Welcome to the 2Q 2021 conference call. My name is James, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the Q&A session, if you have a question, please press star one on your phone. I'd now like to turn the call over to DeAnne Gabel, Senior Director, Investor Relations. DeAnne, you may begin. Thank you, James, and welcome everyone to Spirit Airlines' second quarter earnings call. This call is being recorded and simultaneously webcast. A replay of this call will be archived on our website for 60 days. Presenting on today's call are Ted Christie, Spirit's Chief Executive Officer, Matt Klein, our Chief Commercial Officer, and Scott Haralson, our Chief Financial Officer. Also joining us on the call today are other members of our senior leadership team. Following our prepared remarks, there will be a question and answer session for sell-side analysts. Today's discussion contains forward-looking statements that are based on the company's current expectations and are not a guarantee of future performance. There could be significant risks and uncertainties that cause actual results to differ materially from those reflected by the forward-looking statements, including the risk factors discussed in our reports on file with the SEC. We undertake no duty to update any forward-looking statements. In comparing results today, we will be adjusting all periods to exclude special items. Please refer to our second quarter 2021 earnings release, which is available on our website for the reconciliation of our non-GAAP measures. With that, here's Ted. Thanks, DeAnne. Thanks to everyone for joining us today. Now, nearly 18 months into the pandemic, I grow ever more proud and impressed by the dedication of our Spirit team members. Throughout the course of the crisis, we have banded together to come up with innovative solutions to secure our future, save jobs, and take care of our guests. This summer has proven to be operationally challenging and very busy, with full aircraft and airports. I'm eternally grateful for all the hard work as we move ahead through the recovery. Turning to our second quarter financial results, solid operational and network execution, together with an improved demand backdrop, contributed to our reporting among the best financial results in the industry. While we recorded a net loss of $36.3 million for the second quarter, in June, we recorded our first month of profitability since the onset of the pandemic. Based on current booking trends, we anticipate we will be profitable in both the third and fourth quarters of 2021. Operationally, the team delivered strong results despite numerous weather systems across our network and elevated congestion at airports due to the volume of industry capacity. Our DOT on-time performance for the quarter was 78.3%, and our completion factor was 99.3%. The Spirit team is doing an excellent job managing through the recovery. We are once again growing our network and playing to the strengths of our business model. The team continues to innovate and grow non-ticket revenue, and they are doing a great job managing costs. As we ramp to full utilization, we will see further efficiency gains. There is still much to be done to attain sustained profitability and deliver high returns to our shareholders, but the stage is set, and we like how we are positioned. With that, I'll turn it over to Matt and Scott to discuss more details of our quarterly performance. Thanks, Ted. Second quarter turned out even better than we anticipated. Flights are full, and airports are very busy. I want to thank the entire Spirit team for taking excellent care of our guests and each other during this busy travel season. In discussing results today, I'll be comparing results to the second quarter of 2019, but I'll also explain second quarter revenue trends on a sequential first to second quarter basis, as doing so helps to illustrate the trajectory of our improvement. Turning now to our second quarter revenue results, total operating revenue was down 15% compared to the second quarter of 2019 on 5% less capacity. This result was much better than our initial expectations. Demand trends in our domestic and international markets saw significant improvement as the second quarter progressed, such that June 2021 operating yields were nearly flat compared to June 2019 on similar capacity. Compared to the first quarter 2021, improvement in operating yields as well as higher load factors helped drive an 86.3% sequential improvement in total revenues, compared to a much smaller 28% sequential capacity increase. On a per segment basis, compared to the same period in 2019, total revenue per passenger segment declined 9.4%. The passenger revenue per segment component did decline 23.5%, but we saw very strong non-ticket revenue per segment performance. Our non-ticket revenue per segment increased $2.85 compared to the same quarter in 2019, a 5.1% increase. This non-ticket result is a record for Spirit, and we expect to break that record again this quarter. We said we'd continue the upward march on non-ticket performance. We're doing that through enhanced product offerings, improved customer-facing merchandising, and realized benefits from our revenue management initiatives. The investments in these areas are paying off. We are moving even closer to $60 of non-ticket revenue per segment on a quarterly basis, and I couldn't be prouder of the teams working across the entire company to achieve this result. The revenue management and e-commerce teams continue to lead these efforts, but our fantastic airport services team deserves a lot of credit as well. Thank you to each and every one of you for driving this incredible result while we're still battling through the pandemic. Turning to the passenger ticket side of the equation, load factors have largely recovered and the yields we've seen around peak travel have been impressive and have largely caught up to 2019. The opportunity to push up yields during off-peak periods will likely continue to be a challenge and our focus for a little while. However, as the recovery in leisure as well as business travel progresses, we expect to further close the gap to 2019 passenger revenue per segment. Additionally, while the improving demand trend certainly helps, our network and deployment of assets is the largest driver of our revenue performance. We have a strong track record of picking markets that allow us to profitably offer low fares, stimulate demand, and provide high value to our guests. This has been and continues to be the recipe of our success. We remain very well-positioned to capture market demand. In addition to reinstating nearly the entirety of our route network to pre-pandemic levels, we've been very busy adding new cities to our schedule. Over the past few months, we commenced service from our new cities of Louisville, Kentucky, Milwaukee, Wisconsin, Pensacola, Florida, Puerto Vallarta, Mexico, and St. Louis, Missouri. We added 28 new routes in the second quarter and reinstated 11 routes which had been previously suspended. Some examples of our new routes include service from LaGuardia Airport to Los Angeles, Nashville, and San Juan. We also started new international service from Los Angeles to Los Cabos. Some other examples feature new leisure routes from origination cities like Kansas City and Columbus. Also during the second quarter, Spirit announced new service to Manchester, New Hampshire, and Miami, Florida, which will both begin operations in October. Just yesterday, the president of Honduras joined us in announcing service to the new airport in Tegucigalpa, which will start operations just before Thanksgiving later this year. While in general, we are pleased to be growing again, we are being very deliberate with our route deployment to ensure that we continue to build a sustainable network for the long term. For the third quarter, we estimate capacity will be up 10.6% versus the third quarter 2019. For fourth quarter, we estimate capacity to be up about 23% versus fourth quarter 2019. Moving ahead to the third quarter revenue outlook, July yields and load factors have been strong. Our booking trends indicate August through early September will also be strong. The post-Labor Day period typically books closer in. Therefore, our visibility is somewhat limited, which is normal for this time of year. At this point, we aren't seeing anything to suggest the seasonality trade in September will be different from normal. The revenue range implied by our EBITDA guide is $1.03 billion-$1.1 billion, or up 3.5%-11% compared to third quarter 2019 on 10.6% more capacity. Now here's Scott. Thanks, Matt. I also want to thank our team members for their continued commitment and dedication. In my travels around the system, I see the hard work and I hear the team spirit in their voices, and it makes me proud to be part of the team. Now turning to our second quarter 2021 financial performance. Due to our strategic deployment of assets, an improving demand environment, and our strong operational performance, we were one of only a few airlines to produce positive adjusted EBITDA for the entire second quarter. Our EBITDA margin for the second quarter was a + 7.2%. This result was much better than our initial expectation due to both better revenue and lower costs. Total operating costs increased 2.6% compared to the second quarter 2019. Our cost performance was better than expected, primarily due to strong operational performance, airport use fees increasing at a slightly slower rate than expected, and some timing of events that shifted to Q3, as well as good overall cost management. Moving on to the balance sheet. During the quarter, we leveraged the favorable market dynamics to enter into a series of liability management transactions. To summarize these transactions, we completed a direct placement of 10.6 million shares to holders of our 4.75% convertible notes and used the proceeds to redeem $340 million of our 8% senior secured notes. We also issued $500 million of 1% convertible senior notes using the net proceeds to repurchase 84% of our outstanding 4.75% convertible notes. After accounting for the premiums paid and payment of accrued interest, the net result was that we were able to reduce interest expense by about $30 million per year and reduce our overall debt balance by about $32 million, while not materially impacting the run rate of net diluted shares nor our liquidity position. Details of these transactions can be found in our earnings release and 10-Q filing that were both published yesterday and are available on our website. In addition to these transactions, we also repaid all of the outstanding indebtedness under our senior secure revolving credit facility. We ended the second quarter with $2.2 billion in liquidity, which includes unrestricted cash, short-term investments, and the $240 million of available capacity under our revolving credit facility. Turning now to our fleet and fleet utilization. During the second quarter, we took delivery of five new A320neo aircraft and ended the quarter with 164 aircraft in our fleet. By the end of the second quarter, 23 of our 31 A319s were back in service. Our average daily utilization for the quarter was 9.9 hours, or 23% lower than the second quarter of 2019. As I've noted previously, we expect to ramp to full fleet utilization by mid-2022. During the quarter, we completed the purchase of two additional A319s off lease. Our revised capital expenditure estimate for 2021 is now $290 million. During the quarter, we also launched an RFP for additional aircraft required in the 2022 to 2024 timeframe. As we discussed previously, these aircraft were expected additions to our order book with Airbus. To recap the forward-looking guidance we provided in our earnings release, we estimate our EBITDA margin for the third quarter will range between + 10% to +15%. This assumes total operating expenses of about $1 billion. We're also assuming a fuel price per gallon of $2.14 and D&A of about $75 million. As noted previously, for the first half of 2022, while we still have utilization headwinds, our CASM ex fuel will likely be in the low sixes, and by mid-year, we expect to reach sub six territory. In closing, the ramp-up of our operation and our unit cost progression is happening on target, if not even a little bit better than expected. We don't believe anything about the pandemic changes our long-term opportunities, and we expect a full recovery in travel demand and look forward to growing the airline again. With that, I'll hand it back to Ted. Thanks, Scott. There has been an increase in news reports regarding jurisdictions reinstituting indoor face covering policies. It's too soon to say what, if any, impact this will have on bookings. All along, we've assumed the recovery would be choppy, but regardless of whatever ups and downs occur related to the pandemic, it doesn't change our long-term view. Low costs and high quality have allowed Spirit to deliver industry-leading margins since our IPO. Nothing that we have experienced or learned during the course of the pandemic has changed this historical fact, and we also feel confident that as we exit the pandemic, we will leverage those same strengths to deliver pre-pandemic margins in 2023 and beyond. With that, back to DeAnne. Thank you, Ted. We are now ready to take questions from the analysts. We ask that you limit yourself to one question with one related follow-up. James, we are ready to begin. Very good. Thank you. We can begin our Q&A session. If you have a question, please press star one on your phone. If you wish to be removed from the question queue, you may press the pound sign or the hash key, and if you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, press star one. Our first question comes from Helane Becker. Oh, thanks very much, operator. Probably a question for Scott. As you're thinking about acquiring aircraft, I think you mentioned for the next couple of years, 2022 and 2024 deliveries, how are you thinking about aircraft cost? Because we're hearing from other airlines that they're out looking for aircraft too, and Allegiant said yesterday they were able to secure some aircraft down 30% versus pre-pandemic levels, and I'm wondering if all this demand from various airlines is not going to cause pricing to move up. How are you thinking about that? Yeah, it's a good question, Helane. Good morning too, by the way. We were out in the market really pre-pandemic thinking about this, the rates that we're seeing today, we mentioned on the previous call too, were really at or below pre-pandemic levels for that time period. Hard to say what's going to happen to the lease rates or cost of aircraft sort of post this near-term window. What we're seeing in the sort of 2022 to 2024 timeframe are lease rates that are pretty attractive. Hard to say for the used aircraft because we're in the market primarily for new kit, but the lease rates are in a pretty good spot today. That's very helpful. Thank you. Then just for my follow-up, I think Miami is one of your new markets, and I'm just kind of wondering, maybe Matt, this is for you, how you're thinking about Miami. It's an expensive airport from which to operate on a cost per passenger basis. I don't know, how are you thinking about that and balancing your low fares with those high costs? Thank you. Sure thing, Helane. Good morning as well. Our decision to enter Miami was one that took a number of years for us to be able to get to that point where we could feel comfortable entering Miami. That is because the airport there did change their cost structure along with their lease rates. Just in general, without getting into too many technical details, the structure there changed a lot, which made it attractive for us to finally enter Miami. We feel like as a leisure airline, Miami is one of the largest leisure destinations in the country. It was just a matter of time before we were able to get in there. The cost structure, to your point about low fares, the cost structure there now allows us to go in there with our low fares and be very profitable. That's very helpful then. Thank you very much, and have a great day. Wonderful. Thanks. Our next question from Brandon Oglenski. Hey, good morning, and thanks for taking my question. Matt, I think if we go back to your implied revenue guidance for the quarter, at the top end of it, that would imply getting back to where you were in 2019 from a yield or passenger revenue per segment level. Maybe you can speak to that a little bit more. Yeah, sure thing, Brandon. That's right, the top end of the guide is implied to basically have revenue production at ASM growth. Our continued move up on non-ticket has been, I would say, something that we knew we would be able to achieve, but the investments have been paying off a little bit faster than we had actually even anticipated ourselves. It's one of those things we've talked about over the last few years, really, but even during the pandemic, we continued to invest in what we knew would be important for us coming out of the pandemic. A lot of that was in what we offer our guests and how we offer it, not just what, but how. That seems to be paying off well, and the revenue management and pricing of those products has been working, too. We had it in the prepared remarks as well, is once we get past Labor Day, the high end of the guide would be anticipating that there would be a continued move up, and that we start to see some of the anticipated demand that comes back from, say, small or medium-sized businesses as well. As evidenced by that, every year, we move our capacity around from summer into the post-Labor Day period. Let me give you an example. When schools in some places start to go back to school, so say, for example, in Texas, we'll move some capacity out of Texas in mid-August, move it to the Northeast because school goes back after Labor Day, generally. That's sort of an end of summer move we do with our capacity. You get past Labor Day, and this year, we moved even more capacity into Las Vegas after Labor Day. In fact, I think we're up around eight or nine departures per day once you go from August to September. We did that in anticipation of conference season starting to build back up in Las Vegas. Not just an extended leisure period, but also the anticipation of some of that building back up. That's where we can see maybe some ability to hit the upside of the guide, is if that kind of traffic with the yields we would anticipate on that follows through. Hope that helps give some color on that. Super helpful, Matt. I guess, for Ted or Scott, I think there's been a perception at least, because we've been talking about CASM in 2022 that could be higher than where you were previously pre-pandemic. A lot of investors have asked, like, has Spirit lost its way on cost focus? Seems like, Scott, I think you said sub six come the back half of next year, or maybe I heard that wrong. Can you talk to some of the focus on cost or the cost initiatives you guys are working at? Yeah. Thanks, Brandon. Yeah, look, first off, certainly not the case. Spirit of all people cares about unit costs. It's our biggest strategic asset. That's our 100% continued focus. To think about the math of the situation, there are inflationary costs that are happening in the industry. We're not immune to that. We're seeing inflationary costs on labor, and we've talked about airport costs before. All those things are happening. We're likely going to lean into leasing aircraft a little more. That's going to put pressure on unit costs. All of those things still taken, we're going to be, like you said in the prepared remarks, sub six by mid-2022. How far below six we go depends on a number of things. For example, like financing aircraft, where we fly those assets. In general, we're going to be in the high fives probably, and then we'll see where it goes from there. We've talked about the things that drive unit costs being what you fly, how you finance it, and where you fly those assets. We'll make financing decisions and fleet decisions over the coming years. We'll make network decisions, and those will impact where unit costs go over time. The hope is that we can get to a fairly sizable number below six and continue to maintain that sort of high fives CASM for a period of time. The decisions that we'll make in the short term will dictate where that ends up. Thank you. Next question from Jamie Baker. At JPMorgan. Hi. Good morning, everybody. Let's see. You cited being profitable in the fourth quarter. That's helpful. I realize you're probably not going to provide a ton of granularity, but relative to the third quarter, what really changes as you move into the fourth quarter? Are you expecting costs to meaningfully come down or sequential revenue to meaningfully accelerate? I ask because it's pretty rare for you to generate more revenue in the fourth quarter than the third. We're obviously in a pretty robust recovery at the moment. Hey, Jamie, it's Ted. I think it's both to start. The guys can jump in and give a little clarity, as the airline will continue to ramp utilization, Scott mentioned in his remarks today, utilization in the second quarter was almost three hours less than we normally fly. With that utilization level, we're still producing below $0.065 CASM ex, and we're talking about a 25-ish% utilization penalty. As the airline starts to move the utilization in the right direction, unit costs are going to come down. I think that's a tailwind heading into the fourth quarter. We also are getting bigger, so total revenue will go up. Seasonally, the fourth quarter is not as profitable, generally speaking, as, as the third, but we are anticipating a continued recovery as well. Evidenced by the EBITDA margin guide that we provided, right now our expectations for profitability into the third quarter are around the margin, once we get to the bottom line. Yeah. We're at small numbers, but we're certainly moving into the right direction, and very encouraged by unit cost trajectory and demand recovery. I think that that's what's going to move Q4 sequentially in the right direction, setting us up that by the time we hit the peak of 2022, we're much more in a traditional run rate. Got it. That's actually really helpful. Just as a follow-up, could you quantify what sort of a revenue or RASM drag the new markets, you mentioned the four or five new cities, the new market activity, what pressure that's putting on the third quarter revenue guide? You gave us a third quarter revenue range. Any way to express that on a same store sales, RASM basis, something like that? Yeah, sure, Jamie. I think we'll probably answer it in a little less detail than you may actually want. I can tell you this, that historically, new cities, new service, does usually take around a 10% or so RASM penalty as we ramp up. That has so many caveats in it, which is the time of year we're launching it, how big is the launch. I think we talked about that a little bit a couple of years ago as we had introduced a lot of new cities. We don't anticipate that to be significantly different. The one rub on that is that we do think, because, say for example, Miami, we are starting off in October with, I think, about one gate of service, and then by the time we get to Thanksgiving, it'll be up to nearly 30 departures per day, which is a relatively large launch for us. It's ramping up right before Thanksgiving and then into Christmas. We're not anticipating there to be the normal drag, say, in the fourth quarter that you might have on new service. Then we'll just sort of see what happens after New Year's, because January, as you know, can always be a bit of a wild card for the industry. Okay. Very disclosive answers to both my questions. I appreciate it, gentlemen. Take care. Bye. Thanks, Jamie. Our next question from Duane Pfennigwerth. Hey, thanks. Good morning. A follow-up maybe to Brandon's question. Can you just help us mark-to-market on what you've said on timing about getting ex-fuel unit costs below 2019? It feels like you've ratcheted up capacity at least once, maybe a couple of times. Now it sounds like you're looking for incremental fleet to add. What have you said in the past on timing on when your non-fuel unit cost would be below 2019? How does that compare to where you stand now? How do we contextualize maybe a couple of upward revisions to your capacity outlook? Okay. Thanks, Duane. A couple of points there. On unit costs, we have said that we will be sub six, which in 2019, we're in a fiveish CASM. Even heading into 2020, we said CASM ex would be up probably 1-2 points. We were already experiencing inflationary components and haven't talked about getting to 2019 CASM ex during the COVID or post-COVID period. To clarify, we have said sub six CASM, probably hitting that number in mid 2022. That's the clarification on the unit cost guidance. As for capacity, our capacity moves haven't really changed, or at least our go-forward thoughts around growth. It's been mid-teens capacity. In fact, the COVID crisis set us back a little bit on a percentage basis. 2022, we would be larger absolute had it not been for the COVID crisis. We are going to return to our stated previously mid-teens growth rate. We'll continue that for a period of time. I don't think things have changed around how we think about growth. I think it's really more around the math maybe, in 2021 or 2022 as we get back to full utilization. The growth metric itself on a percentage basis will be a little awkward. How we think about growth hasn't changed. Okay, maybe one for Ted. The commentary, I appreciate there's a lot we don't know at this point in time, you certainly don't want to set a high bar. Given that you're entirely leisure-focused and given that you don't fly to Europe or Asia or any of those places, why would it take until 2023 to restore your margins? Hey, Duane, how are you? We mentioned utilization being a drag, and until we can get the airline back to full use, it will be a margin drag. As Scott indicated, that's probably not going to happen until we get to the middle part of next year. At least for the first half of next year, we're going to have a little bit of a pressure with regard to utilization. We're also anticipating still recovery while you're right, we don't carry transatlantic and transpacific traffic, and we don't carry large corporate traffic, probably. There's, in all likelihood, at least some on our airplanes. It is all demand. All of that stuff is demand in the marketplace. As it returns, the overall marketplace does get healthier. That is part of the expected recovery, which we anticipate happening over the course of the next year and change. I think that's another component as to why we anticipate it taking really up until 2023, when we're starting to see things more normalized. I've already said in an earlier question, by the time we hit the summer of next year, we're sort of running again. I think you can kind of think about that as the start of it. For us, at least, I can't speak for other airlines, but that's the way we're thinking about it. It really is about utilization and getting overall demand back to where it was. Okay. Appreciate the thoughts. Thank you. Next question from Hunter Keay. From Wolfe Research. Hi, everybody. What is the outlook for gaining some slots at Newark in light of the appeals court victory? Ted, can you now compel the FAA or the Port to make room for you? No. Let's start with what we know. We are actively engaged in a number of efforts to get larger in New York. I think that's been well-publicized at this point, which I will comment on further. Today, with regard to the waiver that's in place, there is incremental flying that we can do in LaGuardia, which we are doing some of. We recently relocated some of our service to the Marine Air Terminal, and in doing so, we've created at least physical space for us to get larger to the extent that there is availability. Beyond that, I don't have visibility about how slots would be managed at that airport. Okay. All right. I'd like to ask you a question about M&A. I know you're going to say you'll do what's best for shareholders, and that's the right answer, of course, but what sort of operational considerations would you consider when contemplating M&A? Not just integration and the cost of integration, but also culturally, anything related, IT. Is there anything that would be sort of too difficult or a non-starter as you contemplate maybe engaging in it in one form or another if you decide to go down that path? Thanks. I think those are all inputs. Hunter, you nailed it on the head. We will do what we believe is in the best interest of our constituents, which include our shareholders and our team members and our guests. M&A can have tremendous benefits to it in the form of synergies, but it can also create complexity and challenges with regard to technology and integration risk and operational risk. All of those things are considerations, and if you look back over the history of how airline M&A has gone post deregulation, I think there have been some hits and misses. I think we take that all into consideration as we evaluate or would evaluate opportunities for Spirit. Right now, our focus is on rebuilding the airline, getting ourselves back to where we believe we need to be. We're in a leadership position today in our space, and we want to maintain that. All right, Ted, thank you. Yep. Our next question from Mike Linenberg. Hey, good morning, everyone. Two questions here. Hey, Matt. As you've mentioned, look, you're getting the network back to 2019 levels, but I think one of the sort of interesting sort of backstories here is that, if I were to look at the diversification of your network, it does feel like that you've used the pandemic as an opportunity to really add a lot more points, whether it's spokes or even in some cases, call them focus cities like Miami. Do you have anything that can give us a sense of maybe how the diversification has increased? Say we go to 2018, 2019, your top 10 markets represented 50% of your revenues, and maybe now it's 25%. It does feel like you've really made some efforts there, and it's going to really, I think, help you on the backside here. Any sort of data points or anything that you could provide that highlight that shift or evolution would be great. Yeah, sure thing, Mike. As we exited 2019 and headed towards 2020, we did talk a lot about making sure that we were building upon our strengths, and that includes leisure cities, leisure markets, leisure destinations. The pandemic got a little bit in the way of the execution of that plan, so we really weren't able to show it off the way that we wanted to. We probably took that plan and then took it a little bit to another level once we got inside the pandemic. Some of that is based on where we saw demand materializing, and quite frankly, I think some of our competitors were probably thinking the same thing. For us- yeah. Our low costs allow us to drive the fares necessary to still be profitable long term in leisure routes. I think one thing is we were already planning on doing that, within the pandemic, we were able to find opportunities to really juice that up even more. There's another side to that as well, which is our Latin America and Caribbean network. Pre-pandemic, we were running around 15% of our capacity was in Latin America and the Caribbean. It was only a few short years ago, that number was 10% of our capacity. It went to 15%, and then during the pandemic, we've got that number up to nearly 20% now. Okay. We'll see what happens after we get back to a more normalized demand environment for the entire industry, if that number stays up at 20%. We're pretty happy with the results. We announced a new city just yesterday in Honduras, the second city in Honduras that we'll be serving. We're always looking for those opportunities to diversify the network and find that VFR traffic as well, which is very profitable for us. Very good. Just sort of the second here, and kind of ties into Jamie's question about fourth quarter profitability versus third and why, and in fact, you are going to be a much bigger airline in the fourth quarter versus third. Also, just what are you seeing on the booking side? Early book, Thanksgiving, Christmas. I realize that it had been difficult to go that far out, but we have heard that the booking curve has elongated, and presumably you're benefiting from a much longer, well, I should say a longer booking curve than maybe what you saw six months ago. Any early read on what you can tell us about sort of the November, December timeframe from a book perspective? Thank you. Sure thing. Sure, Mike. Yeah, it's pretty far out right now for those time periods. Normally, we are always pressure testing yields for holiday peak periods just to see what's the market looking at and what's the clearing price because This can be a long answer. I'll try to keep it short. There's different booking curves within different travel periods. Some people like to book really far out from their holiday trips, then others book closer in. I think you're talking about sort of the far out bookers is kind of what you're kind of talking about right now. I would say that's continuing to move at what we would normally see. There's nothing abnormal happening out there that has us concerned that there won't be strength around Thanksgiving or Christmas. The bulk of the booking curve for those holidays comes in after Labor Day. We'll have a lot more commentary on that on our call in October. As of right now, we're not seeing anything that suggests there's going to be an issue at all out in Thanksgiving or Christmas. Great. Thanks. You're welcome. Next question from Stephen Trent. Hi. Good morning, everybody, and thanks for taking my question. Just really a quick one from me. When you're thinking about your pilot staff, how comfortable are you with that labor situation heading into the year in terms of your tenured crew in the fleet at the moment and the pace at which maybe furloughed pilots are currently doing their flight simulator training? Just wanted to get your high-level view on how that's looking. Thank you. Sure, Stephen. First to clarify, we did not furlough any of our crew, so we don't have any of that issue. Obviously, some of them did take leaves, and we've been working to bring them back and are now in that position. We're actively hiring as we grow and have been doing so really since February of this year, one of the first airlines to be back in the market. The reasons that Spirit is an attractive landing place for pilots remains true today. We do have a rather rapid move to captain here because of our growth rate. Anecdotally reading and listening to what our pilots have to say, they enjoy the network. They enjoy their ability to balance their lives with the way that our network flows. That creates actually quite a bit of attraction, and the recommendations coming from our pilots to other pilots is very positive, such that the combination of all of those things mean we're oversubscribed today. We have more applicants than we have jobs, which puts us in a favorable position. Not ignoring the fact that over the next few years, there is going to be a looming pilot issue based on what everyone's saying in the marketplace with retirements and active hiring happening at all airlines. I would put us in a pretty favorable spot there. As cracks start to show around pilot availability, you're not going to see it at Spirit first. It's clearly going to be at regional airlines and less attractive low-cost carriers. We consider ourselves to be in a pretty good position there. Okay. Super. As a quick follow-up, given what we've seen in the news with some of the utter nonsense that unfortunately flight attendants have to put up with rude passengers on planes and what have you, has any of that at all kind of crept into the conversation that you're having with your flight attendants and forgive me, by the way, for screwing up the legalese on furlough versus leave. Thank you. No, no problem. Yeah, is it coming up? Absolutely. You're right, there is a lot of publicized reports on unruly passengers on board aircraft across the U.S. space, and across all brands. It is still the vast minority of activity. As the economy has begun to open up more, restrictions have been lifted over the last six or 12 months. People are growing more comfortable with the way travel is operating. The federal authorities have stepped up their enforcement of regulations on board aircraft. All those things have actually taken some of the wind out of that sail and reduced the steam on the airplane. It still happens, our flight attendants are concerned with that, clearly, all flight attendants and all crew members across all airlines are concerned with that and have elevated the issue. We're addressing that with the way that we treat passengers on board our aircraft that behave that way. We actively ban people who misbehave on board our aircraft. We're backing up our crews, making sure that they're aware of what we're doing with active communication, with messaging on board the airplane, and I think that's having some desired effect. The optimist view here is that as things start to move more towards normalcy, behavior will move in that direction as well. Okay. I really appreciate the color. Thanks, everybody. Yep. Our next question is from Savi Syth. Hey, good morning, everyone. Matt, this might be tied to your response to Brandon, but about two, three years ago, I think, in the face of higher fuel, you did more of kind of day-of-week pruning during the shoulder months. If we compare 2019, I think there's more Tuesday, Wednesday flying in September this year. Is that a shift in philosophy here, given that you're expecting kind of normal seasonality into September? Yeah. Thanks, Savi. I think on a mix basis, we do have a little bit more Tuesday, Wednesday as a percentage of overall flying. We are still doing pull-downs on Tuesdays and Wednesdays, and I think there's some Saturday pull-down going on there as well. That's actually, I think, a little bit more of a reflection that a couple of years ago we felt like we might have pulled a little bit too much on the off-peaks, is really what it was. It's not really anything more than that. Got it. Just if I had a bit of a follow-up to Mike's response on the international market. Just wondering if there's a change, mix change in terms of leisure and VFR-type markets and also just how are those different type of demand profiles performing recently? Right. I think overall, we probably are leaning a little bit more towards leisure. Some cities like Cancun got a decent amount of service added to them as well. Puerto Rico has more service, and there's a lot of VFR and there's a lot of leisure in there, so that Puerto Rico definitely runs both ways for us very well. For example, what we added yesterday, which will start service later this year, in Tegucigalpa in Honduras, that's going to be largely VFR. We're constantly just sort of looking for where we think we can drive more VFR traffic because we're uniquely positioned to be able to do that better than anyone else. We're also going to be very focused on leisure destinations and when they come back. I can give you another example like Jamaica. Jamaica had just jurisdictional requirements that were different than other leisure destinations. As those got relaxed, we saw, say, for example, Montego Bay come back pretty strong and we'll see the same thing in Punta Cana. I don't think at any given time, we're saying to ourselves, "Hey, let's push up VFR more than leisure or vice versa." We think we do great in both. Our cost structure allows us to do well in both. We're just looking for the next best opportunity to continue to add to that network. That's helpful. Thank you. You're welcome. Next question from Chris Stathoulopoulos. Good morning, everyone. Thanks for taking my question. Just going back to the earlier question around what feels like a sort of late return, if you will, to pre-pandemic margins with the 2023 target. I just want to understand here, how much of this is what you can and cannot control and push, if you will. If demand comes back stronger than expected, variant risk subsides, non-ticket piece continues to perform well, and fuel goes the right way, is there an opportunity to accelerate, excuse me, that margin trajectory? Thanks, Chris. Absolutely. If demand recovers faster than what we're expecting today, that would be a contributing factor, 100% and probably in reality, outstrips any kind of benefit we could get about running the airline faster to its peak. A good move in demand would have a positive view on that. We have our case out there as to what we're anticipating, and hopefully we're right, or it's better than that. On the second side of the ledger as it relates to cost, and I just kind of alluded to it, we're moving the engine pretty quick right now. Not only did we have to retrain or get everyone back current for anyone who had taken leaves over the course of the pandemic, but during the pandemic, we took delivery of airplanes, and we're continuing to take delivery of airplanes over the next five years. We have to hire and train all those crews. We have to select all the routes we want to fly to. We have to negotiate with the airports. We have to get our station contract vendors in place. We have to do all of the logistics associated with making that happen. The team is working very hard on making that happen as quickly as they can. I don't know that there's a lot of flexibility for us from a utilization perspective. Around the edges, probably so, but I think our target of hitting where we want to be by that kind of late spring, early summer of next year feels right to us right now. Okay. Thank you. My follow-up, I think in your prepared comments, you mentioned some challenges on pushing yields in some of the off-hour markets. Just could you comment on the fare dynamic, generally speaking, with what you're seeing to some of your peers and if there's any notable areas of strength or weakness? Thank you. Yes, Chris, this is Matt. What we call the floor level, sort of the lowest price points you see in markets, the floors, and this is a very encouraging sign, the floors are higher now than they were even before the summer started, or say late spring into summer. Those floor levels, the lowest levels in the market, are higher. That's a general statement across the board. That's a very encouraging development. I would say what's also encouraging, now, while, yes, it is definitely going to be true that we're going to have, what we anticipate, I should say, to be some challenges on, say, off-peak days of week, that's something that we fully expect. When demand is fully back is when we expect all of that to sort of work itself out. As Ted just alluded to, we're thinking that'll take into, say, spring, summer of next year for demand to be fully back. Until then, there's just going to be a question as to what happens, I think, from the overall industry ecosystem in terms of corporate travel and how much corporate travel is out there. We don't necessarily take a lot of corporate travel, but we do get a lot of business, decent amount of business travel from, say, small and medium-sized businesses do like saving money and flying on us to get their high value when they fly. I wouldn't necessarily say that we're seeing any pockets of significant concern or weakness right now. I think it's just across the board, the low end of the fare structure is higher. What we don't know is once we get through the summer and past the Labor Day period, will we see some of that come down a little bit for say, six or eight weeks until we get to Thanksgiving? Really that's no different than any other year. I think as we know, the base is still a little bit lower than we would like it to be. We don't anticipate there to be any kind of abnormal seasonality trade that would occur, say, versus prior years. Just take 2020 out, for example, and go back a few years. It happens every year. We would anticipate that to be normal, and then we'll see yields stretch back up, even in the off-peak once we get into Thanksgiving, Christmas, and then into next year. Okay. Thank you for the time. Our next question is from Conor Cunningham. Hey, everyone. Thanks for the time. Yeah, you've made a lot of new route announcements. I'm just trying to get a sense for how you're thinking about planning 2022 and 2023. It just seems with growth kind of resuming, it seems like you're going to have an elevated new market as a percentage total. Just curious how you're thinking about balancing that in 2022 and 2023 specifically. I know nothing's announced yet, just how you're thinking about planning for that going forward. Sure, Conor. As you can anticipate or imagine, there's some details I'm not going to share to answer that question. I can tell you that we expect, certainly in 2022, that around 20%, maybe 20%-30% at the most of our growth will be sort of in new cities that we're not in today. If we're going to be growing, say mid-teens capacity, we expect, say 20% of that growth to be in new cities or new routes connecting dots. It's not something where we think we're going to be overstretching the network into so much more growth that we won't be able to manage it on the RASM side. Okay, good. On Miami, I know it's a complement to Fort Lauderdale right now, but are you looking to expand past 30 departures? You clearly know the market really well. Are you just concerned that Miami may cannibalize Fort Lauderdale on some level? Thanks, Conor. No, we're not anticipating Miami is going to be cannibalizing Fort Lauderdale. We want to grow and continue to grow our South Florida presence. The cost structure change at the airport really gave us the opportunity to go in there. You can see by the size of the launch over the c ourse of a couple of months, how excited we are about being able to now serve Miami, and serve it well. In terms of the future, we'll just kind of see how things play out. We need to absorb what we're adding, and if things go according to plan, that'll open us up to be able to do some more over time. We're going to be deliberate and we're going to be pragmatic in our approach. I anticipate we'll be moving some things around as time goes on, and then seasonality will come into play and then we'll see maybe seasonally you'd see more or less depending on what's happening. We expect a good launch, we're excited for it, and we expect to be able to grow that over time. Okay. Appreciate the thoughts. Thank you. Next question from Catherine O'Brien. Good morning, everyone. With non-ticket reaching record levels and another record expected for next quarter, can you just, maybe this is to Matt, can you help us frame what part of that growth versus pre-pandemic levels is driven by either new products or merchandising capabilities? Just trying to understand maybe what part of that relative performance versus fare is maybe those items being a little bit inelastic and what is new that wasn't there in 2019? Thanks. Sure. I'd say, out of, say, the $2.85 improvement that we saw versus a couple of years ago in that rate, well over half of that is what we're basically just better at doing today than we were a couple of years ago. That's very encouraging because, as the quarter went on, things got better and better, as we went through the quarter. That's why we have confidence in setting another record this quarter. It's continuation of being able to just revenue manage the products in a better way. In terms of new products, we have enhanced our bundled services offerings. We now have another version of that's been very popular with our guests to add on to their trips. That's something that's new. As time goes on, we relaunched our loyalty program earlier this year. We're seeing a pretty good traction with that, moving along relatively right on top of what we thought we would see this year as it ramps up and as we come out of the pandemic. The timing of when we come out of the pandemic is always sort of a subjective answer. As we come out of it, we do anticipate we'll see continued improvement and growth of adoption of our new credit card program in conjunction with the loyalty program improvements overall. Got it. Maybe just based on what your operation could handle smoothly and also your outlook on staffing, could you just help us think through the upper bounds of fleet growth for next year, of course, depending on demand, and maybe very high level what that max level of incremental aircraft could apply for capacity? Thanks so much. Yeah. Hey, Catherine. We put out a fleet plan on the website, you'll be able to see what we're looking at for 2022. Probably going to be around 24 aircraft, is what we're looking at today. That'll target us for mid-teens growth for 2022, on a sort of aircraft neutral, or, sorry, really sort of a lower utilization in 2021 neutral sort of mid-teens growth rate. On an aircraft basis, it's about that mid-teens. That's what we're targeting, and like I said before, it's probably going to continue in the near term. 2023, 2024, thinking mid-teens growth too. You'll see that clip along. Do those 24 aircraft from the fleet plan, does that include the incremental aircraft you're looking at the RFPs out on? It does, yeah. We have an order book with Airbus that's around 17 or so directly from Airbus. There will be an incremental seven lessor direct operating leases. Thanks so much. Most likely. Our next question from Dan McKenzie. Oh, hey. Good morning. Thanks. Couple questions here. First is on growth versus the sustainability of the sub six CASM ex fuel that you're targeting next year, and I guess the question is: can you potentially leverage scale over the coming one to two years in a way that you couldn't in 2019? Should we be thinking about the sub six target as the cost paradigm over the coming cycle here? Well, I'll start. This is Scott, by the way. The others can chime in. What I think we're targeting, the mid-teens growth rate is around a few things. Obviously, the opportunity set we think is vast and that's one of the drivers of our desire to grow. The component around mid-teens is as much logistics as it is anything. I think it'd be very difficult for us to grow at a much faster rate, just given the supply chain issues, and the amount of throughput we would need from crew, real estate, and all the other components, to getting the aircraft even, to grow much faster. Growth is dilutive. I mean, if we were to grow faster, that would have a dilutive effect on CASM. I think it's a multi-pronged approach around how we think about growth. I think we feel like mid-teens is probably the right number for us at this point. Mm-hmm. Then if you could remind us, what are the return metrics you're holding that growth to and over what time frame? Then I guess related to this, when you've had competitive responses historically, how long does it typically take for those responses to unwind? Yes. I'll start and Matt and Ted can chime in. Our sort of marching mantra has been mid-teens growth and mid-teens margins, and nothing's really changed that. I guess as far as the competition question, I can wax philosophical here for a second. There has been a lot that we've been told over the years about what happens with our airline. Strong corporate travel is bad for us. Strong corporate travel is good for us. High fuel is bad for us. High fuel is good for us. In all of those instances, and in my nine years here, we've experienced every single one of those environments. We've delivered mid-teens margins or better with growth. It is our expectation that we will navigate through whatever the competitive environment will look like. We will navigate through whatever the fuel environment will look like. We'll deliver sub six CASM-ex, and we're going to do it with mid-teens growth. We're very excited about our prospects at doing so and delivering the returns that we expect for our shareholders. Very good. Thanks so much, you guys. James, I'm told we have one more person in the queue. We can go ahead and finish with our last question, please. Very good. This question is Joseph DeNardi. Great. Thanks. Good morning. Thanks for squeezing me in. Ted, maybe just on the 2023 margin target, what's the assumption for CASM ex? What it'll be then to get there, and then what's the assumption around kind of what you can get non-ticket to by that point? Thank you. Yeah. The group's not going to be happy with me if I start throwing targets out there in 2023. Let's just recap. We expect that we'll be below $0.06 by the time we hit our run rate in mid-2022. The objective around here is to get our unit cost and our efficiency as best as we can. Both of those things, and I expect that to carry into 2023, by the way. Non-ticket, we just set a record this quarter, and I remember starting here, people saying, "Can you get to $60?" Well, we're basically right on top of it now. We're going to continue to kind of put targets out there that we're hopeful that we can attain. We have instituted real technology and process here that's improving our ability to manage the products. As Matt just alluded to in a prior answer, we also haven't really added all the products that we intend to add, mostly because of COVID. We've been delayed a little bit. Our loyalty program was delayed from where we originally wanted it to be deployed. Our ability to sell package vacation products is not where we want it to be today. Those things, combined with the continued momentum we're seeing, I think is a non-ticket tailwind across the board. We anticipate non-ticket to continue to move up. I think those are two very positive stories heading into 2023 from a margin perspective. How the demand environment shakes out over that period of time is still a matter of debate. We anticipate it will be obviously fully recovered by that point. We may be wrong one way or the other, but as I just said earlier, we've navigated through those periods and done quite well. Okay. Scott, is the trajectory kind of into 2023, is CASM ex down growing mid-teens? I think there was some uncertainty around that kind of pre-COVID. What are your thoughts at this point? Hey, Joe. We haven't guided obviously to 2023 yet, but Ted mentioned, and I've talked about before, reaching sub six by 2023, and then the decisions we make around what aircraft we take, if it's 320, 321, 319, how we get rid of the aged fleet, how we finance them. Those kinds of decisions will drive a large part of where CASM is up. We're not ready to fully make that call yet. What our plan is, or our goal, is to manage costs through a flattish sort of year. That may take a few puts and takes here and there. That's the idea. We'll see how we're able to do that over time, and how long that will last, but this sort of $6-ish CASM, plus or minus, is probably what it's going to look like. If we can drive some efficiencies, then it'll be a little bit below, and if we have some inflationary components that minus, it might be a little higher. That's probably what our run rate CASM is for the sort of medium term. Great. Thank you, guys. Thanks to everyone for joining us today. We'll catch you next time. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.