Thank you for standing by. My name is Pam, and I will be your conference operator today. At this time, I would like to welcome everyone to the Spirit Airlines First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to DeAnne Gabel, Senior Director for Investor Relations. You may begin. Thank you, Pam. Presenting on today's call are Ted Christie, Spirit 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, we will take questions from the analysts. Today's discussion contains forward-looking statements that are based on the company's current expectations and not a guarantee of future performance. There could be significant risks and uncertainties that cause actual results to differ materially from those contained in our forward-looking statements, including, but not limited to, various risks and uncertainties discussed in our reports on file with the SEC. We undertake no duty to update any forward-looking statements, and investors should not place undue reliance on these forward-looking statements. In comparing results today, we will be adjusting all periods to exclude special items unless otherwise noted. For an explanation and reconciliation of these non-GAAP measures to GAAP, please refer to the reconciliation tables provided in our first quarter 2024 earnings release, a copy of which is available on our website under the Investor Relations section at ir.spirit.com. I will now turn the call over to Ted Christie, Spirit's President and Chief Executive Officer. Thanks, DeAnne, and thanks to everyone for joining us on the call today. We are coming to you this morning from our new Spirit Central campus in Dania Beach. We celebrated our grand opening a couple of weeks ago, marking a major milestone and a new chapter in our more than 30-year history. In addition to allowing us to consolidate our corporate offices and all of our Fort Lauderdale-based training facilities, the new campus is convenient to Fort Lauderdale Airport. It also provides access to the fabulous amenities at Dania Pointe for our support center team and our pilots and flight attendants when they are in town for training. Until recently, we thought the branding of the new facility might be blue, but now we are proud to boldly display our signature Spirit yellow. Looking back a couple of months, we still feel strongly it was a serious misreading of both the evidence and the law for the federal court to enjoin our merger with JetBlue. Aside from the waste of taxpayer funds and the damage done to two proud companies through this process, the fact that DOJ even brought a case to block a merger between two carriers with less than 8% combined market share just shows how uninformed the government is about our dynamic airline business, particularly in the post-COVID era. Our industry has changed dramatically. Today, nearly all the profits of the entire U.S. airline industry are concentrated in just two companies, while the smaller, non-legacy carriers scramble to restore profitability in what seems evermore like a rigged game. The Big Four are the beneficiaries in this new normal. American consumers are the long-term losers. In the beginning of our consolidation process in 2022, we advocated strongly for a merger between the two largest ULCCs and tried to outline the challenges with the proposed JetBlue transaction, but our shareholders did not listen. While not our first choice, we believe the merger with JetBlue would, as an alternative, still be very positive for consumers and our other constituents. We were well aware of the regulatory risks that might prevent the merger from successfully closing. As such, over the last year, we have been simultaneously developing a standalone plan to de-risk the business and improve our financial performance. The JetBlue merger agreement had several operating restrictions that limited what we could do to rightsize the business, address overstaffing levels caused by the issues with GTF engines on our neo aircraft, and make the necessary changes to our product and strategy to adjust to the evolving industry environment. We no longer have those restrictions and are swiftly taking numerous actions that we believe will lead to cash flow generation and profitability. I thank all our Spirit team members for their contributions to our first quarter results and their unwavering dedication and patience as we deploy our plan to return to sustained profitability. Moving on to our first quarter 2024 results, we reported an adjusted net loss of $160 million. During the quarter, we started to see benefits from the tactical and strategic network changes we have made over the last few months. We have a long way to go to margin health, but we are making steady progress. Operationally, we were negatively impacted by adverse weather and air traffic control-related delays, particularly along the Eastern Seaboard and in Florida. We were also affected by the civil unrest in Haiti. However, our system-wide controllable completion factor for the quarter, that is, excluding events outside our control, was 99.9%. Kudos to the entire operational team for a job well done. With that, here's Matt and Scott to share more details about our first quarter performance and the actions we have taken that set us up well to execute to our go-forward plan. Matt, over to you. Thanks, Ted. I, too, want to thank the entire Spirit team for their contributions. From the support center to the front line to the flight deck and everywhere along the way, our team does an exceptional job delivering great service and the best value in the sky to our guests. Now, moving on to our first quarter revenue performance. Total revenue for the first quarter was approximately $1.3 billion, a decrease of 6.2% year-over-year. As we have previously noted, there has been a significant amount of industry capacity growth in the markets we serve, and gaining yield traction and full loads in the non-peak periods has been difficult. Given this backdrop, we pulled down the schedule on the off-peak days of the week to a greater degree than usual in January and February, and looking back, we believe that was the correct strategy for that time frame. From a yield perspective, the first half of March was also a bit choppier than we had anticipated due to some competitive fare activity, but demand was strong in the peak spring break period, and total revenue results were in line with our expectations. Total RASM for the first quarter was $0.0938, a decrease of 8.2% year-over-year. On a sequential basis, moving from Q4 2023 into Q1 2024, as we had anticipated, we achieved a substantial improvement in total unit revenue. On a per segment basis, fare revenue per segment declined 16.3% year-over-year to $48.08. Non-ticket revenue per segment declined slightly by 1.4% year-over-year to $68.95 for the full quarter. As we continue to see the demand and competitive environments develop, we know that we must also change with the times. You have already seen us move our aircraft into different parts of our network, and that will continue to happen as we look for the best places to maximize revenue. We will continue to test out new merchandising strategies, which we anticipate will change how we think about the components of total revenue generation. Ancillary revenue continues to be a critical part of our business, but we believe there are opportunities to maximize revenue that may involve shifts of revenue from the ancillary bucket into the ticket yield bucket. We will continue to iterate until we find the right balance and formula. Operationally, and from a network design perspective, we are still being impacted by Jacksonville Center ATC issues. Given the length of time it takes to train controllers, it has been difficult for the center to keep pace with the large amount of industry capacity increases. Therefore, to help with our operational performance, we are purposely limiting our growth into and out of Florida. Without these self-imposed limitations, we would likely be at least a few percentage points larger in Florida than we are today. Looking ahead to the second quarter, there remains an elevated amount of capacity chasing leisure demand. Several carriers have commented on the capacity increases in Latin American markets, but the situation remains quite pronounced in domestic markets as well. We have exited a few cities and suspended service to others. Making adjustments to better align our capacity with markets where the supply and demand trends are more in balance is a continuous exercise. We are broadening our network in some cities where we've been relatively too small in the recent past. We have added some new routes with less than daily flight schedules. We're rethinking how we attempt to take advantage of seasonal changes in certain cities, and we're also in a position where we now expect to introduce fewer new cities to our network in the immediate future. Given the dislocation of domestic demand trends last year, combined with our encouraging booking trends earlier this year, everything had pointed to an improving domestic demand environment, and we believed we would see continuous improvement. And while the domestic environment does continue to improve, to date, it has done so at a slower rate than we had initially anticipated. We do expect to continue to see ongoing improvement through the summer, with the peaks performing well. In order for our forecast to materialize, we will need to see the off-peak and shoulder periods improve, but that is anticipated to be the case. In the meantime, we will make material modifications starting in June that will have a positive impact to the brand, the guest experience, and ultimately to unit revenues. We are estimating second quarter 2024 TRASM will be down 8%-9.5% compared to the second quarter last year on a capacity increase of about 2% year-over-year. We estimate that approximately 3 percentage points of this decline can be specifically attributed to the weakness in Caribbean and Latin American revenue trends. We estimate second quarter 2024 total revenue will range between $1.32 billion-$1.34 billion. Looking further out, the GTF engine availability issues and the phasing of AOG aircraft being taken out of service, together with limited visibility on when these aircraft will be returned to service, makes it difficult to accurately predict the number of assets we will have to produce capacity. For the full year 2024, we estimate we will have an average of about 25 AOGs, finishing the year with about 40 AOGs. Based on this assumption, we anticipate year-over-year capacity for Q3 will be up high single digits, and Q4 is expected to be down low single digits. For the full year 2024, capacity is now estimated to range between flat to up low single digits versus full year 2023. Again, this is a fluid situation, so this is just our baseline estimate for now, and at this point, it does not include any potential mitigation efforts from Pratt & Whitney that could improve the forecast. We estimate we will start 2025 with over 40 AOG aircraft, and that number will grow throughout 2025 and could end next year with somewhere around 70 aircraft on the ground from this issue. Additionally, taking into account the aircraft deferrals we recently announced, our working assumption for 2025 is that capacity will be down high single digits versus full year 2024. Again, the situation is very fluid, and we will do our best to update you as we gain further insight or if our working assumptions change. And with that, I'm going to turn it over to Scott. ... Thanks, Matt, and thanks to the entire Spirit team. The first quarter was a bit of an emotional rollercoaster, and I thank our team for staying focused on running the business and delivering the best value for our guests. There was a lot of activity in the first quarter. We terminated our merger with JetBlue, finalized the building of our new headquarters, executed on many of the items in the first phase of our go-forward standalone plan, and began laying the framework for phase two of the plan. This plan is the next evolution for Spirit, and I will cover some of the steps we've already taken, and Ted has a few tidbits to share in his closing remarks as well, but we are keeping most of the competitive details confidential for a bit longer. I will wrap up with a brief overview of the quarterly results and then share some of the views on the second quarter. Regarding our standalone plan, it has been evolving over the past couple of years, with more refinement happening over the past few months. While we were optimistic that the JetBlue transaction would be consummated, we were thoughtfully planning the airline in the event it was not allowed to proceed. Once the merger was terminated, we began executing on it. The first phase involved some updates to our financial and operational infrastructure. The first was to finalize the AOG compensation agreement with Pratt & Whitney for 2024, which we did in March. This agreement should add approximately $150 million-$200 million of liquidity benefit to the business in 2024. Next, we completed a deferral agreement with Airbus to move deliveries from the second quarter of 2025 through the end of 2026 to delivery positions in 2030 and 2031. This will improve 2024 liquidity by about $230 million. Given the reduced capacity from the AOGs and the further reductions in capacity from the deferrals, we began actioning items to right-size the rest of our business to our future capacity. This involves several initiatives, and it unfortunately means that we will need to furlough up to 260 pilots in September. We plan to action other right-sizing initiatives throughout the business as the year progresses to achieve our $100 million cost reduction goal. In addition, our advisors assisting us with addressing our loyalty bond and convertible notes due in September of 2025 and May of 2026, respectively, began having initial discussions with our bondholders of both notes. A large majority of the holders have organized and have hired advisors as well. The initial discussions have been constructive. Even though the discussions have been limited, the current plan is to have resolution with both note holders this summer. One of the important gating items in this discussion is presenting the go-forward Spirit plan to the advisors and possibly some collection of bondholders in order to reach a resolution. Therefore, all of the actions to date and going forward need to be done in a specific order and will require some patience to get to the finish line. Now for the results of the quarter. During the quarter, we managed costs well and ran a good airline, coming in fourth out of 10 major airlines in completion factor for the quarter. Our financial results were at the good end of our original guidance. Our initial guidance included over $30 million of credits from AOG aircraft that we thought would be recognized during the quarter as an offset to other operating expenses. Upon further review of the relevant accounting guidelines, the credits will be treated as vendor compensation for GAAP purposes and recognized as a reduction to the cost basis of goods and services purchased from Pratt & Whitney and primarily amortized over the life of the respective assets. While from a liquidity perspective, the credits will be applied in 2024, most of the benefit of the credits will be recognized through earnings over future years. In the quarter, we earned $30.6 million of AOG credits. Of this, only $1.6 million was recorded as a credit within maintenance, materials, and repairs on the income statement. Unfortunately, the accounting for these credits makes it difficult for the income statement to reflect the full economic impact, and we will have a negative effect on our margin by around two full points for the year. We will do our best to help explain the accounting, but we may need to add some further guidance, guidance metrics to help lay out the economic and cash impact of the compensation. As I have mentioned on prior calls, while the credits do help mitigate the damage of AOGs, we still estimate that our margins were penalized by an additional two to three points. The impact on our business associated with these Pratt engine issues cannot be understated. Despite the estimated amount of AOG credit recognized in the P&L during the quarter being significantly less than what was earned, total operating expenses were in line with our initial guidance due to operational efficiencies that resulted in better-than-expected labor expense and passenger disruption expense, as well as lower-than-expected airport rents and landing fees due to network changes and airport signatory rebates. On a year-over-year basis, first quarter operating costs were about flat. Operating margin was negative 13.9%. Had we been able to recognize all of the AOG credits earned during the quarter, our operating margin would have been negative 11.6%. We ended the first quarter with $1.2 billion of liquidity, which includes unrestricted cash and cash equivalents, short-term investments, and the $300 million of available capacity under our revolving credit facility. During the quarter, we took delivery of seven new A320neo aircraft and retired five A319ceos, ending the quarter with 207 aircraft in our fleet. We also finalized the sale-leaseback transactions for the remaining five aircraft from the 25 sale-leasebacks we announced in December. We completed 20 of the transactions in December of 2023, and the remaining five were completed in early January, resulting in net cash proceeds of $99 million, bringing the total for all 25 aircraft to $419 million.... For the second quarter, we estimate our operating margin range between -11.0% to -9%, or between -8.5% and -6.5% when adjusting for the difference between AOG credits estimated to be earned and the estimated AOG credit to be recognized through earnings. We estimate the credits earned in the second quarter will be about $42 million, of which we estimate we'll recognize about $7 million. We estimate fuel costs per gallon will average $2.80, with total operating expenses ranging between $1.460 billion and $1.465 billion. With that, I'll turn it back over to Ted for closing remarks. Thanks, Scott. It's been only two months since our merger agreement with JetBlue was terminated, but we have already made significant progress on the first phase of our standalone plan. As we approach the summer, we plan to share more details on the status of negotiations with the public bondholders of our loyalty notes and our 2026 convertible notes. Once that is complete, we will take the time to clarify the strategy for the next phase of Spirit. We have work to do to improve the company's revenue production and margin opportunity, and we intend to discuss the details of our go-forward business strategy, strategy at an Analyst Day in early August. Between now and then, we will be deploying some elements of the revised approach to the market. We do not intend to discuss the details on a piecemeal basis, as it is competitively sensitive. But I can say that we have been listening to our guests and general airline passengers, and have been reviewing the competitive set of products in the industry. The core components of our model work well: density and utilization to drive cost efficiency, and product assortment to give consumers choice. However, it is clear that we need to introduce, introduce some changes to reflect the new dynamics in the industry and to make Spirit a more compelling option for the traveling public. Some of these changes to our merchandising and pricing strategy are already being tested in some of our markets, and the results appear to be in excess of our expectations from a volume and yield perspective. It is early, but very encouraging. These are challenging times for the smaller U.S. domestic airlines, but I have confidence in the Spirit team and the work that we have done to date to reestablish ourselves as a disruptive force in the market. And now, back to DeAnne for Q&A. Thank you, gentlemen. With that, Pam, we are ready to begin the question and answer session from the analysts. Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star one to join the queue, and your first question comes from the line of Brandon Oglenski from Barclays. Please go ahead. Hey, good morning, everyone, and thanks for taking the question. Ted, you know, you mentioned in your prepared remarks how you feel like maybe, you know, the industry is feeling uneven right here post-pandemic with the profits focused at a couple of carriers and, you know, the struggles of the low-cost carriers. But what do you think, you know, potentially beyond just control of the market share, is driving this difference? Do you think it's a fundamental shift by consumers just desiring to have, you know, the backup of a network airline or premium products? I don't know, what have you diagnosed as the underlying challenge here? Thanks for the question. So I'd say there's a few things. First of all, corporate travel demand is not back to where it was pre-COVID, even though it appears to be moving in the right direction. We don't normally carry a lot of that, but that is a demand segment that does not exist to the extent it did pre-COVID, and so that's changing at least the way the airlines are competing for traffic. There are more seats available for leisure-based fares because there isn't as much corporate demand soaking up some of that. So to the extent that that continues to improve, that will give credence to the whole normalization thought that we're starting to, you know, that we indicated we're starting to see, and will help put the balance back in place. But as it relates to fundamentally shifting consumer behavior, as I said in my closing, you know, we've been studying the way people are behaving. We've been using the opportunity of the last couple of years to review, you know, where we would be from a standalone perspective. And while we still believe that costs matter, and we're still gonna be a very low-cost airline, and we will attack that vigorously going forward, by the way, beyond whatever the $100 million target is, we're gonna continue to pursue an efficient model. There are components of the way people are buying that are different than they were five or six years ago, and while we were at the forefront of introducing this type of model in an à la carte product, 15+ years ago, the changes we've made to our product have been more nuanced over the last decade, and I think this affords us an opportunity to recast that some. And while we were a hyper successful business in the 2010s, we also recognized that some of that could have been at the sacrifice of the experience that our guests were having on board the airplane. And we've made moves to improve that. We are a better operator today. Our on-time performance is more in line with what we want to expect, but we also want to afford our guests the opportunity to buy products and services that currently Spirit doesn't have available. And I think that's a chance for us to really move up faster than people could appreciate. Clearly, we need the market to perform. You know, to continue to perform. The domestic demand of market needs to reach some level of stability. But we feel confident in the plan that we've got, that we can attack the market well with low costs and deliver products that people want more affordably than they're currently getting on some of the other airlines. And I think that could be a real boon to load factor and yield for us. I really appreciate that response, Ted. And I guess, do you feel culturally that, you know, you have the team in place now, especially given all the ups and downs you guys have gone through here, to act with urgency to really right, you know, the ship in terms of operating profitability? Well, it certainly has been a seesaw a couple of years, and I appreciate the comment. But yes, you know, this is a group that was birthed in changing the industry and making adjustments. We've been an action-oriented management team for my entire experience here, and I'm blessed to have the group around me, and I've been glad to be a part of it. And we get the urgency. So, you know, this is something that, you know, we've been waiting to take advantage of, perhaps, you know, if the deal did not happen. We had to prepare for the fact that the deal would happen. That was the deal that was voted on by our shareholders, and that's what we agreed to do. But now that that's over, this is a chance for us to really move things along quickly. I think you've seen some evidence of that, and a lot, a lot of it, as Scott outlined, has been balance sheet and cost and, and growth rate-related stuff. But there's more to come this summer, and you know, we're moving with all due haste and urgency. Thank you. Your next question comes from the line of Scott Group with Wolfe Research. Please go ahead. Thanks. Good morning. I wanted to just focus on the liquidity and some of the creditor stuff. Can you just remind us minimum liquidity you're targeting? What are any additional sources of liquidity? Any more sale-leasebacks you can do? Any more PDPs to get back? And then, in terms of the creditor resolution this summer, maybe just at a high level, I'm guessing you don't want to get into too many specifics, what are some of the options sort of on the table here? Hey, Scott, this is Scott. So yeah, I think the process, you know, for us or the bondholders has been, has been constructive so far. We expect that to be, you know, sort of finalized through the summer. And, and when, when you think about sort of cash liquidity, minimums for us, we have it publicly disclosed outside of the, sort of $400 million minimum for our loyalty bond and $450 million minimum for our revolver. We haven't disclosed anything in regards to our credit card holdback agreement, but we are well above those, those minimums, today as well. So we think we have, you know, enough liquidity, and we expect to, to start generating some cash, you know, as we move forward into the back half of the year. So we feel good about where we are, and we do have some ability to generate more liquidity. Obviously, we have some financiable assets still remaining, probably expect an EETC sometime in the future here, as we think about enhancement going forward. But we have the ability to move forward, but really, we got to get the business generating operating cash, and that's really what the go forward plan is about. Okay. And then when I look at this Q2 RASM guide, you know, I guess I'm wondering, do you feel like you're seeing any book-away impact, just given sort of all the noise involving Spirit right now? And I don't know, do you have any thoughts there? And then I know you made a comment that you think off-peak gets better. Just any color on why you think that happens? Thank you. Yeah, sure, Scott. This is Matt. You know, we're not seeing anything right now that would indicate that. When you're asking about noise in the marketplace affecting our booking patterns or anything of that nature. What we do think is happening, which is what is being alluded to here, is that we have to make some changes. And what customers want today is a little different than what we're offering today, so we have to make some changes to get there. And as we make those changes, and as we move through the summer and then hit after the summer, we would expect to see things start to improve because of what we're-- what we've done thus far is created a great model and a great program. But what ended up happening is, throughout COVID and then coming out of COVID, we've seen a lot of competitive activity at price points that used to be sort of a place that we would play in, and others are now playing in on those same price points. So we have to make changes, and what we're looking to do is gonna be, as Ted alluded to, is creating different kinds of opportunities for more breadth of service and product, and then we'll just end up seeing how that plays through. It's gonna take a little bit of time for things to really kind of take hold and fully materialize, but we expect to see incremental improvement and accretion to the bottom line as we start to make changes. And that's where we expect to see help in the shoulders and the off-peak periods. Peak periods are relatively good, and it's the off-peaks and the shoulders is really where we need to see the comeback, which is where we used to do pretty well, and we're not doing well in those periods right now, and that's where we expect to see the improvement help us overall down the line. ... Okay, that's helpful. Thank you, guys. Appreciate it. Your next question comes from the line of Duane Pfennigwerth. Please go ahead. Hey, thanks. Good morning, Ted and team. Just a couple cash flow questions. First, on deferred heavy maintenance, can you just talk about what your expectation would have been this year, before any credits, and how we should think about that line, on a net basis, you know, after the $150 million-$200 million in credits? So Duane, are you asking about the estimated cash CapEx that we would spend this year? Primarily, I guess, it is what you're referring to. Exactly. Yeah. Thanks. Yeah, we were sort of forecasting in the sort of $175 million-$200 million range for Cap maintenance, and that's still probably about the case. Most of that's gonna be C work, and then we'll use the credits to offset some of that. Okay, so, that $175 offset by $175, it looks like in the first quarter it was a net outflow of about $20 million. Again, any, I guess any finer point you could put on that would be helpful. Yeah. I mean, we'll spend... Look, I mean, we'll spend more than the credits this year in Pratt from, you know, Cap maintenance and other parts and other things associated. So if you're trying to get at the usage of the credits, yes, we will likely, you know, be able to use all of the credits and beyond in the period. Part of that will be Cap maintenance, but some is within other expenses and then the P&L as well. Thanks. And just on other liabilities, it looks like it was about $120 million use of cash in the March quarter. Can you talk about what is driving that? What are the moving pieces in that line? And if there's any seasonality, is this kind of a front-loaded investment that eases in the back half? Any color on that line would be helpful. Hey, Duane, we don't have the detail on that yet. We'll get back to you on that. I'll have DeAnne reach out. Okay. Thank you. Your next question comes from the line of Savanthi Syth with Raymond James. Please go ahead. Hey, good morning, everyone. It's probably for Scott. Just on the $100 million cost reduction goal, I was curious, you know, you're seeing, as you kinda, or as alluded to, you're gonna have capacity reductions again next year. Does a $100 million right size to where you get to by the end of this year, or is it contemplating, you know, the right cost structure you need to be for next year as well? Hey, Savi. Yeah, the first move of this is to really right size to where we are at the end of the year, and that's sort of a run rate number, the $100 million. Obviously, a lot of that will happen, you know, the back end of the year as we think about the furloughs and other right sizing of some of the labor groups that we have internally. We right size some of the airport facilities that we have and other pieces of the organization. But that's sort of the run rate based on this year's capacity. Depending on the number of AOGs that we have next year, we'll have to reevaluate where we are with all the components of the P&L. But hopefully we get some AOG mitigation relief from Pratt. The number is not as high as Matt mentioned. You know, in his prepared remarks, that could be as high as 70 next year. Hopefully, the number is a little bit lower and easier to manage for us, but we'll have to reevaluate in 2025. Understood. And, and then maybe for Matt, just on the revenue side, you know, you mentioned three points of the pressure. I think this rise and pressure this quarter is from international. Is that kind of alluding to the fact that kind of domestic is having just as much pressure? And I was just kind of curious, as you think to redo the schedule, and I realize it's mostly in the off-peaks, but does your overlap change? Is there any kind of patterns in how you're changing those schedules? Yeah, sure. Thanks, Savi. So those additional points are out there because we would still be seeing some unit revenue weakness in the domestic network as well. So the Latin American Caribbean network is sort of on top of that, bringing down the system average a bit more. And this is: we've had geographic issues with this part of our network in the past, and it's always come back around, and we expect it will again. In the interim, we have made some important moves in our international and U.S. territory network. We've suspended a significant number of cities for now. We've exited one city permanently in that network as well. So you know, we're just like everybody else, I guess, kind of just digesting the capacity that's put in place there. During the early days of kind of coming out of COVID, so to speak, or even during COVID, a lot of traffic went to that region of the world, of our network, and a lot of that demand is still shifted to other parts of the world. So over time, that will come back to Latin America and the Caribbean. And we were thinking there'd be a little bit more of that happening right now than what we're seeing. Of course, there is capacity increases going on as well, so it's just a little bit of too much supply in that part of our network. Also, I would say that a lot of the moves that we are making are intended to find some opportunities where we can go where we think there are underserved opportunities, and that's a lot of the network additions that we put in place. I think it's important to also remember, and this is true for any airline, not just for us, is that anyone can add capacity in any route. This is a very dynamic industry, and anyone can move capacity wherever they want, whenever they want. So moving the network around is incredibly important, of course it is. But what's also important is making sure that we have a product that we can present to our, to our customers, to our guests, that makes us top of mind for them again, like we used to be, and we're going to do that. And that's also as important or possibly more important than thinking about just the network itself. That's helpful. I'll stay tuned. Thank you. Thank you. The next question comes from the line of Jamie Baker with J.P. Morgan. Please go ahead. Oh, hey, good morning, everybody. So first question on competition, you know, obviously one would assume that, you know, markets with multiple competitors, you know, tend to be potentially less lucrative than markets with, you know, maybe just one competitor. My, my question really relates to the behavior of competition in those more competitive markets. You know, what I'm being asked is whether any airlines, and you don't need to name names, but whether they're behaving more aggressively towards Spirit, given some of, you know, the, the, the challenges you've been discussing this morning. Is, is there any, you know, is there any truth to that? Or is it just sort of plain vanilla competition as usual, too many seats, too few people, that sort of thing? Thanks, Jamie. It's Ted. I'll kick off. If Matt wants to add anything, he can. Well, first of all, the industry has always been very competitive, so I think that's been the case, and the power is concentrated today. So it does. You know, if you strip away what appears to be a very lucrative transatlantic market and the credit card-based revenue of the loyalty programs of the bigger airlines, if you take those things out, they're losing money. And I think that speaks to how they're competing domestically. And so what we have to do is make sure we have the right product suite, and to Matt's point, we're positioning the airplanes in the right place. Now, there are definitely airlines that are focusing on different things. I think you could see there's at least one or two airlines that are reaching for as much premium as they can get their hands on and thinking about their brand in a certain way. There are a couple of others who are really just going down market. We're going to, you know, compete around that, as we always do. But I think there is a little bit of a dislocation in the way the market's showing, the bigger airlines are competing, and we're just going to have to pivot, which is, you know, actively what we're doing right now, keeping our focus on the cost structure, but also getting ready to introduce some products that we think could really be competitive, that can actually aid our unit revenue. So what would you add to that? Yeah, I would say from a tactical perspective, I think I would just call the competition that we're seeing quite normal. Airlines move around all the time in terms of how they compete and what's important to them at that time. So some airlines get a little more aggressive, some get a little less, and then it changes around. So I understand your question, Jamie, but I don't know that there's anything specifically different that I would call sort of a pattern emerging of any sort. Okay, that's helpful. And then second question, you know, when we think about the order book, and assuming that the aircraft market remains, you know, as it is for the foreseeable future, you know, should we be thinking about sale-leasebacks down the road being a form of CASM relief? You know, I, I, I don't recall this being a, a part of your DNA, but, you know, you're obviously talking today about, you know, making some brand changes, product changes, that sort of thing. So I'm just, you know, wondering if, if Spirit might, you know, kind of pivot towards that model. I'm, I'm basically trying to square this with what you also said about, you know, potential EETC. So any, any color there would help. Well, let me jump off, and, Scott, you can... I think what you may be referring to is sale-leaseback as a form of CASM relief, meaning potentially using the financing to offset expense by recording gains. We wouldn't do that. That's not- Precisely. Yeah, that's not something that-- We don't view that as an operating activity. You could do it, by the way, and it could be an effective form of financing. But I don't know that it's an operating activity. So, you know, we do sale-leasebacks today, obviously. We just don't-- We strip it out when we talk about it. So it may continue to be a form of financing going forward. We do have owned airplanes today. Scott alluded to, you know, the potential for incremental liquidity coming from EETC market because we have some outstanding EETCs today. But I think we look at the value of the order book as an asset. You know, that's why when we did our deferral program, we held on to the delivery slots because we think when the time is right down the road, we want to continue to modernize the fleet. When Pratt gets their act together, this will be a very powerful cost benefit versus a number of our peers domestically. The fuel burn advantage will translate into real margin points. And so, you know, it'll get there, and we want to be a part of that. So anything you want to add? No, I think you hit it head on. Yep. Okay. Thank you both. Appreciate it. Your next question comes from the line of Andrew Didora with Bank of America. Please go ahead. Hey, good morning, everyone. First question for Matt or maybe Ted. I know it's early, but Scott spoke to the possibility of generating cash flow as we move through the year. So how are you thinking- ... and lower capacity across the industry? Or maybe to ask another way, what kind of RASM do you need in the back half of the year to really begin generating positive operating cash flow? Yeah, Andrew, thanks. So, I'm not going to speak specifically to what unit revenue we need to start generating the operating cash flow. But what I can talk to is we expect, fully expect that the changes we start implementing this summer, and then we'll talk a lot more about other things that we would do come August at our Analyst Day, will be accretive to our profitability. So, that will take time to develop, and some things will be immediate benefits we expect, and some things will take a little bit longer to roll out. I would tell you that what's important here, too, and I neglected to say this earlier, is that in terms of the product itself, we have quite a difference in terms of how guests think about Spirit and how they recommend Spirit to their friends and relatives, relative to people who have not tried the product or have not tried the product in quite some time. It is a shocking difference between people that experience the product versus people that only hear what they hear in the news and the media, and that has to change. There's a significant number of people in this country who do not think about Spirit when they book their travel, and that will change. As that changes, that means we will be widening the funnel, and that funnel will allow us to then push up yields and, and then over time, flow through to other parts of loyalty. So instead of just being transactional with our guests, which largely we've done in the past, we will begin to become more relationship-driven with our guests. And everything we're talking about, doing and thinking about doing will lead there. And over time, and like, like I just said earlier, we expect some of this will be cash flow positive quickly, and other things will take time to develop. So I think that's probably the best way for me to describe what's coming and how we think about the back half of the year. And I might add, you know, as we head towards the back of the year, you know, the road to cash generation and eventual profitability, while it's important that we get the product aligned, as Matt alluded to, and that will be, we think, a near-term contributor, could be, you know, notable, but not, not as significant as it will when it builds over time. But the rest of it has to also come from the airline's cost structure and from its efficiency. If we look right now, today, we've announced, you know, a cost target just to rightsize, as Scott said, to get us into 2024, but most of that cost reduction hasn't taken place yet. We're still burdened with incremental expenses that start to reach run rate in the third and fourth quarters. And that's probably a point or two of margin right there. And then we look at the retirement of the 319s, and while we have challenges with aircraft on ground on the neo fleet, still, you know, an increasing percentage of the total fleet in neo aircraft. The fuel burn advantage right there is probably as much as another point, which starts to really roll through in the back half of this year. And then we've been moving utilization on a AOG-adjusted basis north, but we're still not all the way back. We're better, but not all the way back, and that's probably another point of margin right there. So we're talking about efficiencies that get us three to four points of margin in the back half of the year, we're optimistically thinking. And then the last thing, besides the revenue improvements that Matt alluded to, is the network pivots that he and the network team have been going through, really don't show in force until the month of May. Like, we're seeing them right now. And so we'll get some benefit out of that in the second quarter, but it's really much better in the third and fourth, and that could be as much as a couple of points of margin, we think. So those things, you start to add them up, get us right, probably right where we need to be from a cash generation perspective, not anywhere near where we need to be from a profitability perspective. And that's where we have to make the rest of the pivots, to push the airline even further forward. But, you know, we can't just rely on the unit revenue side of things. We are a cost business, we recognize that, and we think we have room to improve that to help cash flow and generation. That's great, Ted. Thanks so much. I'll, I'll leave it there. Thank you. The next question comes from the line of Conor Cunningham with Melius Research. Please go ahead. Hi, everyone. Thank you. Just on the Pratt credits, you have, like, a $50 million spread right now for 2024. Are the outcomes there just dependent on the days on the ground? And what maybe is turnaround times today? And then, maybe as a clarification, how much of that is for 2024, and how much is for 2023? Just trying to get a clean number as we think about potential compensation in 2025, given all the issues there. Thank you. Yeah. Hey, Conor. So the $50 million spread is obviously based on the number of AOG days. And the turn times we're seeing today are upwards of a year. So there... This is kind of what Matt mentioned earlier. Some of the mitigation efforts for the AOG, primarily for probably 25, will be reduced turn times, you know, as they, as they get better, get more raw materials, to help push those through. To your latter question around, you know, how much is 2023, probably about $30 million of that is for prior period credits that have accumulated, and so the remaining is gonna be for 2024. ... Okay, that's super helpful. And then you mentioned the need for off-peak to improve to hit your revenue assumption. I didn't know if that was a second quarter comment or a full year. And just how much does off-peak need to kind of perk up for you to hit your plan? Thank you. Yeah, sure. So, in terms of second quarter, we're baking into second quarter what we expect to be happening now. So we do need to see some slight improvements from what we saw, say, earlier in the first quarter. And we're seeing some of that happen. I wish it was faster. And it just speaks overall to what we were just talking about earlier, about what we need to do in order to become more attractive again out there. So all of the things that we're talking about doing are—I don't wanna get this confused here. They will also help peak periods as well. It's just that what we do see is that the off-peak and the shoulder periods is where we're having the most challenges, and that's where we need the most self-help in order to bring those back up to what we used to see in off-peaks. You know, we did a lot of cancels on Tuesdays and Wednesdays in the early part of this year. We do that every year. We generally do that in September and October. We'll be finalizing how we think about that here shortly, for the fall. And that's fine. That helps unit revenue, but at the end of the day, we need, we need to make sure that we can produce on those days of the week as well, so that we can also contribute overall to the operating margin on and the bottom line itself. Great. Thank you. Next question comes from the line of Michael Linenberg with Deutsche Bank. Please go ahead. Oh, hey, good morning, everyone. Hey, I just you know, as I think about, you know, your unit revenue guide for the June quarter and your top-line guide, I know, Matt, you highlighted some of the, some of the issues, that have driven, you know, called the subpar result. How much of it is, you know, with respect to new market development, it does look like you're adding a lot of new city pairs. How much does it take? Like, what's the timing for those markets to ramp up? Presumably, there's promotional activity initially to build traction. Just give us a sense of maybe how much exposure you have to developments and the ramp-up time. Yeah. Thanks, Mike. So, we have announced quite a few new routes. A lot of them are day a week, not all of them, a lot of them are. So the actual exposure we have right now in Q2 is really not that high. It's actually relatively low. As we move into Q3 and Q4, that number will increase a little bit. But as of right now, I wouldn't necessarily say that that's something where we've over-rotated there. We're being very careful with how we do this because we also recognize that new routes bring risk, and we're trying to de-risk as much as we can. So we'll be smart about it, and we're doing some things that we haven't done as much in the past. And then on top of that, there's a couple cities that we've been smaller in. We've been larger in them in the past, and cities that we need to kind of reestablish some of our position there. We think that'll help overall. So hope that helps. Okay, great. Now that does. Thanks. And then just second question to Scott. As I think about liquidity, I know in the past you gave us a year-end number. It does seem like that the demand trends are maybe a little bit behind trend. I'm not sure how much that impacts the year-end liquidity guide. But as I think about just seasonality and going from the March quarter to the June quarter, you know, given the fact that Easter was earlier this year and sort of squaring it with the revenue guide, is it conceivable that the ATL could be down, I don't know, $100-$150 million quarter-over-quarter? And again, that's just one part of operating cash flow, but is my thinking about it right? Any clarity would be great. Thanks. Yeah. Hey, thanks, Mike. Yes, I think the ATL actually, probably for the first quarter, was a little bit lower. Heading into the second quarter, bookings were a little light- Mm-hmm. -which I think is part of some of the cash generation negative in the second quarter. But we do expect that to turn around, and I think for the full year, we'll probably be a little bit lower than we initially guided to, probably in the 1.2-1.3 range at the end of the year. Okay. That doesn't include any additional financings that are still, you know, possible. But we think we'll sort of be cash neutral, if not cash positive, for the remaining part of the year. So we'll have to kinda see how the second half plays out. Great. Very helpful. Thank you. The next question comes from Chris Stathoulopoulos with Susquehanna. Please go ahead. Good morning. Thanks for taking my question. So Scott or Ted, the high single-digit capacity guide for 3Q, I'm guessing, is departure driven. You spoke to adding capacity. I believe you said in markets where you have a smaller presence, and you've given a lot of color on, you know, what your thoughts around peak versus off-peak. But if you could help kind of frame the composition of capacity for 3Q, both as it relates to departures and how you're again thinking about allocating peak versus non-peak. And then part B, you know, you spoke to what's happening here within Florida and short-haul Latin America. Do you believe that industry capacity within these markets, which are primary to Spirit, should eventually normalize? Thank you. ... Yeah, I'll start. This is Scott, on utilization. There's some puts and takes in there, obviously, with deliveries coming through the year, as well as increased AOGs and changes in sort of summer utilization as we head into the peak. So, you know, we'll have a higher non-AOG fleet utilization, but overall utilization on a fleet basis may be down a smidge just because of the number of AOGs. And so that sort of, you know, plays into the utilization piece. But with the deliveries, we'll be up, you know, in the sort of higher single digits on a capacity basis in Q3. That'll flatten out in Q4 to probably down a bit in Q4 versus Q3. Right. And, Chris, your other part of your question there, we expect, you know, stage will be down a little bit, but it's not gonna be dramatic. So we would anticipate, you know, likely, maybe slightly more departures, than you would see from overall ASM growth. But it should be. It really should kind of normalize itself out to be pretty much flat, in terms of how the ASMs will be produced. And also, I would tell you that, I think you asked about Latin America normalization. So supply and demand are very powerful things. They always work themselves out. So the answer to your question is yes, and we'll just have to see kind of how that plays out and how the timing is. We have a great cost structure. Our cost structure allows us to compete, and it's all about making sure we can generate revenue. A lot of the things that we're talking about doing will also benefit the Latin America and Caribbean part of our network as well. Okay. And then my second question: So, you know, as we think about 25, you gave it down, I think it's high single digit capacity guide. You have all these right-sizing efforts as it relates to cost, the $100 million in cost savings, effectively reshaping the cost base. AOGs admittedly are a moving target, but, you know, and post-pandemic demand arguably normalizing here. But if we put this all together, as it stands today and looking at our models, do you believe that Spirit can stay below $0.08 within CASM? Thank you. I mean, there's a lot of puts and takes here. I mean, we have, you know, some of the initiatives from, you know, that what Ted mentioned around utilization. We have some of our standalone plan initiatives that, you know, that will influence some of that stuff. But I think you're—we're probably targeting a number around that, actually. Okay. Thank you. Pam, we have time for one more question. All right. This is from the line of Dan McKenzie with Seaport Global. Please go ahead. ... Is underway, are expected to be accretive to profitability. Does the current plan contemplate profitability in any quarters this year? Or, you know, at least can it get you to a break-even operating margin? Hey, we missed the first part of that question, Dan. Oh, the first part is really, does the current plan contemplate profitability in any of the quarters this year? And, you know, or if not, can it at least get you to a break-even operating margin? Yeah, I think we're looking at for this back half of the year to be on an operating basis, positive for Q3 and Q4. On a net basis, we'll be kind of right at just above break even on a net basis. Q4 is gonna be right at probably break even, but we think we'll be sort of cash neutral, maybe generate a little bit of cash, you know, in the back half of the year. Wow! Okay, nice. And, Ted, the consumer bill, I believe Spirit was in favor of the new, the new DOT rules. And I'm just wondering if you can, you know, share some perspective about the incremental cost of the operation from compliance with this new set of rules, and, yeah, what has to happen to reduce that, that cost headwind? And I guess what I'm wondering is if, you know, you might need to carry more spare aircraft, maintain a higher headcount, or, you know, is the, the cost of the new rules, you know, just de minimis? Thanks, Dan. I don't know, perhaps where you got your feedback, but we're not in favor of those rules. And I, you know, I think the industry is digesting them as we speak and trying to decide how they're going to provide feedback. You know, there was a process in place by which, you know, feedback should have been solicited. I don't believe it was done as robustly as it's been done in the past. So, you know, the airline industry does a good job at taking care of its passengers and its guests when they are disrupted. We've always been forward-leaning on our ability to get guests reaccommodated where we can, to offer refunds. We do all of that stuff anyway, and the competitive pressure is what's at best at making sure each airline does the right thing for their own, for their own traveling public. So, you know, for now, we'll let this play out and see what happens next. Mm-hmm. I see. Okay. Thanks for the clarification. With that, thank you all for joining us today. Please contact Investor or Media Relations if you have any further questions. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.