Q1 2022 Allegiant Travel Company Earnings Conference Call. My name is John, your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you do have a question, press zero then one on your touch-tone phone. As a reminder, the conference is being recorded. Now I'll turn the call over to Sherry Wilson. Thank you, John. Welcome to the Allegiant Travel Company's first quarter 2022 earnings call. On the call with me today are Maury Gallagher, the company's chairman and chief executive officer, John Redmond, the company's president and incoming chief executive officer, Greg Anderson, our EVP and chief financial officer, Scott Sheldon, our EVP and chief operating officer, Scott DeAngelo, our EVP and chief marketing officer, Drew Wells, our SVP of revenue and planning, and a handful of others to help answer questions. We will start the call with commentary and then open it up to questions. We ask that you please limit yourself to one question and one follow-up. The company's comments today will contain forward-looking statements concerning our future performance and strategic plans. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the SEC. Any forward-looking statements are based on information available to us today. We undertake no obligation to update publicly any forward-looking statements whether as a result of future events, new information or otherwise. The company cautions investors not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize. To view this earnings release as well as the rebroadcast of the call, feel free to visit the company's investor relations site at ir.allegiantair.com. With that, I'll turn it over to John Redmond. Well, thank you, Sherry, and good afternoon, everyone. Our dedicated and passionate team members are the reason for the stellar results and industry-leading margins we are reporting today. To come out of the throes of Omicron, 600 weather cancellations out of 1,800 total cancellations, ATC issues and high fuel, and still produce a 10.7% and 1.4% EBITDA and operating margins respectively is rather amazing. This spring was the busiest and best spring in the company's history, and this incredible demand continued into April and shows no end. Very strong load factors, especially March at 87%, helped offset the run-up in fuel prices, and those high load factors are now expected to continue through the year. Again, I can only say thank you very much to each and every team member. Our priority for the rest of the year is operational integrity. It is paramount not only for our guests, but our employees, our long-term vision, and our brand. Our business model and DNA have always been to match capacity with demand and fuel prices. We have shown over the years no one in the industry is better at it. Our Q2 guidance reflects this imperative, adjusting our capacity to up roughly 12% year-over-year and total operating revenue increase of roughly 30% year-over-year. 2022 is a foundational year for our company. Significant investments are being made in various initiatives, including IT, that will set us up well into the future and drive focus to where it matters most, continuing to differentiate our business model, improve the customer experience and interaction with Allegiant and, of course, drive more revenue streams. Strategic initiatives don't happen overnight, but the benefits can be transformational. Allways Allegiant World Mastercard was an initiative that launched in 2016 and is really starting to hit its stride, helping to drive total average fare. The cash benefit of the card was $53 million in 2021. We have roughly 320,000 cardholders to date, which will further accelerate in the outyears given our partnerships, relationships, and resorts. Our credit card, along with our Allways Rewards program, are intended to increase share of wallet through greater interaction with the Allegiant travel portfolio. Our joint venture with Viva Aerobus is a piece of that foundation that is being laid this year. For that relationship another IT initiative, we would be years off entering the Mexican leisure market, and the financial benefits would not have been the same as our joint venture. Sunseeker, of course, started in 2017, and after a pandemic interruption, will be completed over the next year. That project, in turn, will lead to further asset-light opportunities. We have our work cut out, but our team members are up to the challenge. All of these initiatives will set the foundation for Allegiant 2.0. Even with all the foundation work being done, we should still end the year with total liquidity in the neighborhood of $1.1 billion. With that, I'll turn it over to Scott Sheldon. Thank you, John, and good afternoon, everyone. Before I get into the first quarter themes, I'd first like to thank you from this management team and to all of our customers, team members and partners throughout the network. This continues to be an incredibly unpredictable time, and we're certainly not immune to the impact Omicron had on our operations in late December and the residual impact for most of the first quarter. We had planes positioned, crews positioned. The planning team did an outstanding job aligning peak holiday capacity with our internal capabilities. Unfortunately, over a 30-day period starting December twentieth, we canceled nearly 1,000 flights or over 12% of our schedule. We went from having twenty folks offline due to COVID to over 400 in a 10-day span. Perhaps more importantly was the longer-term impact on our frontline training pipelines and the training needed to train and deploy team members throughout the network to meet future scheduling needs. Before I get into pilots, which is clearly dominating the headlines these days, I want to take a minute to talk about operational trends. Historically, we prided ourselves on leading the industry in controllable completion factor and targeting high 70% on-time performance. Unfortunately, we're falling short of these targets in this current environment, some reasons being self-inflicted, some being very much out of our control. Looking back at full- year 2021, we led the industry in being the only carrier to exceed 2019 capacity levels, which drove an incredible 17% adjusted EBITDA margin. We were best positioned to take advantage of the leisure recovery cycle. We made a conscious decision to keep as wide of a selling net as possible, but it did come at a cost that's reflected as us being last in completion and on-time performance. Clearly, we have lots of work to do. Fast-forward to today, our network is simply much more complex and dispersed than it was in first quarter of 2019. Year-over-year departures are up 13% on crew base growth and aircraft growth of approximately 50% and 40% respectively. During the quarter, we opened two new bases, Appleton and Flint, which brings our total to 23, up from 15 in 2019. We plan on opening our 24th base in Provo this fall. In pre-pandemic environment, many of these attributes that give us operational and commercial advantages in these small markets are headwinds today. Small bases, which are loosely defined as five aircraft or less, are highly dependent on a certain level of labor stability and are more or less relied upon to operate as standalone entities. There's a high degree of focus on dispatch reliability and labor consistency, particularly our flight crews. Without labor consistency, we will be challenged to drive substantial improvements in performance, which is undoubtedly our key focus as we move into summer. Moving on to pilots, pilot staffing, and pilot attrition, we are seeing some of the same themes as our industry peers with perhaps a slight difference. We continue to be successful in bringing on quality applicants. Since July of last year, we have hired over 200 pilots through April, and our May and June classes are already filled to target levels. That would bring our total hiring levels to nearly 250 pilots, which was just short of our projected 270 target need for summer flying of 2022. Attrition levels, on the other hand, are elevated above historical norms and have impacted our first officer ranks the hardest. Year- to- date, we've lost 80 crew members to other carriers, primarily to legacy carriers, and 123 total since May of last year. The last thing I'd like to touch on is our efforts to ratify a new contract with our pilots. It's our number one focus, and it's critical to stabilizing our current workforce and to meet the demands of the airline as we look into 2023. Given the attrition trends we were seeing in mid fourth quarter of last year, we made a substantial effort to expedite the framework of a new deal. Since January, we've passed 4 comprehensive proposals that touch on everything from rates, rate guarantees, requirement, scheduling, work rules, quality of life enhancements, and investments in virtually every stack crew members interface with daily. It's an unusual approach for sure and in no way meant to shortchange the process as our pilots are critical to the success of this company, and we hope to have something positive to report in the near future. In closing, I'd just like to thank our team members and partners once again. Your patience and perseverance in this environment has been tremendous, and we are here to support your efforts to help make this the premier leisure brand in the travel space. We've always prided ourselves on being ultra flexible and taking calculated risks. This year will be no different, and I know we'll take some lumps. That being said, we feel we struck the right balance to drive operational performance while maximizing earning potential, and we look forward to a successful summer. With that, I'll turn it over to Scott DeAngelo. Thanks, Scott. On the commercial side, first quarter saw historic highs for Allegiant in terms of both web traffic to allegiant.com and passenger segments booked. Total visitors to our website were up by more than 25% in the quarter versus 2019, with repeat visitors being up by more than 10% and first-time visitors being up by more than 50%. Most notably, visitors coming to allegiant.com did so by directly entering the URL or by using our mobile app. Users coming that way were up by more than 80%. This speaks to the ever-increasing awareness levels for our brand. More people know about us, and they're coming directly to us at allegiant.com. The number of passenger segments booked in Q1 was 35% more than in 2019, and we achieved our highest ever trailing seven-day moving average in passenger segments booked on two separate occasions in the quarter. Moreover, this demand for leisure travel shows no sign of slowing down as the number of visitors who came to our website in March to conduct flight searches for travel in April through November was up by 150%-250% compared to 2019 levels for the majority of weeks in that travel time period. While bookings from customers of all ages showed increases on a year-over-three-year basis, most in the 15%-20% range, customers 65 years and older showed dramatic booking increases at more than 60% above 2019 levels. This is great news as this age group represents our most frequent travelers, many flying between a primary residence and their vacation home. In addition, as we saw in the past two quarters, third-party revenue growth continued to outpace passenger and passenger revenue growth, exceeding 2019 levels by more than 30%. This continues to be driven by our Allegiant 2.0 approach of enhancing our web and app experience to make it easy for our customers to buy more of their leisure travel needs from us. By enhancing the breadth of our leisure travel offerings at allegiant.com. That said, the Allways Allegiant World Mastercard was once again the prominent driver, having its strongest three months ever in terms of new card signups, average spend on the card, and total compensation to Allegiant. Each month of the first quarter successively set the record for new card signups. For the quarter, new card signups were up by nearly 100%, and compensation to Allegiant was up just over 130% versus 2019. In closing, the historic high demand we saw in the first quarter for capacity levels higher than both 2021 and 2019 appears to be structural, not simply fleeting pickup demand or revenge travel, at least for the foreseeable future. It's broad-based across all the markets we serve for all upcoming travel periods we're selling into, and it's coming from both repeat customer growth, which we believe speaks to the effectiveness of our loyalty programs and first time customers, which we believe speaks to the growing awareness of and preference for our Allegiant brand of low fare and all nonstop travel. With that, I'll turn it over to Drew. Thank you, Scott, and thanks everyone for joining us this afternoon. The cadence of revenue performance since the midpoint of the first quarter has been the best I have ever seen. We have been TRASM positive for eight consecutive weeks with line of sight to many more against comparable 2019 weeks. The first quarter finished with total revenue 10.7% ahead of 2019 on system ASMs of +18.2%. Better than expected close-in bookings, superior Allways Allegiant World Mastercard performance, as well as an extraordinarily robust March Madness fixed fee program drove us above the guided range. The month of March was the mic drop month we have waited over two years for now. Despite growing ASMs by over 14% in the month, our boarded load factor of 86.5% and TRASM of $0.1286 both exceeded March 2019. The incredible March Madness resulted in the best 1Q fixed fee revenue total in company history and the third-best month. The $500 million in total revenue for the quarter was the first time we've exceeded that milestone. Our rev and loyalty teams have continued to drive immense ancillary success, which in turn make the load factor performance significantly more powerful. The $68 per passenger represents a 17% increase over first quarter of 2019 and the second-best quarter in company history, trailing just 4Q 2021. As excited as I am about March's performance, the second quarter looks even better. We are guiding total revenue growth of +28% to +32% over second quarter 2019 on scheduled service ASMs of +10% to +14% and system ASMs of +9% to +13%. This implies a double-digit TRASM growth on double-digit ASM growth and total revenue in excess of $600 million. April continued March's success and posted a load factor beat of over four points versus 2019. As I mentioned, all weeks were TRASM positive. We haven't finalized everything, but I expect the month's TRASM to end plus mid-teens. While we are seeing solid performance in the off-peak weeks, the peak periods are where the real upside is on display. I expect June to have the best year-over-three-year performance in the quarter. While I mentioned TRASM extensively, I want to point out that the metric is an output and not the end goal. Our team is focused on maximizing total profitability through our network and pricing decisions. In 2021, we began service to 10 new cities, plus 1 more in March 2022. Those airports range from smaller, like Key West and Amarillo, to larger, like Dulles and Minneapolis. This summer's network will still have roughly 13% of ASMs coming from routes in their first 12 months of operation, and we've already had some incredible successes in these new adds. We prepared our network strategy so that new markets can mature over several years. Put differently, we've been planting seeds for the future, and we expect our future network strategy to look like this indefinitely with a broad mix of city sizes and destination profiles that fit our strategy and that we can expand upon. Lastly, after a test we started in 2019, we are happy to announce that we will roll out our Allegiant Extra product across most of the fleet. While both the results and customer feedback of the product have been compelling throughout the test, the pandemic put a bit of a pause in the decision process. We have been further encouraged by even stronger results over the last six months and will now take all inducted Airbus A320s in the 180-seat Allegiant Extra configuration starting in the fourth quarter of this year. Additionally, all new Boeing aircraft will deliver in an Allegiant Extra layout. Remember, our layout primarily involves the removal and repitching of rows and nothing structural, enabling a relatively easy return to maximum seat count should that be desired. Customers enjoy legroom advantages, complimentary priority boarding and drink on board, as well as reserved overhead bin space. This should drive an air ancillary boost into 2023 as the fleet grows. With that, I'd like to pass it over to Greg. Drew, thank you, and good afternoon, everyone. For the first quarter, we reported a net loss of $7.9 million. These results can be characterized by the tale of two halves. The first half of our flying for the quarter was not profitable, primarily due to the impacts of Omicron. We recorded an operating margin of -18% and net loss of $44 million for the months of January and February. However, the second half of our flying during the quarter was very profitable, as evidenced by an operating margin north of 21% and net income of $36 million for the month of March. This despite paying $3.46 per gallon of fuel, an increase of 40% from January. The revenue team came through as TRASM accelerated during the quarter, closing just under $0.13 for the month of March, aiding first quarter's TRASM of $0.1078. Excluding fuel, our unitized costs for the quarter were $0.0712, and we are seeing deceleration into the second quarter. Costs were pressured during the first quarter by the $16 million in customer compensation relating to IROPS. Primarily that was due to Omicron, and $7 million for the special recognition bonus for our team members. Normally, our first quarter results would not trigger profit sharing. However, given these extraordinary circumstances in both the airline sector and the broader macroeconomic environment, our board was pleased to guarantee our team members a recognition bonus for 2022. We have the best team in the business and our sincerest thanks to each of you. Excluding this recognition bonus accrual in our IROPS customer compensation, our CASM-ex would have been down or was down 0.5% compared to the first quarter of 2019. The robust demand environment and strength in sales drove a sequential increase in our ATL of $150 million, nearly 50% higher from the fourth quarter. Our strong liquidity of $1.2 billion is more than 2x our ATL and 60% of 2019's revenue. Our net debt balances remain flat sequentially at approximately $550 million and well below pre-pandemic levels. Turning towards the second quarter, our guidance issued today suggests an operating margin north of 12% for the second quarter on ASM capacity growth of 12% year-over-year. This guidance also assumes an average of $4 per gallon of fuel. In February, we actioned trimming our planned capacity in the second quarter by roughly 10 percentage points, and as messaged back then, these reductions were primarily driven by staffing challenges and the volatility around rising fuel costs given the uncertain geopolitical pressures. This capacity reduction does add some headwind to our unit costs as we expect second-quarter CASM-ex to be up 14% year-over-year. This increase is primarily related to inflationary pressures and productivity. We've talked at length around inflationary costs on prior calls, but I thought I'd touch briefly on productivity. To help frame this, we expect to place into service three aircraft this quarter, bringing our total fleet counts to 115 by June's end. Based on our capacity guide, we expect the average ASMs produced per aircraft during the second quarter to be 46 million. This is 12% less production than the average aircraft during the same period in 2019, which we estimate is approximately a third of a cent headwind to our CASM-ex. While this reduced production puts pressure on our unit cost, there is a benefit to the other side of the profitability equation by driving higher yield and higher unit revenue. As Drew indicated, demand is on fire, and current bookings suggest total revenue for the second quarter to be up approximately 30% and TRASM up nearly 20% as compared to the same period in 2019, which I believe segues well into our Allegiant Extra announcement. While reducing the number of seats may not fully optimize unit costs, our data suggests this initiative will be meaningfully accretive to our bottom line as we are a margin-focused company. What gives us an advantage in driving higher margins is our unique ability to align capacity with demand, given our low fixed, high variable cost structure. Regardless of the macro environment, whether high fuel, low fuel, a weak economy or a strong one, we have a proven track record of always outperforming over the long run, with flexibility brings stability. Speaking of flexibility, that's a hallmark around our fleet. Given supply chain disruptions and MRO delays, we are going to give ourselves a little more breathing room by slowing the induction of three aircraft in 2022, pushing them into early 2023. As a result, we now expect to end the year with 124 aircraft compared to our initial plan to end with 127. Pushing these three aircraft in 2023 should not impact our second half capacity expectations. Turning to reinvestments in the business, our full- year 2022 airline CapEx guide remains unchanged. That's $260 million in aircraft CapEx. This is inclusive of our predelivery deposits, $100 million-$90 million in other and heavy maintenance CapEx, respectively. In closing, we continue to make meaningful progress on our major strategic items, one, incorporating Boeing aircraft coming in online in mid-2023. These aircraft are 30% more fuel efficient as measured by ASMs per gallon. Our partnership with Viva Aerobus, and we're expecting to go on sale later this year. Opening our Sunseeker Resort in approximately a year from now. The increased investments in our systems, tools, and infrastructures to better support our long-term growth plans, drive higher revenue and combat costs, and progress with our partner, Schneider Electric, on our ESG initiatives with the intention of publishing our inaugural sustainability report later this year. With that said, it is my privilege to turn the call over to Maury Gallagher. Maury, on behalf of the team, we want to thank you for your mentorship, guidance, and leadership over these many years. You are a legend. Well, how do you follow that? Thank you, Greg. You've gotten a good overview from these very astute managers in the last few minutes. As you can see, we're making very good progress on our way back to normalcy, preparing in particular for our peak flying this coming summer. As you can see, I'm the last to speak, and I suggested that should be the case because this is my last conference call. I've done 61 of these calls before today talking about Allegiant, our journey, our exploits, and our successes over the past 15 years. Deep breath. We have talked about Allegiant 2.0 numerous times, our efforts to drive additional revenues from our current customer base, and we're the only carrier I'm aware of that talks directly to all of its customers. To that end, we have almost 15 million email addresses available to us to do that communication. While increasing unit revenues from our then customers' wallets was important strategically, we wanted to further enhance our brand, particularly in the last few years. What was the best way to increase the awareness of Allegiant with the traveling leisure-oriented public? Front and center in this effort was our partnering with the Las Vegas Raiders in the stadium naming rights. In that process in the past 24 months, having our name on what has now become Allegiant Stadium, has done more to increase our brand with the traveling public nationwide than we were able to accomplish, in my opinion, in the first 20 years. Just as important, these naming rights have provided us with credibility. I've heard the following statement a number of times from different people that I've talked to, "Wow, you own a premier football stadium in the world's greatest leisure destination, and you must be a great company." Well, clearly, we don't own the stadium. It'd be nice, but we don't own it. We are receiving a benefit of this affiliation, and it has substantially increased people's belief in us as a company that is reliable and worth trusting. Our second major trophy property will be our Sunseeker Resort, due to open early next year. This has been one of the more ambitious undertakings during my time here, and there has been a great deal of pushback from many of you on the phone call today. I'm going to make a forecast. Unlike any time before, Sunseeker is gonna be a huge success. You can say you heard it here first. John Redmond is one of the few people in the world who could have pulled this off, including finding the location, designing the building, and recruiting this world-class management team that we're now assembling. I've had the privilege of knowing John for 20 years, and an even bigger privilege, larger privilege of working closely with him the past five and a half years. When he joined management in 2016, neither of us understood what he might recommend, and I had specifically asked him to enhance our third-party revenues, particularly hotels, given his background. Once John located the 23-acre waterfront property in Port Charlotte, Florida, and laid out his vision and plan, I became a believer. In the coming months, you will hear about John's efforts to develop our asset-light approach. There are a number of substantial irons in the fire that will leverage our Sunseeker effort and the management talent that we have put together, John has put together. There are some early returns on Sunseeker that we would like to share with you today, preliminary bookings and interest, and I'm gonna ask John to give us some of those numbers. John? Well, thank you, Maury. These are rather amazing, to say the least. Currently, we have 1.4 million emails in the Sunseeker database, and we're targeting 2.5 million by year-end. Now to put that in perspective, the 3,500-room new property on the Strip, Resorts World Las Vegas, after nine months of being open, had 200,000 emails. We're headed in the right direction. This has been a big focus of us to have a lot of emails. We've also booked 226 transient reservations totaling 610 room nights to date at an ADR of $380. We modeled ADR at $255. We went on sale mid-February, selling into May of 2023. The reservations were made by individuals from 27 different states. Shows the breadth of our email database, amazing. We've also booked 17 groups totaling 21,500 room nights. The total contracted rooms, food, and beverage revenue is roughly $8.3 million. The March 2022 year-to-date Southwest Florida transient ADR, as provided by STR, Smith Travel Research, for the market set, which are 25 hotels in Southwest Florida, was $638, up 38% over the same period last year. For the comp set, which is a ten-hotel grouping that we track in Southwest Florida, the transient ADR was $644 and up 29% over the same period last year. For the year 2021 full- year, the Southwest Florida transient ADR, again, as provided by STR, Smith Travel Research, for the market set was $411, and the transient ADR for the comp set was $457. Again, incredibly impressive to see what's going on in Florida. I'll turn it back over to you, Maury. Thanks, John. This is gonna be an amazing addition, trophy property to us, and it may not equal quite what the stadium's done for us, but it's gonna be high in those ranks of pushing our brand out there and bringing more awareness of the leisure traveling public to Allegiant, as we go forward. I've spent 40 years in this industry and this word different has been my operative word that I've fallen to all the time. I've learned over the years we needed to differentiate ourselves from the other 10 carriers in this industry that we knock heads with. Currently operating a safe, quality airline is critical, a critical component of this success, but a focus on the customer has been just as critical. I believe we've done this better than any other carrier since our beginning in the early 2000s. Going forward, Allegiant is extremely well-positioned to continue to differentiate itself, not the least of which, what you just heard from John, from competitors and generate incremental revenue so important to our profitability. In closing, I'm an airline person at heart. The airline has been the driver of our success over the years, and it will continue to do that in the coming years. In the next five to eight years, we should double our size and be able to service in excess of 30 million customers with our airline network as we grow our way to 200 aircraft. The airline is the catalyst that will drive these incremental revenues so important for our industry-leading success. In 2006, we named the company Allegiant Travel for a reason. While we operate an airline, we are first and foremost a travel company focused on providing our leisure customers with a quality experience both in the air and soon to be on the ground. Now, we'll not be leaving the company, but rather working to support the management team in the coming months. In our efforts to finalize a deal with the pilots, I will be working with Andrew Robles, the president of our local here, and other efforts in Washington, D.C., as we work towards a solution to the pilot supply problem. I will be moving to the background and that's as it should be. I will continue to be on the board and certainly one of the premier shareholders as far as I'm concerned. Lastly, I wanna thank all of our team members, who have been the backbone of this successful effort for the past 20 years. Nothing has given me more pleasure than watching the young people who have joined Allegiant over the years find their sea legs, become knowledgeable in the fields, and begin their future with this great company. In a fitting statement in being a history major by choice many years ago, I've you know called upon Mr. General Douglas MacArthur's famous speech to Congress in April of 1951 about his retirement. As he said, quote, The refrain of one of the most popular barrack ballads proclaimed most proudly, Old soldiers never die, they just fade away. So shall I. Thank you. With that, we'll turn it over for questions, Sherry. Thank you. We will now begin the question and answer session. If you do have a question, press zero, then one on your touch tone phone. If you wish to be removed from the queue, please press zero then two. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. We also ask that you please limit yourself to one question and one follow-up. Once again, if you do have a question, press zero then one on your touch tone phone. Our first question is from Savanthi Syth from Raymond James. Hey, good afternoon, and congrats, Maury. I agree with Greg that you are a legend, and still looking forward to, you know, your contributions, continued contributions to Allegiant and the industry here. Maybe for me. Thanks, Maury. Just if I might, on the capacity front, given this outlook, assuming much doesn't change in the side of demand or fuel, I was curious what this means for maybe 2022 capacity and if there's an adjustment here. Should 2023 grow from here, or do you kinda catch up on utilization and catch up on some of that growth in 2023? Sure. Drew here. I'll start with this one. Yeah, I think for full- year 2022, we're still looking at growth, you know, around that 20% number. I say that as Brent crossed 110 again today. I would expect there to potentially be some revision in the back half of the year if this maintains. I still feel good about that number in general, barring some runaway there. As you think about 2023, you know, I think we're moving back toward that long-term measured type of approach of roughly 10%. Again, that assumes that fuel doesn't run away, demand stays elevated, et cetera, et cetera. I really like where we're going in terms of, you know, getting back to that measured approach. Some of it will probably come from utilization. Sure. Makes sense. Just, can you talk about, I wonder if some of the capacity constraints are related to what you're seeing in Florida and on your operational impact there. How much of it is kind of driven by, you know, Allegiant's internal kinda supply issues versus kinda external partner issues or even the ATC issues in Florida? Sure. A lot there. Take it at probably a high level without, you know, diving in dramatically. As you think about, you know, what we did for this summer, just a little bit over half of our cuts did come in Florida. So certainly some of the ATC and flow environment there did have an impact on our decisions. I think for any peak period going forward, we're gonna run utilization basically as hard as, you know, the first constraint we come up against, whether it's labor, whether it's aircraft, whatever it is. Demand in peak periods has always been there, such that we should operate to the limit we feel comfortable as a company. Off-peak flow will always be driven by either the demand environment or fuel and the resulting profitability. There's kind of, you know, a little bit of both depending on which time frame we're talking about. That makes sense. Thank you. Our next question is from Michael Linenberg, from Deutsche Bank. Yeah. Hey, good afternoon, everyone. Echoing Savanthi's words, definitely a legend, Maury, and you will be missed. You know, knowing that you're gonna remain one of the largest shareholders, if not the largest, gives us good comfort. On to my questions here. I guess this would be to Greg with respect to the 737 MAX deliveries. You know, we hear from other carriers that have airplanes coming this year that aircraft continue to get delayed because of some of the, you know, manufacturing issues that or bottlenecks that Boeing is facing, whether it's supply chain labor, you know, getting raw materials, et cetera. When you think about 2023, are you starting to sort of rethink, you know, the 10 aircraft coming in? Is it more of a 2024 phenomenon? I have sort of a related question on the overall economics of those airplanes. Thanks. Hey, Mike, it's Greg. Why don't I kick it off and turn it over to Robert Neal or BJ or our fleet crew group. Yeah, where we sit today, we're still planning and expecting to take Boeing the Max aircraft in the back half of 2023. What we're thinking about right now is the split between the 8200s and the -7s. We're evaluating that. Candidly, we may look to take the 8200s first. That would be a little easier for us in terms of getting it through on the spec and through for our maintenance and the team members to get it kind of up and running, then you can leverage that work on the -7. Why don't I turn it over to BJ to give you some additional color. Okay. Yeah, Mike, I guess I'll just say that, you know, we're still over a year away from the first scheduled delivery now, so we aren't hearing anything out of Boeing about potential delays. We are hearing some of that same chatter that you mentioned about their current situation. I guess I would just, you know, point to the fact that these airplanes are coming in pretty late in the year, and so we didn't have a lot of capacity planned on those airplanes in 2023 to start with. I think we all feel pretty good about that. I'm looking at Drew here, but yeah, we're okay. Yeah. I mean, we just put our winter 2022 capacity out there. We don't have time to think about 2023. Yeah. Okay, good. Then just on the economics on the airplane, you know, we go back to, you know, late last year, early this year, you know, the view was that the sevens, you were looking at something on the order of, like, $7 million of EBITDA per aircraft, and I think the eights were closer to, like, $10 million. Yet we've just seen this, you know, significant surge in inflation, you know, not just fuel, but, you know, we're dealing with labor and other, like, things coming in a lot higher than what anybody expected, including the Fed, right? I'm curious where you are as you think about that $7 million-$10 million for each airplane, or is it the view that that's gonna find its way into the fare structure, and the $7 million and $10 million are still pretty good numbers to sort of use when we think about overall profitability? Well, Mike, no, it's a great question. It's Greg. Why don't I kick it off and I'm sure others would like to add some commentary on that. Certainly the rise in fuel is something to keep an eye on, and it's great that these Max aircraft, they're on a gallon basis, ASMs per gallon or on an efficiency basis for fuel, they're about 30% more fuel efficient, so that obviously will be helpful for us in terms of combating the higher fuel costs. What I would say is we think that certainly on like-for-like utilization, we will outperform or outearn with the Boeing aircraft, because we have, you know, a third of our network that's gonna support those aircraft, and we have a 20% improvement on operating costs. It certainly should help us continue to drive back to that industry-leading EBITDA per aircraft that we had in 2019. Mm-hmm. There are other areas in the business. Now we're constantly looking at combating the inflationary pressures that you mentioned. We're doing that through systems. John talked about transformational systems. We'll see that from the back end, where we can scale up more on the management side through SAP or TRAX or with productivity, as Scott mentioned on getting new systems for our pilots and crew members, Navitaire. That should help us with scheduling and improve on productivity from that side of the house. You also have. John mentioned our Viva partnership, right? Where we think there's some accretion there, assuming that gets approved through ATI. As Maury and John have said, we're looking at growing, combating our costs, but also growing on the revenue side. There's a lot of irons in the fire that we think will help us and restore and get back to that EBITDA per aircraft. Drew, I don't know if you want to talk about the fare environment to Mike's. Yeah. My view looking forward is that there is a structural change in the demand environment, and one that will produce, you know, a higher level of demand for quite a while than we saw in 2019. I do think that the summer of 2022 is probably the pinnacle, and it may retreat a little bit. Mm-hmm. The structural change in how I think people view travel, view experiencing life, has changed such that there will be a persistent upward pressure on the overall demand, whether it's fare, whether it's loads, for the foreseeable future. I do think we'll recapture some of it through that avenue as well. Great. Another point, Michael, is we're gonna buy these airplanes, and so the balance sheet will come into effect, and our ownership costs are just not gonna be that much higher than we would spend for a normal 186-seat Airbus. Mm-hmm. You get all the benefits of fuel burn and things like that, so that's gonna help us offset a lot of pressure on the cost side. They're just very exceptional airplanes if you can manage them the proper way in the sense of ownership and you know be in them for the long haul. Yeah. Maury, your timing, and obviously to Greg and the team, when you bought those airplanes, it couldn't have been more perfect. You know, even things like the benefits of tax depreciation, and it's just a lot of things that are gonna help you on ownership that I think people don't fully appreciate. Thank you. Well, I'll tell you one other thing, Michael, that really helped us is, candidly, if you make a lot of money in any business, particularly this business, you've got a partner in downturns, it's called the federal government, and you get all that money back. That, a lot of that's sitting on our balance sheet that we paid in taxes over the years when we made so much money. Yeah. No, no, very good. Very good. One of the few that can make that claim. Thanks. Our next question is from Brandon Oglenski from Barclays. Hey, good afternoon. Maury, a very poetic end to a long run here. Thank you for that. I guess, guys, can you talk to the pilot issues that you were speaking to in the prepared remarks? You know, I think you mentioned attrition levels at the end of the year. Has that gotten worse, or have you been able to solve for that? What's the long-term solution here? Hey. Yeah, this is Scott. Yeah, you know, you started to see sort of a trickle, you know, May of last year. There was a pretty bad month. I wanna say it was October. November and December settled down. I think there was a quiet period when you look at what was going on with Omicron for December, January. I sort of view it as sort of pent up where you had back-to-back months of 20+ pilot attrition months. But that seems to have come down a little bit. You know, longer term, obviously the contract is critical to getting something competitive out in our pilot's hands, something that reflects you know, industry standard at worst. We think we have some interesting and unique concepts that will keep these guys in a more competitive foothold, you know, as other carriers start to solidify, you know, their contracts. I think everyone has a minimal contracts with the exception of Spirit and Frontier right now. It's gonna be a moving target, but, you know, we feel if we can keep, you know, sort of the economics to the sidelines and just know that you're gonna be paid a reasonable rate, we think that's sort of the mousetrap that we have to offer, which is, you know, out and back. It's a simple system, single day trips. Just the quality of life aspect is much more desirable than what other carriers have to offer. There's the traditional stuff like partner with flight schools and the like. You know, first and foremost, we gotta get a contract in place. Let me also comment, Brandon. One of my jobs post the job is gonna be working closely with the leader of our IBT group and working to see if we can, you know, move this thing along and get ourselves in a good position sooner rather than later. Some of these things, we're on our second contract, if you will, and language typically in first contracts is clumsy and needs to be revised. You know, we've got a commitment on the other side to make things work. It'll take some time, but hopefully we'll have some answers here in the not too distant future. I appreciate the response from both of you. I guess, Greg, you know, as you think longer term about unit costs, not just specific to the pilots, but, you know, inflation's real here. Does this change the trajectory for the company? Hey, Brandon. Kind of thinking longer term, what I would say kind of echoing some of the comments I was making before, but we of course right now where we sit, we are investing in our organization and, as Maury's used the term grow, come up underneath it. So we have an infrastructure that's, you know, larger right now. We're gonna grow and come up underneath it. I mention that because the goal there, as John mentioned in his opening remarks, is, you know, operational integrity. Getting back and driving IROPS out of the business, that's certainly gonna help on the cost side. Productivity, as I mentioned, whether that's through utilization on the aircraft, but pilot productivity, crew productivity will be helpful. We talked about the systems marketing, I think is another one we don't. I didn't mention earlier. You know, we had some investments, as Maury mentioned in the stadium that Scott DeAngelo and his team put together also with Live Nation. Brandon, as we grow, you know, the ASM, if you will, CASM-ex will come down on, you know, relatively speaking, on those items because those costs are fixed. You kind of combat it from that perspective. Viva, that's another example where we're working closely with Viva and their team. It's combating costs and where we can find synergies working together on the cost front. We're spending some time there, so we think that too will help. All in all, I mean, yes, there's an absolute pressure on the cost side. But we're a margin-focused company. We talk a lot about MASM here, and there's two sides to the equation. We'll continue to focus on that, but we'll make sure that we keep a low fixed, high variable cost structure so we can continue to outperform. MASM, I love a new acronym. Thanks, guys. Our next question is from Catherine O'Brien from Goldman Sachs. Hey, good afternoon, everyone. Just wanna echo everyone else's comments. Maury, it's been a pleasure working with you over the years. Congratulations, John Redmond, on moving into the new role. You know, I wanna come back and talk about revenue a little bit. You know, your revenue outlook, like many of your peers, is incredibly strong for the second quarter. You don't have the same exposure to some of the business or longer haul international recovery that's really, you know, in its early stages that some of them do. Is this strength just really good old-fashioned pent-up leisure demand outstripping supply and passengers are just willing to pay higher fares? Are there also some, you know, maybe some positive competitive developments where, you know, less overall domestic supply is being pointed at lesser, leisure destinations, excuse me, than it was, you know, over the last year or two? You know, I know your third party continues to outstrip. You know, is it just, you know, non-fare initiatives also taking you that extra mile next quarter? I know that's a, you know, quite a few questions in one, but just trying to get a sense of where you're seeing the most strength come from as we head into next quarter. Thanks. Sure. I think the simplest answer to that is just yes. I mean, all of the above are certainly influencing and putting upward pressure on what we're accomplishing here. I think first and foremost, you know, we've had US domestic leisure travel this entire time. The demand pool is larger for that than it ever has been. Being as well-positioned as we are to take advantage, you know, we're seeing the benefits of that. You know, we'll see some in fare. You know, in first quarter, our average fare per passenger was slightly higher than it was in 1Q19. We're starting to expand on load factors, which I think is a direct result of just that larger pool. I think you alluded to it a little bit with the return of business international. I think focus around the industry is gonna start to shift a little bit away from simply the leisure traveler here domestically and trying to recover elsewhere, that will open up more kind of more leisure yield for us. So, you know, I may have glossed over some things there, but suffice it to say all of those things are true. It really is just overall core strength is the leisure demand and where we're positioned right now. That's great. Thanks. Maybe one for Greg. You know, your net debt is lower than it was pre-pandemic, really strong liquidity position. I know that you and the industry are barred from shareholder returns until later this fall. Would you think reinstating your dividend is on the table over the short to medium term or does it maybe like, you know, the little bit of that incremental Sunseeker CapEx we're seeing or the MAX order just change the calculus of how you're thinking about deploying capital going forward? Thanks so much for the time. Thank you, Katie. This is John. You know, when you look at the history, the company histories of returning capital to shareholders, I think it's not a bad proxy to look at, when you're looking at what company's future actions may be. It's not been a conversation we've had yet as a board on whether or not, you know, Q4 this year or some future quarter is the right quarter to start that. That's probably the best way to look at it. As you know, we have a history of paying dividends and buying back stock. As I said, that's a good proxy for future activity that we would consider. That's great. Thanks so much, John. Our next question is from Ravi Shanker from Morgan Stanley. Thanks for being here, everyone. Maury, I will sign on to the petition granting you legend status. Thanks for everything you've done for us. A couple of questions here, maybe a little bit bigger picture. I think one of the big debates over the last several weeks has been you know, the point of demand destruction, and I think you know, one of the debates in the space is whether that point is closer for a ULCC airline because the customer may be more price sensitive or if it is farther away because the fare itself is lower. How would you answer that question? Kind of again, are you seeing that point at this point? And kind of do you think it's closer or farther away for ULCC? First time I've heard this question, so bear with me, perhaps. You know, I would say if you look through the history of all of the environments in which Allegiant has operated, we have not seen demand destruct at any of those, whether we're in a recession, you know, growing the economy rapidly, high fuel, low fuel, whatever it is. The cost model that Greg and team, you know, maintain enables us to be successful in any of those environments. You know, we can respond with lower fares as needed. We'll typically use our capacity in order to use supply and demand to our benefit to get there. If fuel remains high, we can pull capacity back and make sure we're getting the fare needed to remain profitable at the expense of some of that demand, but purposely so. I would say it's certainly farther off, if not, you know, well into the future, if I'm understanding the premise correctly. Well, hang on, Scott. Real quick. We're the ultimate demand management company. We have from the get-go, you know, managed the demand in Septembers and Januarys, so we're geared for that better than anybody. Scott. Yeah. The only thing I would add is looking at our customer base. I know I've mentioned this on calls before. 85% of our customers, when asked what airline did you last fly or what airline do you regularly fly, say Southwest or one of the three network carriers, obviously be it their regional partners as well, in that order. Our customers are the same as their customers, so in as much they are somewhat inelastic in their demand to airfare, so too are ours. The last point I'd make, and the comment I pointed out in my prepared remarks, was the significant growth of our customers age 65 and older. Most of these are those that own second, some of them third homes that fly us out of Cincinnati, Grand Rapids, Indy, et cetera, many legacy markets for network carriers that upon consolidation left those areas as hubs. They fly us 'cause we're taking them nonstop and they are actually have quite amount of discretionary time and income. I would just put that forward to say our customer base probably looks a lot different than maybe even other ULCC customer bases, and would, you know, vote for the over or the further out on our customer base being impacted by the effects you're talking about. You know, maybe to expand a little bit on what Scott was saying. You know, a customer, you know, carrier selection is not indicative of a customer's net worth. You know, they're just willing to spend more on when they get there on the experience rather than on how they get there. In our case, of course, when you have 75% of your flights are nonstop, non-competitive, you know, some cases we're the only choice. That's very good color. Thank you for that. Maybe kind of a related follow-up there. Thank you for the stats on your higher web traffic. Do you have details on, you know, how many of those visits were, you know, new to Allegiant, new to ULCCs in general? I'm just trying to get a sense if, you know, are you guys taking share or are you growing the pie here? Yeah, I think a little bit of both. The answer is yes to the first question. About half of our web visits in Q1 were from first-time users. We don't know if they're first time to ULCC, we just know it's the first time we ever saw them. That's to the first one. I think there is a combination. I think that as airfares have gone up, you know, I hypothesize that given the last comment I made about who our customers tell us they last or regularly fly, we remain still, even at an elevated airfare, an attractive option versus say network carriers and/or Southwest from a price perspective. We could very well be seeing people, if you will, coming to us for the first time because they may be priced out and/or price shopping more vigorously than they've done in the past, just given all the variety of inflationary pressures. Just a hypothesis for now. Great. Thank you for that, and, look forward to an Allegiant analyst day hosted at Sunseeker before it opens. Just an idea. Thank you. Our next question is from Scott Group from Wolfe Research. Hey, thanks. Afternoon. So you had a comment on the call that summer could be the pinnacle of demand and may retreat a little bit. I just wanted to. Is that something you're seeing? Is that just a sort of a hypothesis? If that's right though, just maybe talk about why do you wanna ramp capacity from low double digits to mid-twenties in the back half of the year if demand may start to moderate a little bit? When I talk about that, I think this summer's gonna get the perfect storm combination of that structural change that both Scott B and I talked about, as well as some of the maybe more temporary pent-up from folks that haven't traveled in two to three years. It's kind of just that cherry on top that I think will come out because holidays 2021 were relatively strong, as folks said, "Come hell or high water, I'm going to travel for holidays and I'll take January off," which every airline saw in their results. I'm not suggesting we're coming back to 2019 levels by any means. It's still gonna remain quite elevated and quite strong, just maybe slightly moderated from what I think will be the pinnacle in summer of 2021. I wouldn't run away with taking it down, but I also wouldn't run away with the continued, you know, sequential growth or something like that. Okay. What changes actually allows you to get to that from a low double-digit capacity growth to a mid-20% capacity growth? What actually changes that lets you do that? I'm not sure we're mid-20%. I'm thinking something about 20% for the full-y ear. I guess you're implying mid-20s% for the back half. Some of it will be. Right You know, more comp driven for to what we have in the back half of the year. We'll have some off-peak growth certainly through the August, September, October timeframe. It's a nice kind of round number for the year as well. I don't know that something needs to materially change for us to get there. We'll have the aircraft. We believe we have the pilots in place to do it. This is purely our take on where profitability will be and what's the right level of flying for us to accomplish. As I see it today, that's about right with maybe a little downward pressure applied by another fuel spike that we're kind of seeing today. Okay. Just last thing real quick. Can you just give an update on the updated budget for Sunseeker and, you know, confidence level that this is sort of the final raise here? Yeah. I think when you look at the world and the challenges, all of us have faced regardless of industry with supply chain and cost inflation pressures, it's been tough to put a, you know, a pin in it as to when things may stop in terms, and when I say stop, I mean escalation. We think we're there now. You know, there could be obviously some slight movement, but we think the 618 is a final number. But, you know, I always wanna caution that, you know, this world is changing, you know, daily when it comes to supply chain and cost pressures. Maybe to give some additional comfort around that number, we are 75% bought out on the project, and we will be 100% bought out by July 1. Over the next 60 days, we'll be buying out the rest of the project. Of course, by the Q2 call, there will be incredible conviction around a number, and hopefully that number is still 618, and we feel real good about that number today. As a sidebar, if you wanna see an impressive building and coming together, go out to SunseekerResorts.com, which has a double R in it, and look. Drone footage. Well, there's a button you have to click. Project updates. Project updates, and look at the drone footage. It's impressive. Thank you. I would like to turn the call back over to Maury Gallagher for closing remarks. Thank you all very much, and this group will be talking to you in 90 days. Have a good week. Yay. Thank you, ladies and gentlemen. That concludes today's call. Thank you for participating, and you may now disconnect.