Q1 2024 Alaska Air Group Inc Earnings Call
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Operator: Good morning, ladies and gentlemen, and welcome to the Alaska Air Group 2024 First Quarter Earnings Call. At this time, all participants have been placed on mute to prevent background noise.
Speaker Change: Good morning, ladies and gentlemen, and welcome to the Alaska Air Group 2024 first quarter earnings call at.
Speaker Change: At this time all participants have been have been placed on mute to prevent background noise.
Operator: Today's call is being recorded and will be accessible for future playback at alaskaair.com. After our speaker's remarks, we will conduct a question and answer session for analysts. I would now like to turn the call over to Alaska Air Group's Vice President of Finance, Planning, and Investor Relations, Ryan St. John. Thank you, operator, and good morning.
Speaker Change: This call is being recorded and will be accessible for future playback at Alaska Air Dotcom.
Speaker Change: After our speakers remarks, we will conduct a question and answer session for analysts.
Speaker Change: I would now like to turn the call over to Alaska Air Group's Vice President of Finance planning and Investor Relations Ryan St. John.
Speaker Change: Thank you operator and good morning.
Ryan St. John: Thank you for joining us for our first quarter 2024 earnings call. This morning, we issued our earnings release along with several accompanying slides detailing our results, which are available at investor.alaskaair.com. On today's call, you'll hear updates from Ben, Andrew, and Shane. Additionally, several others on our management team are also on the line to answer your questions during the Q&A portion of the call. This morning, Air Group reported a first quarter net loss of $132 million.
Speaker Change: Thank you for joining us for our first quarter 2024 earnings call. This morning, we issued our earnings release, along with several accompanying slides detailing our results, which are available at investor that Alaska Air Dot com on.
Speaker Change: On today's call you will hear updates from Ben Andrew and chain several others of our management team are also on the line to answer your questions. During the Q&A portion of the call.
Speaker Change: This morning Air Group reported a first quarter GAAP net loss of $132 million.
Ryan St. John: Excluding special items and mark-to-market fuel hedge adjustments, Air Group reported an adjusted net loss of $116 million. As a reminder, our comments today will include forward-looking statements about future performance, which may differ materially from our actual results. Information on risk factors that could affect our business can be found within our sec file. We will also refer to certain non-GAAP financial measures, such as adjusted earnings and unit cost excluding.
Speaker Change: Excluding special items and Mark to market fuel hedge adjustments Air group reported an adjusted net loss of $116 million.
Speaker Change: As a reminder, our comments today will include forward looking statements about future performance, which may differ materially from our actual results information on risk factors that could affect our business can be found within our SEC filings. We will also refer to certain non-GAAP financial measures such as adjusted earnings and unit costs excluding fuel.
Ryan St. John: And as usual, we have provided a reconciliation between the most directly comparable gap and non-gap measures in today's earnings. Over to you. Thanks, Ryan. And good morning, everyone.
Speaker Change: And as usual we have provided a reconciliation between the most directly comparable GAAP and non-GAAP measures in today's earnings release over to you Ben.
Speaker Change: Yes.
Ben Andrew: Thanks, Ryan and good morning, everyone.
Benito Minicucci: As you are all aware, the most significant event this quarter was the accident involving Flight 1282 and the subsequent four-week grounding of a third of our fleet. Our focus has been on the safe return of our fleet, caring for our employees and guests, and enhancing our oversight of the production of our new aircraft. This event also had a substantial financial impact, totaling $162 million, for which Boeing has fully compensated us. To provide clarity on our core business, I will discuss our Q1 results excluding the effects of Flight 1282 and the MAX grounding. During the quarter, we also received a second request for information from the DOJ regarding our proposed acquisition of Hawaiian Air.
Ben Andrew: As you are all aware the most significant event. This quarter was the accident involving flight 12, 82, and the subsequent four week grounding of a third of our fleet.
Ben Andrew: Our focus has been on the safe return of our fleet carrying for our employees and guests and enhancing our oversight of the production of our new aircraft.
Ben Andrew: This event also had a substantial financial impact totaling a $162 million, which Boeing has fully compensated us for.
Clarity on our core business performance I will discuss our Q1 results excluding the effects of flight 12, 82, and the Max grounding.
During the quarter. We also received a second request for information from the Doj regarding our proposed acquisition of Hawaiian Airlines.
Benito Minicucci: We are working to respond to these requests as quickly as possible. Given the substantial volume of information involved, we have granted the government an additional 60 days to review our responses and will continue to work with them to advance the process as swiftly as possible.
Ben Andrew: We are working to respond to these requests as quickly as possible given the substantial volume of information involved we have granted the government an additional 60 days to review our responses and we will continue to work with them to advance the process as swiftly as possible. We still believe strongly in the pro consumer and pro competitive.
Benito Minicucci: We still believe strongly in the pro-consumer and pro-competitive merits of this deal and are excited by the opportunities this will unlock for Alaska both domestically and internationally. A year ago, I set a goal for my team to reduce losses in the first quarter, traditionally our weakest, with the aim of progressing towards break-even over the next three years. I am proud to announce that, excluding the grounding impact, we have achieved this goal in one year.
Ben Andrew: Of this deal and are excited by the opportunities this will unlock for Alaska, both domestically and internationally.
A year ago I set a goal for my team to reduce losses in the first quarter traditionally our weakest with the aim of progressing towards breakeven over the next three years I am proud to announce that excluding the grounding impact we have achieved this goal and one year, our Q1 performance far exceeded our initial.
Benito Minicucci: Our Q1 performance far exceeded our initial expectation of a 30% profit improvement coming into this year. We not only reduced losses, but we turned a small profit absent the max grounding on record revenue for the quarter. Several factors contributed to this positive performance, including discipline and thoughtful capacity planning, a concerted effort to reconfigure and optimize our network, the return of West Coast business travel, particularly among technology companies, and strong leisure demand throughout our market.
Expectation of a 30% profit improvement coming into this year.
Ben Andrew: We not only reduce losses, but we turned a small profit absent the Max grounding on our record revenue for the quarter.
Ben Andrew: Several factors contributed to this positive performance, including disciplined and thoughtful capacity planning a concerted effort to reconfigure and optimize our network. The return of West coast business travel, particularly among technology companies and strong leisure demand throughout.
Ben Andrew: Our markets.
Benito Minicucci: While we strive to do even better going forward, the underlying improvement in our core business in Q1, despite the significant disruption felt across our business from the Max grounding, is a fantastic result for Air Group. With this under-performance, we are revising our full-year adjusted EPS from $3.25 to $5.25, which does not reflect any compensation.
Ben Andrew: While we strive to do even better going forward the underlying improvement in our core business in Q1, despite the significant disruption across our business from the Max grounding is a fantastic result for Air group.
Ben Andrew: With this outperformance we are revising our full year adjusted EPS from $3 25 to $5 and 25.
Ben Andrew: Which does not reflect any compensation.
Benito Minicucci: We remain encouraged by our Q2 Outlook and beyond. We've continued to see robust demand through the spring break travel season and have visibility to double-digit adjusted pre-tax margins in the second quarter, despite higher fuel prices. Our commitment to changing the outcome in Q1 positions us at a better starting point.
Ben Andrew: We remain encouraged by our Q2 outlook and beyond we've continued to see robust demand through the spring break travel season and have visibility to double digit adjusted pretax margins in the second quarter, despite higher fuel prices.
Ben Andrew: Our commitment to changing the outcome in Q1 positions us at a better starting point not only for the rest of this year, but also in years to come as we look to grow profits and earnings over time from a stronger base.
Benito Minicucci: Not only for the rest of this year but also in years to come, as we look to grow profits and earnings over time from a stronger business. Now looking ahead, our focus remains on driving our strategic initiatives forward and managing the elements of our business within our control. We are excited to be back on track and running a solid operation with our full fleet and service. As I stated earlier, we have received $162 million in cash compensation from Boeing, making us whole for the total Q1 profit impact related to the MAX grounding. Our long-standing partnership with Boeing is important to us and to our customers. The financial agreement we've reached with them is a strong reflection of that relationship.
Ben Andrew: Looking ahead, our focus remains on driving our strategic initiatives forward and managing the elements of our business within our control. We are excited to be back on track and running a solid operation with our full fleet in service.
Ben Andrew: As I stated earlier, we have received $162 million in cash compensation from Boeing making us whole for the total Q1 profit impact related to the Max grounding, our long standing partnership with Boeing is important to us and to our success.
Ben Andrew: The financial agreement, we've reached with them is a strong reflection of that relationship.
Benito Minicucci: We remain committed partners, but we will hold Boeing to the highest bar for quality out of the factory. And to that end, we have enhanced our in-person oversight of our 737 production line and are regularly engaging with Boeing leadership on quality and schedule. Alaska needs Boeing.
Ben Andrew: We remain committed partners, but we will hope Boeing to the highest bar for quality out of the factory.
Ben Andrew: And does that and we have enhanced our in person oversight of our 737 production line and are regularly engaging with Boeing leadership on quality and schedule allows.
Ben Andrew: Alaska needs Boeing our industry needs Boeing and our country needs Boeing to be a leader in airplane manufacturing.
Benito Minicucci: Our industry needs Boeing, and our country needs Boeing to be a leader in airplane manufacturing. Operationally, we've regained our reliability by returning our entire fleet to service in February. The response from our guests has been incredibly positive. Strong Demand Evidence throughout February and beyond. Our teams have dedicated themselves around the clock to restore operational excellence, resulting in an improved completion rate of 99.5% from the second week of February through March, more in line with our historical standard of performance.
Ben Andrew: Operationally, we've regained our reliability by returning our entire fleet to service on February eight <unk>.
Ben Andrew: The response from our guests has been incredibly positive with strong demand evident throughout February and beyond.
Ben Andrew: Our teams have dedicated themselves around the clock to restore operational excellence, resulting in an improved completion rate of 99, 5% from the second week of February through March more in line with our historical standard of performance, a big shout out to our entire maintenance and engineering team for bringing back all our maximum.
Benito Minicucci: A big shout out to our entire maintenance and engineering team for bringing all our MAX 9s back into service safely and reliably. Safety is a foundational and uncompromising value for Air Group, and we expect nothing but the highest quality aircraft from Boeing.
Ben Andrew: These into service safely and reliably.
Ben Andrew: Safety is a foundational and uncompromising value for air group, and we expect nothing but the highest quality aircraft from Boeing regarding 2024 aircraft deliveries as we've stated before we expect Boeing will fall short of the 23 planned deliveries to us this year Andrew.
Benito Minicucci: Regarding 2024 aircraft deliveries, as we've stated before, we expect Boeing will fall short of the 23 planned deliveries to us this year. Andrew will discuss Q2 capacity in more detail, but our objective will be to deliver a schedule with a high level of service and reliability our guests expect and know from us, and Shane will discuss the impact on full-year CapEx due to fewer delays. As we kick off the second quarter, one of our busiest and most profitable periods, we are optimistic and determined to drive strong results in our Safety remains paramount, and we've successfully restored operational. Building on our Q1 profitability improvements, we're now focused on leveraging these strengths to expand profitability and generate free cash.
Ben Andrew: Andrew will discuss Q2 capacity in more detail, but our objective will be to deliver a schedule with the high level of service and reliability, our guest expect and know from us and Shane will discuss the impact to full year capex due to fewer deliveries.
Speaker Change: As we kick off the second quarter, one of our busiest and most profitable periods, we are optimistic and determined to drive strong results in our business safety.
Safety remains Paramount and we have successfully restored operational excellence built.
Speaker Change: Building on our Q1 profitability improvements were now focused on leveraging these strengths to expand profitability and generate free cash flow.
Benito Minicucci: With last year's strong unit cost performance as our foundation, we're enhancing productivity across the board. And our careful management of capacity, combined with our focus on a premium guest experience, positions us well to deliver solid financial results over the next three quarters. And lastly, I just want to acknowledge this amazing Alaska team, from our exceptional frontline employees who deliver consistently strong operational results and guest service to our leadership team that holds itself accountable to being better each day. Together, we're driving success every step of the way. And with that, I'll turn it over to Andrew.
Speaker Change: With last year's strong unit cost performance as our foundation, we're enhancing productivity across the board and our careful management of capacity combined with our focus on our premium guest experience positions us well to deliver solid financial results over the next three quarters.
Speaker Change: And lastly, I just want to acknowledge this amazing Alaska team from our exceptional frontline employees, who deliver consistently strong operational results and guest service to our leadership team that hold itself accountable to being better each day.
Speaker Change: Together, we're driving success every step of the way and with that I'll turn it over to Andrew.
Andrew R. Harrison: Thanks, Ben, and good morning, everyone. Today, my comments will speak to our first quarter results, with a focus on unpacking our core performance and addressing second quarter trends and guidance. We achieved record first quarter revenues totaling $2.2 billion.
Andrew: Thanks, Ben and good morning, everyone. Today, My comments will speak to our first quarter results.
Andrew: With a focus on unpacking, our core performance in addressing second quarter trends and guidance.
Andrew: We achieved record first quarter revenues totaling $2 $2 billion.
Andrew R. Harrison: Up 1.6% year-over-year. This is an incredible result, especially when you consider the $150 million in revenue that we lost due to the ground. Our team did a masterful job rethinking the deployment of our Q1 network in order to combat the seasonal challenges we face and best serve the demand in our geography. Capacity ended the quarter down 2.1% year over year, inclusive of an approximate 5.5 point impact from the ground.
Andrew: One 6% year over year.
Andrew: This is an incredible result, especially when you consider the $150 million in revenue that we lost due to the grounding.
Andrew: Our team did a masterful job rethinking the deployment of our Q1 network in order to combat the seasonal challenges, we face and to best serve the demand in our geographies.
Andrew: Capacity ended the quarter down two 1% year over year inclusive an approximate $5 five point impact from the grounding.
Andrew R. Harrison: This result was better than our initial expectation immediately following the accident due to high utilization, a better than expected completion rate, and no significant winter weather. Absent the grounding, capacity would have been up approximately 3.5%, a level we feel was appropriate for the Q1 environment and our network reconfiguration. In addition to our focused network efforts, we were positively impacted by the rapid return of corporate travel revenues and general close-in strength, which drove a strong unit revenue result. For the quarter, unit revenue was up 3.8% year over year.
Andrew: This result was better than our initial expectation immediately following the accident due to high utilization a better than expected completion rate and no significant winter weather.
Andrew: Is it the grounding.
Andrew: <unk> would have been up approximately three 5% a level, we feel is appropriate for the Q1 environment and our network reconfiguration.
Andrew: In addition to our focus network efforts, we were positively impacted by the rapid return of corporate travel revenues and general closing strength, which drove a strong unit revenue result.
Andrew: For the quarter unit revenue was up three 8% year over year, excluding the impact of the grounding unit revenue would've been up 5%, which is markedly higher than our original guidance of up 1% to 2%. This outperformance was driven by three factors first one five points of RASM.
Andrew R. Harrison: Excluding the impact of the grounding, unit revenue would have been up 5%, which is markedly higher than our original guidance of up 1-2%. This outperformance was driven by three factors. First, one and a half points of RASM outperformance came from better than expected results related to the reallocation of flying.
Andrew: Outperformance came from better than expected results related to the reallocation of flying.
Andrew R. Harrison: These changes more successfully met demand across our markets as we capitalized on more leisure flying. One-and-a-half points of RASM improvement came from a material step up in business travel beginning in January, especially from large technology... In Q1, managed business revenue grew 22%, approximately 50% driven from yield and 50% from volume. Tech companies saw the biggest improvement, with revenues up over 50% year-over-year and professional services revenue an impressive 20%, to put the speed of recovery into perspective. Managed Business Revenues increased 10% in January, a stunning 30% in February, and 24% in March. These results were achieved despite the grounding and layaway we experienced.
Andrew: These changes more successfully met the demand across our markets as we capitalized on more leisure flying second.
Andrew: One and a half points of RASM improvement came from a material step up in business travel beginning in January, especially from large technology companies. In Q1 managed business revenue grew 22% approximately 50% driven from yield and 50% from volume.
Andrew: Tech companies saw the biggest improvement with revenues up over 50% year over year and professional services revenue an impressive 20%.
Andrew: To put the speed of recovery into perspective managed business revenues increased 10% in January a stunning 30% in February and 24% in March.
These results were achieved despite the grounding and book why we experienced today managed corporate revenue has fully recovered to 2019 levels. While tech is approximately 85% recovered.
Andrew R. Harrison: Today, managed corporate revenue has fully recovered to 2019 levels, while tech is approximately 85% recovered. As we've said for some time, we expected business travel to come back, which we are clearly seeing today. While we did not bake this into our Q1 forecast, we do not anticipate any step back in corporate travel in Q2. Half a point of RASM improvement came once we restored our schedule reliability, and we saw strength in close in leisure demand return.
Andrew: As we've said for some time, we expected business travel to come back, which we are clearly seeing today.
Andrew: While we did not bake this into our Q1 forecast, we do not anticipate any step back in corporate travel in Q2.
Andrew: Third.
Half a point of RASM improvement came once we restored our schedule reliability and.
And we saw strength in close in leisure demand return.
Andrew R. Harrison: This strength is especially evident in February, where revenue beat our original pre-grounding expectations despite loss flying and booking away at the beginning of the month. Similarly, our total March revenue surpassed our record-breaking result last year on just over one point lower load factor, bolstered by yields that improved two points in the month, driven by strong, close-input sales. Taken all together, these impacts drove a three and a half point improvement above the midpoint of our original guide for the quarter.
Andrew: This strength is especially evident in February where revenue beat our original pre grounding expectations, Despite loss flying and book away at the beginning of the month.
Andrew: Similarly, our total match revenue surpassed our record breaking result last year on just over one point lower load factor.
Andrew: By yields that improved two points in months driven by strong close in performance.
Taken altogether. These impacts drove a three five point improvement above the midpoint of our original guide for the quarter.
Andrew R. Harrison: Lastly, our premium cabin performance continues to support what we believe to be a structural shift in higher demand for premium products. First and Premium Class revenues finished up 4% and 11%, respectively, during the quarter, with our First Class paid load factor hitting monthly records at 68% during February and 69% in March.
Andrew: Lastly, our premium cabin performance continues to support what we believe to be a structural shift in higher demand for premium products.
First and premium class revenues finished up 4% and 11% respectively. During the quarter without first class paid load factor meeting monthly records at 68% during February and 69% in March.
Andrew R. Harrison: What makes these premium revenue results even more significant? is that they would have been higher had we not experienced the ground. Our paid premium capacity has come a long way from the days of paid load factors in the 40% range for Mainline and an all-coach regional. As we continue to refine our premium strategy across our products and markets, we have further upside to come and remain committed to building on our premium guest experience, offering the products our guests and loyalty members want. Our loyalty program, which we hope to share more on later this year, also continues to post strong results. Co-brand cash remuneration of approximately $430 million in Q1.
Andrew: What makes these premium revenue results, even more significant is that they would have been higher had we not experienced the grounding.
Our paid premium capacity has come a long way from the days of paid load factors in the 40% range, but mainline and an old coach regional fleet as we continue to refine our premium strategy across our products and markets. We have further upside to come and remain committed to building on our premium guest experience offering the products.
Andrew: Guests and loyalty members want a loyalty program, which we hope to share more on later this year also continues to post strong results.
Andrew: With co brand cash remuneration of approximately $430 million in Q1 up four 2% year over year, notwithstanding the grounding and a major contributor to the 48% of revenues, we generate outside the main cabin.
Andrew R. Harrison: Up 4.2% year-over-year, notwithstanding the grounding, and a major contributor to the 48% of revenues we generate outside the main cabin. Now, turning to our outlook and guidance. We expect capacity to step up 5-7% year over year in the second quarter, with the low end of this range assuming no aircraft are delivered this quarter. Given the uncertainty around delivery timing following the grounding, we have extended the retirements of several of our older aircraft over the next few months and pushed utilizations slightly higher across the mainline fleet where we have opportunities.
Andrew: Now turning to our outlook and guidance, we expect capacity to step up 5% to 7% year over year in the second quarter with the low end of this range assuming no aircraft delivered this quarter.
Andrew: Given the uncertainty around delivery timing following the grounding we have extended the retirements of several of our older aircraft over the next few months and pushed utilization slightly higher across the mainline fleet, where we had opportunity.
Andrew R. Harrison: We also added back more capacity on the regional side through Horizon and SkyWest, given higher utilization from improved pilot staff. Through the combination of these changes, we are confident in flying a reliable schedule for our customers. While the second quarter will be our highest growth this year, it is also our most profitable growth, with June a clear peak month for us. While we've added a handful of new routes across our network, the majority of our added flying is focused on additional frequencies in high-demand markets where we have conviction in their profitability. Second quarter bookings so far are encouraging, with yields continuing at healthy levels in April and beyond, albeit slightly moderating through the quarter on growing industry capacity.
Andrew: We also added back more capacity on the regional side through horizon, and Skywest, given higher utilization from improved pilot staffing.
Andrew: Through the combination of these changes we are confident in flying I reliable schedule for our guests.
Andrew: While the second quarter will be our highest growth. This year. It is also our most profitable growth with June a clear peak month for us while we've added a handful of new routes across our network. The majority of our added flying is focused on additional frequencies in high demand markets, where we have conviction in their profitability.
Andrew: Quarter bookings, so far are encouraging with yields continuing at healthy levels in April and beyond will be a slightly moderating through the quarter on growing industry capacity.
Andrew: This year, we have seen any more normalized yield and booking curve building and strength as we get closer in a trend we expect should persist.
Shane R. Tackett: This year we have seen a more normalized yield and booking curve building in strength as we get closer to the year, a trend we expect should persist. Looking beyond Q2, the back half of the year looks to be shaping up well, as industry capacity constraints remain in place. Competitive Intensity Dynamics Across Our West Coast Markets Stable. In closing, the team has done a tremendous job in reshaping our network to produce a strong result for our most seasonally-challenged, Full Value of our differentiated product offering, from premium seating to lounges to global partnerships. I believe we are well positioned to drive another solid quarter of performance as we move into our peak periods this summer. And with that, I'll pass it over to Andrew. Thanks, Andrew. And good morning.
Andrew: Looking beyond Q2, the back half of the year, it looks to be shaping up well as industry capacity constraints remain in place and competitive intensity dynamics across our west coast markets stabilize.
Andrew: In closing the team has done a tremendous job in reshaping our network to produce a strong result for our most seasonally challenged period.
Andrew: The full value of our differentiated product offering from premium seating to lounges to global partnerships. I believe we are well positioned to drive another solid quarter of performance as we move into our peak periods. This summer and with that I'll pass it over to Shane.
Shane: Thanks, Andrew and good morning, everyone.
Shane: What has been a challenging start to the year, our people and our business model have shown amazing resilience safety of course is our absolute priority and it will continue to be our top focus above all else. It has however been encouraging to see the level of improvement to our core first quarter performance. This year.
Shane R. Tackett: In what has been a challenging start to the year, our people and our business model have shown amazing resilience. Safety, of course, is our absolute priority, and it will continue to be our top focus above all else. It has, however, been encouraging to see the level of improvement in our core first quarter performance this year. While managing through the difficult circumstances of Flight 1282 and its aftermath, the teams did an admirable job operating safely and on time, and our commercial team put together a network plan that, coupled with strong demand, positioned us well to meet our long-term target to break even in Q1.
Shane: While managing through the difficult circumstances, a flight 12, 82 and its aftermath. The teams did an admirable job operating safely and on time and our commercial team put together a network plan that coupled with strong demand positioned us well to meet our long term target to breakeven in Q1.
Shane: We are not shy about setting ambitious goals for ourselves and we have a good history of delivering on those commitments.
Shane: Our financial focus remains on continuing to strengthen our business model and delivering strong financial performance over the long term.
Shane: Turning to our results for the first quarter, our adjusted loss per share was <unk> 92.
Shane: Which excludes compensation received from Boeing related to our Max fleet grounding the.
Shane: The profit impact of the fleet grounding in Q1 was $162 million or <unk> 95 of EPS and seven points of margin.
Shane R. Tackett: We are not shy about setting ambitious goals for ourselves, and we have a good history of delivering on those commitments. Our financial focus remains on continuing to strengthen our business model and delivering strong financial performance over the long term. Turning to our results, for the first quarter, our adjusted loss per share was $0.92, which excludes compensation received from Boeing related to our MAX fleet grounding. The profit impact of the fleet grounding in Q1 was $162 million, or $0.95 in EPS, and seven points of margin. Fuel price per gallon was $3.80.
Shane: Fuel price per gallon was $3.08 as.
Shane: As West Coast refining margins continued to be a unique margin headwind to our results relative to the rest of the country.
Shane: Our total liquidity inclusive of on hand, cash and Undrawn lines of credit stood at $2 8 billion as of March 31.
Shane: Debt repayments for the quarter were approximately $100 million and are expected to be approximately $50 million in the second quarter.
Shane: Our leverage levels remain healthy at 47% debt to cap and one one times net debt to EBITDAR, while our ROIC stands above 9%.
Shane: For the quarter unit costs were up 11, 2% year over year.
Shane R. Tackett: As West Coast refining margins continue to be a unique margin headwind to our results relative to the rest of the world, our total liquidity, inclusive of on-hand cash and undrawn lines of credit, stood at $2.8 billion as of March 31st. Debt repayments for the quarter were approximately $100 million and are expected to be approximately $50 million in the second quarter. Our leverage levels remain healthy at 47% debt to CAP and 1.1 times net debt to EBITDAR, while our ROIC stands above 9%.
Six points of which are directly attributable to the fleet grounding primarily from the significant loss of planned capacity, but we also incurred approximately $30 million of incremental operational recovery costs due to the grounding as well.
Shane: Our core unit costs absent grounding impacts were up approximately 5% year over year in the first quarter.
Shane: The drivers remained similar to prior quarters and are consistent with pressures faced by most airlines the primary of which is higher labor rates for our people.
Shane: We have completed seven labor contracts over the past two years, including a recently signed agreement with our aircraft technicians and we continue to prioritize finalizing an agreement with our flight attendants.
Shane: We remain committed to high productivity in our contracts and absent the Max grounding, we would've had a 2% increase in productivity year over year as measured by passengers carried per FTE. We expect continued productivity improvements throughout the year across the company and in May we will operate under our new <unk>.
Shane R. Tackett: For the quarter, unit costs were up 11.2% year over year, six points of which are directly attributable to the fleet grounding, primarily from the significant loss of planned capacity. We also incurred approximately $30 million of operational recovery costs due to the grounding as well.
Shane: <unk> bidding system for pilots for the first time, which will allow for both enhanced pilot productivity and importantly schedules that are more aligned with our pilots priorities.
Shane R. Tackett: Our core unit costs, absent grounding impacts, were up approximately 5% year-over-year in the first quarter. The drivers remain similar to prior quarters and are consistent with pressures faced by most airlines, the primary of which is higher labor rates for our, We have completed seven labor contracts over the past two years, including a recently signed agreement with our aircraft technician, and we continue to prioritize finalizing an agreement with our flight, We remain committed to high productivity in our contracts, and absent the max grounding, we would have had a 2% increase in productivity year-over-year, as measured by passengers carried per FTA.
Shane: While costs are materially higher structurally for the industry our margin profile for the first quarter is evidence we are making the right decisions on capacity deployment and we will continue to prioritize the overall margin health of the company over growth for the sake of unit cost performance alone.
Shane: We are committed to also retain our relative cost advantage and we continue to do well on that basis, we achieved the industry's best cost performance last year and looking at a rolling four quarter unit costs, we have outperformed both delta and United by three points on a stage length adjusted unit cost basis, while we.
Shane: We may experience quarterly variances on a unit basis, we are not ceding any of our relative advantage. We have widened the gap over the past 12 months and we remain focused on managing to a massive budgets and delivering strong margin performance.
Shane R. Tackett: We expect continued productivity improvements throughout the year across the company. And in May, we'll operate under our new preferential bidding system for pilots for the first time, which will allow for both enhanced pilot productivity and important schedules that are more aligned with our pilots' priorities. While costs are materially higher structurally for the industry, our margin profile for the first quarter is evidence we are making the right decisions on capacity deployment, and we will continue to prioritize the overall margin health of overgrowth for the sake of unit cost performance alone.
Shane: Not only did we improve profitability, excluding the grounding by $120 million year over year, when compared to the first quarter of 2019 and 2023, we've close the margin gap to our largest peers by approximately two to three points.
Shane: As we look ahead to Q2 and the rest of the character I won't provide capacity fuel EPS and capex guidance consistent with the metrics, we shared last quarter and our focus on the overall margin profile of the business.
For the full year, it's been shared we do not expect to receive all 23 deliveries from Boeing that we had originally planned for this year.
Shane R. Tackett: We are committed to also maintaining our relative cost advantage, and we continue to do well on that basis. We achieved the industry's best cost performance last year, and looking at our rolling four-quarter unit costs, we have outperformed both Delta and United by three points on a stage-length adjusted unit cost base. While we may experience quarterly variances on a unit basis, we are not feeding any of our relatives.
Shane: We are in discussions with Boeing and as we gain more clarity on those deliveries, we will update our expectations, but we expect full year capacity growth at this point to be below 3%.
Shane: Also due to lower expected deliveries, we now expect Capex of one two to $1 3 billion versus our prior expectation of one four to $1 5 billion.
Shane: We expect economic fuel cost per gallon to be between $3 and $3 20 for the second quarter and expect refining margins on the west coast to be more in line with Gulf Coast, which we've seen in the past several weeks.
Shane R. Tackett: We have widened the gap over the past 12 months, and we remain focused on managing to aggressive budgets and delivering strong margin performance. Not only did we improve profitability, excluding the grounding, by $120 million year over year, when compared to the first quarter of 2019 and 2023, but we've closed the margin gap with our largest peers by approximately 2 to 3 points. As we look ahead to Q2 and the rest of the year, I will provide capacity, fuel, EPS, and CapEx guidance, consistent with the metrics we shared last quarter and our focus on the overall margin profile of the business.
Shane: Given the significant spread in west coast fuel costs versus the rest of the country. We are developing strategies to mitigate this disadvantage. Our first step was to discontinue our hedging program given refining margins have become the more volatile component of fuel costs, which hedging did not protect us from the full value of hedging cost reduction will take <unk>.
Shane: Quarters to bleed in.
Shane: We're also changing our strategy for our annual fuel tender process to obtain better pricing and are likely to begin a program to begin a modest amount of self supply of fuel later this year and into 2025.
Shane: While these will take time to fully mature into our results. We expect these actions to close the current fuel headwind, we faced versus the rest of the industry and will help us to be well positioned to lead the industry in margins.
Shane R. Tackett: For the full year, as Ben shared, we do not expect to receive all 23 deliveries from Boeing that we had originally planned for this year. We are in discussions with Boeing, and as we gain more clarity on those deliveries, we will update our expectations. But we expect full-year capacity growth at this point to be below three percent. Also, due to lower expected deliveries, we now expect CapEx of $1.2 to $1.3 billion versus our prior expectation of $1.4 to $1.5 billion.
Shane: And as Ben mentioned, we expect full year EPS to now land between $3 25, and $5 25 for the full year and $2 20.
Shane: And $2 40 for Q2.
Shane: Despite a likely 35% year over year headwind from fuel, we have visibility to a path back to healthy double digit margins in the second quarter on our way to another strong full year performance with the immediate impact of the grounding behind us and our operational reliability back on track we are optimistic about our outlook for the rest of the year <unk>.
Shane R. Tackett: We expect economic fuel costs per gallon to be between $3 and $3.20 for the second quarter and expect refining margins on the West Coast to be more in line with the Gulf, which we've seen the past several. Given the significant spread in West Coast fuel costs versus the rest of the country, we are developing strategies to mitigate this disadvantage. Our first step was to discontinue our hedging program given that refining margins have become the more volatile component of fuel costs, which hedging did not protect.
Shane: <unk> continues to expand with supportive wage growth recently, improving consumer sentiment and trends, indicating a continuing preference to prioritize spending on travel and experiences over goods.
Shane: By remaining focused on our historical strength safety operational excellence and relative cost performance and continuing to reap the benefits of our commercial initiatives. Our business is configured to compete to maintain a relative advantage and to continue to deliver strong financial results.
Speaker Change: With that let's go to your question.
Speaker Change: At this time I would like to invite analysts who would like to ask a question. Please press Star then the number one on your telephone keypad.
Shane R. Tackett: The full value of the hedging cost reduction will take several quarters to bleed through. We are also changing our strategy for our annual fuel tender process to obtain better pricing and are likely to begin a program to begin a modest amount of self-supply of fuel later this year and into 2025. While these will take time to fully mature into our results, we expect these actions to close the current fuel headwind we face versus the rest of the industry and will help us to be well-positioned to lead the industry in margin. And as Ben mentioned, we expect full-year EPS to now land between $3.25 and $5.25 for the full year and $2.20 and $2.40.
Speaker Change: We'll pause for just a moment to compile the Q&A roster.
Speaker Change: And our first question will come from Andrew <unk> with Bank of America.
Andrew: Hi, good morning, everyone.
Andrew: Jane I know youre, not guiding to CASM, but if I were to just think about one <unk> being up 3% three 5% capacity.
Andrew: Are there any kind of puts and takes you would call out for QQ, whereby we wouldn't see kind of CASM stepped down nicely given youre growing at 6% and then similarly, as we think about the <unk>.
Andrew: Half as growth comes down.
Andrew: We expect CASM to maybe flex back up is that a fair assessment.
Speaker Change: Hey, Andrew Good morning, Yeah, I think that's the right contour that we're expecting to see this year will will you will see a decent improvement in unit costs in the second quarter given the.
Andrew: The growth profile of the company and as you mentioned growth slows down in the back half of the year and we'll probably see a little more pressure in the back half of the year again on unit cost.
Shane R. Tackett: Despite a likely 35-cent year-over-year headwind from fuel, we have visibility to a path back to healthy double-digit margins in the second quarter on our way to another strong four-year performance. With the immediate impact of the grounding behind us and our operational reliability back on track, we are optimistic about our outlook for the rest of the year. The economy continues to expand with supportive wage growth, recently improving consumer sentiment, and trends indicating a continuing preference to prioritize spending on travel and experiences over goods. By remaining focused on our historical strength, safety, operational excellence, and relative cost performance, and continuing to reap the benefits of our commercial strategy, our business is configured to compete, maintain our relative advantage, and continue to deliver strong financial results. And with that, let's go to your questions.
I think.
Andrew: I do just want to mention like the the company I like I think we've done a nice job balancing capacity versus unit costs, you've heard us increasingly talk about our focus on the margin health of the company. So we're going to continue to be.
Andrew: <unk> about how we.
Andrew: Put capacity into the market and we'll continue to compete really well on a unit cost basis against the larger airlines and our markets.
Speaker Change: That's great. Thanks, Shane and then just a follow up for Andrew I. Appreciate all the color you gave on corporate travel.
Andrew: Do you know what what percentage of your revenues today are corporate and how that compares to a pre pandemic.
Any color you can give us just in terms of what.
Andrew: Our RASM premium would be on corporate versus leisure travel. Thank you.
Andrew: Yeah, Thanks, Andrew we don't disclose that information, but.
Speaker Change: But I will tell you.
Operator: At this time, I would like to invite analysts who would like to ask a question to please press star and then number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Our first question will come from Andrew Didora with Bank of America. Hi, good morning, everyone. Shane, I know you're not guiding to chasm.
Speaker Change: That we see continued improvement and strength in our corporate position the business that is coming our way.
Speaker Change: And again as we've said for some time this return from West Coast business travel, especially in the technology area.
Speaker Change: Area, that's just been very significant and I think when you look at others.
Speaker Change: Comments around how much they manage business travel increased hours increased significantly more year over year, which is very encouraging.
Andrew George Didora: But if I were to just think about one, one Q being up 3% on three and a half percent capacity, are there any kind of puts and takes that would take you a call out for two Q, whereby we wouldn't see any kind of chasm step down nicely, given you're growing at 6%? And then, you know, similarly, as I think about the back half, as growth comes down, you know, I would expect the chasm to maybe flex back up. Is that a fair assessment?
Speaker Change: Great. Thank you.
Speaker Change: Thanks, Andrew.
Speaker Change: And our next question will come from Helane Becker with TD Cowen.
Helane Renee Becker: Thanks, very much operator, hi team hope all is well.
Just a question with respect to the way we should think about the second half of the year. So second quarter continues kind of the first quarter strength and then how are you thinking third quarter versus second quarter.
Helane Renee Becker: Some of your peer group have been talking about shift in seasonality.
Shane R. Tackett: Hey, Andrew, good morning. Yeah, I think that's the right direction that we're expecting to see this year. We'll, we'll, we'll see a decent improvement in unit cost in the second quarter, given the growth profile of the company. And, as you mentioned, growth slows down in the back half of the year, and we'll probably see a little more pressure in the back half of the year again on unit cost. I think I do just want to mention the company I like. I think we've done a nice job, though, balancing capacity versus unit cost.
Helane Renee Becker: Maybe stronger July I wanted to say stronger in July and June and maybe not so strong I guess I'm not sure how you guys.
Helane Renee Becker: The pattern of travel goes.
Speaker Change: Yes, Hi, Helane.
Helane Renee Becker: Yes, we are seeing the same thing I think.
Helane Renee Becker: August and the return of schools and just the exposure of about network across different geographies June is be coming the single strongest month.
Helane Renee Becker: And so what you'll see here as we move capacity around to accommodate that.
Shane R. Tackett: You've heard us increasingly talk about our focus on the margin health of the company. So we're going to continue to be smart about how we put capacity into the market, and we'll continue to compete really well on a unit cost basis against the larger airlines in our market. That's great. Thanks, Shane. And then there's just a follow-up for Andrew.
Helane Renee Becker: So we feel pretty good about getting ahead of that mix.
Speaker Change: Okay. That's really helpful. And then Andrew as you look at like Alaska, and the state of Alaska.
Speaker Change: What's the capacity industry capacity situation look like up there.
Speaker Change: <unk> been seeing some other airlines, adding capacity to increase in Fairbanks from.
Andrew: Various cities not Seattle, and I'm, just kind of wondering if that's impacting your overall.
Andrew R. Harrison: I appreciate all the color you gave on corporate travel. Do you know what percentage of your revenues today are corporate and how that compares to pre-pandemic? And, you know, any color you can give us just in terms of what the RASM premium would be on corporate, say, versus leisure travel?
No no market share, maybe it's right up there.
Andrew: Yes, I think you know it ebbs and flows people love to put their capacity into Alaska as we go into the summer period, I would say industry capacity, what I call Alaska long hole is up.
<unk>, so that's putting a little bit pressure, but overall.
Andrew R. Harrison: Thank you. Yeah, thanks, Andrew. We don't disclose that sort of information, but I will tell you that we see continued improvement and strength in our corporate position and the business that is coming our way. And again, as we've shared for some time, this return from West Coast business travel, especially in the technology area, has been very significant. And I think when you look at others' comments around how much their managed business travel increased, ours increased significantly more year over year, which is very encouraging. It's great, thank you.
Andrew: We feel really good about our position in Alaska and the routes that we serve and of course, we are very well positioned to serve anybody who is wanting to travel to Alaska.
Speaker Change: Right Gotcha, Okay. Thanks very much.
Speaker Change: Thanks Helane.
Yeah.
Speaker Change: Your next question will come from Savi <unk> with Raymond James.
Speaker Change: Hi, This is <unk> on for Savi and what's the general environment that you're assuming for the second half of the year. That's reflected in your full year EPS guidance.
Speaker Change: Yeah, Hi.
Speaker Change: I think.
Speaker Change: The second half of the year, we expect to continue to be strong and stable.
Speaker Change: <unk>.
Helane Renee Becker: Thanks, Andrew. Thank you. Our next question will come from Helane Becker with TD Coworkers. Thanks very much, Operator. Hi, team. Hope all is well.
Speaker Change: Right now we think it's gonna be consistent with what we're seeing today I don't think there is a sign that demand is slowing down we don't expect that at all.
Speaker Change: I think fuel costs are a little higher than we had planned for the year, which was roughly $3 and came in at $3.08.
Helane Renee Becker: Just a question with respect to the way we should think about the second half of the year. So, second quarter continues the kind of first quarter strength, and then how are you thinking about the third quarter versus the second quarter? You know some of your peer group have been talking about a shift in seasonality, maybe a stronger July; I want to say stronger July and June and maybe not so strong August. I'm not sure how you guys, the pattern of travel goes. Yeah, hi, Helane.
Speaker Change: I think some of that.
Speaker Change: Increase in costs, we expect to be offset by the stronger close in demand certainly on the business side.
Speaker Change: And so net net we haven't really changed our expectation for the full year.
Speaker Change: And we think it's going to continue to be a strong demand environment.
Speaker Change: Okay sounds good and then one more if you can provide any color about your recent commercial initiatives like Alaska access and your expectations for the contribution from these programs that would be great. Thanks, Dan.
Dan: Hi, well I'm glad you noticed.
Unknown Executive: Yeah, we're seeing the same thing. I think August and the return of schools and just the exposure of our network across different geographies. June is becoming the, you know, single strongest month.
Speaker Change: Alaska access I think what you're really seeing here.
Speaker Change: Is that we're continuing to broaden the products and services that we offer.
Speaker Change: That's obviously something that's quite small, but the reality is the distribution landscape is materially changing.
Unknown Executive: And so what you'll see here is we've moved capacity around to accommodate that. So we feel pretty good about getting ahead of that mix. Okay, that's really helpful.
Speaker Change: Got NBC, but you've also got off of older settlement and delivery.
Speaker Change: These technology changes are going to massively increase our ability on the revenue side to distribute our various products and services.
Unknown Executive: And then, Andrew, as you look at Alaska and the state of Alaska, what's the capacity, industry capacity, situation look like up there? I've been seeing some other airlines adding capacity to Anchorage and Fairbanks from, you know, various cities, not Seattle. And I'm just kind of wondering if that's impacting your overall, I don't know, market share, maybe that's the right word up there. Yeah, I think, you know, it ebbs and flows; people love to put their capacity into Alaska as we go into the summer period. I would say industry capacity, what I call Alaska long haul, is up.
Speaker Change: What youre going to see us continue to do.
Speaker Change: Is to bifurcate all the products and services that we have and.
Speaker Change: And continue to distribute those in different forms and ways over time. So we're really excited about just the technology, that's coming out a way to help us generate greater revenues.
Speaker Change: Great. Thanks.
Speaker Change: And our next question will come from Ravi Shanker with Morgan Stanley.
Ravi Shanker: Thanks, Good morning, everyone.
Ravi Shanker: So just want to close and commentary.
Ravi Shanker: Your comments on the strength of closing was particularly notable because some of your competitors have been having some challenges with close in strength or weakness actually.
Unknown Executive: Decently, so that's putting a little bit of pressure on us, but overall, we feel really good about our position in Alaska and the routes that we serve, and, of course, we're very well positioned to serve anybody who is wanting to travel to Alaska. Right, gotcha. Okay, thanks very much.
Ravi Shanker: So are you doing something differently as a strength idiosyncratic to you is the weakness idiosyncratic, but then if you can unpack that that'd be great.
Savvy Sisk: Thanks, Helane. Our next question will come from Sabby Sisk with Raymond James. Hi, this is Zahra on behalf of Savi.
Speaker Change: Hi, I can't specifically speak to other carriers, what I can tell you sitting here looking into April.
Zahra: What's the general environment that you're assuming for the second half of the year that's reflected in your full year EPS guide? Yeah, hi. Look, I think the second half of the year we expect it to continue to be strong and stable where we view it. Right now, we think it's gonna be consistent with what we're seeing today. I don't think there's any sign that demand is slowing down. We don't expect that at all.
Speaker Change: Demand is coming in very nicely with double digit increases in unit revenues year over year as we move through the month of April and as we look to May and June where we have obviously a little bit more industry capacity. We're also seeing a very positive direction in the yields that are coming in throughout our system. So overall, we feel that Q2 is going to.
Unknown Executive: I think fuel costs are a little higher than we had planned for the year, which was roughly $3 and came in at, you know, $3.08. And I think some of that is due to that. Increasing costs we expect to be offset by the stronger close in demand, certainly on the business side. And so, net net, we haven't really changed our expectation for the full year. And we think it's going to continue to be a strong demand environment. Okay, sounds good. And then one more. If you can provide any color about your recent commercial initiatives like Alaska Access and your expectations for the contribution from these programs, that would be great. Thanks again.
Speaker Change: Continued a strong network as well configured premium classes performing our ancillary revenues are performing directly up 6% in the first quarter, even though passengers were down so we feel good about our setup for the second quarter.
Speaker Change: And Ravi I might just there could be some effect that as you know the west coast had been more depressed on a business recovery basis.
Speaker Change: I think thats caught up pretty quickly here in the first quarter and that could be helping us and then I also think just premium continues to be the place where most of the demand growth is happening and I think we're doing a good job meeting that demand.
Speaker Change: Got it that's helpful and maybe as a follow up to that thanks for the detail on the slides and the CASM in the RASM walk.
Unknown Executive: Hi, well, I'm glad you noticed Alaska Access. I think what you're really seeing here is that we're continuing to broaden the products and services that we offer. That's obviously something that's quite small.
Speaker Change: Can you maybe help us understand kind of what that gap between CASM and RASM might look like in <unk> and maybe for the rest of the year as well.
Speaker Change:
Speaker Change: Well.
Unknown Executive: But the reality is the distribution landscape is materially changing. You've got NBC, but you've also got Offer, Order, Settlement, and Delivery. These technological changes are going to massively increase our ability on the revenue side to distribute our various products and services. So, what you're going to see us continue to do is to bifurcate all the products and services that we have and continue to distribute those in different forms and ways over time. So we're really excited about just the technology that's coming our way to help us generate greater revenue. Great, thanks.
Speaker Change: Robbie we're not going to give guidance on.
Speaker Change: I'll note that unit metrics, but I would tell you.
Speaker Change: I think that as we mentioned.
Speaker Change: Earlier, maybe the first question I think CASM will perform better in the second quarter than it did in the first quarter.
Speaker Change: Just given the higher capacity, we will be able to see it.
Speaker Change: See a better result.
Speaker Change: Like approach flattish.
Speaker Change: CASM good in the second quarter, we will see ultimately if we get.
Speaker Change: To the mid point of our capacity guide or not.
Speaker Change: Based on deliveries over the next couple of months and I think unit revenues, they're gonna be still pressured a bit by the grounding impact of 12 82, and some of the book away and spring break that happened over the first quarter, but I think theyre going to be strong I think they're going to continue to perform amongst the best in the industry.
Ravi Shanker: Our next question will come from Ravi Shanker with Morgan Stanley. Thanks everyone. So just on the close-in commentary, your comments on the strength of close-in were particularly notable because some of your competitors have been having some challenges with close-in strength or weakness. So are you doing something differently? Is the strength idiosyncratic to you? Is the weakness idiosyncratic to them?
Speaker Change: On a domestic basis.
Speaker Change: Anyhow, So I think we're looking at.
Speaker Change: Strong second quarter from a margin perspective, which is what we've said in the script.
Unknown Executive: If you can unpack that, that would be great. Hi. I can't specifically speak to other carriers, but what I can tell you sitting here looking into April, demand is coming in very nicely with double-digit increases in unit revenues year over year as we move through the month of April. And as we look to May and June, where we obviously have a little bit more industry capacity, we're also seeing a very positive direction in the yields that are coming in through our system. So overall, we feel that Q2 is going to continue to be strong. Our network is well configured.
Speaker Change: Understood. Thank you.
Speaker Change: Thanks Robert.
Speaker Change: And we'll move next to Duane <unk> with Evercore ISI.
Duane: Hey, Thank you.
Duane: Can you talk a little bit about what youre seeing in Hawaii.
Duane: How you're thinking about the recovery in Maui and your capacity.
Duane: Covered there.
Duane: And what Youre seeing competitively any any changes there.
Speaker Change: Hey, Duane.
Duane: So on a Hawaii actually we were very pleasantly.
Duane: Surprises as far as just the general.
Duane: Framework and strength of Hawaii in General that said I think our capacity was down close to 40% out of Maui in total still going to be down 20, as we move through.
Unknown Executive: Our premium class is performing. Our ancillary revenues are performing. They were actually up 6% in the first quarter even though passengers were down. So we feel good about our setup for the second quarter, and Ravi, I might.
Duane: So outside of Maui, Hawaii is performing within expectations I think its going to be some time before Maui recoveries just to be Frank and so we are adjusting our capacity to meet demand that we're seeing there, but it's certainly.
Unknown Executive: There could be some effect that, as you know, the West Coast had been more depressed on a business recovery basis, and I think that's caught up pretty quickly here in the first quarter, and that could be helping us. And then I also think just, you know, premium continues to be the place where most of the demand growth is happening, and I think we're doing a good job meeting that demand.
Duane: A slow journey.
Speaker Change: Okay. So maybe the down 40 recovers to down 20, and you kind of wait and see at that level is that a is that a fair way to think about it.
Speaker Change: Yes, I think the way to think about it as we get through through this summer and then as we look into the back end of the year, which is more seasonally weak we're going to assess how demand is and will adjust capacity appropriately.
Unknown Executive: That's helpful. And maybe as a follow-up to that, thanks for the detail on the slides and the Chasm and the RASM walk. Can you maybe help us understand kind of what that gap between Chasm and RASM might look like in 2Q and maybe for the rest of the year as well? Well, Ravi, we're not going to give guidance on those two unit metrics, but I would tell you, I think, as we mentioned earlier, maybe the first question, I think CASM will perform better in the second quarter than it did in the first quarter. Just given the higher capacity, we'll be able to see a better result. It could approach flattish. I think CASM could in the second quarter.
Speaker Change: Okay, Great and then.
Speaker Change: I guess, Shane you piqued my interest with self supply of fuel can you just elaborate on that.
Shane: Sure Duane thanks.
Shane: Thanks for asking about fuel supply look I think we've been pretty passive other than hedging program on on managing the fuel line.
Shane: The line in the business as you know we've had significant headwinds that are unique to us relative to the rest of the industry and I think it prevented us from being the top margin producer in the industry last year, just on our refining margin basis on the west coast relative to Gulf Coast.
Shane: So we're not going to sit idly by and let that continue to impact our results. We spent a lot of time in the.
Shane: The first quarter understanding why we have a.
Unknown Executive: We'll see ultimately if we get to the midpoint of our capacity guide or not based on deliveries over the next couple of months. And I think unit revenues are going to be pressured a bit by the grounding impact of 1282 and some of the book away in spring break that happened over the first quarter, but I think they're going to be strong.
Shane: 30, <unk> differential relative to the rest of the industry.
Shane: One of the things we believe we can do is.
Shane: Is ultimately buy our own fuel from other places around the globe and ship it into some of our larger cities. It takes a while to get that done other airlines do it it's not a brand new idea to the industry.
Shane: And I think there'll be.
Shane: Our way of saving a few pennies per gallon, which we're going to we're going to go. After later this year and into next year, we will say more about it as we from our plants.
Unknown Executive: I think they're going to continue to perform amongst the best in the industry on a domestic basis. And anyway, so I think we're looking at a strong second quarter from a margin perspective, which is what we said. Okay. Thank you. Thanks, Ravi.
Speaker Change: That's great and if I could sneak one more in here just on regional mix can you talk broad strokes.
Speaker Change: What regionals would be as a percent of your capacity.
Duane Thomas Pfennigwerth: And we'll move next to Duane Pfennigwerth with Evercore ISI. Hey, thank you. Can you talk a little bit about what you're seeing in Hawaii, you know, how you're thinking about the recovery in Maui and your capacity recovery there and, you know, what you're seeing competitively, any changes there? Duane, yeah, so on Hawaii. Actually, we were very pleasantly surprised as far as just the general framework and strength of Hawaii in general. That said, I think our capacity was down close to 40% out of Maui in total, and it's still going to be down 20% as we move through.
Speaker Change: Maybe this year versus versus last year.
Speaker Change: And I know youre, not giving point estimates on the metrics, but just broad strokes, how we should be thinking about it kind of tailwind to RASM headwind to CASM.
Speaker Change: And maybe you know margin impacts it feels like Theres, probably parts of your network.
Speaker Change: Starving for more regional lift, but just help us help us think about that thanks for taking the questions.
Speaker Change: Yeah. Thanks for the question I think you know from your perspective, it's give or take around 10% of our capacity is regional I don't see that materially changing that said.
Speaker Change: The regional businesses.
Duane Thomas Pfennigwerth: So outside of Maui, Hawaii is performing within expectations. I think it's going to be some time before Maui recovers, just to be frank, and so we are adjusting our capacity to meet the demand that we're seeing there. But it's certainly a slow journey.
Speaker Change: Profitability, just with the return of utilization and redeployment has jumped significantly and they've been a valuable partner, both skywest and horizon to help us with al Boeing deliveries in those Embraer <unk> hundred 70, fives back filling some markets that we otherwise couldn't save.
Unknown Executive: Okay, so maybe the down 40 recovers to down 20, and you kind of wait and see at that level. Is that a fair way to think about it? Yeah, I think the way to think about it is we get through this summer, and then as we look into the back end of the year, which is more seasonally weak, we're going to assess how demand is, and we'll adjust capacity. Okay, great. And then I guess Shane, you piqued my interest with the self-supply of fuel. Can you just elaborate on that? Sir Dwayne, uh...
And when I will just say four horizons part this has been a horizon.
Speaker Change: Performing.
Speaker Change: No.
Speaker Change: Fantastic margins are up.
Speaker Change: Put a lot of focus in the last few years in our regional business and it's really performing nicely and we continue to see that trend.
Speaker Change: Over the rest of the year.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thanks Duane.
Speaker Change: Your next question will come from Jamie Baker with Jpmorgan.
Jamie Nathaniel Baker: Hey, good morning, I'll admit I had to Google Alaska access.
Shane R. Tackett: Thanks for asking about fuel supply. Look, I think we've been pretty passive other than the hedging program on managing, you know, the fuel line in the business. As you know, we've had significant headwinds that are unique to us relative to the rest of the industry, and I think they prevented us from being the top margin producer in the industry last year just on a refining margin basis on the West Coast relative to the Gulf Coast.
Jamie Nathaniel Baker: Okay.
Jamie Nathaniel Baker: A little embarrassing to start off with that.
Jamie Nathaniel Baker: So obviously the corporate momentum as a positive.
Jamie Nathaniel Baker: Can you speak to how corporate patterns.
Jamie Nathaniel Baker: Compare to those are pre COVID-19.
His trip duration compare.
Jamie Nathaniel Baker: Booking curve elongated as change fees have gone away.
Jamie Nathaniel Baker: Behavioral change I guess is what I'm asking about.
Speaker Change: Yeah. Thanks.
Shane R. Tackett: So we're not going to sit idly by and let that continue to impact our results. We spent a lot of time in the first quarter understanding why we have a $0.30 differential relative to the rest of the industry, and one of the things we believe we can do is, ultimately, buy our own fuel from other places around the globe and ship it into some of our larger cities. It takes a while to get that done.
Thanks, Jamie I think.
Speaker Change: I, probably will have a better answer for you next quarter as I shared the rapid uptake up 30 up 24, just in this first quarter with everything else going on with.
Speaker Change: Something we need to better digest as we move through the second quarter, but I am seeing a lot of the traditional.
Speaker Change: Demand return as we've seen it historically, but I'll I'll have a better answer after we have digested this quarter and get through the second quarter.
Shane R. Tackett: Other airlines do it. It's not a brand new idea to the industry. And I think there'll be a way of saving a few pennies per gallon, which we're going to go after later this year and into next year. We'll say more about it as we form up plans. That's great.
Speaker Change: Okay. Well then you won't fall to me when I asked the same question in 90 days and that's good.
So second question just on the revised full year guide.
Duane Thomas Pfennigwerth: And if I could sneak one more in here, just on regional mix, can you talk in broad strokes about what regions would be as a percent of your capacity, maybe, you know, this year versus last year. And I know you're not giving point estimates on the metrics, but just broad strokes, how we should be thinking about it, you know, kind of tailwind to rasm, headwind to chasm, and maybe, you know, margin impacts. It feels like there's probably parts of your network that were starving for more regional lift, but just help us think about that. Thanks for taking the questions.
Speaker Change: First quarter was solid and <unk> got good visibility into the second.
Speaker Change: I guess I'm wondering what's driving the two dollar range in that guide I mean to be fair United is at $2 range as well is it just stylistic that you chose to maintain that range or do you really think there's that much.
Speaker Change: Variability and uncertainty in the second half and if so what are the most uncertain inputs in your model besides fuel.
Speaker Change: Yeah, Hey, Thank you Jamie.
Unknown Executive: Yeah, thanks for the question. I think, from your perspective, it's give or take around 10% of our capacity is regional. I don't see that materially changing.
Speaker Change: Theres probably a.
Speaker Change: A large component of it that's just habit.
Speaker Change: Habitually Denver $2 range, and we tightened that maybe in the fourth quarter or something.
Unknown Executive: That said, the regional businesses are, profitability, just with the return of utilization and redeployment, has jumped significantly, and they've been a valuable partner, both SkyWest and Horizon, to help us with our Boeing deliveries and those Embraer 175s backfilling some markets that we otherwise couldn't see. Yeah, and, and on Horizon's part, this has been Horizon just performing, you know, fantastic margins are up. We've put a lot of focus in the last few years on our regional business, and it's really performing nicely. And we expect to see that trend continue over the rest of the year. Okay, thank you very much.
Speaker Change:
Speaker Change: I do think can fuel is the largest you know.
Speaker Change: Immediate driver typically that we see that.
Speaker Change: That will run us up or down that that.
EPS guide, but yeah, I do think the $2 range as more just out of habit than anything.
Speaker Change: But we're trying to architect around like a specific set of outcomes.
Speaker Change: On the worst case side versus the best case side.
Speaker Change: And just if I can sneak in a clarification earlier in the call, but did you say double digit RASM on 3% capacity in April.
Speaker Change: What I said was that our intakes coming into the months are up double digit for April.
Jamie Nathaniel Baker: Thanks, Duane. Your next question will come from Jamie Baker with JPMorgan. Hey, good morning. I'll admit I had to Google Alaska access. A little embarrassing to start off with that.
Speaker Change: Tickets, we're selling today, yes, no no that's not the entire book.
Speaker Change: Yes that makes sense I was I was paid by our clients to about that so I hadn't heard that way either so thank you for the clarification I'll cede the floor to somebody else. Thank you.
Jamie Nathaniel Baker: So obviously, the corporate momentum is positive. Can you speak, though, about how corporate patterns, Compared to those of pre-COVID, you know, how does trip duration compare, you know, as the booking curve elongated as change fees have gone away, you know, that sort of thing. Behavioral change, I guess, is what I'm asking about.
Speaker Change: Thanks, Jamie.
Speaker Change: And we'll move next to Scott Group with Wolfe Research.
Scott H. Group: Hey, Thanks, Good morning, So I just wanted to follow up on that last point because.
If you assume that chasm is approaching flat it feels like the guidance assumes RASM, that's flat to down and you are saying it was up 5% in Q1, you sounded like everything is really really good in Q2, so I'm not sure if I'm missing something or if there is a lot of.
Unknown Executive: Thanks, Jamie. I think I probably will have a better answer for you next quarter as I shared the rapid up 10, up 30, up 24, just in this first quarter with everything else going on was something we need to better digest as we move through the second quarter. But I am seeing a lot of the traditional Demand return as we've seen it historically, but I'll have a better answer after we've digested this quarter and got through the second quarter. Okay, well, then you won't fault me when I ask the same question in 90 days.
Scott H. Group: Conservatism in the guide or any color would be helpful.
Speaker Change: Yes, I think.
Speaker Change: Scott I think the thing to remember in the first quarter is obviously by far our seasonally weakest second quarter is very very strong and capacity industry wide is growing.
Speaker Change: Obviously much more in a second so its all relative I think what are your statements around CASM and RASM directionally.
Jamie Nathaniel Baker: That's good. So second question, just, you know, on the revised four-year guide. You know, the first quarter was solid.
Speaker Change: Spot on.
Speaker Change: And as we've been shared before as we get into this period and then we look at our margins and profitability for the second quarter very strong and as we've shared before as we move through this quarter and beyond West coast capacity from the industry is reducing growth is reducing so there's a really good set up for the back half of the year.
Jamie Nathaniel Baker: You've got good visibility into the second. I guess I'm wondering what driving the $2 range in the guide. I mean, to be fair, United has a $2 range as well. Is it just stylistic that you chose to maintain that range? Or do you really think there's that much Variability and Uncertainty in the Second Half? And if so, what are the most uncertain inputs in your model besides fuel?
Speaker Change: Okay.
Speaker Change: I understand and then you had a comment about we'll tell you more at some point about loyalty, but maybe just give us a little bit of some thoughts about what your what you are referring to and that'd be helpful.
Jamie Nathaniel Baker: Yeah, hey, thank you, Jamie. You know, there's probably a large component of it that's just habit, like we've habitually done a $2 range, and we tighten it maybe in the fourth quarter or something. I do think fuel is the largest, you know, immediate driver that we typically see that will run us up or down that EPS guide, but yeah, I do think the $2 range is more just out of habit than anything, you know, that we're trying to architect around a specific set of outcomes, you know, on the worst-case side versus the best-case side.
Speaker Change: Yes, Scott I think in general.
Speaker Change: Going to ship much today, but we have a number of things in the works that were working on and at the right time, and we're going to be sharing more just really wanted folks to know, especially on the revenue side.
Speaker Change: Some really good things in store and we're not ready to share those yet.
Speaker Change: Andrew was just teasing Scott.
Speaker Change: Right.
Speaker Change: But I did look theres a lot of things that we've got a lot of irons in the fire in terms of loyalty and products and and stuff. So yes, when the time is right.
We'll provide more color on those but.
Speaker Change: I'm really excited about them.
Speaker Change: Okay. Thank you guys appreciate it.
Speaker Change: Thanks Scott.
Speaker Change: Our next question will come from Stephen Trent with Citigroup.
Stephen Trent: Hi, good morning, everyone and thanks for taking my question.
Jamie Nathaniel Baker: And just if I can sneak in a clarification, earlier in the call, did you say double-digit RASM on 3% capacity in April? What I said was that our intakes coming into the month are up double-digit for April. Like, the tickets were selling today. Yes. Not, not, not the entire held book, like, held.
Stephen Trent: The first one kind of an ignorant one for me but.
Stephen Trent: Let's say hypothetically.
Stephen Trent: Oscar and Hawaiian merge they run any sort of major adjustments in capacity that the Doj passes down.
Jamie Nathaniel Baker: Okay. Yeah, that that makes sense. I was pinged by a client about that. So I hadn't heard it that way, either.
Speaker Change: At this juncture whether.
Your exposure to a west coast refining cost would would rise with the combined Hawaiian or would it kind of stay the same or is it kind of.
Jamie Nathaniel Baker: So thank you for the clarification. I'll see the floor to somebody else. Thank you, thanks, Jamie. And we'll move next to Scott Group with Wolfe Friesen. Hey, thanks. Good morning.
Speaker Change: Too early to tell.
Speaker Change: Yes, Thanks, Steve.
Speaker Change: I'm.
Scott H. Group: So I just want to follow up on that last point. Because if you assume that the chasm is approaching flat, it feels like the guidance assumes rasm that's flat to down, and you're saying it was up 5% in Q1, you sound like everything's really, really good in Q2. So I'm not sure if I'm missing something or if there's a lot of Conservatism in the guide. Any color would be helpful.
Speaker Change: I'm not going to hypothesize too much but I will tell you that the fuel prices in Hawaii are significantly lower than you see in the.
Speaker Change: Continental U S.
Speaker Change: Yeah.
Steve: Okay very clear Super Thank you for that.
Speaker Change: And just one quick follow up I mentioned.
Speaker Change: 90 days ago about.
Speaker Change: What you guys are doing in the nice work, you've done and having that investment grade credit rating.
Unknown Executive: Yeah, I think, Scott, the thing to remember in the first quarter is it's obviously by far our seasonally weakest; the second quarter is very, very strong, and capacity industry-wide is growing, obviously, much more in the second. So it's all relative.
Speaker Change: Could you refresh my memory sort of what the push might be to get.
Speaker Change: And investment grade ratings from all three agencies.
Speaker Change: Yes Stephen.
Stephen Trent: Good question I think we deserve it and.
Unknown Executive: I think what your statements around CASM and RASM are spot on. And as we've been shared before, as we get into this period, and then we look at our margins and profitability for the second quarter, very strong. And as we've shared before, as we move through this quarter and beyond, West Coast capacity from the industry is reducing, and growth is reducing. So there's a really good setup for the back half of the year. Okay, I think I understand.
Stephen Trent: We are hopeful that they review us soon and <unk>.
Stephen Trent: Reconsider their ratings were not.
Stephen Trent: We're not actively out talking with the other two agencies right now we've got a lot going on and we're really focused on.
Stephen Trent: Hopefully closing the proposed acquisition of Hawaiian we've got to go to market potentially raise some money to do that so that's our focus right now we'll get that behind us and then.
Stephen Trent: I think we've got really good debt metrics credit metrics.
Scott H. Group: And then you had a comment about, we'll tell you more at some point about loyalty, but maybe just give us a little bit of, you know, some thoughts about what you're referring to and, Yeah, Scott, I think in general, I'm not going to share much today, but we have a number of things in the works that we're working on. And at the right time, we're going to be sharing more. I just really wanted folks to know, especially on the revenue side, we have some really good things in store, and we're not ready to share those yet. Andrew was just teasing Scott.
Stephen Trent: I think we're definitely deserving of reconsideration by the other two agencies and we'll keep making our case overtime to them.
Speaker Change: Oh, great I appreciate that's changing and then thanks everybody.
Speaker Change: Thank you Steve.
Speaker Change: And we'll move next to Conor Cunningham with Melius research.
Conor T. Cunningham: Everyone. Thank you.
Conor T. Cunningham: No.
Conor T. Cunningham: Talked to Boeing.
Conor T. Cunningham: Are you looking to completely rework the order book It just seems like the comments today seem like you're more focused on 24, but is there an opportunity to kind of I don't know.
Unknown Executive: But that, but I did look, there's a lot of things that we got a lot of irons in the fire in terms of loyalty and products and, and stuff. So yeah, when the time is right, we'll provide more color on those. But, I'm, I'm really excited about it.
Conor T. Cunningham: Stabilize that over the next couple of years I, just I'm just trying to understand what you want in a new delivery stream from them going forward. Thank you.
Speaker Change: Thanks Connor.
Speaker Change: I think yeah look there is two or three moving pieces there.
Speaker Change: Their own ability to get back to production rates that support.
Speaker Change:
Unknown Executive: Thank you guys, I appreciate it. Thanks, Scott. News. Our next question will come from Stephen Trent with Citigroup. Hi, good morning, everyone.
Speaker Change: Consistent and reliable delivery stream, which.
Speaker Change: Most important to us is the quality and safety of the manufacturing process.
Stephen Trent: And thanks for taking my question. Um, the first one is kind of an ignorant one for me, but, you know, let's say hypothetically that Alaska and Hawaii merge; there aren't any sort of major adjustments in capacity that the DOJ passes down. Could you tell at this juncture whether your exposure to West Coast refining costs would rise with the combined Hawaiian, or would it kind of stay the same, or is it kind of, you know, too early to tell? Yeah, thanks, Steve. I'm not going to hypothesize too much, but I'll tell you that the fuel prices in Hawaii are significantly lower than you see in the continental US.
Speaker Change: So we've got to sort that out we also.
Speaker Change: Prefer the Max 10 at this point, it's not certified yet we've got to make decisions about when to expect that I think it is going to come later than we had expected which was second half of next year.
Speaker Change: And then again if if the proposed transaction is able to proceed we've got another.
Speaker Change: 60% to 65 aircraft to think about along with 330 or so we have today. So we just need to take some time look at all of these variables and put together.
Speaker Change: Our new Sky.
Speaker Change: Skyline for the for the Boeing Max deliveries.
Unknown Executive: Okay, very clear. Super. Thank you for that. I just want to follow up on what you guys are doing and the nice work you've done in having that investment grade credit rating. Could you refresh my memory sort of what the push might be to get an investment grade rating from all three agencies? Yeah, Stephen.
Speaker Change: Thank you know directionally, it will probably be less than we had.
Speaker Change: <unk> been thinking about.
Speaker Change: Even a year ago. So it should be good for our Capex story, good for free cash flow story over time, but we need we need to.
Speaker Change: Another quarter or two to really work through that on our side and then with.
Speaker Change: Our partners over at Boeing.
Speaker Change: Okay. That's helpful and then on this on the premium.
Shane R. Tackett: Um, good question. I think we deserve it. And we are hopeful that they will review us soon and reconsider their ratings. We're not, You know, we're not actively out talking with the other two agencies right now. We've got a lot going on, and we're really focused on, you know, hopefully closing the proposed acquisition of Hawaiian. We've got to go to market, potentially, and raise some money to do that. So, that's our focus right now.
Speaker Change: Revenue and then you are saver I'm, just it seems like Theres, a pretty huge spread going on and I don't know if there's anything to glean into like your main cabin saver fare option is.
Speaker Change: Just trying to understand how you think about that spread over the long term and then maybe as sorry as an incremental after that.
Speaker Change: Your I think your inventory you didn't sell your inventory as far out as you initially did and you talked about closing how are you thinking about changing how you how your.
Shane R. Tackett: We'll get that behind us, and then, you know, I think we've got really good debt metrics, credit metrics, I think we're definitely deserving of reconsideration by the other two agencies, and we'll keep making our case over time to them. Oh, great. Appreciate that, Shane.
<unk> sits going forward to try to capture more of the close in demand.
Speaker Change: Even your premium offering sorry about that I realize it looks like nine questions, but thanks, yeah right.
Speaker Change: Antibody just high level I think.
Speaker Change: The save a fair has been.
Speaker Change: Very.
Shane R. Tackett: And thanks, everybody. Thank you, Steve. We'll move next to Conor Cunningham with Amelia Threese.
Speaker Change: Good product for us in.
In fact, we've made it significantly more available than we did last year and we've also seen significant increase in revenues buying out a save up and it's a very valuable tool in the seasonality given where our network moves around I think.
Conor T. Cunningham: Everyone, thank you. You know, as you talk to Boeing, are you looking to completely rework the order book? It just seems like the comments today seem like you're more focused on 24, but is there an opportunity to kind of, I don't know.
Speaker Change: We're focused on and probably historically, we've pretty much chase loads to some respect and I think as we're seeing where the industry is and where we are where we're putting more focus on yields and how we structure the pricing of our cabins, both Maine and premium and and the Ciba and I think what I can tell you is we're more than ever.
Unknown Executive: Stabilize that over the next couple years. I'm just trying to understand what you want in a new delivery stream going forward. Thank you. Yeah, thanks, Connor.
Unknown Executive: I think, yeah, look, there's two or three moving pieces there, you know, their own ability to get back to production rates that support a consistent and reliable delivery stream, which is most important to us is the quality and safety of the manufacturing process. So we've got to sort that out. We also, you know, prefer the Max 10 at this point, although it's not certified yet.
Speaker Change: More deliberate about how we manage our product setup.
Speaker Change: Kevin and I think theres only goodness to come from that.
Speaker Change: Very helpful. Thank you.
Thanks, Gunnar thanks for color.
Speaker Change: And we'll move next to Mike Lindenberg with Deutsche Bank.
Michael John Linenberg: Hey, good morning, everyone.
Michael John Linenberg: Thank you.
Michael John Linenberg: We have better than anyone and good sense.
Michael John Linenberg: This evolution of close in leisure I really feel like it was something that hit the scene big time during Covid a lot of it had to do it last minute reopening.
Unknown Executive: We've got to make decisions about, you know, when to expect that. I think it's going to come later than we had expected, which is the second half of next year. And then, again, if the proposed transaction is able to proceed, we've got another 60 to 65 aircraft to think about, along with the 330 or so we have today. So, we just need to take some time, look at all of these variables, and put together, you know, a new skyline for the Boeing Max deliveries.
Speaker Change: And like I said.
Speaker Change: Pre COVID-19 it was either a bereavement there I don't know maybe your power excluding a ticket to the Taylor Swift concert.
Speaker Change: And out of Atlanta.
Speaker Change: Right.
Speaker Change: Becoming a bigger piece and.
Speaker Change: I don't know if it's 5%.
Speaker Change: Kind of year when you look at your various segments corporate discretionary whenever long haul international.
Speaker Change: Can you can you talk about that evolution.
Speaker Change: Because I don't think I can and have already but maybe it's become a much bigger category when I realized and it can have impact on RASM.
Speaker Change: Well number one flattery will get you everywhere. So thank you.
Speaker Change: But we had a huge we had a huge learning from COVID-19.
Unknown Executive: I think, you know, directionally, it will probably be less than we had, you know, been thinking about even a year ago. So, it should be good for a CapEx story, good for a free cash flow story over time, but we need another quarter or two to really work through that on our side and then with our partners over at Boeing. Okay, that's helpful.
Speaker Change: We were squeezing out the Cabot because we went for loads and you know there was a robust.
Speaker Change: And of course, when I talk about leisure I'm talking also about chase loyalty and Costco and major league agencies.
Speaker Change: So what we're really seeing is that for us at least we had structured al.
Conor T. Cunningham: And then on this, on the premium, you know, revenue, and then versus your saver, I'm just, it seems like there's a pretty huge spread going on. And I don't know if there's anything to glean from, like your main cabin saver fare option. I'm just trying to understand how you think about that spread over the long term. And then maybe, sorry, as an incremental follow-up to that, you know, your inventory didn't sell your inventory as far out as you initially did. And you talked about close in. Are you thinking about changing how you, how your inventory sits going forward to try to capture more of the close in demand given your premium offering? Sorry about that.
Speaker Change: Cabin in a demand environment to take more further out and leave less closer arena I think what we're finding is there is a whole group of our customers and guests.
Speaker Change: Our strong leisure travel as it just spoke a lot closer in and we are making seats available for them today and of course, given the fare fencing and how that all works the yields are much better than they would be further out.
Speaker Change: Absolutely.
Speaker Change: Absolutely that makes sense and then just my second.
Speaker Change: No you did talk about a couple of pieces.
Speaker Change: Things that we should look out for you did drop loyalty I know Ben mentioned loyalty if anything are we up for renewal this year.
Speaker Change: No.
Unknown Executive: I realize that's like nine questions, but thanks. Yeah, that's all right. I'll answer at a high level.
Speaker Change: We're past that but I think.
Speaker Change: You know if you just what I would say about loyalty and you've heard other side is such a very powerful and important.
Michael John Linenberg: I think the saver fare has been a very, you know, good product for us. In fact, we've made it, [inaudible] We're focused on and probably historically we've pretty much chased loads to some respect and I think as we're seeing where the industry is and where we are we're putting more focus on yields and how we structure the pricing of our cabins both main and premium and the saver and I think what I can tell you is that we're more than ever getting more deliberate about how we manage our product setup in our cabin and I think there's only goodness to come, Very helpful.
Speaker Change: Part of our business, if you look at the environment and how loyalty programs, they're all evolving and there's changes and so we are looking at how our loyalty program needs to change and evolve and I think there's just real upside and again, we're not willing to share anything today. Other than this is an area of focus for us.
Speaker Change: Okay very good thank you.
Speaker Change: And we'll move next to Dan Mckenzie with Seaport Global.
Speaker Change: Yeah.
Daniel J. McKenzie: Oh, Hey, good morning. Thanks, a couple of questions here I guess my first question really is a head count versus fleet count question.
Michael John Linenberg: Thank you. And we'll move next to Mike Linenberg with Deutsche Bank. Hey, good morning, everyone. Um, hey, Andrew, you probably have a better sense of, you know, this evolution of close in leisure than anyone. I really feel like it was something that hit the scene big time during COVID.
Daniel J. McKenzie: So what number of deliveries are you I guess, how are you guys hiring too and then I guess, where I'm going with that is the overhead or the cost burden that Alaska is carrying because the deliveries.
Andrew R. Harrison: A lot of it had to do with just last minute reopenings and, and the like. I sort of feel, pre COVID, it was either a bereavement fair or, I don't know, maybe your pal scored you a ticket to the Taylor Swift concert, and you found out about it last. But it's, it's becoming a bigger piece. And I, I don't know if it's 5% of, kind of your when you look at your various segments, corporate discretionary, whatever, long haul international. Can you, can you talk about that evolution?
Are coming in a little less than expected and then I guess as Boeing compensating you for that that cost burden.
Speaker Change: Thanks, Dan.
A couple of things here on this one I think we originally had anticipated 23 deliveries of course, when they come is an important variable as well.
Speaker Change: As evidenced by our revised full year capacity guide and Capex guide, we expect to get fewer than that.
Speaker Change: But we actually have 10 aircrafts essentially built and going through the final review and ticketing process.
Andrew R. Harrison: Because I don't think it's a category, but maybe it's become a much bigger category than what I realized, and it can have a meaning on a resume. And of course, when I talk about leisure, I'm also talking about Chase Loyalty and Costco and major leisure agencies. So what we're really seeing is that for us, at least, we had structured our cabin and our demand environment to take more further out and leave less closer in.
Speaker Change: We expect to get all of those and probably.
Speaker Change: Some additional units beyond that so we're thinking somewhere between 10 and 20.
Speaker Change:
Speaker Change: We have a number of aircraft we were planning to retire so many of those aircrafts were going to replace older 900 classics.
Speaker Change: Our head count situation is in really good shape relative to the.
Speaker Change: Livery stream coming our way, we're not going to be.
Andrew R. Harrison: And I think what we're finding is there is a whole group of customers and guests who are strong leisure travelers that just booked a lot closer in, and we're making seats available for them today, and, of course, given the fair fencing and how that all works, the yields are much better than they would be further out. Absolutely.
Speaker Change: Materially Overstaffed I don't believe in any part of our business. We watch that closely we had to staff up a bit.
Speaker Change: Throughout the end of last year to get ready for this year in the spring.
Speaker Change: But I.
Speaker Change: I don't think that we're going to be in a.
Andrew R. Harrison: Absolutely, that makes sense. And then, just my second question, I know you talked about a couple teasers and things that we should look out for. You did drop loyalty.
Speaker Change: Significant drag position from a cost perspective.
Speaker Change: And to the extent that we are we are having.
Speaker Change: Having conversations with Boeing in terms of compensating us for that.
Michael John Linenberg: I know Ben mentioned loyalty. If anything, are we up for renewal this year? No, we're, we're, we're past that.
Speaker Change #100: Yeah, very good okay and.
And then I guess she has another question for you here in the 10-K, Alaska highlighted 200 million gallons of Saf through 2030, and I guess I'm just curious how many gallons you're planning to buy here in 2024.
Michael John Linenberg: But I think, You know, if you just what I would say about loyalty, and you've heard the other side, it is such a very powerful and important part of our business. If you look at the environment and how loyalty programs are evolving, they're all evolving. And there are changes. And so we are looking at how our loyalty program needs to change and evolve. And I think there's just a real upside. And again, we're not willing to share anything today, other than that this is an area of focus for us. Okay, very good. Thank you, and we'll move next to Dan McKenzie with Seaport Global. Oh, hey, good morning.
Speaker Change #100: And what is the cost differential today of that versus West coast jet fuel and then where do you think that differential can go say in two to three years' time, and I guess I'm, what I'm trying to get at is probably a small percent of your overall volume, but I'm just trying to get a sense of the margin headwind from that.
Speaker Change #101: Yes. Thanks for the question. So it is a small part of the overall buying and that's in large part because it's a small part of the supply in the world at large for 2024, it'll be about 1% of our total fuel.
Daniel J. McKenzie: Thanks. There are a couple of questions here. I guess my first question really is a headcount versus fleet count question. So you know, what number of deliveries are you guys hiring for? And then I guess where I'm going with that is the overhead or the cost burden that Alaska is carrying because the deliveries are coming in a little less than expected. I guess, you know, is Boeing compensating you for that? Thanks, Dan. A couple things on this one.
Speaker Change #101: And that's coming from a couple of different suppliers.
Speaker Change #101: It is there is a green premium over the cost of jet a we're fortunate to have a lot of really strong corporate partners that are working with us to co invest in SaaS in a way that also offsets are the scope three emissions of their business travel.
Speaker Change #101: And we're doing a lot in the market to try to grow and mature the soft market in the future and which includes looking at the cost down curve of different technologies and different producers.
Shane R. Tackett: I think we originally had anticipated 23 deliveries. Of course, when they come is an important variable as well. As evidenced by our revised full year capacity guide and CapEx guide, we expect to get fewer than that. Boeing actually has 10 aircraft essentially built and going through the final review and ticketing process. So we expect to get all of those and probably, you know, some additional units beyond that. So we're thinking somewhere between 10 and 20.
Dan I think the.
Daniel J. McKenzie: Thanks, Dana for the color I don't think there is.
Speaker Change #102: A noticeable margin headwind from it this year.
Speaker Change #103: Obviously, it's a consideration for the entire industry as we move forward it becomes a larger part of supply, but we're probably a few years before it really starts to show up.
Speaker Change #103: In a way that that increases materially the cost of fuel going into the plan.
Speaker Change #104: Yeah, Okay. Thanks for the time you guys.
Shane R. Tackett: [inaudible] We have a number of aircraft we are planning to retire. So many of those aircraft we're going to replace with older 900 classics. So our headcount situation is in really good shape relative to the delivery stream coming our way. We're not going to be, you know, materially overstaffed. I don't believe in any part of our business.
Speaker Change #105: Thanks, Good afternoon.
Speaker Change #105: And our next question will come from Chris <unk> with Susquehanna Financial group.
Chris: Good morning, Thanks for taking my question.
Chris: Comment.
Chris: For <unk> I think it was flattish CASM X just want to confirm that.
Yes.
Chris: The freight costs and then freighters are.
Speaker Change #107: Not typically discussed here I think youre sizing up that fleet can you just remind us of the current size and where that's going this year. Thank you.
Shane R. Tackett: We watch that closely. We had to staff up a bit, you know, throughout the end of last year to get ready for this year in the spring. But I don't think that we're going to be in a significant drag position from a cost perspective. And to the extent that we are, we are having conversations with Boeing in terms of compensating us for that.
Speaker Change #108: Thanks, Chris Yeah, and that that comment is X greater costs.
Speaker Change #108: But you'll be able to see the year over year I don't think it's going to be materially different even if you included for your costs in both both years, yes.
Speaker Change #109: Yes, we had a fleet of three which is a small fleet. They do a lot of work for us up in the state of Alaska.
Shane R. Tackett: Yeah, very good. Okay. Then I guess, Shane, I have another question for you here.
Speaker Change #109: Really important.
Speaker Change #109: To our customers up there is some.
Daniel J. McKenzie: In the 10K, Alaska highlighted 200 million gallons of SAF through 2030. And I guess I'm just curious, how many gallons you're planning to buy here in 2024? And you know, what is the cost differential today of that versus West Coast jet fuel?
Something we're proud of being able to do.
Speaker Change #109: We've been.
Speaker Change #109: Predominant.
Speaker Change #109: Cargo carrier in the state of Alaska for most of our history, we're moving to five.
Speaker Change #109: Dedicated freighters again, most all of that lift will be in a state of Alaska.
Speaker Change #109: And who knows over time, if we will be able to.
Shane R. Tackett: And then where do you think that differential can go, say, in two to three years' time? And I guess what I'm trying to get at is it's probably a small percent of the overall volume, but I'm just trying to get a sense of the margin headwind from that. Yeah, thanks for the question. So it is a small part of the overall buying decision. And that's in large part because it's a small part of the supply in the world at large.
Speaker Change #109: <unk> to increment from that base of five we would certainly like to have the business remains strong.
Speaker Change #110: Okay, and just my follow up and I think you said in your prepared remarks that youre anticipating a better supply demand balance in the core markets.
Speaker Change #110: In the second half and so we've had a competitor retreat from parts of L. A it doesn't look like there.
Speaker Change #110: Theyre coming back outside and this is curious how confident are you in this supply backdrop or this sort of new dynamic if you will going forward.
Shane R. Tackett: For 2024, it'll be about 1% of our total fuel, and that's coming from a couple of different suppliers. It is, there is a green premium over the cost of Jet A.
Speaker Change #111: Thank you.
Speaker Change #111: Hey, Dan well look I think if you look at how Q1 turned out for us.
Daniel J. McKenzie: Again, it was just an amazing quarter from what it was in Q1 of 2023. So we're just looking at just the higher water level, we're starting from in Q1, and that's translating forward into Q2.
Shane R. Tackett: We're fortunate to have a lot of really strong corporate partners that are working with us to co-invest in SAF in a way that also offsets the scope three emissions of their business travel. And we're doing a lot in the market to try to grow and mature the SAF market in the future, which includes looking at the cost down curve of different technologies and different producers. Dan, I think, thanks, Dana, for the color.
Daniel J. McKenzie: Based on everything we're seeing in terms of demand and Andrew touched on a lot of those things. We just feel like we're well positioned so that's why we're forecasting double digit pre tax margins.
Daniel J. McKenzie: And so we're feeling really strong it's our most profitable quarter.
Daniel J. McKenzie: I don't think there's, you know, a noticeable margin headwind from it this year. Obviously, it's a consideration for the entire industry as we move forward and it becomes a larger part of supply, but we're probably a few years before it really starts to show up in a way that increases materially the cost of fuel going into the plane. Okay, thanks for the time, you guys.
Daniel J. McKenzie: And.
Daniel J. McKenzie: So I think we're really set up well for Q2 and the rest of the year.
Speaker Change #112: Okay. Thank you.
Speaker Change #113: Thank you so much Chris.
Speaker Change #114: Chris and thank you everyone for joining us.
Speaker Change #115: You guys have a great day, and we'll see we'll talk to you guys next quarter.
Speaker Change #116: This concludes today's conference call. Thank you for attending.
Chris: Our next question will come from Chris with Susquehanna Financial. Morning, thanks for taking my question. Shane, the comment you said for 2Q, I think it was Slavish, ChasmX, just want to confirm that that's the freighter costs and, you know, freighters are now typically discussed here. I think you're sizing up that fleet. Can you just remind us of the current size and where that's going this year? Thanks, Chris.
Speaker Change #117: The host has ended this call goodbye.
Shane R. Tackett: Yeah, and that that comment is X Frater Cost, but you'll be able to see the year-over-year. I don't think it's going to be materially different even if you included freighter costs in both years. Yeah, we had a fleet of three, which is a small fleet.
Speaker Change #117: [music].
Shane R. Tackett: They do a lot of work for us up in the state of Alaska. It's really important to our customers up there. It's something we're proud of being able to do. We've been the predominant supplier.
Shane R. Tackett: Cargo Carry in the state of Alaska for most of our history, we're moving to five dedicated freighters. Again, most, if not all, of that lift will be in the state of Alaska. And who knows over time if we'll be able to continue to increase from that base of five.
Chris: We would certainly like to if the business remains strong. Okay, and as my follow-up, Ben, I think you said in your prepared remarks that you're anticipating a better supply-demand balance in the core markets in the second half. And so we've had a competitor retreat from parts of LA. It doesn't look like they're coming back outside of this. I'm curious, you know, how confident are you in this supply backdrop, or this sort of new dynamic, if you will, going forward? Thank you. Hey Dan.
Unknown Executive: Well, look, I think if you look at how Q1 turned out for us, and again, it was just an amazing quarter from what it was in Q1 of 2023. So we're just looking at just the higher water level we're starting from in Q1. And that's translating forward into Q2. You know, just based on everything we're seeing in terms of demand, and Andrew touched on a lot of those things, we just feel like we're well positioned. So that's why we're forecasting double-digit pre-tax margins, and we're feeling really strong.
Unknown Executive: It was our most profitable quarter. And so I think we're really set up well for Q2 and the rest of the year. Okay, thank you. Thank you so much, Chris.
Operator: And thank you everyone for joining us. You guys have a great day, and we'll see you guys next quarter. And this concludes today's conference call. Thank you for attending.
Operator: Goodbye. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good morning, ladies and gentlemen, and welcome to the Alaska Air Group 2024 first quarter earnings call. At this time, all participants have been placed on mute to prevent background noise.
Today's call is being recorded and will be accessible for future playback at alaskaair.com. After our speaker's remarks, we will conduct a question and answer session for analysts. I would now like to turn the call over to Alaska Air Group's Vice President of Finance, Planning, and Investor Relations, Ryan St. John. Thank you, operator, and good morning.
Thank you for joining us for our first quarter 2024 earnings call. This morning, we issued our earnings release along with several accompanying slides detailing our results, which are available at investor.alaskaair.com. On today's call, you'll hear updates from Ben, Andrew, and Shane. Additionally, several others on our management team are also on the line to answer your questions during the Q&A portion of the call. This morning, Air Group reported a first quarter net loss of $132 million.
Excluding special items and mark-to-market fuel hedge adjustments, Air Group reported an adjusted net loss of $116 million. As a reminder, our comments today will include forward-looking statements about future performance, which may differ materially from our actual results. Information on risk factors that could affect our business can be found within our SEC file. We will also refer to certain non-GAAP financial measures, such as adjusted earnings and unit cost excluding, As usual, we have provided a reconciliation between the most directly comparable GAAP and non-GAAP measures in today's earnings. It's over to you. Thanks, Ryan. And good morning, everyone.
As you are all aware, the most significant event this quarter was the accident involving Flight 1282 and the subsequent four-week grounding of a third of our fleet. Our focus has been on the safe return of our fleet, caring for our employees and guests, and enhancing our oversight of the production of our new aircraft. This event also had a substantial financial impact, totaling $162 million, which Boeing has fully compensated us for. To provide clarity on our core business, I will discuss our Q1 results excluding the effects of Flight 1282 and the MAX grounding. During the quarter, we also received a second request for information from the DOJ regarding our proposed acquisition of Hawaiian Airlines.
Speaker Change #117: [music].
We are working to respond to these requests as quickly as possible. Given the substantial volume of information involved, we have granted the government an additional 60 days to review our responses and will continue to work with them to advance the process as swiftly as possible.
Speaker Change #118: Good morning, ladies and gentlemen, and welcome to the Alaska Air Group 2024 first quarter earnings call.
We still believe strongly in the pro-consumer and pro-competitive merits of this deal and are excited by the opportunities this will unlock for Alaska both domestically and internationally. A year ago, I set a goal for my team to reduce losses in the first quarter, traditionally our weakest, with the aim of progressing towards break-even over the next three years. I am proud to announce that, excluding the grounding impact, we have achieved this goal in one year.
Speaker Change #119: At this time all participants have been have been placed on mute to prevent background noise.
Speaker Change #119: Today's call is being recorded and will be accessible for future playback at Alaska Air Dot Com.
After our speakers remarks, we will conduct a question and answer session for analysts.
Speaker Change #120: I would now like to turn the call over to Alaska Air Group's Vice President of Finance planning and Investor Relations Ryan St. John.
Our Q1 performance far exceeded our initial expectation of a 30% profit improvement coming into this year. We not only reduced losses, but we turned a small profit absent the max grounding on record revenue for the quarter. Several factors contributed to this positive performance, including discipline and thoughtful capacity planning, a concerted effort to reconfigure and optimize our network, the return of West Coast business travel, particularly among technology companies, and strong leisure demand throughout our market.
Speaker Change #121: Thank you operator and good morning.
Speaker Change #122: Thank you for joining us for our first quarter 2024 earnings call. This morning, we issued our earnings release, along with several accompanying slides detailing our results, which are available at investor that Alaska Air Dot Com.
Speaker Change #123: On today's call, you'll hear updates from Ben Andrew and Shane several others of our management team are also on the line to answer your questions. During the Q&A portion of the call.
Speaker Change #123: This morning Air Group reported a first quarter GAAP net loss of $132 million.
While we strive to do even better going forward, the underlying improvement in our core business in Q1, despite the significant disruption felt across our business from the Max grounding, is a fantastic result for Air Group. With this under-performance, we are revising our full-year adjusted EPS from $3.25 to $5.25, which does not reflect any compensation.
Speaker Change #123: Excluding special items and Mark to market fuel hedge adjustments Air group reported an adjusted net loss of $116 million.
As a reminder, our comments today will include forward looking statements about future performance, which may differ materially from our actual results information on risk factors that could affect our business can be found within our SEC filings. We will also refer to certain non-GAAP financial measures such as adjusted earnings and unit costs excluding fuel.
We remain encouraged by our Q2 Outlook and beyond. We've continued to see robust demand through the spring break travel season and have visibility to double-digit adjusted pre-tax margins in the second quarter, despite higher fuel prices. Our commitment to changing the outcome in Q1 positions us at a better starting point.
Speaker Change #123: And as usual we have provided a reconciliation between the most directly comparable GAAP and non-GAAP measures in today's earnings release over to you Ben.
Speaker Change #123: Yes.
Ben Andrew: Thanks, Ryan and good morning, everyone.
Ben Andrew: As you are all aware the most significant event. This quarter was the accident involving slide 12, 82, and the subsequent four week grounding of a third of our fleet.
Not only for the rest of this year but also in years to come, as we look to grow profits and earnings over time from a stronger business. Now looking ahead, our focus remains on driving our strategic initiatives forward and managing the elements of our business within our control. We are excited to be back on track and running a solid operation with our full fleet in service. As I stated earlier, we have received $162 million in cash compensation from Boeing, making us whole for the total Q1 profit impact related to the MAX grounding. Our long-standing partnership with Boeing is important to us and to our customers. The financial agreement we've reached with them is a strong reflection of that relationship.
Ben Andrew: Our focus has been on the safe return of our fleet carrying for our employees and guests and enhancing our oversight of the production of our new aircraft.
Ben Andrew: This event also had a substantial financial impact totaling $162 million, which Boeing has fully compensated us for.
Ben Andrew: To provide clarity on our core business performance I will discuss our Q1 results excluding the effects of flight 12, 82, and the Max grounding.
Ben Andrew: During the quarter. We also received a second request for information from the Doj regarding our proposed acquisition of Hawaiian Airlines, we are working to respond to these requests as quickly as possible given the substantial volume of information involved we have granted the government an additional 60 days to review our.
We remain committed partners, but we will hold Boeing to the highest bar for quality out of the factory. And to that end, we have enhanced our in-person oversight of our 737 production line and are regularly engaging with Boeing leadership on quality and schedule. Alaska needs Boeing.
Ben Andrew: Responses and we will continue to work with them to advance the process as swiftly as possible. We still believe strongly in the pro consumer and pro competitive merits of this deal and are excited by the opportunities. This will unlock for Alaska, both domestically and internationally.
Our industry needs Boeing, and our country needs Boeing to be a leader in airplane manufacturing. Operationally, we've regained our reliability by returning our entire fleet to service in February. The response from our guests has been incredibly positive. Strong Demand Evidence throughout February and beyond. Our teams have dedicated themselves around the clock to restore operational excellence, resulting in an improved completion rate of 99.5% from the second week of February through March, more in line with our historical standard of performance.
Ben Andrew: A year ago I set a goal for my team to reduce losses in the first quarter traditionally our weakest with the aim of progressing towards breakeven over the next three years.
Ben Andrew: I'm proud to announce that excluding the grounding impact we have achieved this goal and one year, our Q1 performance far exceeded our initial expectation of a 30% profit improvement coming into this year.
Ben Andrew: We not only reduce losses, but we turned a small profit absent the Max grounding on our record revenue for the quarter.
A big shout out to our entire maintenance and engineering team for bringing all our MAX 9s back into service safely and reliably. Safety is a foundational and uncompromising value for Air Group, and we expect nothing but the highest quality aircraft from Boeing.
Ben Andrew: Several factors contributed to this positive performance, including disciplined and thoughtful capacity planning.
Ben Andrew: Concerted effort to reconfigure and optimize our network the return of West Coast business travel, particularly among technology companies and strong leisure demand throughout our markets.
Regarding 2024 aircraft deliveries, as we've stated before, we expect Boeing will fall short of the 23 planned deliveries to us this year. Andrew will discuss Q2 capacity in more detail, but our objective will be to deliver a schedule with a high level of service and reliability our guests expect and know from us, and Shane will discuss the impact on full-year CapEx due to fewer delays. As we kick off the second quarter, one of our busiest and most profitable periods, we are optimistic and determined to drive strong results in our Safety remains paramount, and we've successfully restored operational. Building on our Q1 profitability improvements, we're now focused on leveraging these strengths to expand profitability and generate free cash.
Ben Andrew: While we strive to do even better going forward the underlying improvement in our core business in Q1, despite the significant disruption across our business from the Max grounding is a fantastic result for Air group.
Ben Andrew: With this outperformance we are revising our full year adjusted EPS from $3 25 to $5 and 25.
Ben Andrew: Which does not reflect any compensation.
Ben Andrew: We remain encouraged by our Q2 outlook and beyond we've continued to see robust demand through the spring break travel season and have visibility to double digit adjusted pre tax margins in the second quarter, despite higher fuel prices.
Ben Andrew: Our commitment to changing the outcome in Q1 positions us at a better starting point not only for the rest of this year, but also in years to come as we look to grow profits and earnings over time from a stronger base.
With last year's strong unit cost performance as our foundation, we're enhancing productivity across the board. And our careful management of capacity, combined with our focus on a premium guest experience, positions us well to deliver solid financial results over the next three quarters. And lastly, I just want to acknowledge this amazing Alaska team, from our exceptional frontline employees who deliver consistently strong operational results and guest service to our leadership team that holds itself accountable to being better each day.
Ben Andrew: Looking ahead, our focus remains on driving our strategic initiatives forward and managing the elements of our business within our control.
Ben Andrew: We're excited to be back on track and running a solid operation with our full fleet in service.
Ben Andrew: As I stated earlier, we have received $162 million in cash compensation from Boeing making us whole for the total Q1 profit impact related to the Max grounding, our long standing partnership with Boeing is important to us and to our success.
Together, we're driving success every step of the way. And with that, I'll turn it over to Andrew. Thanks, Ben, and good morning. Today, my comments will speak to our first quarter results, with a focus on unpacking our core performance and addressing second quarter trends and guidance. We achieved record first quarter revenues totaling $2.2 billion.
Ben Andrew: Financial agreement, we've reached with them is a strong reflection of that relationship.
Ben Andrew: We remain committed partners, but we will hope Boeing to the highest bar for quality out of the factory.
Ben Andrew: To that end, we have enhanced our in person oversight of our 737 production line and are regularly engaging with Boeing leadership on quality and schedule.
Up 1.6% year-over-year. This is an incredible result, especially when you consider the $150 million in revenue that we lost due to the ground. Our team did a masterful job rethinking the deployment of our Q1 network in order to combat the seasonal challenges we face and best serve the demand in our geography. Capacity ended the quarter down 2.1% year over year, inclusive of an approximate 5.5 point impact from the ground. This result was better than our initial expectation immediately following the accident due to high utilization, a better than expected completion rate, and no significant winter weather.
Ben Andrew: <unk> needs Boeing our industry needs Boeing and our country needs Boeing to be a leader in airplane manufacturing.
Ben Andrew: Operationally, we've regained our reliability by returning our entire fleet to service on February eight three.
Ben Andrew: The response from our guests has been incredibly positive with strong demand evident throughout February and beyond <unk>.
Ben Andrew: Our teams have dedicated themselves around the clock to restore operational excellence, resulting in an improved completion rate of 99, 5% from the second week of February through March more in line with our historical standard of performance, a big shout out to our entire maintenance and engineering team for bringing back all our Max nine.
Absent the grounding, capacity would have been up approximately 3.5%, a level we feel was appropriate for the Q1 environment and our network reconfiguration. In addition to our focused network efforts, we were positively impacted by the rapid return of corporate travel revenues and general closing strength, which drove a strong unit revenue result. For the quarter, unit revenue was up 3.8% year over year.
Ben Andrew: Into service safely and reliably.
Ben Andrew: Safety is a foundational and uncompromising value for air group, and we expect nothing but the highest quality aircraft from Boeing regarding 2024 aircraft deliveries as we've stated before we expect Boeing will fall short of the 23 planned deliveries to us this year.
Excluding the impact of the grounding, unit revenue would have been up 5%, which is markedly higher than our original guidance of up 1-2%. This outperformance was driven by three factors. First, one-and-a-half points of RASM outperformance came from better-than-expected results related to the reallocation of flying.
Andrew will discuss Q2 capacity in more detail, but our objective will be to deliver a schedule with the high level of service and reliability Rguest expect and know from us and Shane will discuss the impact to full year capex due to fewer deliveries.
Ben Andrew: As we kick off the second quarter, one of our busiest and most profitable periods, we are optimistic and determined to drive strong results in our business safety.
These changes more successfully met demand across our markets as we capitalized on more leisure flying. Additionally, one-and-a-half points of RASM improvement came from a material step-up in business travel beginning in January, especially from large technology companies. In Q1, managed business revenue grew 22%, approximately 50% driven from yield and 50% from volume. Tech companies saw the biggest improvement, with revenues up over 50% year-over-year and professional services revenue an impressive 20%, to put the speed of recovery into perspective. Managed Business Revenues increased 10% in January, a stunning 30% in February, and 24% in March. These results were achieved despite the grounding and layaway we experienced.
Ben Andrew: Safety remains Paramount and we have successfully restored operational excellence built.
Ben Andrew: Building on our Q1 profitability improvements we are now focused on leveraging these strengths to expand profitability and generate free cash flow.
Ben Andrew: With last year's strong unit cost performance as our foundation, we are enhancing productivity across the board and our careful management of capacity combined with our focus on our premium guest experience positions us well to deliver solid financial results over the next three quarters.
Ben Andrew: And lastly, I just want to acknowledge the amazing Alaska team from our exceptional frontline employees, who deliver consistently strong operational results and guest service to our leadership team that holds itself accountable to being better each day.
Ben Andrew: Together, we're driving success every step of the way and with that I'll turn it over to Andrew.
Today, managed corporate revenue has fully recovered to 2019 levels, while tech is approximately 85% recovered. As we've said for some time, we expected business travel to come back, which we are clearly seeing today. While we did not bake this into our Q1 forecast, we do not anticipate any step back in corporate travel in Q2.
Andrew: Thanks, Ben and good morning, everyone. Today, My comments will speak to our first quarter results.
Andrew: With a focus on unpacking, our core performance in addressing second quarter trends and guidance.
Andrew: We achieved record first quarter revenues totaling $2 $2 billion.
Andrew: Up one 6% year over year.
Andrew: This is an incredible result, especially when you consider the $150 million in revenue that we lost due to the grounding.
Andrew: Our team did a masterful job rethinking the deployment of our Q1 network in order to combat the seasonal challenges, we face and to best serve the demand in our geographies.
And we saw strength in close in leisure demand return. This strength was especially evident in February, where revenue beat our original pre-grounding expectations despite lost flying and booking away at the beginning of the month. Similarly, our total March revenue surpassed our record-breaking result last year on just over one point lower load factor, bolstered by yields that improved two points in the month, driven by strong, close-input sales. Taken all together, these impacts drove a 3.5 point improvement above the midpoint of our original guide for the quarter.
Andrew: Capacity ended the quarter down two 1% year over year inclusive of an approximate $5 five point impact from the grounding.
Andrew: This result was better than our initial expectation immediately following the accident due to high utilization a better than expected completion rate and no significant winter weather.
Andrew: Absent the grounding capacity would've been up approximately three 5% a level, we feel was appropriate for the Q1 environment and our network reconfiguration.
Andrew: In addition to our focused efforts.
Lastly, our premium cabin performance continues to support what we believe to be a structural shift in higher demand for premium products. First and Premium Class revenues finished up 4% and 11%, respectively, during the quarter, with our First Class paid load factor hitting monthly records at 68% during February and 69% in March. What makes these premium revenue results even more significant is that they would have been higher had we not experienced the ground.
Andrew: We were positively impacted by the rapid return corporate travel revenues and general close in strength, which drove a strong unit revenue result.
Andrew: For the quarter unit revenue was up three 8% year over year.
Andrew: Excluding the impact of the grounding unit revenue would have been up 5%, which is markedly higher than our original guidance of up 1% to 2%. This outperformance was driven by three factors.
Our paid premium capacity has come a long way from the days of paid load factors in the 40% range for mainline and all-coach regional. As we continue to refine our premium strategy across our products and markets, we have further upside to come and remain committed to building on our premium guest experience, offering the products our guests and loyalty members want. Our loyalty program, which we hope to share more on later this year, also continues to post strong results. Co-brand cash remuneration of approximately four hundred and thirty million dollars in Cuba, Up 4.2% year-over-year, notwithstanding the grounding, and a major contributor to the 48% of revenues we generate outside the main cabin.
Andrew: One five points of RASM outperformance came from better than expected results related to the reallocation of flying.
Andrew: These changes more successfully met the demand across our markets as we capitalized on more leisure flying second.
Andrew: One five points of RASM improvement came from a material step up in business travel beginning in January, especially from large technology companies. In Q1 managed business revenue grew 22% approximately 50% driven from yield and 50% from volume.
Andrew: Tech companies saw the biggest improvement with revenues up over 50% year over year and professional services revenue an impressive 20%.
To put the speed of recovery into perspective managed business revenues increased 10% in January a stunning 30% in February and 24% in March.
Now turning to our Outlook and Guidance. We expect capacity to step up 5-7% year over year in the second quarter, with the low end of this range assuming no aircraft are delivered this quarter. Given the uncertainty around delivery timing following the grounding, we have extended the retirements of several of our older aircraft over the next few months and pushed utilizations slightly higher across the mainline fleet where we have opportunities. We have also added back more capacity on the regional side through Horizon and SkyWest given higher utilization from improved pilot staff. Through the combination of these changes, we are confident in flying a reliable schedule for our guests.
Andrew: These results were achieved despite the grounding and book value experienced today managed corporate revenue has fully recovered to 2019 levels. While tech is approximately 85% recovered.
Andrew: As we've said for some time, we expected business travel to come back, which we are clearly seeing today.
Andrew: While we did not bake this into our Q1 forecast, we do not anticipate any step back in corporate travel in Q2.
Andrew: Third.
Andrew: Half a point of RASM improvement came once we restored our schedule reliability.
Andrew: And we saw strength in closing leisure demand return.
This strength is especially evident in February where revenue beat our original pre grounding expectations, Despite loss flying and book away at the beginning of the month.
While the second quarter will be our highest growth this year, it is also our most profitable growth, with June a clear peak month for us. While we've added a handful of new routes across our network, the majority of our added flying is focused on additional frequencies in high-demand markets where we have conviction in their profitability. Second quarter bookings so far are encouraging, with yields continuing at healthy levels in April and beyond, albeit slightly moderating through the quarter on growing industry capacity.
Andrew: Similarly, our total match revenue surpassed our record breaking result last year on just over one point lower load factor.
Andrew: <unk> bye yields that improved two points in months driven by strong close in performance.
Andrew: Taken altogether. These impacts drove a three five point improvement above the midpoint of our original guide for the quarter.
This year we have seen a more normalized yield and booking curve building in strength as we get closer to the year, a trend we expect should persist. Looking beyond Q2, the back half of the year looks to be shaping up well, as industry capacity constraints remain in place. Competitive Intensity Dynamics Across Our West Coast Markets Stable
Andrew: Lastly, our premium cabin performance continues to support what we believe to be a structural shift in higher demand for premium products.
Andrew: First and premium class revenues finished up 4% and 11% respectively. During the quarter with our first class paid load factor heating monthly records at 68% during February and 69% in March.
In closing, the team has done a tremendous job in reshaping our network to produce a strong result for our most seasonalally challenged Full Value of our differentiated product offering, from premium seating to lounges to global partnerships. I believe we are well positioned to drive another solid quarter of performance as we move into our peak periods this summer. And with that, I'll pass it over to. Thanks, Andrew. And good morning, everyone.
Andrew: These premium revenue results, even more significant is that they would have been higher had we not experienced the grounding.
Andrew: Paid premium capacity has come a long way from the days of paid load factors in the 40% range, but mainline and an old coach regional fleet as we continue to refine our premium strategy across our products and markets. We have further upside to come and remain committed to building on our premium guest experience offering the products out.
In what has been a challenging start to the year, our people and our business model have shown amazing resilience. Safety, of course, is our absolute priority, and it will continue to be our top focus above all else. It has, however, been encouraging to see the level of improvement in our core first quarter performance this year. While managing through the difficult circumstances of Flight 1282 and its aftermath, the teams did an admirable job operating safely and on time, and our commercial team put together a network plan that, coupled with strong demand, positioned us well to meet our long-term target to break even in Q1.
Andrew: <unk> and loyalty members want a loyalty program, which we hope to share more on later this year also continues to post strong results with.
Andrew: With co brand cash remuneration of approximately $430 million in Q1 up four 2% year over year, notwithstanding the grounding and a major contributor to the 48% of revenues, we generate outside the main cabin.
Andrew: Now turning to our outlook and guidance, we expect capacity to step up 5% to 7% year over year in the second quarter with the low end of this range assuming no aircraft delivered this quarter.
Andrew: Given the uncertainty around delivery timing following the grounding we have extended the retirements of several of our older aircraft over the next few months and pushed utilization slightly higher across the mainline fleet, where we had opportunity.
We are not shy about setting ambitious goals for ourselves, and we have a good history of delivering on those commitments. Our financial focus remains on continuing to strengthen our business model and delivering strong financial performance over the long term. Turning to our results, for the first quarter, our adjusted loss per share was $0.92, which excludes compensation received from Boeing related to our max fleet grounding. The profit impact of the fleet grounding in Q1 was $162 million, or $0.95 of EPS, and seven points of margin. Fuel price per gallon was $3.80.
Andrew: We also added back more capacity on the regional side through horizon, and Skywest, given higher utilization from improved pilot staffing.
Andrew: Through the combination of these changes we are confident in saying.
Andrew: I reliable schedule for our guests.
Andrew: And while the second quarter will be our highest growth. This year. It is also our most profitable growth with June a clear peak month for us.
Andrew: While we've added a handful of new routes across our network. The majority of our added flying is focused on additional frequencies in high demand markets, where we have conviction in their profitability second.
As West Coast refining margins continue to be a unique margin headwind to our results relative to the rest of the world, our total liquidity, inclusive of on-hand cash and undrawn lines of credit, stood at $2.8 billion as of March 31st. Debt repayments for the quarter were approximately $100 million and are expected to be approximately $50 million in the second quarter.
Andrew: Second quarter bookings, so far are encouraging with yields continuing at healthy levels in April and beyond will be at slightly moderating through the quarter on growing industry capacity. This year, we have seen a more normalized yield and booking curve building and strength as we get closer in a trend we expect should persist.
Our leverage levels remain healthy at 47% debt to CAP and 1.1 times net debt to EBITDAR, while our ROIC stands above 9%. For the quarter, unit costs were up 11.2% year over year, six points of which are directly attributable to the fleet grounding, primarily from the significant loss of planned capacity. We also incurred approximately $30 million of incremental operational recovery costs due to the grounding as well.
Andrew: Looking beyond Q2, the back half of the year, it looks to be shaping up well as industry capacity constraints remain in place and competitive intensity dynamics across our west coast markets stabilize.
Andrew: In closing the team has done a tremendous job in reshaping our network to produce a strong result for our most seasonally challenged period with the full value of our differentiated product offering from premium seating to lounges to global partnerships. I believe we are well positioned to drive another solid quarter of performance as we move into our peak periods. This summer.
Our core unit costs, absent grounding impacts, were up approximately 5% year-over-year in the first quarter. The drivers remain similar to prior quarters and are consistent with pressures faced by most airlines, the primary of which is higher labor rates for our. We have completed seven labor contracts over the past two years, including a recently signed agreement with our aircraft technician, and we continue to prioritize finalizing an agreement with our flight crew. We remain committed to high productivity in our contracts.
Andrew: And with that I'll pass it over to Shane.
Thanks, Andrew and good morning, everyone.
Shane: And what has been a challenging start to the year, our people and our business model have shown amazing resilience.
Shane: Safety of course is our absolute priority and it will continue to be our top focus above all else. It has however been encouraging to see the level of improvement to our core first quarter performance. This year.
Shane: While managing through the difficult circumstances, a flight 12, 82 and its aftermath. The teams did an admirable job operating safely and on time and our commercial team put together a network plan that coupled with strong demand positioned us well to meet our long term target to breakeven in Q1.
And absent the max grounding, we would have had a 2% increase in productivity year over year as measured by passengers carried per FD. We expect continued productivity improvements throughout the year across the company. And in May, we'll operate under our new preferential bidding system for pilots for the first time, which will allow for both enhanced pilot productivity and important schedules that are more aligned with our pilots' priorities. While costs are materially higher structurally for the industry, our margin profile for the first quarter is evidence we are making the right decisions on capacity deployment, and we will continue to prioritize the overall margin health of Overgrowth for the sake of unit cost performance
Shane: We are not shy about setting ambitious goals for ourselves and we have a good history of delivering on those commitments.
Shane: Our financial focus remains on continuing to strengthen our business model and delivering strong financial performance over the long term.
Shane: Turning to our results for the first quarter, our adjusted loss per share was <unk> 92.
Shane: Excludes compensation received from Boeing related to our Max fleet grounding the.
Shane: The profit impact of the fleet grounding in Q1 was $162 million or <unk> 95 of EPS and seven points of margin.
Fuel price per gallon was $3 eight.
Shane: As West Coast refining margins continued to be a unique margin headwind to our results relative to the rest of the country.
We are committed to also maintaining our relative cost advantage, and we continue to do well on that basis. We achieved the industry's best cost performance last year, and looking at our rolling four-quarter unit costs, we have outperformed both Delta and United by three points on a stage-length adjusted unit cost basis. While we may experience quarterly variances on a unit basis, we are not feeding any of our relatives. We have widened the gap over the past 12 months, and we remain focused on managing to aggressive budgets and delivering strong margin performance.
Shane: Our total liquidity inclusive of on hand, cash and Undrawn lines of credit did at $2 8 billion as of March 31.
Debt repayments for the quarter were approximately $100 million.
Shane: And are expected to be approximately $50 million in the second quarter.
Shane: Our leverage levels remain healthy at 47% debt to cap and one one times net debt to EBITDAR, while our ROIC stands above 9%.
Shane: For the quarter unit costs were up 11, 2% year over year.
Shane: Six points of which are directly attributable to the fleet grounding primarily from the significant loss of planned capacity, but we also incurred approximately $30 million of incremental operational recovery costs due to the grounding as well.
Not only did we improve profitability, excluding the grounding, by $120 million year over year, when compared to the first quarter of 2019 and 2023, but we've closed the margin gap with our largest peers by approximately 2 to 3 points. As we look ahead to Q2 and the rest of the year, I will provide capacity, fuel, EPS, and CapEx guidance, consistent with the metrics we shared last quarter and our focus on the overall margin profile of the business.
Shane: Our core unit costs absent grounding impacts were up approximately 5% year over year in the first quarter.
Shane: The drivers remained similar to prior quarters and are consistent with pressures faced by most airlines the primary of which is higher labor rates for our people.
Shane: We have completed seven labor contracts over the past two years, including a recently signed agreement with our aircraft technicians and we continue to prioritize finalizing an agreement with our flight attendants.
Shane: We remain committed.
Shane: Committed to high productivity in our contracts and absent the Max grounding, we would've had a 2% increase in productivity year over year as measured by passengers carried per FTE.
For the full year, as Ben shared, we do not expect to receive all 23 deliveries from Boeing that we had originally planned for this year. We are in discussions with Boeing, and as we gain more clarity on those deliveries, we will update our expectations. But we expect full-year capacity growth at this point to be below 3%. Also, due to lower expected deliveries, we now expect CapEx of $1.2 to $1.3 billion versus our prior expectation of $1.4 to $1.5 billion.
Shane: We expect continued productivity improvements throughout the year across the company.
Shane: And in May we will operate under our new preferential bidding system for pilots for the first time, which will allow for both enhanced pilot productivity and importantly schedules that are more aligned our pilots priorities.
Shane: While costs are materially higher structurally for the industry our margin profile for the first quarter as evidence we are making the right decisions on capacity deployment.
Shane: And we will continue to prioritize the overall margin health of the company over growth for the sake of unit cost performance alone.
We expect the economic fuel cost per gallon to be between $3 and $3.20 for the second quarter and expect refining margins on the West Coast to be more in line with the Gulf, which we've seen the past several. Given the significant spread in West Coast fuel costs versus the rest of the country, we are developing strategies to mitigate this disadvantage. Our first step was to discontinue our hedging program, given refining margins have become the more volatile component of fuel costs, which hedging did not protect.
Shane: We are committed to also retain our relative cost advantage and we continue to do well on that basis, we achieved the industry's best cost performance last year and looking at a rolling four quarter unit costs, we have outperformed both delta and United by three points on a stage length adjusted unit cost basis.
Shane: While we may experience quarterly variances on a unit basis, we are not ceding any of our relative advantage. We have widened the gap over the past 12 months and we remain focused on managing to a growing breadth of budgets and delivering strong margin performance.
The full value of the hedging cost reduction will take several quarters to bleed in. We are also changing our strategy for our annual fuel tender process to obtain better pricing and are likely to begin a program to begin a modest amount of self-supply of fuel later this year and into 2025. While these will take time to fully mature into our results, we expect these actions to close the current fuel headwind we face versus the rest of the industry and will help us to be well-positioned to lead the industry in margins. And, as Ben mentioned, we expect full-year EPS to now land between $3.25 and $5.25 for the full year and $2.20 and $2.40.
Shane: Not only did we improve profitability, excluding the grounding by $120 million year over year, when compared to the first quarter of 2019 and 2023, we've close the margin gap to our largest peers by approximately two to three points.
Shane: As we look ahead to Q2 and the rest of the character I won't provide capacity fuel EPS and capex guidance consistent with the metrics, we shared last quarter and our focus on the overall margin profile of the business.
Shane: For the full year has been shared we do not expect to receive all 23 deliveries from Boeing that we had originally planned for this year.
Shane: We are in discussions with Boeing and as we gain more clarity on those deliveries, we will update our expectations, but we expect full year capacity growth at this point to be below 3%.
Shane: Also due to lower expected deliveries, we now expect Capex of one two to $1 3 billion versus our prior expectation of one four to $1 5 billion.
Despite a likely 35-cent year-over-year headwind from fuel, we have visibility to a path back to healthy double-digit margins in the second quarter on our way to another strong four-year performance. With the immediate impact of the grounding behind us and our operational reliability back on track, we are optimistic about our outlook for the rest of the year. The economy continues to expand with supportive wage growth, recently improving consumer sentiment, and trends indicating a continuing preference to prioritize spending on travel and experiences over goods. By remaining focused on our historical strengths, safety, operational excellence, and relative cost performance, and continuing to reap the benefits of our commercial strategy, our business is configured to compete, maintain our relative advantage, and continue to deliver strong financial results. And with that, let's go to your questions.
Shane: We expect economic fuel cost per gallon to be between $3 and $3 20 for the second quarter and expect refining margins on the west coast to be more in line with Gulf Coast, which we've seen in the past several weeks.
Shane: Given the significant spread in west coast fuel costs versus the rest of the country. We are developing strategies to mitigate this disadvantage. Our first step was to discontinue our hedging program given refining margins have become the more volatile component of fuel costs, which hedging did not protect us from the full value of hedging cost reduction.
Shane: We will take several quarters to bleed in.
Shane: We're also changing our strategy for our annual fuel tender process to obtain better pricing and are likely to begin a program to begin a modest amount of self supply of fuel later this year and into 2025.
At this time, I would like to invite analysts who would like to ask a question to please press star and the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster, and our first question will come from Andrew Didora with Bank of America. Hi, good morning, everyone.
Shane: While these will take time to fully mature into our results. We expect these actions to close the current fuel headwind, we faced versus the rest of the industry and will help us to be well positioned to lead the industry in margins.
Shane: And as Ben mentioned, we expect full year EPS to now land between $3 25, and $5 25 for the full year and $2 20, and $2 40 for Q2.
Shane, I know you're not guiding to the chasm, but if I were to just think about one, one Q being up 3% on three and a half percent capacity, are there any kind of puts and takes that would give you a call out for two Q, whereby we wouldn't see any kind of chasm step down nicely given you're growing at 6%? And then similarly, as I think about the back half as growth comes down, I would expect the chasm to maybe flex back up. Is that a fair assessment?
Shane: Despite a likely 35% year over year headwind from fuel, we have visibility to a path back to healthy double digit margins in the second quarter on our way to another strong full year performance with the immediate impact of the grounding behind us and our operational reliability back on track we are optimistic about our outlook for the rest of the year.
Shane: <unk> continues to expand with supportive wage growth.
Shane: <unk>, improving consumer sentiment and trends, indicating a continuing preference to prioritize spending on travel and experiences over goods.
Hey, Andrew, good morning. Yeah, I think that's the right direction that we're expecting to see this year. We'll, we'll, we'll see a decent improvement in unit costs in the second quarter, given the growth profile of the company. And, as you mentioned, growth slows down in the back half of the year, and we'll probably see a little more pressure in the back half of the year again on unit costs. I think I do just want to mention the company I like. I think we've done a nice job, though, balancing capacity versus unit costs.
Shane: By remaining focused on our historical strength safety operational excellence and relative cost performance and continuing to reap the benefits of our commercial initiatives. Our business is configured to compete to maintain a relative advantage and to continue to deliver strong financial results and with that let's go to your questions.
Speaker Change #124: At this time I would like to invite analysts who would like to ask a question. Please press Star then the number one on your telephone keypad.
We'll pause for just a moment to compile the Q&A roster.
Speaker Change #124: And our first question will come from Andrew <unk> with Bank of America.
You've heard us increasingly talk about our focus on the margin health of the company. So we're going to continue to be smart about how we put capacity into the market, and we'll continue to compete really well on a unit cost basis against the larger airlines in our market. That's great. Thanks, Shane. And then there's just a follow-up for Andrew.
Andrew: Hi, good morning, everyone.
Andrew: Shane I know youre not guiding to CASM, but if I were to just think about one <unk> up 3% three 5% capacity.
Andrew: Are there any kind of puts and takes you would call out for two Q, whereby we wouldn't see kind of CASM stepped down nicely given youre growing at 6% and then similarly as you think about the <unk>.
Andrew: Half as growth comes down.
Andrew: We expect CASM to maybe flex back up is that a fair assessment.
I appreciate all the color you gave on corporate travel. Do you know what percentage of your revenues today are corporate and how that compares to pre-pandemic? And, you know, any color you can give us just in terms of what the RASM premium would be on corporate versus leisure travel?
Andrew: Hey, Andrew Good morning, Yeah, I think that's the right contour that we're expecting to see this year will will you will see a decent improvement in unit costs in the second quarter given the.
Andrew: The growth profile of the company and as you mentioned gross flows out in the back half of the year and we'll probably see a little more pressure in the back half of the year again on unit cost.
Thank you. Yeah, thanks, Andrew. We don't disclose that sort of information.
Andrew: I think.
Andrew: I do just want to mention like the the company I like I think we've done a nice job, though balancing capacity versus unit costs, you've heard us increasingly talk about.
But I will tell you that we see continued improvement and strength in our corporate position, the business that is coming our way. And again, as we've shared for some time, this return from West Coast business travel, especially in the technology area, has just been very significant. And I think when you look at others' comments around how much their managed business travel increased, ours increased significantly more year over year, which is very encouraging. It's great, thank you.
Focus on the margin health of the company. So we're going to continue to be.
Andrew: <unk> about how we.
Andrew: Put capacity into the market and.
Andrew: We will continue to compete really well on a unit cost basis against the larger airlines and our markets.
Speaker Change #125: That's great. Thanks, Shane and then just a follow up for Andrew.
Speaker Change #125: Appreciate all the color you gave on corporate travel.
Speaker Change #126: Do you know what what percentage of your revenues today are corporate and how that compares to a pre pandemic.
Thanks, Andrew. Thank you. Our next question will come from Helane Becker with TD Coworkers. Thanks very much, Operator. Hi, team.
Speaker Change #127: Any color you can give us just in terms of what.
Andrew: Our RASM premium would be on corporate versus leisure travel. Thank you.
Hope all is well. Just a question with respect to how we should think about the second half of the year. So second quarter continues kind of the first quarter strength, and then how are you thinking about third quarter versus second quarter? You know some of your peer group has been talking about a shift in seasonality, maybe a stronger July, I want to say stronger July and June and maybe not so strong August. I'm not sure how you guys' pattern of travel goes. Yeah, hi, Helane.
Speaker Change #128: Yeah. Thanks, Andrew we don't disclose that sort of information.
Speaker Change #129: But I will tell you.
Speaker Change #129: That we see continued improvement and strength.
Speaker Change #129: <unk> corporate position the business that is coming our way.
Speaker Change #129: And again as we've said for some time this return from West Coast business travel, especially in the technology area.
Speaker Change #129: Area, that's just been very significant and I think when you look at others.
Yeah, we're seeing the same thing. I think August and the return of schools and just the exposure of our network across different geographies. June is becoming the, you know, single strongest month.
Speaker Change #129: Comments around how much they manage business travel increased hours increased significantly more year over year, which is very encouraging.
Great. Thank you.
Speaker Change #130: Thanks, Andrew.
Speaker Change #130: And our next question will come from Helane Becker with TD Cowen.
And so what you'll see here is we've moved capacity around to accommodate that. So we feel pretty good about getting ahead of that mix. Okay, that's really helpful.
Helane Renee Becker: Thanks, very much operator, hi team hope all is well.
Helane Renee Becker: Just a question with respect to the way we should think about the second half of the year. So second quarter continues kind of the first quarter strength and then how are you thinking third quarter versus second quarter.
And then, Andrew, as you look at Alaska and the state of Alaska, what's the capacity, industry capacity, situation look like up there? I've been seeing some other airlines adding capacity to Anchorage and Fairbanks from, you know, various cities, not Seattle. And I'm just kind of wondering if that's impacting your overall, I don't know, market share, maybe the right word up there? Yeah, I think, you know, it ebbs and flows, people love to put their capacity into Alaska as we go into the summer period. I would say industry capacity, what I call Alaska long haul, is up.
Some of your peer group have been talking about shift in seasonality.
Helane Renee Becker: Maybe stronger July I wanted to say stronger in July and June and maybe not so strong August so I'm not sure how you guys.
Helane Renee Becker: The pattern of travel goes.
Speaker Change #131: Yes, Hi, Helane.
Yes, we are seeing the same thing I think.
I guess then the return of schools and just the exposure of our network across different geographies June is be coming the single strongest months.
Helane Renee Becker: And so what you'll see here as we move capacity around to accommodate that so we feel pretty good about getting ahead of that mix.
Decently, so that's putting a little bit of pressure on us, but overall, we feel really good about our position in Alaska and the routes that we serve, and, of course, we're very well positioned to serve anybody who is wanting to travel to Alaska. Right, gotcha. Okay, thanks very much.
Okay. That's really helpful. And then Andrew as you look at like Alaska, and the state of Alaska.
Helane Renee Becker: What's the capacity industry capacity situation look like up there.
Helane Renee Becker: And seeing some other airlines, adding capacity to Anchorage and Fairbanks from.
Andrew: Various cities not Seattle, and I'm, just kind of wondering if that's impacting your overall.
Thanks, Helane. Our next question will come from Savvy Sist with Raymond James. Hi, this is Zahra on Versavi.
Andrew: I don't know market share, maybe it's right where it up there.
What's the general environment that you're assuming for the second half of the year that's reflected in your full year EPS guide? Yeah, hi. Look, I think the second half of the year is expected to continue to be strong and stable. We view it right now. We think it's going to be consistent with what we're seeing today. I don't think there's any sign that demand is slowing down. We don't expect that at all.
Andrew: Yes, I think you know it ebbs and flows people love to put that capacity into Alaska as we go into the summer period, I would say industry capacity, what I call Alaska long haul is up.
Andrew: Recently, so that's putting a little bit pressure, but overall.
Andrew: We feel really good about our position in Alaska and the routes that we serve and of course, we are very well positioned to serve anybody who is wanting to travel to Alaska.
Speaker Change #132: Right Gotcha, Okay. Thanks very much.
I think fuel costs are a little higher than we had planned for the year, which was roughly $3 and came in at $3.08. And I think some of that is due to that. Increasing costs, we expect to be offset by the stronger close in demand, certainly on the business side. And so, net net, we haven't really changed our expectation for the full year. And we think it's going to continue to be a strong demand environment. Okay, sounds good. And then there was one more.
Speaker Change #133: Thanks Helane.
Speaker Change #133: Yes.
Speaker Change #133: Your next question will come from Savi <unk> with Raymond James.
Speaker Change #134: Hi, this is on for Savi, what's the general environment that you're assuming for the second half of the year. That's reflected in your full year EPS guidance.
Savi: Yeah, Hi.
Speaker Change #136: Look I think.
Savi: The second half of the year, we expect to continue to be strong and stable, where we view it.
Speaker Change #137: Right now we.
Speaker Change #138: It's gonna be consistent with what we're seeing today I don't think there is a sign that demand is slowing down we don't expect that at all.
If you could provide any color about your recent commercial initiatives like Alaska Access and your expectations for the contribution from these programs, that would be great. Thanks again. Hi, well, I'm glad you noticed Alaska Access. I think what you're really seeing here is that we're continuing to broaden the products and services that we offer. That's obviously something that's quite small.
I think fuel costs are a little higher than we had planned for the year, which was roughly $3 and came in at $3.08.
Speaker Change #138: And I think some of that.
Speaker Change #138: Increase in costs, we expect to be offset by the stronger close in demand certainly on the business side.
Speaker Change #138: So net net we haven't really changed our expectation for the full year.
And we think it's going to continue to be a strong demand environment.
Speaker Change #138: Okay sounds good and then one more if you can provide any color about your recent commercial initiatives like Alaska access and your expectations for the contribution from these programs that would be great. Thanks, Ken.
But the reality is the distribution landscape is materially changing. You've got NBC, but you've also got offer, order, settlement, and delivery. These technological changes are going to massively increase our ability on the revenue side to distribute our various products and services. So what you're going to see us continue to do is to bifurcate all the products and services that we have and continue to distribute those in different forms and ways over time. And we're really excited about just the technology that's coming our way to help us generate greater revenue. Great, thanks.
Ken: Hi, well I'm glad you noticed.
Speaker Change #140: Lastly access.
Speaker Change #141: What you're really seeing here.
Ken: Is that we're continuing to broaden the products and services that we offer.
Speaker Change #142: Thats, obviously, something thats quite small, but the reality is the distribution landscape is materially changing.
Speaker Change #142: Got it but you've also got offer order settlement and delivery.
And our next question will come from Ravi Shanker with Morgan Stanley. Thanks, everyone. So just on the close-in commentary, your comments on the strength of close-in were particularly notable because some of the competitors have been having some challenges with close-in strength or weakness. So are you doing something differently? Is the strength idiosyncratic to you? Is the weakness idiosyncratic to them?
Speaker Change #142: These technology changes are going to massively increase our ability.
Speaker Change #142: On the revenue side to distribute our various products and services.
Speaker Change #142: So what youre going to see us continue to do.
Speaker Change #142: Is to bifurcate all the products and services that we have and.
And continue to distribute those in different forms and ways over time. So we're really excited about just the technology, that's coming our way to help us generate greater revenues.
Speaker Change #143: Great. Thanks.
Speaker Change #143: Thank you. Our next question will come from Ravi Shanker with Morgan Stanley.
If you can unpack that, that would be great. Hi. I can't specifically speak to other carriers, but what I can tell you sitting here looking into April, demand is coming in very nicely with double-digit increases in unit revenues year over year as we move through the month of April. And as we look to May and June, where we obviously have a little bit more industry capacity, we're also seeing a very positive direction in the yields that are coming in through our system. So overall, we feel that Q2 is going to continue to be strong. Our network is well configured.
Hi, Thanks, good morning, everyone.
Ravi Shanker: So just on the closing commentary.
Your comments on the strength of closing was particularly notable because some competitors have been having some challenges with close in strength or weakness actually.
Ravi Shanker: So are you doing something differently as a strength idiosyncratic to you is the weakness idiosyncratic, but then if you can unpack that that'd be great.
Speaker Change #144: Hi, I can't specifically speak to other carriers, what I can tell you sitting here looking into April.
Speaker Change #144: Demand is coming in very nicely with double digit increases in unit revenues year over year as we move through the month of April and as we look to May and June where we have obviously a little bit more industry capacity. We're also seeing a very positive direction in the yields that are coming in throughout our system. So overall, we feel that Q2 is going.
Our premium class is performing. Our ancillary revenues are performing. They were actually up 6% in the first quarter, even though passengers were down. So we feel good about our setup for the second quarter, and Ravi, I might.
There could be some effect that, as you know, the West Coast had been more depressed on a business recovery basis, and I think that's caught up pretty quickly here in the first quarter, and that could be helping us. And then I also think just, you know, premium continues to be the place where most of the demand growth is happening, and I think we're doing a good job meeting that demand.
Speaker Change #144: Continued a strong network as well configured premium classes performing our ancillary revenues are performing directly up 6% in the first quarter, even though passengers were down so we feel good about our setup for the second quarter.
Speaker Change #145: Ravi I might just.
Ravi Shanker: There could be some effect that as you know the west coast had been more depressed on a business recovery basis.
That's helpful. Maybe the follow-up to that. Thanks for the detail on the slides and the chasm and the rasm walk.
Ravi Shanker: I think thats caught up pretty quickly here in the first quarter and that could be helping us and then I also think just premium continues to be the place where most of the demand growth is happening and I think we're doing a good job meeting that demand.
Can you maybe help us understand kind of what that gap between chasm and rasm might look like in 2Q and maybe for the rest of the year as well? Well, Ravi, we're not going to give guidance on those two unimetrics, but I would tell you, I think that, as we mentioned earlier, maybe the first question, I think CASM will perform better in the second quarter than it did in the first quarter. Just given the higher capacity, we'll be able to see a better result. It could approach flattish. I think CASM could win in the second quarter.
Got it that's helpful and maybe as a follow up to that thanks for the detail on the slides and the CASM in the RASM walk.
Can you maybe help us understand kind of what that gap between CASM and RASM might look like into Q and maybe for the rest of the year as well.
Ravi Shanker:
Speaker Change #146: Well Ravi, we're not going to give guidance.
Speaker Change #146: I'll note that unit metrics, but I would tell you.
Speaker Change #147: I think that as we mentioned.
Speaker Change #147: Earlier, maybe the first question I think CASM will perform better in the second quarter than it did in the first quarter.
We'll see, ultimately, if we get to the midpoint of our capacity guide or not, based on deliveries over the next couple of months. I think unit revenues are going to be pressured a bit by the grounding impact of 1282 and some of the book away in spring break that happened over the first quarter. But I think they're going to be strong.
Speaker Change #147: Just given the higher capacity, we'll be able to see it.
Speaker Change #147: See a better result.
Like approach flattish.
Speaker Change #147: CASM good in the second quarter, we will see ultimately if we get.
Speaker Change #147: So the midpoint of our <unk>.
Speaker Change #147: The guide or not.
Speaker Change #147: Based on deliveries over the next couple of months and I think unit revenues, they're going to be still pressured a bit by the grounding impact of 12 82, and some of the book a little way in spring break that happened over the first quarter, but I think theyre going to be strong I think they're going to continue to perform amongst the best in the industry.
I think they're going to continue to perform amongst the best in the industry on a domestic basis. Anyway, I think we're looking at a strong second quarter from a margin perspective, which, understood. Thank you. Thanks, Ravi.
Speaker Change #147: On a domestic basis.
Speaker Change #147: So I think we're looking at.
We'll move next to Duane Pfennigwerth with Evercore ISI. Hey, thank you. Can you talk a little bit about what you're seeing in Hawaii, you know, how you're thinking about the recovery in Maui and your capacity recovery there and, you know, what you're seeing competitively, any changes there? Duane, yeah, so on Hawaii. Actually, we were very pleasantly surprised as far as just the general framework and strength of Hawaii in general. That said, I think our capacity was down close to 40% out of Maui in total, and it's still going to be down 20% as we move through.
Speaker Change #147: <unk> second quarter from a.
Speaker Change #147: Margin perspective, which is what we said in the script.
Speaker Change #148: Understood. Thank you.
Speaker Change #149: Thanks Robert.
Speaker Change #149: And we'll move next to Duane <unk> with Evercore ISI.
Duane: Hey, Thank you.
Can you talk a little bit about what youre seeing in Hawaii.
Duane: How you're.
Duane: You're thinking about the recovery in Maui and your capacity recovery there.
And what Youre seeing competitively any any changes there.
Speaker Change #150: Hey, Duane.
Duane: Yes, so on a Hawaii actually we were very.
Duane: Pleasantly surprises as far as just the general.
So outside of Maui, Hawaii is performing within expectations. I think it's going to be some time before Maui recovers, just to be frank, and so we are adjusting our capacity to meet the demand that we're seeing there. But it's certainly a slow journey.
Duane: Framework and strength of Hawaii in General that said I think our capacity was down close to 40% out of Maui in total still going to be down 20, as we move through.
Duane: Outside of Maui, Hawaii is performing within expectations I think its going to be some time before malware.
Okay, so maybe the down 40 recovers to down 20, and you kind of wait and see at that level. Is that a fair way to think about it? Yeah, I think the way to think about it is we get through this summer, and then as we look into the back end of the year, which is more seasonally weak, we're going to assess how demand is, and we'll adjust capacity. Okay, great. And then I guess Shane, you piqued my interest with the self-supply of fuel. Can you just elaborate on that? Sir Dwayne, uh...
Duane: <unk> just to be Frank and so we are adjusting our capacity.
Duane: Man that we're seeing there, but it's certainly.
Duane: A slow journey.
Speaker Change #151: Okay. So maybe the down 40 recovers to down 20, and you kind of wait and see at that level is that a is that a fair way to think about it.
Speaker Change #152: Yes, I think the way to think about it as we get through through this summer and then as we look into the back end of the year, which is more seasonally weak we're going to assess how.
Speaker Change #152: And is it will adjust capacity appropriately.
Speaker Change #153: Okay, Great and then.
Speaker Change #153: I guess, Shane you piqued my interest with self supply of fuel can you just elaborate on that.
Thanks for asking about fuel supply. Look, I think we've been pretty passive other than the hedging program on managing the fuel line in business. As you know, we've had significant headwinds that are unique to us relative to the rest of the industry, and I think it prevented us from being the top margin producer in the industry last year just on a refining margin basis on the West Coast relative to the Gulf Coast.
Shane: Sure Duane.
Shane: Thanks for asking about fuel supply look I think we've been pretty passive other than the hedging program on on managing the fuel line.
Shane: <unk> business.
Shane: As you know we've had significant headwinds that are unique to us relative to the rest of the industry and I think it prevented us from being the top margin producer in the industry last year, just on our refining margin basis on the west coast relative to Gulf Coast.
So we're not going to sit idly by and let that continue to impact our results. We spent a lot of time in the first quarter understanding why we have a $0.30 differential relative to the rest of the industry, and one of the things we believe we can do is, ultimately, buy our own fuel from other places around the globe and ship it into some of our larger cities. It takes a while to get that done, but other airlines do it.
Shane: So we're not going to sit idly by and let that continue to impact our results. We've spent a lot of time in the first quarter understanding why we have.
Shane: 30, <unk> <unk>.
Shane: Differential relative to the rest of the industry and one of the things. We believe we can do is.
Shane: Is ultimately buy our own fuel from other places around the globe and ship it into some of our larger cities. It takes a while to get that done other airlines do it it's not a brand new idea to the industry.
It's not a brand new idea to the industry, and I think there'll be a way of saving a few pennies per gallon, which we're going to go after later this year and into next year. We'll say more about that as we firm up plans. That's great. And if I could sneak one more in here, just on regional mix, can you talk in broad strokes, what regions would be as a percent of your capacity?
Shane: There'll be.
Shane: A way of saving a few pennies per gallon, which we're going to we're going to go. After later this year and into next year, we'll say more about it from our plants.
Speaker Change #154: That's great and if I could sneak one more in here just on regional mix can you talk broad strokes.
Maybe, you know, this year versus last year. And I know you're not giving point estimates on the metrics, but just broad strokes, how we should be thinking about it, you know, kind of tailwind to rasm, headwind to chasm. And maybe, you know, margin impacts. It feels like there's probably parts of your network that are starving for more regional lift, but just help us think about that. Thanks for taking the questions.
Speaker Change #154: What regionals would be as a percent of your capacity.
Speaker Change #154: Maybe this year versus versus last year.
Speaker Change #154: And I know youre, not giving point estimates on the metrics, but just broad strokes, how we should be thinking about it kind of tailwind to RASM headwind to CASM.
Speaker Change #154: And maybe margin impacts it feels like Theres, probably parts of your network that were starving for more regional lift, but just help us help us think about that thanks for taking the questions.
Yeah, thanks for the question. I think, from your perspective, it's give or take around 10% of our capacity is regional. I don't see that materially changing.
Speaker Change #155: Yeah. Thanks for the question I think you know from your perspective, it's give or take around 10% of our capacity is regional I don't see that materially changing that said.
That said, the regional businesses are, Profitability, just with the return of utilization and redeployment, has jumped significantly, and they've been a valuable partner, both SkyWest and Horizon, to help us with our Boeing deliveries and those Embraer 175s backfilling some markets that we otherwise couldn't. Yeah, and, and on Horizon's part, this has been Horizon performing, you know, fantastic. Margins are up. We've put a lot of focus in the last few years on our regional business, and it's really performing nicely. And we will continue to see that trend continue over the rest of the year. Okay, thank you very much.
Speaker Change #155: The regional businesses.
Speaker Change #155: Profitability, just with the return of utilization and redeployment has jumped significantly and they've been a valuable partner, both skywest and horizon to help us with al Boeing deliveries in those Embraer <unk> hundred 70, fives back filling some markets that we otherwise couldn't save.
Speaker Change #156: And and Duane I will just say four horizons part this has been a horizon.
Speaker Change #156: Performing.
Speaker Change #156: Fantastic.
Speaker Change #156: <unk> margins are up.
Speaker Change #156: Put a lot of focus in the last few years in our regional business and it's really performing nicely and we continue to see that trend.
Thanks, Duane. Our next question will come from Jamie Baker with J.P. Morgan. Hey, good morning. I'll admit I had to Google Alaska access. A little embarrassing to start off with that.
Speaker Change #156: Over the rest of the year.
Speaker Change #157: Okay. Thank you very much.
Speaker Change #158: Thanks Duane.
Speaker Change #158: Your next question will come from Jamie Baker with JP Morgan.
Hey, good morning, I'll admit I had to Google Alaska access.
So obviously, the corporate momentum is positive. Can you speak, though, about how corporate patterns compare to those of pre-COVID, you know, how does trip duration compare as the booking curve elongated as change fees have gone away, you know, that sort of thing, behavioral change, I guess is what I'm asking about. Thanks, Jamie.
Speaker Change #158: Okay.
Jamie Nathaniel Baker: A little embarrassing to start off with that.
Jamie Nathaniel Baker: So obviously the corporate momentum as a positive.
Jamie Nathaniel Baker: Can you speak to how corporate patterns.
Compare to those are pre COVID-19.
Jamie Nathaniel Baker: His trip duration compare.
Booking curve elongated as change fees have gone away.
Jamie Nathaniel Baker: Behavioral change I guess is what I'm asking about.
I think I probably will have a better answer for you next quarter as I shared the rapid up 10, up 30, up 24, just in this first quarter with everything else going on was something we need to better digest as we move through the second quarter. But I am seeing a lot of the traditional Demand return as we've seen it historically, but I'll have a better answer after we've digested this quarter and get through the second quarter. Okay, well, then you won't fault me when I ask the same question in 90 days.
Speaker Change #159: Yeah. Thanks.
Speaker Change #160: Thanks, Jamie I think.
Speaker Change #161: I, probably will have a better answer for you next quarter as I shared the rapid uptake up 30 up 24, just in this first quarter with everything else going on with.
Something we need to better digest as we move through the second quarter, but I am seeing a lot of the traditional <unk>.
Speaker Change #161: <unk> return as we've seen it historically, but I'll I'll have a better answer after we have digested this quarter and get through the second quarter.
That's good. So second question, just, you know, on the revised four-year guide. You know, the first quarter was solid.
Speaker Change #162: Okay. Well then you won't fall to me when I asked the same question in 90 days and Thats good.
Speaker Change #162: Yes.
You've got good visibility into the second. I guess I'm wondering what driving the $2 range in the guide. I mean, to be fair, United has a $2 range as well. Is it just stylistic that you chose to maintain that range?
Speaker Change #163: So second question just on the revised full year guide.
Speaker Change #163: First quarter was solid and <unk> got good visibility into the second.
Speaker Change #164: I guess I'm wondering what's driving the two dollar range in the guide I mean to be fair United is at $2 range as well.
Or do you really think there's that much? Variability and Uncertainty in the Second Half? And if so, what are the most uncertain inputs in your model besides fuel?
Speaker Change #164: Is it just stylistic that you chose to maintain that range or do you really think there's that much.
Speaker Change #164: Very ability and uncertainty in the second half and if so what are the most uncertain inputs in your model besides fuel.
Yeah, hey, thank you, Jamie. You know, there's probably a large component of it that's just habit, like we've habitually done a $2 range, and we tighten it maybe in the fourth quarter or something. I do think fuel is the largest immediate driver, typically, that we see that will run us up or down that EPS guide. But yeah, I do think the $2 range is more just out of habit than anything that we're trying to architect around a specific set of outcomes on the worst-case side versus the best-case side.
Speaker Change #165: Yeah, Hey, Thank you Jamie.
Speaker Change #166: Theres probably a.
Speaker Change #167: A large component of it that's just habit.
Speaker Change #167: Habitually dermatitic $2 range, and we tightened that maybe in the fourth quarter or something.
Speaker Change #167: <unk>.
Speaker Change #167: I do think can fuel is the largest you know.
Speaker Change #167: Immediate driver typically that we see.
Speaker Change #167: And that will run us up or down that that.
Speaker Change #167: EPS guide, but yes, I do think the $2 range as more just out of habit than anything.
Speaker Change #167: But we're trying to architect around like a specific set of outcomes.
And just if I can sneak in a clarification, earlier in the call, did you say double-digit RASM on 3% capacity in April? What I said was that our intakes coming into the month are up double-digit for April. Like, the tickets were selling today. Yes. Not, not, not the entire held book, like, held.
Speaker Change #167: On the worst case side versus the best case side.
Speaker Change #167: And just if I can sneak in a clarification earlier in the call, but did you say double digit RASM on 3% capacity in April.
Speaker Change #167: What I said was that our intakes coming into the months are up double digit for April.
Okay. Yeah, that that makes sense. I was pinged by a client about that. So I hadn't heard it that way, either.
Speaker Change #167: Tickets, we're selling today, yes, not not not the entire held book Okay.
Yeah, Yeah that makes sense I was I was paid by our clients to about that so I hadn't heard that way either so thank you for the clarification I'll cede the floor. It if somebody else. Thank you.
So thank you for the clarification. I'll see the floor to somebody else. Thank you, Thanks, Jamie. We will move next to the Scott Group with Wolf Rees. Hey, thanks. Good morning.
Speaker Change #168: Thanks, Jamie.
So I just want to follow up on that last point. Because, you know, if you assume that the chasm is approaching flat, it feels like the guidance assumes rasm that's flat to down, and you're saying it was up 5% in q1, you sound like everything's really, really good in q2. So I'm not sure if I'm missing something or if there's a lot of Conservatism in the guide. Any color would be helpful.
Speaker Change #168: And we'll move next to Scott Group with Wolfe Research.
Scott H. Group: Hey, Thanks, Good morning, So I just wanted to follow up on that last point because.
Scott H. Group: If you assume that chasm is approaching flat it feels like the guidance assumes RASM, that's flat to down and you are saying it was up 5% in Q1, you sounded like everything is really really good in Q2, so I'm not sure if I'm missing something or if there is a lot of.
Yeah, I think, Scott, the thing to remember in the first quarter is it's obviously by far our seasonally weakest; the second quarter is very, very strong. And capacity industry-wide is growing, obviously, much more in the second. So it's all relative. I think what your statements around CASM and RASM are spot on.
Scott H. Group: Conservatism in the guide or any color would be helpful.
Speaker Change #169: Yes, I think.
Speaker Change #170: Scott I think the thing to remember in the first quarter is obviously by far our seasonally weakest second quarter is very very strong.
Speaker Change #171: Capacity industry wide is growing.
Speaker Change #172: Obviously much more in a second so its all relative I think what your statements around CASM and RASM directionally.
And as we've shared before, as we get into this period, and then we look at our margins and profitability for the second quarter, very strong. And as we've shared before, as we move through this quarter and beyond, West Coast capacity from the industry is reducing, and growth is reducing. So there's a really good setup for the back half of the year.
Speaker Change #173: Spot on.
Speaker Change #173: As we've been shared before as we get into this period and then we look at our margins and profitability for the second quarter very strong and as we've shared before as we move through this quarter and beyond West coast capacity from the industry is reducing growth is reducing so there's a really good set up for the back half of the year.
Okay, I think I understand what you were saying about, we'll tell you more at some point about loyalty, but maybe just give us a little bit of, you know, some thoughts about what you're referring to and, Yes, Scott, I think in general, I'm not going to share much today, but we have a number of things in the works that we're working on. And at the right time, we're going to be sharing more. I just really wanted folks to know, especially on the revenue side, we have some really good things in store, and we're not ready to share those yet. Andrew was just teasing Scott.
Speaker Change #173: Okay.
Speaker Change #174: I understand and then you had a comment about we'll tell you more at some point about loyalty, but maybe just give us a little bit of some thoughts about what your what youre referring to.
Speaker Change #175: That'd be helpful.
Speaker Change #176: Yes, Scott I think.
Speaker Change #177: In general.
Speaker Change #178: Going to ship much today, but we have a number of things in the works that were working on and at the right time, and we're going to be sharing more just really wanted folks to know, especially on the revenue side. We have some really good things in store and we're not ready to share those yet.
But that, but I did look, there's a lot of things that we got a lot of irons in the fire in terms of loyalty and products and, and stuff. So yeah, when the time is right, we'll provide more color on those. But, I'm really excited about it. Thank you guys.
Speaker Change #179: Andrew I was just teasing Scott.
Speaker Change #179: But.
Speaker Change #179: But look there's a lot of things that we've got a lot of irons in the fire in terms of loyalty and products.
Speaker Change #180: And stuff so yes.
Speaker Change #180: When the time is right, we'll provide more color on those but.
Thanks, Scott. Our next question will come from Stephen Trent with Citigroup. Hi, good morning, everyone. And thanks for taking my question. The first one is kind of an ignorant one for me.
Speaker Change #180: I'm really excited about them.
Speaker Change #180: Okay.
Speaker Change #181: Thank you guys appreciate it.
Speaker Change #182: Thanks Scott.
Speaker Change #182: Our next question will come from Stephen Trent with Citigroup.
But, you know, let's say hypothetically that Alaska and Hawaii merge; there aren't any sort of major adjustments in capacity that the DOJ passes down. What could you tell at this juncture, whether your exposure to a West Coast refining cost would rise with the combined Hawaiian, or would it kind of stay the same or is kind of, you know, too early to tell? Yeah, thanks, Steve. I'm not going to hypothesize too much, but I'll tell you that the fuel prices in Hawaii are significantly lower than you see in the continental US.
Stephen Trent: Hi, good morning, everyone and thanks for taking my question.
Stephen Trent: The first one kind of an ignorant one for me but.
Stephen Trent: Let's say hypothetically.
Stephen Trent: Aska and Hawaiian merge there on any sort of major adjustments in capacity that the Doj passes down.
Stephen Trent: Can you tell at this juncture whether you.
Stephen Trent: Your exposure to a west coast refining costs.
Stephen Trent: Would rise with the combined Hawaiian or would it kind of stay the same or is it kind of.
Speaker Change #183: Too early to tell.
Speaker Change #184: Yes, Thanks, Steve.
Im.
Speaker Change #185: I'm not going to hypothesize too much but I will tell you that the fuel prices in Hawaii are significantly lower than you see in the.
Okay, very clear. Super. Thank you for that. I guess one quick follow-up I mentioned 90 days ago about what you guys are doing and the nice work you've done in having that investment grade credit rating. Could you refresh my memory sort of what the push might be to get an investment grade rating from all three agencies? Yeah, Stephen.
Speaker Change #185: Continental U S.
Speaker Change #185: Yeah.
Steve: Okay very clear Super Thank you for that.
Speaker Change #186: And just one quick follow up I mentioned.
Speaker Change #187: 90 days ago about.
Speaker Change #187: What you guys are doing in the nice work, you've done and having that investment grade credit rating.
Speaker Change #188: Could you refresh my memory sort of what the push might be to get that.
Um, good question. I think we deserve it. And we are hopeful that they will review us soon and reconsider their ratings. We're not, You know, we're not actively out talking with the other two agencies right now. We've got a lot going on, and we're really focused on, you know, hopefully closing the proposed acquisition of Hawaiian. We've got to go to market, potentially, and raise some money to do that. So that's our focus right now. We'll get that behind us.
Speaker Change #188: <unk> grade ratings from all three agencies.
Speaker Change #189: Yes, Stephen Good question I think we deserve it and we are hopeful that they review us soon and.
Speaker Change #189: Reconsider their ratings were not.
Speaker Change #189: Okay.
Speaker Change #190: Not actively out talking with the other two agencies right now we've got a lot going on and we're really focused on.
Speaker Change #190: Hopefully closing the proposed acquisition of Hawaiian we've got to go to market potentially raise some money to do that so that's our focus right now we'll get that behind US and then you know.
And then, you know, I think we've got really good debt metrics and credit metrics. I think we're definitely deserving of reconsideration by the other two agencies, and we'll keep making our case over time to them. Oh, great. I appreciate that, Shane. And thanks, everybody. Thank you, Steve, and we'll move next to Conor Cunningham with Melios Rios. Everyone, thank you. You know, as you talk to Boeing, are you looking to completely rework the order book? It just seems like the comments today seem like you're more focused on 24.
Speaker Change #190: I think we've got really good debt metrics credit metrics.
Speaker Change #190: We are definitely deserving of reconsideration by the other two agencies and we'll keep making our case overtime to them.
Speaker Change #191: Oh, great I appreciate that's changing and then thanks everybody.
Speaker Change #192: Thank you Steve.
And we'll move next to Conor Cunningham with Melius research.
Conor T. Cunningham: Everyone. Thank you.
Conor T. Cunningham: As you talked to Boeing.
But is there an opportunity to kind of, I don't know, stabilize that over the next couple years? I'm just trying to understand what you want in a new delivery stream, Going Forward. Thank you.
Conor T. Cunningham: Are you looking to completely rework the order book It just seems like the comments today seem like Youre more focused on 24, but is there an opportunity to kind of I don't know.
Conor T. Cunningham: Stabilize that over the next couple of years I, just I'm just trying to understand what you want in a new delivery stream from them.
Yeah, thanks, Connor. I think, yeah, look, there's two or three moving pieces there, you know, their own ability to get back to production rates that support, you know, a consistent and reliable delivery stream, which is most important to us is the quality and safety of the manufacturing process. So we've got to sort that out. We also, you know, prefer the Max 10 at this point, although it's not certified yet.
Speaker Change #193: Forward. Thank you.
Speaker Change #194: Yeah. Thanks, Conor I think yeah look there is two or three moving pieces there.
Speaker Change #194: Their own ability to get back to production rates that support.
Speaker Change #194:
Speaker Change #195: Consistent and reliable delivery stream, which.
Speaker Change #195: Most important to us is the quality and safety of the manufacturing process.
We've got to make decisions about, you know, when to expect that. I think it's going to come later than we had expected, which is the second half of next year. And then again, if the proposed transaction is able to proceed, we've got another 60 to 65 aircraft to think about, along with the 330 or so we have today. So we just need to take some time, look at all of these variables, and put together, you know, a new skyline for the Boeing Max deliveries.
Speaker Change #196: Got to sort that out we also.
Speaker Change #196: Prefer the Max 10 at this point, it's not certified yet we've got to make decisions about when to expect that I think it is going to come later than we had expected which was second half of next year.
Speaker Change #196: And then again if if the proposed transaction is able to proceed.
Speaker Change #196: We've got another.
60% to 65 aircraft to think about.
Speaker Change #196: Along with 330 or so we have today. So we just need to take some time look at all of these variables and put together.
I think, you know, directionally, it will probably be less than we had, you know, been thinking about even a year ago. So it should be good for a CapEx story, good for a free cash flow story over time. But we need, we need, you know, another quarter or two to really work through that on our side and then with our partners over at Boeing. Okay, that's helpful.
Speaker Change #196: Our new Sky.
Speaker Change #196: Skyline for the for the Boeing Max deliveries.
Speaker Change #197: Thank you know directionally, it will probably be less than we had.
Speaker Change #197: Then thinking about you know.
Speaker Change #197: Even a year ago. So it should be good for our Capex story, good for free cash flow story over time, but we need we need to.
Speaker Change #197: Another quarter or two to really work through that on our side and then work with.
And then on this, on the premium, you know, revenue, and then versus your saver, I'm just, it seems like there's a pretty huge spread going on. And I don't know if there's anything to glean from, like your main cabin saver fare option. I'm just trying to understand how you think about that spread over the long term. And then maybe, sorry, as an incremental follow-up to that, you know, your inventory didn't sell your inventory as far out as you initially did. And you talked about close in. Are you thinking about changing how you, how your inventory sits going forward to try to capture more of the close in demand given your premium offering? Sorry about that.
Speaker Change #197: Our partners over at Boeing.
Okay. That's helpful and then on this on the premium.
Speaker Change #197: Revenue and then versus your Savr I'm, just it seems like Theres, a pretty huge spread going on and I don't know if there's anything to glean into like your main cabin saver fare option is.
Just trying to understand how you think about that spread over the long term and then maybe as sorry as an incremental after that.
Speaker Change #197: Your I think your inventory you didn't sell your inventory as far out as you initially did and you talked about closing how are you thinking about changing how you.
Speaker Change #197: How are your inventory sits going forward to try to capture more of the close in demand.
I realize that's like nine questions, but thanks. Yeah, that's all right. I'll answer at a high level.
Speaker Change #198: Your premium offering sorry about that I realize it looks like nine questions, but thanks, yeah right.
I think the saver fare has been a very, you know, good product for us. In fact, we've made it significantly more available than we did last year. We've also seen a significant increase in revenues from buying out of Saver, And It's A Very Valuable Tool In The Seasonality And Given Where Our Network Moves Around. We're focused on, and probably historically, we've pretty much chased loads to some respect, and I think as we see where the industry is and where we are, we're putting more focus on yields and how we structure the pricing of our cabins, both main and premium, and the saver.
Speaker Change #199: Antibody just high level I think.
Speaker Change #200: The save a fair has been.
Speaker Change #200: Very.
Speaker Change #200: Good product for us.
Speaker Change #200: Fact, we've made at <unk>.
Speaker Change #200: Significantly more available than we did last year. We've also seen significant increase in revenues buying out a save up and it's a very valuable tool in the seasonality and given where our network moves around I think.
Speaker Change #200: We're focused on and probably historically, we've pretty much chase loads to some respect and I think as we're seeing where the industry is and where we are where we're putting more focus on yields and how we structure the pricing of our cabins, both Maine and premium and and the Ciba and I think what I can tell you is that we're more than ever getting.
And I think what I can tell you is that we're more than ever getting more deliberate about how we manage our product setup in our booth, and I think there's only goodness to come from that. Very helpful. Thank you, and we'll move next to Mike Linenberg with Deutsche Bank. Hey, good morning, everyone.
Speaker Change #200: More deliberate about how we manage our product set up in <unk>.
Speaker Change #200: Cabin, I think theres only goodness to come from that.
Speaker Change #201: Very helpful. Thank you.
Speaker Change #202: Thanks, Gunnar Thanks Connor.
Um, hey, Andrew, you probably have, better than anyone, a good sense of this evolution of close in leisure. I really feel like it was something that hit the scene big time during COVID. A lot of it had to do with just last minute reopenings and, and the like, I sort of feel pre-Covid. It was either a bereavement fair, or I don't know, maybe your pal scored you a ticket to the Taylor Swift concert, and you found out about it last.
Speaker Change #202: And we'll move next to Mike Lindenberg with Deutsche Bank.
Michael John Linenberg: Hey, good morning, everyone.
Michael John Linenberg: Andrew.
You probably have better than anyone and good sense.
Michael John Linenberg: This evolution of close in leisure I really feel like it was something that <unk> seen big time during Covid a lot of it had to do it.
Last minute reopening.
Michael John Linenberg: And like I said.
Michael John Linenberg: Pre COVID-19 it was either a bereavement there or I don't know maybe youre, excluding a ticket to the Taylor Swift concert and found out about it last night.
But it's, it's becoming a bigger piece. And I, I don't know if it's 5% of, kind of your when you look at your various segments, corporate, discretionary, whatever, long-haul international. Can you, can you talk about that evolution?
Michael John Linenberg: Right.
Michael John Linenberg: Becoming a bigger piece and.
Michael John Linenberg: I don't know if its 5%.
Michael John Linenberg: Kind of year when you look at your various segments corporate discretionary whenever long haul international.
Speaker Change #203: Can you can you talk about that evolution.
Speaker Change #203: Because I don't think I can and have already but maybe it's become a much bigger category when I realized and it can have impact.
Because I don't think it's a category, but maybe it's become a much bigger category than I realized, and it can have an impact on RASM. And of course, when I talk about leisure, I'm also talking about Chase Loyalty and Costco and major leisure agencies. So what we're really seeing is that for us, at least, we had structured our cabin and our demand environment to take more further out and leave less closer in.
John Ransom: John Ransom.
John Ransom: Well number one flattery will get you everywhere. So thank you.
John Ransom: But we had a huge we had a huge learning from COVID-19.
John Ransom: We were squeezing out the Cabot because we went for loads and you.
John Ransom: You know there was a robust.
John Ransom: And of course, when I talk about leisure I'm talking also about chase loyalty and Costco and major league agencies.
John Ransom: So what we're really seeing is that for us at least we had structured al.
And I think what we're finding is there is a whole group of customers and guests who are strong leisure travelers that just book a lot closer in, and we're making seats available for them today, and, of course, given the fair fencing and how that all works, the yields are much better than they would be further out. Absolutely. Absolutely. That makes sense. And then, just my second, um, I know you talked about a couple teasers and things that we should look out for. You did drop loyalty.
John Ransom: Cabin in our demand environment to take more further out and leave less closer in and I think what we're finding is there is a whole group of customers and guests.
John Ransom: Who are our strong leisure travel as it just spoke a lot closer in and we are making seats available for them today and of course, given the fare fencing and how that all works the yields are much better than they would be further out.
John Ransom: Absolutely.
Speaker Change #205: Absolutely that makes sense and then just as my second.
I know Ben mentioned loyalty. If anything, are we up for renewal this year? No, we're, we're, we're past that.
Speaker Change #206: I know you did talk about a couple of teasers and.
Speaker Change #206: Things that we should look out for you did drop loyalty I know Ben mentioned loyalty if anything are we up for renewal this year.
But, um, I think you know what I would say about loyalty, and you've heard others say it is such a very powerful and important part of our business. If you look at the environment and how loyalty programs are evolving, there are changes. And so we are looking at how our loyalty program needs to change and evolve, and I think there's just real upside. And again, we're not willing to share anything today other than that this is an area of focus for us. Okay, very good. Thank you, and we'll move next to Dan McKenzie with Seaport Global. Oh, hey, good morning.
Speaker Change #206:
Speaker Change #206: No.
Speaker Change #206: We're past that but I think.
Speaker Change #206: If you just what I would say about loyalty and you've heard other side is such a very powerful and important.
Speaker Change #206: Part of our business, if you look at the environment and how loyalty programs, they're all evolving and there's changes and so we are looking at how our loyalty program needs to change and evolve and I think there's just real upside and again, we're not willing to share anything today.
Speaker Change #206: Then this is an area of focus for us.
Speaker Change #207: Okay very good thank you.
Thanks. There are a couple of questions here. I guess my first question really is a headcount versus fleet count question. So you know, what number of deliveries are you guys hiring for? And then I guess where I'm going with that is the overhead or the cost burden that Alaska is carrying because the deliveries are coming in a little less than expected. I guess, you know, is Boeing compensating you for that cost? Thanks, Dan. A couple things on this one.
Speaker Change #207: And we'll move next to Dan Mckenzie with Seaport Global.
Daniel J. McKenzie: Oh, Hey, good morning. Thanks, a couple of questions here I guess my first question really is a head count versus fleet count question.
Daniel J. McKenzie: What number of deliveries are you I guess, how are you guys hiring too and then I guess, where I'm going with that is the overhead or the cost burden that Alaska is carrying because the deliveries.
Daniel J. McKenzie: Coming in a little less than expected and then I guess as Boeing compensating you for that that cost burden.
I think we originally had anticipated 23 deliveries. Of course, when they come is an important variable as well. As evidenced by our revised Foliar Capacity Guide and CAPEX Guide, we expect to get fewer than that. Boeing actually has 10 aircraft essentially built and going through the final review and ticketing process. So we expect to get all of those and probably, you know, some additional units beyond that. So we're thinking somewhere between 10 and 20.
Speaker Change #208: Thanks, Dan.
Speaker Change #209: A couple of things here on this one I think we originally had anticipated 23 deliveries of course, when they come is an important variable as well.
Speaker Change #210: As evidenced by our revised full year capacity guide and Capex guide, we expect to get fewer than that.
Speaker Change #210: But we actually have 10 aircrafts essentially built and going through the final review and ticketing process.
Speaker Change #210: We expect to get all of those and probably.
We have a number of aircraft we are planning to retire, so many of those aircraft we're going to replace with older 900 Classics. So our headcount situation is in really good shape relative to the delivery stream coming our way. We're not going to be, you know, materially overstaffed. I don't believe in any part of our business.
Speaker Change #210: Some additional units beyond that so we are thinking somewhere between 10 and 20.
Speaker Change #210:
Speaker Change #210: We have a number of aircraft we were planning to retire so many of those aircrafts were going to replace older 900 classics.
Speaker Change #210: Our head count situation is in really good shape relative to.
We watch that closely. We had to staff up a bit, you know, throughout the end of last year to get ready for this year and this spring. But I don't think that we're going to be in a significant drag position from a cost perspective, and to the extent that we are, we are having conversations with Boeing in terms of compensating us for that. Yeah, very good. Okay. And then I guess, Shane, I have another question for you here.
Speaker Change #210: The delivery stream coming our way, we're not going to be.
Speaker Change #210: Materially Overstaffed I don't believe in any part of our business. We watch that closely we had to staff up a bit.
Speaker Change #210: Throughout the end of last year to get ready for this year in the spring.
Speaker Change #210: But I.
Speaker Change #210: I don't think that we're going to be in a.
Speaker Change #210: Significant drag position from a cost perspective.
Speaker Change #210: And to the extent that we are we are having conversations with Boeing in terms of compensating us for that.
In the 10K, Alaska highlighted 200 million gallons of SAF through 2030. And I guess I'm just curious how many gallons you're planning to buy here in 2024? And you know, what is the cost differential today of that versus West Coast jet fuel?
Speaker Change #211: Very good okay.
Speaker Change #211: And then I guess she has another question for you here in the 10-K, Alaska highlighted 200 million gallons of Saf through 2030, and I guess I'm just curious how many gallons you're planning to buy here in 2024.
And then where do you think that differential can go, say, in, you know, two to three years' time? And I guess what I'm trying to get at is it's probably a small percent of the overall volume, but I'm just trying to get a sense of the margin headwind from that. Yeah, thanks for the question. So it is a small part of the overall buying decision. And that's in large part because it's a small part of the supply in the world at large.
And what is the cost differential today of that versus west coast jet fuel.
Speaker Change #211: And then where do you think that differential can go say in two to three years' time, and I guess I'm, what I'm trying to get at is probably a small percent of the overall volume, but I'm just trying to get a sense of the margin headwind from that.
Speaker Change #212: Yes. Thanks for the question. So it is a small part of the overall buying and that's in large part because it's a small part of the supply in the world at large for 2024, it'll be about 1% of our total fuel.
For 2024, it'll be about 1% of our total fuel, and that comes from a couple of different suppliers. It's, there is a green premium over the cost of Jet A. We're fortunate to have a lot of really strong corporate partners that are working with us to co invest in SAS in a way that also offsets the scope three emissions of their business travel. And we're doing a lot in the market to try to grow and mature the staff market in the future. And which includes looking at the cost-down curve of different technologies and different producers. Dan, I think, thanks, Dana, for the color.
Speaker Change #213: And that's coming from a couple of different suppliers. It's a it is there is a green premium over the cost of debt. A we're fortunate to have a lot of really strong corporate partners that are working with us to co invest in SaaS in a way that also offsets are the scope three emissions of their business travel.
Speaker Change #213: And we're doing a lot in the market to try to grow and mature the SaaS market in the future and which includes looking at the cost down curve of different technologies and different producers.
I don't think there's, you know, a noticeable margin headwind from it this year. Obviously, it's a consideration for the entire industry as we move forward and it becomes a larger part of supply, but we're probably a few years before it really starts to show up in a way that increases materially the cost of fuel going into the plane. Okay, thanks for the time you guys. Your next question will come from Chris with Susquehanna Financial. Morning, thanks for taking my question. Shane, the comment you said for 2Q, I think it was Slavish, ChasmX. I just want to confirm that that's X.
Speaker Change #213: Dan I think the.
Daniel J. McKenzie: Thanks, Dana for the color I don't think there is.
Speaker Change #214: A noticeable margin headwind from it this year, obviously, it's a consideration for the entire industry as we move forward it becomes a larger part of supply, but we're probably a few years before it really starts to show up.
Speaker Change #214: In a way that increases materially the cost of fuel going into the plan.
Speaker Change #215: Yeah, Okay. Thanks for the time you guys.
Speaker Change #216: Thanks, Good afternoon.
Speaker Change #216: And our next question will come from Chris <unk> with Susquehanna Financial group.
Chris: Good morning, Thanks for taking my questions.
The freighter costs, and then you know freighters are not typically discussed here. I think you're sizing up that fleet. Can you just remind us of the current size and where that's going this year? Thanks, Chris. Yeah, and that that comment is X Frater cost, but you'll be able to see the year over year. I don't think it's going to be materially different even if you included freighter costs in both years. Yeah, we had a fleet of three, which is a small fleet.
Chris: You said for <unk> I think it was flattish CASM X just wanted to confirm that that's X.
The freight costs and then freighters.
Chris: Not typically discussed here I think youre sizing up equity can you just remind us the current size.
Chris: Where that's going this year. Thank you.
Speaker Change #217: Thanks, Chris Yes that that comment is X greater cost.
Speaker Change #218: But you'll be able to see the year over year I don't think it's going to be materially different even if you included for your costs in both both years.
They do a lot of work for us up in the state of Alaska. It's really important to our customers up there. It's something we're proud of being able to do. We've been the predominant cargo carrier in the state of Alaska for most of our history. We're moving to five dedicated freighters. Again, most, if not all, of that lift will be in the state of Alaska.
Speaker Change #218: Yes, we had a fleet of three which is a small fleet. They do a lot of work for us up in the state of Alaska, It's really important.
To our customers up there it's some.
Speaker Change #218: Something we're proud of being able to do.
Speaker Change #218: We've been the predominant.
Speaker Change #218: Cargo carrier in the state of Alaska for most of our history, we're moving to five dedicated freighters again, most all of that lift will be in a state of Alaska.
And who knows, over time, if we'll be able to continue to increase from that base of five. We would certainly like to, if the business remains strong. Okay, and as my follow-up, Ben, I think you said in your prepared remarks that you're anticipating a better supply and demand balance in the core markets in the second half. And so we've had a competitor retreat from parts of LA. Doesn't look like they're coming back outside of this.
Speaker Change #218: And who knows over time, if we will be able to.
<unk> continue to increment from that base of five we would certainly like to have the business remains strong.
Speaker Change #219: Okay, and just my follow up and I think you said in your prepared remarks that youre anticipating a better supply demand balance in our core markets.
In the second half and so we've had a competitor retreat from parts of L. A it doesn't look like there.
I'm curious, you know, how confident are you in this supply backdrop or this sort of new dynamic, if you will, going forward? Thank you. Hey Dan. Well, look, I think if you look at how Q1 turned out for us, and again, it was just an amazing quarter from what it was in Q1 of 2023. So we're just looking at just the higher water level we're starting from in Q1. And that's translating forward into Q2.
Speaker Change #219: They are coming back outside and this is curious how confident are you in this supply backdrop or this sort of new dynamic if you will going forward.
Speaker Change #220: Thank you.
Speaker Change #220: Hey, Dan well look I think if you look at how Q1 turned out for us.
Speaker Change #221: Again, it was just an amazing quarter from what it was in Q1 of 2023. So we're just looking at just the higher water level, we're starting from in Q1, and that's translating forward into Q2.
You know, just based on everything we're seeing in terms of demand, and Andrew touched on a lot of those things, we just feel like we're well positioned. So that's why we're forecasting double-digit pre-tax margins. And so, we're feeling really strong. It's our most profitable quarter. And so I think we're really set up well for Q2 and the rest of the year. Okay, thank you.
Speaker Change #221: Based on everything we're seeing in terms of demand and Andrew touched on a lot of those things. We just feel like we're well positioned so that's why we're forecasting double digit pre tax margins.
Speaker Change #221: And so we're feeling really strong it's our most profitable quarter.
Thank you so much, Chris. And thank you everyone for joining us. You guys have a great day, and we'll talk to you guys next quarter. And this concludes today's conference call. Thank you for attending.
Speaker Change #221: And.
Speaker Change #221: So I think we're really set up well for Q2 and the rest of the year.
Speaker Change #222: Okay. Thank you.
Speaker Change #223: Thank you so much Chris.
Speaker Change #224: Chris and thank you everyone for joining us.
Speaker Change #225: Have a great day, and we'll see we'll talk to you guys next quarter.
Speaker Change #226: This concludes today's conference call. Thank you for attending.