuts that we did have a response to the high fuel prices, we certainly have looked at.

Really peak opportunities, where we can.

We're tight on cruise and we're thinking always about how we can allocate those across the opportunity set.

Keep in mind also fuel prices.

Overly expense long haul. So you look at some of the cuts we made that's because of steel prices were just trying to get those flights out of the out of the <unk> service business.

So we can't give you an exact answer but we're just always modifying the schedule based on inputs to include the yield environment in the fuel prices and.

Trying to.

Continually and hurdle rate in every period.

That makes sense.

Yeah.

And look out to the third quarter.

You know what.

It is planned.

Planned in and baked in.

Scheduled for quarter would you be taking that at this point based on how strong EBITDA.

I appreciate you.

Taking my questions.

Yes.

Our third quarter.

<unk>.

We think is appropriate for today's view.

Forward curve.

Which is <unk>, we don't get a decline in fuel prices will probably have to cut a little bit more and if fuel falls faster than we expect then we will probably have some opportunities to add.

The seasonality in Minneapolis tends to go all the way through Labor day, and so and also we have a big Texas operation with.

Traveled to Mexico, and all of that looks really really strong.

But I don't see it improving from where we are today.

In other words I think we are probably about right.

Yeah.

Okay very clear thank you.

Okay.

Your next question comes from the line of Brandon of Lansky from Barclays. Your line is now open.

Hey, good afternoon, thanks for taking the question.

I guess maybe to be more explicit if we look at <unk> schedules right now as things are down about 6% does that sound about right.

Yes, that's about right.

Okay.

Jude I think you mentioned some constraints as well, though on the staffing side can you talk to.

The new pilot contract and if that's helped you on attrition or not and I think you mentioned a new hire classes are full as well.

Yeah, our new hire classes remains full for pilots, we're hiring about 20 a month.

That began in.

In the winter and continues on today the companies we have.

Got it had been around for a long time and tradition was hiring.

Five or so a month.

Sure.

Lumpy basis, and now we're growing sort of at unprecedented rates and were starting to hit.

Bottlenecks across.

The training production timeline to include Sams, which we have we went from one to two we need to go to three.

Check airman, which we're in the process of training more and getting more approval from the FAA for more of those so we're eliminating these bottlenecks, but we're just.

We're growing at 30% and that's that's.

That's difficult to do in this in this environment.

The other thing Hey, Brian It's Dave the other thing I want to point out as you.

You can look at sort of our ASM production relative to 2019, that's one metric, but a more relevant metric for US is total block hours because we've got this big cargo business now that we didn't have two years three years ago or whatever.

When you look on that metric were up 25% in terms of total capacity in the second quarter.

So the growth continues to be very robust.

Judy pointed out sort of what we're doing on the pilot front I mean I think this is the this is sort of been the trend I said on the last call we experienced high levels of attrition in like the October September October timeframe of last year. We did the deal attrition has moderated income.

Come down it hasnt come down to what it was before which we wouldn't expect it to given all the hiring at legacy carriers. So what we've done is we have increased the size of our new hire classes and the good news is applications continue very strong and we're filling our new hire classes. So it's.

A front end a front end of the funnel anymore that looks to be solved.

We're working on now diligently is expanding the size the aperture of that funnel. So that we can get our classes up even larger and continue the growth sort of going forward, we're making good progress on that.

Yes.

Got you Dave.

One last one for me I think you said rates were up by 30% with the new contracts, but you had a lot of efficiency offsets that you expected with it is that coming through as you expected.

Yes.

Here's here's where that's going to come through so we haven't seen a lot of it yet so we expect some cost reductions in the future one of the biggest ones is PBS so preferential bidding, which almost which most other airlines have we didn't have that is not slated to come online until really the first quarter of next year. So.

That'll be we think a pretty big step change in efficiency there as some of the other stuff that we're seeing that is bearing some fruit some of the commuter stuff.

But that PBS change is going to be the big the big benefit to us.

Okay. Thank you.

Thanks, Brian .

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

Hey, good afternoon, everyone.

Hey, guys. So my take on this cost question.

I'm sure the 30% increase in block hours helped drive efficiencies across fixed costs.

You do have the new pilot contract can you just said one of the biggest productivity offset doesn't come until next year, we still saw costs ex fuel on a per block hour basis down 6% from 19 could.

Could you just give us some more color on like what line items are helping you drive that result.

Yes, I mean, there's a few things.

The one thing just from a bigger so we're spreading costs overhead over more more block hours.

Which is also reflected in our CASM number we've done a lot of work as we've talked about a number of times here on the fleet front over the last few years and driven our ownership costs.

One of our biggest cost items, clearly down significantly in excess of 25% over the last several years, so thats bearing fruit, we've taken our distribution costs down.

Through a number of initiatives that we've sort of had in work. So it's really sort of all over the map, we're working hard on reducing our maintenance costs. We've got an active program now buying green time engines as opposed to expensive overhauls, which is another benefit of our of our older fleet strategy.

So it's a it's items like that.

Got it and so is there maybe just as we think about.

I think you said over the next year Youre going to keep growing like 20% plus just with the aircraft you've got.

Often so should we continue to see that obviously I know it.

Well, a little lumpy quarter to quarter, but just in general in like the <unk> versus <unk> should we continue to see that.

The efficiency build versus 19 fill so to drive that cost even lower.

We've got PBS on the horizon and a couple of other things and then obviously more overhead spread.

Yes, I mean I mean.

But I can't give you the exact numbers in the quarters ahead, but that all of those concepts are absolutely still there and particularly as we continue to grow and add flying will continue to spread our costs out over more block hours.

Yes, I think the input is fuel that we don't know how that affects ex fuel CASM is that we will cut out some flying.

Grow less fast if fuel does it mean.

I mean revert.

Yes, that's the big wildcard is how.

As we've talked about before were very targeted in where we fly we do it economically we.

We don't fly when we can make money. So so part of it is our growth is going to be tempered by both staffing as well as.

Fuel costs.

Got it that makes sense and then maybe just one quick last one on a related just kind.

Go ahead on the plan the same strength.

As you said fuel is obviously significantly higher than in 2019.

Uh Huh anyone's best guess right next year, but just as we think about some of the Chinas Swift business I would think you would improve your run rate profitability, adding the cargo business I understand Pilar.

Pilot costs, maybe took a little bit on margins this year, but.

That improves going forward and then charter block hours.

Lower your revenue per charter block hours higher.

All of these new contracts.

If we get to the back half of the year, we could see margin surpassed 2019 levels, if fuel and demand stay relatively stable to where they are today. Thanks for your time.

Yes.

The answer I mean, I think the right way to think about our margins is when it's as good as it can get for everybody else will be right there with them and in all other circumstances will be will lead the industry.

Very clear thank you.

Yes.

Your next question comes from the line of Scott Group from Wolfe Research. Your line is now open.

Thanks afternoon guys.

Thank you Scott you talked about $49 of ancillary revenue per passenger.

Or do you see that going where do you see that going from here rest of the year longer term.

So I want to be careful here, because we just launched a new product called <unk>.

Passenger interface charge, which is which is going to displace fair pretty substantially.

So the ancillary products that are most relevant are ones that are accretive to total revenue per passenger.

And we think we have about five to $7 of upside in there based on third party products increased efficiency.

Effectiveness of our pricing and bags and.

And seat assignments, and we're rolling out bundles, which is going to be really effective.

But what youre going to see in our financials just to warn you.

Pretty rapid acceleration of our ancillary revenue per passenger.

Because of that Pip and Thats, just going to be a displacement of the airfare. So.

We're probably going to finish.

Over 60%.

But you are saying.

Lot of that is just a shift from one to the other.

Yes.

All of the <unk> to have a product like that.

And we're doing one that's all that it is so when.

Just need to be careful as you interpret comparisons across the industry for ancillary revenue per passenger.

Stuff that matters is the stuff that is accretive to total revenue.

And that is particularly if you think about the stack of ancillary products bag fees people would kind of.

We expect to have to bring them back and therefore, it's priced into the airfares seat assignment a little less so you don't have to buy one onboard sales completely irrelevant to the airfare third party product sales you're going to buy anyway. Those are totally accretive. So there is a spectrum of incremental value associated with the product categories.

I think allegiant calls it a customer convenience fee, it's a CIC customer interface charge at frontier I can't remember, what's fair 'cause it but they all have one and it's basically just a fee.

<unk> money from from fair.

As you pointed out.

The object here is obviously accretive to total revenue. So we've talked about three to $5 of upside in sort of truly accretive stuff.

Yield management of seed pricing.

Getting heavier more heavily involved in third party products, which we started doing in the rental car business.

So that's sort of coming down the road as well.

Okay.

Follow up on the Amazon cargo question from earlier, so I get no change in the business.

Today do you think does does Amazon, maybe having some excess capacity in the network change your timing of when you could get additional aircraft in your mind.

We remain in discussion with them about growth opportunities.

And I continue to believe that there are some I mean right now.

Scheduled service is doing really well.

We're not in a big rush to grow our cargo business quite frankly.

We need to.

We need to try to continue to push peak period.

Scheduled service, which is really strong today.

It's our best thing right now.

Okay, and then just lastly, as we're seeing a little bit of an uptick in.

Cases, you're seeing any changes in the demand environment.

Cases move at a little higher.

No no none at all I mean, I'd say its a steady hill.

Average airfare sold it everyday it gets higher and higher as we push into the summer.

A linear and this kind of inflection point I know you're hearing all the Ceos across the airlines say it but it's.

It's very rare I can't think of another circumstance and we've seen kind of this.

This variance from mid February where we saw this inflection point and no signs of slowing down and the capacity backdrop.

In the U S looks looks really accretive youre going to pay a lots of travel because theres not enough seats out there.

So.

I can't imagine it turning around anytime soon.

Okay. Thank you guys appreciate the time.

Thanks Scott.

Again, everyone. If you have questions. Please press star one on your telephone keypad again Thats Star then the number one on your telephone.

Next question comes from the line of Mike Lindenberg from Deutsche Bank. Your line is now open.

Oh, Hey.

Hey, good afternoon, guys I guess, just a quick one here on fueled a $3 50 per gallon, presumably thats. The strip, what's the date and maybe maybe are you benefiting from better prices Chicago mid Con youre not dealing with New York Harbor that did seem to be a bit lower.

Yes, thats the strip along with some assumption for some crack spread narrowing to be honest with you Thats, probably I don't know four or five days six days old something like that we think we think cracks are going to come in.

The bulk of the obviously the bulk of the fuel we buys here in Minneapolis.

Our exposure to the northeast is very minimal.

But that continues to be where most of our fuel comes from probably more relevant as you compare our fuel price to the rest of the industry is the seasonality of our business within a volatile fuel environment. So if you look to the first quarter, we probably paid a little higher fuel prices are significantly higher fuel price than comps and thats because of the majority.

As compared to them more of our flying happened in March when fuel is higher.

Which is that's our business plan and the same exists in the second quarter, where we're going to be really heavy.

In June relative to the other two months of the quarter.

The reverse in the third quarter.

Et cetera.

Okay. That's helpful and then.

This this last quarter I mean, you did make a pretty meaningful shift to your scheduled capacity and it's look it's the right thing.

Pulling down things like Minneapolis to Fairbanks, and obviously west Coast, Hawaii, I mean, it starts getting really expensive Judah as you said some of these longer haul flights and given the fact that you are carrying fuel to carry the fuel to get you to that destination with the 700 trees.

I'm curious.

Yes.

Q3 months ago sort of on a block hour basis.

That mix was I know you said you were 66% in the March quarter June quarter. It looks like it's going to be a little bit worse than for scheduled.

Two to three months ago, what were you above 70, and maybe there was less for charter.

Now you've been able to shift and it's not just airplanes, but I guess, it's shifting pilots from scheduled maybe to backfill pilots on reserve. It at the charter rates are at the cargo business.

Yes. So let me first just talk about pilots I mean, our pilot group supports all lines of flying always so we integrated in particular trips and we have a single crew base.

They go out and fly scared and then they may play a charter and then they may play a cargo and then all in one trip.

So it's very integrated and that gives us a lot of the efficiencies and so optimally worried about 25% fixed flying 75% Sked, we think which gives us the ability on a typical seasonality that we would expect September versus March to draw down our scheduled <unk>.

Service to about a third of what it is in March and September .

So.

And then theres other variations of that inputs associated with yield environment or fuel prices are or anything else its competitive backdrop progressive or benign or whatever.

And but I think over time, we're going to kind of correct into that place, where it's about $75 25.

Sked versus.

Versus track in <unk>.

And cargo, which basically operate the same.

In our business and granted yet anything else does.

Great Yeah, all I would say is the team does a really good job of optimizing based on forecasted.

Margins and so as we if you would have stepped back in time, we definitely made the adjustments you made your you commented on from a scheduled service, which are absolutely. The right. One has done with us through a strategic framework and then on the charter side, we absolutely as Dave mentioned, we have these AD hoc customers that are relatively close in and we can pick and choose there as well so you'll see a.

A little bit of a reduction there, but still executing and operating at a high level for our biggest customers but.

This team does a really good job of optimizing.

Drive the most amount of value.

Very good thanks, Thanks for your time everyone.

Thanks, Mike Thanks, Mike.

Your next question comes from the line of Chris <unk> from Susquehanna. Your line is now open.

Hey, good afternoon. Thanks for taking my question. So just wanted to get to this.

Demand or.

Perhaps try some outlook in a different way so masked mandates off here summer travel around the quarter.

You could give some color with respect to what the zero to 60 day booking window looks like and how does it compare to this time last year and then let's say three to five years on average pre pandemic and then further out so let's say 60 plus days are you having to stimulate discount excuse me to.

Late demand or is marketing.

Whatever you'd normally do around with your RMS teams sufficient to fill out your kind of required load factors into the second half. Thank you.

Hey, Chris Let me make a couple of general comments Don over to grant.

Right now, we're not doing any stimulation pricing.

It is a.

If there is low prices and a flight it cut.

We just won't fly it.

Yes.

One of the things I think you may be getting at is kind of.

When we went into this new pricing environment. After omicron kind of how quickly are we going to react to the new environment and so mid February is when we saw the change in booking behavior and demand really recovered strongly.

We just came through Covid with all its ups and downs and I'd, probably give us a grace of about two weeks to the end of February to kind of alright, This is real and different and good.

Where we would say okay now we're pricing in the new environment.

And we had sold in the second quarter about a third of our segments by the end of February with two thirds, yet to be priced into the new environment and it's about 15% at the third quarter. So so yields will go up just because more of the seats will be sold.

Into the new environment, but of fares So post March 1st.

It's kind of on a year over three year basis.

Hi, but like steady.

And in the days out of bookings are basically what they were back in the day.

Back in 2019, it just we're selling a lot.

Let higher fares fares up.

I would say.

50%.

Move.

One other comment is that.

Fares or on a heuristic algorithms so.

Yeah.

Activity booking activity creates higher fares by nature.

And.

So our algorithms just sort of naturally address.

So we are able to take advantage of it even in advance of a kind of realigning our expectation yes.

Grant anything now and the only thing I would add to that Judy is the team we have teams.

Revenue management yield management team.

Especially these are folks who know these markets really really well they manage these on a flight by flight basis day by day basis.

So they're seeing this and theyre doing a really good job of making sure that we are selling.

<unk>.

Highest level that the market will bear being cognizant of other things. The other thing is I would just echo <unk> sentiment when we put schedules out.

Absolutely expect every flight to drive value for the airline so we're not doing any stimulation and the schedules we have out in the future there's been a lot of thought.

And.

Just input from stakeholders on what's the best schedule for Sun country.

Great good color thanks for the time.

Thanks, Chris.

Your next question comes into line of Duane <unk> from Evercore. Your line is now open.

Hey, Thank you for the for the follow up so when we look at.

Kind of the model historically in scheduled service you've had good you've had good revenue you've had decent peers, you've had you've had decent yields.

It hasnt been as much of a sort of push all the way on on loads.

But just given how tight you are with capacity right now actively deciding to be tight with capacity.

Should we be thinking about.

Loads a little bit differently.

Balance of this year.

It's a good question and I'll, let Graham answer it but I just wanted to highlight a couple of differences that we have we do a lot of seasonal flying the nature of seasonal flying when it begins and ends is that theres a naked lag right. So your first round trip to Central America.

<unk> pulled down but empty back because nobody was able to fly down and beyond that return flight.

No.

I would say probably our steady state load factors is at <unk>.

It's lower than what you would expect to see in.

Southwest for example.

Yes, but we do caters is scheduled to fly when people want to fly so.

Lot of the ballot or the unit revenue increases are certainly going to come through there, but it's really.

He is doing a good job getting people on the airplane, we fly when people want to fly so we're getting the ancillary benefit from that as well and if you do sort of take a step down into the depths of.

Where we're allocating capacity, we're still doing that in a very strategic way. So while at a system level. We may be down you can absolutely look at markets that were really excited about and we're making strategic bets there. So.

We feel really good about how things are coming in for us.

Helpful. Thank you.

Thanks Duane.

Alright, I am showing no further questions at this time I would now like to turn the conference back that you had weaker.

Thanks for your interest everybody in and.

<unk>.

Thanks for spending the time with us.

The next quarter.

Okay.

This concludes today's conference call. Thank you all for your participation you may now disconnect.

Okay.

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