Allegiant Travel Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 2, 2023

There are 17 speakers on the call.

Operator

Good morning and thank you for standing by. Welcome to the Q3 2023 Agilent Travel Company Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sherry Wilson.

Operator

Please go ahead.

Speaker 1

Thank you, Lisa. Welcome to the Allegiant Company's Q3 2023 earnings call. On the call with me today are Maury Gallagher, the company's Executive Chairman and CEO Greg Anderson, President Scott DeAngelo, our EVP and Chief Marketing Officer Drew Wells, our SVP and Chief Revenue Officer Robert Neal, SVP and Chief Financial Officer and a handful of others to help answer questions. We will start the call with commentary and then open it up to questions. We ask that you please limit yourself to one question and one follow-up.

Speaker 1

The company's comments today will contain forward looking statements concerning our future performance and strategic plans. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward looking statements. These risk factors and others are more fully disclosed in our filings with the SEC. Any forward looking statements are based on information available to us today. We undertake no obligation to update publicly any forward looking statements, whether as a result of future events, new information or otherwise.

Speaker 1

The company cautions investors not to place undue reliance on forward looking statements, which may be based on assumptions and events that do not materialize. To view this earnings release as well as the rebroadcast of the call, feel free to visit the company's Investor Relations site at ir.wegianair.com. And with that, I'll turn it to Maury.

Speaker 2

Thank you, Sherry, and well, hello again. Some of you may recognize my voice. I hope you've all been well for the past year and a half. It's good to be back. As you saw in our release, Allegiant Airlines generated an operating profit in Q3 after adjustments, our 11th quarter in a row of airline operating profits beginning in Q1 of 2021.

Speaker 2

Our year to date 2023 13% airline operating margin leads the industry for those that have reported. And we have achieved these results while continuing to invest for the future. During the past quarter, we've installed 2 Substantial Management Systems, SAP and Navitaire, both are operating as I write this. As you saw at the top of our release, Sunseeker will open December 15. It's been a 5 year effort, almost 3 years longer than planned, but the wait will be worth it.

Speaker 2

Mike Richins, our Sunseeker President and his cohorts, Jason Skarupa and Paul Barry, All MGM Las Vegas veterans are putting the final touches on this magnificent project. The critical reason I endorsed Sunseeker was The quality of this management group, our ability to attract these gentlemen to convince them to work for a startup, move their families to Florida speaks volumes of their belief in this project. And Mike is here with us today, I'm happy to announce to answer any questions. Our first MAX 8200 is scheduled for delivery in early 2024. Our MAX fleet will have a premium seating of just over 50 of our 190 seats And we'll improve our economics in the coming years.

Speaker 2

Besides the benefits from the quality and number of seats, it will have a substantially improved fuel burn Compared to the Airbus, improved reliability, maintenance honeymoon, while maintaining a comparable Airbus ownership expense. We're excited about on boarding the MAX in coming years and beyond. During the past few months, there have been discussions concerning a structural shift in our industry, particularly as it pertains to the ULCCs. We, Spirit and Frontier invented this industry segment during the past 20 years focusing on low cost and high growth for our leisure customers. There has been and still are differences between our business model and the Frankie centric model.

Speaker 2

At the end of the day, you judge us on our profitability. Costs are a part of the equation, but having the lowest cost does not guarantee success. We at Allegiant have a flexible model focused on flying when the customers want to fly. We're said differently, we minimize our flying in off peak periods And peak up for the peak periods. That has been our model for over 20 years.

Speaker 2

In addition, our direct to customer sales approach is less expensive And allows us to capture important customer information. I might add, we have over 18,000,000 names in our customer database at this point. It also allows us to capture more of a leisure customer's wallet with our 3rd party revenue program. During the past 5 years, we have prioritized enhancing our brand as well. These efforts include adding Allegiant Stadium, our soon to be open Sunseeker Resort, our best in show completion percentage And our number one ranked credit card program, all are difference makers.

Speaker 2

These investments have allowed us to maintain unit revenues that have been consistently higher than the high utilization ULCCs today as much as 40% higher. As we all do, revenue production is the issue of the day. Our revenue production is one of the critical differences that separates us from the ULCC crowd. Our network structure is also different. We have operated an out and back schedule since our earliest days.

Speaker 2

It's much simpler to manage than the traditional hub and spoke. Each route stands alone. We monitor what we believe its Capacity should be enhanced its profitability. We are diligent in managing individual route earnings. We have had a 22 year history of consistent profits and growth with this scheduling approach, industry leading profits, I might add.

Speaker 2

Additionally, with our focus on smaller cities to sign and fund destinations, we've been able to own the majority of our markets. 75% of our routes Have no direct competition. As I said, we own these markets. This contrasts with the 90% overlap the high utilization ULCCs have in their networks. Lastly, we have identified as many as 1400 new domestic routes that we could add in the coming years, plus the addition of our international partnership with Veeva.

Speaker 2

More subtle difference has been the pace of growth. During our 22 years, we've grown to 127 to an average of 5.7 per year. Others in this space have grown at a much faster pace, to date adding aircraft almost 3 times faster per year than we have. Still others have planned deliveries in the coming years that have double digit yearly ads with a 3 handle if you do the math. Fast growth while attractive to the audience on the phone here creates potential operational problems, including a concentrated fleet of the same aircraft type, which has historically been desired, but today has become a burden with the Pratt motor problem, operational size and complexity that most likely outpaces management experience, And lastly, a pronounced competitive response given the network overlap with the larger incumbent carriers.

Speaker 2

We are built for the long haul for consistency. We have a bright future. I understand there's a new label as well for ULCC circulating LMAs or low margin airlines. That description does not define our nor fit our model. At this time, given the names seem to be involved, given new names, I'm proposing a new label for us, no more ULCC and certainly no LMA.

Speaker 2

Our new label is PLFC, Profitable Leisure Focused Carrier. That's what we're going to be called from now on. We are in a class of our own. Lastly, let me thank our team members. There's been a difficult 3 to 4 years.

Speaker 2

They have been supporting our passengers with safe, reliable and friendly service during this time. They have run the best airline this year, an industry leading 99.8% completion factor. In today's era of poor service and canceled flights, they have put us back where we belong the top of the pack. Thank you very much. Greg?

Speaker 3

Maury, thank you. Great to have you back. As we experienced broader macro uncertainty around geopolitical risk, inflation and high interest rates, there also appear to be signs of structural changes happening in our industry. In the face of these uncertainties, Allegion is uniquely set up to continue to reshape the leisure travel sector. We have been strengthening our foundation to do just that.

Speaker 3

Operational excellence underpins everything we do and our year to date controllable completion of 99.8% demonstrates that, also resulting in a staggering reduction of nearly $100,000,000 or 75% in total IROP costs year over year. Our disciplined approach to costs and particularly our variable cost model gives us a competitive advantage as we adjust capacity to the environment. Whether day of week, month of year or route by route, our planning teams are expertly matching capacity with leisure demand. As leisure demand seasonality has more normalized, we are working towards a measured approach to take utilization higher during the peak demand periods or in other words peak to peaks. For instance, average aircraft utilization was 7 hours during this past summer.

Speaker 3

Increasing that by 1 hour would drive roughly dollars 50,000,000 more in earnings. The composition of our mixed fleet balanced with our with both low per seat and low per trip cost will further benefit us by deploying the right gauge aircraft in the right markets at the right times. Our 737 MAX Aircraft will strengthen our fleet flexibility. It's nearly 20% fuel burn advantage, yet similar ownership cost profile translates into incremental earnings power of more than $2,000,000 more for MAX aircraft when compared to the compared to our existing fleet. Furthermore, we are excited to expand premium seatings for our customers.

Speaker 3

Every MAX aircraft delivered will enter into service in the Allegiant Extra configuration, while the retrofit of the in service A320s has already begun and will complete over time. Our Allegiant Extra product continues to deliver as it is in high demand with our customers and driving meaningful value. During 2023, we expect to fly nearly 18,000,000 customers. Notably, we were the most convenient and only nonstop Option available on approximately 75% of the routes from the communities we serve. Our direct distribution strategy coupled with our continued ascension of our brand is unlocking deep and longstanding relationships with our customers.

Speaker 3

On an annual basis, nearly 2 thirds of our customers are repeating their experience with us, dollars 12,000,000 of whom are members of our award winning Always Rewards, fueling the amazing growth of our aspirational loyalty program that Scott will discuss momentarily. Our continued investments in technological upgrades to our foundational systems such as SAP, Navitaire Tracks and NavBlue Not only optimize scale and provide new capabilities, they also free up development resources for strategic differentiated products to drive more revenue or reduce costs. Furthermore, Navitaire will unlock international expansion for us into coveted beach destinations in Mexico alongside our joint venture partner Viva Aerobus once we can secure the necessary government approvals. Each of these initiatives mentioned have or should provide significant long term benefits for the company. However, none have near as great of impact as Team Allegiant.

Speaker 3

As we listen and learn from our team members across the system, I am constantly energized by their commitment and their passion. They are dedicated to taking care of our customers and each other. And while earlier this year, we ratified and extended 2 of our 4 labor agreements, we still have 2 to go, 1 with flight attendants and 1 with pilots. I want to reiterate management's commitment to getting agreements in place that our flight crews will be proud to support. What Team Allegiant has accomplished this year is truly remarkable.

Speaker 3

While today our broad footprint serves 125 cities with over 5 50 routes throughout the United States, We are positioning to grow our airline profitably as the environment allows. Allegion's business model and the role we play in the communities we serve has netted us into the fabric of the nation's leisure travel industry. We have identified 1400 plus incremental routes that fit beautifully into the Allegiant network. As we expand in those markets, we further solidify the important and necessary part we play in the travel industry throughout the U. S.

Speaker 3

And in closing, I want to extend my sincerest thanks to all of our team members. Together, we are running a great airline. Together, we have meaningfully strengthened our foundation. And together, Team Allegiant has proven to be unstoppable. Thank you.

Speaker 3

Scott?

Speaker 4

Thanks, Greg. 3rd quarter saw continued post pandemic normalization of domestic leisure We saw peak demand levels during July when we topped bookings in load factor versus last year's historic highs. We saw slight demand decline during August versus prior year as back to school came mid month for many of the cities we serve and summer vacation season came to an end. And we saw further modest demand decline in September versus prior year as we officially entered the off peak leisure travel season. As you all know, our business model is always focused on the domestic leisure traveler and these peak versus off peak ebbs and flows in domestic leisure travel demand Regularly existed before the pandemic and a year removed from unprecedented levels of pinuprevenge travel demand in 2022, The same familiar ebbs and flows have returned this year.

Speaker 4

That said, there are 2 areas of potential domestic leisure travel demand headwinds that are being talked about a lot in the industry and that I'd like to address based on what we're seeing and hearing from our customers at Allegiant. The first is the economy. We conduct a weekly customer sentiment tracking survey where we ask our customers how they feel about the state of the economy. At the beginning of the Q3, about 50% said they felt the economy was getting somewhat or much worse. In the past several weeks, That number has grown to nearly 70%.

Speaker 4

However, during that same time span as captured within the same survey, The portion of customers saying they intend to book air travel in the next 90 days has remained virtually unchanged. We believe this seeming contradiction can be easily explained by the majority of our customers who say they are traveling to visit friends or family as well as by the material portion of our customers who say they are traveling between a primary residence and a second vacation home. As we've stated in the past, it's been our experience that these remain the most reliable and resilient forms of leisure travel during economic downturns. The second area is international travel. For the past quarter, we've also surveyed our customers weekly on this topic.

Speaker 4

Consistently, up to 20% of our customers do say that they either had traveled or planning to travel abroad this year. However, the vast majority of those nearly 90% said that their international travel is in addition to, not in substitution of their domestic leisure travel plans. While these observations may be different than what other airlines are seeing or saying, It likely speaks to Allegiant's differentiated low utilization business model with a focus on selling our all non stop route network direct to consumers under a surging brand and winning loyalty programs that are unique and their ability to engage and reward the domestic leisure traveler. Speaking of our loyalty programs, our most loyal and engaged segment within the Always Rewards program is of course our co brand credit cardholders. 3rd quarter year to date, these cardholders have exhibited 11% greater spend on the card on a per cardholder basis versus last year.

Speaker 4

In addition, our co brand cardholders continue to exhibit strong travel frequency and spin with net revenue booked up 10% versus prior year. Through 3rd quarter, total co brand credit card program compensation has been $88,000,000 which is 14% higher than last year and puts us well on our way to surpassing $100,000,000 in total program compensation for the full year. Our Always Rewards non credit card program also continues to show strong positive impact on customer behavior. 3rd quarter year to date nearly $13,000,000 always rewards member passenger segments have been booked, that's 17% more than last year. And for the same time period, spend per member is about 5% greater than last year.

Speaker 4

Finally, as Maury mentioned, Completion of enterprise wide systems implementations that provide a modern technology foundation for all areas of our business We'll free up technology development capacity for smaller, but nonetheless critical strategic enhancements to our website, mobile app and loyalty programs, helping us supercharge our abilities to drive greater revenue outside the aircraft and high margin third party products and loyalty program partnerships. We believe that these enhancements enable us to further differentiate Allegion and further diversify the ways we drive revenue. And with that, I'll turn it over to our Chief Revenue Officer, Drew Wells.

Speaker 5

Thank you, Scott, and thanks, everyone, for joining us this morning. I'm extremely pleased with the record 3rd quarter performance of $565,000,000 in total revenue, growth of nearly 1% on system ASM reduction of 0.4%. This combination produced a TRASM of $0.128 which bested any previous 3rd quarter and grew year over year by 1.4%. Our commitment to matching capacity and demand set us up for success in the Q3 with nearly 45% of our scheduled ASMs coming in July and in September having just more than half of July's flying. However, we are still meaningfully constrained in the best demand periods limiting our ability to truly match with appropriate capacity.

Speaker 5

Despite the relatively out weighted July level of flying, our utilization was almost 2.5 hours per aircraft per day lower than 2019, lower than any year since 2015 when MD-80s grew over 60% of our ASMs. We have proven the ability to achieve peak flying and As we will always schedule peak periods to the 1st operational constraint, either aircraft or crew, expect to restore utilization alongside the relief of those constraints. As we continue to learn what the new normal means for the travel industry, one component of pre pandemic travel has firmly returned, the gap between peak and off peak performance. By way of example, Saturdays in post Labor Day September 2023 were Approximately 30% worse than July Saturdays in terms of unit revenue and in line with 20 nineteen's peak to trough variance. Last year, that figure was just 15% worse.

Speaker 5

And as one would expect, the combination of outperforming off peak periods in late 2022 and current year demand normalizing creates a tough environment for year over year figures. This makes me even prouder of the results we generated. A significant part of this was continued success of our air ancillary products, which grew approximately 10% on a per passenger basis year over year. 1st and foremost, our learning and experimenting with bundled ancillaries continue to show incredible strides. Additionally, Allegiant Extra contribution on a per flight basis has improved year over year in every quarter despite increasing the number of configured aircraft.

Speaker 2

We will

Speaker 5

end the year with roughly 11% of the fleet configured for Allegion Extra and expect that to grow to nearly 30% of the year end 2024 fleet. Underscoring both and air ancillary at large are the expected improvements of Navitaire. One of the ramifications of specific use case internal development is some mismatch of existing capabilities versus the off the shelf product. I truly believe this is a significant signal of strength for our internal capabilities that will become supercharged in the future state. So while we still have immense confidence in the upside to come with Navitaire, we actually expect to see some slight headwinds into the 4th quarter due to a short term small loss of functionality.

Speaker 5

I believe it's worth reminding that the entire leisure demand ecosystem remains well above pre pandemic levels with July roughly flat with 2022 and high teen percent above 2019. In fact, among carriers reporting thus far, Allegiant is the only carrier of double digits in both capacity and unit revenue year over 4 year, both in the Q3 and year

Speaker 6

to date through the Q3.

Speaker 5

We are also seeing some normalcy as we shift into 4Q and expect to TRASM reasonably in line with pre pandemic historic median sequential change. While certainly off from the extraordinary 4Q 2022 comp, it should still produce a better 4Q TRASM than any pre pandemic 4th quarter and the last 9 months 2023 TRASM higher than the last 9 months 2022. Additionally,

Speaker 6

there is some growth

Speaker 5

through the Q4 around 5%. This should put full year scheduled service capacity up approximately 1.5% versus full year 2022, while system capacity should be approximately plus 1.8%. The growth in the quarter is focused in 2 areas: weeks with large forecasted cost per gallon declines like in October and holiday weeks, which will extend into early January 2024 as well. As I mentioned, even with the growth, holiday flying will still be lower than we ultimately desire. However, we believe we struck the right balance of profitability potential and operations within the limitations present, particularly after 2022's weather impacted holiday operations across Further, we are treading carefully with capacity in early 2024 with so many moving parts, Boeing deliveries, crew pulls for transition training and persistent elevated fuel among others.

Speaker 5

I expect the first half of the year to be fairly flat with a full year target of up mid single digits. The holiday weeks, as with all peaks, have shown incredible resilience. Even Labor Day in September was a record. I maintain high expectations for holiday performance, while expecting normal leisure softness around them. And with that, I'd like to turn it over to Robert.

Speaker 6

Thanks, Drew, and good morning, everyone. This morning, we reported our Q3 2023 financial results, which included an adjusted consolidated net income of $2,700,000 and an adjusted earnings per share of $0.09 Included in that number is approximately $6,000,000 in costs related to resort operations Head of opening our Sunseeker property later this year. Adjusted net income for the airline was $7,900,000 yielding an adjusted airline earnings per share of $0.31 Total operating revenue during the quarter was $565,000,000 up approximately 1% over the same quarter last year and the highest of any third quarter in our history. This was on a slight capacity reduction of 0.8 percent resulting in TRASM of $0.128 which was 1.4% higher as compared to the same quarter last year. Fuel costs increased sharply beginning mid August driving the September cost per gallon 27.5% above July.

Speaker 6

This brought our 3rd quarter cost per gallon to $3.09 15% above the prior quarter and brings our estimated full year cost per gallon to $3.12 an increase of $0.22 from the prior guide of $2.90 Adjusted non fuel unit costs were just under 0 point was an increase of 9.5% over the Q3 of 2022. Our non fuel unit cost increase This was driven by approximately 7 points in wage increases for frontline employees, inclusive of our pilot payroll accrual, which was in place for all 3 months during the quarter. Other drivers of the unit cost increase were 1.7 points from lower asset utilization at approximately 0.5 point related to inflationary costs in aircraft maintenance and stations and the rest from a handful of other items. Assuming an estimated fuel cost of $3.12 per gallon for the full year, we are expecting an adjusted airline earnings per share of approximately $8.15 at the midpoint, down from $11.75 at the midpoint of prior guidance. Fuel costs drive a reduction of $2.40 per share and the reduced off peak revenue makes up most of the remaining 1.20 As Maury noted, opening of Sunseeker has shifted by about 2 months.

Speaker 6

And as a result, we are now expecting only about 2 weeks of revenue production during the year, which would take our full year Sunseeker guidance to a loss per share of $1.75 as compared to our prior estimate of 1.20 Although I'm pleased to see significant improvement in 2023 over the prior year with respect to financial performance, we still have work to do to return to sustained industry leading margins. With the introduction of a new fleet type alongside a volatile fuel environment and the normalization of leisure demand patterns, we expect to take a conservative and measured approach to growth during next year. We've made significant investments in the business this year and we remain confident these investments will deliver expanding margins in the coming years. On the balance sheet, we ended the quarter with net debt of $1,300,000,000 and just under $1,300,000,000 in available liquidity, which included $1,000,000,000 in cash and investments and $280,000,000 in undrawn revolvers. In addition, we are pleased to have more than $400,000,000 in committed financing for upcoming aircraft deliveries and pre delivery deposits.

Speaker 6

We refinanced 7 A320 aircraft during the quarter and used proceeds toward this morning's prepayment of a $150,000,000 bond, which was scheduled to mature in 2024. With committed financing covering the vast majority of our CapEx obligations up to the Q2 of next year and our largest 24 maturity now repaid, we expect to maintain liquidity at the greater of 2 times our air traffic liability or $850,000,000 at year end. 3rd quarter airline capital expenditures were $157,600,000 which included $112,000,000 in aircraft inductions and Delivery deposits, dollars 45,500,000 in other airline CapEx and deferred heavy maintenance spend of $14,000,000 Capital expenditures related to SunSneakers were $71,600,000 Our guidance today reduces our full year 20 3 estimated airline CapEx excluding heavy maintenance to approximately $590,000,000 largely due to the timing of aircraft deliveries shifting some of this spend into 2024 2025. Turning to fleet, we inducted 1 A320 aircraft during the quarter, which was owned and on property at the end of the We expect 2 additional A320 purchases during the Q4 before we begin taking deliveries of our 737 MAX order book in early 2024. During the quarter, we reached agreement with Boeing on an amendment to our order for 5730 7 MAX Aircraft, whereby the firm aircraft are now scheduled to deliver through the Q4 of 2025.

Speaker 6

We've converted 6 of our MAX 7 positions to the MAX A200 variant, And we're pleased to now have 80 options in our MAX order book, securing opportunities for fleet growth through 2029 and providing tremendous flexibility, allowing us to evaluate the results of a new fleet type in our business prior to making further commitments. I'm pleased with our year to date financial performance yielding an adjusted airline operating margin of roughly 13%, notwithstanding the continued heightened fuel. Our load utilization model sets us up nicely to expertly deploy capacity to meet seasonal demand trend and we will enhance this with the introduction of more efficient aircraft next year. By the time of our next earnings call, we expect to have opened Sunseeker, taken delivery of our first MAX aircraft And starting to see the benefits of Navitaire and the systems investments we've made in 2023. Certainly, we're not out of the woods on execution risk yet, But we are excited about the positive momentum we have on these initiatives heading into 2024.

Speaker 6

Thank you, Lisa, and we can now begin taking analyst questions.

Operator

Thank you. Our first question today will be coming from Michael Linenberg of Deutsche Bank. Your line is open.

Speaker 7

Hi, everyone. This is actually Shannon Doherty on for Mike. Maury, congratulations and welcome back. If I may, you guys' first half results were much better than the second half. It was actually quite a meaningful deceleration of earnings into the second half.

Speaker 7

So how does that impact your decision making for 2024 when you think about capacity, which markets serve fleet planning. And if you can give us anything any more color here that would be helpful. Thank you.

Speaker 3

Hey, Shannon, this is Greg. Why don't I kick it off? There's some components in the first half of the year, obviously demand Strength in the off peak fuel that helped fuel that higher profitability versus the second half of the year. But as we think about 2024, we're not coming out and going to give a guide this year, but I think BJ hit on it really nicely in his remarks where We should think about 2024 of unlocking a lot of the benefits and the investments that we've made. I mean, 1st and foremost, from my perspective, we want to continue to work hard to get labor deals Complete for our flight crews, so that's a key component.

Speaker 3

Systems, both Maury and I alluded to this as did Scott DeAngelo in our opening remarks, but we've made massive investments in new kind of next generational type systems. And When I say investments, I mean these are hundreds of thousands of man hours that we've been putting in on each one of these systems, SAP, tracks. We've cut those 2 over. We have 2 more to go. And what we're going to do with those systems now is we're going to get better.

Speaker 3

We're going to learn how to use them properly. We're going to become more efficient. We can scale better. So that's an important element as well. Obviously, Sunseeker opening, bringing on the Boeing aircraft.

Speaker 3

So there's just been a lot of investments in the business that I think truly believe will strengthen us. But one thing I want to say as we think about capacity next year and balancing that With the environment and the normalization that we've seen, it's how do we get back to peak in those peaks. We've been constrained for various reasons, whether that be the broader ecosystem, ATC, whether that be labor. But really, if you think about 2023 and if you remember a year ago when we talked about entering 2023, we said we needed to level set operations. We need to make sure we ran integrity operational excellence and integrity and we've done that.

Speaker 3

And now it's how do we balance and build that back and As we think about peaking the peaks, I'm not sure if Drew or anyone wants to add any commentary there for next year or anything else on 2024?

Speaker 5

Yes, I mean, we I hit on this a little bit in my remarks, but the peaks are subject to any operational constraint all of Right now, there's a bit more constraining than typical. We earn a significant amount of our annual earnings through those periods. There will come a time that those that we get some relief on those constraints and we will be able to peak. We've been capped Relatively similar in terms of departures per peak day in the summer for the last several years, which is not something we've experienced in

Speaker 2

the past.

Speaker 5

Beyond that, we've taken a lot of strides to maintain operational integrity and we kind of threw a lot of things at that. And now we can start to call those back in a meaningful way as we start to understand how each of those components build up to the whole. So I think what you're seeing is something that's on the more conservative side relative to what we've thrown out before. We've proven that we can do peaks at close to 10 hours a day and then I have every bit of confidence we'll get back there.

Speaker 2

Well, one other comment. The 3rd quarter is always our Weakest quarter. And what we've got going on now is our Q4 just hasn't shown up because we've got a resetting of Going back to traditional network types of things and people are trying to get back into a form factor that they're used to. And so to Drew and Craig's point, we need to now 'twenty four will be the first time I think when we can really look and reinstitute the 2019 model that we So well ran back then and we may not be hitting on all cylinders in 'twenty four, but we'll be well on our way through our typical very good first quarter, very good Q3 breakeven week, 4th quarter start getting ready for the next year and do the same thing.

Speaker 7

Thank you. And did I hear you guys correctly that we should think first quarter capacity somewhat flat and still targeting mid single digits next year capacity For the full year?

Speaker 5

Generally, yes, first half of the year probably, roughly flat with mid singles, but full year target.

Speaker 7

Okay, great. And if I can squeeze one more in really quickly. Greg, and you guys should thank you for all the remarks on utilization, but I was intrigued by the 1 hour increase in utilization that could have possibly increased profits by $50,000,000 If you were to just Pinpoint, what is limiting you the most right now on increasing your air capital utilization? I know you guys listed a bunch of things like ETC Labor, where is the biggest pain point currently? Thank you.

Speaker 3

No, thanks for the question, Shannon, and that would be just in the summer period. So if we think about it on a full year, the summers are peakiest or longest peak period. But if you add March And you end the winter of the holidays, it's probably more like $100,000,000 in total if you're able to take an hour up of utilization. Yes, I'd say it depends on the period. In March, it was we were more aircraft constrained.

Speaker 3

In the summer, it's been more labor constraints, but also trying to balance what we were With some of the disruptions around airports or ATC, but kind of underpinning all of this, Shannon, though, is operational integrity. And we capped our peak period flying this Before we even entered, we just said we won't do any more than this, roughly 7 hours per day until we build it back.

Speaker 5

And I might just add real quick. Well, that's the biggest Components to peaking the peaks, we probably lost between half hour and hour of utilization simply with elevated fuel and the kind of the demand versus fuel Big off that happened in off peak periods. But there's still value to be had in off peaks, despite all of this, but it's much harder to find it at 3.50 a gallon than it is at Yes, 215, kind of where we were in 2019. So I don't want to fully lose sight of that either.

Speaker 7

All right. Thank you all for your time.

Operator

Our next question will be coming from Savi Syth of Raymond James. Your line is open.

Speaker 8

Hey, good morning. Could I ask you about your 2024 fleet plan? Boeing, You said 2 more Airbus and then kind of is it the rest just Boeing then and hopefully you'll get to a month?

Speaker 6

Yes. So hey, Sabia, it's Vijay. For 2024, we are currently we are contracted to take delivery of 2 airplanes per month throughout 2024, as you know and I think you're alluding to there's a lot of moving parts there. So we're staying close to Boeing on that. And it's for that reason that we kept a good amount Flexibility in the used fleet that we'll keep in service for next year.

Speaker 6

Candidly, there's a few other candidates out there that we'd like Retire a little bit more quickly, but we're going to keep those in through next year as a bit of an insurance policy. The 2A320s that you're talking about are purchased This year and inducted in, I think, January, February or sometime during the Q1 next year. And then we have the MAX aircraft entering service late Q1 And building on that throughout the year. On the high end, I would expect the total fleet count around 140, 141, But that's not guidance. That's about as high as it could go.

Speaker 8

That's helpful. And then if I might, you've heard Some of your competitors talking about where a lot of the extra capacity is in some of the kind of bigger markets, crowded markets And wanting to redeploy the capacity. I'm wondering and then on the other hand too, you have regional airlines that I think trends are bottoming and maybe starting to, as you get into 2024 possibly being able to pick up their utilization as well. Just curious kind of based on the visibility you have, what you're seeing from a competitive standpoint in your markets?

Speaker 5

Yes, Drew here. The relative level of competition has been quite flat for the better part of 2 years and is relatively in line with what we thought in 20 Obviously, the dynamics change a little bit, who it is and where it is, but the overall level has been remarkably consistent.

Speaker 8

And that's what you're seeing in the forward schedule, Sujit?

Speaker 2

Correct. So you're just going to you can't see capacity grow With the way fuel is and fuel stays at this level and there's a good argument to suggest it's been permanently changed given the Environmental issues and what's going on in the world, capacity can't grow that much if people are going to make money. It just doesn't work. Capacity has got to come out to raise fares to offset the fuel increases. That's a macro statement.

Speaker 8

That's negative for your model too, Moriah, isn't it? Because you talk about leisure travel.

Speaker 2

I'm not going to sit here and say we're going to grow like a weed, but we have better opportunities to grow because we have less competition. I think we're not facing a lot of Headwinds that everybody else is with our 75% non competitive and that profile will continue, we believe, going forward. So It's not a rosy picture for the industry. I'm not going to sit here and say it is, but oil has to come down somewhat. It's the big variable we can all face.

Speaker 5

And further stuff, remember, we can pull our September capacity down to half of what we do in July as a reflection of the broader fuel environment, recognizing that Demand is picking up in the peaks to withstand the capacity and we're going to withdraw it where it doesn't make sense for all factors including fuel. So I feel really good about how we think about Capacity deployment in the face of persistent high fuel.

Speaker 8

That makes sense. Thank you.

Speaker 9

Thank you.

Operator

Our next question will be coming from Duane Sillingworth of Evercore, your line is open.

Speaker 10

Hey, thanks. Maury, welcome back. Drew, maybe you could just expand on your RASM commentary. I think you made Some statement like normal sequential change or normal seasonal change in RASM, could you just expand on that?

Speaker 5

Yes. I mean, just look back, I think I was losing even like 2,005 to 2019 sequential change in absolute TRASM from 3Q to 4Q It seems to be the right barometer as we're looking at 2023. So hopefully that gets to what you were driving at.

Speaker 10

Yes. It just looks like it's up in 2017 sorry, in 2018 2019, it looks like it's up sequentially. So I just want to make sure that's not what you're suggesting there.

Speaker 5

2018 2019 were definitely on the high end of if you look at all however many in 14, 15 years there. So I would expect something sequentially less than that, but in line if you take a much bigger sample.

Speaker 10

Okay. And then just taking a step back, and I know you've got some of the team on the phone here, but Early thoughts on Sunseeker ramp in 2024, what kind of top line and EBITDA margins, we should be thinking about understand this could be a 2 to 3 year ramp, but maybe in year 1, how you're thinking about it?

Speaker 2

Micah, any comments?

Speaker 11

Yes, I think right now it's really too early for us to guide. We're happy now to just be announcing the date, being able to kick off Our bookings and get going on the marketing, the real indicator the only real indicator that we have right now is group bookings that are on the books And we've got about 30,000 on the books and another 32,000 that are in room nights.

Speaker 2

Room nights.

Speaker 11

Room nights, yes. So that's That's probably the best leading indicator right now. We're still outside the booking window and we'll know a lot more in about 90 days.

Speaker 10

Okay. Well, good luck with the launch. Thank you.

Speaker 2

Thank you. Thank you, Duane.

Speaker 9

Thank you.

Operator

Our next question will be coming from Scott Group of Wolfe. Your line is open.

Speaker 2

Yes. Hi, it's I think this is me. It's Scott, I think you called me. I just want to Mor, you made a comment about, I guess, the seasonality in Q3, we see that. You made a comment about Like Q4 is a lower margin this year.

Speaker 2

I wasn't sure I was following your point. Can you just maybe Go back to that. Well, it just goes to the theme that we've got more in the way of off peak flying We can't pick up as much as we have historically, because of just utilization, cruise, all the things we've talked about. We're somewhat relearning how to do all this stuff too, I might add. But our first priority this year was to make sure we ran a good operation.

Speaker 2

So we didn't we got conservative and pulled back being pushy and edgy that we might have been in the past times. If you Go back to 2019 versus 2018, we flew 8 hours a day and we came out of we only had I think like 70 5 airplanes down from 90 airplanes in 2018 when we moved out of the MDs and we pushed the edge and that We saw dramatic benefits of being able to fly the push the utilization up. So those are the things we have to relearn and we'll do that. That's One of our top priorities going into 'twenty four and beyond. Okay.

Speaker 2

And then just following up on that last question, like can you just maybe be a little bit more I know explicit with what you're assuming for RASM or at least what that historical 3Q to 4Q absolute RASM Trends should be, I just want to make sure we're all on the same page. And then in an environment where Capacity is up mid single digits next year. Any early thoughts how you're thinking about CASM for next year? Thank you.

Speaker 5

Yes, I'll take the first part. I'm and maybe I missed something as I look around the table. Just taking the absolute TRASM from Q3, the absolute TRASM from Q4 historically, we've tended to step up a little bit, not by huge amount, low singles. That's generally what I was expecting. So not a year over year commentary, but simply an end year sequential.

Speaker 3

Hey, Scott. This is Greg real quick. And I know we haven't put out quarterly guide. So we're getting there. You can kind of back into it with the Q4, but I think it might just be helpful To Maury's comment about the Q3 being the weakest seasonally for us and what you saw in the 3rd Quarter airline EPS, I just want to say that 4th quarter airline EPS, the midpoint of our guide, we expect it to be stronger than the 3rd quarter.

Speaker 3

Sometimes with the weighted average share counts and what's happening on that side of the house and the lower overall share count that we have, Kind of broader highlights or pronounces the swings, but I just wanted to make sure that that came across that we expect the 4th quarter airline EPS To be higher than the Q3. And then sorry, Vijay, I didn't mean to jump in there on your 2024 costs.

Speaker 6

No, no, that's great. I mean, we're in the middle, Scott, of our budget That's for 2024, so not ready to give a guide on CASM ex for next year. And I'll just say there are a lot of moving parts Around delivery of the Boeing aircraft, induction of those airplanes, having crew members ready, etcetera. But on kind of the capacity guidance that Drew put out there, we would expect CASM ex to be up a little bit next year. I don't want to give a number yet.

Operator

Our next question will be coming from Daniel McKenzie of Keycloak Global. Your line is open.

Speaker 12

Hey, thanks. Maury, welcome back here. A couple of questions. I guess the first is really a housecleaning question on Sunseeker, I know you don't want to elaborate on 2024, but at least for the Q4 here, does the full year EPS outlook include or exclude Sunseeker revenue. And then once it opens, can you share what at least what you're seeing today in terms of occupancy And book groom

Speaker 6

traits? Hey, Dan, it's BJ. I'll start with the first question. The The outlook on Sunseeker for full year 2023 does include some revenue, but it's very, very minimal assuming that you're only open for 2 weeks out of the year And you're just kind of barely opening. You're not expected to be at any kind of full run rate.

Speaker 6

So there's some in there, but I wouldn't run away with that for 'twenty four for 'twenty three, I'm sorry.

Speaker 12

Okay. All right. And then I guess in terms of the occupancy room rates, I understand it's in there. And Drew, going back to your commentary of peak periods being scheduled to aircraft and crew constraints, I am looking at the back half of December and it looks like Allegiance flying is down 14% year over year. And so I guess a couple of questions tied to that.

Speaker 12

1, is that accurate? And then secondly, is that tied to constraints? And if and I'm just wondering if we should model these constraints extended into peak March 2024 flying as well potentially?

Speaker 5

I think what you're capturing there is some of the shift in the holiday timing as well. So the let's call it the 3rd week of December was a Pretty meaningful capacity in December of 2022 as the travel started a bit sooner. That week comes down, I believe it's about 22% And then you get a little bit of growth into the more peak, call it, last, I don't know, 10 days or so of the month. So I think a competitor called this out as well, but there will be a downshift in the mid part of December that's kind of captured on the upside at the beginning of January That I think explains most of what you're seeing. I see.

Speaker 5

Okay, very good.

Speaker 12

Thanks for the time you guys.

Operator

Thanks, Dan. Thank you. Our next question for today We'll be coming from Conor Cunningham of Most Research. Your line is open.

Speaker 13

Hi, everyone. I think you called me. As you think about load factor versus yields, I'm not trying to talk about pricing. Just like from a high level, as you think into 'twenty four, there seems to be a lot of discounting to fill seats. So I'm just trying to I'm just curious on how And what you're viewing as the key priority in building revenue next year?

Speaker 13

Thank you.

Speaker 5

Yes. I mean, at the end of the day, total It's the end game. I think you'll see yields be more resilient in the peaks. And then us making sure that we're capitalizing $70 of total ancillary per passenger through the rest of the year, which is generally driven by load factor build, as a general rule of thumb. So I would kind of separate those two elements like that.

Speaker 5

But at the end of the day, we need to make sure that we're maximizing That ancillary component.

Speaker 13

Okay. And then on the 1400 route comment that you had All the opportunities going forward. I'm just you always had a lot of opportunities. So I'm just your cost structure is obviously a lot higher. So I'm just trying to understand How that changes with a higher cost base?

Speaker 13

And then if you could just touch on where you sit with the pilots today and what's going on there that would be helpful. Thank you very much.

Speaker 5

Sure. On 1400 RAS, I mean, we're still extremely confident in that. I think you have to strip it back a little bit into a fixed Versus variable type of thought on that cost structure, right? And fuel, we'll see if I mean that's as variable as it gets. But for the rest of the cost structure, it still supports all of these 1400 routes as The fixed cost portion will kind of take care of itself as we get back to utilization, we get back to growing again.

Speaker 5

But again, that's not how we think about new network Deployment, it's all on a variable basis.

Speaker 3

Hey, Connor, it's Greg. I might try and hit on a couple of other parts there. On the cost though to Drew's point, Keep in mind, we're accruing this year, at least beginning in May, accruing for an increased labor agreement with our pilots. But increase in productivity of just Half hour in utilization per aircraft per day is worth like a 0.5 percent of CASM ex. So you have that that I think over time, I mentioned that We've invested in this infrastructure where the infrastructure has outpaced ASMs, but we're going to get back there.

Speaker 3

And when we did these system cutovers, everyone has their day job And these are massive system cutovers. And so the philosophy was measure twice, cut once, get it done, but it's going to allow us to scale and grow more efficiently. And then on the pilot side of the house, just the trends are meaningfully improving. Just to put that into perspective, in the first half of twenty twenty three, If you think about net new pilots, we were flat, whereas in the back half of 'twenty three, we'll have over 100 or we Expect over 100 net new pilots and that's twofold. 1, the attrition is meaningfully down, but 2, the classes are full and they remain full.

Speaker 3

And in fact, applications Over the past couple of months, they've more than doubled. And I think our the shout out to our flight ops team and the focus that they have And in the pathway programs and making sure that we're identifying the pilots that want to be here at Allegiant, we have A unique quality of life offering overall, which is that out and back model. But the most important thing that we need to do and I keep We're working hard and we're committed to getting a deal done for our pilots, for our flight attendants and that's a key focus for us and we'll carry that in and get trying to get that done as soon as possible.

Speaker 2

Connor, let me put an editorial on top of that. You can't understand the mindset inside of an airline in March, February with the pilot issues going on, you just didn't know what was going to happen, particularly if you're in the middle of the sandwich like we were, Well, a lot of our guys are going up the hill to American Delta and United. And can you we literally trained 200 pilots in 'twenty two and kept 10. So a lot of expenses going in just to training these guys. But now that you're seeing the world, I mean Spirit announced they're not hiring any pilots For 2024.

Speaker 2

I mean, there's a radical shift in mindset of how you can think about having access to crews. And for us, We need to make sure we get we need some extra crews certainly for the Boeing as we transition. So we needed to have that type of mindset and it's there To Greg's point, we'll get a contract on. Our pilots are very much on board with growing this business and we're also being much more selective in who we bring into the business. We need to know that they want to be in our model and want to be here long term.

Speaker 2

Not to say we weren't selective before, but it was much more, could you Fly an airplane then, what are your personal needs? So those are the kinds of things we've learned from this effort. And not only us, but everybody in this industry is going to be much more Comfortable that they can make a forecast on pilots and availability, so you can put a schedule out 9 months from now and still operate it.

Operator

Our next question will be coming from Andrew Didora of Bank of America. Your line is open.

Speaker 14

Hi, everyone. Thanks for taking the questions. Maury, welcome back. Maury or maybe Greg, Just staying on the pilots here, what kind of where are you kind of where do the negotiations stand right now? And If you can, just what are the some of the key holdups at this point?

Speaker 3

Hey, Andrew, it's Greg. So earlier this year, we combined with the union It started mediation in the mediation process and while we're progressing, candidly, it's not at the rate I'd like to see. So but we're still working through it. And there's a variety of items we're working through, but we understand The important items that we need to get done and to get a competitive contract is paramount in our view. And I have all the confidence We'll continue to make progress and then we'll get a deal done.

Speaker 2

Yes, Andrew, there's some practical applications. We're both at the table young in our maturity in many ways in doing a contract. This group of pilots has never been involved in negotiating a contract before. And so they're, I think, kind of feeling of their way forward as to What did they want to see in a contract? And you have proper people at the table that know how to do this.

Speaker 2

So United, American, Delta, it's been 70 years. They have 500 page contracts that they don't have a lot to talk about. We've got a lot of items that are still young and tender And both sides need to feel their way through it. So to Greg's point, it's been slower than we would have liked, but we get the materiality and what we want to do. But I think both sides are getting a little bit of deal fatigue candidly if I had to say so, just to get something done.

Speaker 2

As we all know, this is not these contracts never end. They're just extensions until we sit down and do it again 3 or 4 or 5 years from now.

Speaker 14

Got it. Thank you. And then as a follow-up, I know you spoke a little bit about kind of The contracted deliveries for 2024, in that context, how should we be thinking about CapEx for next year?

Speaker 5

Hey, Andrew, it's Vijay.

Speaker 6

We're live in discussing some of this with Boeing. What I'll tell you is in 2023, we were paying large amounts of pre delivery deposits substantially focused on aircraft delivering in 2024. And so you would see the same thing in 2024 for aircraft delivering in 2025 given the new schedule. I would expect CapEx to be elevated next year versus 2023, but don't have a guide for you yet.

Speaker 14

Okay. Thank you.

Operator

Thank you. Our next question will be coming from Christopher Stathoulopoulos of Susquehanna Financial Group. Your line is open.

Speaker 14

Thank you, operator. Good afternoon, everyone. I'll keep this to 1. Maurice, so I want to understand, If you could, a little bit more on the composition of your 2024 capacity, with the idea here that not all capacity is created equal, it comes with Different margin profiles, etcetera. So I think you said 70%, 75% of routes non competitive, 1400 new domestic routes identified, And that you have a line of sight or you're looking to get back to 2019 utilization levels.

Speaker 14

On the other side of the ledger, mid single digit ASM growth is below what you've typically done. So As we think about the moving pieces and if you want to frame it departure, stage, engage or however else, Is this about frequencies within existing dots, adding dots, a little bit of both? Just want to understand here the moving pieces that makes up and builds into that Mid single digit capacity guide and that soft CASM ex guide that you gave for next year? Thank you.

Speaker 5

Hey, Christopher, Drew here. Probably a little early to get into all of those dynamics today. I think maybe speaking fairly generally, I wouldn't anticipate seeing that utilization rebuild in the first half of the year with the flat ASMs, that probably goes without saying. As we bring on the Boeing's, we will get a little bit of gauge benefit As the A200s will come in at 190 seats, which is larger than what we have today by a little bit. Yes.

Speaker 5

I don't foresee massive stage differences through the year, although we'll get back to you maybe on that in 90 days. But I think as we think about the overall network, I would foresee a bit more frequency restoration coming earlier Then the new route announcements then kind of relative to our typical split before probably more of a late 24, but really more of a 25 and 26 story on network expansion would be my guess at this point.

Speaker 6

Hey, Chris. And then this is Vijay. The main thing to think about for CASM ex next year is really just the full year Of the pilot payroll costs and the full year of labor agreements that were implemented this year, other than that we don't have most of the other buckets moving so much John, the capacity that Drew just outlined.

Speaker 14

Okay. Thank you.

Speaker 7

Thank you.

Operator

Our next question will be coming from Helane Becker of TD Cowen, your line is open.

Speaker 9

Thanks very much, operator. Hi, everybody. Welcome back, Maury. Just two maybe clarification questions. All your peers are calling out maintenance and you didn't really mention that.

Speaker 9

Is there something I mean, what's different between you and them, maybe?

Speaker 6

Hey, Helane, it's BJ here. I think one of the things is Potentially that our heavy maintenance is capitalized or we use a deferred method. And so you don't see the immediate impact In the period that the cash goes out, so there has been some pressure in heavy maintenance expense, Not to the degree that like we've been hearing from some of the other carriers' calls, but also expecting some pretty nice relief on that as we move through 2024 and 2020 And those aircraft with the most expensive heavy checks will be retired prior to undergoing that maintenance.

Speaker 9

Right. Got it. That's really helpful. And then for my follow-up question, the other thing that some of your Competitor I don't know if they're really competitors, but some of the other airlines have been calling out, has been too much capacity in Las Vegas, and you didn't mention that either. And yet Las Vegas tends to be one of your larger locations.

Speaker 9

I don't think it's the largest anymore. I think that shifted around the network. But maybe can you talk a little bit about what you're seeing in Las Vegas? And I guess the Grand Prix is coming pretty soon. So I'm imagining you're going to see a fair Step up in traffic there in addition to the holidays?

Speaker 5

Yes. Thanks, Helane. Just because Vegas has seen incremental seats does not necessarily mean that Allegiant has seen incremental seats on top of ourselves into Vegas. Our routes and where we originate customers tend to be pretty differentiated. And the price points haven't leaked into connecting traffic in a way that we saw in like 2015 When you could get to Vegas, one stop for $100 So that has not manifested yet.

Speaker 5

So we still maintain A really solid network differentiation here that I think kind of puts us on an island, if you will, there. In terms of F1, Canada have been a little Wrong on this. I went into it saying that it would probably be the worst week that Allegiant had ever had coming into Vegas. And luckily that has not manifested. You've seen hotel pricing come down here looking at Scott DeAngelo, but 50%, 60% in places that I think is catering back toward Away from the core F1 customer and more towards just Vegas experience, it will have some fast cars going on the bed.

Speaker 5

So it'll be fine, but I wouldn't call it out as anything that I believe will be super special for us. Yes.

Speaker 2

F1 is Vegas is a midtown, mid price town. It's not a high end town, Monaco or something like that. And The hotel prices were starting off the status there. You can't blame them. They'd start there and then come down.

Speaker 2

But It's going to be a zoo here that weekend, but it's $20,000 $15,000 to get into a panic as they call it. Those are not the usual Vegas crisis.

Speaker 9

Got it. Maury, I'm really disappointed that you haven't done an Investor Day at Allegiant Stadium In conjunction with 1 of the football games.

Speaker 2

We'll put it on the list, all right? That's a good idea. We can do that.

Speaker 9

All right. All right. Thanks very much you guys.

Speaker 2

Thank you.

Operator

Thank you. One moment for our next question. Our next question will be coming from Catherine O'Brien of Goldman Sachs. Your line is open.

Speaker 15

Hey, good morning, everyone, and welcome back, Maury. Maybe just two quick ones on some of the ancillary revenue buckets. I thought it was great you shared that remuneration year to date on the credit card. I guess is that similar to the revenue impact? I I know sometimes there's a bit of a timing difference there.

Speaker 15

And I guess any thoughts on what the tailwinds are there going forward? Like How should we think about if we're talking mid single digit capacity growth, are we thinking about credit card remuneration above and beyond that? And I've got one more. Thanks.

Speaker 4

Thanks, Katie. This is Scott Deangelo. So I'll take the first couple of parts there. So the way to think about it as a rule of thumb, About 3 quarters to 80 percent of total compensation is recognized in any given year. A portion of What we get paid gets immediately recognized and the other portion is deferred and it's in effect subsidizing, right, a card When they use points to buy air travel and it gets recognized as revenue once those points are redeemed.

Speaker 4

In terms of tailwinds, there's All of things that I'll speak to a high level at. We are aggressively pursuing what's referred to as a second look program, So an augmentation of our credit card program that to the customer looks no different, but it's other issuers We're willing to issue in the subprime and the nearprime spaces, which currently are largely unserved by our product. And that should enable us to open the aperture, if you will, on approval rate. And then finally, the other thing we're doing is Marketing more aggressively, not just in the plane, but through digital and even in some cases traditional advertising to build Preference for and drive applications for the card in a way that we've never done before. So all of those things combined, we expect to Continue to flame tailwinds.

Speaker 4

Last point, we currently sit at about 3 percentage of our loyalty program has the card. Mature Airlines, Delta and America, I believe both made this public, were more in the 13% to 14% of their loyalty program. So that gives you kind of an idea of what upside is there if these tailwinds above and beyond the traditional ASM growth Can drive us there.

Speaker 3

And Katy, it's Greg. I just want to add one quick point to what Scott mentioned there and that's that The network that we serve and the communities that we're in, so many of them were a really big deal. And Our card is aspirational. They want that card. And it's a great, I think, kind of program that we continue to build on that's unique to Allegiant because Again, in those markets, we are the game in town.

Speaker 15

That's great. And then maybe just one sorry, Go ahead. Just on Allegiant Extra, I know you talked about a positive contribution, but could

Speaker 1

you just put a finer point

Speaker 15

on that? Like what's the average buy up on an Extra seed or can you talk about how revenue growth is trending maybe versus Allegiant Extra seed growth? Any help there would be great. Thanks so much.

Speaker 5

Yes, Katy. I think this is something we continually say, hey, we'll dive into more detail at an Investor Day and really provide Some good stuff there and we keep pushing the Investor Day. So I promise we'll get there at a future Investor Day. In terms of occupancy, we tend to get by right around 50% mark, give or take, at a pretty meaningful unitized rev over any other seat. So we're I think we've stated about $1 per passenger in the past, but I think that might be a little bit conservative as we've seen continued growth.

Speaker 15

Right. Maybe I'll just throw another location into the ring with Helane. I'd love to go see Sunseeker. So keep us posted on that. Thanks guys.

Speaker 2

All

Speaker 3

right. Thanks, Katie.

Operator

Thank you. And our last question for the day is coming from Ravi Shankler of Morgan Stanley. Your line is open.

Speaker 16

Hi, good afternoon everyone. So, A, Maury, welcome back. And B, kind of just wanted to follow-up on something you said earlier about how high jet fuel prices kind of Almost forces capacity discipline across the industry. We have seen some indication of that on the 3Q conference calls with some of the low cost carriers talking about Muting their growth plans for next year. Do you think the industry finally gets it on capacity discipline for next year?

Speaker 16

Or do you think there's kind of still a little bit of proof needed on kind of walking the talk there?

Speaker 2

We've got what, 30, 40 years of deregulation history bucking a new tent So a trend, if you want to take a comparable one, price of oil has gone up dramatically since February of 2022, but You haven't seen the fracking industry run out and put a lot of new wells in. They've caught a lot of grief from your compatriots about saving Investment and make some money. So you've seen behavioral changes there, which have, I think, affected supply and the U. S. Has always been the counterbalance For oil and knocking the price down when it gets to rich from the Middle East and Russia and those guys.

Speaker 2

So maybe you have new trends there. I think the industry is very focused on making money. The big guys are definitely showing that they like having those numbers. They've got a very well rounded product. They've got a lot of debt on the balance sheet they want to pay down.

Speaker 2

So making good money the way they have is maybe becomes infectious. But long term, making money is the name of the game. And what you've seen over the last 3 years, 4 years is we've all been thrown out of Our habits and what we've done historically, I think the American Delta and United have benefited by Kind of the stuff they did pre pandemic and brought it to home here in the last few months and last year with both international being so rich and With the ability to offer competitive products, when you look at the ULCC market, as I said, they've got over a 90% overlap in their marketplaces. That's tough competition to go up against if you've got a comparable product that's sitting there with a well known brand that has a credit card, has all the attributes. So we like staying out of people's way, and doing those things.

Speaker 2

But As far as capacity growth, I think it's you're certainly not going to see kind of a wide open funnel like we saw in the mid teens and the like in my mind. Could it get there a couple of years from now? Sure. But right now, I think everybody's a bit cautious and wants to bring it back slowly. And I'll say on top of all this is ATC, when you're being asked to cut your summer travel into New York City because ATC can't keep up, That's a big whack to your operation and your bottom line.

Speaker 16

Always appreciate your thoughts. Thanks, Maury.

Operator

Thank you. There are no more questions in the queue. And I will now turn the call back over to Mori for closing remarks. Please go ahead.

Speaker 2

Thank you all very much for your time. Appreciate your interest and we'll see you in 90 days. Thank you.

Operator

Thank you for joining. You may all disconnect and have a great day.

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Earnings Conference Call
Allegiant Travel Q3 2023
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