Spirit Airlines (SAVEQ) 25 Jul 192019 Q2 Earnings call transcript

Company Profile

Participants

DeAnne Gabel	IR
Edward Christie	CEO
Matthew Klein	Chief Commercial Officer
Scott Haralson	CFO
Brandon Oglenski	Barclays PLC
Joe Caiado	Credit Suisse Securities
Savanthi Syth	Raymond James & Associates
Hunter Keay	Wolfe Trahan & Co.
Michael Linenberg	Deutsche Bank
Rajeev Lalwani	Morgan Stanley
Jamie Baker	JPMorgan Chase & Co.
Helane Becker	Cowen Securities LLC
Duane Pfennigwerth	Evercore ISI
Susan Donofrio	Macquarie Capital
Kevin Crissey	Citigroup
Catherine O'Brien	Goldman, Sachs & Co.
Dan McKenzie	Buckingham Research Group

Call transcript

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Operator

Welcome to the Second Quarter 2019 Earnings Conference Call. My name is John, and I will be your operator for today's call. [Operator Instructions]

And I will now turn the call over to DeAnne Gabel.

DeAnne Gabel

Thank you, John, and welcome everyone to Spirit Airlines second quarter earnings conference. recorded, webcast. being is call and simultaneously This A our website this call archived on will be for replay of XX days.

Presenting Chief Scott Ted Matt Officer. on Christie, Spirit's Chief are today's Executive Klein, Commercial our Haralson, our and Officer; Chief Financial call Officer;

Q&A have sell-side for a prepared analysts We our remarks. session will following

Thomas our and our of other Counsel; us Bendoraitis, John team. joining Also Canfield, our today members senior are General Chief Officer; leadership Operating

financial concerning performance. represent that the current future statements events forward-looking beliefs and contains discussion Today's expectations Company's or

Forward-looking on performance not results. based statements guarantee a are are expectations current management's of or future

could that from results XX-Q. There Quarterly be forward-looking factors cause significant in Report reflected our uncertainties risks statements, materially and could on differ in on the XX-K, risk and discussed Reports to Form the including actual those Annual Form

any second duty special release, to XXXX periods forward-looking In no adjusting will non-GAAP our our comparing exclude which we the available undertake our to measures. to results quarter be refer statements. website, today, We for on reconciliation all of is earnings items. Please update

that, here's Ted. with And

Edward Christie

Thanks everyone us for DeAnne, to today. joining thanks and

quarterly strong delivered continued of and increased profits line top our our basis initiatives XX.X%. margin the XX.X%. of XXXX. second strong and Adjusted increased earnings operating team Our XXX to drove a points XX.X%, demand quarter environment per The share for strategic execution improvement of

entire to every our the systems for do a made care thank for numerous team challenging that has busy and very guests. storm coupled environment, I season to A want with travel for day operating they Spirit all

the middle to pack our on-time performance For XX.X% other the us relative was XXXX, the second in placing of U.S. airlines. quarter

point was factor XX.X%, year-over-year. Our down about a completion

our three materially made business and last our improved to numerous the adjustments reliability. we have years, operational Over

regardless are doing environment. the operating experience of a of In guest addition, much a job quality ensuring better we

always to been further additional in Coming off has make elected to DNA push efficiencies. to an in further effort drive year run improvement. tweaks record in operating business we we It ourselves how toward some XXXX, to a our the

some Given our changes operational performance not were this that summer, effective. is of these evident it

our already after We year the are and disruptions. winter our recover to peak differently about schedule to making adjustments are approach period ability next weather to to how improve thinking

that Matt the for Scott second our With and XXXX detail. for quarter discuss our to XXXX outlook third and here's in the results and quarter full-year more

Matthew Klein

Thanks Ted.

load seat second We increased with total the on XX.X% growth to billion. that yields. just X% capacity both year-over-year $X for quarter over available and are revenue pleased mile report XX.X% to factor Total revenue XXXX increased in gains per

segment $XX.XX, the for between per the non-ticket passenger basis, revenue $X.XX track quarter full to on non-ticket XXXX. passenger year for per revenue second or produce was $XX and year-over-year, segment a we On up and X.X% remain $XX

do bags to well. dynamic segmentation seats pricing market and around around continued Our initiatives

Additionally, contribution we for growing pleased runway services bundled long our a believe offering from are continued with very we has which the still growth.

pace with added routes have drag In TRASM. but second the they destinations the are we've and a our months, of six were Most expectations XXXX for most growing on on network. our added in the last markets been to we've new domestic part they six quarter

In regards overall I'd international pleased with region’s the say to our we're network, performance.

approximately we we mature the which taking XXX to added by quarter last had year second longer late TRASM points. routes impacted basis of some are than negatively However, anticipated,

should post Labor the Day We overall routes performance. are to improve making a few help which schedule portfolio’s adjustments these in the

our Looking quarter, forward estimate XX%. to will we the growth approximately increase third capacity

and increase will we between For the growth estimate fourth XX.X% capacity XX.X%. quarter,

initial Compared lower. to average our plan significantly XXXX, our both stage for QX and for be will QX

network will plans beneficial be are quarter Shorter to and our true and stage on X.X%, current fourth based Third that's generally TRASM stage on quarter stage will X.X%. be down down the flights too.

launched we've full in a even they However, routes to not stage benefit though seeing still shorter shorter are up, TRASM XXXX the than provides. we yet average are generally the so stage, are of that spooling most new

Now turning remain to our revenue outlook, strong. international demand domestic and trends

While last still as describe down quite year to as locked time, inventory as they I'd were this controls be at the seem stable. do not backdrop

Based trends the third new development airports with TRASM cities somewhere for real Overall, We we to estate estimate enter the up quarter network. became gate constrained down will XXXX, available. on we the seeing; we're be are pleased currently between year-over-year. to X% opportunity took the the as X% of

seeing the expect to drag we that XXXX. flying beneficial simply of in TRASM unit due new some be revenue to throughout the will recent compared are but We network years, mix to

over And with turn I'll it that, to Scott.

Scott Haralson

to Thanks us Matt, joining everyone today. thanks and

second CASM with of our XXXX previous in X.X% is quarter line an increase year-over-year ex-fuel guidance. Our $X.XXXX

face During escalations from cost continued costs rate. rent a pressures as to higher we by various higher the quarter, service variances. ground rates partially several were than well favorable with offset headwinds and cancellation ongoing associated airport as These expected

strategic designing few which our left buffer in impacted the recover an to in is turn schedule, weather In to moves less we summer higher efficiency. system adverse these changes our ability end, in made costs. mentioned, Ted driving with and the As the a in increase conditions, us effort from

meantime, disruptions to estimate plan for remainder making of we the we higher third purposes, anticipated assume to year-over-year. see it weather to the is from the continue to third a In will level up had be the ex-fuel X% CASM already We're to peak we adjustments CASM X% will X% ex-fuel up year. period forecasting We next appropriate of our In would quarter year-over-year. for for year. our think for February, quarter X% be the

Compared points additional Fort disclosed construction. runway in conjunction the we Lauderdale of XXX costs previously to with to expectation, basis related the had pressure that initial

due of to ASM XXX is through related reduced the continued are remaining peak for Another flight shorter and where points points we which estimates periods basis is The higher to XXX stage. production QX, is clearly basis focused. disruptions

assumed X.X%, basis XXX X.X% higher this was points up disruption related of a rest The be guide primarily shorter we production stage, For for anticipated the costs. at had estimate increase about to CASM-ex to quarter, our and ASM to initial increase of lower flight we X%. fourth the contributes initially versus estimates about will than

transitory always an cost pivot; improve the points anomaly, that's early and pushing earnings, levers while in we're will do basis to about what view as and productivity, expecting, grow effort this we XXXX this effect be and when that a we’re performance pressure provide going will an it's guide, view net tailwinds and efficiency, XXX what We're and to We increased in is our XXXX. isn’t here. to of is too

sure it will but tailwinds about not to words other yet XXXX. offset XXXX maybe headwinds the the will In repeat of gently flat feels up Not in right.

producing growing While for tweaks and solid strong earnings stability a XXXX. producing the few us These help and and a top, we margins. mid-teens set will tweaks our network business complement up we're to still our will core operation, make strong of

from Now quarter fleet perspective, two XXX delivery and aircraft aircraft. quarter a leased second of ending we in the the debt-financed at took one one

capacity to additional of in signed XX deliver growth of nine by to take help us our mid-teens delivery four deliver expect aircraft meet end and XXXX additional recently the the aircraft aircraft rate. We to additional to in for XXXX lease year. agreements We

late discussion the progress In on regards August and are early RFP, to our engine fleet aircraft continue make to and with our decision and targeting manufacturers we September. between a

back Ted. that, to And hand will it I with

Edward Christie

Scott. Thanks

among XX% growth. strong an to are we're couple but of second U.S. we and of The summer. business and overcome reportable on-time Admittedly, Year-to-date, which performance us on-time a dip the and we've have earnings do fourth we the nearly is running in we well will better. can places doing half carriers, and year a delivering this taken bumps reliability airline in

was levers too related We that than impact with much cost our of our much assumed bit more cancellations hit original On in few a base what year a is we last the on an the a notable case plan. side weather versus And the self-imposed. operation. change in had coupled adverse cabin also pushed

going We’re changing impacts. inputs unexpected to network these to already offset plan forward the our

than management front, may track of our of to that’s couple year. of revenue up a XXXX us do are year. setting a we our our with expected. initiatives this timing hit are well we bit target we on even the Non-ticket continues On pleased and benefit to next revenue with initiatives. to most longer skew then originally for XXXX their actually well taking The And

produce in back margins anticipate XXXX mid-teens are half on the continue earnings We we we deliver to growth this will good and of to pace year.

a foundation ever our larger gap are stronger about CASM-ex competitors cents an The and half Five cost our to estimated is ever. business than than our of with of

the the in we is world production in of increase are margin revenue it line highest on among to non-ticket sight have the business. we and best the even and further initiatives producing Our

back With DeAnne. that, to

DeAnne Gabel

Scott. and Matt Thanks Ted,

one from one to with ready analyst. yourself follow-up. to limit now are We ask take related questions We the to you question

Operator

from [Operator Instructions] question first our ahead. Brandon And Please is Oglenski. go

Brandon Oglenski

were a distracted the at one a that much beyond reserve about to you add to XXXX just I think quarter? the structural I outlook, network take there, how I talk second. solutions issues out time talking up was cost about Scott, cost ratios to very looking little not you getting you you this block it’s need your sorry But am these in could highlighted future. mistaken, bit for you avoid as look Can and in that guys crew So if

Edward Christie

it's Brandon, Sure Ted.

also an when we And increase more made year. we’re this we from I potential So, in that that as a And is bit utilization said at crew is pushing in perspective. think we to operational I think think as efficiency that's cost by drive ourselves, peak destructive to the to a excellent and we actually was to is changes, could, opportunity an key regard but XXXX little what a there well. discussion where finding looked we earnings and

which we and one, may be construction changes those for for What additive. already going really basis additional staffing of forward points this Scott neighborhood all expenses XXX related impacts things in they as and cost while considerable schedule we've to the the look surface saying experienced as we to which and to net the appear year, is quarter. is pivot mentioned of the disruption make we're all of in on we're that said reserve another, is So, some

result to ASMs lost a cancellations. as addition In of we that,

act making those a our by actually that change, actually structure. as view of tailwind. the net cost The all things to this so, we’re improve is And going

less having benefit of like overtime disruption more related the far expenses, additional expense expenses reserves. less and outweigh related cancellations, the less recovery So, of

is And all it that’s Admittedly, to been frustrating look we strike. changes the number given where time. these make the looking us to for we've but the balance landed,

where to skis. was ourselves We’re always think looking optimize a to plan. output over a and better And our bit total found we execute I little

we the beneficial to going make we’re be adjustments unit so, cost necessary And forward. to that think going will

Brandon Oglenski

being case a for - into to has but company, operation come XXXX need like bit me Ted, just the here that forgive Is maybe similar for back right? because your scale critical. outcomes It had contracts a and you run disruptions different much seems with too Well had where of that this we reasons, maybe appreciate time all these I response, rethink but up the we pilots. in Spirit the weather when

Edward Christie

improve and this for Yes circumstances are right, the within exercise Obviously, the and to performance much needed the to a were trade experiment luckily worked in view no, structural early launched than kind but here no. business. first different, this don't we We dealing as knew when we marginal XXXX. tolerances is would very cost we're the improvement overall level structure, completely answer in that has say operational well anything generally the for We improve of us. that XXXX make I narrower really to that operational utilization the of

of view long-term us as over the weather tweaks here some we So structural. combination don't probably skis, the a we plus little like much year-over-year our I while admittedly, caught a bit of worse made pattern said that

In fact, what and naturally we things these know reverse we of exactly here. did most

peaks and the peak of good So next - remainder quarter, we fix is, year. the that into change importantly periods the can the but of into more already launching of that we're news the fourth of heading a lot

Operator

is question go Joe Our from Caiado. next ahead. Please

Jose Caiado

a reliability operational last time your pointed improving years as improved you Ted, out the that passengers. of few you lot spent with that’s your over reputation

this how terms differently reliability of compensating feeling customers? your affected in hit reputational setback of care anything passengers, the given and are doing you any with are you're and in you summer, taking Just

Edward Christie

is, way. thanks go the short answer our don't part no. therefore put So, in airlines' the actually operational reputation news The when first to The its performance the we’ve question. and brand improving always this reaping good for is dividends work is things on

brand a improvement the So, much and are path it initiative, relates now. we how we interruption operating there to right along see an we’re still being in don't as

actually my and about It the in it and really better ratios mentioned few drives clearly how think cancellations improve it's given about in What then but few targeting crew, on more with the design, business expense the pretty may peak, those part our for seem than network of that's we on-time the the performance to any that our look we starts ability I we cancellations attendants, talking pilots and like, and is schedule construction and good. an prepared ends reserve and with it last we comments, is really flight to in are As day, upon. operate. last big

disruption a any brand So, is to good news. the which perspective I see don't from there be

process reputation, care of improvement as three and up that years; take guests, we As airline at take in experienced been XXXX, order an of care ways last different been of the that's effect. may over times our in it to we on but to a in course live our well we’ve the that cliff relates you than how have will guests to the not

good we own and has larger how us for about and the gotten time. will disruption The view will larger, - we think network of news the has more grow it's think can whatever how nature the I gotten options that we our as airline the cancellation is the and us re-accommodate help over the is re-accommodate.

on, pivot the the and we that forward. exactly other going we acts as and So focus back what did way to again I looking think is we’re tailwind a we think here know

Jose Caiado

to So think cost with expense a structural and maybe as point we passengers that associated Spirit being shouldn't of nicer the last that? little - bit of creeps bit a

Edward Christie

No, I of that think at all. wouldn't it way

this through just - In a move and generally long-term in more over is efficient really as things. all the the a and long-term next we fact - we’re on story all next view

time going quite a So over tailwind be to it’s frankly.

Jose Caiado

cost a Okay, Scott I I this just year you Maybe Would as kitchen for a guide appreciate characterize if quick follow-up very that. full may. sink. updated

Just this conservative thing? quarter really can does were cushion factor a in that a bit of get and your extremely that other of also unlikely to the bad comfortable with arms assumptions surprise how the embed see Basically it the we're terms rest for everyone. have you of investors year completion you next another for cost unknowns? around Thanks

Scott Haralson

that here Joe. end seasonal the of little weather thanks end think interruption even a as said right, some what gets Yes, I look the we and pattern made that’s cheaper. does those different we too. QX going have QX we've with look We’ve done has Yes trends assumption Obviously, than the and weather patterns. We've made bit adjustments times of a summer forward.

is arms we need we have what So doing here we feel we’re do around, to operationally. like, what

have in the disruption expect the the to are and changes those with where make have, far. we can to guidance so that changes do that good about think we we we we we the pretty going network. We’re with short so feel to that the What term, structural

the mean, production QX look, I way third we’re through already. of the

to idea So is QX comfortable we peak QX where will where have a end fit. up. we And good pretty going feel

happen. So this we good to is about given are what what expect where would of feel we we seen we've sort and

Operator

Our go next Please ahead. Syth. from question is Savi

Savanthi Syth

and reversal some for thought leases of unit of there kind to this margin always was but line. the that growing I being on maybe or gently the you year doing maybe about mean, year? non-op think more the op you gently out of know revenue the Scott versus flat kind down you I look but cost shifts unit maybe even we miss from for was you debt is the wondering flat to of kind is Could kind how a even up with and just understand up set some next down so or just was view fact as the to that operating ULCC of to hear. wondering and me cost should if mid-teens of I start the can well Ed. up I help as Flat the

Edward Christie

Savi, it's Ted.

am a of kind and me well. I few as let the Let to edges going make comments, around Scott someone

of as where you business We know close to store are be bringing we focus. us a those network have found be cost component that by are as the this launching So But beneficial year has forward. made we’re low operator revenue we forward. bunch we going revenue unit the in focused cities you and know, a a opportunities haven’t a to some we think in our get and to stage cost to to going cost and into well, clearly but that going new changes of to is help the

comp cost headwinds we and and improving a tailwinds growth revenue every So market actually stable every our we story from those using but really a this airline good that perspective expenses using this next cost in on an think case year, faced from manage incurred faces is we we year year.

I with we us against widening a into move going got sets as else absolute very, cost XXXX focus cost to and be here, think forward. it So up our everyone do actually that's well is really very maintaining advantage that and level low that

don’t if more. had I you’d any know Scott, So

Scott Haralson

color on No, give right. XXXX.We’re to give a firm bit you that I’ll Savi, not little of a guide. ready

as know the this trip disruption through be definitely we facing that gone a but puts costs we increasing is talked little industry process about happen year, but tailwind cost costs that bit have know occur expense takes. and interrupt before. do haven't and the the next we won’t the about planning We rent We year labor

number a costs year that this plus we’ve have effect. depreciation costs, will year full to of going aircraft increasing a amortization and leased We’re have

ownership we're rent, up. give as get part where We that early the like I that fit. the sort about and we’ve be in guy clear maybe the latter gently puts will not the into able XXXX, our good remarks takes are to head XXXX. past sort same XXXX. of the may prepared thinking in we a of Like said so these we feel us and frames we of in leave into view to that to gotten flat in and more in going of So

Savanthi Syth

in a think might here of little might stage follow know us you And if a I talking help from last length maybe I Could with just have us lot the struggling Matt because we some less that fourth about fourth quarter about with be are bit quarter. up pressure of the comps year? the

Matthew Klein

Yes, so fourth our go - I you about together. putting guide a thinking a sort give I what we talk but not am of quarter thinking or to How guide how about. revenue to specifically tell can we're outlook going is about

we we move So look then and we look year. historically us shoulder now. of at do performing look into back out are at into the sequentially. year. this number and trends then going what's of peak of how peak, We right shoulder the look how the different pieces into that on again revenue seasonally out at We at the peak all look in go understand and end the We unit

the environment We a of network that weighted into these things we’re have So different how about year-over-year may took changed basis. also the we effect. on at then look all we current based in and heavily variables on

our revenue applying what's that those out know looking we about the in to I unit and all on what but time always take at applying we and think -- a we're we real future. actually guidance. talk basis really together and that happening report how that things about is them doing So year-over-year that's

things that than mentioned So new we and seen. more we've markets one network the is our historically of

our year quarter, This in So call last year seats routes were it’s pulling new of XX%. the in for would example X% what we third up.

year In X% basis X% it the an a year-over-year to little quarter, basis year. to absolute fourth a lower this it’s goes bit on last on but

XXXX, unit variables in that have we about it the beneficial of our cycles, the those to about and this in and for we guide this are waves. revenue kinds we becomes talk So when goes when about think ability about think that then thinking goes how

you nine construction we’re that's going guides a don’t for and we know if year our Last next This network together. think things as and we about entered about put year little enter but our new how together that’s think cities. I helps we new we cities these putting bit to seven year for

Savanthi Syth

Matt. Just a on that, follow-up

I maybe So is thinking year of of do you assumption Tuesday kind it? last less much might and the continued some of doing the know did the year. that too late you last you cuts we’re

Matthew Klein

Yes.

percentage bit a of little it as on the still of last as off-peak relatively as we It's this So that's mix right. a basis percentage have but was less number on it's days network, healthy a year a cuts than last a year, year. not large week,

Operator

is question Keay. next Our Hunter from

Hunter Keay

How value impact on commonality? does thoughts recent experience with an aircraft fleet of the order recoverability this your and

Edward Christie

think Scott orders, as here how So in don't fleet we’re mentioned comment competitive on that our to really get at sure want the for our that in on we the result shareholders. to make running we his because strokes we short absolute things the want so regard We a process. were in best specifically about remarks we

we them. there and spent a having time modeling inputs that to lot and are we into understand those common Clearly fleet of benefits are

the And and right cost there it's Much of cost going other total would input single ownership, are well I think know for a considerations of impact so, it's lot the a price answer airplane maintenance an what's consideration that the it and being operator as forward. us we that the airplane about so like about as today. of and say like the fleet a the definitely we

color. you give can that some So I think at least

in much where than really comment further would we don’t I that. process we think Given the are

Hunter Keay

and are reduce may -- with to in to presence challenges reduce airports And demand the in certain CPE costs structure way one and airports and me to be the lower is rising is with the ones obviously obviously on high strong only CPEs but worse. bear with there favoring temptation operational rhizome quickly high improve CPEs, and get cost your really this the to the or the because

factor you Thanks. stuff how as the of in about what with in out together, CPE with you these trends think So cost do you grade? balancing just all this terms

Edward Christie

Sure.

you're think right. I

cost airports process today. even improvement way seeing airports all creep the the at low in You're by CPE are

nationwide see and isolate pressure could going there's a we’re board, to basis you projects on percent airports. don't the cost so low-cost high the So airports just I across know versus

Mathematically high-cost know outcome the the what you is correct. for abandon said our will airports our that's and CASM we airports shareholders. when low-cost If earnings all don't go down. if I right

been And know so in last don't a destinations, international it, fact we've that we careful strategy that to over going larger in mathematical may and the building and years, I leisure that's forward. balance franchise right a there, answer originations XX very have think includes be about there the but that lease to

Operator

is Linenberg. Our Please Michael next question from go ahead.

Michael Linenberg

kind This a is the of to Scott. follow-up guidance on

costs. higher challenging to the out for XQ related the flight referencing conditions. you primarily call are disruption CASM I to the that like you're anticipating the looks costs but XXX on that year say go basis points estimates for It of weather that just rest guide, know You that's

a that, hundred, basis points? XXX the maybe more is factor is completion points than inclement lower when on think of normal. about basis So we XXX weather full-year What because that basis

Scott Haralson

And points so completion or Fort will or impact it calculating of ASM little XXX we’re points production way of is as the XX so Scott, basis bit factor. really sort of a is XX it's basis about construction basis the full of really which Easter year There's well. Lauderdale and ITE. this estimating to related points call about Mike

So we’re XXX talking really about a perspective. from full-year

Michael Linenberg

whether follow-up answer. issue you or Ted and a can just that to maybe even Then Scott

toolbox the given Thank in ability As regular XXXX? CapEx. increase to do recovery have fine and our current in currently feel sufficient and be about the company get operations new to you. an have you’ll you invest of today the think systems deal you that like are is your the what there you or to you maybe you will and in with anticipating your size recover and Are systems

Edward Christie

Mike, it’s Ted.

is So made CapEx, to an toolkit it I both with do what effort This adjustments. that available the in improve with do weather this are nothing has bad in nothing have work. decisions the to base that knowledge coupled has today this and case believe to these we didn't systems. strategic make These we us to efficiency. to And with do the

we’re what to about acts execution a tailwind it, saying this is that's of construction. into thinking of in us we’re about schedule year. and pivot how think stuff all that And we the purely as that around think gives about opportunity we an going network about way how And next is then crew allocation And resources.

Scott Haralson

issue Mike this changes but of the have to oversimplify we want I add what and don't component I is to identified would to know Scott, that, the operational this, the going we’re make.

that change the how change. in it the know we make change structurally cost It doesn't we view systems or So a people fixed we doesn't crew vast majority processes. can is and the of or structure,

we've simple be in manner. a fairly change and identified we’ll able to that So make

Operator

go ahead. question is next Please Our from Rajeev Lalwani.

Rajeev Lalwani

that of hypercompetitive markets? these move again away a network these made Ted headwinds markets. from adjustments creating Spirit’s of to last you, question you as shifts a this to of of of of years made completely those you Is some competitive couple those avoid some the some some highly part bunch for unrelated network of for over to what's

Edward Christie

them point. year the cities kind we've in years again we United that Fort of half in don’t added new at Eastern of and call and considerably had we've had a We've Rajeev grown the we've States. Orlando whatever. ebbs I bigger We've big international I any midsized flows. comes I expansion would And use given had or know those things kind this avoid growth and lot Well Lauderdale. happened so in throughout have throughout had that the of growth Vegas where word of – the would cities

that direct to inputs answer we the is deploy. we totally are they not choose affecting What operational resources unrelated as the view we your to no deploy the performance. company's how question we But as the the way the is roots in

really far done So of crew again know we've understand and about fix we know we and is optimizing for both what and asset what going forward. utilization we thus that what can

Rajeev Lalwani

and story Ted table? being the you’ve of to as out as touched down helpful wrong in, a that’s year Ted year off is company now and the flat a then sort if follow-up I'm that CASM correct

Edward Christie

Yes, mentioned pressures I time inflationary would with have airport the we we us us faces offset but say worse generally gaining sequentially and been pressures. today. some we does scale are of that I so with think growth where where still that that. inflationary offset than Scott are deal do business they time we’ve we Luckily, And from have some of generally to airline and that help start been related related wage helps that and that we

think Rajeev advantage absolute what's very cost. for very, maintaining us the low core I is widening So

being story. sets that over up or That a little well absolute any down efficiency with for results that stable view widens time as year operational will our around I But very think up we the any come low maybe maybe at is given our focus and on good our us maintaining margin and little given CASM year. growth maybe operational a an or advantage

Operator

from is question Jamie next Our Baker.

Jamie Baker

management tailwind a contract some too at efficiencies possible contract case pretty overfly to haven’t whether you possibly one squeeze to moving tell There is to much last going the have So could or free I'm when the about definitely new just the contract. there to to mean wondering possible you to trying is misguided. I know and seem think contract you’ve this to that you I pilot tried was year bullish a in think we’re me you're next of related But it be back questions feel which unlock. year. be if your I PBS. from

what's there's again I hesitate wrong me to angle guess to pilot call currently the if a if wondering just I'm contract out barking wrong going don't up tree? I'm

Edward Christie

Jamie, it’s Ted.

We way and So with earlier the of really we've about half that was component had agreement. know first And a which bit almost. now last way early. has summer this implementation the of get by we’re for all you still did contract pleased gone, very implemented the that a a the year

relates that it, excellent of it think forward. to but and implemented as So getting that job we’re teams we still figuring the things going did out an

structure to pilots or we the that as attendants I relates construct the for hard have a necessarily allocation your But had that perspective be the the resource anything pushed question we think little fair. may think don't too answer I of is do to to flight the it pushed, or contract. bit to with

saying we we I ran bit we there said business. like slack just was a of and year little felt about us good hey, challenged was think airline that last and ourselves in the a really more

discussion. think we we a more a different And And be so doing talk right vehicles having – probably we would assuming we just can pattern that through the about weather we little about. be in think optimize same that those the and we were said, if might I year-over-year

So weather what that learned year changes in I is last don't artificially regular more and know. this think we either here a making coupled pattern year with those being good being

think I and sensitivities about the But it there tells us lot in adjust. time that's to our definitely a

criticize barking more to think do you never would did The I you correct were saying our but the it push, it up contract I decisions strategic has with is concept probably we tree. than itself. wrong with are does While

Jamie Baker

the related to say so opportunity forecasts you just wrong. follow-up like duration to would how your evolved the management say, during can Can MAX no quick give of the the a been far? you say MAX I to RASM RASM you’re have doesn't what I'm experience a look has there's profound it been impact on overlap. given so that wears limited groundings delay of the just curious pretty me as sort

Matthew Klein

outside its this benefit who across way pretty the that the the are should been cancellations little a or where and with not had country. There widespread we Jamie we’re Generally has be from So Matt, perspective. cancellations routes about advantage bit benefit. seeing few a seeing from and have occurred have of benefit reported the that rolled perhaps yield widely is speaking taking and

we've sure specifically relates we've we’re possible numbers. is. that bit to what one to we've that But helping what than been seeing into not of this other and construction anything added talk of as a generally about year broadly tease been across thing our the seeing It’s more out MAX speaking able market new we things the benefits little for are necessarily it us seeing network to a lot board. and the And mention we

the Simply doing we mix in past. flying we’re because new the than more or towards the had is skewed

a able many to is little it revenue It's there be given that hard hard comes so are how network. moving so anyone on specifically with So the pieces into to pinpoint point.

Operator

Our next question is from Helane Becker.

Helane Becker

they you the that. about had about how on maybe of and that and seat loyalty related And and program of had us wondering update forward? the and just And thinking I going is if redesign front was what kind then there? design two I question your could to you're on thinking other big monetizing questions you're aircraft your mostly the I were

Matt Klein

Helane, Matt. this is

out. a on that a bit loyalty this earlier perspective, We delayed year about little program from talked as that are well. think I rolling So we

chance the to and get inputs get sure You we program that we’re one correct. your every redesign all making show off

go that and making sure we’re launch the all push to when technology have that a in promotional seamlessly be We’re and lined would we what behind well. as that so we works flawlessly included doing proper up everything

place those like not to like our really of making with this delayed, line. already we’re time the so on together all right. to even year yet had that beneficial something and next had It new that programs take of in that's year forward wish that sure we is and bottom proud we we contributing it year, will is later and So production we’re our get this we've moving it pieces pleased be things something this us that non-ticket

opportunity opportunity that and for of general is excitement on non-ticket a bring in we example you we forward the when up about have forward. that moving moving So and that perfect talk

front think think construction and big how forward. regards your of question moving terms In about I cabin seat with we to

For and continuing big happy but very doing in really the construction terms best production front only being on in strong revenue there. big seat, I levels what optimize Ed very, we’re terms am inning a of cabin to at able going seat front of to truly It’s probably in improve itself with in of we’re chime at Scott we’re to let the fifth revenue. the fourth or or

pricing and perspective perspective. management a from from a but revenue just merchandising not also are They

opportunities another reeling revenue year this us for tailwinds are we still as lot to provides for XXXX that move seat and front one those continue through of of XXXX it's to opportunity and big a So into us.

Scott Haralson

Helane, this to is merchandising really Scott. don’t To changing any focused BFST applying think around the the opponent number have we Matt we on. talked cabin and thoughts about, have is the what what I of construction,

RFP, if additional As No, adding what getting we we're think no intent to point. this think at. the that's about BFS at about

Operator

Our next question go is Please from Duane ahead. Pfennigwerth.

Duane Pfennigwerth

or the think leadership earlier year. I late changes planning had year you last some in network in

and well market versus the the new that push in push buying to you this that on markets you What doing new markets or margin new you can market aggressive holding what are is how new points. RASM profile are staying extent either RASM Just is strain? that is back the much back the your know quantify theme, contributing markets new markets serve the if already points dense op any versus to the holding you're

Matt Klein

Duane, Great it’s Matt. question.

we quantify construction estimate prepared comes the of quarter. but was XXX the points to where the there. in basis think, in TRASM of a new want that lot don’t the didn’t to quarter points that in XXX to XXX and the our to impact we XXX get remarks basis quarter from estimate tell as second to of you second between second parts the that I So moving around there's we but in cities, to we it details am I an into prepared its around all

there’s the there pieces as in we able we that’s anticipate a impact what around the be the that’s of quarter is. to you third will number having third lot still moving but that we’re after anticipating give quarter a And Again impact well. same on better on closes because

We not the we didn’t get able network that advantage had we cycles. you We of moves, we able get of those that of of part took this out previously lot part to just into cities opportunity for for new so business the and into course us be answer just have the because were there’d call question, of believe normal and to we the opportunities. is it most specifically to lots be a but asked

you us. are accretive themselves they we up, know they and to want means present we there’s short-term advance shut the long-term it those if that. good already we available, become year benefit then opportunities do we’re to five is a and do and they're to have impact opportunities opportunities that think When And over a out to network last of some plan seven of part because be to our thing The to going time. of are

Duane Pfennigwerth

contribute spaghetti had Yes. you new whether is, I are someone a I to from thesis that densifying market did small here? certainly perspective and wasn’t ops for the those than to you but know big strain markets, guess asking market question the know versus approach it push what or from cities I existing to big more that's a basic your markets attractive the small is cities call extent

Matt Klein

answer we’re One the operational second though, cities, of on have ability think about to to in added part any added question there that airline cities the we think to issues the directly certain question does not us then, your follow-up to to perspective. the tail of say we seeing So really we your thing or is the from of line Adding new schedule how construction. an that is it to no. the to swaps help do the crew we how we when and how we airline the ability densify give schedule about schedule can

earlier, our Ted given do beneficial said how into to through the -- changes, taking some done in year. be more cities. -- learning the as up perfect about summer fall what we and learning we've flexible summer to to schedule Scott next from and Scott, August making move that of schedule slightly in have that we into move more already the us opportunities. are grow to things as out in we ability of should and beneficial move as than schedule definitely we more as examples and those as Vegas Orlando those we create advantage certain we of cities, a So continue Las It’s we fact, and densify we’re in to that

of We’re operation the run densification create us recover Vegas, more from are that it learning be taking to going say that that in opportunities to we’re doing Las gives more and of opportunity for time. to advantage swap -- way in things and

Operator

next ahead. Please Our Susan question from go Donofrio. is

Susan Donofrio

planning. forward on Question

and that, you’ve of disruptions So appear certainly given you go some Northeast forward thinking number challenges the address new you of with be that and the of these? how could If Are differently weather had be route from will a you this Florida. about just quarter appreciated. to

Edward Christie

Sure, it’s Ted. Susan,

we’re the plan has the is So going an is do have have to earlier, to has It I with it to going What resource impact. into than think planning that to inputs our with from more on selection. plan. impact forward definitely today forward as do an route seeing I mentioned that a perspective

We are and not airline primarily change. Florida that will a

almost XX% a our Florida have it piece big is touching are. of there and we We of capacity who

here. headquartered We’re

home We’re state airline. the

FA the What to we about and recoverability season seen put definitely we of while that do So some overall the south in does way down has our has this think definitely from year, we've shifted slack the south the the this focused it weather that our from the into data confirm was opportunity. system. and that it view the not influenced the change does north,

we I the and of this cost example probably utilization the we crew an than is and that in harder And I quarter, than probably rather is of much us little money a saved, that needed this think cards. bit think third quarter marginal push to reversing very

Susan Donofrio

north then interested? guys some it And comment there and maybe you appears available, whether any would case be

Edward Christie

morning, at that this too early it's talk to obviously up so about just just That’s think I came all. just

our develop. just we'll things have We have see to how performance happy presence we’re there New in with a York, and

Operator

is next Our Crissey. question form Kevin

Kevin Crissey

where down on double-digits many days or other of way. or be or sector, in we same you their whether investible it for make schedule? the its investable you members that to approach utilization granted more make change to create the the making be stock divisions conservative sector any more to you and in different comes wants the it processes like you unforced challenging, the changing sector investors are of cost talk can want it and more schedule, kind tougher Thanks. the incorporating analysts amount about a the take but the when to The is the process which to schedule that particularly Can people but side team are just from used errors

Edward Christie

better that he Kevin, we an job about in I’ll we XXXX the have comment is obviously it’s add responsible the in Ted. since teams here, color done some much and can talking but room of a Matt’s shop scheduling, for together team impacts we getting have. are aggressive a the

come work there I have of and good the operational aside periods setting we and that early few did think from three tougher time periods have learn and very been XXXX frankly that in to some from. had that time successes things exercise out very we like well quite we've where this summer, a years last had over not some the

that is defined there that running I’ve Clearly, efficient of narrowed And the brains involved few this, a schedule a it discrete we’re we we've with already that to down and of change it. so as that to most make we've know now, it, going heads lot a what can. lot for items sure specifically exactly relates think we I to intentionally it done little we’re and it and a adjust” to as we “easier understand exactly to moved, right to we because is us bit what do so,

people So forward? lot of going we make a of it better how that talking regardless about do there’s

Operator

is Catherine O'Brien. question Next from

Catherine O'Brien

revenue seeing great. maybe adding color pricing improvements color quarter, more towards you on year any So a are is from the and you you management saw you’re dynamic benefits be there anticipating us that increase, boost the any can ability to in if that question, move second your there the doesn’t revenue first stream, to give some would

Matt Klein

Catherine, it’s Matt. Thanks for the questions.

management So perspective of segmentation. customer we revenue we from benefit seen bags doing from we’re terms are to of what of from learning a the ancillaries, just call beginning perspective, we clusters lot in what a have a

then very groups that and they’re about everyone at is looking think important. to or where parties flying we’re pricing bags, So specifically transparence is how making that extremely sure

so how -- evident very be there's so sure that make I how and clear that's our want taken pricing to website very works, that. time and lot works, do that as it's to we've surprises and that thoughtful that of about on to a in no

bit seats front does the quarter. little stage our we On segment little is the And we production, perspective, past I second up on earlier can there thing up but quarter and well down in a about talked have that about there. going have are the that per was we a all fact where talked a and stage big but seat right X.X% non-ticket impact was that in the bring on so I now think opportunity X.X% second we some passenger the non-ticket in as one

I to think about of answer initiatives. your to speaks the success the question revenue our probably management

Catherine O'Brien

XXXX know, maybe year slower little on then over the were RASM to expecting. about capacity complexion a or terms fact to of is growth and how that just the out Thanks. than XX months of in in And you the initially reflecting change maybe Does drag both bit you past markets that up a you that think given seeing the this added you those growth? are even ramp much some of new on markets farther you’ve how

Edward Christie

it’s Catherine, Ted.

get this in again today, clearly terms of acts mentioned, around into that natural plan them, to turns based that know and for tailwind. Matt of that constrained increased were largely normal to were as probably rate, tell Matt that it that we such new next goes markets mix that gap an a I gave and percentage and ourselves year, down year point the was again, can finding part us were great and a more what opportunity on our but that flying you a we and in it's as we opportunity So back describing opportunistic gate they

XXXX. clearly a we’ve a now, far about matures, over then us done of that in right bunch but and are into new that year the international the drag this company we've what we a so help cities the should has As maturing got big and going of stuff markets all growing think presence last year, Orlando that's added thus

Catherine O'Brien

Maybe that. like one really quick to follow-up

In where terms the terms larger your bit forecast any these further in this new of competitive maybe you driving will of What's markets than be helpful? just thought. ramp slow it ramping is just in market that is cities a little [indiscernible] color those response,

Matthew Klein

So this is Matt again.

So bit them really because international little that from lot them whole a And a And regarding history of an the expansion longer. we and have most large just nonstop did of from there Orlando was very some lot those out be perspective. perspective. our And seats to very are is that's clear quick. expansion of opportunity just taking routes of a a don't of behind

Orlando. slower. we adjustments the them we ramping building was of number the what in and in optimize little And bit Day after some I them we’re the there markets which So we’re schedule is just schedule, to general do Labor mentioned of think it little better are to large a make starting

other be along new to very are just clear about with the and they routes, we are moving, actually lines. moving So happy they how are

drag in there exceptions generally see. percentage but the double that few just is last lines it as terms point unit revenue. the year than is was always are It's along moving what’s There like - to mix the having we’d is they're on

this Specifically everything fact city we’re happy doing that it’s city in there. with we’re not or

we ramped expected. Some even routes than faster of the

I just we right a really is and process away routes going something take on overall. of want very now, causing of have now. it’s to you mix that drag an issue this the kind normal don’t So new what’s It’s right

Operator

McKenzie. Dan is question from next Our

Dan McKenzie

Matt following question. last up that on

or take I’m of you just international would quarter of pull response? third domestic or point XXX a you all characterize the on if If in wondering headwind you quarter XX% versus just a XX% look from international would or bps that can RASM finer the in it. second little

Matthew Klein

clear. had then a little when XXX routes. top like to part basis of we So basis pinpoint domestic the make point just the We new thanks from that’s network the causing XXX we is and about for can harder from that’s points we’re drag the And to on described. the between that, that’s just domestic more its questions international estimating exactly itself this ramping XXX the probably on

Dan McKenzie

revenue operational I’m what's The XXX in outlook revenue I just first you the wondering calling of new this the third end to some date And lost away the where bps, any okay. the book book disruptions, versus is embedded guess I June exiting? know in from to there you're this, you related back you business. off. months And if secondly, the what routes to from guess on-time The quarter opportunity away then can about and year expect talk seeing

Matthew Klein

So now. causing itself not operation away right is a us really the book for

One of very, season peak when is a the things we and right don't high because have a that in does we factors. we flights revenue very in the of just the and recoverability high cancel is which load factors has occur industry we're lot that now, on really have load that

to it which get the they they’re if to a don't want than and cancel more day to that kind year. of out the where a So can right course trip, happens taking two don’t of to a we we choose parts people other the happens they may in day trip provide guest summer or go couple we it lot to experience the like times, for and of just but of want only

only our to a means if canceled that two three back lot now, they outbound or from and days closed but back, set super they coming of in. is if their they sell demand are model up product can’t that So come not

than So home. a seat flies empty get the outbound of the coming times lot we cancel,

it in impact when And talk operational to us want the disruption out than and performance. periods, summer more why Ted you that's the peak impacts may we So airlines on-time other there. have to it

Edward Christie

seeing Yes, good. I any so brand that our evidence Dan, of away. are that mentioned book aren't the a strong, just mean and metrics I on earlier is still clarification we

we I have quite would done on-time exactly what hoped. we've And today's frankly along doing the with we’re much think clicking is an hoped. still work very perspective we that from what

pushing it then the lower in while in performance June that intentionally and on-time Our July weather given was in the fact we peak. not the surprisingly are

that the would've and in We're feels we what like XXs about scripted so out. still

the year asked that be day If it's a the can the of beginning last you’d few the more the to that's about where at about and "disruption" reserve and the me fixed flights I how factor the with few that's schedule and felt we’re part on-time, optimization. changes to having changes completion few of the a

Dan McKenzie

to it is when or effect, me is going fourth change is quarter? it remind just those you in September more Can

Edward Christie

longer just have spool up. from make perspective mix longer schedule You bit little the but things more us is by Matt resources will - I few assist fall we takes know to really perspective pooling the attempt earlier be adequate a have crew the the it's things - we that a of and time bit the helping a do that we the schedule fourth bit can from heading peak would sure making engine there a a a quarter sure mentioned that a in close to little think into the reach to we be reserve on there's few correct,

that really we're of being assumes thing year bit more a disruption So factor. forecast a than will our which why QX more bit little and a of more today and had thinking is next there originally little beyond be about we kind lower planned completion

Operator

questions further time. this at no have We

DeAnne Gabel

Great. and the next time. you will we joining Thank everyone you for catch call today

Operator

you participating That for may today's disconnect. you, now concludes ladies call. you and Thank Thank gentlemen. and

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