Welcome to the Sun Country Airlines third quarter 2025 earnings call. My name is Marvin and I will be your operator for today's call. At this time, all participants are in 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 is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to 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, Torque Zubeck, 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, and are subject to risks and uncertainties. Actual results may differ materially w e encourage you to review the risk f actors 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 third 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. Thanks for joining us. Our diversified business model is unique in the airline industry as demonstrated by our 13 consecutive profitable quarters. 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. As discussed on prior calls, in 2025, Sun Country is focused on cargo expansion as we execute on the planned growth of the cargo fleet to 20 aircraft. Today, all 20 aircraft are in operation. Our third quarter cargo revenue for September is up 60% year- on- year and we expect it to move to over 75% by December based on the current schedule. Consistent with our plans, cargo growth has displaced some scheduled service flying. The year-on-year cuts in scheduled service were largest in 3Q and we'll be focused on recovering those levels in the next several quarters. I expect to be able to show positive year-on-year scheduled service growth by 3Q 2026. For me, the most positive news in the quarter was the inflection in scheduled service TRASM. 3Q TRASM was up 1.6%, however, for September it was up over 7%. Currently, we expect 4Q TRASM to be up over 6% with 1Q 2026 advances even stronger. Our revenue strength is across all regions of our network and based on our current industry selling schedules, I don't see any reason that those trends shouldn't continue. I continue to expect to achieve $300 million of run rate EBITDA after the second quarter of 2027 operating the fleet we currently have on our balance sheet. The timing of full implementation may be delayed by many factors, some beyond our control. The aircraft that we lease out will be redelivered through the end of next year and we project that utilization will continue to increase as we train crews to increase block hours. Another positive in 3Q was charter production. We had an all-time record volume while also growing revenue per block hour by 4% year- on- year. In the backdrop of strong demand for charters, we're able to allocate surplus capacity into this segment. This helps offset some of the underlying of scheduled service. Our ability to flex capacity between charter and scheduled service continues to be a competitive advantage, especially in this environment. Finally, and perhaps most important for our long-term success, we continue to execute a safe and reliable network with 3Q controllable completion factor of 99.3%. Operations as varied as ours are difficult. It's a team sport. I continue to be impressed by all our employees that make it happen for our customers every day. With that I'll turn it over to Torque. Thank you, Jude. As Jude mentioned, this quarter marked the completion of our cargo expansion with all 20 aircraft now operating under the contract for Amazon. Adding eight additional aircraft to our fleet was truly a team effort and represents a 14% increase in our total fleet. As such, we remain in a transition period while we begin to annualize our cargo growth and then begin to grow back our passenger service business to the pre-2024 utilization and expand our passenger fleet to 50 aircraft by mid-2027. During this transition, we have remained profitable thus far and, as Jude mentioned, produced our 13th consecutive profitable quarter. Our GAAP EPS for the third quarter was $0.03, and while our adjusted EPS was $0.07, GAAP pre-tax margin was 8% while adjusted pre-tax margin was 2%. Our fourth consecutive quarter of year-over-year adjusted margin expansion, third quarter total revenue was $255.5 million, a 2.4% higher than Q3 2024 on a 3.8% increase in total block hours. Revenue for our passenger segment, which includes our scheduled service and charter business, was down 3.2% year-over-year, primarily on a greatly reduced scheduled service operation. As we completed our transition to the increased cargo fleet, our scheduled service business strengthened throughout the quarter. August total fare increased 2.6% versus last year while August load factor increased 2.7 percentage points to 87%, which was the highest monthly load factor this year. September saw an even better performance as total fare was up 4.5% versus last year and load factor increased 3.2 percentage points to 83%. Scheduled service ASMs were down 10.2% in the third quarter as we shifted resources to facilitate the dramatic growth in our cargo segment. While we will not be adding additional cargo aircraft in the fourth quarter, we will still be annualizing the new growth. Thus, scheduled service ASMs are still expected to decline between 8% and 9% in Q4 2025 versus last year. Third quarter revenue continued to show strength. Charter revenue grew 15.6% while charter block hours increased 11.1%. Excluding the impact of fuel revenue reconciliation, charter flying grew 16.7%. The flexible nature of our charter business was on full display as block hours dedicated to ad hoc charter opportunities grew 31%, which helped offset the slower build in the third quarter. Cargo block hours, charters flown under long-term contracts, still account for 77% of the charter block hours, which was down from 80% last year. Revenue in our cargo segment grew 50.9% in Q3 to $44 million, which was the highest quarterly cargo revenue in our history. Cargo block hours grew 33.7% in the third quarter as all 20 cargo aircraft were in service by late August. This transition was a bit slower than we expected going into the process. As such, it drove pilot costs higher as we hired up for a greater level of block hours in the quarter. Now turning to costs, our Q3 total operating expenses grew 3.6% on a 3.8% increase in block hours. If you exclude fuel and special items, our operating expense in Q3 was actually lower than it was in Q2 despite having 1.3% more block hours in Q3 than in Q2. CASM in the quarter was up 10.3% versus the same period in 2024, while our adjusted CASM increased 5.2%, both heavily influenced by the 10.2% drop in scheduled service ASMs. Salaries grew in Q3 15% in large part driven by a 10.6% increase in employees, the increase in pilot contractual rates from the beginning of the year, and flight attendant contracts ratified in Q1. Maintenance in the quarter increased 13.5% due mostly to the occurrence of unplanned maintenance events. Now regarding the balance sheet, at the end of the quarter we closed on a $108 million term loan facility with a fixed rate of 5.98% per annum. This allowed us to pay off the March 23rd term loan which had a materially higher interest rate and refinance our five 737-900ER aircraft. We still have not drawn down the entire $108 million and expect to receive the remaining $54 million by the end of 2025. Our total liquidity of $298.7 million in the earnings release includes this amount. In addition, we spent $10 million for share repurchases in the quarter and have $15 million remaining in our previously announced Share Purchase Authority. Year to date we have completed a total of $20 million in share repurchases. We have also spent $29.1 million through the year in CapEx and expect to spend between $80 million and $90 million for the full year of 2025. As a reminder, we do not expect to have meaningful aircraft CapEx until later in 2027 as we still have owned aircraft on lease to other carriers that will redeliver to us throughout 2025 and 2026. These five aircraft will drive growth in the passenger segment for the next couple years. Net debt at the end of the third quarter was $406.1 million, down from $438.2 million at the beginning of the year. Now turning to guidance, we expect the fourth quarter total revenue to be between $270 million and $280 million on an increase in block hours of 8% - 11%. We are anticipating our fuel cost per gallon to be $2.50 for us to achieve an operating margin of 5% - 8%. Our fourth quarter is also burdened by an acceleration of some heavy maintenance costs that we plan to pull forward from 2026 to manage the maintenance of our fleet. Our business is built for resiliency, and we will continue to allocate capacity between segments to maximize profitability and minimize earnings volatility. With that, I'll open it up to questions. Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you need to 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, please limit yourself to one question and a follow-up. Please stand by while we compile the Q&A roster. Our first question comes from Brandon Oglenski of Barclays. Your line is now open. Hey, good morning, gentlemen, and thanks for taking the question. Jude, how do we think, and I don't mean this to be a near term question, but just given that cargo is going to be a bigger mix going into early 2026, how does that impact the seasonality of the business? Because traditionally you guys get a pretty big margin in the first quarter with folks leaving Minneapolis. Hey, Brandon. Yeah, I'll answer that a couple ways. First is the ramp up has been slower than we expected for cargo. We're rostering December in a couple weeks, and we're planning a block hour production in the cargo fleet of over 5,000 hours. That's about what we would expect the run rate to be on a permanent basis, subject to out of service time related to planned maintenance. That's going to be the effect of the cargo operation through most months. In 2026, we still will have a really seasonal operation because the value of cargo, whether it's with the scale that it was last year or the scale it's going to be next year, is that we can fly higher peaks. The negative effects of the cargo implementation in the third and fourth quarters have been that we had to cut down peak period flying in order to accommodate cargo growth. That'll be rebuilt in the subsequent quarters. We'll be repeating the schedule, which will actually potentially increase seasonality of our business as we expand March into March 2026 and March 2027. I don't think there's going to be much to change the seasonality of our business. Our first quarter is always going to be massive. Okay, appreciate that. Torque, congratulations on the new role here. I guess it would be great to get your impressions being there for a while now. I think you made some commentary around maintenance costs in the third and fourth quarters. Maybe if you could elaborate on that. Thank you. Yeah. When we talk about our maintenance costs, that's really served by the fleet that we have. We've expanded fleet and there's more maintenance required in there. I don't know, Steve, if you want to. Yeah. It's an opportunity to pull it in to 2025 to stabilize the maintenance demand and p rovide a more predictable platform to run our business. The lumpiness of maintenance will always be heavy checks, including engine repairs. This is a relatively high period for us. Okay, thank you. Thanks Brandon. Thank you. One moment for our next question. Our next question comes from the line of Catherine O'Brien of Goldman Sachs. The line is now open. Hey, good morning everyone. Thanks for the time. Hey Cath. Hey, you guys noted that fares and loads were strong in August. September accelerated from August, I guess. Is that continuing into the fourth quarter? I know there's some pretty tough comps on an industry basis in late November and December, but you've got capacity down year-over-year. Any color you can provide us on how you see RASM progressing through the months of your 4Q outlook, and any read on holiday bookings would be great. Thanks so much. Yeah, I mean certainly listening to earnings calls across the industry, it appears we're on an island and it looks really strong. I don't have any negatives. I mean, we had over, as I mentioned earlier, we had over 7% TRASM improvement in scheduled service in September. Off peak periods will be more responsive to capacity changes for TRASM impact. In other words, cutting down September has a greater impact on TRASM than it would in a peak period when all the flying is strong, for example. We're moving into our winter peak season. Sales look really, really strong into the winter period. Our guide reflects an over 6% TRASM year-on-year improvement for the third quarter. You know, I mean there's just nothing worrisome in advances right now across the network. I'm not seeing any competitive movements that give me pause or any year- over- year weaknesses. Minneapolis is becoming a two airline market as we talked about in the past with the removal of Allegiant and Spirit Airlines from our home market. I don't know, it just looks really good. I don't have anything negative to speak of. Hey, happy to hear it. I'll take it. I guess maybe one for Torque or someone else. And welcome Torque. On my math, CASM ex fuel is accelerating quite a bit into the fourth quarter. I'm getting to like mid teens inflation but then on a block hour basis closer to 5% year- over- year, I guess. First, lots of moving pieces. Can you correct me if I'm wrong and then give us some color on the impact that maintenance pull forward is having on the fourth quarter, and then maybe just higher level as cargo inductions are behind you and the start of service further behind you. Any preliminary thoughts on what 2026 capacity and unit cost inflation could look like? High level. I know last quarter you mentioned you expected cost pressure to persist through first half, so sorry, that's kind of a twofer for my second one. Thanks for the time. Yeah, thanks, Cath. I think, you know, when we look at our maintenance coming up, we've got $2.4 million of heavy maintenance forecasted in 2026 right now. That's certainly going to. Okay, that's from 26 into. Oh yeah, sorry. From 26 into Q4. Sorry about that. Yeah. Capacity. We mostly think about capacity while we have more aircraft than blackout, so we're blackout constrained. Credit hour growth 2026 over 2025 will be about 10%. Now, those credit hours consumed in cargo don't produce the same amount of block hours as those credit hours that are going to be consumed by scheduled service flying. Our block hour growth will be lower than our credit hour expansion because of the cargo expansion. That makes sense. The real thing that I'm most focused on to try to get us back into the mid-teen annual operating profit margin is going to be the expansion of scheduled service flying in peak periods, which currently is constrained by our credit hour constraint. As we hire pilots and continue to add and upgrade pilots, then those numbers will expand and that's the highest margin opportunities that we have that we're not able to execute on with current staffing constraints. Okay, got it. Thanks for that. Yep. Thank you. One moment for our next question. Our next question comes in line of Tom Fitzgerald of TD Cowen. Your line is now open. Thanks so much for the time. Just sticking with labor for a minute, I remember historically there's been a kind of just more of a broader theme of having trouble getting captains upgraded or first officers upgraded from the right seat t o the left seat. And t here had been discussion about maybe o pening a base in Florida. Just wondering what the latest is there, and what your thinking is right now. There's a lot going on in flight ops here. We for the first time ever rostered our crews in October with PBS, which drives a lot of efficiency. That was part of the 2021 deal that we did with ALPA and are finally able to execute on that. That'll drive efficiencies going forward. We do intend to open a base. That process is ongoing. It's not going to be in Florida, it's going to be in Cincinnati in support of our largest cargo operation there. Both of those things I think will increase demand for captain upgrades. You're right, it still is an issue here at Sun Country and captain upgrades are the limiting factors. We do long range planning into 2026 and 2027. Okay, thanks so much for that. That's really helpful c olor. Just kind of curious thinking about the balance sheet. I know there's still some left on the current authorized buyback program, but I'd just love to get your latest thinking on capital allocation and liquidity just associated w ith Torque on board now and where you're thinking about as we move into 2026. I'll give you my initial thoughts and then throw it over to Torque. I mean, we have a lot of liquidity and we're producing a lot of free cash flow. We'd love to be really opportunistic in buying metal, but we've been trying and there's not a lot out there that meets our price expectations. I don't expect us to find a lot of CapEx opportunities. This is going to be buybacks. That's where we are. Torque, anything to add on that? I just think, you know, when we have capital available and if there's opportunities to deploy that, we will be looking for those a nd a s Jude had mentioned, it's really the market's tight for aircraft and engines, and those are our primary areas. We're looking for investments. Thank you. One moment for our next question. Our next question comes in the line of Michael Linenberg of Deutsche Bank. Your line is now open. Hey, good morning, everyone. I guess with respect to competitive capacity i n your markets, I see that Spirit i s actually going to out of the Minneapolis market December. I know even as recently as earlier this year they were serving probably like a half a dozen cities. Does that free up any potential gates pace, or is there real estate there f or you to take advantage of? And maybe any other airports that I k now that they rejected leases at about a dozen airports. Are there opportunities there for you? And a s well as kind of answering the competitive capacity question in your key markets. The Minneapolis domestic capacity, actually North American capacity, which is a better comp for us through the selling schedule, which we just extended out through Labor Day 2026, is flat to down. You point out airlines leaving the market and Spirit isn't sorry to see them go, is in serving Minneapolis beginning here real soon. They serve out of T1 and it's not, you know, we have our own terminal. It doesn't really change the dynamic here. I just want to point out we're not capacity constrained in Minneapolis whatsoever. Okay. That's one of the strengths of the business. We can park airplanes, as many airplanes as we need too. We can. We have plenty of gate space. There's really no constraints. We do have capacity constraints in some of our major, busiest airports in outstation. Boston Logan, we have trouble extending the schedule past 1:00 P.M. We serve Newark and JFK both. Capacity constraints, LAX, etc. Some pullbacks from Spirit will be healthy there and might provide more opportunities. I think primarily the impacts of Spirit, because we don't have a lot of direct overlap with them, will be secondary. In other words, Frontier will move into their markets and they have big operations in Detroit and Atlanta. Obviously that's impactful for Delta and perhaps displacement capacity here in Minneapolis. I consider it a secondary effect. We're not at the top of the list of airlines that are going to be the most beneficial from the cuts that we're seeing at Spirit. Okay, that's helpful. Thanks, Jude. And then just second, this goes back t o your initial comments where you talked about TRASM kind of running over 6% i n the fourth quarter then ny ou went on to say t hat the 1Q 2026 advances are even stronger at this point in time, l ike, how much are you booked up i n the March quarter? January sold to 35% loads today. As advances go, our first quarter sells further in advance than the rest of our schedule, but it's not material enough to make a strong call in the first quarter. In other words, we're not sold enough to where we can be certain about the strength we're seeing. We're selling ahead on load factor and fare sold PRASM, which again, when we're looking out this far with relatively low sold loads, can be very volatile. We're up about 25% in January today. Now, that's going to moderate because you can't have a load factor increase of 10 points. I mean, it's just not possible. We're going to be higher than it was for December and higher than it was in November. It continues to get stronger. That 35%. That's a bit higher than I realize that your big quarter, i t runs higher than your other quarters but t hat is a bit higher than w hat it would be for any other carrier. You're probably 10, 15 percentage points, 20 percentage points above your competitors. Yeah, Mike, that gets to the core of the strategy. I mean, we're relevant in this community. We're a small airline, but relevant to the community we serve, and we have a differentiated model. If you want to go nonstop to Mexico, South Florida, Southern California, Caribbean destinations, we're the carrier of choice here in the Twin Cities. It's better to be small and relevant than big and irrelevant everywhere. I think Spirit and Frontier are kind of playing that out. That's right. One last one, just to squeeze in. Kind of a wonky question. I see the 900ers are now scheduled. Obviously, they give you more capacity, so it's going to work in markets probably l ike Orlando and Phoenix, is there anything interesting or unique? I mean, I know they have the r ange for Hawaii, which you used to serve. Is there anything that we could see with the 900ers that may be a l ittle bit different than maybe what you've done in the past? Thanks for taking my questions. Sorry to disappoint. I think those airplanes are just going to go on trunk wraps. Okay. And you can take a look at our largest markets by volume. They're going to be 900 markets, either a mix of 9 and 8 or pure 900 market. Just to call out a couple, Minneapolis to Fort Myers, Louisiana, Vegas, MCO, Boston, SEA-TAC, those kind of markets. Great, thanks. Thanks, Mike. Thank you. One moment for our next question. Our next question comes on the line of Ravi Shanker of Morgan Stanley. Your line is now open. Hi, good morning. This is Katherine Bell on for Ravi. Thank you for taking my question. I was curious how we should be thinking about charter in 2026. I know you mentioned a bit on 3Q, but just curious what you guys are seeing for next year. Hey, Katherine. Charter comes in a couple different flavors. I'll just kind of call them out. We have track programs that are committed contractual flying for counterparties, and that consumes about six aircraft. We have a VIP operation, casino operations, and Major League Soccer separate from those. We have a military program that's a committed program and also a lot of ad hoc flying. I just want to point out that with the government shutdown, that flying has been unaffected. It continues to be strong. The third is ad hoc, which mostly is sports programs. This time of year, NCAA football, and that's hard to predict because it shows up close in. We set a record, as I mentioned, in the third quarter on volumes. There have been a lot of airlines that have left the market like Iero, and then there's a huge new customer to charters in ICE. We don't work for ICE, but they're consuming a lot of charter capacity. There's a lot of demand growth and there's fewer people providing that lift. It's been a really good thing for us. We still look at ad hoc opportunities primarily as a way to offload available capacity. We'd rather commit capacity to scheduled service, but if we have the excess capacity, then we bid on charter opportunities. Thus far it's been really strong. I can't give you more material guidance though into 2026 because first quarter is always kind of a trough. There's not a lot going on, but the summer should be really strong if things continue the way they're going. Got it. That's really helpful. Just a quick follow up. I think in your prepared remarks you had said charter under long term contracts came down from, I think it was 80% last year. I was just curious why that became lower. Were some of those contracts just up and do you go out and look for contracts? Do people come to you? Just curious how that works. Ad hoc mix. Ad hoc mix, yeah. Ad hoc was a grayer, so it took down the mix. Oh, okay. Yeah. No, our track programs continue. They haven't grown much except for the rate volumes for our casino programs. Major League Soccer and our VIP program are pretty flat. I think what's happening, what Chris tells me is what's changed is that ad hoc grew faster and therefore the mix of contracted flying is lower. Got it. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Christopher Stathoulopoulos of SIG. The line is now open. Morning everyone. Talk about the puts and takes around your operating margins for next year. We have the maintenance pulled forward into 4Q. You've given us a lot of color on how you expect cargo to move. I think December's when you really see that, I think spooling up or hitting a run rate. Maybe talk to, I guess for scheduled service, the puts and takes around costs and timing to kind of get back to those pre-Amazon margins. Also, on the charter piece, there are some events the question before you referenced, I think soccer World Cup next year, America's 250. That would seem that there's some opportunity there. At a high level, really kind of focus on scheduled puts and takes around op margins next year, I guess net of this maintenance pull forward into the fourth quarter. Thanks. Two primary inputs. First, is going to be the TRASM continuing to improve in the rate that we've seen. I don't see any reason that that should change. Then the second one is we should hit an inflection point on unit cost. That's because we did a deal with our flight attendant union that's effective for this year. We had the final pay increase for our pilots effective this year. We don't have a lot open on labor, and those rate increases will have good comps and therefore also our efficiency initiatives will start to take hold, like I mentioned earlier, PBS and incremental basing. We should start to see an inflection point. You have the lumpiness of our maintenance program, specifically heavy checks. We don't do engine overhauls here. We buy in lieu of and replace in lieu of repair. That should be pretty constant. Those costs flow through our DNA. We're getting a lot of cost pressure like all airlines from airports. I don't see that abating much. Everybody's massive capital programs just sort of everywhere. That'll continue to pressure us. I think overall we're expecting year-on-year CASM X to hit kind of a zero flat level in the middle of next year, late next year, and then improve from there. I feel really good about unit cost trends. We should finally start to see the post-COVID inflationary pressures kind of run their course and us to kind of stabilize. I think it's going to be really good. Torque, anything to add on that? It's so block hour dependent because there is the charter piece that you mentioned that is ad hoc. There's what Amazon's going to do, peak season, of course. Do you think for the full year on a per block hour basis that unit costs could be down? No, because the mix is going to change. Right. It costs a lot more per block hour to fly scheduled service flying because fuel cost and ground handling and all that stuff is in there. We're going to continue to have pressure on that because we're just a segment mix. Okay. As a follow up on the Visa, I realize it's still early response thus far, and if you could remind us of any remuneration targets you've communicated. Thanks. I've mentioned publicly that our credit card program produces about $20 million annually. That would be full implementation of the Synchrony contract. We're on pace. It's going to take us, I don't know, maybe a year to kind of get the contribution per passenger up to where we want it to be. From there it's just about scaling volumes. Synchrony has been great. I've been really, really pleased with the technology outlay. Passengers, I mean, our customers are picking it up really rapidly. They're transitioning over to the new card beyond what we expected. Everything's looking green on that program. Okay, thank you. Yeah, thank you. One moment for our next question. Our next question comes from the line of Duane Pfennigwerth of Evercore. Your line is now open. Hey, good morning, this is Jake Gunning on for Duane. Thanks for taking my question. It looks like you generated very strong free cash flow in the third quarter? Would you consider that normal seasonality? If not, did the ramp in any o ther segments maybe contribute on the working capital side? Let me give you a general comment there. There's a lot of seasonality in our business, and therefore there's a lot of seasonality in our ATLs. A lot of our free cash flow by quarter is going to be based on ATL expansion. As we talked about earlier, we're selling now into our winter peak season with higher volumes and higher fares. There's a lot of ATL pickup in that. Torque, any other color? I think what we're seeing now is very strong, and the builds are where we expect them to be, so it'll be in good shape. Okay, great. That makes sense. Just on the aircraft side, you alluded to it earlier, but are you seeing any movement in used aircraft values for the 737? No, we haven't done a deal in a long time. It's been pretty brutal. Fortunately, we did a lot of transactions coming out of COVID and buying out stub lease aircraft. To our commentary, throughout the whole year we have a 70 aircraft operation. 50 of those airplanes we own and are on the balance sheet, but seven of them at the beginning of the year were leased out. Those redeliveries will fund our scheduled service growth, our passenger network growth going into 2026 and 2027. We don't have to buy anything, and we could kind of hold the line on price, but it's been tight out there. Boeing was here yesterday. We were talking about their rate increases. I think the NG availability is going to be mostly dependent on MAX production rates, which unfortunately have been slow to pick up. We're not sitting on our hands here. We're looking at hundreds of airplanes literally. Right now owners of airplanes have better options than to take the Jude Bricker price, I guess. Great, thank you. Thank you. One moment for our next question. Our next question comes in line of James Kirby of JPMorgan. Your line is now open. Good morning. This is actually Jamie Baker filling in for James. First question. It feels a little weird. Just looking at the fourth quarter schedule on the West Coast, it looks like the capacity cuts there are a little bit steeper than the overall domestic average. Anything to read into West Coast fundamentals from that, or is that just how it played out as you're pivoting more towards cargo? Not really much. We talked earlier in past calls about Minneapolis, L.A., being kind of a weaker market than the rest of our network. That kind of continues. If you look at the West Coast broadly as we look at it, it also includes Palm Springs, San Diego, San Francisco, Portland, and SeaTac, which aren't operated in the wintertime. Those Southern Cal markets that are in L.A. are doing really, really well. Palm Springs in particular, I call out. This is like the leisure market is strong and there's not a lot of capacity growth, and it's materializing in higher fares. Looks really good to me. I also had a Boeing question since you brought up the Jude Bricker price. I recognize that you guys are not, you know, pounding the pavement, but you obviously have your ears to the ground. How would you describe, you know, having met with Boeing? Where do you think the market is today relative to however you calculate on an age-adjusted basis the values that you were able to get coming out of COVID? From a timing perspective, it does seem like the uplift on MAXes will provide some relief on the youth side by the time that you guys are really out there actively shopping around. Yeah, Jamie. Yeah. Indulge me to rant for a second. We have kind of always looked at an airline as a core bit of like a bucket of parts, right, that are the end of the life realization. You know, that number has been about $2 million for the airframe and $2 million for each engine. Let's call that $6 million. Then there's the maintenance value that's transferred over from the prior operator or from new, and that can be full life to 16 or 0. There's an operator premium kind of availability metric. All three of those metrics kind of go in now. The residual value, that $6 million, has been pretty constant. It's higher than it was during COVID, but it's not out of whack. I mean, we're selling airframe, we part out airframe, we sold for about, I think, $275,000, something like that. We sold a couple cores, probably $3.5 million relative to $2 million. It's up, but it's still kind of, I don't know, ballparky. Where we've really seen a massive value expansion is in engine maintenance value transfer. That's because shop visit costs are just through the roof, probably twice what they were at the bottom of COVID. To give you a sense, we did an engine in the middle of COVID, so we had a lot of leverage. It was $500 a cycle, no monthly fees, nothing like that. We don't usually lease, but they just really wanted this lease to happen. Now when we're valuing engines, the inherent cyclic value is over $1,000, say $1,100 or so. That value metric has almost doubled. That's the largest proportion in the value of a used airplane. It really has challenged the market. All right, definitely appreciate that insight. Thanks for the color. Take care. Sure, Jaime. Nice to see you, man. Thanks. Thank you. One moment for our next question. Our next question comes from the line of Scott Group of Wolfe Research. Your line is now open. Hey, good morning, this is Ryan Capozzi on for Scott. Just kind of harping on some previously asked questions, but I guess, you know, with the reduced scheduled service capacity in MSP, have you seen any degree of backfilling from your competitors in some of your markets? No, no, we haven't. I mean, there's been, God, I can't even think of a single market that we serve that has capacity increase in the first quarter. I can't think of a single one. No, no, it looks really good. I don't have anything else to add. Okay, no, that's helpful. Maybe just building off that, right, as you start to add back some of the scheduled service in 2026. Just curious, kind of, you know, what does that capacity growth look like exactly? Is it just adding back frequencies or is there any sort of change to the network strategy next year? Yeah, if we bring fleet utilization, passenger fleet utilization, up to 7.5 hours per day on an annualized basis and induct all the leased airplanes to get to 50 aircraft in passenger operation, that operation is about 30% bigger than we are today. You know, we're going to expand next year into kind of what we had already lost, and then we'll expand beyond that. What's most important, what's, I think, really exciting is that that growth can be realized in peak periods. We cut down September massively to support cargo growth. Our September scheduled service block hours in 2025 is smaller than it was in 2017 when we had 40% of the fleet. The reason is there's just not that much opportunity in those periods of time. When we think about growth, what's exciting is that we can expand because of more aircraft and having a larger cargo operation that buffers peaks and troughs. We can be adding into June, July, August, December, and most importantly March. That's going to keep, you know, our growth will pressure naturally unit revenues, but it's not going to, it's going to be pretty muted because we're going to be focused on peak periods where there's excess demand. It just looks, it's setting up really nicely for us. Great. Thanks for the color, Jude. Sure. Thank you. One moment for our next question. Our next question comes from the line of Catherine O'Brien from Goldman Sachs. Your line is now open. Hey, thanks for the follow up. Appreciate the time. I just was thinking about some of your comments on margins and seasonality you've made over the course of the call as they pertain to the first quarter. Schedules are showing capacity down year- over- year in 1Q, so I'm guessing that will put pressure on margins year-over-year. To your point, taking peak flying down is a margin drag, but you're also talking about a lot of momentum on the demand side. I guess, will the capacity cuts just be too difficult to overcome from a year-over-year margin perspective, or based on what you're seeing today, understand that could change on the demand side, do you think you could be potentially setting up for margin expansion, just any ineffective. Absolutely. No, I want to be super clear. Absolutely. Yeah. I mean, you know, there's inputs like fuel and all that stuff that's normal. The maximum impact on our scheduled service was in the third quarter of this year. It's behind us. Now we're kind of continuing to expand and, you know, we'll be, as I mentioned, December we're fully implemented on our cargo, and from there all incremental credit hours will be allocated into scheduled service growth. Yeah, we should be, you know, I think we're going to have a tailwind in 2026. It looks pretty good. Just to be clear, 1Q margin year- over- year is the absolutely comment. Yeah, we're not ready to guide. Based on what you see today. Yeah, I'm pretty bullish on 1Q. Okay. Awesome. Thank you so much. Yeah. Thank you very much. Thank you. I'm showing no further questions at this time. I'll now turn it back to Jude Bricker for closing remarks. Thanks for joining us today. We're really excited about where we are and where we're headed. We'll talk to you guys in about 90 days. Have a great day. Thank you for your participation in today's conference. 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