Q3 2023 Sun Country Airlines Holdings Inc Earnings Call
Speaker 1: Welcome to the Sun Country Airlines third quarter 2023 earnings call. My name is Crystal Love and I will be your operator for today's comp.
Welcome to the Sun country Airlines third quarter 2023 earnings call. My name is Krystal Love and I will be your operator for today's conference.
Speaker 1: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
At this time all participants are in a listen only mode.
After the Speakers' presentation, there will be a question and answer session to ask a question. During this session you will need to press star one one on your telephone you will then hear an automated message advising that your hand is raised to withdraw your question. Please press star one one again.
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Speaker 1: Please be advised that today's conference is being recorded.
Please be advised that today's conference is being recorded.
Speaker 1: I will now turn the call over to Chris Allen, director of Investor Relations. Mr. Allen, you may begin.
I will now turn the call over to Chris Allen Director of Investor Relations. Mr. Allen you may begin.
Speaker 2: Thank you. I'm joined today by Jude Brickert, Chief Executive Officer, Dave Davis, President and Chief Financial Officer, and a group of others that help answer questions.
Thank you I'm joined today by Jude Bricker, our Chief Executive Officer, Dave Davis, President and Chief Financial Officer, and a group of others to help answer your questions before we begin I would like to remind everyone that during this call. The company may make certain statements that constitute forward looking statements. Our remarks. Today may include forward looking statements, which are based upon management's current beliefs expectations assumptions.
Speaker 2: Before we begin, I would like to remind everyone that during this call, the company may make certain statements that constitute for looking statements. I remarks today may include for looking statements with their based upon management's current police, expectation assumptions, and subject to risk and uncertain.
Speaker 2: actual results made different material. We encourage you to review the risk factors and cautionary statements that line in our earnings release and most recent SEC filings. We assume no obligation for to update any poor looking statement. You can find our third quarter earnings fresh lease and investor relations portion of our website at ir.fundcountry.com. With that said, I'd like to turn the call over to you.
Subject to risks and uncertainties actual results may differ materially we encourage you to review the risk factors and cautionary statements outlined in our earnings release and most recent SEC filings, we assume no obligation to update any forward looking statement you can find our third quarter earnings press release on the Investor Relations portion of <unk> website at IR Dot Sun country Dot com with that said I'd like.
Like to turn the call over to Jerry.
Thanks, Chris.
Speaker 3: Thanks for joining us this afternoon everyone. Our diversified business model is unique in the airline industry. Due to the predictability of our charter and cargo businesses, we are able to deliver the most flexible scheduled service capacity in the industry.
Thanks for joining us this afternoon, everyone. Our diversified business model is unique in the airline industry due to the predictability of our charter and cargo businesses, we're able to deliver the most flexible scheduled service capacity in the industry. The combination of our schedule flexibility and low fixed cost model allows us to respond to both predictable.
Speaker 3: The combination of our schedule flexibility and low fixed cost model allows us to respond to both predictable leisure demand fluctuation.
As your demand fluctuation and its AD units industry shops, we believe due to our structural advantages, we will be able to reliably deliver industry, leading profitability throughout all cycles.
Speaker 3: and insurgent industry shocks. We believe due to our structural advantages, we will be able to reliably deliver industry leading profitability throughout our site.
Speaker 3: Today we're announcing three Q results, including an adjusted operating margin of over 8% on 18 and 1,000 year on year departure growth.
Today, we're announcing <unk> results, including an adjusted operating margin of over 8% on 18, 5% year on year departure growth.
Speaker 3: We know now these results produce the highest trailing 12 month pre-tax margin of any of the 11 public mainline US carriers. The same was true with the end of the second. The same was true with the end of the third.
We know what we know now these results produced the highest trailing 12 month pre tax margin of any of the 11 public mainland U S carriers. The same was true at the end of the second quarter demand remained strong across all segments of our business highlighted by scheduled service.
Speaker 3: Demand remains strong across all segments of our business highlighted by schedule service
Speaker 3: Trasm down 5% on 15% ASM growth first prior year. Since the beginning of the year, every month, scheduled service trasm has reset to around 35% higher than pre-COVID-COMS with this trend generally continuing into bookings on future traps.
Tried them down 5% up 15% ASM growth versus prior year and at the beginning of the year every months schedule service traveling has reset to around 35% higher than pre COVID-19 comps with this trend generally continuing into bookings on future travel.
Speaker 3: Also, our charter block-hour production, critical during the fall scheduled service demand trough, was up over 14 percent year-on-year.
Also our charter block hour production critical during the fall of scheduled service demand trough was up over 14% year on year recall that the third and fourth quarters typically produce margins well below our annual production.
Speaker 3: Recall that the third and fourth quarters typically produce margins well below our annual production.
Speaker 3: We continue to deliver a high quality product. And the third quarter, our controllable completion factor was 99.4% while delivering the highest D0 among U.S. mainline carriers. I'm so grateful to all our team members that work so hard to take care of our customers every day.
We continued to deliver a high quality product in the third quarter. Our controllable completion factor was 99, 4%, while delivering the highest D zero among U S mainline carriers I'm. So grateful to all our team members that worked so hard to take care of our customers everyday.
Speaker 3: Unfortunately, the cause of our variance of performance to potential remains crew staffing levels. Due to captain availability, we flew about 3,500 fewer block hours in third quarter, mostly in July , than the demand environment would have supported with our fleet and the fuel price input. We continue to see staffing levels improve, albeit more slowly than we would
Unfortunately, the cause of our variance of performance to potential remains crews staffing levels due to captain availability. We flew about 3500 fewer block hours in third quarter, mostly in July than the demand environment would have supported with our fleet and the fuel price input we continue to see.
<unk> staffing levels improve, albeit more slowly than we would like.
Speaker 3: Looking ahead, we recently extended our schedule through the summer of 2024 and announced 10 new Minneapolis markets. I think this is representative of our growth for the next few years as we continue to expand into our Minneapolis opportunity during peak periods supported by modest off-peak growth in our charter business.
Going ahead, we recently extended our schedule through the summer of 2024 and announced 10, New Minneapolis markets. I think that's right. This is representative of our growth for the next few years as we continue to expand into our Minneapolis opportunity during peak period supported by modest off peak growth in our charter business.
Speaker 3: As our growth has moderated based on pilot staffing, we've decided to lease out two additional aircraft. They were scheduled to enter our fleet in Q4. This will delay the entry into service of 2737-800's, planned for the fourth quarter of 2023 until the first quarter of 2025. Aircraft are generally in high demand as much of the aviation industry deals with production delays on new narrow bodies and service disruptions from the GTF.
As our growth has moderated based on pilot staffing, we've decided to lease out two additional aircrafts that were scheduled to enter our fleet. In Q4. This will delay the entry into service of $2 737, eight hundreds planned for the fourth quarter of 2023 until the first quarter of 2025 aircrafts are generally in high demand as <unk>.
Much of the aviation industry deals with production delays on new narrow bodies and service disruptions from the GTS.
Speaker 3: So we'll make good returns on these aircraft until we're able to fully utilize them.
So we'll make good returns on these aircrafts until we're able to fully utilize them.
With that I'll turn it over to you Dave.
Speaker 4: Thanks, Jude Q3 was another profitable quarter for sun country with revenue finishing at the upper end of our guided range and operating margin finishing in the middle of our guided range despite incurring a fuel price that was 10% higher than expected.
Thanks, Jude Q3 was another profitable quarter for Sun country with revenue, finishing at the upper end of our guided range and operating margin, finishing in the middle of our guided range. Despite incurring a fuel price that was 10% higher than expected.
Speaker 4: Total revenue increased 12.3% year over year to 248.9 million, while adjusted earnings before taxes were $11.1 million versus $9.7 million in Q3 at 20.
Total revenue increased 12, 3% year over year to $248 9 million, while adjusted earnings before taxes were $11 $1 million versus $9 $7 million in Q3 of 2022.
Speaker 4: Adjusted operating margin was 8.1% for the quarter and 14.7% year-to-date. As Jude mentioned, on a trailing 12-month basis, Sun Country's adjusted pre-tax margin through Q3 was 10.2%.
Adjusted operating margin was eight 1% for the quarter and 14, 7% year to date.
As Jude mentioned on a trailing 12 month basis. Some countries adjusted pre tax margin through Q3 was 10, 2%.
Speaker 4: This was the highest of the 11 publicly traded mainline US carriers. The strength of our diversified business model continues to be demonstrated by our strong result.
This was the highest of the 11 publicly traded mainline U S carriers the strength of our diversified business model continues to be demonstrated by our strong results.
Speaker 4: Revenue for our passenger segment continued to grow in Q3, with combined scheduled service and charter revenue increasing 9.7% year-over-year to $214.4 million.
Revenue for our passenger segment continued to grow in Q3 with combined scheduled service in charter revenue, increasing nine 7% year over year to $214 $4 million.
Speaker 4: Scheduled service plus ancillary sales generated $166.9 million in revenue, which was 9.5% higher than last year.
Scheduled service plus ancillary sales generated $166 $9 million in revenue, which was nine 5% higher than last year.
Speaker 4: Scheduled service TRASM was 11.72 cents, which was 5% lower than last year, and a 15.1% growth in scheduled service ASM.
Scheduled service <unk> was 11, 7%, which was 5% lower than last year, and a 15, 1% growth in scheduled service <unk>.
Speaker 4: We're still maintaining remarkable scheduled service TRASM strength versus 2019, Q3 2023 was almost 39% higher than Q3 2019.
We're still maintaining remarkable scheduled service transom strength versus 2019, Q3, 2023 was almost 39% higher than Q3 2019.
Speaker 4: This marks our sixth consecutive quarter of scheduled service TRASM being at least 25% higher versus its comparable quarter in 2019. We do not expect this streak to end in Q4.
It's marks our sixth consecutive quarter of scheduled service traveling being at least 25% higher versus the comparable quarter. In 2019, we do not expect this streak to end in Q4.
Speaker 4: Our total fare per passenger declined 8.7% to $153.11 while we maintained an 86.6% load factor.
Our total fair per passenger declined eight 7% to $153 11.
While we maintained an 86, 6% load factor.
Speaker 4: Charter revenue in the third quarter grew 10.6%.
Charter revenue in the third quarter grew 10, 6%.
Speaker 4: $47.4 million dollars on block hour growth of 14.1 percent. A portion of our charter revenue consists of reimbursement from customers for changes in fuel prices as we do not take fuel risk on our charter flying.
To $47 $4 million on block hour growth of 14, 1%.
Portion of our charter revenue consists of reimbursement from customers for changes in fuel prices as we do not take fewer risk on our charter flying.
Speaker 4: Q3 fuel prices dropped by over 18.8% year over year. And if you exclude the fuel reimbursement revenue from both Q3 23 and Q3 22, charter flying revenue grew 14.6% over the period, which is in line with block hour growth, producing flat year over year charter revenue per block hour.
Q3 fuel prices dropped by over 18, 8% year over year, and if you exclude the fuel reimbursement revenue from both Q3 dollars 23, and two to $3 22 charter flying revenue grew 14, 6% over the period, which is in line with block hour growth producing flat year over year.
Charter revenue per block hour.
Speaker 4: Third quarter cargo revenue grew 10% to $26 million on a 6.3% increase in block hours.
Third quarter cargo revenue grew 10% to $26 million on a six 3% increase in block hours.
Speaker 4: Last year, we had lower levels of flying due to scheduled maintenance events, and the annual increases in our Amazon contract occurred in December of 2022.
Last year, we had lower levels of flying due to scheduled maintenance events and the annual increases in our Amazon Amazon contract to cure occurred in December of 2022.
Speaker 4: We're continuing to grow at a profitable measured pace. We expect total ASM growth in Q4 of this year to be between 8 and 10%. We anticipate a similar growth rate to continue for full year of 2024.
We're continuing to grow at a profitable measured pace, we expect total ASM growth in Q4 of this year to be between eight and 10%. We anticipate a similar growth rate to continue for full year of 2024.
Turning now to costs.
Total operating expenses increased 11, 4% on a 14, 4% increase in total block hours in the third quarter.
Speaker 4: Adjusted chasm was up 2.6 percent versus Q3 of 22. This year-over-year change is down significantly from the 10 percent plus increases we experienced in the first half of 2023.
Adjusted CASM was up two 6% versus Q3 of 22 this.
This year over year change is down significantly from the 10% plus increases we experienced in the first half of 2023.
Speaker 4: The timing of maintenance events in Q3 was a large contributor to our year-over-year cost increase as airframe check volume doubled from Q3 of 22 and material price increases were almost 9%.
The timing of maintenance events in Q3 was a large contributor to our year over year cost increase as airframe check volume doubled from Q3 of 'twenty, two and material price increases were almost 9%.
Speaker 4: Looking into Q4, we expect heavy check volume to remain high relative to Q4 of 22.
Looking into Q4, we expect heavy check volume to remain high relative to Q4 of 'twenty two.
Speaker 4: Shifting focus to 2024 for a minute, we are anticipating adjusted chasm to be roughly flat versus full year 2020.
Shifting focus to 2024 for a minute we are anticipating adjusted CASM to be roughly flat versus full year 2023.
Yes.
Speaker 4: Let me switch to the balance sheet. Our total liquidity at the end of Q3 was $198 million, which was lower than the amount at the end of Q2, primarily due to the seasonality of bookings and the timing of our share repurchases, which finished towards the end of the quarter. As of November 6th, our total liquidity was $230 million.
Let me switch to the balance sheet.
Our total liquidity at the end of Q3 was $198 million, which was lower than the amount at the end of Q2, primarily due to the seasonality of bookings and the timing of our share repurchases, which finished towards the end of the quarter.
As of November 6th our total liquidity was $230 million.
Speaker 4: Through the end of September , we've spent $210.6 million on CapEx, which has funded a significant amount of our planned aircraft growth into 2025.
Through the end of September we've spent $210 $6 million on Capex, which has funded a significant amount of our planned aircraft growth into 2025.
Speaker 4: We anticipate our full-year 2023 CAPEX to be approximately $225 million and our year-ending passenger fleet count to be 42 aircraft.
We anticipate our full year 2023, capex to be approximately $225 million and our year ending passenger fleet count to be 42 aircraft.
Speaker 4: Fleet growth in 2024 will be modest and the majority of our growth will be funded through higher utilization.
Fleet growth in 2024 will be modest and the majority of our growth will be funded through higher utilization.
Speaker 4: We expect 2024 capital expenditures to be well under half of the 2023 level and free free cash flow generation to be strong.
We expect 2020 for capital expenditures to be well under half of the 2023 level and free free cash flow generation to be strong.
Speaker 4: We continue to maintain a very strong balance sheet. Our net debt to adjusted EBITDA ratio at the end of Q3 was 2.4 times.
We continue to maintain a very strong balance sheet, our net debt to adjusted EBITDA ratio at the end of Q3 was two four times.
Speaker 4: Since we do not have a significant debt burden, we have flexibility in how we deploy our cash. Since Q4 of 2022, we spent approximately eighty million dollars on share repurchases, which is the total amount that our board had authorized.
Since we do not have a significant debt burden, we have flexibility in how we deploy our cash.
Since Q4 of 2022, we spent approximately $80 million on share repurchases, which is the total amount that our board had authorized.
Speaker 4: Just recently, our board authorized another $25 million in repurchase authority, which we plan to deploy opportunistically.
Just recently, our board authorized another $25 million repurchase authority, which we plan to deploy opportunistically.
Turning to guidance.
Speaker 4: We are anticipating Q4 total revenue to be between 242 and 252 million dollars, an increase of 7% to 11% versus Q4 of 22 on a block and an increase in block hours of 11 to 15%. We're forecasting a $3.20 per gallon fuel price in the 4th quarter and adjusted out margin for the quarter is forecasted to between 3 and 5%.
We are anticipating Q4 total revenue to be between 242 and $252 million, an increase of 7% to 11% versus Q4 of 22 on our block and an increase in block hours of 11% to 15%.
We're forecasting a $3 20 per gallon fuel price in the fourth quarter and adjusted Op margin for the quarter is forecasted between three and 5%.
Speaker 4: The fundamentals of our unique diversified business remain strong, and our model is highly resilient to changes in macroeconomic conditions. Our focus remains on profitable growth. And with that, I'll open it up for questions.
The fundamentals of our unique diversified business remains strong and our model is highly resilient to changes in macroeconomic conditions, our focus remains on profitable growth and with that I'll open it up for questions.
Thank you.
Speaker 1: At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.
At this time, we will conduct a question and answer session.
As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to the amount.
I would draw your question. Please press star one again.
Speaker 1: Please stand by while we compile the Q&A rough.
Please standby, while we compile the Q&A roster.
Speaker 1: Our first question comes from the line of Duane Sessingworth of Evercore ISI. Your line is now open.
Our first question comes from the line of Duane staffing work of Evercore ISI. Your line is now open.
Hey, thanks.
Speaker 5: Just a couple for me. On aircraft, can you just remind us what the ideal vintage or age on the 800s that you're targeting and how much you think the market for these assets has changed? I understand you're not in the market. There's a bit of a pause here, but to the extent you own them, how much do you think the value of those assets has changed in this backdrop?
Just a couple for me on aircraft can you just remind us.
Kind of what the ideal vintage or John on the eight hundreds.
That you're targeting.
And how much you think the market for these assets has changed I understand youre not in the market. There is there's a bit of a pause here.
But to the extent you own how much do you think the value of those assets has changed in this backdrop.
Speaker 3: We vary, hey Duane, we vary our price based on age. So, there's not really a preference because we put that in the valuation. What we've had the most success in is about a 12-year-old airplane, which is where the value historically for us has equated to.
We vary a Duane we vary our price based on age so theres not really a preference because we put that in the valuation while we've had the most success in is about a 12 year old airplane, which is where the value historically for us has equated to.
Speaker 3: the aggregate of the transferred maintenance value and the residual value.
The aggregate of the transferred maintenance value.
And.
The residual value of the components.
Speaker 3: Earlier than that, we have to pay a premium for the newness and later than that, we don't get, you know, typically as compensated as we would for the age. So that's kind of the sweet spot in the market. It also happens to align with.
Earlier than that we have to pay a premium for the newness and later than that we don't get.
Typically as compensated as we would.
For the age so that's kind of the sweet spot in the market. It also happens to align.
With.
Speaker 3: likely recent large maintenance events having occurred on that aircraft type.
Likely reset large maintenance events, having occurred on that aircraft type.
Speaker 3: So, we look at the valuation just like that, transfer maintenance value. Maintenance value is getting a lot more valuable from OEM escalation predominantly, and then the bids, and then we add a premium to that. We, the last airplane we originated was about six, seven months ago, and that premium was zero.
So we look at we look at the valuations just like that transferred maintenance value maintenance value is getting a lot more valuable from OEM escalation predominantly and then the bids and then we added premium to that.
We the last airplane, we originated was about six seven months ago.
And that premium was zero.
Speaker 3: So that's a little bit, you know, we were getting a little bit discount through COVID and before COVID it was, you know, one or $2 million.
So thats <unk>.
Little bit we were getting a little bit discount through COVID-19 and before Covid. It was one or $2 million. So.
Speaker 3: I would say it's pretty consistent. I think what's really happening.
I would say, it's pretty consistent I think what's really happening is theres a lot of demand for really short term leases engine leases.
Speaker 2: There's a lot of demand for really short-term leases, engine leases, and people are extending leases on short-term basis. It's just all having to do with the industrial challenges of the new production.
And people are extending leases on short term basis, its just all having to do it.
The industrial challenges of the new production.
Okay, Great and then.
Speaker 5: Are you, I guess, are you booked for 2025? And maybe you just said it, or sorry, are you booked through 2025? And what is your growth number for next year? I don't know if you mentioned it on the call. Sorry if I missed it.
Are you I guess are you booked for 2025, and maybe you just said it sorry are you booked through 2025 and what is your growth number for next year I don't know if you mentioned on the call sorry, if I missed it.
Speaker 4: Yeah, so, we are largely booked through 2025. If you recall, we did this deal with the 737-900ERs that are on lease to Oman Air. Those start to come off lease and redeliver to us in November of 24. So, that's incremental aircraft in 25. Jude also mentioned a
Yes. So we are largely booked through 2025, if you recall we did this deal with the 737 900 <unk> that are on lease to Oman air those start to come off lease and redelivered to us in November of 24, So thats incremental.
<unk> and 'twenty five.
<unk> also mentioned a sort of additional lease deal that we're near completion on for two more aircraft, we were going to take those all now come in the first quarter at 25, So that's seven incremental.
Speaker 4: additional lease deal that we're near completion on for two more aircraft we were going to take. Those will now come in the first quarter of 25. So that's seven incremental and we may or may not be in the market for one or two more.
And we may or may not be in the market for one or two more.
Speaker 4: I mean, the good news here is between improved utilization, the aircraft that we already have in the pipeline, the capex for those has largely been incurred already. So we think we're in a great position from a
The good news here is between improved utilization the aircraft that we already have in the pipeline. The capex for those has largely been incurred.
Already so we think we're in a great position from a from a fleet perspective.
Speaker 5: Great. And if I could just sneak one last one in, just your thoughts on, you know, when you think we'll be able to kind of fully capture these peak demand periods.
Great and then if I could just sneak one one last one and just your thoughts on.
When you think we'll be able to kind of fully capture these peak demand periods.
Speaker 5: uh... you know would would spring break at the uh... a reasonable cast a reasonable guess on that i thought i thought it was interesting fedex suggesting that they're overstaffed on pilots
With spring break.
<unk> are a reasonable guess on that I thought it was interesting fedex, suggesting that they're overstaffed on pilots by.
Speaker 5: By about, I think, 700, some of the press reports, you have at least one peer.
By about I think 700 some of the press reports you have at least one peer.
Speaker 5: which is cancelling bids, cancelling higher bids or offers that it made.
Which is canceling bids.
Cancelling cancelling higher bids or offers that it made.
Speaker 5: So, it feels like this pilot shortage is effectively over. You know, given that, when do you think you're in a position to sort of fully capture peak demand?
It feels like this pilot shortages it is effectively over.
Given that when when do you think youre in a position to sort of fully capture peak demand.
Speaker 4: Yeah, so recall, you know, for a year now, at least for us, the issue has not been hiring pilots and the issue has not been pilot attrition.
Yes, so recall.
For a year now at least for US the issue has not been hiring pilots and the issue has not been pilot attrition.
Speaker 4: So that's not a concern. The issue has been on the upgrade front.
So that's not a concern the issue has been on the upgrade front.
Speaker 4: And there's myriad reasons for that, which we've talked about in the past.
There is myriad reasons for that which we've talked about in the past.
Speaker 4: We are seeing positive trends based on some of the actions we've taken over the last six months. We're seeing positive trends in the cap-
We are seeing positive trends based on some of the actions we've taken over the last six months, we're seeing positive trends in.
In the captain upgrade world.
Speaker 4: I think we're all around the table anticipating a very strong Q1 and a strong ability to capture peak demand in March, which is part of the company's best quarter. But the trends are moving in the right direction.
I think we're all are on the table anticipating a very strong Q1, and a strong ability to capture.
Peak demand in March, which which is.
Part of the Companys best quarter, but the trends are moving in the right direction.
Speaker 4: We don't see a shortage of pilot availability at this point. It's an internal issue for us that we are making progress and working through.
We don't see a shortage of pilot availability at this point, it's an it's an internal issue for us that we are making progress and working through.
Okay. Thank you.
Speaker 1: Thank you. Please stand by for our next question.
Thank you please standby for our next question.
Speaker 1: Our next question comes from the line of Katherine O'Brien from Goldman Sachs. Your line is now open.
Our next question comes from the line of Catherine O'brien from Goldman Sachs. Your line is now open.
Good afternoon, gentlemen, thanks for your time.
Hey, Catherine Keating.
Speaker 6: Maybe just one follow-up on the Captain Upgrade issue. I know you said in your prepared remarks it's getting better, but a little slower than hoped. I guess, you know, how has your capacity and unit cost outlook changed over the last couple months, if at all, as we head into 2024? And how sensitive is that guidance to, you know, budgeting?
Maybe just one follow up on the captain upgrade issues I know you said in your prepared remarks.
It's getting better or at a little slower than hoped.
How is your capacity and unit cost outlook changed over the last couple of months if at all as we head into 2024.
How sensitive is that guidance maybe.
Maybe seeing that captain upgrade issue gone better than expected next year, just trying to get a census at sensitivities there. Thanks.
Yes ill give you my view on that.
Speaker 4: I think our planning, the sort of 2024 growth numbers I gave, you know, let's say high single, low double digit numbers are very achievable numbers. And then the roughly flat chasm numbers are essentially a function of that.
I think our planning.
2024 growth numbers I gave let's.
Let's say high high single low double digit numbers are very achievable numbers and then they're roughly flat CASM numbers are essentially a function of that.
Speaker 4: I think if we continue to see favorability in some of these upgrade trends, we can grow the airline more quickly than that, and we don't need additional aircraft to do it given the utilization opportunity that exists.
I think if we continue to see favorability in some of these upgrade trends we can grow the airline more quickly than that and we don't need additional aircraft to do it given the utilization.
Opportunity that exists.
Speaker 4: Any more growth is going to have a positive impact on CAS.
Any more growth is going to have a positive impact on CASM.
Speaker 4: So I would say that our view probably hasn't changed that much.
So I would say that our view probably hasn't changed that much.
Speaker 4: in the last couple months, maybe gotten a little bit more conservative on the growth front.
In the last couple of months, maybe gotten a little bit more conservative on the growth front.
Speaker 4: but there hasn't been anything sort of, you know, drastic. What might surprise
But it hasnt been anything sort of <unk>.
Drastic.
Might surprise everybody has that.
Speaker 3: that as we grow utilization and focus that incremental capacity into peak periods, you'd likely see an increase in unit revenue as well, because the foregone flying largely resides in periods of peak demand.
As we grow utilization and focus that incremental capacity into peak periods, you'd likely see an increase in unit revenue as well.
The foregone flying largely resides in periods of peak demand.
Speaker 3: Pilot constraints are a monthly block hour metric. And so you think about a really volatile demand environment, like what we're designed to deal with, and then push down those peaks.
Constraints are a monthly block hour metric and so you think about a really volatile demand environment like what we are designed to deal with and then pushed down those peaks that foregone flying tends to be at a higher than average level for unit revenues and so youll see a lot of traction as we get into.
Speaker 3: That foregone flying tends to be at a higher than average level for unit revenues. And so you'll see a lot of traction as we get into, you know, increasing utilization. That's going to happen a little more quickly because we're releasing out some airplanes.
<unk>.
Increasing utilization, that's going to happen a little more quickly because we're reaching out some airplanes.
Speaker 6: But, and it's linear, you know, it's not going to be like one day we wake up and everything's sorted out. It's just going to continue to get better, I think, as we move forward in the next couple of months. Got it. Maybe just a little bit of a follow up to that.
But and its linear it's not going to be like one day, we wake up and everything's sorted out.
It's just going to continue to get better I think as we move forward into the next couple of months.
Maybe just a little bit of a follow up to that so as you have the ability to flex up those peaks.
Is the first.
As utilization increases overall is the first priority to tweak the scheduled service I know you also talk about adding AD hoc charters.
Speaker 7: scheduled service. I know you also talk about adding ad hoc charters or maybe the answer's both just depending on the season, just any close.
Or maybe maybe the answers both just depending on the season, just any color there would be helpful.
Speaker 3: Yeah, both is the answer. I mean, keep in mind the way we integrate charters and sketch services unique in the industry. So we'll build...
Yes, both is the answer I mean keep in mind the way, we integrate charters and skirt service is unique in the industry. So we will build.
Speaker 7: aircraft routing that incorporates both of those lines of business depending on the season. And so, the predominance of incremental growth will be in sketch service, but we intend to grow charters next year as well. Got it. If I can sneak one last one in, I just want to make sure, you know, I'm not mixing apples and oranges as we think about the go forward.
Aircraft routing that incorporates both of those lines of business depending on the season.
And so the predominance of incremental growth will be an <unk> service.
But we intend to grow charters next year as well.
Got it if I can sneak one last one and I just want to make sure.
Mixing apples and oranges as we think about the go forward on unscheduled service RASM.
You both made comments that you would expect that that versus 2019 trend, which has been 30%.
<unk> plus higher over the last couple of quarters, you weren't expecting any major change.
I don't know what your forecast some scheduled service.
Speaker 7: schedule service and send this to that be helpful, but I guess like if I find it's plug in, you know plus you know up 30% something
So that would be helpful, but I guess like if I just plug in plus.
Up 30% something scheduled with RASM in the fourth quarter.
That implies.
Year over year some admittedly.
Admittedly very quick math is that what you are expecting or.
Speaker 3: Well, no. So what the point of making is, since the beginning of the year, we've seen a kind of a reset into pre-COVID levels. I'm using 2019 as a comp. And it's very stable between 35 and 40% on a scheduled service, tri-s and basis year over four.
Help me figure out now.
So what the point I'm, making is that since the beginning of the year, we've seen that kind of a reset into pre COVID-19 levels I'm using 2019, as a comp and it's very stable between 35% to 40% on a scheduled surface trans and basis year over for <unk>.
Month by month.
Speaker 3: And what is important is that we had a really strong and rapid domestic recovery in the summer of 22. That recovery then moved into the near international like Mexican Caribbean markets for last winter. And now it's transatlantic. It's probably going to go into the Pacific, I would guess. But the point is, it's kind of resetting on a more permanent basis to very similar peak off peak trends that we saw pre-COVID, but just at a higher level.
What is important is that we had a really strong and rapid domestic recovery in the summer 'twenty two that recovery then moved into the near international like Mexican Caribbean markets for last winter and now its trans Atlantic is probably going to go into the Pacific I would guess, but the point is it's kind of resetting on a more permanent basis.
It's a very similar peak off peak trends, if we saw pre COVID-19, but just at a higher level.
The one comp I'd call out is December December had the best of all calendar setups and December 19, and it's going to be a little bit of a.
More difficult comp.
There'll be a lot better in 2023.
It won't be at that 35% level.
Speaker 3: So that in that, in the quarter, the fourth quarter for us kind of goes as December goes.
And that in the quarter the fourth quarter for us kind of goes as December goes.
Speaker 4: Yeah, and just maybe I didn't see it clearly enough, but the number I quoted was six consecutive quarters of 25% up plus, and we expect that trend to continue.
Yeah, and just maybe I didn't say it clearly enough but.
The number I quoted was six consecutive quarters of 25% plus and we expect that trend to continue.
Very clear thank you for your time.
Thank you please standby for our next question.
Speaker 1: Our next question comes from the line of Helene Becker of TD Cohen. Your line is now open.
Our next question.
Comes from the line of Helane Becker at TD Cowen. Your line is now open.
Speaker 8: Thanks operator, hi team. Thank you for the time here. Just two questions. One is...
Thanks, Operator, hi team. Thank you.
For the time here.
Just two questions one is.
Speaker 8: The scheduled service revenue in the third quarter looked like a sequential decline that was bigger than what we've seen in prior quarters, not with standing Dave's comment about being up 25%. And we saw a smaller increase in the amcillaries and just wondering if there's anything going on there.
The revenue scheduled service revenue in the third quarter looked like a sequential decline that was bigger than what we'd seen in prior quarters, notwithstanding daves comment about being up 25%.
And we saw smaller increased ancillary and just wondering if there's anything going on there.
Speaker 3: Hey, Elaine, they're looking at some numbers, but I just want to caution you on sequential for us because we're just really.
Hey, Randy.
David looking at some numbers, but I just caution you on sequential for us because we are just really really seasonal so.
Speaker 3: The year over year change in the second quarter versus in the third quarter certainly settled down. That was a function of two things. One, we're growing a lot faster, but also the comps in 22 were really challenging and they lasted well into the fall season, which is something that's pretty rare for us. And that was focused on big city connectivity in the Minneapolis, like, you know, I call up Boston, Seattle, big markets like that, that were really strong in the third quarter and those have since settled down into.
The year over year change in the second quarter versus in the third quarter certainly settled down.
A function of two things one we're growing a lot faster, but also the comps in 'twenty two we're really challenging and they lasted well into the fall season, which is something is pretty rare for us and that was focused on big city connectivity in the Minneapolis like.
You can call out Boston, Seattle Big markets like that that were really strong in the third quarter and those that settle down into.
Speaker 3: you know, more permanent increase for spre COVID levels, but flat on the year of four basis.
More permanent increase versus pre COVID-19 levels, but flat on the.
On the year of four basis.
Got it that's helpful and then my.
Speaker 8: My follow up question is the announcement that you made regarding the ads and wasn't today, right? The ads at a mini-apple store, I guess maybe winter and next summer. Have you seen any, I mean, do you think of yourself as a spill carrier? So you wouldn't see much pushback from Delta? Or do you see them, you know, saying,
My follow up question is.
The announcement that you made regarding the ads and wasn't today right.
And in Minneapolis for I guess next maybe winter next summer.
Have you seen any I mean, do you think of yourself as a.
Bill carrier, so you wouldn't see much pushback from Delta.
Or do you see them, saying hey.
Speaker 8: Hey, if they're doing a good job in this market, maybe we should be there too.
Hey, if theyre doing a good job in this market, maybe we should be there too.
Speaker 3: Okay, then let me give you a couple thoughts and I'll call Grant in here to add. So first.
Yes, Brian Let me give you a couple of thoughts to knockout granted year to add.
So first.
Speaker 2: We have a strong brand in the Minneapolis market. We're certainly a spill carrier in some of our non-mini-appless scheduled service flying opportunities. But in Minneapolis, we invest in the brand, we market to the community, we have a vibrant loyalty program. So I don't view us as...
We have a strong brand in the Minneapolis market, where it is certainly a spill carrier and some of our non Minneapolis scheduled service flying opportunities, but in Minneapolis, we invest in the brand we market to the community. We have a vibrant loyalty program. So I don't view us as.
Speaker 3: at all as a spill carrier in the Minneapolis Metroplex. In that,
At all as the spill carrier and the Minneapolis Metroplex.
And that shows up in the way that we plan that schedule specifically for these reliable demand patterns, we announced 10 new markets a lot of those markets support our MLS partnership.
Speaker 3: plan that schedule specifically for these reliable demand patterns. We announced 10 new markets. A lot of those markets support our MLS partnership with SKED service. And I think this is going to be a theme for us. We're going to continue to connect Minneapolis to domestic and international markets, focus on VFR traffic in the summer months between Memorial Day and Labor Day. And then in the winter time, it's going to be a little bit of new markets, but mostly thanks to our sale growth as we continue to expand out into
Let's get service and I think theres going to be a theme for us we're going to continue to connect Minneapolis to domestic and international markets focused on VFR traffic.
In the summer months between Memorial Day, and Labor day, and then in the winter time, it's going to be a little bit of new markets, but mostly same store sale growth as we continue to expand out into the peak opportunities with fleet growth in pilot.
Speaker 3: opportunities with fleet growth and pilot work group expansion.
Pilot work group expansion so.
Speaker 3: You know, and that's in real contrast to what we do, say, to the Mexican-Caribbean markets out of Texas in the summer. In the past, we've flown the Hawaiian markets off the West Coast. And that is certainly being a spill carrier. But we're just very strategic about when we apply capacity so that we can deliver high-unit revenue.
In essence, it real contrast to what we do.
Say to the Mexican Caribbean markets out of Texas in the summer in.
In the past we saw on the Hawaiian.
Markets off the West coast and that is certainly being a spill carrier, but we're just very strategic about when we apply capacity. So that we can deliver high unit revenues.
Speaker 9: Um, granted anything else, but the only thing I'd add to that, dude, is yeah, being the leisure carrier of choice up here, we added 15 new markets this year. They all work. They're all coming back. We extended or we added these new 10, um, gelt is a formidable carrier. They have a really strong hub here. We never expect to have uncontested dom stocks, um, but the business is, uh,
John.
The only thing I'd add to that Judy is yes, being the leisure carrier of choice up here, we added 15, new markets. This year. They all work Theyre all coming back we extended or we added these new tan.
Delta departmental bulk carrier they have a really strong hub here, we never expect to have uncontested darn stocks, but the businesses.
Speaker 9: very comfortable that will be successful and we have sort of past
We feel very comfortable that we'll be successful and we have sort of passed.
Speaker 3: examples to back up that framework. Well, one more thing on Delta. We want Delta to be successful in the market because.
Samples to backup that framework, one more thing on Delta, we want delta to be successful in the market because.
Speaker 3: It serves business customers and we want a vibrant business community here in the Twin Cities. So, you know, I think we serve completely different segments of the market. And, you know, we launched these ten new, announced these ten new markets and they did change their schedule and a few of the markets to add some nonstop opportunities. Most of it's on regional connectivity. I think that's consistent with everything we've seen with them, with them since this on country transition began in, you know, 2018.
It serves business customers and we want a vibrant business community here in the twin cities. So I think we serve completely different segments of the market.
We had a launch these 10, new announced these 10, new markets and they did change their schedule and a few of the markets to add some non stop opportunities most of its on regional connectivity I think thats consistent with everything we've seen with them with them since.
The Sun country transition began in two.
2018 or so.
No got it okay. That's really helpful. Thanks team.
Speaker 1: Thank you. Please stand by for our next question.
Thank you please standby for our next question.
Speaker 1: Our next question comes from the line of Michael Linenberg of Deutsche Bank. Your line is now open.
Our next question comes from the line of Michael Lindenberg of Deutsche Bank. Your line is now open.
Speaker 10: Oh, hey, good afternoon, guys. Dave, you called out for you had called out fourth quarter. You talked about, I guess, a large number of heavy checks, I guess, on on maintenance. What what would be the impact of that? Maybe on a margin basis? And what are some of the other.
Oh, Hey, good afternoon guys.
Thank you.
You had called out fourth quarter, and you talked about I guess, a large number of <unk>.
Heavy checks I guess on maintenance.
What would be the impact of that maybe on a margin basis and what are some of the other sort.
Speaker 10: sort of pressure points. I think about, you know, margins down year over year, fuel is fuel is a good guy. What are some of the is it labor? Is it maintenance? Any color on that would be great.
Sort of pressure points.
Think about margins down year over year fuel as fuel as a good guy.
Some of it is it labor is it maintenance any color on that would be great.
Yes, so the.
The number of checks in the fourth quarter are about three times what they were in the fourth quarter of 2020.
The number of checks in the fourth quarter or about three times, what they were in the fourth quarter of 2022.
So that is a significant driver and just the timing of checks. Probably.
So that is a significant driver and it's just the timing of checks.
It's probably a.
board a five million dollar issue for us in q4 so it is it is not small
$4 million to $5 million issue for us in Q4. So it is it is not small.
You know, that's probably the only one that sort of stands out for me there.
Yes.
That's probably the only one that sort of stands out for me there.
Yes.
But, you know, that's just it's a, you know, it's airframe heavy checks. It's on a schedule and.
But that's just that's it.
Yes.
Airframe heavy checks, it's on our schedule and we.
We can't do much about it.
And then just my second question, you know, it was interesting.
Okay. Okay. Good.
And then.
My second question.
It was interesting one of.
One of your fellow low fare competitors, you know, was talking about, you know, refocusing on different markets.
One of your fellow low fare competitors.
Talking about.
Refocusing on different markets, and maybe allocating more of their flying to underserved markets versus silver served.
maybe allocating, you know, more of their flying to underserved market versus over served and Minneapolis.
<unk> came up at least I think twice on that call and I think you guys know Minneapolis better than anyone.
at least I think twice on that call, and I think you guys know Minneapolis better than anyone, Jude, you and Grant. You're thinking on that? Is it an underserved market? Is there gate availability? Should we be concerned that we're going to see more low fare competition in that market? I know you've dealt with low fare competitors in the past. Any thoughts on that comment? Thank you.
Would you and grant.
Youre thinking on that is it is it an underserved market is there are there is a gate availability should we be concerned that we're going to see more low fare competition in that market.
I know you've dealt with low fare competitors in the perhaps any thoughts on on.
Comment thank you.
Yeah, I think what's interesting is how the US market has kind of differentiated itself. And I think largely, the differentiation, the success of US carriers over the last quarter has been
Yes, I think what's interesting is how the U S market is kind of differentiate itself and I think largely.
The differentiation the success of U S carriers over the last quarter has been.
about how they deal with off-peak demand. And there's kind of three ways they do it. One is the network carriers, which focus on business customers. They've also largely been able to take advantage of a longer Atlantic season this year. Or the ULCC guys, one of which you're talking about there, that just discount into that environment and try to stimulate some demand. Or there's guys like us, and we just cut out those flights.
About how they deal with off peak demand and Theres kind of three ways. They do it is one is the network carriers, which focus on business customers. They are also largely been able to take advantage of a longer Atlantic season. This year.
Or the UFC, guys, one of which youre talking about there that just discount into that environment and try to stimulate some demand or theres guys like us if we just cut out those flights.
And I think our method is the best, obviously. And what I say is, like, you know, and that makes us kind of uniquely capable of serving this.
And I think our method is the best.
Thanks Lee.
And what I'd say is that and that makes us kind of uniquely capable of serving this.
in particular the Minneapolis, but also I think it applies to some other markets as we grow.
In particular, the Minneapolis, but also I think it applies to some other markets as we grow.
demand profile that's really volatile and there's no, you know, we have 98 markets out of Minneapolis, five of them are year round.
Demand profile, Thats really volatile and Theres no.
We have 98 markets out of Minneapolis five of them are year round.
And so.
The Minneapolis consumer wants to go very different places at different times.
The Minneapolis consumer wants to go very different places at different times based on the calendar and were designed to do that so I'm not I'm not too concerned about it I think we will continue to have some overlap, particularly in the kind of traditionally largest leisure markets like cancun in Orlando.
based on the calendar, and we're designed to do that. So I'm not too concerned about it. I think we'll continue to have some overlap, particularly in the kind of traditionally largest leisure markets like Cancun, Orlando, and Vegas, for example. And then probably also Detroit and Denver, because those two carriers serve that as markets a lot.
And Vegas for example.
And then probably also Detroit Denver, because those two carriers serving those markets a lot.
But, you know, I don't think that changes my outlook at all for anything. That's the only thing I would add to that.
But I.
I don't think that changes.
Outlook at all.
For anything that's not the only thing I would add to that.
And we've added a lot of service to a lot of new markets. So we've added new markets that allow customers here, notably leisure customers, to go nonstop. The other thing that I think the really important component of this might.
And we've added a lot of third as do a lot of new markets. So we've added new markets that allow customers, notably leisure customers to go nonstop. The other thing that I think the really important component of this Mike is that Minneapolis at high point of sale coming out of the market. So all of that has been done by the team to build that.
is that Minneapolis has high point of sale coming out of the market. So all that has been done by this team to build the brand, build our seat share, is really powerful because as people go and look for places to go, they really come to, you know, they'll go to Delta.com, but they'll also go to SunCountry.com. So for others to come into the marketplace, it isn't just as easy as saying, hey, I'm going to put planes up here and they're going to be successful. There's a lot of work that goes into it.
Brand build our seed share is really powerful because.
People go and look for places to go they really come to so I'll go to Delta Dot com results kind of Sun country Dot com, so for others come into the marketplace.
Is it just as easy as saying, Hey, I'm going to put planes up here and theyre going to be successful. There is a lot of work that goes into what.
built and developed over the last few years and I can't overstate the volatility of our schedule we'll have days with 150 flights and days with three in the
Built and developed over the last few years and I can't overstate the volatility of our schedule will have days with 150 flights in days with three.
In the third quarter.
And it's just, you know, that's how we're able to generate these unit revenues.
And it just.
That's how we're able to generate these unit revenues.
Yes.
Great, and just if I could squeeze in one quick last one, Jude, if you had.
Great and just if I could squeeze in one quick last one June if you had.
the right amount of pilot time so that you could really lean in during the peaks during during the September quarter.
The right amount of pilot time so.
You could really lean in during the peaks during during the September quarter.
How much better, like how much margin have you left on the table because you're not at the optimal staffing level just yet, knowing that that additional flying tends to be very high margin, just trying to get a feel for it. So our variable contribution and.
How much better.
How much mark how much margin have you left on the table because youre not at the optimal staffing level, just yet knowing that that additional flying tends to be very high margin.
Just trying to yes, so so.
Our variable contribution in <unk>.
July is about 40% and thats.
You know, so incremental flying into that period would be a little bit lower than that because when we're capacity constrained on monthly block hours, we'll bunch together the flights on the peakiest of days. So we'd be expanding into Wednesdays and Saturdays, for example, but it'd still be in the 30-25% range. And that demand period would have lasted into the beginning of August . So that 3,500 foregone block hours probably would produce somewhere in the range.
So incremental flying into that period would be a little bit lower than that because when we are capacity constrained on monthly block hours will bunch together the flights on the <unk> days, so it would be expanding into Wednesdays and Saturdays for example, but it still be in that 30% 25% range.
And that demand period would have lasted into the beginning of August so that 3500, a foregone block hours, probably would produce somewhere in the range of.
know seven to ten million dollars of operating earnings for the quarter. Okay, very good.
$7 million to $10 million of operating earnings for the quarter.
Okay.
Very good. Thank you thanks, everyone for answering my questions.
Thank you. Please stand by for our next question.
Thanks, Brian.
Thank you please standby for our next question.
Our next question comes from the line of Scott Group of Wolf. Your line is now open.
Our next question comes from the line of Scott Group of Wolfe. Your line is now open.
Hey, thanks afternoon. I know we talked about the fourth quarter RASM assumptions, but maybe just help us with some of the other pieces in the in the fourth quarter revenue guide scheduled service capacity and then maybe expectations on charter and cargo revenue.
Hey, Thanks afternoon.
I know, we talked about the fourth quarter RASM assumptions, but maybe just help us with some of the other.
Pieces in the fourth quarter revenue guide scheduled service capacity and then maybe <unk>.
Expectations on charter in cargo revenue.
Well, sorry, the easy one cargo is fairly flat, which we would expect every cold.
Sorry, the easy one cargo is fairly flat.
Which we would expect every quarter to be kind of looking forward.
Dave, anything else? Yeah. Yeah. I mean, we talked about what our sort of what our, our.
David anything else yes.
Yes, I mean, we talked about what are sort of what are our.
Revenue growth.
and our block hour growth expectations are for the fourth quarter. I think, you know, we're probably going to see unit revenues down moderately, you know, in the fourth quarter. And we've got largely these maintenance costs as the biggest driver of, of a chasm in Q4.
At our block hour growth expectations are for the fourth quarter.
I think we.
We're probably going to see unit revenues down moderately.
<unk>.
In the fourth quarter and we've got largely these maintenance cost is the biggest driver of.
Of CASM in Q4.
I think those are sort of the major trends.
Okay, and then maybe, you know, I get there's there's a lot of seasonality to your.
Okay, and then maybe I guess theres a lot of seasonality to your.
um model you know each quarter and and there's just not a lot of
Model each quarter, and there's just not a lot of.
You know, pre pandemic history just so what I'm hoping to get some help on here is right. If you just look at the, the operating margins, you know, Q1 was 20% Q2 was 15 Q3 8. now this quarter's for. I mean, what's your, like, what's the margin run rate you think we're, we're, we're at right now entering 2024 is this based on the what, you know, today is this a.
Pre pandemic history, just so what I'm, hoping to get some help on here is that if you just look at the operating margins in Q1 was 20% in Q2 was 15 Q3 eight now this quarter's four.
What's your what's the margin run rate you think we're at right now entering 2024 is this based on what you know today is this.
Mid-single-digit margin, a high single-digit margin, a double-digit margin, I just, it's hard to know, right? There's so much seasonality, we just don't have a lot of history.
Mid single digit margin high single digit margin a double digit margin.
It's hard to know right. There's so much season that there is so much seasonality, we just don't have a history.
Our pre tax trailing 12 month margin is.
10.2%. And so, you know, you were talking about operating margins. So that put operating margin probably in the 14 range. I mean, I think that's something we should.
10, 2%.
So you were talking about operating margins, so that put operating margin probably in the 2014 range.
I think thats something.
Being able to continually replicate.
I think that 14% number is replicatable in the near future, and the potential for the business is greater than that. I mean, Jude mentioned the number. Once we get sort of the, you know, full advantage of the peak opportunities, particularly in the summer months, we should be able to do better than that sort of mid-teens operating margin number. And you feel like you've got visibility to that low-teens optimum?
I think that 14% number is replicate a bowl.
In the near future and the potential for the business is greater than that I mean, do you had mentioned the number once we get sort of the.
Full advantage of the peak opportunities, particularly in the summer months.
We should be able to do better than that sort of mid teens operating margin number.
And you feel like you've got visibility to that.
Low teens op margin next year.
Yes, but we are selling through labor day.
So we have pretty good visibility into sales. I don't know if you watch our schedule that much, but we're adding January .
So we have pretty good visibility into sales I don't know if you watch our scheduled that much but we're adding January.
Other commentary you're seeing around the industry is people cutting back in January as being a trial period. We're seeing the need for more capacity and also responding to improved pilot staffing situations.
Other commentary youre seeing around the industry is people cutting back in January as being a trough period, we're seeing the need for more capacity and also responding to improved pilot staffing situation.
Yeah, I think that's pretty good. Yeah. So, I mean, we're not, we're not giving full year 2024 guidance at this point, but, you know, based on where we're at now, in terms of getting our plan together for next year. We think we have some very, very achievable revenue and cost goals, and they put our margin in in that range that we were just talking about.
Yes.
And then pretty good first quarter, yes, so I mean, we're not we're not giving full year 2020 for guidance at this point, but.
Based on where we're at now in terms of getting our plan together for next year.
We think we have some very very achievable revenue and cost goals and they put our op margin in in that range that we were just talking about.
Okay and then maybe just lastly just some of the puts and takes around free cash flow for next year. It sounds like CapEx coming down a bunch, but how do you think about free cash flow?
Okay, and then maybe just lastly, just some of the puts and takes around free cash flow for next year. It sounds like capex coming down a bunch, but how do you think about free cash flow next year.
Yes, so free cash flow is going to be significantly higher. First of all, again, not to give too much 24 guidance, but we expect a material improvement in results next year and a drastic reduction in CapEx. So I think we're going to be a very strong free cash flow generator, which is one of the reasons we felt comfortable allocating another $25 million to share repurchases. We will continue on this track. You know, our aircraft are large.
Yeah, So free cash flow is going to be significantly higher first of all.
Again, not to give too much 24 guidance, but we expect a material improvement in results next year and a drastic reduction in capex. So I think we're going to be a very strong free cash flow generator, which is one of the reasons, we felt comfortable allocating another $25 million to share repurchases. We will continue on this track.
No.
Our aircrafts are largely purchased.
Operating results look strong based on what we've seen so far. We'll continue to make the best use of our cash as we generate it.
Operating results look strong.
Just on what we've seen so far will continue to.
To make the best use of our cash as we generate it.
Okay. Thank you for the time guys appreciate it.
Thanks Scott.
Thank you. At this time, this does conclude our question and answer session. I would now like to turn the call back over to Jude Bricker for closing remarks.
Thank you.
This time. This does conclude our question and answer session I would now like to turn the call back over to Jude Bricker for closing remarks.
Thanks for your time and attention, everybody. We'll talk to you again at the end of the year. Thanks.
Thanks for your time and attention to everybody and we'll talk to you again at the end of the year.
Thanks.
Yeah.
Thank you. This does conclude today's conference.
Thank you this does.
This concludes today's conference.
Now disconnect.
You
Okay.
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