Q2 2025 Allegiant Travel Co Earnings Call
Third quarter.
Importantly, we continue to expect to report a healthy operating profit for the full year with our fourth quarter, historically more in line with the first first 2 quarters in a much stronger quarter than the third that Leisure Travel. Typically picks up seasonally seasonally
I also want to reiterate that we remain steadfast on our core principle that, we need to earn the right to grow while 2025 has been a year with meaningful growth. And as mentioned, that growth was accomplished with adding to our Fleet count without adding to our Fleet count or to our Personnel, it represents a 1-time catch up year after Max delivery delays, that sharply curtail our capacity growth in previous years.
Encouragingly, when we compare our first half 25 year-over-year changes between tras and kasim X. We believe it to be among the industry's best.
As we look to 2026, we currently expect capacity to be relatively flat as we further harvest our current infrastructure. Both plans should help us improve our yields for several reasons. First, we expect to drive incremental revenue through enhanced navatar capabilities and new commercial initiatives. Second, we should benefit from rounds maturing, with peak flying representing a greater proportion of ASM in 2026 and 2025. Also, we expect to tell when from a more fully ramped Allegiant extra, which will start the year being deployed on 70% of our fleet, up from 50% at the beginning of 2025.
Third, we anticipate our Allegiant credit card remuneration will continue to grow from the $140 million expected this year. It is a great source of steady incremental cash flows.
Drew will provide more details but suffice it to say those offerings as well as other Revenue. Generating initiatives is give us confident today that the unit Revenue should improve in 2026, all all else being equal in the demand backdrop.
On the cost side, we are continuing to increase the usage of the MAX aircraft, which are expected to be more than 20% of our ASM for 2026, up sharply from 25. We are planning to divest some of the Airbus fleet over the course of the coming year, with any proceeds used to further strengthen our balance sheet.
We are keeping a tight control over costs. Our cost structure is a key competitive advantage.
So when you put it all together, we are taking important steps to simplify our business and further strengthening our core Airline competencies.
The airline is operating extremely well, and we continue to position ourselves to deliver strong incremental margins.
I'm excited about what was in store for us over the coming year and Beyond and let me close by how highlighting, how proud I am that. Our teams performance resulted in Allegiant being named sky. Track best low-cost carrier in North America, for the second year in a row.
Our greatest driver of of success is team Allegiant. Our dedicated team members, who deliver a great service for our customers every day of the year, their dedication sets us apart. And I'm honored to work with such a talented team. And with that, I'll turn it over to Drew.
Thank you Greg and thanks everyone for joining us this afternoon.
We finished the second quarter with $669 million in airline revenue, approximately 3% above the prior year, producing a Q2 travel of 11.577, which was down 11.2% year-over-year, in line with our internal expectations from the prior call.
Allegiant grew total ASM by 16% with overall utilization of 17%.
Despite the increase in utilization, reduced available plane space for a fixed speed line has impacted our operations. Our fixed fee revenue was down just 4% on a year-over-year basis and ahead of our internal estimates for the quarter.
While BJ will hit on the unit cost benefits of our growth profile and expectedly have an impact on our email groups.
Focusing a bit on the core of Allegiance strengths and deploying predominantly Peak day capacity, unit revenues in our markets operating, the same capacity in both the current year and prior year, mainly comprised of markets flying 2 to 3 times per week, or off roughly 6% year-over-year. Seemingly in line with commentary from others throughout the site.
But perhaps slightly oversimplified the growth profile. Contributed roughly 5 incremental points of revenue and solved. Generally in line with our typical expectations of the relationship between growth and your revenue change.
We certainly saw more resilience on peak days where, even in the aforementioned same capacity scenario, 8 days held up about 4.5 points better year-over-year than off-peak days.
New Peak weekends, weekends even came to light.
The emergence of Juneteenth as a strong traveling holiday is a welcome addition. In fact, the strongest trauma leads on the summer traditional peak week around the 4th of July was topped in total.
Our approach to capacity in the second half of the Year aims to align capacity with demand in our typical fashion.
Our 3 few growth rate is down more than 10 points from our estimates at the start of the year. As mentioned on the last call. Those cuts are heavily focused on the offbeats both day of week and see
Approximately 48% of July line.
After the cuts, we still expect third quarter scheduled service azoms to go approximately 10% with the fourth quarter slightly higher than that. Given 2024 hurricane related cancellations
We've certainly seen demand pick up in July earlier than last year. While those same capacity markets did improve slightly in July relative to June, the uptick missed a good portion of the July booking window.
Additionally, due to the overweight portion of 3Q ASM falling in, July the third quarter will be a lower overall benefit than other carriers most likely
Broadly, we do believe the back half of the year is setting up better than most of the last 6 months.
Consumer confidence, kicks, higher in July, the industry setup is improving through the post-summer truck.
That said the November December industry growth profile remains elevated. And in particular, capacity to lead oriented destinations as an email larger spread first last year,
Agent. And I believe we gained the first incremental benefit from the system.
That was the earliest we’re discovering aren’t necessarily solely ancillary revenue. Per passenger lists, a rather conversion and in turn load factor benefits that we expect to see manifest more fully in the coming months.
In fact, July load factor should be the best month year-to-date, both in terms of the actual metric and the year-over-year performance.
Finally, while we're thrilled with the trajectory and results of our award-winning Allegiant Allways, Cobra, and credit card and loyalty programs to date, we have kicked off an in-depth review of the programs to ensure we are continuing to offer a value proposition that resonates with our customers after 9 years and much industry change.
As we dig in, on the evolution of these programs, the best support, our customers needs, we'll come back with more details in the coming quarters.
And now, I'd like to hand it over to all the damn.
All right. Thank you. Drew uh, good afternoon everyone. I'll walk through our results and share our Outlook today, all on an adjusted basis unless otherwise noted
This afternoon, we reported second quarter consolidated net income of $22.7 million and consolidated earnings per share of $1.23.
The airline segment produced net income of 34.3 million in Airline, only earnings of $186 per share exceeding, our initial expectations of approximately 1 dollar.
This outperformance was attributable to solid cost execution. Throughout the quarter, on a share count of just under 18 million, we drove operating margins at 8.6%, ahead of our guided range.
Our second quarter consolidated results include special charges of $103 million related to the pending sales of Sunseeker Resort, but now in early July.
We remain on track to close on the sale in early September.
With 122.5 million yielding and debit do margin of 18.3%.
Fuel averaged $2.42 per gallon during the quarter, in line with our initial forecast.
Our focus on growing into our labor force and leveraging existing infrastructure kept momentum during the second quarter. Total airline operating expenses reached $611 million, up 4.9% year-over-year, on capacity growth of 15.7%. I'm very pleased with the team's cost execution. Excluding fuel, unit costs were down 6.7% despite the removal of nearly 7 points of planned capacity growth in the quarter.
Our counting next result. Included a 1-point Headway in front of expected transitory costs in the aircraft rent line.
as we prepare to return, 11, aircraft off, operating leases, which originated during the pandemic,
Department leaders across the organization have been focused on cost performance, especially in light of capacity reductions and the softer demand environment experienced during the first half.
And we are not solely focused on unit cost results.
But that said, we pulled 4 and a half points of capacity growth from our 2025 plan and still expect full year, non-field unit costs to be down mid single digits. Thanks to numerous budget initiatives across the organization.
Turning to the balance sheet, we ended the period with robust total liquidity of 1.1 billion which includes 853 million in cash and Investments and 275 million in undrawn, revolving credit facilities.
In addition we have 3355 million in available, undrawn loan commitments. At the end of the quarter cash and Investments were approximately 34% of trailing 12-month Revenue at quarter in
We may continue progress on debt reduction, repaying $152 million, including $113.5 million in non-recurring repayments and $38.5 million in scheduled principal payments, ending the quarter just below $2 billion in total debt.
Net leverage remains flat sequentially at 2.6 times, down from 3.8 times at the end of the second quarter last year.
Capital expenditures for the quarter totaled $137.7 million, comprised of $108.3 million in aircraft-related spend and $29.4 million in other airline capex.
Deferred heavy maintenance account of an additional $10 million during the period.
Now, moving to Fleet, we retired 2 A320 series aircraft and took delivery of 5 new 737 MAX aircraft, of which 1 was placed into service at quarter-end.
We are pleased to say that Boeing has exceeded our expectations on aircraft deliveries throughout this year, and we expect our remaining 3 aircraft for 2025 to be delivered in the third quarter. As we ramp up operation of our Max fleet in the fourth quarter.
Predictable and reliable performance from Boeing provides us with tremendous fleet flexibility. When we're leaving our full year, capex forecast unchanged at this time at $435 million.
In light of staffing costs incurred, in 2024, we made the conscious decision at the start of the year not to hire additional flight crews for these aircraft.
and plan for pilot transition after our summer peak schedule.
and thus, we expect to place the remainder of these aircraft into service alongside available type rated flight Crews, beginning in October. And we transition our Fort Lauderdale base to an all 737 Max operation.
Looking ahead to the third quarter. As previously announced, we've entered into a definitive agreement to sell Sunseeker Resort for million dollars, with closing, plans for early September, and expectation, for sales proceeds, to be used for debt repayment.
We will report Consolidated and Airline only results for the third quarter, which we expect will include approximately 2 months of operating losses at some Seeker during its off peak season.
As most of, you know, the third quarter is seasonally our softest while. We've recently seen some strength in bookings, much of July, our Peak month would have been booked before a notable increase in demand was observed.
As such, the benefit to the third quarter is somewhat muted. Though, we expect to capture some upside in our four-year guidance, which I'll discuss in a moment for the third quarter. We expect a consolidated loss per share of $2.25, including a loss of approximately $0.50 from Sunseeker.
For the full year 2025, we are expecting airline-only earnings of greater than $3.25 per share.
Factoring in 8 months of operations at Sunseeker. We expect Consolidated full year earnings per share above $2.25.
Our Outlook today contemplates, some of the demand improvements observed in July. However, we believe there's still room for upside particularly during the fourth quarter. If macroeconomic conditions continue to improve,
Although it's still too early for us to guide 2026, we will share that we expect to retire 88,320 family aircraft and plan to induct 9 incremental MAX aircraft into the operating space next year, weighted to the back half.
As a result, we do not expect Fleet count to drive capacity growth next year.
With continued progress on revenue initiatives, the earnings drag from Sunseeker removed, and an improving macroeconomic backdrop, we believe we're well positioned to deliver materially higher earnings in 2026.
In closing, I want to thank the entire Allegiant team for their efforts during our peak summer travel season. We operated a record number of flights this summer, and the operational performance exceeded expectations.
Despite a really 17% increase in Fleet utilization and flat employee headcount.
We operated nearly 16% more flights compared to 2024, and it did. So, with significantly fewer operational disruptions.
From cost discipline to operational execution, we're proving our ability to adapt execute and position a legion for long term outperformance.
Management prepared remarks. We can now go to analyst questions.
Thanks, Robert. At this time, I would like to remind everyone that in order to ask a question, please press star, then the number 1 on your telephone keypad. Once again, that's star 1.
In the interest of time, we ask that you please limit your questions to 1 primary and 1 follow-up question. Thanks in advance, excuse me, and we will pause just a moment to compile the Q&A roster.
Okay, looks like our first question comes from the line of Mike linenberg with Deutsche Bank. Mike. Please go ahead.
Yeah. Hey, um, good afternoon, everyone. I just ran the numbers for the full year. You have the consolidated at greater than $225 million in the airline, greater than $325 million. I guess some seeker has already lost over a dollar per share for the first half of the year, and there's another 50 cents in the third quarter. For the last two months, I guess, what's...
I see the dollar difference, but I guess.
you know, you should have left the Gap at that point, but
maybe that was by Design.
Hey, hey Mike! It's Greg. Let me kick it off, and BJ or the other team can jump in.
The, you know, where we're expecting for our guide is that, um, at the end of September by September that Sunseeker, uh, is, you know, no longer a part of a legion and excluded obviously moving forward in earnings. And so, um, I think that's the way it was built and if we need to go kind of more in detail, we could do that certainly offline. Um, but what I,
what the guide suggests, you have our third quarter number but I believe on the EPS uh what it would suggest that is about a buck and a quarter in Airline only uh Epps
Mhm. Okay. Okay, thanks then. Um, then um, just my second question on some secret itself. I mean the AK that came out talked about, you know, I guess,
Cash proceeds of $200 million. I mean, I'm not sure if you know if there was anything else tied to that, if there's a residual stake. I mean, is it a clean $200 million coming in? Are there some other impacts there? How should we think about it? Just because I'm, you know, the original 8-K.
Was fairly terse and providing details around that transaction. Thanks, thanks for taking my questions.
Yeah, of course. My just, just the, it's all 100% sold to Blackstone. And that's the sell agreement, and then the $200 million proceeds to Allegiant upon close of the deal.
All right. Thanks Mike. Our next question. Comes from the line of Savvy Scythe. Excuse me, with rim, and James Sabi. Please go ahead.
Thank you, and hey, good afternoon everyone. Um, maybe I can kind of talk a little bit about the 2026, uh, kind of where you're thinking about it. I appreciate that color this early on. Um, just curious about your exit cost executions. This year has been remarkable and, given the kind of flat outlook, how should we think about non-alcoholic next year? Um, given that you still don't know what the pilot deal might look like, and just how should we think about the puts and takes into 2026?
Sure, thanks. Bobby. Yeah, 1 of the reasons. Um, you know, we're not prepared to guide 2026, of course, we're still. Um, just just actually kicking off our, our budget initiative now. Um, but also just, um, fully understanding what capacity is going to look like, next year. Remember we had a good bit of off peak capacity During certain periods, uh, in in 2025 and, and basically, the current environment. And we, we wouldn't expect to see that next year. So I'm just trying to get our get our, uh, get a handle around aircraft and, and team members utilization. So I keep those in mind and then and then timing of a, a pilot deal as you mentioned in the question.
anything else than as we think about, like, some of the cost savings that you have this year, do any of those get reversed next year or, or is there a kind of a rule of thumb, if you didn't have any of those kind of moving Parts, just how much, you know, you know, cost pressure, you see
Yeah, I mean, we expect the where you're seeing the most benefit on a unit cost basis. This year is in a salaries and wages line. Um, I I would expect that, um, the the total cost for that line, uh, I, I don't want to commit to it being flat, but I don't expect it to be up materially, uh, and and on Lower utilization, if we had lower utilization, um, or lower asms, you would, you would see some pressure there. But again, this just depends on. Um, what kind of capacity we put out there?
I think from a cost perspective, it can get a pretty expensive quickly, uh, when we don't run a good option, so just really proud, you're hearing some of the operational performance. Um, that that's we're seeing in the improvements, we've seen over the past couple years, it's helped drive a lot of our costs out of the business so that that that's Step 1. Next year and giving us even some more confidence to fly a little bit more in those Peak periods uh given that the Ops performance. But 1 of the things that, you know, I think I want to say as well is just the organization has been incredibly focused on just driving on necessary costs, out of the business DJ and his team. It's a team of cost Hawks that we've seen, you know, close a couple of high cost bases like LAX and Austin, we've reduced corporate Personnel over the past year by 10%, uh, We've reduced fixed marketing expenses and we reduced. It spent, I mean, there's areas in the business that structurally, we've gone through and they've done a really nice job and what I am I guess we're very encouraged by is the culture uh, where everyone's looking to, you know, really be prudent on on the
cost front.
Maybe 1 more, um, quick addition to the answer there. So I'll be, um, and this 1, I can give you the help with modeling. Um, I mentioned in the, uh, prepared remarks. Um, an increase in the aircraft rent line. Uh, I would expect that to persist, through the back half of this year. Maybe a little bit of relief in the fourth quarter. But in 2026, we should see that return to the same run rate that we had in 24.
Pretty helpful. Thank you.
All right. Thanks Abby. And our next question comes from the line of Dwayne pfennigwerth with evercore Dwayne. Please go ahead.
Hey, thank you. Um,
On the growth headwind, uh, to rasim of 5 Points.
I assume that's a, that's a 2q comment and and this might be impossible, but how would you frame that?
Maybe earlier in the year and and even into third quarter here, is it fair to say that the year to date impact?
is probably in a similar range to that 5 points.
Yeah, I think that's probably probably Fair year to date, you know, what's just looking at at the severe off peak like September? You know, we didn't have that same comp in January as as we were still kind of thriving from from a booking perspective. Uh,
You know, so what kind of forecasting that?
You see, it's similar but slightly improving um, through the quarter to, to a point to maybe a little bit better than that 6%. That we
Put up in the second quarter.
Thanks Wayne. Yeah, I'm happy to start great. If you want to add in, um, yeah, early innings for sure. Uh, I think Greg gave the percentage of asms that were operated by the max but certainly expect that to be, uh, you know, in the 20% range uh, any next year. So there's definitely Room to Grow. We're also not able to schedule the max aircraft on the most optimal lines of flying yet because we're still training crew members. And so the, the airplanes are operating shorter stage lengths, which is not optimal for, um, the, the um, fuel Burns, uh, performance of that airplane. So, I think there's definitely room to go and then I would just say on the, on the DNA side. Um, you got to remember there's also a little bit of overlap.
In the, in the second quarter of this year, we had a 1-time crew up on, uh, on on some unrelated assets. So there's a little bit of a bump in the second quarter. I would expect to see some relief there in the third quarter. And then, as we move into next year, you see some of the Airbus assets start to fall off from the the DNA line.
And Dwayne I I just add maybe a little more specific on the costs improvements to BJ's point. We have you know we're up to next year about 20% of our asm's flown by the more cost efficient Max Fleet.
You know, we'd expect asms per gallon. Next year to improve by call it 2 to 4 Points.
I think in 27 you you would expect that to step up even further. I think our just our kind of tentative plan has us, you know, between
7 to 9 points or 7 to 10 points in ASM per gallon Improvement.
Thank you. Thanks, Dwayne. All right, thank you, Dwayne.
And our next question comes from the line of Robbie Chancre with Morgan Stanley. Bobby, please go ahead.
Good afternoon everyone. Uh, not asking you to guide for 26, but do you have a sense of what you're normalized DPS might look like 1 of your peers? Quantified it on their call for 2027. Uh, and also uh what might that be depended on? In terms of moving parts?
Hey Robbie. What, why don't I kick it off. But yeah, we're not we we're uh we're not going to give a guy right here and I'll just I mentioned a lot of the initiatives as we think about 26 or perhaps items to keep an eye on. And, uh, we mentioned, you know, we we believe there's a clear path to improving unit Revenue. Uh,
And we, we're going to keep a tight lid on costs.
Uh, you've seen the team and the performance this year and so we want to continue to really run a great operation. Uh, the flattish capacity is not going to put any pressure. We don't think on the operations, we can fly a little bit more in the peak period. We think given where we're seeing on the operational front and during his team. Other ski starting to think about a plan for 2026.
Uh, right now, you know, if the demand backdrop improves particularly Leisure, you'd still have some flexibility to push the utilization of the shoulder and off peak. Um, we're not planning on that today.
But what what I'd say is just you kind of put it all together Robbie and I know this isn't giving you a specific answer but we think there's an opportunity to you know materially improve our earnings um EPS for us. We have 18 million shares so you can kind of back in to you know here and there. Each 1 of these levers is worth X points and EPS just all else being equal.
Understood that's helpful and maybe as a follow-up slash clarification, uh, just on 3 Q on the demand environment. Are you saying that, um, the, the, the 3Q you you've guided to is essentially what a normal 3Q, like, non- Peak environment, looks like or do you think you're still, uh, seeing drags from, uh, from from what happened? The first time, I'm just trying to get a sense of
What? That sequential steps to 2, Q3 q4q looks like relative to. What do you think normal would be?
Yeah, I I probably caution normal, for sure. Um, what what we're thinking about for, for the third quarter is a, a ramp in demand, uh, cylinder, what we experienced last year. Um, so 2024 was was not particularly normal as as we talked about, um, you know, a year ago. Um, we're starting from a little bit of a lower point, right? So so getting a, a slightly stronger ramp. I think we'll get you to the the sequential traum, um, year of your benefit that that we talked about. So I don't think we're quite normal yet, very little post. Pandemic feels normal at all. Um, but, but look, more than 2024 is kind of the the guiding principle there, more than anything.
Very good. Thank you.
Thank you, Robbie.
And our next question comes from the line of Scott, group, with wolf research, Scott, please go ahead.
Razom, and and kasim and and Q3 and and I think you had a point that things are getting better but maybe you're not going to see the same benefit of things getting better. Maybe as much as others. I just didn't follow that point. If you can just
Go through that again. Yeah, I'll start on the browsing side and really got what that comes back to is, um, how we deploy our capacity, right? 42% of our asms for the core will come in July, um, leaving only 58% for the rest of it. So, as, as demand ticks up, we just don't have the same flat kind of schedule that that many other carriers do, uh, that would enable them to better. Um, feel a third quarter impact from that, that uptick that was really the the extensive uh, that commentary but but more generally maybe. Um, I think in the remarks that I mentioned we would expect sequential wins on on year-over-year as we get into the third quarter and that is the fourth quarter, getting just a little bit better, uh, in each of those.
Yeah. Hey Scott, it's DJ. And then on the on the cost side, um, we we, uh, did not guide unit metrics for the for the quarter. But I will tell you that I gave a bit of a Cadence of unit costs, um, at the first call this year. So it's the 1424 earnings call, um, so I'll just kind of repeat that. So, it's out there. We expected at the time. Um, first quarter to be down the most second quarter would be down, not quite as much. And then we had talked about the fourth quarter coming in, maybe flat and that and and that did assume a little bit higher capacity. So we pulled some capacity up.
Uh since then. But I think those comments will largely hold and then I said in my prepared remarks that we would expect the full year to end down uh mid single digits.
Okay, that's helpful. And then just secondly, I think you had a comment about
Fourth quarter capacity, and leisure markets.
Looking uh, higher maybe just any more color there. I just want to sort of like if I look at the Q4 guide of a Dollar Plus of Airline earnings, I see a big improvement from Q3 but still a big decline from fourth quarter last year and that just feels a little different than what some of the other airlines have guided to. So just any thoughts or color,
Yeah. I mean some of that's just going to come down.
to, you know, a belief.
Slightly more conservative view on where the fourth quarter can end up. Um,
But, you know, just looking at at leisure oriented markets. That's a pretty big change at, you know, for example, um, the Orlando area that was down 10% for a quarter last year. Now, you know, showing up 77 and a half percent at at an industry level. So there's a little bit of a different Dynamic. I think in the geography of of where, um, seats are still in the market, now, that's all subject to change. Uh, that's kind of lit in the back of my mind, as as something that, you know, maybe it's reason for us to be a little more cautious. As we go into November December, then maybe however, Airlines have have described it.
Okay, great. And then I apologize. If I can just sneak 1 lesson just going back to my my first question like,
Like relative to the rasim down, 11% or whatever in Q2. Like how much sequential Improvement are we talking about? Is it 5 Points? Is that a good ballpark? Is it more or less? Any just any thoughts? Just to give us a little bit of help.
Yeah, I probably won't go into, you know, trying to to guide an actual number here, though. I appreciate the question. Um, you know, do do you think it will be better? Uh, you know, a, a lot of this will come down to, to your view on on how good you think September can be, um, in a, in a typically Leisure, uh, week period like that we're planning on something, you know, roughly similar. Uh, so what we saw in 2024, um, as as kind of a ramp from this point forward, in terms of demand,
maybe as far as I take it.
Okay, great. Well, thank you, Scott.
And our next question comes from the line of Andrew dedora with Bank of America, Andrew. Please go ahead.
Hey, good afternoon everyone. Uh, thanks for the questions here. This first question for for Drew, um, when you when you look at, you know, all the commercial initiatives you outlined in your prepared remarks, whether it's a legion extra more Peak flying. Now, you have navitar operating as you initially thought.
How should we think about whether it's Raza or, maybe it's ancillary for passengers? You know, how do you think about the uplift from all these initiatives in kind of the status quo demand environment as we head into 2026? How should we think about that?
Booking that that's a little bit, candidly of a change. We had called that out as, you know, the 2 dollars uh to get back to level and then an incremental $2 per passenger. Um but we might have to we might start to shake that a little differently given given we're seeing it come through through load instead um on the allegiance extra. That's that's purely. Um, a purely enhanced player revenue for passenger metric. We're still holding pretty strong at that roughly $3 per passenger on, uh, flights with the Allegiant extra layout. Um, coming out to, you know, 500 US dollars per per departure that that number is still um still still intact on that from um
This weekend.
Okay, thank you. And then, um, just a quick question for for, for DJ, thanks, for the, the color and the higher least cost in the quarter. I was going to ask you about that, but got me thinking, like when you think about, you know, you have the Maxes coming in, you know, would you ever consider, you know, leases or sell lease backs as a way to finance future? Deliveries, or are you still 100% committed to the the full-on ownership? Thanks.
Yeah, thanks, thanks Andrew. Uh, the answer is, yes. We will always, uh, consider it. We Revisited It 2 to 3 times a year, uh, at this point. Uh, it's, it's, it's our view that over the long term, over the long, the the full useful life of the aircraft. It's 2 times as expensive to lease airplanes, as it is to own them. And so,
So long as the balance sheet allows us to own aircraft, I think you'll continue to see that from us. It doesn't mean that we won't diversify our funding sources or, you know, be opportunistic here and there. You know, we have an order for 50 firm aircraft. I can envision a few of those being operating leases by the time we take the last one, but at the moment, we don't have any plans to fail. These facts.
And Andrew, it's Greg. I might just add a quick comment at my level on that as well, and that's...
You know, our strategy is not only to be really good at operating aircraft but also to be very opportunistic, trading assets and aircraft. And, uh,
you know, we like to own that provides us flexibility, um, that there's a lot of embedded value in our Fleet and 1 of the things that
I've been DJing, and as we talk about capital allocation, I think they've been doing a really nice job.
Is selling some of our underutilized Assets in a very, you know, High Market or hot Market, uh, can help us buy aircraft, we ordered, you know, at the bottom of the market and so that that's been helpful as well. But the, the thing that's most impressive is they're looking at Every Which Way, um, to the opportunistic and and that they're, they're on their game.
All right. Thanks Andrew.
And our next question comes from the line of Conor Cunningham with Melius Research. Conor, please go ahead.
Hi everyone. Thank you. I was, uh, hoping to ask about the booking curve and maybe tied into a couple other questions that you had. Um, so just, I'm just trying to understand like is the booking curve normal at this point. And I guess the, the question that I think a lot of us are trying to figure out, is just, how much do you have left to book in 3 Q? I didn't realize that July is your, obviously, your most important month. But then, if you could just talk about where you are at 4 and is that comping up on what you currently have, I'm just trying to understand like what's out there right now. Again, you, you kind of struck them more cautious tone, which is fine, but I'm just trying to Benchmark like, where we're at? Thank you.
Yeah, July the 1, and most confident, um, in responding with 0%, left the book, um, for the rest of the quarter. Uh, you know, August and September, we, we probably have, um, something in the 40. Maybe 35. To 40% left to book their. Um, so so certainly still some some room. Um, but you know, it it gets starting to get dark on on that booking window, uh, fourth quarter. So also a lot to go, we're we're 85% left um, at that point. Um, so that there's still a lot to learn. Um, but like I kind of
We're going to do everything we can to to maximize the fourth quarter earnings and you know all or maybe just to get back to your booking curve question. So, what we saw a lot of compression last year um, where where we were down, probably, you know, medium booking turn down 7%. Something like that. We tell them relatively flat with with that, um, you know, kind of close in proportion. So, you know, we have something quite the same surge that you've seen from others. But it's, it's normalized with what we saw last year, which was Surge uh, that that maybe I don't know if others saw or not. It wasn't quite as popular as the question.
Okay, appreciate it. Then maybe I'm on the comment. Uh, that you, uh, need to earn the right to go. I was just hoping that you could potentially Benchmark. What? That means to you. Is there a margin Target? A return on invested Capital Target that you're looking. That would give you the green light to grow. Again. I'm just trying to understand like maybe long term, you know, when does Allegiance start to go back at this, you know, 10% issue number that, you've historically been at, uh, for some time. Thank you.
Yeah, thank thanks for the question. Conor, I don't think we're ready like publicly to, um, go out there with the Benchmark. But what I would tell you is, how we're looking at it. Internally, it's kind of a couple of factor. Folds 1 is margin. You know, how do we get back to restoring our historic margin performance? Others balance sheet, you know, we want to continue to strengthen and improve our balance. She obviously improving margins helps in that regard and then the others are cost of capital and what that looks like. Uh, since so you got to put all that together and you balance the environment in
And some of the items that we mentioned, uh, before just being disciplined. I don't think Allegiance dependent on high growth. I think we're able to produce, you know, solid margins in with with growth or without. Um, and but with that said, we want to maintain flexibility. And uh, and as the demand environment fluctuates, we want to be able to adjust accordingly and continue to focus on initiatives that will help us drive uh more margin and I think uh just you know our our the mode around our area that we talked about for many years is our model and our team members. And last quarter, we talked about like the 4 corners that kind of fortify that mode and what is it in the network tactical? Utilization, Fleet, flexibility, and having, you know, low cost structure and Conor, that's what we're incredibly focused on simplifying, the business continued to strengthen those 4 Corner, Stones. We, we talked about how we're doing that today with more, you know, obviously initiatives down the road as well. And we think you put all that together. That'll
Continue to help us improve and drive more earnings and and earn that right to grow. As you as you said.
Appreciate it. It's not great. Thank you.
Thanks Connor. All right, thanks. Thank you. Connor.
And our next question comes from the line of Tom Fitzgerald with PD. Colin Tom, please go ahead.
Hey, thanks so much for the time. Um, so just kind of picking up with that last, uh, response to Connor's question, should we be expecting an investor day in the next like 12? 18 months? Um, and just, you know, just you are at an interesting point in the road and um, would you look to just focus on these like kind of asset light opportunities and like a low growth organic story or um, would you be open to any any any uh, m&a at all? Thanks again, for the time.
Hey Tom. Thanks, thanks for the question. We're we're you can't obviously see us but there's a couple smiles across the table because what we've been talking about that for some time and in fact, uh, you know, Drew Vijay and I we we want to get something scheduled and then not too distant future because we think, uh, that'll be incredibly helpful to walk through. Obviously we're viewing the business, uh, and long term as well. And the initiatives that we think could help be a little more creative, uh, we, we've held off on that. But just give it some of the, um, I guess idiosyncratic issues, that we've been facing or constraints. We've been facing. We're now working through those and, and it's the stories kind of clearing up a little bit more. So, I, I think my point of going into, uh, into that detail is, yes, that that's the plan. We don't have anything set. I wouldn't expect it in the coming months, but I would expect in the next year to 18 months or so maybe probably within the next year. Uh, we would have uh, we would get something scheduled for an investor day and then I I think on your your m&a question I thought I heard a 7A question in there.
um,
we get asked quite a bit about that. Uh, it's the
I would say, I think there's a degree of consolidation that uh, could be positive for for the industry. I think, right now, less Supply would be better, particularly in the domestic Leisure space.
Um, I don't think it's validation is required for us to get back to those, those historical margin levels. Um, with that said, we we, as we always do, we look to expand and drive more shareholder value and whatever. That looks like we we keep a close eye, um, on all the time.
Great. Thank you so much. That's uh those are both of mine. Thanks again.
All right, thank you, Tom.
And it looks like our final question. Today comes from the line of Chris. Steth alos with Cisco, Hannah Chris. I hope I got your name right. Uh, please go ahead.
That's right. Thanks uh thanks everyone. So uh on the uh next year's Outlook flat capacity. Um and apologies if you went over this, but if you could help parse that out, so
I guess the usual input stage gauges departures, and then if you could peek versus off-peak and new versus existing markets. Thank you.
Yeah, I don't know if I'm gonna have.
share with you.
Right now, um, you know, on the new versus existing. Uh, you know, right now we're running about 5 and a half or some of our asms being in New Markets. Um, lastly some of that will start to come off, but, you know, something mid singles is probably fine for an overall, um, outlook on on that front.
Uh, you know, stage off the top of my head. I I don't, I don't think we'll see stage change much. We'll see a slight increased engage as we move into the maxes at 190 seats, um, and it requires some 177 seat aircraft, um, but I don't know if there's a lot of, a lot of moving Parts in in there.
The only other thing I might add, uh, it's true, is that we would expect how you're planning right now, a higher mix of keep flying.
First off, peak flying proportionally year-over-year. And, uh, what gives us at least for me a lot more confidence in that is just back to how the operations had performed this year in those Peak periods. Now, we pushed to significantly and we wanted to make sure we could achieve that and the team that the the, the the front line and the operational teams have done just a fantastic job with the same overall infrastructure and they continue to improve processes systems and continue to strengthen that foundation. And so part of the after with Team or planning, is that there's an ability even on that same uh, infrastructure uh, that we could push a little bit more and those Peak periods and I think they're planning as such and then back to just an earlier comment this is based on you know if it's a demand in backdrop improves, um there's still opportunity to to push utilization in the shoulder and off peak period. But again we're planning to to drive most of the the as much in the Peaks as we can next year.
And so, but I think I heard you say on the MAX piece, the percentage of your total fleet or capacity was that—was that 20%?
for next year.
I, I didn't mention, I don't know if anybody else had any better enough for next year.
You have that number. Oh, oh, on the max Fleet. I'm sorry. I thought you said keep flying. Yeah. Yeah. Max Fleet we expect. And I'm I'm sorry. Uh, Chris. I yeah the max plate. We expect 20% of our asms to to be produced with the max aircraft.
Okay, but overall, at the system level, flattish on gauge at this point.
No, I think once the gauge comes up just a little bit, because we're retiring aircraft with 1,777 seats and adding airplanes with 190.
Okay.
So my second question so the material materially higher. Excuse me. Um, earnings for next year. Um, I realized you don't want to you know, you're still early stages here. What I heard was
Um, so qualitative flat capacity, we have loyalty benefits.
Uh, at this point.
Assuming steady. State economy Leisure? Let's say sideways to like season a lot of performance and have a star. So maybe on the utilization piece, any color you can give on how you're thinking about utilization, or perhaps, on load factors. Are we at a point where there's a I guess sustained and permanent return to kind of that low 80s.
Uh, system load Factor.
Or any color really on how you're thinking about utilization at this point here, in addition to what you've said about now, the Star Loyalty and everything else. Thanks.
yeah, you
will effectively EB and flow with the off peak for 7. Flying. Right. I mean that's that's the easiest um, flying. That's a plug into the schedule. We'll be able to do a little bit more. Repeat days like, like Greg mentioned but I, I was expecting legalization of any of these slightly lower. Given the the lower um,
You know, black path together should be some load Factor benefits. We talked a little bit in my remarks about July seeing that Improvement and and the data there, helping the drive conversion which is turning into to low-fat as well. So, I do think there's a line of sight to that and they take, you know, a few months to get back to the levels, we really want to be at. Um, but yeah, they're they're kind of like
And I just want to, just—you said earlier, I think the fourth quarter is 85% left. It sounds like 15% or so is on the books.
Yeah, that's good for for a semi round number.
Okay, all right. Thank you.
Thanks. All right. Thank you, Chris.
And we didn't have 1 additional uh caller jump into the queue uh Tool mehari uh with UBS has a question and a tool. Please go ahead.
Oh thanks for squeezing me in uh good afternoon everybody. Um
So, uh, 2 quick ones, really? So first, uh, you're expecting a similar level of browsing acceleration in the fourth quarter. Uh, like you saw last year. So question is, uh, how much confidence do you? Do you have that this acceleration will come through last year? You had about, I'm looking at the model correctly is 300 to 400 basis points Improvement, like sequentially from 42 to 32. So like are you already seeing yield Improvement in Recent Bookings. That's commensurate with this level of acceleration or any other color that you can provide that helps us get get more confidence about the implied, fourth quarter ramp,
Yeah, I mean, we we've certainly seen the the uptick in demand happen, you know, across the, you know, the the selling schedule. Uh, just just bear in mind. I mean, it's 15%, uh, for the entirety of the fourth quarter, right? So you're looking at more than 90% left to go for December. Um, so it's I'm trying not to run away with small sample size theaters, um, but hey, it looks, it looks fine in the small sample. We do have
Okay.
Uh, and then uh, as a follow-up, uh, in 2023? Uh, you are well, not of 7 dollars in EPS. So, do you think you got over earning then or is that level of eps something that you expect to achieve in the next couple of years and somewhat related to this? So but what elements of the business that drove that $7 Plus in EPS a few years back?
That is maybe not going to repeat going forward, and what are some of the things that were missing then that you expect to drive earnings in the future?
Hey Joe, what's Greg? I I could kick it off at a high level. I think 23 had a, had a, you know, I'm looking at Drew at a very strong demand backdrop. Um, also 23 is when we began nearly mid year, I want to say in May. Um, so what the full year, we started acrew a 35% increase, for, for a pilots in terms of pay, uh, that'll, you know, as we're in class or negotiations. Um, but kind of just putting it all back together, what we've talked about
Out in the focus, sit in the areas whether that be, you know, flying more in the peak period, the operational performance, all the commercial initiatives, the cost discipline, ringing on more max aircraft growing, the Loyalty program, um, technology Investments, all of that Pro better productivity, you know. We, we see a path where we sit today to continue to, um, grow and expand our earnings. And we see that, uh, you know, we we expect to be able to get back to where we were and then were and historical performance. I don't want to come out and give a guy and say, hey we're going to be in 23 by we're going to recapture 23 EBS by this year or that year, but we expect to get back to where we were and that's what we're working towards.
Great. Uh, thanks for that and good luck with the rest of the year.
Thanks to.
Thank you.
And that does conclude our Q&A session for today. So I will now turn the call back over to Sherry Wilson for closing remarks, Sherry.
Thank you all for joining the call. We'll speak again next quarter.
Thank you, Sherry. And again, ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.