Hello, and welcome to the Sun Country Airlines Second Quarter 2025 Earnings Conference Call. My name is Andrew, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand has been raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I will now turn the call over to Chris Allen, Director of Investor Relations. Mr. Allen, you may begin. Thank you. I'm joined today by Jude Bricker, our Chief Executive Officer, Bill Trousdale, Chief Financial Officer, and a group of others to help answer questions. Before we begin, I'd like to remind everyone that during this call, the company may make certain statements that constitute forward-looking statements. Our remarks today may include forward-looking statements, which are based on management's current beliefs, expectations, and assumptions that are subject to risk and uncertainty. Actual results may differ materially. We encourage you to review the risk factors and cautionary statements outlined in our earnings release and our most recent SEC filings. We assume no obligation to update any forward-looking statement. You can find our second quarter 2025 earnings press release on the Investor Relations portion of our website at ir.suncountry.com. With that said, I'd now like to turn the call over to Jude. Thanks, Chris. Good morning, everyone. We're pleased to report our 12th consecutive quarter of profitability. Our diverse business model is unique in the airline industry. Due to the predictability of our charter and cargo businesses, we are able to deliver the most flexible scheduled service capacity in the industry. The combination of our scheduled flexibility and low fixed cost model allows us to respond to both predictable leisure demand fluctuations and exogenous industry shocks. We believe, due to our structural advantages, we'll be able to reliably deliver industry-leading profitability throughout all cycles. The theme in 2025 for Sun Country is about growth in our cargo business. At the end of August, we expect to have all eight 2025 cargo additions in service, bringing our cargo fleet to 20 aircraft. We anticipate fleet growth, along with contractual rate increases, will roughly double versus prior contract our cargo revenue once these additional aircraft reach mature utilization. In the short term, this rapid growth has caused a pullback in our scheduled service volumes. We are planning that these reductions will be recovered as we move through 2026. I want to provide a little color as to the effects of this rapid cargo growth as it has on our results. Our 2Q results reported yesterday reflect the year-over-year TRASM improvement of 3.5%. Within the quarter, each month had a positive unit revenue performance. May had the best year-on-year improvement with TRASM up 6.6%, which is consistent with our expectation that off-peak and shoulder periods are the most sensitive to capacity changes. Importantly, the peak summer months of June, July, and August could absorb much more capacity than we are able to deliver with little fall off in unit revenue and performance. Here's the point. First, the rapid growth of our cargo business has required us to pull back scheduled service during our peak summer months. Second, during peak months, unit revenue improvements won't overcome unit cost pressures of lower utilization. This situation will be most acute in July and therefore most impactful in Q3 2025. We expect margins to expand as we build back our scheduled service with flying that was productive, but that we had to cut. With all this complexity in our current results, I think it's worthwhile to look into the future when we get the cargo fleet fully utilized, recover our passenger fleet utilization, and add in our own fleet of leased-out aircraft, mostly 900s, coming back to us through 2026. That will be an in-service fleet of 70 aircraft, 20 cargo, and 50 passengers. With current demand for our product and at current fuel prices, I expect the business to deliver roughly $1.5 billion in revenue, $300 million in EBITDA, and $2.5 in EPS. The timing of getting to this is a bit uncertain as we're challenged with induction timing and pilot upgrades, but I expect to be there right around the second quarter of 2027. In the meantime, we'll be focused on deploying our free cash flow. Our success in achieving these results will be mainly dependent on our ability to continue to deliver a great product. For 2Q, I'm particularly proud that we delivered the industry's best completion factor, our most important operating metric. Airline operations are a team event. I'm so proud of all our folks for delivering for our customers every day. Over to you, Bill. Thanks, Jude. As Jude mentioned earlier, we are pleased to report that the second quarter marked a 12th consecutive quarter of profitability. Our truly diversified revenue streams focused on traditional scheduled passenger service, charter passenger service, and our growing freighter service delivered the highest second quarter revenue in Sun Country history and generated a GAAP pre-tax margin of 3.2% and an adjusted pre-tax margin of 3.9%. Furthermore, this is our third consecutive quarter of both total revenue growth year-end and year-over-year improvement in pre-tax margin. During the second quarter, our cargo block hours were lower than we had anticipated at the beginning of the quarter due to the timing of cargo aircraft deliveries. That being said, we were able to pivot our pilot resources toward passenger flying and more than offset the reduction in cargo revenue with increased charter revenue, demonstrating the powerful benefit of our uniquely diversified business model. As of today, we have received delivery of all eight of our incremental cargo aircraft, and as Jude mentioned, we remain on track to have them all in service by the end of the third quarter. Second quarter total revenue of $263.6 million was 3.6% higher than Q2 of 2024 on a 0.5% decrease in total block hours. Revenue for our passenger segment, which includes both our scheduled service and our charter businesses, was down 0.8% year-over-year, primarily on a greatly reduced scheduled service operation. Due to our focus on growing our cargo segment this year, scheduled service ASMs declined 6.2% in Q2 versus the same period last year. Scheduled service TRASM increased 3.7% as total fare increased 6.5%, which offset the 1.3 percentage point decline in load factor. Throughout this year, we have seen scheduled service revenue book closer in and are not anticipating that to change anytime soon. As Jude described, second quarter demand was strong, with May exceeding expectations. Third quarter scheduled service ASMs are expected to contract between 9% and 10% as we continue to pull back in support of the growth of our cargo business. Second quarter charter revenue grew 6.4% to $54.3 million on a 7.9% increase in charter block hours. As a reminder, some of our contracts have revenue reconciliation based on fuel prices. Since fuel prices were down 15% in the quarter versus the same period in 2024, we naturally received less fuel reconciliation proceeds than we did a year ago on a per-block hour basis. Excluding this fuel revenue reconciliation, revenue received from charter flying easily exceeded the 7.9% increase in block hours in the quarter. About 77% of our Q2 charter block hours were flown under long-term contracts, which is a similar level as Q2 of last year. Revenue in our cargo segment grew 36.8% in Q2 to $34.8 million. This was the highest quarterly cargo revenue in our history. Cargo block hours grew 9.5% as we had 15 cargo aircraft in service by the end of the quarter, up from 12 in the previous year. We expect to have all 20 flying by the end of the third quarter as our cargo aircraft induction process is now casing as planned. Turning now to costs, Q2 total operating expense grew 2.2% on a slight decline in block hours. Adjusted CASM increased 11.3% and was heavily impacted by the 6.2% decline in scheduled service ASMs, arising from our shift out of the passenger business into cargo business. We project this year-over-year quarterly increase in CASM to be the highest such increase in 2025. It is important to note that our adjusted CASM will remain elevated as we do not anticipate to resume the growth of our scheduled passenger service until the back half of 2026 following the annualization of our cargo growth. Salaries grew in Q2 12.9%, in large part driven by a 7% headcount increase, the increase in pilot contractual rates from the beginning of the year, and our new flight attendant contract that was ratified in the first quarter. Also, during the second quarter, landing fees and airport rent expense increased 9.1% on higher rates, while the 14% increase in other operating expense was primarily the result of an increase in operation and a decrease in activity from our engine part sales programs. Regarding our balance sheet, our total liquidity at the end of Q2 was $206.6 million. Given our focus on Amazon growth in 2025 and into 2026, coupled with the aircraft currently on lease to third-party airlines, we do not anticipate a need to purchase any incremental aircraft until we begin looking for capacity growth for 2027 and beyond. During this quarter, we took redelivery of our second Boeing 737-900 that was previously on lease to another airline, and we expect both of those aircraft to enter service later this year. We also extended the leases on two of the remaining five aircraft that are on lease to other airlines, and we now expect two of those five to be redelivered to us in Q4 of this year and one in each of Q2, Q3, and Q4 of 2026. We still expect 2025 CapEx to be between $70 million and $80 million, with $21 million already spent in the first half of the year. Our total debt and lease obligations were $562 million at the end of Q2, down from $619 million at the beginning of the year. We expect to pay down an additional $44 million in debt by the end of the year, and we still have available all of our $25 million share repurchase authorization from our Board of Directors. Turning to guidance, we expect the third quarter total revenue to be between $250 million and $260 million on an increase in block hours of 5%- 8%. I would like to point out that included in our Q3 revenue guide is a reduction of approximately 33% in other revenue versus our Q2 results, driven by a reduction of the number of aircraft we have on lease to unaffiliated airlines, plus a $2.7 million Q2 benefit of a lease redelivery as described in our 10Q. We are anticipating our Q3 fuel cost per gallon to be $2.61 and for us to achieve an operating margin between 3% and 6%. Our business is built for resiliency, and similar to what we observed in Q2, we will continue to allocate capacity between segments to maximize profitability and minimize earnings volatility. With that, operator, I will open up for questions. Certainly. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from the line of Ravi Shanker with Morgan Stanley. Great, thanks. Good morning, everyone. Jude, thanks for that trajectory on the kind of long-term normalized EPS. Can you just talk about how purely idiosyncratic versus industry macro-dependent that path to $2.50 EPS is and maybe kind of what you're assuming for industry conditions at the time in 2Q 2027? Sure. Thanks, Ravi. When we look at long-term revenue forecasts, we use a general tailwind associated with inflation of about 3%, and then we have a two-factor model associated with changes in utilization of our fleet and also absolute growth. We're not assuming any changes in utilization versus last year as we look forward for those forecasts. It really is kind of just normalized, I would say, unit revenue performance, current fuel prices, the costs that we can reliably predict, which today are most of our costs as most of our labor situation has been sorted out post-COVID. I think we're pretty, there's not a whole lot, I think, of aggressive or conservative assumptions. It's kind of right down the middle. Understood. That's helpful. Maybe as a follow-up, apologies if I missed this, but I know your Amazon revenues are not volume-dependent. Do you have any sense from them as to what peak season is shaping up like? That's still somewhat debated in the space. I'll make a couple of comments, and Bill has done a lot of work on this. The basics are that the utilization of the assets and the availability of assets are both delayed. We're taking airplanes, we're doing work to them to get them ready for service. They're entering service later than we expected, and by virtue of that happening, the fleet isn't as committed because we want to make sure that we're executing well. It's just taking a little bit longer to get to, you know, kind of terminal velocity on that fleet. Very good. Thanks, guys. Thank you. Our next question comes from the line of Brandon Oglenski with Barclays. Hey, good morning, and thanks for taking the question. Jude, maybe I can follow up there. Can you remind us, do you have like a step up in pricing on that contract as well later this year, or is that an issue looking into next year? Yeah, we have an annual, this is Bill, by the way, we have an annual step up on the contract basically on the anniversary of the contract. That's sort of standard with it. With the new fleet coming in, when we put the last aircraft in place, we have a final step up of the change in the economics on the updated agreement. Current rates will be adjusted by annual escalators from here forward, and current rates are much higher than they were this time last year based on the contract that we signed with Amazon at the end of last year. Okay, we're at that new higher level run right now? Yeah, as Bill Trousdale said, it just kicked in. Just kicked in. Q3 will be the. Okay, got it. Jude, maybe just a bigger question about industry capacity and maybe, you know, strategic actions that can be taken here, just given some of the challenges that your competitors, larger low-cost competitors. Yeah, you know, our strategy here is to just continue to execute and produce good results and keep an eye out for organic growth opportunities that present themselves through restructuring or disruptions around the industry. I certainly agree with your assessment that there are some challenged airline operators out there. I don't know what to say. Our approach is basically, let's get a good balance sheet, let's continue to execute, and hopefully we will be able to move quickly when these opportunities present themselves. Immediately, as I look around, the reason that a lot of these carriers are struggling is because of overcapacity situations, which means we can't really move into these markets in advance of them having the pullback. I think we're taking the right approach. It's just continue to execute, build up our Amazon base that allows us to be really nimble with our scheduled service capacity, continue to strengthen the balance sheet, maybe distribute some of our surplus capital to shareholders, and be ready to move when there's an opportunity. Okay, appreciate it. Thank you. Thank you. Our next question comes from the line of Duane Pfennigwerth with Evercore ISI. Hey, good morning. Thanks. Jude, appreciate you speaking to the longer-term earnings power, but wanted to ask you just maybe in the more intermediate term. It feels like we've been in kind of a known holding pattern where you're holding resources in expectation for this cargo ramp. It sounds like although there's been some shift, the idea that you're going to be kind of fully ramped by the fourth quarter is still on the table. Maybe you could just help us understand the intermediate-term margin improvement, when you kind of hit your stride in cargo, which feels like the fourth quarter, and feel free to push back on that if you don't feel like the fourth quarter would be a good measurement point. Hey, Duane. Yeah, I think fourth quarter for a cargo ramp is pretty good. We're on track for that. Really what we're experiencing right now is we're going to grow credit hours, so pilot availability hours, by 10% year-on-year. That's a nice stable output for us, predictable. We're not having to add extra infrastructure. That puts, you know, cargo is pilot intensive, so we get less block hours for every credit hour than we do in scheduled service. We're going to grow block hours by a little bit less than that. When we planned the third quarter, we were planning on the cargo business being even bigger than it turned out to be for the reasons I mentioned earlier. As a result, our scheduled service is incrementally smaller. We don't get any offset cost savings on the fixed basis. We have a bigger fleet and something else that's happening is that we have lease returns that are going through induction. Every airline, when they take an airplane, typically begins expensing the ownership of that aircraft when the airplane goes into service. Differently for us, we're taking a lease redelivery, putting it through our induction process, and continuing to depreciate the asset while it's being inducted. We have unproductive assets on the passenger side. We have no change in the overhead of the passenger fleet that we had had in service before we started our cargo ramp. That's just putting a lot of cost pressure on the business on a unit cost basis as we absorb this cargo growth. 10% growth this year, 10% growth next year, that puts us into a growth mode again on our scheduled service fleet, scheduled service operations, probably around the second quarter of next year and just continuing on to absorb the fleet that we already own coming into our operating fleet thereafter. There's a little bit of noise. We're going to still lead the industry in margins, but the growth rate's going to be a little bit constrained as we absorb this cargo expansion. Okay, appreciate those thoughts. On your initial view of 5% to 8% block hour growth for the third quarter specifically, I wonder if you could just comment on how that looks by segment. Sure, Bill, you got that? I have that. For the third quarter, obviously, you know, there's going to be a tremendous amount of block hour growth in our cargo segment, probably year- over- year up between 40% and 50%. Scheduled service will be down high single digits. Charter service will be kind of up single digits. One thing that's really important that I tried to cover with my prepared comments is that capacity cuts of scheduled service in July are, you know, profit. They're very expensive because the market can easily absorb those hours, and we don't get much change to our unit revenues by cutting really profitable flights by necessity. Differently, September, we're cutting marginal flights that would have been in the schedule. There's very little effect in months like September and early May and off-peak periods like that. It really, you know, we're kind of at the most acute situation right now with this imbalance across our segments in July and August as we're cutting really productive flying. Thank you. Thank you. Our next question comes from the line of Michael Linenberg with Deutsche Bank. Yeah, hey, good morning, everyone. Just sort of back to Duane's question and maybe trying to get it a little bit more granularly. When we think about just the margin drag in the September quarter, Jude, you've talked through all the puts and takes about the ramp-up and the fact that you're underutilizing across your scheduled service. How should we think about it on a margin basis? I mean, are we looking like a drag of 300, 400 basis points here? Any color on that would be great. I think for the third quarter, you could $10 million, 4% is your point. Okay, got it. Okay, got it. Super, super helpful. My second question, as you know, we've heard from other carriers how the consumer may be changing in how they book. We've heard carriers talk about shorter booking curves. Obviously, the most price-sensitive customer seems to be the most impacted right now in the current macro environment. Is there anything that you can talk about and maybe what you're seeing? I realize you're coming into this with a very constrained capacity backdrop, which may make it more difficult for you to discern some of the maybe structural or secular changes that we're seeing in how people book, et cetera. Thanks. Yeah, I'm listening to the 10-quarter earnings calls that have come out thus far, and we're not really seeing a similar situation. I mean, our bookings are strong. We're seeing year-on-year monthly improvements in unit revenue. Our peak periods remain really good. We're concentrated on the peaks, so that kind of drives the business. If you go back to pre-COVID margin comparisons for peak days, we're replicating those situations in spite of higher fuel prices, higher airport costs, higher labor costs, higher maintenance costs associated with OEM pricing. It's all passed through, and it's just incredibly similar. The other thing that we're seeing is kind of like everybody's saying domestic's weak, and we're going to see pressure on the third quarter, and in some cases, airlines are kind of banking on a fourth quarter recovery. When you go back and look at our expectation of the third quarter when we plan the year, our budget is almost spot on our performance that we now expect to experience in the third quarter. Things are pretty good, and I think it mostly reflects, one is we're concentrated on a healthy local economy here in Minnesota. Secondly, the capacity overall for the industry across our network is either slow growth or modestly declining. We're kind of also into a point where we've absorbed most of the inflationary pressure, so we can be pretty good about where we think costs are going to fall as we add capacity into the network. Things are pretty good, and we have a lot of tailwind looking forward into the back of the year with the launch of our loyalty program. We're getting PBS out to our crews, which I think is going to increase productivity. We've absorbed the last contractual rate increase on our pilots here this year, so that'll be a tailwind going into next year's comps. One thing on the comp basis that I should bring up is that as you look on third quarter year-on-year, the only month in the six-month period of the second and third quarter where we'll be near zero or maybe slightly negative on a unit revenue basis is July, and that's because the comp for 2024 was when Delta experienced their CrowdS trike outage, and we had a lot of reacomp revenue last minute at really high yield. If you stabilize for that, July looks really good. I mean, we're booking the winter right now. We're scheduled out through April. Bookings look really strong into the winter peak period for us. August is closing in a lot better than we had thought just a couple of weeks ago. I'm kind of, you know, somewhat experiencing what Scott Kirby talked about on his call with the recent strengthening of close-in bookings. We're certainly seeing that here. We're not experiencing the variance to what we expected that other airlines are talking about that I can't. Jude, how much of December quarter's booked right now? Do you have a sense of just? Okay, that makes sense. Looking at the actual numbers right here. Hang on one sec, Mike. What do you have? Yeah, that was sort of mid-teen, exactly right. Yeah. Perfect. No, thanks for that. That's all very helpful. Really appreciate it. Thanks, Mike. Thank you. Our next question comes from the line of Thomas Fitzgerald with TD Cowen. Hi everyone. Thanks so much for the time. Jude, just wanted to return back to capital allocation. It just seems like you guys have such a lower risk opportunity here versus a normal airline. With the stock trading around like four times the 2027 potential or mid-year 2027, how do you weigh next year? How do you kind of weigh that balance between growth opportunities and then shareholder returns? Will the PE be kind of the deciding metric or what else kind of goes into the calculus? We run the business for EPS, and it's certainly a viable strategy to introduce share count. I think that for me, the balance is, and I'll turn this over to Bill then, is that when we got planned liquidity, we're producing a lot of free cash flow. To start with that, we're not going to do any debt prepayments beyond our amortization schedule unless it's associated with a refinance. We're going to continue to build cash, and I think the balance is, do we return to shareholders? Do we try to find asset deals, which we're working real hard on trying to find some? I'm talking asset deals up for aircraft. Are we going to have a bunch of dry powder for what we think is going to be a shakeup in the low-cost space in the near term? I think probably we'll end up doing a little bit of all three. Bill, do you have anything to add? Yeah, I would just add, I mean, just one thing that we are cognizant of is a fairly severe inflationary pressure on, you know, aircraft assets and specifically engine assets that are important to us. While we do have, you know, relatively modest CapEx outlook, depending on what the severity is of that inflation, it could sort of have some upward pressure, which puts availability pressure on the ability to do further share buybacks. Certainly at today's pricing, it's more attractive than it was yesterday. We want to be opportunistic in the asset market. If there's a big portfolio that comes along for airplanes that we intend to operate or engines we intend to use, we want to be able to act without any capital constraints. That's a consideration as well. Okay, that's really helpful just to kind of get some of the philosophy there. Most of it might have already been answered, but just thinking about, you know, if things go better than expected in 2026, like what some of those, mainly like scheduled service, do you foresee, just given how nimble your model could be, like in June and July with the World Cup? is that like something where, you know, in the past, like you've gone into markets like Texas or Hawaii and when they've been hot, do you foresee that as maybe an upside opportunity or things in the track charter? Thanks again for the time, guys. Sure, Tom. No, The World Cup will probably be a slightly negative event for us because we'll be able to schedule around some of the events and pick up some high-yielding traffic, but the offset will be, the Major League Soccer will be paused during that period. I think it'll be probably a little bit slightly negative as a result of the World Cup. Thank you. Our next question comes from the line of Scott Group with Wolfe Research. Thank you. Good morning. A couple of questions ago, that $10 million drag you're talking about for Q3, how should we think about what that looks like in Q4? Do you think it's fully gone by the time we get to 2026? Yeah, so it goes Q4, goes Thanksgiving and Christmas peak periods. There's about an aggregate 30 days where things are really good. If we can recover, it really is about pilot capacity by then, then there won't be any impact. That's unlikely. I think it'll, you know, this is kind of peak impact and it'll kind of ameliorate over the fourth and first quarters of the subsequent year. The next big opportunity for us is in March of 2026. I feel better about getting back to an unconstrained situation on the scheduled service fleet by then. Yeah, that longer-term comment about $250, second quarter 2027, it's just like a very specific sort of quarter. It's like, especially because Q1 is usually your peak quarter, why is it Q2? Is there something about the shape of earnings for you that changes now with some of these mixed changes? I'm just surprised it was such a specific quarter. Got it. It's a pretty simple analysis. It's just our 10% growth, rolling that out when that gets to a fleet of 70 at the utilization that we expect it to be over the long run. It's just algebra. Okay. Okay. Maybe just lastly, just to follow up on that, is there a step function that happens there, or do you think we see sort of linear improvement like in 2026 on our way to that sort of longer-term? We're not assuming, right? We're not assuming any step function. We're assuming a linear approach, but there's a lot of uncertainty there, particularly around changes. We're launching a crew base this year, which is the first non-Minneapolis pilot base this company's ever had. We don't know what the effect of that's going to be, but I think it's going to be positive. We're launching PBS, as I said earlier, which is a different way to roster our crews. There's a lot of efficiency in that. Those initiatives together may change the trajectory substantially, and we can bring utilization online faster. I think we can summarize all that by saying we're pretty conservative on where we think growth is going to go. I think there's probably, particularly with hiring of pilots being where it is, there's no constraints there. Particularly with that, I think that we're probably on the conservative side. Okay, great. If I could just sneak in one last one, please. Sorry, go ahead. If I could just sneak in one last one, any color on competitive capacity you're seeing as you look out over the next quarter or two? Yeah, if you kind of look month by month, if you go all the way out, now a lot of airlines haven't extended their schedules past January, which is a head-scratcher in and of itself. If you look out across our network all the way through our selling schedule in the beginning of April, it's either flat to down. It looks really, really good. I can't imagine we don't have, you know, with kind of demand maintaining at its current level, capacity very moderate, down single digits across our network. I think we're going to continue to see the kind of unit revenue trends we already produced in the second quarter. Importantly, Southwest's pullback from the Minneapolis market, Spirit Frontier pullback from the Minneapolis market, Allegiant doesn't have Minneapolis in their current selling schedule. We're just seeing this become very quickly a two-airline market. I think both carriers are going to be really healthy in that environment. Okay, that's great color. Thank you. Appreciate it. Thanks, Scott. Take care. Thank you. Our next question comes from the line of James Kirby with JP Morgan. Hey, good morning. Maybe just a little bit more color on the charter and how to model that business out into early 2026. Given scheduled service, it sounds like capacity is going to be flat to down in the first half of the year. Is that consistent with where charter capacity should be? Maybe just a comment on Ad Hoc flying. It looks like last quarter was better than historical run rate. Any comments there as we think about the back half of this year and early next? Yeah, let me give you some general comments about how we think about charters, and then Bill can give you kind of what we can guide to. I think, so charters, it comes in two flavors. One is long-term commitments, which operate economically very similar to our cargo business. Very stable, very reliable margins, pass-through economics associated with ground handling, fuel, et cetera. Those will not change. I don't think there's going to be a lot of growth in those opportunities for us. It's casino charters, Major League Soccer, and our VIP business, which operates out of L.A. The other side of that is Ad Hoc bids, which tend to happen closer in in the fall for us. That's collegiate football. All year round is military. Those have been up for us recently in the second quarter because of availability of crew and airplanes, as we didn't have the kind of growth that we had expected from our cargo fleet, as we talked about earlier. Looking forward, I think that's probably going to continue to be the case through the back half of the year, where we'll be able to be more aggressive at picking up these Ad Hoc opportunities. I think it's going to be a relatively minor impact on overall results. Bill, any? Yeah, I mean, we spoke about sort of the growth of charter earlier. I mean, from a unit revenue perspective, our charter as a whole, on a per-block hour basis, is growing on an annual basis of approximately 4%. There are some peaks and valleys through the quarters, but that's probably a good run rate. Okay, got it. That's helpful. I appreciate the color. Second question, of the $1.5 billion top line by the second quarter of 2027, are you able to break that down maybe by mix of segment? I mean, or if you're not able to, you talked about long-term target weights. Is that just consistent with where you're seeing it? Yeah, $230, $240 of that's going to be in cargo. Bill Trousdale talked about charter growth, you know, 4% from where it is today. The remainder will be in scheduled service. Great. Thanks, Jude. Appreciate it. Yep. Thank you. Our next question comes from the line of Catherine O'Brien with Goldman Sachs. Hey, Catherine. Good morning, everyone. Hey, good morning. Thanks for the time. Do you guys extend the two leases that you have with the third-party airlines, pushing out the returns into 2026? Is that a reflection of your view on staffing or demand? It doesn't sound like it, or just the economics were too good to pass up. I'm just trying to get a sense of how you're thinking about when you can start pushing the utilization on that passenger fleet more, and if the gating factor is still pilots? That's a scenario where we are faced with all the issues that we talked about, where we're growing but not able to absorb the fleet growth that we're experiencing, and then also the operator really wanting to keep the airplanes. We're getting great economics by leasing them out until we're ready to operate them. It's kind of an intersection of the two points that you brought up. Okay, great. I know you talked about July having tough comp, the rest of the months rising to be positive. Can you give us some more details on how things are booking into the fall? Like, you know, how does August compare to June? Any early thoughts of September or any geographies you'd want to call out as particularly strong or maybe less strong? Yeah, sure. I'm happy to give you more color. The most significant trend, I think, in our bookings is that we're consistently coming in under where we expected on load factor and higher where we expected on fares. Ancillary unit revenue has continued its steady climb of low single-digit improvement. The fare load factor trade-off is a result of demand close in, and as we adjust our pricing in expectation of that demand, we're accepting lower load factors to hold seats available for the expectation of closer in demand. Across the network, generally, we're seeing demand is really good in the Northeast, really good in the Midwest, and moderately, you know, kind of flat Mexican Caribbean, weaker in California, Southern California, desert destinations. I think most of that is attributable to OA capacity. I feel that these are sort of normal variations across geographies that we experience every time we look at revenue. I think everything's in a pretty tight band of expectations, and nothing really stands out as weird to me at this point. I feel really good about where we're predicting things to go based on the fact that we're hitting where we predicted to be now. Yeah, no, that makes a lot of sense. Maybe I can squeeze just one really quick one in. You mentioned participating in a potential shakeup in the ULCC space. As of now, I know it's hard to predict. It's not like an opportunity at the exact moment, but are you seeing more on acquiring assets? Could that include outright M&A? I know you've talked about that in the past. You'd need to see a cost structure and a pilot contract that would align better with yours. As it stands now, are any of those things aligned where you could be talking more outright M&A, or right now it's looking more like asset acquisitions if there's something attractive? Yeah, so kind of all of the above, but I'd say we've, I don't spend any mental horsepower on things. I have a limited amount of that to give, and I tend to focus on things I can control. For us, that's asset acquisitions and then being ready for organic growth opportunities based on a shakeup in the industry. M&A, because of our size, is probably going to be something that we are asked to participate in, not initiating. Therefore, we don't, I don't spend any time worrying about it. I think it's an unlikely scenario because of how different our model is. We're just best serving our shareholders by keeping our heads down, executing a plan, and continuing to outperform the industry. I think it sounds like a prudent plan. Thanks so much for the time. Thanks, guys. Yeah. Thank you. Our next question comes from the line of Christopher Stathoulopoulos with SIG. Good morning everyone. Thanks for the questions. Going back to the targets on 2027, I just want to understand, I guess, the inputs here. I heard a two-factor model, wasn't clear exactly what's in that, but 3% inflation, $240, I think you said, in cargo out of the 1/2 on the top line. In utilization, similar to last year, if that's the case. Maybe if you could give on the utilization piece exactly what's contemplated on the scheduled and cargo side, and then is there anything unique with respect to charter? You did call out casinos, Major League Soccer, military, college football. That would be different perhaps versus where those contracts currently sit. Thanks. Yeah, there's a lot there. First, to kind of review the inputs. The 3% is just an inflationary, I mean, we just add inflation to kind of the backdrop of where we do long-term forecast. The two-factor model is just what we experience on unit revenue impact from a change in utilization, which we're assuming is zero because we're replicating our inflation, I mean, our utilization as we look forward. Then absolute growth. Absolute growth puts pressure on unit revenues, but that tends to come down as incremental capacity adds, same-store sales or new markets. The impact of that kind of stabilizes over time. That's how we think about forecasting long-term revenue. Our last year's fleet utilization was 7.3 hours per day per passenger airplane, and we're assuming we get back to that somewhere around the middle of 2027. That's the inputs on the long-range plan that we have. On the charter growth, the track programs, as I mentioned, I don't see right now a whole lot of opportunity to grow that business. Ad Hoc is really a function of having fleet and crew available when there's availability. As the passenger fleet grows, we'd like to keep Ad Hoc flying kind of proportionately the same, which is to say, we have off-peak opportunities where we have surplus fleet and crews, and we can take advantage of any opportunity that presents itself. That's kind of the basis of our long-range assumptions. Anything to add, Bill? Just keep in mind that this year versus last year, that utilization will continue to decline faster in the back half of the year because of the cargo sort of ramping up. That's why it's going to take us a while. You might not see much utilization variance in the first half of the year as Jude is describing it. That'll sort of kick in and bottom out probably in Q1 of next year on a year-over-year basis. Okay. A second question on the, what I heard is some delay around the utilization with the Amazon aircraft. Is that just some delays with deliveries prepping or perhaps some hesitation around the schedules, given all the noise around tariffs and demand? If there is a weak peak season, are those aircraft able to be deployed in other areas? I just want to understand, again, if you could reiterate weak peak, what that might mean for utilization, volume commitments, et cetera. Thanks. It's a ACMI model. We operate the schedule they give us. As the airplanes were coming in and they were delayed, they adjusted by lowering the utilization and also the assumed entry into service dates of the rest of the fleet. We had already built our scheduled service plans that included these higher production levels for the cargo fleet, and therefore we were just under-allocated. That'll correct itself in very short order. I can't read anything into what the schedule that they produce was a result of. I just don't know, other than those internal issues around getting the planes in service. Okay. If the weak peak season piece does occur, I realize it's still early. I'm sorry, could you say it again, please. For peak season shipping, still early, but if the season does come in softer than expected, are you able to do anything else around those assets? Maybe if you could remind us around the volume commitments and how that all works. Thanks. Yeah, sure. Looking backwards, generally the schedule, which is what we love about it, is very flat and reliable. My assumption would be going forward that we would expect the same. These are Amazon airplanes flown for Amazon's purposes, and I don't expect anything different out of this fleet. Okay, thank you. Thank you. I'm showing no further questions. With that, I'll hand the call back over to CEO Jude Bricker for any closing remarks. Hey guys, thanks for your time today. We're really excited about where we're headed and look forward to talking to you again in 90 days. Take care, buddy. Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.