Good morning, ladies and gentlemen. Welcome to the Spirit Airlines third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speakers' prepared remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. If you would like to withdraw your question, you can press star one again. Now at this time, I'll turn things over to DeAnne Gabel, Senior Director, Investor Relations. Please go ahead, ma'am. Thank you, Bob, and welcome everyone to Spirit Airlines third quarter earnings conference 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 are other members of our senior leadership team. Following our prepared remarks, there will be a question-and-answer session for 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 third quarter 2022 earnings release, which is available on our website for the reconciliation of our non-GAAP measures. With that, I turn the call over to Ted Christie. Thanks, Deanne. Thanks to everyone for joining us today, and thanks to everyone on the Spirit team. The daily demands of operating an airline are complex and often come with unexpected challenges, and I want to thank our team for being committed to bringing their best day in and day out and delivering excellent service to our guests. Before discussing our third quarter results, just a quick update about the merger agreement with JetBlue. On October nineteenth, our stockholders voted to approve the transaction. This is an important step forward on our path to closing a combination that will create a compelling low-fare challenger to the dominant U.S. carriers. The transaction remains subject to regulatory approval. JetBlue is taking the lead on this. We are committed to assisting them in whatever way we can. Turning now to our third quarter results, the business performed well against a set of negative headwinds, including much higher fuel costs, Hurricane Ian, and Florida capacity constraints. Strong demand and sound revenue management coupled with excellent operational reliability, which led to good cost execution, helped mitigate the impacts of these headwinds. We achieved a break-even adjusted pre-tax margin and $3.6 million of adjusted net income, or a profit of $0.03 per share. Leisure demand remained strong throughout the entire quarter, leading to total revenue increasing 35.4% compared to the third quarter of 2019 on 13.5% more capacity. Operationally, we are running great. Despite challenging operating conditions during the quarter with hurricanes in Florida and the Caribbean, Spirit achieved the best third quarter DOT on-time performance in our company's history. Our team did a fantastic job planning for and reacting to Hurricane Ian as it developed and changed course, minimizing the impact to our guests and on the operation. The crew scheduling and network changes we made earlier in the year also contributed to these record results. There are still many in our home state of Florida that are dealing with the devastating impacts from Hurricane Ian, and our heartfelt thoughts are with them. While our third quarter 2022 results were in line with our expectations, we continue to face infrastructure constraints that are impeding our return to normalized margins and full utilization. One of the primary limitations is the constraint on flight volume to and from Florida. There has been some improvement since the issue first arose, and we continue to work closely with the FAA on alternative options to increase throughput. This will likely be a multi-year headwind limiting our network optimization. Our network team has plenty of other growth opportunities, but growing service in our hometown state of Florida is key to our return to normalized operating margins. We are also facing high rates of labor inflation. Increasing productivity will help mitigate this, which is in part tied to the pace at which we can hire and train pilots. Attrition rates remain elevated, which means we've had to build a bigger schoolhouse and increase resources to train the number of pilots needed to support our growth and to cover the higher attrition. Additionally, attracting new pilot talent has been more challenging as regional airlines and major airlines have announced new pay structures. However, in September, we began negotiations to amend the current collective bargaining agreement with ALPA, the union representing our pilots. Both parties are working towards an agreement which may in part address the higher attrition rates. We are very pleased with how smoothly the operation is running, and we are encouraged with the strength we are seeing in demand trends as we head into the fourth quarter. Now I'll hand it over to Matt and Scott to share additional details about our third quarter performance, as well as some color around our fourth quarter outlook. Matt, over to you. Thanks, Ted. I also want to thank the Spirit team members for their resiliency in the face of challenging circumstances and for making Spirit a great place to work. Turning now to our third quarter 2022 revenue performance. Total revenue was $1.34 billion, up 35.4% compared to the third quarter 2019. Total RASM for the quarter was 11.07 cents, up 19.3% versus 2019, an excellent result in any environment, but especially impressive in conjunction with our increased capacity footprint. Demand was strong throughout the entire quarter to include holding up particularly well in September. Although September load factor was 2.2 points below that of September 2019 on 26% more capacity, the percent change in total RASM was up nearly 20%. We are not seeing any signs of leisure demand slowing down as one might assume given the overall economic environment. On a per segment basis, again, compared to the third quarter of 2019, total revenue per passenger increased 22% to over $134. Passenger revenue per segment increased 23% to $67.52, and non-ticket per segment increased 21% to $67.07. Our array of dynamically priced ancillary items allow our guests to customize their itinerary and flight experience that works best for their budget, and we continue to see guests respond favorably to the options we provide them. Looking ahead to the fourth quarter of 2022, we are anticipating strong revenue results even with the continued constraints on Florida flight volume, which carries a RASM penalty for the quarter, especially during what is typically the beginning of Florida's peak season. This constraint also limits our connectivity options in Fort Lauderdale, which has effects on how we flow the rest of the network. Rather than get too much into the weeds discussing network scheduling, I'll summarize by saying that we believe having less variability in the number of flights day to day at any given airport better supports our operational reliability and is more likely to maximize earnings in this environment. Our fourth quarter schedules were built with this in mind. This strategy may have a slight downward impact on load factor and total RASM, but we are comfortable it is the right decision in this particular set of circumstances. Taking all of this into account, we estimate total RASM for the fourth quarter will be up between 15%-16.5% versus fourth quarter 2019 on a capacity increase of 24.5%. The implied revenue range based on these inputs is between $1.39 billion and $1.41 billion. As we look ahead to 2023, we plan to continue to take a pragmatic approach to how we deploy our assets. Given the various infrastructure constraints on our network, anticipated Airbus delivery delays and engine supply chain issues, for planning purposes, we are now targeting 60-62 billion available seat miles for 2023 or up 23%-27% compared to full year 2022. With that, I'll now turn it over to Scott. Thanks, Matt. During the quarter, we added three destinations to the network, opened two new crew bases, and carried a new Spirit record of almost 10 million passengers, and hired and trained over 800 new crew members, and did it all while setting a new on-time performance record for a third quarter, even with a hurricane ripping through a large part of our network. I want to acknowledge our entire team and congratulate them on a job well done. Turning to our third quarter cost performance, non-fuel operating costs came in better than expected. In addition to good cost management, the benefits of running a great operation drove better than expected results throughout the P&L. On the other hand, fuel cost per gallon was $3.82, about 15 cents higher than we had initially expected, driving approximately $27 million of additional fuel expense. Adjusted operating income for the quarter was $11.3 million. We estimate the direct impact of Hurricane Ian on third quarter operating income was approximately $5 million and will be about $5 million in the fourth quarter as well. In addition, we saw some softness in bookings to Florida destinations and to Myrtle Beach in early October, immediately following the hurricane, and estimate this will negatively impact fourth quarter 2022 revenue by another $3 million-$5 million. Liquidity at the end of the third quarter was $1.3 billion, which includes unrestricted cash and cash equivalents, short-term investments, and $240 million of available capacity under our revolving credit facility. We took delivery of four A320neo aircraft during the third quarter, ending the period with 184 aircraft in our fleet. All of these aircraft were delivered under sale-leaseback transactions. Year to date through September 30th, we've made debt payments, including principal, interest, and fees of $232 million and have incurred capital expenditures, including net purchase deposits of $190 million. For the full year of 2022, we estimate our capital expenditures, including net purchase deposits, will be approximately $260 million. For 2023, we estimate gross CapEx will be about $350 million. About $150 million of this is related to the building of our new headquarters facility in Dania Beach. This estimate also includes $10 million of net PDP payments and five spare engines. Aircraft utilization for the third quarter was 10.6 hours, down 15.2% compared to the same period in 2019. Looking ahead, we have 13 aircraft scheduled for delivery during the fourth quarter. Even with the large number of Q4 deliveries, we expect to see sequential quarter-to-quarter improvement in utilization. As mentioned over our calls, we plan to gradually improve fleet utilization, reaching a return to full utilization around the middle of 2023. We estimate our operating margin for the fourth quarter of 2022 will range between 1%-3%. This assumes total operating expenses of $1.365 billion-$1.375 billion and a fuel price per gallon assumption of $3.55. One housekeeping item that I want to mention is to explain why we changed our guidance from pre-tax margin to operating margin. There is one unique accounting item related to a change in the accounting for our 2026 convertibles. Due to a change in how the notes are to be settled under the merger agreement, we are now required to bifurcate the equity component of the 2026 convertible notes. The fair value of the derivative liability will be marked to market every quarter. This quarter, the mark-to-market credit was sizable and resulted in a credit to interest expense of approximately $15 million. It is difficult, if not impossible, to estimate the impact of the mark-to-market exercise each quarter. Therefore, we will guide to operating margin going forward. We did provide an estimate for a total non-operating expense for the fourth quarter of 2022, $22 million, but this does not include any potential change in the mark-to-market adjustment related to the derivative portion of the convertible notes. With that, I'll hand it back to Ted. Thanks, Scott. I'll close with an update on our near-term initiatives. One, network reliability enhancements and growth. Despite the impact of Hurricane Ian and the Florida operational constraints, we capped off one of our most reliable summers on record. We have seen improvement in Florida operations since the spring, but we are going to be very disciplined and pragmatic about building back to our normalized peak. Regarding network, we are the largest airline in Fort Lauderdale and second-largest in Las Vegas and Orlando, and have opportunistically grown in Los Angeles and Newark, such that both cities are now in our top 10 markets. Second, utilization and profitability. Our target is to achieve normalized utilization by mid-2023. Utilization in Q4 of this year is on track to show the progress we expected, which reinforces our confidence in achieving this target. Third, record non-ticket performance. While non-ticket results continue to be the shining star of our revenue results, and it's not an official target, $70 per passenger segment is now within reach, and the improvement in non-ticket per segment does not appear to be diluted to ticket revenue per segment. Fourth, costs. CASM ex-fuel is still high, with labor costs the primary pressure across the business, but it will mitigate as utilization returns. Fuel price is driving significant margin pressure today, but our burn will continue to improve as fleet mix favors larger neo-aircraft. Spirit is a group of passionate aviation professionals who want to deliver for our guests and stockholders, so our current financial results are disappointing. However, we believe it is prudent for us to build back the network more methodically, which will allow our team to digest the growth and learn from our experience. 2023 will be a big year for all of us, and I look forward to delivering on our objectives. With that, back to DeAnne. Thank you. We are now ready to take questions from the analysts. We ask that you limit yourself to one question with one related follow-up. Operator, we are ready to begin. Thank you, Ms. Gabel. Ladies and gentlemen, at this time, if you have any questions, please press star one. Just a reminder, if you find that your question has already been addressed, you can remove yourself from the queue by pressing star one again. We'll take our first question this morning from Michael Linenberg at Deutsche Bank. Oh, hey, everybody. Good morning. I guess two questions here. This is probably to Matt or Ted. When I look at your current schedule, it doesn't look like that you, at least at this point, have included the 16 runway timings that you were awarded by the DOT. Is that just subject to some sort of final sign-off, or is that something that shows up in 2023? When do you start doing those eight round trips? Hey, Mike, it's Matt. I'll take that question. Hey, Matt. Hey, good morning. We have deployed the use of those peak times in Newark. We were able to take advantage for a while of some of the waivers that were in Newark due to. Mm-hmm. Some of the international slots not being used. We were already scheduling a lot of that flying. Okay. Yeah, what the award did was allow us to make that flying permanent and then allow us, as we utilize our gates fully in Newark, to add back in some of the off-peak times to fully utilize those assets up there. Okay, that makes sense. As I recall, those runway timings were sort of peak time slots, so that's good. Okay, that makes sense. Just a second question on when we think about next year and you know CapEx and you know sort of it's a big year for growth. How many aircraft are you taking delivery of in 2023? When we think about you know in the past you've you know resorted to sale leasebacks, should we assume that most of them those airplanes are gonna be leased? Have you locked down that financing, or is that still to be determined on at least a portion of the airplanes for next year? Thanks for taking my question. Hey, Mike, this is Scott. Yeah, you're right. Hey, Scott. Hey. Hey, good to see you again. We do take 33 aircraft next year, 17 of which are direct order from our order book. 16 are additional leases from lessors. 13 of those are A321neos that we take as well. Mm-hmm. We do have financing lined up for those. We're in the final innings of signing the documents on that, but we do have committed financing for all those, so we're in a good spot there. Oh, great. Great to hear To your point around the deliveries from Airbus, it is also leaseback financing, so there will be no debt associated. Okay. Very good. Thank you. We go next now to Duane Pfennigwerth at Evercore. Hey, thanks. Good morning. You did such a good job in your initial defense. It's a little bit hard for us to forget about some of the risk factors that you flagged. I just wanted to ask you about attrition and hiring since the merger announcement and, you know, trends there, and what, if anything, that you've, you know, implemented, you know, to create change there or to stem the bleeding, for lack of a better word. Hey, Duane. Thanks. I assume you're referring specifically to our defense of our original merger agreement and then where we sit today with JetBlue. Exactly. You know, part of the primary structuring of our agreement with JetBlue was to give us comfort that we were putting ourselves in the best position regardless of the outcome. We're of course supportive of and optimistic that we will be granted authority to merge with them and create a real viable fifth competitor to the big four, which is the primary objective. You know, we put in place structures, be they economic or commitment otherwise, that actually have reassured a good deal of our team members that they will be part of the go-forward business. JetBlue's made verbal commitments as such as well. When you're talking about the kind of general and administrative folks, you know, there is quite a bit of effort there to reassure them that, you know, this is just a much bigger airline that will require all of their efforts, and I think they've largely digested that and understand that and feel good about that. When you look at the bigger part of the organization, which is all of our folks who operate the airline every day, our pilots, our flight attendants, our technicians, the people working at our airports, our contracted service providers, the good news there is this is broadly, you know, an accretive transaction for them. They're going to be part of a much larger business. They're gonna have greater opportunities of new places to fly, new bases to live in, you know, opportunities for growth. Both airlines are growth airlines, and they've been told that story and they understand it. Setting that aside. I don't think that that's incremental to any of the either attrition risks that we're seeing or any change in that regard. If anything, we view it as a positive because, you know, it is something that they can look forward to be part of a bigger business. Nonetheless, we are experiencing attrition. I think we've, you know, talked about that for the better part of a year now, and it's elevated. It's still elevated. It hasn't really moved off of, you know, the level we've seen, which is, you know, I guess in some respects good that we can forecast it. Nonetheless, it's still too high, and that would be across all work groups. I think that that's a product of more of the labor market than it is anything else. We, you know, we are looking at ways to address it. I referred to in my prepared comments specifically our pilots, but we, you know, we have other things that we talk about at airports and with our technicians and with our flight attendants as well. You know, we keep plugging away, you know. I mean, there is a bit, it is definitely, you know, one of the limiting factors for us today, is attrition on the back end and attracting and hiring on the front end. We've addressed that with the schoolhouse and making ourselves a good landing spot for our team members, and we'll continue to hammer away at it. Ted, I appreciate that, very direct answer, and I don't wanna put you on the spot, but could we put numbers to pilots? So kind of where are we today, and what do you need to hire to hit, the growth plan or the capacity guidance that you've outlined there? Is this simply a function of getting folks that you've already hired through the schoolhouse, or is this about net new hiring? Thank you for taking the questions. Sure. It's both, Duane. It's obviously we have and I think we talked about this over the last few calls, we have ramped up the size of our flight operations schoolhouse and our in-flight schoolhouse, both our flight attendants and our pilots considerably. Like, we've more than doubled the size of that throughput in either case and have been successful at attracting new candidates and moving them through that process. That requires us to not only hire to address the deficit in utilization that we have today, because remember, we're flying about two hours per aircraft less than we wanna fly today, but we're delivering new airplanes as well. As we attrit off the back end, we have to make up for that. It's quite a bit of effort. The team has done a great job in a very abbreviated amount of time at building that, you know, that infrastructure to make that happen, which I'm very proud of them for being able to do. It's a daily activity, you know. You know, I would say that the numbers to think about, and I think Scott even mentioned that, you know, in the quarter we hired 800 people. You know, we're onboarding a significant number of new pilots every day. You know, the class sizes are, like I said, more than double what they used to be. I'd say that's true for flight attendants as well. That will remain the case for the foreseeable future as we both address attrition and hopefully it starts to wane and we chew into our utilization deficit in the additional airplanes. Thanks for the thoughts. Thank you. We take our next question now from Christopher Stathoulopoulos at Susquehanna. Good morning. Ted, I was wondering if you could give us Some color on what you're seeing around peak versus non-peak travel and seasonality, and whether any of those trends are perhaps signaling what you think might be a shift with respect to leisure travel due to hybrid work. Meaning are sort of any anomalies showing up there that perhaps non-peaks are less non-peak, if you will, and seasonality is not behaving the way it normally would, which you believe you could attribute to this hybrid work? Thank you. Sure, Chris. I'm actually gonna let Matt jump in and give some thoughts on that. Matt? Yeah, sure thing. Yeah, Chris, some of the language we've heard out there in the industry in terms of how passengers have shifted around by day of week is something that we're seeing as well. We've seen that all through COVID. All of a sudden Thursday became the peak day of the week, and Monday became the peak day of the week, more so than Friday and Sunday. We're seeing similar patterns with that. As we moved out of the summer into the fall with school back in session, it's not as pronounced as we had seen in prior years in terms of day of week shift, but we still see some of that, which is good. It stretches the days of the week out, and it lends to more flying in general. More trips are happening in general, which is why when we talk about the ULCC model in general and the growth of travel, there's more travel opportunities being opened up now than there ever has been before. We believe part of that is hybrid work allows for more trips, shorter trips, and more trips to fill in some of those off-peak, previously known as off-peak days of the week. Now having said that, we are still seeing differences in yields and load factors on off-peak days of the week. Tuesdays and Wednesdays for us are still Tuesdays and Wednesdays in terms of their demand relative to those days of the week. Overall, they definitely are closer to the median as to where they were pre-COVID. I would also add in that we are seeing some shifts not just by day of week, but also by time of year. We're definitely seeing, as we mentioned in my pre-prepared remarks, even in September, while load factor was down a little bit versus 2019, overall demand is strong and the yields were especially impressive coming out of the summer into the fall period. I guess in summary, you could say yes, we are seeing some shifts. We saw it throughout COVID. It's still there. Not as pronounced as it was during COVID, but it's definitely still there. I'd say part of the best part is that we are seeing people move into off-peak times of month, which over time will be very beneficial for overall, earning production. Okay, my follow-up question, so Ted, you spoke about in your prepared remarks about this multi-year headwind to the network as it relates to Florida, but at the same time you're targeting a full return to utilization by mid-2023. If we put those together as well as perhaps some of the shift here in travel due to this hybrid phenomena, if you will, is low sixes CASM ex-fuel still the plan for next year? Thank you. Sure. Let me make a couple of comments. I'll let Scott jump in too, as it relates specifically how we're thinking about CASM. Yes, Florida is a constraint. We're still gonna get back to utilization. It's just from a revenue production perspective, it's not going to be the optimal answer. We'll fly to non-Florida places where we have opportunities, but Florida is a big earnings generator for us. Fort Lauderdale is a big powerful, you know, spot for us. We're now the second-largest airline in Orlando and those are both, you know, a big piece of our network. We would prefer to have more flying in Florida from a revenue perspective, but the utilization will come in other places which are still good opportunities for us, and that'll drive, you know, by the middle part of next year, middle to late part of summer, utilization sort of more normalized. But the pressures I referenced before are still pressures on CASM ex-fuel. Scott, what would you add on- Yeah, no, I think that's right. I mean, I think it's around, you know, we're gonna fly the capacity we can fly. Where we fly it, you know, is partially dictated by some of the stuff happening in Florida and where we'll have to reallocate the network. But from a cost perspective, it really all we've talked about is 2023, and Matt alluded to a slightly lower level of capacity. Look, we're still trying to figure out, you know, what fleet deliveries will look like. You know, we have insights really into the first half of 2023, and we're gonna make some assumptions around how that carries forward the rest of the year and we'll continue to work with our partners on figuring out delivery dates. Right now we're sitting at something slightly lower than what we thought about, so we're probably gonna see a little pressure on CASM ex-fuel. We had talked about low sixes, so it's probably in the low to mid sixes given the reduced level of capacity. We'll refine that as we get through the planning process and get definitive dates on deliveries. Capacity is gonna be the biggest driver here as we think about 2023 CASM. Okay. Thank you. Thank you. We'll go next now to Conor Cunningham at Melius Research. Hey, everyone. Thank you for the time. I was just wondering if you could just speak to the strategy on both ancillary and base fares. You know, you alluded to this a little bit in the prepared remarks, but one of your competitors is clearly prioritizing ancillary over base, and you guys are coming at it at a much more balanced approach. I'm just curious on why you would go that way versus pushing ancillary. You know, any thoughts would be helpful. Thank you. Sure, Connor, it's Matt. Generally speaking, I understand your question. We are in the game of producing total RASM. The way that we see our network and the way that we see our long-term production, we think a balanced approach is the right way to go moving forward. We're not sure if we were to see a reduction in economic activity, what would happen to non-ticket. We know it's stickier and it's proven to be sticky, but at some point you might get to a level where you can't maintain a number that moves too high, too fast relative to the more traditional method of base fare. That's the approach that we're taking right now. We're trying to be very measured and pragmatic in our movements. We're definitely trying to maximize both metrics, so it's not. We're not trying to minimize one, as it relates to the other. I don't know if our competitors are thinking of it the same way or not, but I know for us, we are actively trying to not trade between the two buckets. We're trying to make sure that we maximize both on the way up. We think that's a better long-term approach to driving revenue. Okay. Then on the 2023 capacity, you know, adjustment that you're making, can you just flesh out a little bit of the puts and takes? You know, like from growth, you know, new markets, you know, that frequency, that type of thing. 'Cause what I'm trying to really understand is just like what a new normal is for utilization. We talk about normalized utilization all the time, but I don't know if that number is the same that it was pre-pandemic. Just, you know, any thoughts on the actual makeup of the capacity in 2023, I think that would be helpful. Thank you again. I guess I can offer. This is Ted. I can offer a couple comments, and Matt, if you wanna jump in as well. At the highest level, you know, fleet utilization prior to the pandemic here at Spirit was in the low 12 hours range, somewhere, you know, 12.25, maybe plus or minus a little bit more than that, depending on how we felt about the season. Today, we're at 10.6, so we're well underneath that. I think getting back to a 12+ number is the objective, and that's still the objective. We updated or gave a view on ASM production next year at 60-62 billion ASMs, which was less than where we were before, and alluded to a few inputs. Putting it directly, we are seeing supply chain related issues on aircraft deliveries and supply chain related issues on engine manufacturing and engine overhaul, which is forcing us to take aircraft out of service. We're losing active airplanes, which is the primary driver of the reduction in ASMs, which is, you know, not the best answer, to be honest. Nonetheless, those are the facts. We'll continue to optimize around that as best we can. We have airplanes that can, you know, work a little harder. We have some that we are evaluating, you know, eventually retiring, and we got to make decisions on that. There are still refinements coming, but that's probably the primary reason that we're seeing ASM kind of like come down a little bit in the year. The mix of flying, I would turn over to Matt, see if he has any view on that. Yeah. Geographically, we are still a little bit constrained, as we talked about in Florida. We'll learn a lot as we move through the winter here and spring, for Florida and how just sort of industry traffic, including general aviation, plays a role in running through the air traffic control system. We'll learn a lot. We'll continue to learn more. What you'll see us doing, like we're doing in the fourth quarter now as well, is just continue to run a little bit more during the off-peaks in order to generate as many ASMs as we can. As we said in the prepared remarks, running more on off-peaks may have an impact on some metrics like RASM. We believe at the end of the day, in the environment we're in today, it's better to have the most efficient crew network we possibly can. To have the most efficient crew network we can, it requires us to do some things like run a little bit more off-peaks, but that ultimately drives earnings because we're generating more capacity, and we're not having an issue filling that capacity with good yields at this time. Appreciate the details. Thank you. Thank you. We'll go next now to Scott Group at Wolfe Research. Hey, thanks. Good morning. I just wanna talk about utilization near term. It's been sort of trending slightly lower throughout 2022. It sounds like you think it gets better in Q4. I guess what's the target for utilization Q4 within the guidance, and then what's the driver of that inflection higher in Q4? Hey, Scott. I'll let our Scott jump in too. Yes, utilization did trend down. We were very vocal about the fact that we had to pull flying from the third quarter because of Florida ATC constraints, and that was a direct impact to utilization. It was not the answer we wanted, but that's where we landed. You are correct, though, that as we turn the corner heading into the fourth quarter, we are going to see an uptick in utilization. It's not dramatic, so if we landed about 10.5 hours in the third quarter, it will be more like 10.75 hours. That's right on the line of our expected return to normalization as we move between now and the middle part of next year. Feeling good that that's exactly where we wanna be. Scott, what would you? Yes, that's exactly right. Look, I mean, we took or will take a large number of aircraft in Q4, which will, you could say, mathematically pressure that number in the quarter. The plan has always been to methodically move utilization from here until the middle of 2023, and we're doing that. We feel good about where capacity and utilization sit for Q4, where it looks for Q1 and Q2 and Q3 of next year. I think that's what we're doing, is we're balancing the hiring, operational reliability and the economic production of the business. It's happening along the plan that we had always sort of thought. We knew this was not gonna be a snap your fingers overnight fix, and we've said that for probably a year now, that it's gonna take some time. Obviously the attrition that happened in the crew network has slowed that down a bit, but we're still targeting the middle of next year. I think we're still moving in that direction. Okay, that's helpful. Just wanna follow up on the CASM commentary for next year. One of the other airlines today talked about first half next year, flat to up first half 2023 versus 2022, and then down year-over-year second half versus 2023 versus 2022. Directionally, is that how you'd be thinking about CASM for you guys as well, still up in first half and then down in second half? We haven't talked about any quarter or, you know, sort of 2023 distribution of how CASM looks. CASM will be down year-over-year. As we get production back in the business, we will see, you know, an annual reduction in unit costs. We do see sometimes the first quarter will be slightly higher just due to a handful of timing components. In the year, we do expect CASM to be down as we get utilization back in the year. We haven't given any detail to the quarterly breakout. Okay. Thank you guys. Appreciate it. Okay. Thank you. We go next now to Jamie Baker of JP Morgan. Hey, good morning, everybody. Most of my questions have been addressed, so I'll try to ask something from left field. Question on pilots. You know, the deal you struck back in 2018 had a preferential bidding system. I know that, you know, transitioning to a PBS is, you know, time-consuming. There's some calibration along the way. Just curious if the current results, your current financials fully reflect that benefit, and assuming that it does the benefit square with what your expectations were, you know, back in the day? Hey, Jamie, it's Ted. Thanks for the left field question. Yes. We did put PBS in as part of our 2018 contract. It took us about a year to get that implemented, so we got about a year of pre-COVID experience with it, and I'd say that it behaved exactly as the way both parties had agreed, so both the union and ourselves. That we did get the benefit, and they got what they needed out of it. Of course, COVID's disrupted all that, so I wouldn't say anything's included in the way production works today. Yes, it's working the way we anticipated and which is a good sign. Okay, good. A more conventional follow-up. You know, the aforementioned shifts in travel patterns that, you know, you and everybody is, you know, everyone's discussing these days, how does that flow through to scheduling and maintenance? I would have thought it would have been trickier if you had a more consistent schedule. I would think peaks and valleys would make maintenance easier, but that's not the case that Frontier cited. I'm just kind of curious about how you're flying the airline any differently as a result of these travel patterns. Well, at the highest level, operators want consistency. Okay. They want level stuff, right? Airline commercial people push you into peaks and valleys because they wanna maximize revenue. That tug, that push-pull is what's going on at any business today. You know, what you addressed, you said you would have thought that peaks and valleys would make maintenance easier. What it does is it pushes all the maintenance into the valley, right? Mm-hmm. You may think that was like optimized, but I don't think the maintenance people would tell you they wanna do that, right? Yeah. They wanna, they want a plan, and they want something that's because they can staff easier to it, they can order easier to it, they can hangar easier to it. It's just, you know, the logistics of it end up being a lot smoother. Again, the push-pull is still there today. It's just that we've taken learnings away from the way we operated in the summer of last year, and one of the things that we're doing is smoothing the schedule out because it does make it easier on the airports, it makes it easier on tech ops, and it makes it easier on staffing. Okay, perfect answer. Thanks for squeezing me in. Take care. Yep. We'll go next now to Quinn Lasko of Cowen. Hi, this is Quinn in for Helane. Last call, you talked about having 30% more pilots than pre-pandemic. I know part of that is due to aircraft deliveries, part of it is positioning for higher attrition. As you've seen airport infrastructure improve in your Florida market, are you confident enough in your own operational performance that you'd be willing to scale back the excess reserve levels of pilots you guys are managing as you add back capacity? Let me kick off, and then you know, Scott, you can feel free to update if we have. You're right. What's been happening over the course of our recovery here as we build back is that we've been adding in infrastructure. That's pilots, flight attendants, airplanes, you know, staffing, broadly speaking, ahead of the actual ASM production. In addition to the fact that you have the larger schoolhouses across the business, which really has the additional people and expense in it that are not producing anything. Those are just bigger cost drags today than they were before. They're ahead of where overall growth in ASM production would normally be. Yes, that gives us confidence that we will hit our ASM targets. It is, you know, one of the things that makes CASM look higher than it should be. What are you gonna- Yeah. The only thing I would add there, Quinn, is obviously when there's volatility in the staffing components of the airline, call it the crew, right? We have higher attrition, we have bigger numbers that we have to hit, we have moving utilization, growing fleet, all those things. That has given us, you know, a bit of caution to make sure we have enough, you know, I'll call it slack in the system to feel comfortable in predicting where the numbers need to be and actually hitting those. As volatility in the ranks reduces, we'll feel more comfortable reducing some of the slack. Over time, that sort of means returning back to traditional reserve levels and we're doing things to the network that make it slightly easier to operate. As we put all those puzzle pieces back together, you know, it's growing the airline and also gaining efficiency as we do it. All these things will sort of combine over time. Yeah, I think once we get levels that we can predict, when we get comfortable in how they operate, then we'll be ready to remove some of the slack, and that includes reserves. Got it. That makes sense. Thank you. Second question. Load factors took a bit of a hit in 3Q. Yields remained strong, though. I'm just wondering, in September month, were you getting any sort of pushback on the fares? You seeing any sort of ceiling there? Hey, Quinn, this is Matt. Actually, what we started to see happen throughout September was some efforts. Because we had mentioned about our off-peak day of week and some of the increases we've done on off-peak days of the week, what we found is that the traffic ended up being relatively sticky compared to the fares. What I mean by that is trying to drive a little bit more load factor on those off-peak days a week wasn't necessarily generating the revenue outcome that we thought was maximizing for the company. We actually found that the fare levels themselves were at the right price points to maximize TRASM. Reducing the fare did not drive higher TRASM, which is why we went back to the sort of our going rate, so to speak. They were still off-peak, they were still September, but they weren't as low as they'd been in prior years, and that actually drove the best revenue outcome for us. On top of that, if I can drive higher TRASM with a little bit less activity at the airport, that's better for everybody involved. That's actually worked out pretty well for us that we learned last month. Got it. That's very helpful. Thank you for the time. Sure. We'll go next now to Stephen Trent of Citi. Good morning, everybody, and thanks very much for squeezing me in. Just a quick one for you. I appreciate the comments on the Florida capacity constraints. You know, when you think about the growth opportunities in some of the other markets, you know, any high-level views, you know, on how you're seeing, you know, maybe a westbound flow or Mexico cross-border, you know, Caribbean Basin, sort of any high-level views on the growth opportunities you're seeing in other markets. Thank you. Sure, Stephen. It's Matt. I would tell you that I think we mentioned this on the last call. We were seeing a little bit of a slowdown in traffic to some of our international VFR markets. We saw a little bit of that in Central America, a little bit in South America. The good news is while we did see some of that slowing down earlier this year, it came back. It's almost all the way back to where it was before. This is speculation. We don't know if it was because of just economic slowdown. Was it the end of COVID activity? Was it inflation? Was it currency-related issues? We're not entirely sure. Take your pick. It might have been all of them. The good news is that we are seeing that bounce back as well. Where we did see some slowdown geographically in our international VFR, that's come back to where we would like to see that. What we've been able to do is continue to grow a little bit more out on the West Coast and in the middle of the country. Los Angeles has been a spot that we've been seeing great profitable growth in. Las Vegas continues to grow for us as well. While we are seeing the constraints on our Florida network, we are able to reallocate that to other parts of the country. We're comfortable with the unit revenue production there. It will serve us well in the future because we're establishing more predictability in our future network now in some of the growth opportunities that we saw for the future. We're doing those growth opportunities now. As we in the industry feel more comfortable with throughput into Florida, when I say the industry, I'm talking about air traffic control throughput, we'll be able to then grow back into Florida, which is a major strength for us today. It's worked out all right. We are taking a somewhat of a RASM penalty because of the network construction right now, but for the long term, it should work out quite fine as we ramp back up into our strengths. Really appreciate that, Matt, and nice to be ungagged on you guys. Thank you. Thank you. Great. Thanks, David. Thank you. The next line, Savi Syth at Raymond James. Hey, good morning. I was curious with the peak off-peak changes you're seeing, is there a change in kind of ancillary revenue of, you know, the way people are purchasing ancillary revenue items? Along with that, just what's driving some of the ancillary revenue growth, you know, currently and into next year? What would you see as kind of being the big drivers? Sure, Savi. It's Matt again, I'll take that one. In terms of the timing as to when our guests are adding ancillaries onto their itineraries, we're not seeing a real difference in advanced purchase of those ancillaries. What I would tell you, we don't talk about this very often, but I do think it's important for Spirit and our business model is the use of new technology that is referred to as NDC, which is a new distribution capability technology, that is in conjunction with IATA. It's been out for a long time. It continues to improve, and we've really adopted that across the board for our third-party distribution. What that allows us to do is basically treat third-party pricing and display. What we provide to those parties is going to be very similar, if not the same, as to what they see at spirit.com and our app. What that means is it allows us, as we dynamically price more and more of our ancillaries, we're able to push that pricing out to those third parties, and those third parties are displaying and selling those products for us. That's a change from pre-COVID to today. That's a big deal. As we continue to move forward, that gives more access to the optional services that our guests like and what they wanna add to their itineraries. It just gives us another channel to have more reach, and I think that's important. I don't think that's exactly the question you were asking, but I think that's the color that's important to understand is where we're collecting our ancillaries from has changed, not necessarily when we collect them. Okay. In terms of drivers for next year? Sure. In terms of drivers for next year, well, we're continuing to build out our bundled services offerings. Those are continuing to get more fine-tuned. Some of our growth in our non-ticket rate that we've seen throughout this year has been due to those offerings. In conjunction with all of that, we're still seeing nice growth. The trajectory is now really moving more vertically for us, which is great in terms of our co-brand credit card partnership that we have out there. We relaunched the program about 18-19 months ago now. It continues to grow. One of our largest distribution channels is when we offer the card on our flights themselves, and our flight attendant group, our in-flight group has been fantastic with that. We were pre-COVID. We had a little bit of a lull during COVID for what I think would be obvious reasons. Now coming out of COVID, we've seen a great adoption once again, and it's been a great partnership throughout the entire company. I think that is another option for us to keep growing as we get into next year as well. Okay. That's helpful. If I might, just really quickly, on the margin side, you know, is it real? You know, what's really gonna get you back to kind of historical margins? Is just getting back to utilization sufficient, or do you need to be able to start kind of growing in Florida again? You know, what are the kind of key triggers to build back that margin? Yeah, Savi, it's Ted. Thanks for asking the question. I was gonna offer that clarity on an earlier question, and I kinda got timed out. I think it's a valid point because we've been talking a lot about, you know, what Florida means, where we are with utilization, why is our margin where it is. I think you know, we've done some math on this. If we were at peak utilization today, you could probably add about 4% to the margin. If we were flying Florida the way we wanted to fly Florida and network, the way we wanted to fly network, we'd probably be another 3%-4%. In today's fuel environment with utilization the way we want it to be, we'd be a double-digit kind of op margin business. Not, again, not where we want it to be long term, but closer. I think that's those are the building blocks, right? Is getting the utilization back up and allowing the network to be where it optimally wants to be. That's why we've sort of, and we've said this a few times, we've used words like methodical and pragmatic and all that other kind of stuff. We're we've drawn our guidance line as to when we think we can get back to that type of operation, and we're on that line today. Admittedly, it's not where we would prefer to be today, but we understand where it is, and we're confident that we will get there by the middle part of next year. That's helpful. Thank you. Bo, I think we have time for one more question. Thank you, Ms. Gabel. We'll take that question this morning from Andrew Didora of Bank of America. Hey, good morning, everyone. Thanks for squeezing me in here. Most of my questions have been answered. Just maybe a random one for Ted. You know, obviously a lot has transpired over the course of this year. You have the lengthy kind of regulatory process coming up. Where are you and the team spending your time today? Can you focus as much around the day-to-day as you did, say, kind of pre-February of this year? Thanks. Sure. Well, yeah, it was a distracting period for a select number of senior management as we worked through the various ups and downs throughout the course of this M&A, you know, drama. That's all behind us now. We are running the business like we would run the business any other day. I speak for everyone from the ramper all the way up. 100% time being focused on achieving those objectives that I laid out for you and kind of hitting the points that I just laid out to Savi, which is getting us back to where we wanna be, both on the margin and on utilization. Got it. Makes sense. Thank you. Great. That's it for this call, folks. We'll catch you next quarter. Thank you for joining us. Thank you, Ms. Gabel. Again, ladies and gentlemen, that will conclude Spirit Airlines' third quarter 2022 earnings conference call. We'd like to thank you all so much for joining us and wish you all a great remainder of your day. Goodbye.