Sun Country Airlines Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 1, 2024

There are 9 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Sun Country Airlines 4th Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker's 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, Christopher Allen, Director of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you. I'm joined today by Jude Bricker, our Chief Executive Officer Dave Davis, President and a group of others to help answer questions. Before we begin, I would 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 upon Mann's current beliefs, expectations and assumptions and are subject to risks and uncertainties. Results may differ materially.

Speaker 1

We encourage you to review risk factors and cautionary statements outlined in our earnings release and our most recent SEC filings. We assume no obligation to update any forward looking statements. You can find our Q4 and full year 2023 earnings press release on our website ir. Suncountry.com. With that said, I'd like to turn the call over to Jude.

Speaker 2

Thanks, Chris. Good morning, everyone. Thanks for joining us today. Our diversified business model is unique in the airline industry. Due to the predictability of our charter and cargo cost model allows us to respond to both predictable leisure demand fluctuations and exogenous industry shocks.

Speaker 2

We believe due to our structural advantages, we'll be able to reliably deliver industry leading profitability throughout all cycles. We have much to be proud of in the way we finished 2023. Many of the challenges of the post COVID period are fading as we move into 2024. Our operations in the 3rd quarter showed significant year on year improvement across every major operating metric, D0A14 completion factor and mishandled bag rate. For completion factor, we only canceled one scheduled service flight during the entire quarter.

Speaker 2

A14 increased 13 percentage points year on year without an increase in target block times. In 4Q, we produced a declining year on year CASM ex the first time since COVID. One of the main contributors to our improving cost and operational performance is that we've been able to staff the airline closer to optimal. In fact, we've seen better staffing metrics across every major labor group. Improved staffing has allowed us to allocate additional peak capacity and scheduled service and to take advantage of close in charter demand.

Speaker 2

Maintaining Peak schedule allocations has allowed us to fly almost 15% more ASMs in 4Q with adjusted TRASM declining only 8%. We continue to operate in a strong demand environment across all three segments of our business with scheduled service continuing to receive the majority of our growth a trend we expect to continue into 2024. Congratulations to the entire Sun Country team that delivered record full year 20 revenue, full year passenger volume and full year operating margin. I wanted to highlight a few things that I'm excited about in 2024. I feel like we have good control of our unit costs.

Speaker 2

While we will continue to face headwinds, particularly with the heavy check cycle of our fleet, We should be able to continue to lead the industry in cost trends going into 2024. Demand is holding up really well. For 1Q, we faced challenging comps as we lap the exceptional yield environment of winter 'twenty two, 'twenty three. For 1Q, we are currently scheduled to fly over 15% more ASMs than prior year with only an expected mid single digit decline in unit revenues. These positive revenue trends are mostly a result of growth being heavily weighted to peak period due to lessening staffing constraints.

Speaker 2

A few examples. In December 2023, we flew 120% more ASMs in scheduled service During the last 14 days of the month as compared to the 1st 14 days, industry capacity shifted about 3%. In 1Q 2024, March will have about 60% more scheduled service ASMs than January. This was 47% in 1Q of 2023. This schedule variability, along with our cost structure, It's the mode around our business and is made possible by our multi segment model.

Speaker 2

On the fleet side, we have 3 aircraft in various stages of delivery. These aircraft will be part of our controlled fleet of 63 airplanes by the end of 2Q. We expect to be able grow ASMs by around 40% versus 2023 levels with lease returns, utilization increases and up gauging in addition to these air That should give us 2 to 3 years of growth, while simultaneously producing exceptional free cash flow yields. That combination rarely happens in our industry. We have many projects that should help us keep momentum on operational costs and revenue trends into 2024.

Speaker 2

To highlight a few, in 2024, we were able to rebid we are able rebid our credit card agreement, which we expect to result in materially better economics. In 2023, we launched bag scanning technology that has had a material impact on MBR, that solution will be rolled out to outstations in the coming months. We automated our passenger reacom process, which allows us to take more scheduled service risk during peak periods, we'll launch our app in a few months, our crew rostering system will transition PBS later this year and all the investments we've made in crude training are starting to pay off with the lowest training footprints we've seen since COVID. Finally, our growth brands have very little risk. We have high confidence in our Minneapolis expansion based on prior success.

Speaker 2

Further, based on ongoing discussions with charter and cargo customers, I expect those segments to be able to keep growth pace with our scheduled service opportunities. And with that, I'll turn it over to Dave. Thanks, Jude. We're pleased to report strong Q4 results, including an adjusted operating margin of 7.4%, which was well ahead of our guidance. Both our quarterly and full year 2023 results again demonstrate the resiliency and earnings power of our unique diversified business model.

Speaker 2

2023 was the 3rd consecutive year of profitability Sun Country and on an adjusted net income basis with one exception, we've been profitable in every full quarter since going public in March of 2021. We believe we finished the year with the highest or among the highest adjusted pretax margins in the industry at 9.9%. This result was very similar to 2019 despite fuel being 38% higher this year. It's important to understand that our operating model is almost the opposite of the high utilization carriers. Our passenger business flies when demand and unit revenues are highest and we fly much less in off peak periods.

Speaker 2

The modest increase in unit costs this produces is more than offset by the resulting improvements in unit revenue. Additionally, our diversification across scheduled service, charter and cargo operations leads to resiliency through business cycles. Our strong 2023 results allowed us to return $68,600,000 to shareholders in the form of share repurchases. Since 2022, our share repurchases have totaled $93,600,000 I'll turn now to the specifics of our Q4 and full year results. First to revenue and capacity.

Speaker 2

In the 4th quarter, total revenue grew 8.1% versus Q4 of 2022 $245,500,000 Scheduled service revenue plus ancillary grew 4.6 percent to $163,800,000 Scheduled service TRASM decreased 9.1 percent to $0.1073 as scheduled ASMs grew by almost 15%. For the full year, total block hours increased by 9.8% versus 2022 and our total revenue was $1,050,000,000 was 17.3% higher than prior year. 2023 scheduled service plus ancillary revenue grew 15.7% to $730,000,000 Full year scheduled service TRASM increased 7.6% and an increase of 7.2% scheduled ASMs. Looking forward to Q1 of 2024, We're anticipating scheduled service ASMs to grow approximately 15% versus Q1 of 2023 with scheduled service plus ancillary revenue growth outpacing the 4.6% year over year growth we saw in the 4th quarter. Charter revenue in the Q4 grew 8.8 percent to $46,900,000 on block hour growth of 7.8%.

Speaker 2

A portion of our charter revenue consists of reimbursement from customers for changes in fuel prices as we do not take fuel risk on our charter flying. Q4 fuel prices dropped by 14% year over year. If you exclude the fuel reimbursement revenue from both Q4 of 2023 In Q4 of 2022, charter flying revenue grew 11.1% during the period, easily exceeding block hour growth and producing a 3.1% increase in charter revenue per block hour versus last year. For the full year, charter revenue was $190,100,000 17.6% higher than full year of 2022. Charter revenue under long term contracts was 80% of the total charter block hours as contracted charter flying grew 25.7 percent versus 2022.

Speaker 2

4th quarter cargo revenue grew 3.6 percent to $25,300,000 on a 1.8% increase in block hours. For full year 2023, Cargo revenue grew 10.4 percent to $99,700,000 on a 5.8% increase in block hours. As you can see, we are continuing to grow at a profitable measured pace. Q1 of 20 4 total block hours are expected to grow between 8% 11%, while total revenue should be between $310,000,000 $320,000,000 Turning now to costs. 4th quarter total operating expenses increased 7.7% on a 10.4% increase in total block hours.

Speaker 2

Adjusted CASM declined by 2.2% versus Q4 of 2022. During the quarter, we saw solid cost control across the company. As our pilot availability issues have eased, we've been able to achieve our growth plans and we're benefiting from the operating leverage in the business. Importantly, more pilot availability means fewer hours paid at premium rates and lower unit costs. For the full year, total operating expense increased 9.9 percent in line with total block hour growth of 9.8%.

Speaker 2

Full year adjusted CASM increased 6.4 percent to $0.075 with increases in the first half of the year driving this increase. Regarding our balance sheet. Our total liquidity at the end of Q4 was $205,000,000 which reflects $13,500,000 in share repurchases during the quarter. As of January 31, our total liquidity was $234,000,000 In 2023, we spent $218,000,000 on CapEx, almost $200,000,000 of which was for aircraft and engines. We expect these aircraft to provide the bulk of the passenger lift we need through 2025.

Speaker 2

As such, we anticipate our full year 2024 CapEx to be approximately $100,000,000 and our 2024 year ending in service passenger fleet count to be 44 aircraft. In addition to these aircraft, we expect to have 3 aircraft being inducted into our fleet and 4 aircraft on lease to other carriers, We expect to redeliver to Sun Country throughout 2025. We anticipate strong free cash flow generation in 2024. Continue to maintain a very strong balance sheet. Our net debt to adjusted EBITDA ratio at the end of 2023 was 2.2 times, down from 2.7 times at the end of 2022.

Speaker 2

Since we do not have a significant debt burden, we have flexibility in how we deploy our cash. Turning to guidance. We expect full quarter total revenue to be between $310,000,000 to $320,000,000 on block hour growth of 8% to 11%. We're anticipating our cost per gallon for fuel to be $3 and for us to achieve an operating margin between 17% 21%. The fundamentals of our unique diversified business remain strong And our model is highly resilient to changes in macroeconomic conditions.

Speaker 2

Our focus remains on profitable growth. With that, we'll open it for questions.

Operator

Our first question comes from the line of Duane Pfennwerth with Evercore ISI. Your line is now open.

Speaker 3

Hey, good morning. Thank you. Just on the This improved utilization, your ability to kind of flex back up again in the peaks, which segment would you say is most constrained Or maybe ask differently, how would you characterize margins or margin opportunity across the 3 segments?

Speaker 2

Scheduled services by far the highest margin and most affected by staffing constraints. So think about it like an S curve or a sine wave. And if we have staffing constraints that kind of pushes the peaks down because we can only produce a Certain amount of block hours in any given period, so monthly is typically the constraint. And that yields these really expensive opportunity costs during peak periods that's sort of becoming less of an issue as we staff the airline appropriately.

Speaker 3

That's helpful. And so this the percentages that you put out there for March versus January, is that Optimal? Or do you think as we kind of roll through the year, there's maybe even more peak capture you could realize?

Speaker 2

The latter. There's definitely more opportunity in March. So a good comp would be to look back at utilization in 2019 when we weren't constrained And there's still about 2 hours per aircraft per day of production that we aren't able to achieve in 2023 or 2024 versus 2019. Now the fleet is older than it was then. There's a little bit different dynamics as it relates to congestion in airports and things like that.

Speaker 2

So we won't achieve what we achieved then, but there's definitely plenty of for incremental flying. And the important aspect of that is that as we add more flying, it's coming kind of mid week March. But as you compare that opportunity to the average yield for the quarter, it's still above average. So we're increasing volume and unit revenues by growing peak period capacity.

Speaker 3

Yes, that makes sense. And then just for my follow-up, I don't know if there's any way to frame it, but in terms of premium pay or overtime That you incurred in 2023 that you feel like you won't incur kind of going forward in any way to size that order of magnitude?

Speaker 2

I'm not sure I can give you order of magnitude. I would just say that this is sort of what our current outlook is as we go forward. There's a minimum level of premium pay just because of the way that our contract works in any given month. So we'll need to pay that in 2024 just like we did in just like we did in 2022. We only have 2 months right now dialed in at higher levels of premium pay in 2024 than the minimum amounts.

Speaker 2

So I think I'll just comment on the overall staffing situation. Things have gotten significantly better. We've talked now for several quarters about the initiatives that we've undertaken here to try and improve the availability of captains in particular. I would say that those are bearing fruit, and we're seeing the kind of growth that we need and the kind of attrition levels that continue to occur favorably for us. So I think premium pay is sort of where it needs to be as well as our levels of upgrade and attrition.

Speaker 2

Now we could use more because as June just talked about, there's more opportunity for growth here, I think we're seeing really steady progress. Okay.

Speaker 3

Nice to see you come through. Appreciate the time.

Speaker 2

Thanks, Duane.

Operator

Thank you for your question. Our next question comes from the line of Catherine O'Brien with Goldman Sachs. Your line is now open.

Speaker 4

Hey, good morning, everyone. Thanks for the time.

Speaker 2

Hey, Katie.

Speaker 4

Hey. I was just hoping to get some high level puts and takes on 2024. How should we think about scheduled capacity growth through the rest of the year or just capacity growth overall following that 15% growth in 1Q, Just in the context of you already have aircraft locked in, sounds like pilot availability is getting much better. And then on the cost side, I did some quick math and looks like to get to the midpoint of your operating margin guidance, I'm getting the cost ex fuel on a block hour basis up about 4%. Is that the right level to think about through the year?

Speaker 4

Should we see efficiency build? Or if easier, I know you guys made the comments about you think you're going to lead The industry on a CASMex basis, I wasn't sure if that was a cost GAAP comment or year over year performance. I know there's a couple in there, but thank you.

Speaker 2

Yes. Let me start with the cost question for next year. I don't have the block hour numbers off the top of my head, but let me give you just Some CASM indicators, which I think are probably very similar to block hour. On the CASM front, I think you what we're expecting now is CASM to basically be flat to up low single digits. And here's the rationale.

Speaker 2

I think I mentioned last quarter, we have a program underway of accelerating some maintenance spend into 2024, which will have a modest bump to CASM, but pay significant dividends in 2025 and 2026 in terms of reduced unit costs by sort of bringing some more activities forward and packaging them into the current checks. So that's going to be a little bit of a cost bump. Think right now looking forward, we're seeing, like I said, flat to low single digit CASM growth. And my comment around relative CASM was mainly to kind of point out that we're not subject to the major challenges, particularly on the fleet side that the rest of the industry is dealing with. So we don't have gear turbofan.

Speaker 2

We're not subject to new aircraft delivery delays. We don't expect to do any engine performance restorations aren't subject to OEM escalation in 2024. We don't have MAX 9s. There's just not that much pressure on our costs relative to the industry. So I think we'll continue to produce better trends, maybe not on an absolute basis.

Speaker 2

And then on your question on capacity growth, like generally, we would think about mid teen block hour growth, most of that will be allocated to Sched service.

Speaker 4

Got it. Super helpful. And then a lot of your competitors have spoken to stronger domestic trends as capacity has come down. I know your model is more immune to overcapacity in the troughs, which has been the roughest periods when capacity is out of whack. But has this had any impact on pricing in the peak where you flex up your flying?

Speaker 4

Any early reads on spring break or summer that you want to call out that you find encouraging? Thanks for the

Speaker 2

Yes, I mean, as I mentioned in my comments, spring break of last year was spectacular and probably not repeatable. And so we've seen a bit of a settling consistent with comments that you've heard other carriers make in the Mexican Caribbean markets. But this year, we'll produce substantial TRASM premiums to pre COVID levels as consistent with my comments in the last several quarters. The domestic market is doing really well. I think we're Seeing a rebound in Florida, which is important to us, as we lap the Ian challenges that West Florida was facing last year.

Speaker 2

Sort of broadly, I think things are really good, consistent with other folks' comments. Grant's here with me, anything?

Speaker 5

No. That's absolutely the case. And the airline is digesting well 20% capacity growth in March. So it just speaks to How the brand has been built in Minneapolis, we definitely continue to be and work very hard to be the leading leisure airline in that marketplace that I think our results speak to that point and we're going to compete aggressively for that title going forward.

Speaker 4

Great. Thanks for the time.

Operator

Thank you. One moment for our next question please. Next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is now open.

Speaker 6

Good morning, everyone. This is Catherine on for Ravi. Thank you for taking my question. I was just curious about, You kind of mentioned this on your last question, but as the floor of CASM across the industry is expected to potentially push RASM up, I was Curious if that helps you guys take price or share in that scenario?

Speaker 2

Yes. I mean, generally, yes. But the things that make us less subject to capacity Because effects also reduce the impact of sort of unexpected grounding of the GTF fleet, for example. We're just not for good and for bad, we're just not as exposed to the industry machinations. But capacity out of the system is a net positive, I think but we'd be like the secondary, tertiary effect of like reallocation capacity to backfill will pull on the margin some capacity off our network maybe from our OAs, but it's not material.

Speaker 6

And just as a quick follow-up. So I know close in bookings across the industry were really in last year and even probably 2021 and then kind of dropped off in 'twenty three. What is that looking like now? And I'm curious if you guys What normal behavior might look like for close in bookings at some country?

Speaker 2

Close in remains really Strong. I mean, we the shape of the booking curve, which is sort of like aggregate bookings made any given time, It's very similar to pre COVID levels, but at a higher fare. So I think the future looks a lot like the past, and passenger behavior. I think things are really positive. Graham, anything else?

Speaker 2

No, Brad. Yes. It's good. Thank you.

Operator

Thank you. One moment for our next question please. And our next question comes from the line of Mike Linenberg with Deutsche Bank. One moment please for your question.

Speaker 7

Can you guys hear me?

Speaker 2

Yes. I got you now. Now we can. Yes.

Speaker 7

Sorry. Just to follow-up, actually have two questions here, but one a follow-up on Duane's question where you've talked about really being able to take advantage of call it the marginal opportunity here. I think in the past you've characterized that being able Now take advantage of the fact that you can have the fixed cost base, you're able to sort of capitalize on that. I think you've characterized it as like a 40% operating margin incremental operating margin as better utilize your asset base. You did sort of backtrack and say, well, we're still going to be off about 2 hours from where we could have been or Where we were back in 2019.

Speaker 7

Is that magnitude on the incremental opportunity here, does that still come at It is my math, right? Somewhere in the 40% range or so. Is that how we should think about it?

Speaker 2

Yes. I mean, So what we're talking about there is not an operating margin, but rather a contribution margin. So profits in excess of variable cost, revenue in excess of variable cost. And yes, I mean, our March That variable contribution is in excess of 40%. So is it in July?

Speaker 2

So is it in the back of December? So as we grow those markets Grow those periods of time in the calendar, we would expect that level of contribution for those incremental flights. Absolutely. Yes, Mike. I think one of the things on the utilization comment, 2019, there were some unique things, particularly around military flying was really strong and other things that we were able to pick up.

Speaker 2

We're not saying that there's not 2 hours of opportunity. We're just there's opportunity. We're just not maybe going to get back to the 9 plus hours that we did in 2019 because there were some unusual things. But there's plenty of opportunity on the utilization front to drive high variable contribution flying. Yes, downward pressure on utilization is going to come from the check cycle that Dave mentioned earlier.

Speaker 2

We have a higher sparing ratio than we've had in the past. We're going to make sure we execute real well in operations, and that requires a little bit of conservatism on utilization.

Speaker 7

Great. And then just my second question, as we go back to fleet and procurement and the like and I appreciate your point about That you're not dealing with the issues that a lot of other carriers are, whether it's the GTF or the grounding of the MAX 9. But now it does seem like that Going forward, one of the large OEMs basically will really only have one airplane that people care about. As you know, not a lot of interest in the MAX 9, it's going to be all about the MAX 8. And it seems like that that's probably going to be the primary airplane of choice over the next couple of years, which will probably put a lot of upward pressure in the used market for 800s and even used 900 ERs or maybe even 700s.

Speaker 7

What are you seeing in the market? And it was obviously encouraging to see that you picked up 2 more 800s from Fly to buy, so that plus the 5 from Omen. So you have 7 shells of growth. Have you identified Additional shells out there that are maybe that you're working on right now? And what are you seeing on the pricing For these used airplanes, it would seem like that the bid for those types of airplanes have actually moved up given the constraints at the OEMs.

Speaker 7

Any color on that would be great. Thanks.

Speaker 2

So Mike, I think you covered the operating lessors. Every quarter they say how strong a market it is for residual value. This is one time that they're right. We're going to I mean, so all the challenges that the OEMs are having is kind of trickling into used aircraft market and availability and pricing are both moving in the favor of owners of aircraft. And We are comfortable then not having to do any deals for a few years and just cash flow.

Speaker 2

And We remain in the market. We're very active. If an airplane is out there trading hands, we're at the table. But our the bid ask for us has really widened over the last several months. And we only originated one aircraft over the last 12 months, And we may continue on in that trend for the foreseeable future, say, 2 years.

Speaker 2

The point I was making though is that we could grow this airline 40 without any incremental originating aircraft deals.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Brandon with Barclays. Your line is now open.

Speaker 8

Hey, good morning guys and thanks for taking the question.

Speaker 2

Hey, Brad.

Speaker 8

Drew or Dave, I guess, can you talk to us looking into April in the second quarter, Because you guys do have just based on the model on your peak scheduled out of Minneapolis in the Q1, 2Q can be a little bit softer. So how do you see at least the first half of the year playing out from a profitability perspective.

Speaker 2

So just A little bit of expectation setting. I mean, Easter is a lot earlier this than it was last year. And so that will have a negative effect on April on a year over year comp basis, which is expected. We had a really spectacular April of last year. As I mentioned, the winter of last year was really special, and that won't repeat itself.

Speaker 2

But the trends that we've seen as we kind of lap the COVID recovery have broadly maintained themselves. I mean, We're looking at 25%, 30% TRASM sort of broadly over 2019. You got to adjust for these calendar shifts, but generally, fares have kind of reset themselves at a stable but a much higher level. 2Q for us is not nearly as good as 1Q and that will obviously be the same this year, but we're certainly Really bullish about where we're booking right now, Granny.

Speaker 5

Yes. And I would also say that you've seen a continued ability of us to add capacity where we know we're going to be profitable sort of throughout the process And we work really closely with the operating team. So I would say there's a lot of work going on to understand where we can add some incremental capacity in the second quarter. So those keeping score with BO and those sorts of things, it's not all in there yet. And I would echo Jude's sentiment.

Speaker 5

We understand what the world is going to look like in the Q2 and we have a plan for it. So, yes.

Speaker 2

That's a really good point. I mean, so our scheduling philosophy is one where we hold back some capacity and kind of allocate it as bookings matriculate. And I think That's the right way to run our business. Many airlines schedule above so that competitors notice and then they kind of cancel down as bookings happen. We have the opposite.

Speaker 2

So we'll have this little bit, couple of percentage points of capacity to allocate as we get in closer, which will help as well.

Speaker 8

Appreciate that too. And then Dave, maybe on expectations in the offsets, I know you mentioned maybe lower premium pay this year. What else do you have going on, on the cost side that you can speak to?

Speaker 2

Well, I mean, I think cost control across the company has been Very solid. On the so there's a lot of operating leverage here sort of as we grow. Like we talked about a minute ago here on the aircraft side, we've basically got the shells we need to fly to 2024 level. So that Operating leverage kicks in and we get a CASM benefit from that. We've also got a number of IT projects that we've been working now that I think are going to contribute to a lower CASM as well.

Speaker 2

With the exception of this maintenance issue, which is sort of a decision that we've made, Costs are well in control. I can't point to any one initiative. I just think across all of the areas of company right now, costs are well in hand. Thank you. Thanks Brandon.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Christopher Staphyloffos with Susquehanna. Your line is now open.

Speaker 8

Good morning. Thanks for taking my question. What percent of your charters Currently under contract and how much is up for renewal this year?

Speaker 2

We have About 85% of our charter revenue right now is under long term contract. As these pilot and other staffing issues sort of resolve themselves, we want to drive a little more ad hoc revenue. But right now, like I said, 85 percent -ish or so is long term. I don't think we have any significant contracts up. No.

Speaker 5

And we're working with any that are. So we feel really good about the portfolio and they like what we're doing and we like being connected with them.

Speaker 8

Okay. Okay. And second question, the sequential decline in block hours and cargo, Is that just reflective of a weak peak or perhaps a regional shift in Amazon's network between carriers? It's just a little

Speaker 2

less No, that's the result entirely of the C Check cycle and some weather disruptions that we had. It has nothing to do with I mean, I can't comment on anything about what Amazon's plan is.

Speaker 8

Okay. Okay, great. Thank you.

Operator

Thank you. One moment for our next question please. The next question comes from the line of Catherine O'Brien with Goldman Sachs. Your line is now open.

Speaker 4

Hi, again. Thanks so much for the follow-up. Steve, maybe just one quick one on the share repurchase program. You guys were pretty active the last 2 years. I think you've got like $11,000,000 $11,500,000 left And CapEx is stepping down materially.

Speaker 4

I guess any comments Are there any changes to how you're thinking about capital allocation? Or should we just stay tuned on the shareholder returns front? Thanks so much.

Speaker 2

Yes. First of all, your comment on the free cash flow generation is spot on. I mean, CapEx at the company will drop by more than half between 23% and 24%. If we deliver the kind of results that we think we're going to deliver, we're generate a lot of free cash and then we'll have to decide what we're going to do with that cash. There is more share buybacking that We would definitely look at.

Speaker 2

We don't have a lot of debt that's economical to pay down. We don't have a lot of debt period. We don't have a lot of debt that's economical to really pay down early with sort of one exception. So what I think is as we go forward here, there will be Decisions around do we do share buybacks? Do we pay down this one piece of debt that we can?

Speaker 2

We're going to fully fund and we have been fully funding cost reduction and revenue generative initiatives, particularly on the IT side. We'll continue to do that, But that should be reflected in the $100,000,000 I talked about for 2024 CapEx. So we're in a good position to have a lot of flexibility around what we do how we deploy our cash in 2024 and 2025.

Speaker 4

That's great. Thanks so much.

Operator

Thank you. I'm currently showing no further questions at this time. I'd like to turn the call back to Mr. Bricker, Chief Executive Officer for closing remarks.

Speaker 2

Well, thanks everybody for joining us today. Have a great day and we'll talk to you in 90 days. Thanks.

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Sun Country Airlines Q4 2023
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