Q4 2024 Alaska Air Group Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the Alaska Air Group 2020 for fourth 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 Alaska Air Dot Com.
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, Thank you for joining us for our fourth quarter 2024 earnings call Yes.
Speaker Change: Yesterday, we issued our earnings release, along with several accompanying slides detailing our results which are available at Investor day at Alaska Air Dot Com and.
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: This morning Air Group reported fourth quarter and full year GAAP net income of 71 and $395 million respectively.
Speaker Change: Excluding special items and mark to market fuel hedge adjustments.
Speaker Change: Air Group reported adjusted net income of 125 and $625 million.
Our comments today will include discussion of Air Group reported results inclusive of Hawaiian Airlines since the closing of the acquisition on September 18th fourth quarter and forward looking guidance are compared to prior year pro forma results as if Alaska, and Hawaiian where our combined company for the full periods referenced.
Speaker Change: Lastly, as a reminder, forward looking statements about future performance may differ materially from our actual results.
Speaker Change: Information on risk factors that could affect our business can be found within our SEC filings.
Speaker Change: We'll also refer to certain non-GAAP financial measures such as adjusted earnings and unit costs excluding fuel.
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.
Speaker Change: You bet.
Speaker Change: Thanks, Ryan and good morning, everyone. Just six weeks ago, we shared our strategic plan, Alaska accelerate during our Investor day.
Speaker Change: This plan is focused on driving scale relevance and loyalty by connecting our guests to the world through remarkable travel experiences rooted in safety care and performance with a clear vision and a strong path forward, we closed out the year with growing momentum and that momentum has only grown stronger since.
Speaker Change: We're picking up right, where we left off at Investor day excited today to share our strong results for the fourth quarter, we delivered an adjusted EPS of <unk> 97.
Speaker Change: And for the full year 2024 $4 87.
Speaker Change: Both exceeding our guidance.
Speaker Change: We reported a full year adjusted pre tax margin of seven 1% and had it not been for the four week nine Max grounding legacy Air Group would have posted the best margin and the industry to.
Speaker Change: To cap off the year, we aggressively repurchased $248 million in shares during December bringing full year repurchases to over $300 million and fully exhausting our existing program in January we launched our newly authorized $1 billion share repurchase program and we will continue.
Speaker Change: To leverage repurchases to underscore our confidence in our business.
Speaker Change: Before diving further into our business update I want to take a moment to reflect on the pivotal year, we had in 2024.
Speaker Change: Just a year ago falling flight 12, 80 to a third of our Alaska fleet was grounded operations were severely disrupted and uncertainty loomed.
Speaker Change: Yet our teams rose to the challenge with an unwavering commitment to safety and restored air group to the safe reliable operation were known and trusted for.
I want to extend a heartfelt. Thank you to all our employees for their dedication in helping us deliver another strong year their commitment to excellence care and service sets us apart I'm excited to announce that due to legacy Air group's outstanding financial performance, Alaska and horizon employees will receive a.
Speaker Change: The record bonus payout this year we.
Speaker Change: We expect to distribute over $300 million.
Speaker Change: Equivalent to the six weeks of pay this is the largest payout in our history and we believe the highest in the industry.
Speaker Change: Investing in our people and our culture is important and we hope to have our Hawaiian employees participate in this plan in 2025.
Speaker Change: In addition, we couldnt be happier that we reached an agreement in concept with Alaska Airlines flight attendants earlier this month.
Speaker Change: And we look forward to beginning the joint collective bargaining process with all of our unions this year.
Speaker Change: 2024 was at the finding year in which we embarked on the most exciting transformation in our company's proud history.
Speaker Change: The most significant and foundational piece of that strategy was closing our acquisition of Hawaiian Airlines at September <unk>.
Speaker Change: This combination strengthens air group with several key strategic assets, including a leading position in that top 25 U S hub.
Speaker Change: Incredibly valuable brand.
Speaker Change: A mix of wide body and narrow body aircraft and our legacy of operational reliability and exceptional customer service.
Speaker Change: Moving to 2025, our work now is geared towards delivering on our line accelerate our vision for the future and it's off to a great start.
Speaker Change: The underlying trends in our core business proving our legacy Alaska assets are on track to deliver slightly positive profits in the first quarter. Despite the recent rise in fuel prices, our Hawaiian assets outperformed expectations in the fourth quarter and while we expect them to be unprofitable in Q1 from the second.
Speaker Change: Quarter on we anticipate a small pretax profit as recent network changes take effect and synergies materialize.
Speaker Change: Over time, we aim to improve Q1 performance similar to the progress made with Alaska over the last two years.
We are confidently shaping the future of our company building on our strengths.
Speaker Change: <unk>, our business model and elevating our competitive edge through a strategy centered on maximizing our proven approach as a larger company and unlocking new opportunities across our business.
Speaker Change: First we're leveraging the power of our combined network, which Andrew will share more on the benefits we're already seeing.
Andrew: Our Seattle and Portland hub banking strategy is taking effect and early data from the launch of our first Seattle to Tokyo International Route is progressing as planned this is helping us build our international gateway and Seattle, while strengthening our relevance and loyalty across our west coast hubs and beyond.
Andrew: Second as Hawaii as trusted airline we're capitalizing on the combined strength of both networks one world.
Andrew: If the loyalty program and the Hawaiian brand to become the airline of choice for both domestic and international flights and Hawaii.
Andrew: Third we're focused on meeting all our guests needs, including expanding our premium products and experiences at every phase of the travel journey and.
Andrew: And lastly, diversifying our business, including growing our cargo business through the combination of Alaska and Hawaiian.
Andrew: Combined with the constructive industry environment my confidence in our plan and our ability to deliver results has only strengthened this includes our EPS target of more than $5 75, and no margin dilution in 2025.
Andrew: Additionally, we are set to unlock a billion dollars in incremental pretax profit over the next three years through a combination of commercial initiatives and at least $500 million of synergies.
Andrew: Integration is progressing as planned with the goal of achieving a single operating certificate by the end of 2025, followed by the transition to a unified reservation system. Shortly thereafter.
Andrew: As we shared at our Investor day.
Andrew: This is just the beginning.
Andrew: Our track record and future potential reaffirm our position as industry leaders driven by clear strategies and encouraged to take bold steps along the way, we're delivering value to everyone who depends on us our people our guests and the communities, we serve and our shareholders.
Andrew: And with that I'll turn it over to Andrew.
Andrew: Thanks, Ben and good morning, everyone with.
Andrew: With the first full quarter, including Hawaiian I'll focus my discussion on the strength of our core business trends during the fourth quarter and where we are headed for the first quarter.
Andrew: Our business is transforming and I'm excited to share what we are seeing in our network along with the encouraging initial results on the strategy. We laid out last month that is delivering $800 million in profit through a combination of commercial initiatives and synergies over the next three years.
Andrew: In the fourth quarter, we achieved a record $3 $5 billion in revenue up nearly 10% year over year unlimited capacity growth of two 5%.
Andrew: This drove unit revenues up 7% year over year, continuing and improving sequential trend and up six points from Q3 <unk>.
Andrew: December in particular exceeded expectations driven by a combination of close in strength from corporate demand.
Andrew: Higher load factors and strong operational performance as we connected the Hawaiian and Alaska networks with Codeshare.
Andrew: Regionally areas of strength during Q4 included North America to Hawaii.
Andrew: Which represents approximately a quarter of our capacity and saw revenues grow 15% with unit revenues up 7%.
Andrew: And that's without having fully connected and networks.
Andrew: Scott and Latin America improved on better alignment supply and demand while neighbor Islands showed marked improvement with unit revenues up double digits.
Andrew: We also continue to see strong demand for our premium cabins first and premium class revenues were up 10% and 11% year over year, respectively on 5% capacity.
Andrew: Paid first class load factor was 75% for the quarter up three points with yields up 4%.
Andrew: For the full year total premium cabin revenues increased by 10% with unit revenue increases of 6% exceptional performance and we expect that premium products will continue to outperform our main cabin product in 2025.
Andrew: As a quick update on our premium class seat expansion for the 900 E R and the Max Dash 919 aircraft modifications have been completed to date.
Andrew: And we're on track to have 79 done and ready to fly during the busy summer schedule.
Andrew: Our loyalty programs generated $2 $1 billion in cash remuneration in 2020 full with exceptionally strong fourth quarter results from promotions along with several exciting announcements we've made that continue to create more value and choice for our guests.
Andrew: Our new premium credit card announced mid December and launching this summer.
Andrew: Had strong initial demand across different geographies and demographics, giving us confidence in our trajectory to achieve our targets and expand out loyalty footprint outside of our current geographies of strength.
Andrew: Who are <unk> by Hawaiian our new loyalty benefits program for Hawaii residents modeled after our successful club 49 program in the state of Alaska also continues to gain traction in the two months since launching this program. We've registered over 150000 members and card acquisitions are up.
Andrew: 30% in the state of Hawaii year over year with accelerating card spend since close.
Andrew: And finally managed corporate business travel has shown strength all year and really spiked in December with revenues up 35%, helping drive overall fourth quarter corporate revenues up 8% year over year.
Andrew: As we've seen in prior quarters, the technology and professional services sector led these increases up 15% and 13% respectively.
Andrew: For the full year, our managed corporate revenues were up 15%, we continue to see upside from several of our largest accounts, but as we discussed last month and even greater opportunity for us will come from international business travel and with the launch of our first international Widebody service from Seattle to Tokyo and read it is Mike.
Andrew: We are eager to begin servicing this demand.
Andrew: Now turning to our outlook with continued leisure demand strength healthy corporate travel demand and a constructive industry backdrop.
Andrew: We're encouraged by the setup as we head into 2025, we expect our capacity to be up approximately 2.5% to 3.5% in the first quarter, while industry capacity is expected to be stable up approximately one 5%.
Andrew: Our advanced bookings are shaping up well withheld manage business revenue up 20%.
Andrew: <unk> to support close in bookings strength in the first quarter, we expect unit revenues to be up high single digits.
Andrew: Our legacy Alaska assets are building positive loads and yields year over year in January and February.
And like trends in the fourth quarter, North America to Hawaii, and neighbor Islands are holding solid unit revenue increases year over year for January and February.
Andrew: International, namely International travel to Hawaii is challenged as it has been for some time, although it remains in line with our expectations and we're starting to see modest improvements given our network changes and synergy capture as you'll recall the 2027 targets unveiled in our Alaska access.
Andrew: Great plan do not assume any material improvement in either neighbor Island, all Hawaii International flying.
Andrew: With any recovery, providing more upside for our business.
Andrew: The combined Alaska and Hawaiian network provide the foundation for significant revenue unlocked over the next few years.
Andrew: And while changes to our combined network begin in earnest. This April we're already starting to see our network strategy materialize.
Andrew: Code sharing across the legacy Alaska and Hawaiian networks began in December and represented double digit percentages of operating carrier bookings for both Alaska and Hawaiian flights during the month, highlighting the power of selling out combined network through both platforms.
Andrew: The connectivity benefits of our hub banking strategy are also beginning to materialize.
Andrew: Our bank schedule in Seattle began in early January and now connecting passengers via Seattle are up nearly 20% in February with minimal displacement of our local traffic.
Andrew: We just loaded out bank Portland schedule, a few weeks ago and early results point to a doubling of connecting guests.
Andrew: Initial bookings on a first Seattle long haul route to Tokyo, and Narita show strong core demand in Seattle with 56% local traffic, but importantly, approximately 25% of flow traffic is coming from east of the Rocky Mountains beyond alcohol as we laid out at our Investor day.
With efficient itineraries and a great product, we become a top choice for more travelers across mid continent geographies and lastly, 55% of booked traffic comes from our loyalty members demonstrating the deep support and demand that we know our members have for Al International service.
Andrew: Although a relatively small 5% of our total revenue our international flying is a key element of our strategy to meet our guest demand and continue building relevance in Seattle and beyond.
Andrew: I want to close by reiterating that we are building out the commercial engine of Air group to an extent we have never done before we're capitalizing on our momentum and 25 is looking strong as.
Andrew: As we look forward our managed corporate revenues continue to strengthen our premium cabins continue to perform our how banking is already showing positive returns and our synergies from the network hub being realized we are well on our way to achieving the plan, we outlined as part of the Alaska accelerate to unlock 800 million in incremental.
Andrew: Over the next three years, including $300 million in synergies and with that I'll pass it over to Shane.
Andrew: Okay.
Shane: Thanks, Andrew and good morning, everyone. As you know we finished the year with a successful investor day in December where we had the chance to speak to the future. We are focused on creating an air group.
Shane: And while we are in the early stages of building toward the vision the strength of our fourth quarter results are a fantastic way to get started on that future.
Shane: And while 2020 for Delta is a tough start with the fleet grounding negatively impacting our results by approximately $200 million, we closed the year strong.
Shane: And absent the impact of the grounding legacy Alaska posted the industry's best adjusted pre tax margin.
Shane: This result speaks to the strength and resilience of our company our people and our business model.
Shane: December closed, particularly well for both Alaska and Hawaiian in fact, Hawaiian posted its best absolute adjusted pretax profit and margin in the month of December.
Shane: We are now focused on our Alaska accelerate plan building on our fundamental strengths safety and operational excellence cost discipline and balance sheet strength as.
As well as building a strong commercial pillar that we believe is required for longer term success in this industry.
Shane: In particular, we will be focused on building scale relevance and loyalty across our network. We are highly confident in our plan and our ability to execute and already are putting into action initiatives that will enable us to deliver on our financial targets.
Shane: Turning to fourth quarter results, our adjusted earnings per share were <unk> 97.
Shane: Approximately 50 cents above our guided midpoint.
Shane: 25 of the EPS outperformance is directly attributable to the strength of our core business.
Shane: We also benefited from a renegotiation of certain interest payments and from a true up of our tax liability for the year.
Shane: For the full year, we reported earnings per share of $4 87.
Shane: Similarly above our previously guided range with an adjusted pre tax margin of seven 1%, which was driven by continued underlying strength in the legacy Alaska business model and an improving trajectory of Hawaiian.
Shane: Our total liquidity inclusive of on hand, cash and Undrawn lines of credit stood at $3 4 billion at yearend scare.
Shane: Scheduled debt repayments for the quarter were approximately $65 million and our.
Shane: <unk> to be approximately $155 million in the first quarter.
Shane: In October we raised $2 billion in the capital markets borrowing against our valuable mileage plan program and achieving amongst the tightest spreads compared to similar debt issued previously by industry peers in.
Shane: In Q4, we used those new funds to repay $1 $6 billion of higher rate debt acquired from Hawaiian.
Shane: Together with the renegotiation of interest payments, our debt raise and prepayment activity have improved the interest expense profile of the combined business.
Shane: In 2025, we expect nonoperating expense to be about $40 million per quarter.
Shane: To end the year, our debt to cap stood at 58% with our net debt to EBITDAR at two four times.
Shane: As we outlined last month, we expect to return to our long term target of less than one and a half times leverage in 2026.
Shane: As Ben discussed in his remarks, we also repurchased $312 million of Alk stock in 2024, as we remain confident in our outlook and the value. We are poised to drive for the business over the next few years.
Shane: With these purchases, we more than offset dilution and reduced our outstanding share count to 123 million shares, resulting in a share count now on par with 2019 levels.
Shane: We have begun executing our new $1 billion share repurchase program in earnest in January which we intend to fully consume within the next four years are.
Shane: Our ultimate repurchase pace will be dependent on the margin profile and cash flow of the business over that time.
Shane: Fourth quarter unit costs were up eight 6% year over year coming in slightly better than guidance, despite higher performance based pay accruals.
Shane: Normalizing for bonus pay our core unit costs would have been two points lower.
Shane: The teams across Alaska, Hawaii, and Horizon did a great job managing costs, all the way through the end of the year.
Shane: For the full year legacy Alaska unit costs ended up approximately 7% year over year, despite the grounding and Boeing strike that reduced planned capacity materially and drove an approximate two point full year impact to CASM ex.
Shane: Turning to our outlook, while we've moved away from granular unit metric guidance. There are a few specifics to keep in mind for 2025.
Our full year capacity growth of 2% to 3% assumes we will receive approximately 14 737, Max aircraft and three 787 aircrafts from Boeing this year.
Shane: We expect flat growth across our Alaska assets, given assumed delivery timing and retirement of our oldest 737 dash 900 aircraft.
Shane: And expect a material increase in Hawaiian asset utilization, particularly within the <unk> hundred 21 fleet.
Shane: We expect first quarter capacity to be up two and a half to three 5% year over year.
Shane: We.
Shane: Specced unit cost to be up low to mid single digits in Q1 with greater improvement in the back half of the year as productivity improves synergy capture begins to ramp materially and we lap the extremely low growth rate for the second half of 2024.
Shane: A notable cost item for the year, we expect will be the pending new contract re reached initial agreement on with our Alaska flight attendants.
Shane: Well it will be several more weeks before we learned a flight attendants approve the deal the cost for the new agreement are assumed to be effective beginning January 1st and would represent approximately one five points of unit cost pressure for the year.
For first quarter earnings, we expect a loss per share of <unk> 50 to 70.
Shane: This seasonality is as you know normal for Alaska, However represents our expectation of a material improvement on a year over year basis.
Shane: While we will increasingly focus our commentary on combined results I will note on today's call that our legacy Alaska assets are expected to breakeven in Q1 consistent with the goal we set for ourselves two years ago.
Shane: And our Hawaiian Airlines assets are expected to improve by over $50 million in the first quarter compared to 2020 for the.
Shane: To summarize our guidance in the first quarter, we expect capacity to be up two and a half to three 5% RASM to be up high single digits.
<unk> to be up low to mid single digits.
Shane: And a loss per share of <unk> 50 to 70.
For the full year, we still expect to deliver EPS of more than $5 75.
Shane: On capacity growth of 2% to 3%.
Shane: We also expect one four to $1 $5 billion of Capex and to generate positive free cash flow this year.
Shane: We've closed another strong year and have entered 2025 with more momentum and confidence than we felt in a long time.
Shane: We have a playbook to win in the industry in the years to come including significant profit unlock from synergies and initiatives, which we have already begun executing on.
Shane: And all of this is against a constructive industry backdrop with many airlines increasingly focused on returning to threshold margin performance and guests who are increasingly loyal to airlines that can deliver better and more premium experiences end to end we.
Shane: We have a clear strategy of where we want to go.
Shane: And we're looking forward to delivering on our future vision from here forward and with that let's go to your questions.
Shane: Okay.
Shane: 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.
Well pause for just a moment to compile the Q&A roster.
Speaker Change: And our first question today will come from Brandon <unk> with Barclays.
Brandon: Hey, guys. Good good afternoon or good morning, Thanks for taking the question.
Brandon: I guess it seems like everything's firing on the right cylinders here.
Brandon: As you look at the network reallocation. This year like what is most important because we hear a lot of moving pieces here like launching and read a flight out of Seattle, But then also I think the bank structure at Portland, and Seattle as well as some pretty important. So can you maybe elaborate more on that or maybe thats a better question for Andrew I'm not sure.
Speaker Change: Well, maybe I'll start and then I'll just get Andrew I think overall you are right Brandon.
Speaker Change: It's a great question, we have a lot going on and Fortunately I have just an outstanding team across the company. We've got an integration that we're doing so we've got to keep our eye on executing a single operating certificate is here and a unified reservation system, but along that we've got all these synergies coming through and so connecting the networks is extremely.
Speaker Change: <unk>.
Speaker Change: Top of mind for Us as Andrew mentioned, all the synergies that come from that international flying and getting the operation really focused on not missing a step is where I'm just keeping the company you know between between the guard rails, but Andrew just a little more color on that yeah.
Andrew: Yeah, I think hi, Brandon as you see what that guidance out a capacity growth is very low this year. So what we're really focused on is moving out aircraft around and positioning them in the best way possible.
Andrew: Thank you know with the re banking again, just moving out aircraft around and being very deliberate about what connects to what and we've seen significant goodness. There. The last thing I will say is that.
Andrew: We launched 19, new markets in December and January of this year to replace capacity in the first quarter that you know it hasn't been performing and I think that's a big part of what we've done all but one of those markets is seasonal so again, we try not to use our assets that we have today to unlock the synergies and to be a very purposeful about.
Andrew: Where we fly and how we fly.
Andrew: Well it is.
Speaker Change: Definitely a great outlook, Andrew really quick I think you mentioned.
Speaker Change: Corporate travel up pretty significantly in December can you maybe elaborate on that and the trends that you're seeing here in January.
Yeah.
Speaker Change: Corporate travel was up about 8% in the fourth quarter and we see a lot of showed a whole west coast traffic business traffic coming back in.
Speaker Change: In that that's why it drove yields were higher growth in passengers for the full year was 15%.
Speaker Change: And as we sit here today al held corporate revenues managed are up 20% as we go into the fourth quarter here and there is still a number of clients in other areas of the AR.
Speaker Change: The managed corporates that we think will continue to grow so it's a really good outlook right now.
Speaker Change: I appreciate it thank you.
Speaker Change: Thanks Brendan.
Speaker Change: And our next question will come from Conor Cunningham with Melius research.
Conor Cunningham: Hi, everyone. Thank you, maybe just sticking with the banking situation that that number on Seattle about 20% was was obviously a lot.
Conor Cunningham: Are you already benefiting from the network connect a Hawaii until legacy Alaska like is that what's driving that or is it just the changes that you've made to the legacy Alaska network that that's really been the needle mover there.
Conor Cunningham: Yeah, Hi, kind of it I mean, it's obviously, both but I think the significant part and you got to remember and our load factors have always been a challenge in January and February So there's plenty of room on Aeroplan and we've just reconfigured the flights.
Conor Cunningham: To maximize our connectivity and the team is getting much better that in fact I'm excited sitting here today that we are sitting on just above 80% load factor for January which has always been you know GUL and we've struggled to do that and we're sort of there. This year. So it's just really exciting to see.
Conor Cunningham: And Andrew we have 350 flights a day up to 400 and the peak in Seattle. So there's just a lot of flights coming in connecting.
Conor Cunningham: Okay. That's helpful and then.
Not to get ahead of myself, but obviously, a really strong start on unit revenue in the first quarter. There is some noise from the Max situation last year.
Conor Cunningham: But as.
As we look at the calendar and all that stuff your own capacity plans like it would suggest that you're actually going to get a little bit better from here. So I know, it's early but if you could give any indications on how spring breaks kind of your expectations, there and how things are booking and maybe any anything youre seeing on spring trends in general that would be helpful. Thank you.
Speaker Change: Yeah. Thanks, Kona I mean spring still just starting to come into the window in the the team is actively managing that.
Speaker Change: So I don't have anything exciting to report there I think what we're really focused on is the continued network synergies with the Alaska assets in the Hawaiian assets and bringing those together.
Speaker Change: And as we've mentioned in our prepared remarks, the North America to Hawaii and neighbor Islands are all continuing to improve but I fully expect to have a very strong spring break and that gets more into our higher demand period, but things are looking really good as we sit here today.
Speaker Change: Great. Thank you.
Speaker Change: Thanks Connor.
Speaker Change: And we'll move next to Scott Group with Wolfe Research.
Scott: Hey, Thanks, good morning.
Speaker Change: Wanted to just follow up again on the on the <unk>.
Speaker Change: High single digit RASM, maybe if you can unpack it a little bit more between.
Speaker Change: What youre seeing in legacy Alaska versus Hawaiian how is cargo thats really really strong right now contributing to that and then maybe just with that like I remember last year.
Speaker Change: After that the Macs issued March ended up being a really strong RASM period for you do you feel like you've that month do you feel like you've captured like the comps getting tougher later in the quarter.
Speaker Change: And this.
Scott: Hi, Scott Yeah, just a tick through a couple of those.
Speaker Change: Both the Hawaiian assets and the Alaska assets are performing well on a unit revenue basis.
Speaker Change: Theres just a lot of noise that occurred last year, you had the rollover impact from the Maui fires you had flight 12 82, we had a very different network. We didn't have the combined network and Codeshare and as we've shared in.
Speaker Change: In the past January and February are always the most opportunity for us to improve and you're seeing that and that's being done March and spring break I think are always good for us I think we have a better set up this year as far as our network and what we're doing and just to reiterate we have all the goodness of the synergies.
Speaker Change: And connectivity coming through so we are very excited about.
Speaker Change: How this season is shaping up.
Speaker Change: Okay, Great and then maybe just Shane I think you've got a slide in the deck looking at like the Lumpiness of capacity, maybe like help us think what that means in terms of CASM as the year goes on that says CASM improve maybe does it get worse in Q2, and then does it get better in the back half.
Speaker Change: For the year relative to the low to mid single digit Youre doing in Q1.
Shane: Yeah, Hey, Thanks, Scott.
Shane: Well the simplest way to answer your question is yes pretty much that's going to be the contour, we have the lowest rate of growth in the year, probably in the second quarter and the hardest comp.
Shane: Because of our growth rate and performance last year on costs.
Shane: We're we're going to start to see the real benefit of synergy capture of really starting to get utilization up on the <unk> hundred 21 fleet.
And benefit from the productivity that will sort of be able to drive from those two things and.
Shane: So I think we're going to have a good quarter this quarter with unit costs, our hardest comp is going to be next quarter.
Shane: I think we're going to then flow through the rest of the year in a really nice trajectory and exit them well so.
Shane: I think the thing that we've continually talk to you all about since December as we do expect RASM to outperform CASM.
Shane: Throughout the year and we're excited about.
Shane: How we can perform this year.
Speaker Change: Helpful. Thank you guys appreciate it.
Scott: Thanks Scott.
Speaker Change: Our next question will come from Andrew <unk> with Bofa Global research.
Andrew: Hey, good morning, everyone.
Speaker Change: First question, maybe for Andrew I know.
Andrew: It Hasnt really been long since Investor day.
Andrew: But have you noticed any sort of changes in competitive capacity or competitive behavior. After outlining your plan and phase starting all of your re banking efforts.
Andrew: Hi, Andrew.
Andrew: I would say very little there's some things around the edges. There some equipment changes by some carriers here and there, but but on the whole what we've seen is the industry continue to play out.
Andrew: Seasonal schedules get chewed up.
Andrew: They're on but other than that pretty.
Andrew: The same as what we were seeing when we met with you six weeks ago.
Andrew: Okay. It makes sense.
Speaker Change: And then just for Shane.
Speaker Change: You for clarifying the chasm comments earlier and.
Speaker Change: Nice job just resetting your debt stack since the close of the deal.
Speaker Change: I'm sure all the heavy lifting is done here, but just in terms of balance sheet are there any any ways to be even more more opportunistic on debt pay down from here or again kind of the.
Speaker Change: The big opportunity is now behind you.
Speaker Change: Yeah.
Speaker Change: Yeah. Thanks, Andrew I think like the major opportunities are behind US we acquired you know double digit rate debt.
Speaker Change: When we close the deal with Hawaiian and we knew we wanted to move quickly to restrike that Emily and her team have done a fantastic job.
Speaker Change: We'll continue to obviously watch the environment we've got.
Speaker Change: No no nothing that would prevent us from continually buying down our rate if we could and we've also done a I think a nice job of.
Speaker Change: So the aircraft ownership side of the business, there's opportunity there as well as we go forward on the.
Speaker Change: At least part of the Hawaiian fleet, but that will take some time to work itself out.
Speaker Change: If I could sneak one more in and any thoughts on potentially what you could do with the.
Speaker Change: Payroll relief loans is that resets I guess later this year on the first tranche. Thanks again.
Speaker Change: Thanks, Andrew This is Emily them. So we are looking at those P. S. P loans that as they come to a convert to higher interest rates starting here in 2025, it's likely that what we will do is use some of our planned debt repayment to just get ourselves out of those loans, but it's also possible that if we find something compelling finance opportunity.
Speaker Change: Is that we weren't just replace them with more favorable rate debt.
Speaker Change: Thanks, Andrew.
Speaker Change: We'll hear next from Jamie Baker with Jpmorgan.
Jamie Baker: Oh, Hey, good morning, everybody.
Speaker Change: So.
Speaker Change: Not at all trying to detract from your momentum, but I think I have a fair question to ask.
Speaker Change: As you know understand the Hawaiian franchise inside and out.
Speaker Change: What if anything that has to be something.
Speaker Change: I hope that.
Speaker Change: That has surprised you to the downside and let me give you. An example, because you may recall I asked this question.
Speaker Change: Shortly after the Virgin integration kicked off in one of the things you cited then where aircraft leases Virgin had really good economics, but a lot of duration and those leases. So that sort of thing anything you can call out that has disappointed you.
Jamie Baker: Jamie Thank you for the question.
Speaker Change: Honestly certainly not aircraft ownership I think we feel good about the fleet we acquired in.
Yeah.
Speaker Change: I think just one differences I do think while we spent a lot of time in due diligence on the Virgin acquisition, we spent.
Speaker Change: A multiple of that on this acquisition, so I would've expected fewer surprises not to say there aren't things ahead of us.
Speaker Change: But from a just core understanding of how that business was working how they.
Speaker Change: Where their cost structure had moved over time, where the soft spots in the network, we're coming out of the pandemic and some of the challenges that they faced.
Jamie Baker: That really werent, a they're doing like the wildfires in Maui and Cabo GTS issues I think all of those Jamie we have not seen a material difference in what our expectation was I appreciate that you'd noted that we have complete command over the two companies we've.
Jamie Baker: Maybe not I don't think we would quite say that yet I think we're racing to get there.
Jamie Baker: But we've had we've had the company for a single quarter and so there is still much for us to learn and maybe maybe been on people and culture and those sorts of things, which I think have been positive too.
Jamie Baker: You know what.
Jamie Baker: Jamie It's a great question and I keep looking for things that we didn't we missed during our due diligence for like Shane said with with our board, we because we went.
Jamie Baker: Through this before with Virgin America. So we were experienced what to look for.
Jamie Baker: There is nothing coming at us in fact that I would just say the opposite there's just it feels like it's better than what we had thought things are getting stronger.
Jamie Baker: Yes.
Jamie Baker: Our Hawaiian and produced a profit in December they are going to be profitable from Q2. The Q4 Q1 is better.
Jamie Baker: So.
Jamie Baker: I think it's I think it's again the same theme things are better than we expect.
Jamie Baker: But like Shane said Theres still a lot to come together theres still although theres a few more layers of the onion that needs to be peeled off and you'll be the first to know.
Jamie Baker: If we find something.
Speaker Change: Alright, I appreciate the thorough response and just as a quick follow up.
Jamie Baker: Mentioned in your prepared remarks.
Jamie Baker: The Hawaiian franchise, too first quarter profitability somewhere down the road by applying some of the.
Jamie Baker: You said lessens, our best practices learned at Alaska can you remind us in your mind. What you think are the largest building blocks or moving pieces that need to be addressed that get Hawaii to a future first quarter profit whats standing in the way.
Jamie Baker: Yes.
Jamie Baker: Just.
Jamie Baker: One of the things that we did with Alaska, just we wanted to have.
Speaker Change: Right amount of capacity for the demand that's available.
Speaker Change: A weaker first quarter, it's putting the right airplanes in the right markets.
Speaker Change: It staffing it's productivity, it's all those things that we've honed over the years.
Speaker Change: We're going to duplicate.
Speaker Change: Our Hawaiian brand and I think there's just a lot of opportunity there we've learned a lot on the Alaska side and.
Speaker Change: I think you're going to see some of that that experience and discipline be forced onto onto that network.
Speaker Change: Okay terrific. Thank you very much everybody.
Speaker Change: Sharon.
Speaker Change: Our next question will come from Catherine O'brien with Goldman Sachs.
Catherine O'brien: Hey, good morning, everyone. Thanks for your time.
Catherine O'brien: Maybe first just two quick follow ups on the unit cost trajectory question earlier I guess first is the one five points of flight attendants incremental Kaufman with contracts that in the <unk> guide and the full year outlook and then second understand second quarter. It sounds like CASM gets a bit worse some of the comps.
Catherine O'brien: There, but just trying to understand how much better class could get in the second half based on the <unk> Youre talking about.
Catherine O'brien: I guess, the first half overall with maybe a bit worse than this one Q guide second half good enough for full year CASM to be better than the <unk> inflation, you are guiding to and I realize that was not too quick follow up so thanks for the time.
Catherine O'brien: Yeah.
Speaker Change: Thanks Katie.
Speaker Change: Slide attendant contracts should it ratified yes, that's in our.
Speaker Change: Our guidance for Q1, and it's totally represented there so it wouldn't be incremental.
Speaker Change: Once it ratifies, which we hope it does.
Yes.
Speaker Change: I don't want to get into like <unk>.
Speaker Change: Back half of the year guidance at this point.
Speaker Change: I think one thing I would say is we're not going to grow.
Speaker Change: As much as we have in the past I think you know.
Speaker Change: 2% to 3% for the full year.
Speaker Change: And we talked before about unit cost trends at those growth rates are likely to be.
Speaker Change: You know more than flat I'm actually pretty excited about where we can get to this year as we start to ramp the synergies and the Utilizations and so I guess, what I would say is we're we're hopeful and optimistic about the back half of the year, having a really good strong cost performance there as we get into the real work.
Speaker Change: Of getting the two operations together and getting synergies and productivity up and I know youre looking for more specifics in terms of the guide but.
Just know Q2 is our hardest comp and we're not really fully ramping synergies.
Speaker Change: Utilization until we get into third quarter and fourth quarter, but I think we're going to have a nice cost performance this year.
Speaker Change: Great and then maybe just one more if you don't mind.
Speaker Change: You've noted a material improvement in our island would be upside to your outlook I guess, where are you expecting to see.
Speaker Change: Inter island, RASM up double digits in the fourth quarter, and and hope for Hawaiian overall to flip to a pre tax profit into Q.
Speaker Change: I think that's the first time since the pandemic when you kind of set these targets in December just trying to understand like how things have performed since you said that 575.
Yes no.
Speaker Change: Maybe I'll be honest because it may be more about like against forecast question.
Speaker Change: Certainly when we looked at the fourth quarter, we saw that there was an improving trend in neighbor Island I think what we were.
Speaker Change: Articulating in in December and we've talked to folks when we sat down and looked at the potential of combining with Hawaiian.
Speaker Change: We just made no.
Speaker Change: We made no estimates.
Speaker Change: It's around an improving neighbor island franchise over time, we certainly expect it to do that our job is to go drive loyalty, which I think Andrew and the commercial team have done a fabulous job initially with the Hawkeye E program in all of the sign ups $130 or 50000 people already in that program.
Speaker Change: And I think we're we're fully intending to be the carrier of choice.
Speaker Change: In the neighbor Islands and for Hawaii residents and I think we've got a nice start to that that strategy.
Speaker Change: Over the long term I think the last thing I would just remind folks is we had also remarked that the.
Speaker Change: The business Hawaiian had already improved in online by at least $130 million relative to their first and second quarter result last year as they lapped some of the.
Speaker Change: Things that weren't really in their control like the DTF grounding.
Speaker Change: And.
Speaker Change: And lapping the wildfires from AOI in 2023, so that business was an improving trend I will say that.
Speaker Change: Did better than we thought even in December I thought I think the demand was was.
Speaker Change: Strong and stronger than we thought in December which is why ultimately move to a nice profit for the month of December which we were excited to see.
Speaker Change: Great. Thanks.
Speaker Change: Thanks Katie.
Speaker Change: And we'll move to our next question from Tom Fitzgerald with TD Cowen.
Tom Fitzgerald: Hi, everyone. Thanks, so much for the time I'm wondering if you would mind touching on the cargo business for a little bit just any any new updates since investor day and.
Tom Fitzgerald: Companywide, but also just.
Tom Fitzgerald: Specifically on the Amazon flying thanks, so much.
Speaker Change: Sure, we'll have Jason I'll take that question.
Speaker Change: Hi, Tom good to hear from you.
Speaker Change: It's still early days as we mentioned as we work together to get these two carriers integrated single serve selling platform and a lot of the performance you've seen in Q4 was really the two 787 freighters, we brought into the Alaska network and the new Amazon business as it starts to generate energy. It's we flew six freighters in Q4, we hope to have.
Speaker Change: All 10 by April and then we'll really see the kind of the full engine running by that time.
Speaker Change: Yes.
Speaker Change: Okay. Thanks, that's really helpful. I appreciate that Jason and then just as a follow up.
Speaker Change: Would you mind, maybe just I don't know maybe for Andrew just touching a little bit more on on.
Speaker Change: <unk>, California, San Diego was a big focus at Investor Day.
Speaker Change: And as well as the just curious on the inter California markets performing as well as maybe transcon. Thanks again congrats everybody.
Speaker Change: Yes, Thanks, Tom we actually had a fair bit of growth in San Diego This year and is in 'twenty four and it's absorbed that very very well and so we're very happy about that.
Speaker Change: The very unfortunate situation with the la fires we've.
Speaker Change: We've seen intra, California down a little quite a bit as a result of those and the bank, but the rest of the L. A stations are continuing on a somewhat normal trend overall, I think transcon, especially in California, and the product that we have the the Max nine have been doing well.
Speaker Change: So again I think across all tides here.
Speaker Change: We're really pleased and again the synergy is.
Speaker Change: All impacting both the Pacific Northwest and California.
Speaker Change: So again as we move forward those areas of our business continue to get stronger.
Tom Fitzgerald: Thanks, Tom.
Speaker Change: Okay.
Speaker Change: And your next question will come from Ravi Shanker with Morgan Stanley.
Ravi Shanker: Good morning, everyone.
Ravi Shanker: You guys just got started but when will you know if you can bring forward some of the timing on the integration gains, especially the combined bookings of stemmed the loyalty program and such is that something you'll know right out the gate as you start or does that come in in <unk>.
Ravi Shanker: Yeah, Hi, Ravi, yes, there's a very clear and definite timetable for that will stop the single loyalty process This summer and that'll.
Ravi Shanker: That will be fully complete including the launch of the premium credit card by the way by October.
Ravi Shanker: And then a single passenger service system.
Ravi Shanker: By April.
Ravi Shanker: These are sort of hard.
Speaker Change: Dates that we and the teams are very focused on because both those unlock greater synergies from where we are today and we're on track to meet those deadlines.
Speaker Change: Understood and maybe as a follow up I know that the industry is moving away from giving specific fuel guidance and thats, probably a good thing, but you guys had probably more field noise than most kind of with the with the crack spreads and such but how do you think about kind of how do we think about that relationship and maybe.
Speaker Change: The volatility coming down between jet fuel price in your all in pricing through the course of the year.
Ravi Shanker: Yes, Thanks Ravi.
Ravi Shanker: We're sort of tracking towards something like $2 65 for the first quarter, that's what we paid to date.
Ravi Shanker: We are as you know suspended our hedging program I think.
Ravi Shanker: 18 months ago, it's been it's been a while it has a long tail because because you're buying out into the future and so I think this.
Ravi Shanker: This year, we will have very very minimal actual recognized hedging expense, which is good. That's that's obviously something that we had planned for a while ago and it's nice to see the benefit of that now.
Ravi Shanker: We'll probably get to talk to you guys about fewer more than we would.
Ravi Shanker: For two or you would prefer us to because Hawaiian does have a very different cost.
Ravi Shanker: Structure and profile on their field as they get supplied from Singapore and they enjoy a beneficial rate most of the time relative to west Coast Gulf Coast. So.
Ravi Shanker: Anyhow.
Ravi Shanker: Oil has gone up a bit in.
Ravi Shanker: The last 10 days I think gets relaxed him last few days.
Ravi Shanker: And it looks like it's sort of stable right now.
Ravi Shanker: Nothing really more exciting than that to report.
Speaker Change: Andrew So would love any specific guide for a few quarters until we kind of get into the swing of things.
Ravi Shanker: Thanks for that.
Ravi Shanker: Thanks, Ravi will put on the list of requested guides.
Okay.
Speaker Change: And we'll move next to Duane <unk> with Evercore ISI.
Ravi Shanker: Yeah.
Speaker Change: Hey, Thank you I don't know if you should be.
Speaker Change: Adding anything to the Guy that's what youre doing seems to be working so.
Speaker Change: Anyway on the transition of wide bodies into Alaska hubs can you just remind us where we are in the ramp of that and when are the peak seasons that we should be watching.
Speaker Change: As that spools up.
Speaker Change: Hey, Duane So we have two 780 sevens right now we'll have three more next year.
Speaker Change: Yes in 25 excuse me sub five.
Through the end of this year and then another three next year, what we publicly announced as obviously narita starting this may.
Speaker Change: And in showing this October.
Speaker Change: Those will both be year round markets and we're working in at the time at the right time, we will announce the further growth out of Seattle as we shared on Investor Day, We're looking to have 12 markets launched by <unk> and the <unk>.
Speaker Change: First Mark it's Andrew will be on $3 <unk> to launch eventually we'd be moving to stay out of the 770 <unk> yeah yeah.
Speaker Change: I guess just to follow up there are there is there seasonality to those markets or their peaks or they're off peaks.
Speaker Change: Understand theyre going to be full year.
Speaker Change: Yeah, I mean, I mean, Europe, we haven't started yet we all know there's there's peaks although.
Speaker Change: We hear from other than C is getting some.
Speaker Change: Traction in some of the winter holidays there.
Speaker Change: I'm not really in a position to talk to the exact seasonality of all these things what I do know and would remind folks is the narita, we're reallocating from Honolulu, and a radar with it and that has a very material economic upside to us, but these market specific or a little bit more steady year round, but again, we're going to.
Speaker Change: This and we feel really good about the bookings to date, maybe just directionally. Some will be you know all year round and some will be seasonal I think that's it will.
Speaker Change: It depends where we fly we've only announced two but.
Speaker Change: But when we get to the.
Speaker Change: Full 12 plus out of <unk>.
Speaker Change: It'll you'll.
Speaker Change: Youll see us.
Speaker Change: Keep some all year round and Youll see us move some.
Speaker Change: We need to move based on <unk>.
Speaker Change: Based on demand so you'll see us do a mix.
Speaker Change: Thanks, and then maybe just for a quick follow up.
Speaker Change: Just on competitive capacity and I'm talking here more OA capacity cuts.
Speaker Change: Where do you think youre seeing a bigger benefit right now is it on the Alaska side or on the Hawaiian side and I guess, how do you see that evolving.
Speaker Change: <unk> versus the trends that you were seeing in the in the back half of the year. Thank you for taking the questions.
Duane: Yeah. Thanks Duane.
Speaker Change: Sitting here I'm not seeing.
Speaker Change: Seeing anything abnormal or unusual and I think.
Speaker Change: <unk> has been well documented that industry growth period is extremely low.
Speaker Change: Industry capacity growth is only like one 5% in the first quarter. So I.
Speaker Change: I don't think Theres anything in our networks, we're seeing some relief in the neighbor islands, starting in April but other than that I think it's fairly stable.
Speaker Change: Okay very good thank you.
Speaker Change: And we'll move to our next question from Mike Lindenberg with Deutsche Bank.
Yeah, Hey, good morning, everyone. Congrats on really solid results and a great outlook.
Speaker Change: I wanted to go back to <unk>.
Speaker Change: Some of the connecting commentary Andrew that you brought up I mean, doubling importantly, and up 20% in Seattle, obviously impressive numbers, but I have to think it's off of a pretty low base, which obviously lends itself to more more potential upside as you become more of a connecting carrier if we look at Seattle or Portland today rough numbers.
Local versus connect what are we 70 30 80 20 can you just provide some color on that.
Speaker Change: Yes, those numbers are in the ballpark and I suppose I should remind folks again.
Speaker Change: These volumes in connecting traffic are at a low periods of time and I think the whole plan was to have a wider catchment area as we get into our peak spring breaks and some of our airplanes are very full.
Speaker Change: So we're going to be you know revenue managing that and I'm being very careful about the traffic. We take so I would not expect to see these level of connectivity. Obviously continue at this rate, but in the low seasons as being hugely beneficial for us okay great.
Speaker Change: And then just a second.
Speaker Change: Hate to ask a modeling question, but I think it is going to have some influence on how we think about CASM X through the year Youre freighter costs year over year up 100% more than 100% and I know that that gets cut out.
Speaker Change: It was $37 million in the fourth quarter, what what's a good run rate like how do we think about your freighter costs are we going to be looking at like 40, 50 $60 million a quarter in 2025, So we can get to the right CASM ex.
Speaker Change: Yes, Thanks, Mike.
Think the fourth quarter, we had the full Alaska fleet of five freighters operating.
Speaker Change: And we had six of the 10.
Speaker Change: Amazon freighters, so theres four of tend to go.
Speaker Change: Okay.
Speaker Change: Can sort of follow up and if we give more specifics, we'll give it to everybody, but I think it's almost all the way there in the fourth quarter, a little bit to add here in the.
Speaker Change: In 2025, and there were pretty much at steady state unless we add more units at that point, okay. Great. That's helpful. Thanks.
Speaker Change: Thanks, Mike.
Speaker Change: And our next question will come from Dan Mckenzie with Seaport Global.
Speaker Change: Oh, Hey, Thanks, Good morning, guys, Andrew maybe a couple of questions for you. Thanks for the perspective on international revenue.
Speaker Change: Just given the number of new markets what percent of revenue could international represents the end of the year.
Speaker Change: Versus say in two to three years and I'm curious how you'd characterize the contribution from one world as you start to ramp up that international flying.
Speaker Change: Yes, I think the international one I'd say that as those long haul internationals like about 5% so.
Speaker Change: We're sort of adding three aircraft.
Speaker Change: Yeah, So I think.
Speaker Change: <unk> for the next few years, it's going to be a small percentage of our total capacity.
Speaker Change: I think a lot of it for US too is just the huge loyalty and utility play for us out of Seattle.
Speaker Change: And the.
Speaker Change: We can offer directly on Alaska medal.
Speaker Change: As far as the alliances go I think.
Speaker Change: They're continuing to track along very well and we're very happy with the setup that we have with our partners and again, we're looking at as we grow what can we do to strengthen these relationships and partnerships over time.
Speaker Change: Okay, and then I guess, a second question I'm wondering what you can share about the <unk> initiatives that you're planning to rollout later this year at least I believe you are planning to rollout some of them were.
Speaker Change: Wonder if theres an opportunity to improve merchandising first of all and then if so if that wood is currently embedded in the guide and if not what could that upside potentially look like.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Yeah, Thanks, Dan I look.
Speaker Change: Everything that we.
Speaker Change: Envision being able to go execute and deliver on as contemplated in the full year guide for EPS.
Speaker Change: Certainly we'll be excited and happy if we can deliver faster or better and.
We.
Speaker Change: Fully intend to try to do better than than what we've put out there but.
Speaker Change: All of those efforts on the ecommerce side are embedded in the guide they have a really big lift integrating.
Speaker Change: The two reservation systems.
Speaker Change: And also just bringing sort of conformity merchandising practices.
Speaker Change: Our Hawaiian today in Alaska Tomorrow, and they get to do something unique that we're excited about just managed to brands are two front doors into our network and.
Speaker Change: We're still working through how to optimize all of that so I think I. Appreciate you asking the question. We're excited about our approach to distribution and merchandising in ecommerce.
Speaker Change: I'm certain we'll be able to talk to you guys more about this as we get further into the integration.
Speaker Change: Okay. Thanks for the time you guys.
Tom Fitzgerald: And we'll move next to Tom <unk> with UBS financial.
Tom Fitzgerald: Yes, good morning so.
Tom Fitzgerald: Maybe a bit of a high level question, but.
Tom Fitzgerald: You beat by light and <unk>.
Tom Fitzgerald: Industry backdrop is pretty favorable maybe not different than you expected, but I'm wondering I'm wondering why you didn't why you chose not to raise the 2025 guide is that just hey, there's even more upside versus the guide than we thought before how do you think about that just in light of the pretty big upside in <unk> and a good industry backdrop.
Tom Fitzgerald: Yep.
Speaker Change: Yes, Thanks, Tom and just for a note this will be our last question.
Tom Fitzgerald: You know I think.
Tom Fitzgerald: I think we were just with you all in in December and I think we outlined a plan that we're certainly excited about confidence in.
Tom Fitzgerald: And we feel a lot of momentum right now, but theres a lot to go execute on a lot to go deliver on.
Tom Fitzgerald: We did acquire a network that wasn't making money and we've got to go.
Tom Fitzgerald: Sure, we shipped assets around and drive synergies and drive productivity and utilization.
Tom Fitzgerald: If everything goes right then like.
Tom Fitzgerald: We're going to have a really really great year from a financial performance perspective.
Tom Fitzgerald: And like I said to the last question to Dan I'm hopeful that we are able to do even better than what we've guided to but this is the number we were confident we can go deliver this year.
Tom Fitzgerald: No no dilution of margin a nice increase to our EPS in the first year of a of an integration is unique in the industry and we're excited to go drive it.
Tom Fitzgerald: In a way that I think others haven't been able to in the past.
Tom Fitzgerald: And certainly we look forward to upside from there, but not to provide a thought on how you know how much upside there could be.
Tom Fitzgerald: Okay. Okay, no that's fair what about just the kind of how.
Tom Fitzgerald: How we build on the good news in <unk> and <unk>, where there are items that you would say hey, I mean, I know you mentioned, a lower tax rate for Q, but were there any other items that you'd say I always kind of a <unk>.
Tom Fitzgerald: Socratic to <unk>, where just like temporary for <unk> or should we say hey, the kind of cost in <unk> and the revenue for <unk>.
Tom Fitzgerald: Those are continuing things.
Tom Fitzgerald: Yes, no I think look the core business and I said this in the prepared remarks drove 25 or half of the outperformance, which is pretty significant relative to a $40 to 50 initial guide for the quarter. So.
Tom Fitzgerald: Those most trends that we saw in the fourth quarter relative to revenue and.
Tom Fitzgerald: Cost management I think we feel like those are continuing into the first quarter. The other half of the beat.
Tom Fitzgerald: More onetime in nature.
Tom Fitzgerald: Good work by the Treasury team on on the non op side of the business and then truing up tax rates, but certainly the core business beat I think is something that we don't feel like was.
Was onetime in nature, we feel like we've got that tailwind with us at least into the first quarter.
Tom Fitzgerald: Again lots to do lots to go execute on certainly on the cost plan, but.
Tom Fitzgerald: But we feel good where we ended the fourth quarter and how it sets us up for the for the beginning of 2025.
Tom Fitzgerald: Thanks for joining US everybody, we'll talk to you next quarter.
Speaker Change: This does conclude today's conference call. Thank you for attending.
Tom Fitzgerald: Yeah.
Tom Fitzgerald: The host has ended this call goodbye.