Q1 2024 Spirit Airlines Inc Earnings Call
Okay.
Pam: Thank you for standing by my name is Pam and I'll be a conference operator today at this time I would like to welcome everyone to the Spirit Airlines first quarter 'twenty 'twenty four earnings conference call.
Pam: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star One again, thank you I would now.
Pam: I'd like to turn the conference over to Deanne <unk> Senior director.
Deanne: <unk> from Investor Relations you may begin.
Deanne: Thank you Pam.
Presenting on today's call are Ted Christie, Spirit's, Chief Executive Officer, Matt Klein, our Chief Commercial Officer, and Scott Haralson, Our Chief Financial Officer also joining US are other members of our senior leadership team.
Deanne: Following our prepared remarks, we will take questions from the analysts.
Deanne: Today's discussion contains forward looking statements that are based on the company's current expectations are not a guarantee of future performance there could be significant risks and uncertainties that cause actual results to differ materially from those contained in our forward looking statements, including but not limited to various risks and uncertainties discussed in our reports on file with the SEC.
Deanne: We undertake no duty to update any forward looking statements and investors should not place undue reliance on these forward looking statements.
Deanne: In comparing results today, we will be adjusting all periods to exclude special items unless otherwise noted.
Deanne: Explanation and reconciliation of these non-GAAP measures to GAAP. Please refer to the reconciliation table provided in our first quarter 2024 earnings release.
Deanne: A copy of which is available on our website under the Investor Relations section at IR Dot Spirit Dot Com I will now turn the call over to Ted Christie, Spirit's, President and Chief Executive Officer, Thanks, Dan and thanks to everyone for joining us on the call today, we are coming to you. This morning from our new Spirit Central campus in Dania Beach, we celebrated our Grand opening a couple of we.
Ago, marking a major milestone and a new chapter in our more than 30 year history.
Edward M. Christie: In addition to allowing us to consolidate our corporate offices in all of our Fort Lauderdale based training facilities. The new campus is convenient to Fort Lauderdale Airport. It also provides access to the fabulous amenities at Dania Pointe for our support center team and our pilots and flight attendants when they are in town for training.
Edward M. Christie: Until recently, we thought the branding of the new facility might be blue, but now we are proud to boldly display our signature spirit yellow looking.
Edward M. Christie: Looking back a couple of months, we still feel strongly it was a serious misreading of both the evidence and the law for the federal court to enjoin, our merger with Jetblue.
Edward M. Christie: And aside from the waste of taxpayer funds and the damage done to too proud companies through this process. The fact that Doj, even broader case to block a merger between two carriers with less than 8% combined market share just shows how uninformed. The government is about our dynamic airline business, particularly in the post Covid era.
Edward M. Christie: Our industry has changed dramatically.
Edward M. Christie: Today, nearly all of the profits of the entire U S. Airline industry are concentrated in just two companies while the smaller non legacy carrier scrambled to restore profitability and what seems ever more like a rigged game. The big four are the beneficiaries of this new normal American consumers are the long term losers.
Edward M. Christie: At the beginning of our consolidation process in 2022, we advocated strongly for a merger between the two largest ulc's and tried to outline the challenges with the proposed jetblue transaction, but our shareholders did not listen while not our first choice. We believe the merger with Jetblue, what does an alternative still be very positive.
For consumers and our other constituents, we were well aware of the regulatory risks that might prevent the merger from successfully closing as.
Edward M. Christie: As such over the last year, we've been simultaneously developing as Standalone plan to Derisk, the business and improve our financial performance. The Jetblue merger agreement had several operating restrictions that limited what we can do to right size the business address over staffing levels caused by the issues with <unk> engines on our neo aircrafts and make the NES.
Edward M. Christie: Sorry changes to our product and strategy to adjust to the evolving industry environment.
Edward M. Christie: We no longer have those restrictions and are swiftly taking numerous actions that we believe will lead to cash flow generation and profitability I think all our spirit team members for their contributions to our first quarter results and their unwavering dedication and patience as we deploy our plan to return to sustained profitability.
Edward M. Christie: Moving onto our first quarter 2024 results, we reported an adjusted net loss of $160 million during.
Edward M. Christie: During the quarter, we started to see benefits from the tactical and strategic network changes we have made over the last few months, we have a long way to go to margin health, but we're making steady progress.
Edward M. Christie: Operationally, we were negatively impacted by adverse weather and air traffic control related delays, particularly along the eastern seaboard and in Florida.
Edward M. Christie: We were also affected by the civil unrest in Haiti.
Edward M. Christie: Our system wide controllable completion factor for the quarter that is excluding events outside our control was 99, 9%.
Speaker Change: Kudos to the entire operational team for a job well done.
Speaker Change: With that here's Matt Scott to share more details about our first quarter performance and the actions we have taken that set us up well to execute to our go forward plan, Matt over to you. Thanks.
Matthew H. Klein: Thanks Ted.
Matthew H. Klein: <unk> want to thank the entire spirit team for their contributions from the support center to the frontline to the flight deck and everywhere along the way our team does an exceptional job delivering great service and the best value in the sky to our guests.
Matthew H. Klein: Now moving on to our first quarter revenue performance total revenue for the first quarter was approximately $1 3 billion.
Matthew H. Klein: A decrease of six 2% year over year.
Matthew H. Klein: As we have previously noted there has been a significant amount of industry capacity growth in the markets, we serve and gaining nice traction and full loads into non peak periods has been difficult.
Matthew H. Klein: Given this backdrop, we pulled down the schedule on the off peak days of the week to a greater degree than usual in January and February and looking back. We believe that was the correct strategy for that timeframe.
Matthew H. Klein: From a yield perspective, the first half of March was also a bit softer than we had anticipated due to some competitive fare activity, but demand was strong in the peak spring break period and total revenue results were in line with our expectations.
Total RASM for the first quarter was $9 38.
Matthew H. Klein: A decrease of eight 2% year over year on a sequential basis moving from Q4 2023 into Q1 2024, as we had anticipated we achieved a substantial improvement in total unit revenue.
Matthew H. Klein: On a per segment basis fair revenue per segment declined 16, 3% year over year to $48 eight.
Matthew H. Klein: Non ticket revenue per segment declined slightly by one 4% year over year to $68 95 for the full quarter.
Matthew H. Klein: As we continue to see the demand in competitive environments develop we know that we must also change with the times.
Matthew H. Klein: You have already seen us move our aircraft into different parts of our network and that will continue to happen as we look for the best places to maximize revenue.
Matthew H. Klein: We will continue to test out new merchandising strategies, which we anticipate will change how we think about the components of total revenue generation.
Matthew H. Klein: Ancillary revenue continues to be a critical part of our business, but we believe there are opportunities to maximize revenue that may involve shifts of revenue from ancillary bucket into the ticket yield bucket.
We will continue to iterate until we find the right balance and formula.
Matthew H. Klein: Operationally and from a network design perspective, we are still being impacted by Jacksonville Center ATC issues.
Matthew H. Klein: Given the length of time it takes to train controllers. It has been difficult for the center to keep pace with the large amount of industry capacity increases.
Matthew H. Klein: Therefore to help with our operational performance, we are purposely limiting our growth into and out of Florida.
Matthew H. Klein: Without the self imposed limitations, we would likely be at least a few percentage points larger in Florida than we are today.
Matthew H. Klein: Looking ahead to the second quarter, there remains an elevated amount of capacity chasing leisure demand.
Matthew H. Klein: Several carriers have commented on the capacity increases in Latin American markets, but the situation remains quite pronounced in domestic markets as well we.
Matthew H. Klein: We have exited a few cities and suspended service to others.
Matthew H. Klein: Making adjustments to better align our capacity with markets, where the supply and demand trends are more imbalanced as a continuous exercise.
Matthew H. Klein: We are broadening our network in some cities, where we've been relatively too small in the recent past.
Matthew H. Klein: We have added some new routes with less than daily flight schedules.
Matthew H. Klein: We're rethinking how we attempt to take advantage of seasonal changes in certain cities and we're also.
Matthew H. Klein: So in a position where we now expect to introduce fewer new cities to our network in the immediate future.
Matthew H. Klein: Given the dislocation in domestic demand trends last year combined with our encouraging booking trends earlier. This year everything had pointed to an improving domestic demand environment and we would believe we would see continuous improvement.
Matthew H. Klein: And while the domestic environment does continue to improve to date. It has done so at a slower rate than we had initially anticipated.
We do expect to continue to see ongoing improvements through the summer with the peaks performing well.
Matthew H. Klein: In order for our forecast materialize, we will need to see the off peak and shoulder periods improve but that is anticipated to be the case.
Matthew H. Klein: In the meantime, we will make material modifications starting in June that will have a positive impact of the brands the guest experience and ultimately to unit revenues.
Matthew H. Klein: We're estimating second quarter, 2024th RASM will be down eight to nine 5% compared to the second quarter last year on a capacity increase of about 2% year over year.
Matthew H. Klein: We estimate that approximately three percentage points of this decline can be specifically attributed to the weakness in Caribbean and Latin American revenue trends.
Matthew H. Klein: We estimate second quarter 2024, total revenue will range between $1 32 to $1 $34 billion.
Matthew H. Klein: Looking further out the GTS engine availability issues and the phasing of AIG aircrafts being taken out of service together with limited visibility on when these aircraft will be returned to service makes it difficult to accurately predict the number of assets, we will have to produce capacity.
Matthew H. Klein: For the full year 2024, we estimate we will have an average of about 25%, finishing the year with about 40 <unk>.
Matthew H. Klein: Based on this assumption, we anticipate year over year capacity for Q3 will be up high single digits. In Q4 is expected to be down low single digits.
Matthew H. Klein: For the full year 2024 capacity is now estimated to range between flat to up low single digits versus full year 2023.
Again this is a fluid situation. So this is just our baseline estimate for now and at this point. It does not include any potential mitigation efforts from Pratt <unk> Whitney that could improve the forecast.
Matthew H. Klein: We estimate we will start 2025 with over 40, <unk> aircraft and that number will grow throughout 2025 and could end next year with somewhere around 70 aircraft on the ground from this issue.
Matthew H. Klein: Additionally, taking into account the aircraft deferrals, we recently announced our working assumption for 2025 is that capacity will be down high single digits versus full year 2024.
Matthew H. Klein: Again, the situation is very fluid and we will do our best to update you as we gained further insight or as our working assumptions change and with that I will now turn it over to Scott.
Scott: Thanks, Matt.
Scott: Thanks to the entire spirit team the first quarter was a bit of an emotional rollercoaster and I. Thank our team for staying focused on running the business and delivering the best value for our guests.
There was a lot of activity in the first quarter, we terminated our merger with Jetblue finalize the building of our new headquarters executed on many of the items in the first phase of our go forward Standalone plan and began laying the framework for phase two of the plan.
Scott: This plan is the next evolution for spirit and I will cover some of the steps we've already taken antennas a few tidbits to share in his closing remarks, as well, where we are keeping most of the competitive details confidential for a bit longer.
Scott: I will wrap up with a brief overview of the quarterly results and then share some of the views on the second quarter.
Scott: Regarding our stand alone plan it has been evolving over the past couple of years with more refinement happening over the past few months.
Scott: While we were optimistic that the Jetblue transaction will be consummated, we will thoughtfully planning the airline in the event that was not allowed to proceed.
Scott: Once the merger was terminated we began executing on it.
Scott: The first phase involves some updates to our financial and operational infrastructure.
Scott: The first was to finalize the ALG compensation agreement with Pratt and Whitney for 2020 for which we did in March.
Scott: This agreement should add approximately $150 million to $200 million of liquidity benefit to the business in 2024.
Scott: Next we completed a deferral agreement with Airbus to move deliveries from the second quarter of 2025 through the end of 2026 to delivery positions in 2030 in 2031.
Scott: This will improve 2020 for liquidity by about $230 million.
Scott: Given the reduced capacity from the <unk> and the further reductions in capacity from the deferrals, we began actioning items to rightsize the rest of our business through our future capacity. This involves several initiatives and unfortunately means that we will need to furlough up to 260 pilots in September.
Scott: We plan to action other right sizing initiatives throughout the business as the year progresses to achieve our $100 million cost reduction goal.
Scott: In addition, our advisers assisting us with addressing our loyalty bond and convertible notes due in September of 'twenty five in May of 2026, respectively began having initial discussions with our bondholders are both notes.
Scott: A large majority of the holders have organized and have hired advisors as well the.
Scott: The initial discussions have been constructive even though the discussions have been limited. The current plan is to have a resolution with both note holders this summer.
Scott: One of the important gating items in this discussion is presenting the go forward, we have a plan to the advisors and possibly some collection of bondholders in order to reach a resolution. Therefore, all of the actions to date and going forward needs to be done in a specific order and will require some patience to get to the finish line.
Scott: Now for the results of the quarter.
Scott: During the quarter, we managed cost well and ran a good airline coming in fourth out of 10 major airlines and completion factor for the quarter. Our financial results were at the good end of our original guidance.
Scott: Our initial guidance included over $30 million of credits from EOG aircrafts that we thought would be recognized during the quarter as an offset to other operating expense.
Scott: Upon further review of the relevant accounting guidelines the credits will be treated as vendor compensation for GAAP purposes, and recognized as a reduction to the cost basis of goods and services purchased from Pratt <unk> Whitney and primarily amortized over the life of the respective assets.
Scott: From a liquidity perspective, the credits will be applied in 2020 for most of the benefit of the credits will be recognized through earnings over future years.
In the quarter, we earned $36 million of EOG credits of this only $1 6 million was recorded as a credit within maintenance materials and repairs on the income statement.
Scott: Unfortunately, the accounting for these credits makes it difficult for the income statement to reflect the full economic impact and we will have a negative effect on our margin by around two four points for the year we.
Scott: We will do our best to help explain the accounting, but we may need to add some further guidance met guidance metrics to help lay out the economic and cash impact of the compensation.
As I have mentioned on prior calls while the credits do help mitigate the damage of Eog's, we still estimate that our margins are penalized by an additional two to three points the impact on.
Scott: Our business associated with these Brett engine issues cannot be understated.
Scott: Despite the estimated amount of EOG credit recognized in the P&L during the quarter being significantly less than what was earned total operating expenses were in line with our initial guidance due to operational efficiencies that resulted in better than expected labor expense and passenger disruption expense as well as lower than expected airport rents.
Scott: And lending fees due to network changes in airport signatory rebates.
On a year over year basis first quarter operating costs were about flat.
Scott: Operating margin was negative 13, 9%.
Scott: Had we been able to recognize all of the AMG credits earned during the quarter. Our operating margin would have been negative 11, 6%.
We ended the first quarter with $1 $2 billion of liquidity, which includes unrestricted cash and cash equivalents short term investments and the $300 million of available capacity under our revolving credit facility.
Scott: During the quarter, we took delivery of seven new <unk> hundred 20, Neo aircraft and retired five <unk> hundred 19, Ceos ending the quarter with 207 aircraft in our fleet.
Scott: We also finalized the sale leaseback transactions for the remaining five aircrafts from the 25 sale leasebacks and we announced in December.
Scott: We completed 20 of the transactions in December of 2003, and the remaining five were completed in early January resulting in net cash proceeds of $99 million, bringing the total for all 25 aircraft to $419 million.
For the second quarter, we estimate our operating margin will range between negative 11.0% to negative 9%.
Scott: Or between negative eight 5% and negative six 5% when adjusting for the difference between EOG credits estimated to be earned and the estimated credit to be recognized through earnings.
Scott: We estimate the credits earned in the second quarter will be about $42 million of which we estimate will recognized about $7 million.
Scott: We estimate fuel cost per gallon will average $2 80.
Scott: The total operating expenses, ranging between 1460 or $1 billion and $1 65 billion.
Scott: And with that I'll turn it back over to Ted for closing remarks. Thanks.
Edward M. Christie: Thanks, Scott it's been only two months since our merger agreement with Jetblue was terminated but we have already made significant progress on the first phase of our Standalone plan as.
Edward M. Christie: As we approach the summer we plan to share more details on the status of negotiations with the public bondholders of our loyalty notes and our 2026 convertible notes once that is complete we will take the time to clarify the strategy for the next phase of spirit.
Edward M. Christie: We have work to do to improve the companys revenue production and margin opportunity and we intend to discuss the details of our go forward business strategy strategy at an analyst day in early August between now and then we will be deploying some elements of the revised approach to the market.
We do not intend to discuss the details on a piecemeal basis as it is competitively sensitive.
Edward M. Christie: But I can say that we have been listening to our guests and general airline passengers and have been reviewing the competitive set of products in the industry. The core components of our model work well density and utilization to drive cost efficiency and product assortment to give consumers choice. However, it is clear that we need to win.
Edward M. Christie: <unk> introduced some changes to reflect the new dynamics in the industry and to make spirit, a more compelling option for the traveling public some of these changes to our merchandising and pricing strategy are already being tested in some of our markets and the results appear to be in excess of our expectations from a volume and yield perspective. It is early but very encouraging.
Edward M. Christie: These are challenging times for the smaller U S domestic airlines, but I have confidence in the spirit team and the work that we've done to date to reestablish ourselves as a disruptive force in the market and now back to Deanne for Q&A.
Deanne: Thank you gentlemen.
Deanne: With that Pam we are ready to begin the question and answer session from the analysts.
Pam: Thank you we will now begin the question and answer session. If you have dialed in we would like to ask a question. Please press star one on your telephone keypad. Please go ahead and join the queue. If you would like to withdraw your question simply press Star one again.
We are called upon to ask a question in our listening via loud speaker on your device.
Pam: Pick up your handset and ensure that your phone is not on mute when asking your question.
Pam: Again press star one to join the queue and your first question comes from the line of Brandon <unk> from Barclays. Please go ahead.
Brandon: Hey, good morning, everyone and thanks for taking the question.
Pam: Ted.
Pam: Mentioned in your prepared remarks.
Brandon: You feel like maybe the industry is feeling even rideshare post pandemic with the profit focused add a couple of carriers that struggled with low cost carriers, but.
Brandon: What do you think potentially.
Brandon: Potentially beyond the control of the market share.
Brandon: Is driving this difference do you think it's a fundamental shift by consumers.
Brandon: Ziering that half.
Brandon: The backup of our network in Hawaii or premium products or what have you diagnosed.
Brandon: The underlying challenge here.
Speaker Change: Thanks for the question so I would say there is.
Speaker Change: There's a few things first of all corporate.
Speaker Change: Travel demand is not back to where it was pre COVID-19, even though it appears to be moving in the right direction. We don't normally carry a lot of that but that is that is a demand segment that does not exist to the extent it did pre COVID-19 and so that's changing at least the way.
Speaker Change: The airlines are competing.
Speaker Change: For traffic there are more seats available.
Speaker Change: For leisure based fares, because there isn't as much.
Speaker Change: Corporate demand soaking up some of that so to the extent that that continues to improve that will give credence to the whole normalization thought that we're starting to.
We indicated we're starting to see.
Speaker Change: And we will help put the balance back in place.
Speaker Change: But as it relates to fundamentally shifting consumer behavior.
Speaker Change: As I said in my closing we've been studying the way people are behaving well.
Speaker Change: Using the opportunity of the last couple of years to review, where we would be from a standalone perspective, and while we still believe that cost matter and we're still going to be a very low cost airline.
And we will attack that vigorously going forward by the way beyond whatever the $100 million target is we're going to continue to pursue.
And efficient model there are components of the way people are buying that are different than they were five or six years ago.
Speaker Change: And while we were at.
Speaker Change: At the forefront of introducing this type of model in an al Carte product.
Speaker Change: 15, plus years ago.
Speaker Change: The changes we've made to our product we've been more nuanced over the last decade, and I think this affords us an opportunity to recast that some.
And while we were a hyper successful business.
Speaker Change: In the 2000 tens.
We also recognize that some of that could have been at the sacrifice of the experience that our guests we're having on board the airplane.
Speaker Change: We have made moves to improve that.
Speaker Change: Or a better operator today, our on time performance is more in line with what we wanted to expect but we also want to afford our guests the opportunity to buy products and services that currently spirit doesn't have available and I think thats a chance for us to really move up.
Speaker Change: Foster then people could appreciate clearly we need the market to.
Speaker Change: <unk> continue to perform the domestic demand and market needs to reach some level of stability, but we feel confident in the plan that we've got that we can attack the market well with low cost and deliver products that people want more.
Speaker Change: More affordably than they're currently getting on some of the other airlines and I think that could be a real a real boon to to load factor and yield for us.
Speaker Change: A grocery state that response, Ted I guess.
Edward M. Christie: Do you feel culturally that you have the team in place now, especially given all the ups and downs you guys have gone through here to act with urgency to really right.
Edward M. Christie: Chip in terms of operating profitability.
Edward M. Christie: Well it certainly has been a seesaw a couple of years.
And I appreciate the comment but yes.
Edward M. Christie: This is a this is a group that was burst in.
Edward M. Christie: In changing the industry.
Edward M. Christie: And making adjustments we've been an action oriented management team for my entire experience here and I'm Blessed to have the group around me and I have been glad to be a part of it.
Edward M. Christie: And we get the urgency.
Edward M. Christie: So.
Edward M. Christie: This is something that we've been waiting to.
Edward M. Christie: Take advantage of perhaps.
Edward M. Christie: If the deal did not happen we had to prepare for the fact that the deal would happen.
Edward M. Christie: That was the deal that was voted on by our shareholders and Thats, what we agreed to do.
Edward M. Christie: But now that Thats over this is a chance for us to really move things along quickly.
Edward M. Christie: I think you've seen some evidence of that in a lot of it is as Scott outlined has been balance sheet and cost in.
Edward M. Christie: And growth rate related stuff, but there's more to come this summer and we're moving with all due paced and urgency.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Scott Group.
With Wolfe Research. Please go ahead.
Thanks.
Scott H. Group: Good morning.
Scott H. Group: If you just focus on.
Scott H. Group: The liquidity in some of the creditor staff.
Scott H. Group: What can you just remind us minimum liquidity you are targeting.
Scott H. Group: Or any additional sources of liquidity any more sale leasebacks you can do any more PDP is to get back and then in terms of the creditor resolution. This summer maybe just at a high level I am guessing you want to get into too. Many specifics what are some of the what are the options sort of on the table here.
Scott H. Group: Hey, Scott. This is Scott so, yes, I think the process for us with the bondholders has been.
Scott H. Group: It has been constructive so far we expect that to be sort of finalize through the summer.
Scott H. Group: When you think about sort of cash liquidity.
Scott H. Group: Minimums for US we haven't publicly disclosed outside of the.
Scott H. Group: $400 million minimum for a royalty bond and $450 million minimum for our revolver.
Scott H. Group: We haven't disclosed anything in regards to our credit card Holdback agreement, but we are well above those those minimums.
Scott H. Group: Today as well so we think we have.
Scott H. Group: Enough liquidity and we expect to start generating some cash as we move forward into the back half of the year.
And so we feel good about where we are and we do have some ability to generate more liquidity.
Scott H. Group: Obviously, we have some financeable assets still remaining probably expected WTC some time in the future here.
Scott H. Group: As we think about enhancement going forward, but we have the ability to move forward, but really we've got to get the business generating operating cash and that's really what the go forward plan is about.
Speaker Change: Okay, and then when I look at the Q2 RASM guide.
Speaker Change: So im wondering do you feel like Youre seeing.
Speaker Change: Any.
Speaker Change: Book away impact just given sort of all the noise and involving spirit right now.
Speaker Change: Do you have any thoughts there and then I know you made a comment that you think off peak gets.
Speaker Change: It gets better just any color on.
Speaker Change: Why you think that that happens thank you.
Speaker Change: Yeah sure Scott This is Matt.
Matthew H. Klein: We're not seeing anything right now that would indicate that.
When youre asking about noise in the marketplace affecting affecting our our booking patterns or anything of that nature.
Matthew H. Klein: What we do think is happening which is what is being alluded to here is that we have to make some changes.
Matthew H. Klein: And what what customers want today.
Matthew H. Klein: <unk> is a little different than what we're offering today. So we have to make some changes to get there and as we as we make those changes and as we move through the summer and then hit after the summer.
We would expect to see things start to improve because of what we're what we've done thus far is created a great model and a great program.
But.
Matthew H. Klein: What what ended up happening is throughout Covid, and then coming out of Covid, we've seen a lot of competitive activity at price points that used to be sort of a place that we would play in and others are now playing on the same price points.
Matthew H. Klein: So we have to make changes and what we're what we're looking to do is going to be as Ted alluded to is creating.
Matthew H. Klein: Different kinds of opportunities for more breadth of of service and product and then we'll just end up seeing how that plays through it's going to take a little bit of time for things to really kind of take hold and fully fully materialized, but we expect to see incremental improvement in accretion to the bottom line as we.
Matthew H. Klein: Start to make changes and that's where we expect to see help in the shoulders in the off peak periods.
Matthew H. Klein: Periods of relatively good and it's the off peaks in the shoulders is where we need to is really where we need to see the comeback, which is where we used to do pretty well and we're not doing well in those periods right now and Thats, where we expect to see the improvement helped us overall down the line.
Speaker Change: Okay. That's helpful. Thank you guys appreciate it.
Speaker Change: Your next question comes from the line of Duane <unk> San Nicolas. Please go ahead.
Okay.
Speaker Change: Hey, Thanks, good morning.
Speaker Change: Ed and team just a couple of cash flow questions.
First on deferred heavy maintenance can you just talk about what your expectation.
Speaker Change: It would have been this year before any credits and.
Speaker Change: And how we should think about that line.
Speaker Change: On a net basis after the $150 million to $200 million credit and credits.
Speaker Change: So Duane are you asking about the.
Duane: The estimated cash capex that we would spend this year, primarily I guess is what you're referring to exactly yes, yes.
Yes, we were sort of forecasting in the sort of $175 million to $200 million range for for cat maintenance and Thats still probably about the case.
Speaker Change: Most of that's going to be the work and then we'll use the credits offset some of that.
Speaker Change: Okay. So that 175 offset by 175, it looks like in the first quarter was a net outflow of about $20 million.
Speaker Change: Again, any I guess any finer point you can put on that would be helpful.
Speaker Change: Yes, I mean, we will spin look I mean, we'll spend more than the credits this year in Pratt from cat maintenance in other parts and other things associated so if youre trying to get at the usage of the credits, yes, we will likely be able to use all of the credits and beyond.
Speaker Change: In the period.
Speaker Change: Part of that will be kept maintenance, but some is within other expenses within the P&L as well.
Speaker Change: Thanks and.
Speaker Change: Just on other liabilities it looks like it was about $120 million use of cash in the March quarter can you talk about what is driving that what are the moving pieces in that line.
Speaker Change: And if theres any seasonality is kind of a frontloaded investment.
Speaker Change: Eases in the back half and any color on that line would be helpful.
Speaker Change: Hey, Duane we don't have the detail on that yes, we will get back to you on that I'll have Dan reach out.
Speaker Change: Okay. Thank you.
Speaker Change: Your next question comes from the line of Savi Smith with Raymond James. Please go ahead.
Savi Smith: Hey, good morning, everyone.
Savi Smith: And Charlie for Scott just on that 100 million cost reduction call I'm curious.
Savi Smith: Youre seeing.
Speaker Change: And I alluded.
Speaker Change: I alluded to youre going to have.
Speaker Change: Passenger reductions again next year does the $100 million right sized to where you get to by the end of this year or is it contemplating.
Speaker Change: <unk> cost structure, you need to be for next year as well.
Speaker Change: Hey, Savi yeah. The first move of this is to really right size to where we are at the end of the year and thats sort of a run rate number the $100 million.
Savi Smith: Honestly a lot of that will happen.
Savi Smith: On the back end of the year as we think about furloughs and other right sizing of some of the labor groups that we have internally, we right size. Some of the airport facilities that we have and other pieces of the organization, but that's sort of the run rate based on.
Savi Smith: This year's capacity, depending on the number of Eog's that we have next year, we will have to reevaluate reevaluate where we are with.
Savi Smith: All of the components of the P&L.
Savi Smith: But hopefully we get some EOG mitigation relief from Pratt and the number is not as high as Matt mentioned.
Savi Smith: In his prepared remarks that could be.
Savi Smith: <unk> 70 next year, hopefully the numbers, a little bit lower and easier to manage for us, but we will have to re evaluate in 2025.
Savi Smith: Alright.
Savi Smith: And then maybe for Matt just on the revenue side, you mentioned three points of pressure I think this RASM pressure. This quarter is from international is.
That kind of alluding to the fact that kind of domestic as having just as much pressure and I was just kind of curious as you think too.
Read to you the schedule.
Savi Smith: And I realize it's mostly in the off peaks, but does your overlap changes is there any kind of patterns and how youre changing those schedules.
Speaker Change: Yeah sure. Thanks Avi so.
Speaker Change: Those additional points are out there because we would still be seeing some unit revenue weakness in the domestic network as well so the Latin American Caribbean network is sort of on top of that bringing down the system average a bit more.
Speaker Change: And this is this is we've had geographic issues with this part of our network in the past and it's always come back around and we expect it will again in the interim we have made some important important moves in our.
Speaker Change: In our international and U S Territory network, we've suspended a significant number of cities for now we've exited.
Speaker Change: John.
Speaker Change: <unk> city permanently and that network as well.
We're just like everybody else I guess kind of just digesting the capacity that's put in place there they are during the.
Speaker Change: The early days of kind of coming out of Covid, so to speak or even during COVID-19. A lot of traffic went to went to that region of the world of our network and a lot of that a lot of that demand is still shifted to other parts of the world. So over time that will come back to to Latin America.
Speaker Change: <unk> and the Caribbean.
Speaker Change: And we were thinking there'd be a little bit more of that happening right now that what we're seeing of course, there is capacity increases going on as well. So it's just a little bit of too much supply.
Speaker Change: And in that part of our network also I would say that a lot of the moves that we are making.
Speaker Change: Our intended to find some opportunities where we can go where we think there are underserved opportunities and thats a lot of the network additions that we put in place I think it's important to also remember and this is true for any airline not just for US is that anyone can add capacity in any route. This is a very dynamic industry and anyone can move capacity.
Speaker Change: <unk> wherever they want whenever they want so moving in network around is incredibly important of course. It is but what's also important is making sure that we have a product that we can present to our customers to our guests that makes us top of mind for them again like we used to be and we're going to do that.
Speaker Change: And Thats also as important or possibly more important than thinking about just the network itself.
Speaker Change: That's helpful. Thank you and thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Jamie Baker with Jpmorgan. Please go ahead.
Jamie Nathaniel Baker: Oh, Hey, good morning, everyone. So first question on competition, obviously, one would assume that.
Jamie Nathaniel Baker: Markets with multiple competitors tend to be potentially less lucrative markets with.
Jamie Nathaniel Baker: Maybe just one competitor.
Jamie Nathaniel Baker: My question really relates to the behavior of.
Jamie Nathaniel Baker: Competition in those more competitive markets, what I'm being asked.
Jamie Nathaniel Baker: Whether any airlines and you don't need to name names, but whether they're behaving more aggressively towards spirit given some of them.
Jamie Nathaniel Baker: The challenge that you've been discussing this morning is is there any.
Jamie Nathaniel Baker: Is there any truth to that or is it just sort of plain vanilla competition usual too many seats too few people that sort of thing.
Edward M. Christie: Thanks, Jamie it's Ted.
Speaker Change: Kickoff, if Matt wants to add anything he can.
Matthew H. Klein: Well first of all the industry has always been very competitive so I think that thats.
Matthew H. Klein: That's been the case in the power is concentrated today. So it does if you strip away.
Matthew H. Klein: What appears to be a very lucrative trans Atlantic market.
Matthew H. Klein: And.
Matthew H. Klein: Credit card based revenue of the loyalty programs of the bigger Airlines, if you take those things out there losing money.
Matthew H. Klein: And I think that speaks to how they're competing domestically and so what we have to do is is make sure. We have the right product suite and to Matt's point, we're positioning the airplanes in the right place now there are definitely airlines that are.
Matthew H. Klein: Focusing on different things. So I think you can see there is a least one or two airlines that are reaching for as much premium as they can get their hands on and thinking about their brand in a certain way and there are a couple of others, who are really just going down market.
Matthew H. Klein: And and we're going to compete around that as we always do.
Matthew H. Klein: But I think there is a little bit of a dislocation in the way the market's showing.
Matthew H. Klein: The bigger airlines are competing and we're just going to have to pivot, which is actively what we're doing right now keeping our focus on the cost structure, but also getting ready to introduce some products that we think can really be competitive that.
That can actually aid our unit revenue so what would you add to that.
Speaker Change: Just say from a from a tactical perspective, I think I would just call. The competition that we're seeing quite normal airlines move around all the time in terms of how they compete and what's important to them at that time. So some airlines get a little more aggressive some get a little less than it changes around so I understand your question, Jamie I don't know that Theres anything.
Speaker Change: Typically different that I would call sort of a pattern emerging of any sort.
Jamie Nathaniel Baker: Okay. That's helpful. And then second question when we think about the order book.
Jamie Nathaniel Baker: And assuming that the aircraft market remains.
Jamie Nathaniel Baker: It is for the foreseeable future should we be thinking about.
Jamie Nathaniel Baker: Sale leasebacks down the road being a form of CASM reliefs.
Jamie Nathaniel Baker: I don't recall the theme.
Jamie Nathaniel Baker: <unk> DNA, but.
Jamie Nathaniel Baker: You are obviously talking today about making some brand changes product changes that sort of thing. So I'm just wondering if spirit might.
Jamie Nathaniel Baker: Kind of pivot towards that model and I'm basically trying to square that with what you said about potential <unk>.
Jamie Nathaniel Baker: A potential WTC, so any color there would help.
So let me, let me jump off and Scott you can you can.
Scott H. Group: I think what you may be referring to as sale leasebacks. This reform CASM relief, meaning potentially using the financing to offset expense by recording gains we wouldn't do that precisely.
Scott H. Group: Not something that we don't view that as an operating activity you could do it by the way and it could be an effective form of financing.
Scott H. Group: But I don't know that it's an operating activity so.
Scott H. Group: We do sale leasebacks today, obviously, we just don't we strip it out when we talk about it. So it may continue to be a form of.
Scott H. Group: Financing going forward, we do have owned airplanes today as Scott alluded to the potential for <unk>.
Scott H. Group: Incremental liquidity coming from WTC market, because we have some outstanding wtc's today, but.
Scott H. Group: I think we look at the value of the order book as an asset.
And that's why when we did our deferral program, we held onto the delivery slots because we think when the time is right down the road, we want to continue to modernize the fleet.
When <unk> gets their act together.
Scott H. Group: This will be a very powerful.
Scott H. Group: Cost benefit versus a number of our peers domestically the fuel burn advantage will translate into real margin points.
Scott H. Group: And so it will get there.
Scott H. Group: We want to be a part of that so anything you want to know I think you hit it head on.
Speaker Change: Okay. Thank you both appreciate it.
Speaker Change: Your next question comes from the line of Andrew <unk> with Bank of America. Please go ahead.
Andrew: Hey, good morning, everyone.
Andrew: Our first question from Matt or maybe Ted I know, it's early but Scott spoke to the possibility of generating cash flow as we move through the year.
Andrew: So how are you thinking about.
Andrew: Unit revenue potential in the back half given both the easier comps and lower capacity across the industry or maybe to ask another way what kind of RASM do you need in the back half of the year to really begin generating positive operating cash flow.
Speaker Change: Yeah, Andrew Thanks So.
Speaker Change: I'm not going to speak specifically to what unit revenue, we need to start generating operating cash flow, but what I can but I can talk to us we expect fully expect that the changes we start implementing this summer and then we'll talk about more about other things that we would we would do come August it at analyst day.
Will be accretive.
Speaker Change: Two to profitability so.
Speaker Change: That will take time to develop and some things.
Speaker Change: We'll be immediate benefits, we expect and some things will take a little bit longer to rollout I would tell you that.
Speaker Change: What's important here too and I neglected to say this earlier is that in terms of the product itself. We have quite a difference in terms of how guests.
Speaker Change: Think about spirit and how they recommend spirit to their friends and friends and relatives relative to people who have not tried the product wherever or have not tried the product in quite some time.
Speaker Change: It is a shocking difference between people that experienced the product versus people that only hear what they hear in the news in the media and that has to change there is a significant number of people in this country, who do not think about spirit when they book their travel and that will change and as that changes that.
Speaker Change: It means we will be widening the funnel and that funnel will allow us to then push up yields and and then over time flow through to other parts of loyalty. So instead of just being transactional with our guests, which largely we've done in the past we will begin to become more relationship driven with our guests and everything were.
Speaker Change: Talking about doing is thinking about doing will lead will lead there and over time.
Speaker Change: Like I, just said earlier, we expect some of this will be cash flow positive quickly and other things will take will take time to develop.
Speaker Change: So I think thats, probably the best way for me to describe whats commented, how we think about the back half of the year and I might add.
Speaker Change: As we as we head towards the back of the year.
Speaker Change: <unk> to cash generation and eventual profitability, while it's important that we get the product aligned as Matt alluded to and that will be we think a near term contributor could be notable but not not as significant as it will win it builds over time, but the rest of it has to also come from the airlines cost structure and from its efficiency. If we look right now.
Today, we've announced a cost target just to right size as Scott said to get us into 2024, but most of that cost reduction hasnt taken place yet.
Speaker Change: We're still burdened with incremental expenses that start to reach run rate in the third and fourth quarters.
Speaker Change: And that's probably a point or two of margin right. There and then we look at.
Speaker Change: The retirement of the 300 <unk>.
And while we have challenges with aircraft on ground on the Neo fleet still incur.
Speaker Change: An increasing percentage of the total fleet in.
Speaker Change: <unk> aircraft the fuel burn advantage right. There is probably as much as another point, which starts to really roll through in the back half of this year and then we have been moving utilization on a adjusted basis, north, but we're still not all the way back.
Better, but not all the way back and Thats, probably another point of margin right. There. So we're talking about efficiencies that get us three to four points of margin in the back half of the year, we're optimistically thinking.
And then the last thing besides the revenue improvements that that Matt alluded to is the network pivots that he and the network team has been going through really don't show.
Speaker Change: In force until the month of May when we're seeing them right now.
Speaker Change: And so we'll get some benefit out of that in the second quarter, but it's really much better in the third and fourth and that could be as much as a couple of points of margin. We think so those things you start to add them up get us right, probably right, where we need to be from a cash generation perspective, not anywhere near where we need to be from a profitability perspective.
Speaker Change: And Thats, where we have to make the rest of the pivots.
Speaker Change: Two to push the airline even further forward, but we can't just rely on.
Speaker Change: On the unit revenue side of things, we are a cost business, we recognize that.
Speaker Change: And we think we have room to improve that to help our cash flow generation.
Speaker Change: That's great. Thanks, so much I'll leave it there thank you.
Speaker Change: The next question comes from the line of Conor Cunningham with <unk> Research. Please go ahead.
Hi, everyone. Thank you.
Conor T. Cunningham: Just on the.
Conor T. Cunningham: Frac credits you have like a $50 million spread right now for 2024.
Conor T. Cunningham: Are the outcomes, they're just dependent on the days on the ground and what maybe is turnaround times today and then.
Conor T. Cunningham: Maybe as a clarification how much of that is for 2024 and how much is for 2023, just trying to get it clean number as we think about potential compensation and 25, given all the issues there. Thank you.
Speaker Change: Hey, Connor.
Speaker Change: The $50 million spread is obviously based on the number of EOG days.
Connor: And the turn times, where we're seeing today are upwards of a year.
Speaker Change: So there this is kind of what Matt mentioned earlier some of the mitigation efforts for the AIG, primarily for probably 25 will be reduced turn times.
Speaker Change: As they as they get better and get more materials.
Speaker Change: To help push those through and to your or to your latter question around the <unk>.
Speaker Change: How much is 2023, probably about $30 million of that is for prior period credits that have accumulated.
Speaker Change: Until the remaining is going to be for 2024.
Okay. That's super helpful and then.
Speaker Change: You mentioned the need for off peak to improve to hit your revenue assumption I didn't know if that was the second quarter comment or a full year and just how much does it need to dose off peak need to kind of perk up.
Speaker Change: Year to hit your plan. Thank you.
Speaker Change: Yeah sure. So in terms of second quarter were baking into second quarter, what we expect to be happening now so we do need to see some slight improvements.
Speaker Change: From what we saw say earlier.
Speaker Change: In the first quarter end.
Speaker Change: We're seeing some of that happen.
Speaker Change: I wish it was faster.
Speaker Change: And it just speaks overall to what we were just talking about earlier about what we need to do in order to become more attractive again.
Speaker Change: Out there so.
Speaker Change: All of the things that we're talking about doing.
Speaker Change: <unk>.
Don't want to get this confused here. They will also help peak periods as well, it's just that what we do see that the off peak in the shoulder periods is where we're having the most challenges and thats, where we need the most self help in order to bring those back up to what we used to see.
Speaker Change: Off peaks.
Speaker Change: We did a lot of cancels on Tuesdays and Wednesdays and the early part of this year. We do that every year. We generally do that in September and October we'll be finalizing how we think about that here shortly.
Speaker Change: For the fall.
Speaker Change: And Thats fine that helps unit revenue, but at the end of the day, we need we need to make sure that we can produce on those days of the week as well so that we can also contribute overall.
Speaker Change: Operating margin.
Speaker Change: The bottom line itself.
Great. Thank you.
Speaker Change: Next question comes from the line of Michael Lindenberg with Deutsche Bank. Please go ahead.
Michael John Linenberg: Oh, Hey, good morning, everyone, Hey, I, just as I think about your unit revenue guide for the June quarter and your top line Guide I know, Matt you highlighted some of the.
Michael John Linenberg: Some of the issues.
Michael John Linenberg: That have driven coffee subpar result, how much it is.
Michael John Linenberg: With respect to new market.
Michael John Linenberg: Does look like you are adding.
Michael John Linenberg: A lot of new city pairs, how much does it take like whats the timing for those markets to ramp up presumably there's promotional activity initially to build traction.
Michael John Linenberg: Give us a sense of maybe how much exposure you have to developments in the ramp up time.
Speaker Change: Yeah, Thanks, Mike So.
Speaker Change: We have announced.
Speaker Change: Quite a few new routes.
Speaker Change: All of them are day, a week not all of them a lot of them are so the actual exposure. We have right. Now in Q2 was really is really not that high it's actually relatively low as we move into Q as we move into Q3, and Q4 that number will increase a little bit.
Speaker Change: But as of right now I wouldn't necessarily say that that that thats.
Something where we've over rotated there we would be very careful with how we how we do this because we also recognize that new routes bring risk and we're trying to de risk.
As much as we can so we will be smart about it and we're doing some things that we haven't done as much in the past.
Speaker Change: And then on top of that there's a couple of cities.
That we've been smaller we've been larger than them in the past and cities that we need to kind of reestablish some of our our position there we think that will help.
Speaker Change: Overall, so I hope that helps okay. Great guys. Thanks, and then just second question to Scott as I think about.
Liquidity I know in the past you gave us a year end number it does seem like the demand trends there, maybe a little bit behind trend I'm not sure how much that impacts the year end liquidity guide, but as I think about just seasonality and going from the March quarter to the June quarter, given the fact that Easter was earlier this.
Speaker Change: Year and sort of squaring it with the revenue guide is it conceivable that the ATL it could be down I don't know 100 $150 million quarter over quarter.
Speaker Change: And again, that's just one part of operating cash flow, but is my thinking about it right.
Speaker Change: I realize it's sort of a multi pronged question, but any clarity would be great. Thanks.
Speaker Change: Hey, Thanks, Mike.
Speaker Change: Yes, I think the Ato actually probably for the first quarter was a little bit lower heading into the second quarter bookings were a little light.
Speaker Change: I think as part of some of the cash generation negative in the second quarter, but we do expect that to.
Turnaround and I think for the full year will probably be a little bit lower than we initially guided to probably in the one two to one three range at the end of the year and that doesn't include any additional financings that are still possible, but we think we will sort of be.
Speaker Change: Cash neutral if not cash positive for the remaining part of the year. So we'll have to kind of see how the second half plays out.
Speaker Change: Great very helpful. Thank you.
Speaker Change: The next question comes from Chris <unk> with Susquehanna. Please go ahead.
Chris: Good morning, Thanks for taking my question.
Chris: So Scott or Ted.
Chris: The high single digit capacity guide for <unk> I'm guessing is departure driven you spoke to adding capacity I believe you said in markets, where you have a smaller presence.
Speaker Change: And you've given a lot of color on.
Chris: Your thoughts around peak versus off peak, but if you could help kind of frame the composition of capacity for <unk>, both as it relates to departures and heavier again thinking about allocating peak versus non peak and then part b.
Chris: You spoke to what's happening here within Florida, and short haul Latin America do you believe that industry capacity within these markets, which are primary to spirits should eventually normalize. Thank you.
Chris: Yeah I'll start this is Scott on utilization regard theres, some puts and takes in there obviously with.
Chris: Deliveries coming through the year as well as increased.
Chris: <unk> and changes in sort of summer utilization as we head into the peak so.
Chris: We will have a higher non ALG fleet utilization, but overall utilization on a fleet basis may be down a smidge, just because of the number of eog's.
Chris: And so that sort of plays into the utilization piece, but with the deliveries will be up.
Chris: Thats sort of higher single digits on a capacity basis in Q3 that will flatten out in Q4 to probably down a bit in Q4 versus Q3.
Chris: Right.
Speaker Change: Chris Your other part of your question there.
Chris: We expect.
Chris: <unk> will be down a little bit.
Chris: But it's not going to be dramatic so we would anticipate.
Chris: Likely maybe slight slightly more departures.
Chris: And then you would see from overall ASM growth, but it should be it really should kind of normalize itself out to be pretty much flat.
Chris: In terms of how the ASM will be will be produced.
Chris: And also I would tell you that I think you asked about Latin America normalization. So.
Chris: Supply.
Chris: Apply in demand a very powerful things they always work themselves out so to answer. Your question is yes, and we'll just have to see kind of how that plays out and how the timing is we have a great cost structure, our cost structure allows us to compete and it's all about making sure we can generate revenue and a lot of the things that we're talking about doing will also benefit.
Chris: The Latin America, and Caribbean part of our network as well.
Speaker Change: Okay and then my second question, so as we think about 25.
Speaker Change: You gave it down I think it's high single digit capacity guide you have all these right sizing efforts as it relates to cost.
Speaker Change: The $100 million in cost savings effectively reshaping the cost base Alg's admittedly are moving target but.
Speaker Change: And post pandemic demand arguably normalizing here, but if we put this altogether as it stands today and looking at our models do you believe that spirit can stay below <unk> within CASM. Thank you.
I mean, theres a lot of puts and takes here I mean, we have.
Speaker Change: Some of the initiatives from that with Ted mentioned around utilization, we have some of our stand alone plan initiatives that.
Speaker Change: That will influence some of that stuff, but I think we're probably targeting a number around that actually.
Speaker Change: Okay. Thank you.
Speaker Change: And we have time for one more question.
Speaker Change: Alright.
Speaker Change: This is from the line of Dan Mckenzie with Seaport Global. Please go ahead.
Speaker Change: Okay.
Speaker Change: Yeah.
It is underway are expected to.
Daniel J. McKenzie: The accretive to profitability.
Daniel J. McKenzie: Does the current plan contemplate in profitability in any quarters this year or at least can it get you to a breakeven operating margin.
Speaker Change: And we missed the first part of that question Dan.
Daniel J. McKenzie: Oh. The first part is really does the current plan contemplate profitability in any of the quarters. This year and if not can at least get you to a breakeven operating margin.
Daniel J. McKenzie: Yes, I think where we're looking at for the back half of the year to be on an operating basis positive for Q3 and Q4 on a net basis will be kind of right at.
Daniel J. McKenzie: Just above breakeven on a net basis of Q4 is going to be right at probably breakeven, but we think we will be sort of cash neutral maybe generate a little bit of cash in the back half of the year.
Speaker Change: Okay nice.
Speaker Change: And Ted the consumer Bill I believe spirit was in favor of the new the new Dol rules and I'm just wondering if you can.
Edward M. Christie: Sure some perspective about the incremental cost of the operation from compliance with this new set of rules.
Edward M. Christie: Has to happen to reduce that that cost headwind and I guess, what I'm wondering is if you might need to carry more spare aircraft maintain a higher head count or is the cost of the new rules.
Edward M. Christie: De Minimis.
Thanks, Dan I don't know.
Speaker Change: Perhaps where you got your feedback we're not in favor of those rules.
Speaker Change: I think the industry is digesting them as we speak and trying to decide how they're going to provide feedback there was a process in place by which a feedback should have been solicited I don't believe it was done as robustly as it is but not in the past so.
Speaker Change:
Speaker Change: The airline industry does a good job of taking care of its passengers and its guests when they are disruptive we've always been.
Speaker Change: Forward leaning on our ability to get guests re accommodated where we can to offer refunds, we do all of that stuff anyway.
Speaker Change: And the competitive pressure is whats at.
Speaker Change: At best at making sure each airline does the right thing for their own.
Speaker Change: For their own traveling public so for now we'll let this play out and see what happens next.
Speaker Change: I see okay. Thanks for the clarification.
Speaker Change: And with that thank you all for joining US today, please contact Investor Relations. If you have any further questions.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Okay.
Speaker Change: Yeah.