Q2 2022 Allegiant Travel Co Earnings Call
Thank you for standing by welcome to the second quarter 2002, Allegiant Travel Company earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question answer session to ask a question. During the session you will need to press star one one on your telephone.
You wouldn't hear an automated message advising you had S res piece.
Be advised that today's conference is being recorded.
I'd now like to hand, the conference over to your Speaker today, Sherry Wilson, managing director of Investor Relations.
Thank you welcome to the Allegiant travel company's second quarter 2022 earnings call on the call with me today are John Redmond, The company's Chief Executive Officer, Greg Anderson, President and Chief Financial Officer, Scott D'angelo, Our EVP and Chief Marketing Officer drew wells, our SVP of revenue in place.
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 statement, whether as a result of future events, new information or otherwise.
The company cautions investors not to place undue reliance on forward looking statements, which may be based on assumptions and events that do not materialize.
To view this earnings release as well as the rebroadcast of this.
Call it at the Companys Investor Relations site with that I'll turn it over to John .
Thank you very much Sherry and good afternoon, everyone should probably.
Scott Sheldon is not here today, but obviously it will still take whatever questions you have.
This is of course, the first earnings call in the history of Allegiant Morry has not participated where it provides his opening comments.
No one in the industry has a depth of knowledge and awareness of the industry that morry has so as long as your questions are more present day focus we'll get by.
It started every earnings call thanking our amazing dedicated and passionate employees. So it would be remiss if that commentary was not repeated. Thank you. All you are the best.
With this new chapter beginning as fully fitting I announced the promotions of Scott Sheldon and Greg Anderson, the President effective April one.
Every one of you on the call know them. So they need no introduction, we have the best management team in the industry.
This is one of many steps we are taking to ensure consistency continuity and execution Scott.
Scott, Greg Scott, the Angelo, our CMO and Rob Wilson, our CTO.
All signed employment agreements through December 2026.
With regards to our operations Q2 is not our best or an industry best for that matter, but we're reacting fast to this ever changing environment.
Why we started to get back within reach of where we should be with a 99% controllable completion and we expect Q3 to be at the same performance level or better than July .
July was better than June on every metric from Star D zero to 814 and controllable cancellations.
We have always been a margin focused company and that wont change going forward.
Load factors and improving operations margins will grow given reduced IRA ops.
We are in negotiations with our pilots, but have no updates regarding financial impact or timing.
Did mentioned in the Q1 earnings call. He was personally involved in those negotiations so having a decision maker like him with his intimate knowledge of the issues and understanding of the business model is invaluable.
All parties.
In addition, we are having partnership conversations with several flight schools to ensure a predictable stream of pilot into the future.
So there has been plenty of dialogue and commentary out there regarding how people see 2023 unfold.
We have never been ones to over promise and under deliver but trying to make any predictions or forecast in this environment given the many variables is not some things we will do.
We have a history of year over year growth, but that history provides no crystal ball during times of multiple variables moving in unpredictable ways with non line of sight.
Having said that our model was built to handle times like this and our DNA is to remain very flexible and act or react based on changing circumstances, and we will continue to do that as we always have done.
This approach has served us very well to date.
As for Sunseeker resorts Charlotte Harbor.
We are still targeting to open may of 2023, but will not finalize the opening month until early Q4.
To date, we have booked 1100 transient room nights at an ADR of $390.
Which is impressive net most of these reservations or in the May through September timeframe, which is historically the slowest months of the year.
In addition, we booked 31 groups totaling 31300 room nights.
Total contracted rooms, food and beverage revenue for these groups is roughly $13 4 million.
An interesting point to make here is we have already booked five 6% of the total room nights for 2024, none of which are transient bookings.
And stop taking group reservations for February of 'twenty four.
This impressive book percentage will only increase as we move closer to opening.
Allegiant has a direct relationship with its guests, meaning we don't use GDS for Otas to book travel Sunseeker of course follows the same high margin approach, which requires significant number of emails to perform at the level, we expect to.
To date, we have roughly $3 1 million E mails and the Sunseeker database and project. This number will grow to over 4 million by opening.
These numbers are unprecedented in the resort or hotel World and show the power and synergy of the Allegiant model and Sunseeker resort.
They also speak volumes about our excitement and opportunities in the asset light space.
Building, an email database is absolutely critical and foundational to success in this space. After all how can you fill a hotel if you don't have a database to market too.
I can't think of a more efficient and cost effective approach to fill the resort or a plane that email marketing you are starting to see the pieces coming together are what we refer to as Allegiant two <unk> no.
Last but not least we have made the decision to pay off our cares act related government debt of $24 6 million before month end. We appreciate the assistance of the cares Act provided during these unprecedented early stages of the Covid pandemic.
Given the guidance and decisions of our board the untold number of analyses and conversations between management team and the sacrifices made by all of our employees, we find ourselves in the enviable position of paying off this loan well before its maturity date and with that I'll turn it over to Scott to Angelo Thanks, John .
Second quarter again saw exceptionally strong demand for Allegiant in terms of both web traffic to our Legion dot com and passenger segments booked.
Total visitors to our website were up by nearly 35% in the quarter versus 2019.
Most notably new visitors were up by nearly 60% and visitors coming to our Legion dot com by directly entering the U R L or by using our mobile app were up by more than 85% versus 2019.
What's more we've added nearly 1 million new email to our customer database and the first half of this year.
The continued huge increases in both new visitors and direct visitors to Allegiant Dot com speaks not only to the ever increasing awareness of our brand, but also what that brand stands for low fares and non stop flights. The two most important buying factors during what's been a turbulent time in terms of both airlines.
Industry operations and inflationary economic conditions.
Put simply our addressable customer audience continues to grow as more new customers consider lead gen for their leisure travel needs more than 85% of which are coming to us after either last line for most frequently flying southwest Delta American or United less than 15% are coming for.
All other airlines combined and less than 10% are coming from other <unk> customers are looking to find relief from Sky high fares as well as avoid the risks associated with connecting flights through overloaded major airport hubs.
To that point, our weekly tracking of customer sentiment, which was originally focused on COVID-19, but now expanded to include customer sentiment towards the economy and air travel shows a meaningful change in the top three considerations for our customers when selecting an airline for leisure travel in the current environment.
In past years price nonstop service and schedule, where the prevailing top considerations, but in the past several months, while price and non stop service not surprisingly continuing to be the top two factors the airport itself, namely the convenience of smaller less crowded airport has.
Replace schedule as the third most important factor. This represents yet another material development that favors allegiant and our attractive network of alternative airport locations like Mesa Sanford in St. Pete Clearwater to name a few.
These factors not only explain the historic highs and web visits and bookings, but also why the number of visitors to our Legion dot com in the past several weeks to conduct flight searches for travel sometime during the August through November time period is up between 40% to 100% for all weeks compared to the same booking.
And travel periods last year.
And while bookings from all customer ages continued to increase on a year over three year basis customers 65 years and older again showed dramatic booking increases at more than 60% above 2019 levels. This is great news is this age group represents our most frequent travelers.
Many flying between the primary residence in vacation home with great flexibility and resiliency as a general rule given their discretionary time and income.
While air travel demand remains strong for the capacity. We have posted we also continue to aggressively focus on driving greater value per customer by selling outside the aircraft due to the attachment of asset light high margin third party products the.
<unk> always Allegiant World Mastercard remains the prominent driver continuing to post record setting months in terms of new card sign ups average spend on the card and total compensation to Allegiant new card sign ups for the quarter were up by 35% versus last year and 65% versus 2019.
<unk> and revenue and revenue to Allegiant was up by nearly 130% versus last year and more than 150% versus 2019. In addition, our non credit card based loyalty program always reward is just coming up on its one year anniversary, but already were.
Seeing engaged always rewards members spending 34% more on average than non members driven by increased take rates on air ancillary products and attachment of third party products as customers engage with our simple, but compelling rewards currency to maximize our foreign earnings for use on future leisure travel.
With Allegiant also of note, we continue aggressive technology development efforts to boost our ability to sell more hotels at increased attachment level by connecting with more hotel and hotel inventory experimenting with price presentation, and better hotel merchandising and streamlining the checkout process.
To be at par with leading online travel agencies.
In closing, we believe our unique value proposition of low fares non stop flight and broad service of smaller alternative airports remains and will continue to remain an attractive distinctive value proposition, especially in these uncertain economic times that is attracting new and returning customers alike and rare.
<unk> numbers and our focus on continuing to grow our high margin asset light third party product sales can help us drive revenue per passenger growth in the upcoming years to provide at the very least a partial but nonetheless material offset amidst otherwise choppy conditions and with that I'll turn it over to drew for a deeper disk.
<unk> of revenue and capacity. Thank you Scott and thanks, everyone for joining us this afternoon.
It Hasnt been mentioned demand had astronomical levels in the quarter, Scott talked about the outstanding web visitation and that turned into the highest load factors we produced since 2014.
Along with accomplishing our targets to fill aircrafts, we produced a second quarter best $66 per passenger and ancillary revenues.
In total the quarter finished with nearly $630 million in revenue an increase of 28, 1% over 2019.
Core demand exceeded our expectations at the outset of the quarter. However, some noncore elements drove a headwind that Greg will detail shortly.
Additionally, in what has been encouraging but a revenue offsetting dynamic the use of vouchers given out above and beyond refunds or through marketing efforts encouraging folks to travel when ready we're up nearly 200% per passenger.
A great sign that beyond the great works got these team has done to aid awareness and produce new visitors our previous flying guests are returning to allegiant for additional trips.
Scheduled service ASM grew 13, 4%, resulting in a traveling change a 15, 7%.
While im pleased with the summary results this quarter was truly a story of the peaks in the off peaks.
As we mentioned on the May call because of the rise in fuel was so rapid we opted to maintain the majority of the flying through the off peak April and May timeframe that due to the proximity to departure.
It is worth noting this flying but still earnings accretive despite the fuel expense.
While June produce arguably the best revenue story in company history. Both in terms of total recognized revenue and revenue per flight.
Narrowly missed 90% boarded load factors recorded nearly $70 per passenger and ancillary and had the third highest monthly increase when comparing to June 2019, and ore per passenger over the last 15 years of Allegiant and certainly the best with any amount of meaningful ASM growth.
However, not all <unk> are created equal and candidly, we did not have a schedule to fully realize all the potential revenue in the second quarter, nor will be in the third at.
At the beginning of the year, we had aspirations for 30% <unk> growth and 35% in the third.
And while demand did its part fuel prices and operational considerations have resulted in the current growth rates much of this came at the expense of peak flying.
June and July are the lowest year over three year growth months in their respective quarters with utilization roughly 20% below 2019 levels in.
In fact June and July feature less flying than the same months in 2021.
We do take some solace in the unitize metric benefits, we see in these months and looking forward July will mirror the best of what we saw in Q2 <unk>.
Thats phenomenal story features boarded loans over 90% at July record ancillary per passenger and the fourth highest air revenue per passenger increase comparing to July 2019 over the last 15 years of the airline.
Furthermore, the operational integrity intended from the slight cuts materialize the month with a 99% completion as John mentioned.
However, we are still a 100% leisure airline subject to the whims of traditional leisure seasonality and the distribution of growth between peak and off peak within the quarter, We will drive a modest headwind to unitize Rev.
All in all we expect to grow the scheduled service ASM approximately 18% in the third quarter and system ASM is approximately 16%.
Further we expect total revenue to grow roughly 29%.
And with that I'd like to turn it over to Greg.
Drew thank you and good afternoon, everyone.
For the second quarter, we reported GAAP net income of $4 4 million, excluding our recognition bonus that would've been $11 1 million.
We have the best team members in the industry and we are excited to recognize them for their incredible efforts day in and day out. Thank you team Allegiant for everything you do.
Our second quarter financial results did not meet our initial expectations, which is largely explained by three areas first and around revenue. We estimate we left roughly $10 million on the table during the second quarter as we transitioned to a new credit card processor and this drove an additional $4 million headwind in July . This issue has been resolved and is behind us.
Second fuel for mid April into May we saw our fuel price per gallon increased by nearly 50.
Another step function increase in fuel the rapid rise in fuel intra quarter resulted in $19 million more in fuel cost than initially planned.
Third <unk> irregular operations drove an additional $9 million in incremental customer compensation, we are trending in the right direction. As these costs were 40% down as compared to the first quarter and driven by an improvement in completion factor.
And we are encouraged to see reliability in our operations continues to improve as the peak flying months of July resulted in a 99% completion factor are the highest of the year.
If we adjust for the $10 million in revenue $19 million of fuel and $9 million of additional customer compensation. Our <unk> operating margin would have been 11, 4% and in line with our initial guidance.
Turning to the second quarter costs, excluding fuel are unitize costs for the quarter was $6 76.
And in line with expectations excluding.
Excluding our recognition bonus accrual in our <unk> customer compensation, our CASM ex was up 11% compared to the second quarter of 2019.
Decreased productivity drove the majority of our CASM ex increase the lower productivity can be seen through aircraft utilization, which is down 17, 5% as compared to the same period in 2019, and addition, and push inflationary pressures primarily at the airports drove nearly two points of CASM ex increase.
Looking at the balance sheet, we ended the quarter with $1 $2 billion in total liquidity inclusive of cash on hand and.
In August we signed up a $100 million warehouse revolver with any USG, bringing our total liquidity to $1 3 billion or 70% of 2019 revenue.
Our net debt balances increased slightly to approximately $750 million. This is largely due to construction draws for sunseeker. However.
However, this net debt balance is still well below pre pandemic levels.
And for the full year 'twenty, two we expect to make a $185 million in principal debt payments and $90 million and is expected for interest expense.
Turning towards the third quarter, our guidance issued today suggests an operating margin of 5% on system ASM capacity growth of 16% year over three.
This guidance also assumes an average of $3 80 per gallon of fuel.
Throughout 2022, we have action trimming our initial planned capacity by roughly 15 percentage points. These capacity reductions were primarily driven by staffing challenges the volatility around rising fuel costs, and adding more buffers for operational stability.
As mentioned operational stability for the month of July improved as it had a completion factor of roughly 99% just want to point out nearly two percentage point improvement when compared to June and based on third quarter capacity growth of 16%, we expect CASM ex for the quarter to be up 10% year over three this increase is primarily primarily.
Related to inflationary pressures and productivity similar to the second quarter.
Lower aircraft utilization versus third quarter of 2019 to drive roughly four points of CASM increase for assets and other fixed costs lower labor labor productivity should result in another two points of that increase in inflationary pressures, primarily again at our airports and with our service providers is roughly two points.
As we look towards 2023, and there remains significant uncertainty around fuel the broader travel ecosystem and labor challenges.
And while the U S consumer is strong and the demand environment remains incredibly robust we know the future macroeconomic environment is uncertain.
<unk> has a strong track record of industry, leading financial performance, regardless of the macro fuel environment. Our differentiated model is built to outperform and as John said, our focus is on margins and in the coming months, we will closely monitor the landscape and set factors as we continue to refine our capacity plans for 2023 with an eye towards <unk>.
Proving margins so please stay tuned.
Turning to fleet, we are fortunate to have a fleet plan with tremendous flexibility as mentioned last quarter, we decided to hold three aircrafts in storage this year and place them into service in the first half of 'twenty three.
This change means we will end 2022 was 124 aircraft in service and currently we have 34 unencumbered aircraft, which also helps aid our fleet flexibility.
Turning to Reinvestments in the business, our full year 22, total airline capex expectations at slightly reduced and its $240 million in aircraft Capex, which is inclusive of pre delivery deposits $140 million and $60 million in other in heavy heavy maintenance capex respectively.
And in closing we truly believe Allegiant has differentiated business model over the past 20 years, our differentiation has come through major pillars, such as our asset acquisition strategy uniquely vast network direct distribution to our customers selling third party products and most importantly, our people.
We are continuing to refine and enhance these pillars as part of our two point strategy, our Max order with Boeing is expected to.
<unk> assets that are 30% more efficient and at the same time monthly ownership cost on par with our used <unk> hundred 20 aircrafts are.
Our vast domestic network currently includes more than 610 routes and we serve 128 cities more cities in the U S. In nearly every carrier and our network team has identified more than 4500 incremental routes for us to expand our nonstop service to a runway of airline growth for many many years to come.
Opening our sunseeker resorts will enhance our ability to sell products outside of the tube of an airframe with our direct distribution channel and set the stage for unlocking our asset light strategy around hotels.
Always loyalty program <unk> enhances the value proposition, we have with our guests the ability to earn and burn points through multiple platforms and should further deepen our relationship with them and.
And increased investments in systems tools and infrastructure will better equip our team members, while arming them with the data to enhance our execution and drive further efficiencies each of these initiatives should meaningfully improve our bottom line and our long term earnings potential.
That will take your questions.
Thank you so much and as a reminder to ask a question you will need to press star one on your telephone and please standby, while we compile the Q&A roster.
Okay.
Our first question comes from the line of Savi <unk> from Raymond James. Please go ahead.
Okay.
And maybe if I can start off with on the revenue side. It can the outlook here in the third quarter.
It seems like maybe AD unit revenue not as strong as what you thought it could be in the third quarter may be a couple of months ago. I was just kind of curious if that was the case and what might be driving that.
So I think that's generally a fair statement.
We are certainly off the absolute ridiculous highs that we were seeing from a demand front, we're still quite elevated higher than than what we've seen.
Really through any of my 11 five years.
But off the highs a bit which I think you see reflected in the guide here.
Okay that makes sense.
And just on the operations side.
Curious what are you expecting in <unk>.
<unk>.
What has changed is that some of.
And then kind of July to show a positive improvement and maybe as you kind of fill out the quarter.
Expectation to do maybe simulator July or better is there like ATC issues getting resolved is there something different that's happening at allegiant.
Hey, Savi, it's Craig why don't I take a stab at it first here.
I mean, one July we've seen steady improvements continue.
Not only in July , but we would expect August and September to improve as well.
Some of it is just capacity and right sizing and making sure that we have that out there and that we can support that with our crews.
Earlier in the year, we saw some unplanned absences spike we have seen that we've been able to better manage through that certainly to your point, whether in June and ATC issues have been a drag on operations and that's something we'll keep an eye on I would say like in our stations and airports, we've seen stabilization there our team Kinney welfare and his team it has gone up.
And Theres been a couple of airports, where we've had to change out service providers and once we've done that and lessons learned we've seen vast improvements in those respective areas in turn times.
But we know we struggled a bit and we didn't meet expectations in the summer we're getting better one of the things I think it's worth mentioning again, and we talk about quite a bit as customer compensation.
It's expensive and it's meant to make its being on our side, but it's also helps mitigate some of those operational disruptions and kind of help with the brand.
Performance from our customers.
So hopefully that helps answer the question Savi, but anything else.
That's great. Thank you.
Alright. Thank you so much and your next question comes from the line of Helane Becker from Cowen. Please go ahead.
For the time.
Just on an ancillary.
Do you think they can go I mean, you are getting a lot better at selling them, you're offering new products, what should we think about in terms of.
I wanted to know goal.
Sure.
Sure.
I think as we look out over the next few years.
Scott talked a little bit about.
The systems changes that we'll be implementing in putting in place, particularly on the third party side. There also be some enhanced.
I think as we look out five years another $10 per passenger is totally reasonable I'll look over to Scott to Angela to to make sure I'm not overselling.
<unk> two but.
Suddenly getting into into the mid 70% I think it's feasible and I guess I would also throw in there as the product evolves over that same time frame in the next several years I drew the product before allegiant extra which.
Would be our kind of entree into economy premium with extra legroom priority boarding et cetera, as kind of a sub bundle right there become different ways to merchandise and more in that case ancillary product to sell across the fleet over time.
That could help get to that number that drew pointed out.
Okay. That's helpful. Thanks, and then I don't know if you or John if you're willing to answer this question because it sunseeker, but the numbers that you called out four forward.
I don't know if you call them forward bookings or advanced reservations.
That compare.
With your experience.
Higher firms in terms of level of bookings.
This far away from actual.
The actual data.
That's correct.
Okay.
Good questions Helane and in terms of.
How early we started this Phil.
No one start selling debt early so when you take a.
Like the last big MGM type property that opened most Oreo.
They didn't even start selling until six months out.
We elected to sell much further out because we're getting a lot of learnings out of that.
We started talking to customers are starting to sell product. We had all brand new systems, who want to make sure. We can shake them. All out. So there is a multitude of reasons to start doing it on the transient side, which is why we are having great.
The success of their group.
Group bookings those are wildly impressive because.
You can't even see what the product looks like.
So when people are picking us versus someone else. The other properties are looking at are going concerns. They may have stayed there in the past.
No exactly what they offer they're selecting us without knowing anything a lot of those selections are being based on their reputations all of us have and a lot of cases, there are touring the property over by walking down the promenade in envisioning, what's going to be there. So we are we're ecstatic about these.
Early learnings the early bookings of group bookings 31300 room nights is off the charts.
Of course booking five 6% of the total room inventory in 2024 already is amazing, but this is speaks volumes about the importance we've been talking about it having an email strategy and we've been <unk>.
<unk> that strategy for some period of time.
There is no hotel, it's ever opened in the world.
Had over 4 million E mails audio and half of that when it opened.
No.
Stay tuned these are things we've been talking about for some time that what we're going to do to make sure. At this property was going to be wildly successful and where were.
We're starting to see.
See that those data points come to fruition.
That's helpful. John Thanks for the answers.
Thank you.
Thank you. So much. Your next question comes from the line of Scott Group from Wolfe Research. Please go ahead and ask your question.
Guys.
I'm curious why do you think your RASM increases are lagging peers and maybe just on the third quarter margin guidance right.
The airlines running a lot better fuel is coming down.
Versus last quarter why is why are the implied margins lower in <unk> than <unk>.
Hey, Scott, It's Craig why don't I start and I think drew will add some commentary on the revenue side.
As you're aware, we're 100% focused on leisure and.
Just historically I think it's 15 of the last 17 years, a third third quarter is the lowest performing quarter for us because September in off peak is just so drastic.
So that's a big element of why I think our ASM sequentially are meaningfully down second quarter to third and then maybe perhaps drew.
Color on that.
Taking one step further if you think about our ASM cadence, yes, the growth will be the smallest in July which impacts the RASM cadence, but fuel will be the highest as we see it today in July which had the most absolute ASM. So they kind of work against one another there as it pertains to a full quarter on both the RASM and the and the margin front.
I think beyond that and maybe.
Impacted both <unk> and <unk> as you think about unitize metrics, but I think we're one or two carriers that both increased stage and gauge.
Versus 2019, which isn't going to put some headwinds against the unitize metrics there I think.
And it comes out to.
That was about three to four points in each quarter.
Okay. That's helpful. And then maybe just some early thoughts about 2003 in terms of.
Capacity growth and what that May mean for CASM.
Do you think it's going to be down next year versus this year and things like that.
Sure Hey, Scott, it's Greg again here.
As John mentioned and were getting trying to get across here is the 20 threes that the focus is going to be on improving margins and we would expect 23 margins to be better than 'twenty two as we.
We talked about there is a lot of uncertainty out there as we kind of refine and get to a capacity plan for 'twenty three.
In addition, we have we're going to start taking aircraft for Boeing next year, as well, which will we will have to have pilots available for that which will help kind of cap that growth. If you will.
I would say historically, it's been a 10% growth.
That's what we typically.
Targeted allegiant, we flex that up and down based on the environment and what we're seeing today again, coupled with the Boeing taking delivery next year, an extra pilots for that.
I think 10% growth in 'twenty three would be the cap.
They see that come down from there.
A CASM X is going to be dependent on capacity. We're also and as John mentioned, we are in active discussions with our pilots trying to drive a deal making progress there. So in addition to our flight attendants. So theres some labor costs.
<unk> in 'twenty, three or potentially if we if we're able to drive the deal.
We would expect 23, though to also as again as we mentioned the improvement in operations to drive out of the business those Iraq's costs, which were meaningful and that should help on the margin side.
Hesitant, though just given all the uncertainty has got to go in and give you a guide for kind of CASM X, but I just I think hopefully.
You could take away that we're focused on costs and doing the right things, but ultimately.
We're going to drive margin.
Okay. Thank you guys appreciate it.
Thank you so much and our next question comes from the line of Michael Weinberg.
From Deutsche Bank. Please go ahead and ask your question.
Yeah.
Calling in for Mike.
So last quarter you had you talked about you talked about the pilot as we conveyed.
A little bit.
Elevated.
Really encouraging to hear that you're partnering with maybe a slight pause.
We recruit.
Could you talk a little bit about how the attrition trends looked in the second quarter.
Well remain elevated for the rest of the year.
Hey, this is Greg again, I'm, just going to kick it off but then we have Alan team in the room, who is our VP of flight crew planning is really close to this but now we're actively at the table. Our pilots are paid candidly is in that market, we want to get their payback up there we're working on improving the level of service to our pilots and also a better <unk>.
<unk> around scheduling so we're making a lot of effort in that regard and then with Alan If you could give you more color on hiring and attrition sure.
Happy to be here so.
As we discussed during the last time, we spoke covering Q1.
To your point, we did see pilot attrition spike in the first quarter with February in particular.
Since that time, we have actually seen a drop in monthly attrition last month July of <unk>.
2022 was the lowest number that we have seen before December of 2021, and so certainly positive news, but we are prepared for attrition to be choppy and it will certainly fluctuate and probably closely aligned with legacy hiring pattern.
And that continues to be where most of our pilots are heading and then just to kind of put some numbers around it.
Scott during our last call provided the trailing 12 month attrition that was at a 123 may 'twenty one to April 22.
Our trailing 12 month is only a 132 pilots. So it is trending slightly up but it is very much in line with our expectations.
Got it. Thank you. Thank you that's really helpful. And then just another question regarding the PSP. So.
Thank you I was going to pay that back before the month, then does that get you from engaging in buybacks and dividends or any other transactions.
Yes definitely.
Yes than previously outlined.
No I don't think I don't think the quid pro quo people should read into it be any of those types of activities like dividends and buybacks. It was strictly something that we thought it's the right thing to do.
We're sitting on.
A very enviable position in terms of liquidity and and this is something that we debated at length at our board.
And we think it's the right thing to do so.
Been pretty much a fault leader throughout the pandemic and I think this continues.
Approach, where we are the first ones to do this and we just wanted to get it behind us the we appreciated what happened, but I think companies when they no longer need the assistance.
Good.
Pay it off.
So that's why we decided that.
And John just for all Airlines right those restrictions lift October one for the dividend and share repurchases irrespective of when you pay back the debt.
Okay got it got it. Thank you that's very helpful. Thank you very much.
Youre welcome.
Thank you and our last question comes from the line of Daniel Mckenzie of Seaport Global. Please go ahead.
The debt.
Okay got it got it. Thank you that's very helpful. Thank you very much.
Youre welcome thank.
Thank you and our last question comes from the line of Daniel Mckenzie of Seaport Global. Please go ahead.
It looks like flying is going to be up roughly 30% in the month of September just looking at the schedules data and please correct me on that but based on what we know about July .
The implied September traveling does seem to be negative and I'm. Just wondering how much of the revenue deceleration is something thats been intentionally engineered by the network planning team.
And how much is it.
Could it be a weaker consumer that youre anticipating later in the quarter.
And then that's kind of one part and then just why the unusual growth if that's correct and in off peak months and should we extrapolate those September trends into October and November .
Thanks, Dan a lot here, let me, let me try to unpack that so you are correct that there will be elevated September growth relative to the other months in particular I'll point out, though that utilization remains under five hours per aircraft per day I mean, it is a very lowly utilized month's bill.
So more a function of some day of week.
Versus 2019 Labor day moves a bit further back in the monthly capture more of the labor day traffic in the month of September and believe it or not given the low amount of flying that is meaningful from a growth perspective.
Do not believe that September will be negative on the <unk> front.
Im not running away with with an incredible traveling at this point. So ideally there is some upside there but.
No I do not believe it will be negative.
Okay.
And I'm going to pass along a question that was actually asked to me by a long only investor on the asset light side of sudden seekers. So for those that are taking a three year outlook.
What are you anticipating that revenue stream could look like.
And then separately when do you just given the current trends of the hotel.
When do you expect to make a decision on the remaining 13 acres of undeveloped land and then I guess, just I'll throw one I'll squeeze one more in there that $390.
Average room rate I'm, just curious what percent of the rooms booked are the larger suites. So just kind of a mix question related to that that average room rate.
I appreciate it Dan if I Miss anything.
Because I think there's like three or four questions. Airbus maybe is the most recent beauty's as the mixed we're seeing right now between standard rooms, and suite is about 84% standard rooms.
60% of suites, so a lot of demand for the suite product.
Which has been which has been great and keep in mind, we haven't posted.
Area to build flying to that market.
70% of the reservations were taking now are from local in.
In state, which has been amazing and they are the people most where the project. So when we start getting.
Bookings are going to come through the allegiant passengers when they when they book care. That's when we'll start to I would imagine we'd see that sweet mix, even pick up a little bit.
Asset light.
One of the absolute critical factors to that as having an email database. So not only does that serve us well, obviously for opening up a new property, but for taking on other opportunities is critical.
When you look at pick any other management company out there I don't care, whether it's Marriott Hilton Hyatt or whoever they don't let you use their database to market a property when you sign them up.
So thats, a big differentiating factor for us moving into that asset light space that anyone who's property, we choose to manage we'll be able to we will allow them to use our database to be able to market to fulfill that hotel.
And then in terms of the.
Phase III as we call it which would be.
Effectively doubling the size of the resort, we haven't made any decisions on timing there.
Clearly we would not.
<unk> project debt.
Essence copied or followed the same blueprint as phase one and two did until we saw that the results are there. The strength is there the demand is there for the product before we'd ever recommend to the board that we would want to start a project like that and of course.
Theres always the opportunities.
To do anything with that property.
I mean, we've had inquiries from a multitude of different types of developers. So those of course are always possibilities down the road.
So I think by the time, we ever make a decision on that.
It would be.
At the end of this year or early into 'twenty three.
Before we decide when to start something or what to do with it.
Okay.
Thanks, Thanks for the time you guys.
<unk>.
Thank you so much and we don't have any more questions I would now like to turn the conference back to John Redmond for closing remarks.
Well in closing we appreciate everyone's time, we're glad we were able to respond responsive to everyone's questions in.
Stay tuned for.
This concludes.
This concludes today's conference call. Thank you for participating and you may now disconnect.
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