Good day ladies and gentlemen, and welcome to the Q4 2017 Allegiant Travel Company Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference maybe recorded. I would like to introduce your host for today's conference, Chris Allen, Investor Relations. You may begin.

Thank you. Welcome to Allegiant Travel Company’s fourth quarter and full year 2017 earnings call. On the call with me today are Maury Gallagher, our company’s Chairman and Chief Executive Officer and John Redmond, the company’s President; Scott Sheldon, our Chief Financial Officer and Chief Operating Officer; Lukas Johnson, our SVP of Commercial and a handful of others to help answer questions. We will open up with some commentary and then move into questions. Before we begin, I would like to remind listeners that the company’s comments today will contain forward-looking statements and they are only predictions and involve risks and uncertainties. Forward-looking statements made today may include, among others, references to future performance and any other comments about our strategic plan. There are many risk factors that could prevent us from achieving our goals and causing the underlying assumptions of these forward-looking 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 and we are undertaking no obligation to update publicly any forward-looking statements whether as a result of future events, new information or otherwise. The company cautions users of this presentation not to place undue reliance on forward-looking statements, which may be biased and may be based on assumptions and events that do not materialize. This earnings release as well as the rebroadcast of the call are available on the company’s Investor Relations site at ir.allegiantair.com. With that, I would like to turn it over to, John.

Thank you very much, Chris. Good afternoon, everyone. I'm happy to report that our operations continue to perform significantly better than prior year and that this performance has continued of course quarter-to-date as we would all expect. By way of example, we have gone 28 days without a maintenance cancellation and prior to that we had gone 34 consecutive days. So now this is a great testament to the efforts being made by all, you know, great leadership, alignment, accountability and a sense of urgency have really kicked in, in the company and we're excited about 2018 and moving forward. I'll let Scott and of course the rest of the team talk about their respective areas, but the speed and significance of this improvement is definitely impressive. Also I want to mention we have hired a CMO who will start March 5, with the company. I can't say anything about this individual yet given their current employment, but as we move forward of course you'll all come to know who this individual is. I thought I'd take a quick moment to touch base on some Sunseeker issues since I know a lot of you probably had some questions regarding the resort. There has been nothing significant to report beyond what was communicated on Investor Day, but I thought I'd give you a couple of points that are worth noting. In regarding financing the project we've had numerous parties have expressed great interest in that and based on these early conversations we've had, the structure could look like 75% to 80% nonrecourse debt. No restrictions meaning no presale requirements or the like and a term of at least three years with extensions of some type. And the interest rate talks have been sub 6.5%. Again these are very early indications. We're…

Thanks John and good afternoon everyone, as well. So I'd like to give a little bit more detail on our revenue results for the fourth quarter and while we no longer fighting formal forward guidance ranges for TRASM in the first quarter, I'd like to add some color about how we see demand shaking up as we start in 2018. So for the fourth quarter we are very pleased with how it ended up revenue line and despite a 3 point TRASM headwind from Hurricane Irma and Las Vegas shooting, finished the quarter in positive territory. Now it's driven by an increase in our load factors in November and December and that coincides with us ramping up the number of markets being priced on our next generation RM system. So this is our first quarterly load factor increase since 2014 and been trending down the last couple of years. And two months ago at our Investor Day I spoke at length about the new system and how we're still very close to seeing quartile improvements that I consider talking about and after all the brain power the team spends on this, I'm glad to see that we're seeing the fruits of their hard work, continue to see the outperformance of this load factors throughout the entirety of 2018. Also I can point out that fourth quarter was our highest fixed fee revenue quarter in company history, I'll highlight all the hard work done by those teams delivering record breaking quarter. Even those numbers will dip in 2018 as well as focusing on our fleet transition and bullish long term and our ability to uniquely combine get to service in fixed fee plane capacity in our network. Turning towards the first quarter, again well, I won't be giving formal guidance and…

Thanks, Lukas. You know first I wanted to cycle [ph] John comments about the operation, I want to thank all our team members across the network, who have really tremendous effort, performance since the summer has been nothing short of astounding. We had significant momentum into the third quarter which has accelerated into the fourth and into January of this year in virtually every area. You know, in particular higher ups costs are down, operating metrics such as [indiscernible] A 14 are up over 10% and we've been running at 99.99 completion factor really since late November. So I'm just really proud of the organization and what a turnaround from a real difficult summer. I wanted to touch a little bit about guidance as Lukas just mentioned we have changed the approach. We've communicated that at our Investor Day in late November as opposed to providing quarterly TRASM and counting max [ph] amongst other things we're going to a full year EPS target. I think it's the best way to align our interests with both investors and the street. So turning to the earnings release that just went out we basically affirmed many of the things that we communicated back in November. We tried to give enough data points to help us triangulate how we're viewing 2018. Fuel costs per gallon remains the same. Fuel efficiency which is ASMs per gallon remained the same. We gave you an interest expense number, tax rate is an area that has changed due the tax reform. We gave a spread 30, of 37 excuse me, 37% to 38% and now this can be 24% to 25% which is going to drive EPS, the EPS spread from 8 to 10 to 10 to 12. CapEx remains unchanged. We did burn D&A per capital amount in addition to maintenance expense per capital months. Those remained unchanged as well. And then may be lastly, you know, 2018 is a very busy year for us shrinking by 38 in the 80s and growing by 30 is definitely unprecedented and has got a lot of folks here with their head down, but we are hitting our targets, we are hitting our induction schedules. We think we have enough flexibility within the schedule. If we do see some of the targets they slip, I think we're going to be fine. But with that, I think we'll turn it over to the operator for questions.

Hey, thanks. I wonder if you would give any kind of high level color on the trajectory of your non-fuel cost structure, assume that you know the comps so far is here in the second half of the year, but and I know you've not given point guidance but do you want to give any high level commentary on the growth rates?

Yes Duane, you know we're not wanting to start getting into individual quarter trends what's easier, what's the harder comp, I mean part of the UPS guide is to simply get out of the quarter to quarter million. I think, you know maybe we can definitely talk a little bit about the first quarter because there is one individual area that is impacted as you remember we discontinued our credit card surcharge in January of last year. So there's going to be a little bit of an increase specifically in the marketing area and that's strictly related to the – to basically a quarter, a half quarter surcharge last year versus the fourth quarter this year 2017. You're going to see some of these subtle around crew, but in general you know directionally we said ex-fuel costs will be down. We mentioned that at the Investor Day, but I'd rather not get into the corporate quarter trends.

Okay fair enough. And then it looked like Pixie was very strong in the fourth quarter, can you just talk to what drove that and if that’s likely to continue?

Yes Duane, so yes I guess that was not the highest quarter of all times, so certainly I could get a point, but as I mentioned in the last couple of months in 2018 we do expect that to dip a little bit, because our focus for 2018 is really all about the fleet transition, so there is going to be some plain. You know, what kind of spare capacity we do have is known as scheduled service. As far as what drove it, specifically a strong kind of ad hoc sales coming into it. The team has done a really good job of developing some relationships out there, picking up a lot of sports and defense traffic and announced the Airbus is a much better plane than the MD-80. We're going to call some folks that used to never call because they wouldn’t want to deal with the performance restrictions of the MD-80 product on the MD-80 on the reliability and their best test open up some significant path through us.

Thank you and then just for my last one and I don’t know it's for Maury or John, but I wonder if you could talk about the transition of Scott Allard and if you have the bench to sort of backfill or if you're looking at recruiting and if you are looking to refer in a new CIO would you expect the sort of difference in philosophy versus creating your own systems versus buying off-the-shelf? Thank you, thanks for taking the questions.

Thank you, Duane. May be I'll take a stab and Maury can fill in after his comments. But you know we have some very talented personnel in our IT shop just like we do throughout the rest of the company this company has done a great job in developing talent in all the areas and all the aspects of what we do. And so we're able to leverage that when we have some of these issues come up. So we have an individual we've announced Rob Wilson who is functioning in an interim role and his status will be evaluated as we move forward, but he is an extremely talented individual who Scott relied on in a very significant way. So he has all the chops to do this. So we're just seeing how this works for him and us. And the ability to backfill him to free him up to do more of what Scott was doing. We've already filled that position. So we had a gentleman who was a contractor for us. You see a lot of that in the IT world where there are a lot of contractors working. We brought on another individual as a full time employee now to give us a lot more horsepower in that area to free up some of Rob's time. I think when it comes to buy or build, I think the decision making will stay the same. I mean that decision making process is always driven really by users and not by IT. If we think we need the functionality and that functionally we need is unique enough, then we will build it. And if it's something that can be acquired cheaply and easily and it satisfies our needs then we'll buy it. So our model and our requirements as you know are very unique which is driven a lot of that decision-making to date and I don't see any change in that philosophy going forward. I mean both Maury and I and a lot of others in the organization, we are strong believers in having a lot of proprietary software because of the uniqueness of what we do and the flexibility it gives us. But whether it's airline, hotel or anything else we do, if there is product off-the-shelf that we could readily buy and install that's great as well because it does free up more time to focus on these other areas that are primarily, you know, marketing related that have that unique aspect to it.

Thanks John.

You are welcome.

Thank you. And our next question comes from the line of Brandon Oglenski from Barclays. Your line is now open.

Hi this is actually Matt on [ph] for Brandon. Thanks for taking my question. I wanted to just kind of talk from a high level, you talked about operational performance improving and kind of how we see that going through the next few years as performance improves, operational performance improves with a greater reliable fleet, and does that open the opportunities, does that change how schedules are managed does it create greater flexibility as you kind of look to manage the schedule? And can that start to take place and if so can that take place in 2018 or is that more of a 2019 thing?

Yes in terms of BQ [ph] you know what we see on the commercial side as the operations have improved, so first you know to jump off the wood, Duane had asked, I should have mentioned just having simply better operations has improved our fixed capability of going out and winning some contracts. You know you need to be a high performer at the high catch product and so as people have seen our performance improve so those are kind of opportunities that do pop up. In terms of timing for 2018, again it's going to be tight, we're going to hear some [indiscernible] again but it is going to be tight with the fleet transition and that's our major focus, we're not looking at squeezing the operation dry this year. It's really just a transition goal. 2019 and beyond I think the sky is the limit in terms of A, if we can keep this up like we do believe we can we're going to be able to do a lot of things commercially that we haven't, and that's new doors.

Okay, great. That's all from me.

Yes, Matt, this is Maury. Just a general comment, we've got arguably the easiest system in the world to support because we primarily go on back. And so your airplanes were in the same place all the time, the same people were touching them and candidly in past years we didn’t execute very well in leadership areas and in places we should have done better. So the leadership changeover, the enhanced the sparing levels make a lot of fundamental changes that the business needed and it's a real tribute to not only the Scott and the team, but to the leadership out there that are progressing around as quickly as they can and I'll break my own pattern ourselves on the back, but I'm expecting this group to be the most reliable airline in the country. And remember just because of our schedules and when it comes to control domain and events. So that's kind of a baseline and from there we just get better on a number of other areas. But we see all the evidence that, all these talks of unreliable and bad operations are historical conversations. So now it couldn’t be more exciting where we're at.

Okay, great, thank you.

Thank you. And our next question comes from the line of Savi Syth from Raymond James. Your line is now open.

Hey, good afternoon guys. Just wondering if there's an update on the potential for 186 seats project where adding seats to the current fleet?

Go ahead B.J.

Yes, hey Savi, this is B.J. No update after what we got to on Investor Day. We are continuing to explore Airbus and options on the airplanes which we thought were ineligible, but at the moment it's just the aircraft that showed to you in November.

Okay, got it. And if I may in the [indiscernible] just on the unit revenue trends just kind of here is one if Las Vegas is kind of now we should assume that that comes back? And then two, you know, as we talked about the faster growth in the kind of the off peak versus the peak, like how much of a drag is that and is that we could probably see kind of come out as you get towards the end of the year?

Sure, so in terms of Las Vegas it's pretty much back in normal. Florida did recover from the Hurricanes significantly faster than Las Vegas did and Florida actually recovered over. What we're expecting in Vegas is more, it's just kind of taking a slower route to where we area. It shouldn’t be too much of an overhang now in the first quarter you know we do have certain higher percentage for network in the year than other carriers. And in terms of off peak I'd get if you kind of one back through our yesterday flights you're going to see you know I tried to quantify that for the full year effect and 2018 off peak winds will be slightly lower than 2017. I mean still going to be elevated especially in first and second quarters. But if you remember last summer with all the sparing we actually cut, actually kind of negative growth on peak days, that's going to flip itself and in the third quarter we're going to be able to growth peak days past the more than off peak for the first time in several years. So I think it's mostly a first half issue and maybe right you know very end of the years with me complete the MD-80 transition.

Great and can I ask a housekeeping question, just on the 4Q, non-GAAP EPS, it looks like a 16% of that is your tax rate, just kind of curious what's driving that?

Hey Savi, this is Greg. So the low reduction in tax rate is due to tax reform and what happened is we had this re-measurement of our deferred tax liability, so originally they were measured at 35 tax rate, you know with the 21% or 14% reduction to 21%. We re-measure that and then threw it out this year. So that's why you saw the reduction there.

Okay, hi thanks.

Thank you. And our next question comes from the line of Joseph DeNardi from Stifel. Your line is now open.

Yes, thank you very much. John I just want to make sure I understand the process on Sunseeker. I appreciate the days that you provided for construction, but the board still needs to approve those dates and the start of construction if I'm right and the approval will depend on your ability to get condo deposits, is that fair?

Well, what we've been targeting and focused on mostly is the financing. And obviously we can't and don’t intend to put a shovel in the ground until we know that the project is properly financed. So that's the pacing item if you will and that's why we're spending a lot of our time in that particular area. Having said that, you know, these things move in parallel tracks when you do this development work. So at the same time we just basically started the production drawings, so taking all the pretty pictures that you see out there and all the work that's gone into figuring out everything that we have to on a project like that and now converting those to production drawings. So that work on production drawings starts now, the actual drawings if you will are used to build the project and when those are completed which also is around call it the end of April or early May then we're able to go to a general contractor we've already hired and announced and actually get firmed up bids which leads up to what's called the GMP or guaranteed max price. So we intend to enter into a contract with these contractors what they guarantee a max price. So the estimates that we will have as we start to evolve those construction documents between now and November are running in parallel with the Board of Allegiance review of the project. So as the Board is reviewing it, as the architects are developing out those plans and as the costs are being firmed up, those things are all working in parallel along with the financing conversations because then you get to a point where you know how much the project is going to cost. You have a firm bid and we have terms from a financing standpoint that we find acceptable to us. So that confluence of issues starts to happen at the end of April moving into may. So when we start getting around that time frame we'll have a lot more certainty and the Board will have a lot more certainty about pricing and approval. Now we have to understand budgets and then with some degree of estimation there obviously the year would be on the low side, not going over, probably well before that and if the Board is in a position to make decisions earlier, then I'm sure it would. But we're not in any rush to do that. We're facing it properly and in a very managed way. So we don’t get out in front of our skis as they say. So happy about the progress, but it's the timing that you're seeing is expected and the Board has not approved anything yet, until it knows that there is a little bit more certainty around all the numbers.

Okay, yeah, that's fair. I guess just on the sales side I would imagine that that's an equally important data point than pacing item as the financing side. So is there a certain number of deposits that you want to get to or that you can commit to and that if you can't get to that level then you're not going to go forward with the project?

No, that's one of the data points I'd shared when I opened was that the lender community or the financing committee were talking too, they have no requirements on advanced sales, presales or deposits. They have none. They just, they love the project and there's a lot of interest in it. And they have no requirements regarding it. The only thing where they come into play is on the equity side that they would be looking at. It offsets the amount of equity we would have to come up with. But there's no obligation, so if we had zero sales, is to throw it out there, the equity is just your percentage whether it's 20% or 25%. But that again would be offset by any sales activity or sales contracts that we would have. So we are, and these are dates that haven’t changed. These are I had mentioned early on that we were hoping to go to sales contracts in the April/May timeframe that's lagging a little bit into probably closer to May/June only because you have to file these contracts with the State of Florida and in order to do that you're production drawings on how you're going to build it and what you're going to build and what a buyer gets has to be further evolved. So we can't go to a purchase agreement until those construction documents are further evolved which as I said we expect that to happen at the end of April, early May. So around that timeframe is when we would then start going to actual purchase contracts which is at the same time you know again dealing with financing and dealing with certainly on everything else. So we're comfortable with all that pacing. That's where we want to get a sales office on site so if people want to look at the project they can and we'll continue to mine the data base and get additional deposits. So we - again those deposits what they do is offset the equity requirement but they are not a condition to moving forward.

Thanks John.

Thank you. And our next question comes from the line of Mike Linenberg from Deutsche Bank. Your line is now open.

Oh, yes, hey thanks. Good afternoon everybody. Just a couple of questions here, Lukas you mentioned about the defensible nature of your network and the fact that may be you weren’t going to be caught with some of the capacity additions and some of the intensive pricing that we saw you know earlier in the later part of 2017. Can you just give us an update on the number of you know city payers that you are in today and what is the number of city payers that you have head to head competition at present?

Hey Mike, yes, you know the number hasn’t materially changed over the last year. You know we slowly are still right around the 80% or so. Internet market payers were over 400 market payers and were you know probably by the midsummer they may increase the number and when we go into a market we're not particularly looking for competition. You know certainly competitive markets we have we do well in or else we wouldn’t be in them. But it's something that we're particularly going to avoid if it's not something, but you know first and foremost the most controllable nature again is they'll be going in that.

Okay, okay, that's helpful. And then Scott, just you know look I know you don’t want to guide on the quarters and you gave a little bit of commentary around you know peak and off-peak and what you were doing through the year. But when I look at your fleet and the numbers I think they are right where you start being at the 80s and your fleet gets up to 100 and back to 82 and I mean there's a lot of movement in fleet. Should we assume that the capacity growth rates through the year are going to follow that movement in the fleet or are there to be period where you are just going to have some airplanes that are going to be underutilized because you're carrying excess capacity?

Yes, I think you really get into fleet plan and I think that's right out in the press release, yes. So on an absolute basis you know, year-over-year the units actually shrink, but the average aircraft during the period is up pretty dramatically because we pump in so many in late November.

Okay.

You know, honestly we do build in slack into the schedule assumptions, meaning if we - if the planes come out earlier than expected we built in buffers for that. So we’ve taken a pretty conservative view on ASM production.

Okay.

So that’s - I know that kind of cryptic but there's a lot of moving parts obviously when you talk about how shelves are delivering, when they need to deliver in order to hit peak period flying, but there is slack in the system. So if you're looking at productivity by tail, it's going to look a little lower than what it would have otherwise normally been.

Mike, this is Maury. What you're going to see with last year is a material change in how we used to think about kind of scheduling/sparing the airline particularly steady. We've been running anywhere from 15% to 20% spares with the 80s in the high peak periods. We'll be back to 5% by the end of the year, which is that's why your airplane numbers will change so much, but you're capacity won’t.

Okay, great and then just my last question on, you know, back to John. John, just your commentary at the beginning and how you answered those question, you talked about on the marketing side where you basically stopped marketing over the last four or five weeks. And I'm not sure if it was a sense of your initial approach and whether or not you're gaining traction and maybe now you're changing the market direction a little bit, you talked about you know, both in online and bricks-and-mortar approach and the fact that you're going to have a sales offers on the property and I'm not sure if you're going after leasing customers or you're trying to bring some of the people off the road. It's just - it's kind of somewhat unclear when we listen to the commentary about the pace and whether the sales are going at the trajectory that you liked or maybe they weren't sufficient enough such that you had to change direction, but maybe modify the sales approach is that anything that you can provide on that because it's just not all that clear?

We're selling units or selling condo hotel units using a database which is an approach that's never been done anywhere. Right? The developer typically goes out there and put the shovel in the ground, builds those things, fixes the sales office and relies on real estate brokers and agents to bring people by and sign an agreement. I mean that’s the only way things have ever been built. We come into the market and we're taking an approach that we have we found 7,000 people who have an interest in a project that have come from 49 different states. No one has ever done that and as a result, all of a sudden started getting demand from people and you found yourself in the position where your sales capabilities weren't completely there meaning we didn't have the ability to have two way communication with our customers. We didn't have a Sunseeker e-mail type approach where they can be talking to us back and forth. So all the CRM that needed to get built out wasn't built out as fast as it needed to. And we just didn't anticipate that those that quick response like that, that far exceeded what we expected and it's something again that we're new at and no one else has done it. But we are we getting better at it as every week passes and we're developing out our capabilities in that system where we now are in a position that everything we need to sell and to communicate two way with our customers were able to do that. When it comes to who the buyer is, frankly I’m not that concerned whether it's an Allegiant customer or a non-Allegiant customer. I just want a buyer because what we ultimately want that project for is the hotel rooms. So what we want to be able to do is put Allegiant customers in those rooms. I just need to sell all the units so I have all the room capacity available to sell to Allegiant customer. So whether it’s in Allegiant customer or non-Allegiant customer that buys the units that doesn't matter to me.

Okay, now that's very helpful. Thanks John. Thanks everybody.

You're welcome.

Thank you. And our next question comes from the line of Hunter Keay from Wolfe Research. Your line is now open.

Hey, thank you. A couple more on Sunseeker John, it’s a non-recourse debt that you mentioned is that collateralized entirely by Sunseeker assets, you're not pledging any like aircraft or anything is that isolated to Sunseeker project?

That is exactly correct Hunter. There would be no other collateral other than the project.

Okay, and when you're saying you have, I'm sorry I'm still a bit confused by this, you have the portion you're putting at risk is effectively the other 20%, 25% the equity portion which is where you start of like gradually work down by deposits. Right? So what you're saying is correct, okay so the worst case scenario you're going to lose 20% of whatever this land or whatever is worth and the other 80% would be effectively just repossessed by the lenders is that correct?

That is correct. Yes, you are looking at it exactly right.

Okay, thank you. And then how does tax reform impact your willingness to maybe Bill and his kind of I guess this kind of compounds all that sort of that the build when do you start to go forward versus deposits? Tax reform has changed the game for Allegiant. You're allowed to bonus depreciate used aircraft it's a really big deal for you guys. Is there going to be a little bit more of a willingness based on tax reform to maybe build out a little bit more than you would have because after all what was the point of the tax reform Bill for once something like this, may be take a little bit more cash risk, given you might say to yourself net, net even if it doesn't work out I'm still off because of the tax reform benefits?

Well, tax people will always have comments regarding taxes and who benefits and how you benefit, but I guess at the end of the day that tax reform that's almost like it was written for us because every aspect of it helps us. I mean we've always as you know have been a cash tax payer, so that works out well the bonus depreciation that it couldn't work any better and the five year window to take bonus depreciation when we already have basically a project ready to go with a bow around it's unbelievable the timing. Having said that, our decisions regarding timing aren't being driven by tax. We're just being benefited by it. So it makes the project that much more interesting and that much more compelling but it's not changing our decision making. It just makes it look better.

Okay, thank you John. I appreciate it.

Thank you. And our next question comes from the line of Helane Becker from Cowen & Company. Your line is now open.

Thanks, operator. Hi everybody. Thank you so much for the time. Just a couple of questions on John, I think you have a track record actually for building hotels and I'm just kind of wondering if the timeline that you're seeing and outlined to us today and back in November is consistent with what you've seen before, when you built out other projects?

Most definitely when you do these larger projects, you need to make sure, you have the right level of expertise involved in these projects. So we've been transparent in that regard to make sure that you and the outside world understand the quality of people that we have realizing that early announcing handful of them, but there is numerous of the people underneath them from civil engineers to consultants of certain types to everything you can imagine that gets involved in a project like this. So the bench of the expertise is very deep and wide and we feel very comfortable regarding these timeframes of construction. I have a gentleman who I've mentioned before has overseen his project on behalf of us. He's an employee of the company and he's done this is entire life. He literally has a PhD and the stuff. And so this isn’t his first rodeo either in the entire team has been around for a long time that the general contractors been around for over 100 years and they've been doing these projects, vertical projects, condo projects, here in Naples and Southwest Florida. So that's why we have a degree of comfort that we do it's because we have the expertise involved in a project that we have and Maury and I have said from the get go that’s why we're not taking a risk here would if we didn't bring on the right level of expertise we said from the get go that we are pursuing these opportunities because it’s we can go out and get that expertise. So whether it's building it as we are, whether it's now operating it going forward, we have a long line of people who want to get involved to operate it. I mean it's a very long list of people that I can accommodate them all that would love to come work for us in the hotel world. So we're excited now as we build it with a team of people we have them we can't wait to operate it with the list of people who have an interest.

That's great. Thank you for that detailed answer. Now I have two other questions that are completely unrelated. And the first question is with respect the A320s. I don't know if this is like more of Hunter's question, but are you scouring the market for good used aircraft or are you happy with what you have? And I asked that because as oil prices have moved up perhaps there are some companies, some airlines that would want to get rid of their older aircraft and swap into newer aircraft. So I'm kind of wondering if you're thinking of going in that direction in other words more aircraft. And then the other thing is with the major carriers hiring, so many pilots because of their retirement programs. How is your attrition level and how is your training going?

Hi Helane this is Greg. I tackle the first question and then maybe Scott or Trent can tackle the second part of it. As far as the aircraft we who, we are looking for used aircraft and we have about 10 to 15 we're looking to fill and put into service and by 2020 and so that's kind of the plan now. I mean you're right used aircraft from a depreciation perspective or bonus depreciation perspective as a factor to us but I would want to highlight that we have as far as aircraft that we've acquired to date for use. The new tax law requires that you have a binding agreement in place by September 27, 2017 and then so we have basically four or five aircraft qualified for that and then moving forward all future aircraft that are placed into service by 2022 will qualify for that 100% bonus depreciation.

Right.

This is Trent. To answer your question on the pilot attrition, we essentially finished our Collective Bargaining Agreement in August of 2016 we seen our attrition decline significantly with the pilots to where it was pre negotiation and it is an area that we always keep our eye on especially given the rumors and things that are out there about. About highlights and potential shortage there but as of right now we're happy with where there attrition levels its come back down to them.

Perfect and then just one last one that I can maybe squeeze in. I think your credit card or a loyalty program contributed $17 million in 2017 and I'm just wondering if there's any you know update to the program and anything you might want to add to, what you said in the press release.

Sure, hey Helane its Lukas. Yes, so we had initially given an update on the credit card program and you're going to exceeded expectations in this first year, but the biggest kind of jump in growth is of course mid programs first year and it'll going to slowly increase from there as we get towards maturity. So you know you're not going to double and triple it in years per passenger. And of course when we're growing passengers so the total number will be growing, but we're certainly bullish on it. And as we go through this year and we start of thinking about non [indiscernible] and other ways to enhance that for the future with the number should grow.

Great. Thanks gentlemen. I appreciate your help.

No problem.

Thank you. And our next question comes from the line of Daniel McKenzie from Buckingham Research. Your line is now open.

Hey thanks. Couple of quick house cleaning questions, just maybe Scott this would be for you, so if you can just remind us you know what's the operating income impact this year from pilot training, so factored in lost revenue and the temporary cost impact from having the pilots kind of having a bubbled in pilot training. And then secondly, just going back to partly Maury's comments about 15% to 20% sparing ratio that goes to 5% by the end of this year. I think if my math is correct that should feel something like 10 year planes and so I'm just kind of wondering, what's the operating impact tailwind that you might have in 2019 from that inefficiency going away?

Dan, it's Maury. Yes we' not gThat we're not going to get more airplanes, we're just going to have fewer spares. For the operational airplanes, so the operational airplanes will stay the same. We'll be over the network with a much smaller spare numbers what it turns about to be. So I don’t, we're not going to have more than 10 airplanes we can just skip to Lukas there, and start scheduling.

Follow and find them.

Well, that’s helpful. The operating income from the pilot training?

Yes, this is Trent. We’re looking this as we'll be coming back to these levels in 2019 and 2020, so we are still going to be carrying pilots and gain the productivity extra pilots and seeing the productivity levels and we saw during 2017 and during 2016, so as much guidance as we can get right now would be that we're going to see some more productivity levels.

I see, okay just following up on the revenue side here Lukas, I’m just wondering what the benefit was from expanding the network under the new revenue management system in the fourth quarter and I'm just wondering how that might affect your outlook for the full year 2018, I think you talked about the benefit at you're Investor Day.

Yes So. Thanks Dan. And so we got – I certainly got a lot of questions at the Investor Day about how do we measure the system, what is the effect of the system, how soon can you see it we're a couple days prior to our traffic release we had Investor Day and it came out immediately and in terms of load factor and I think that the easiest way, especially since we're not getting forward guidance on TRASM for you guys to measure the impact of the system is through that increased load factor it's been three years since we've kind of had declining load factors through a little fair environment increased off peak flying larger cities what are the regional legacy system was built out seven years ago and it didn't have any of those intact in there. So as times have evolved and the companies evolved we need to get better systems and process and kind of technology there. So as we used to run in high 80s touching 90s for load factor, we're probably not going to get there considering the fundamental shifts in how we fight, but we're not going to be low 80s either. And so throughout this year we're going to see actually reclaim a lot of that load factor, without as much of a yield degradation hopefully. So that's going to show up and total unit revenue increasing and I guess I'd just for you guys out there just watch the traffic releases to see how we're kind of coming out with that.

Okay, that's helpful and then one final question I guess just Lukas going back to an earlier question on the competitive capacity. I know that Fort Lauderdale and Orlando our growth markets for some of the other ultra low cost carriers and some of the other airlines and I know at Orlando you operate out of Sanford and from your remarks it seems like you're not really feeling a pricing pinch. but I’m just were if you can just elaborate little bit more on whether or not that the competitive dynamic in Florida potentially is having some kind of effect on how you view the revenue environment here.

Yes, yes, Dan. We don't focus on a lot of the core, certainly if any kind of hub to a major release or destination when places like New York became de-flooded almost two years ago we were the only carrier that didn’t announce more New York to Florida service and that's my reason. The attempt at our network it's clear to anybody that’s going to be a more competitive market with certain more destinations out of Orlando than any other carrier and the vast majority those are complete in search small and mid-sized cities and that's what we're going to continue focusing on. You know even the Fort Lauderdale throughout the last nine, 12 months it had a lot of increased competition, competitive capacity. It’s been one of our top performing destination cities, even with the growth it had there. So I think we're pretty insulated and that’s again why kind of power of the network that we've got here, is that we can go out, we can do what we're doing and we can more or less ignore the specific hotspots throughout the industry.

That's perfect. Thanks for the time you guys.

Thank you.

Thank you. And our next question comes from the line of Kevin Crissey from Citigroup. Your line is now open.

Hi guys. Thanks for the time. Can you just talk about what you expect the first thing the new CMO will ask that person to do?

Well, this is John. There is such a myriad of opportunities for this person to get involved in since we've been absent some of that capacity for a long time, that this individual be drinking water through a fire hose. But I have a, I've been developing out of laundry list of those initiatives that we want to embark on, but there's no doubt the focus will always primarily start with the airline. So, there's a lot of initiatives we want to take a look at as it relates to the airline and that's always going to be first and foremost. But as you all know, I mean we have a lot of things of course going on with resorts and in every other aspect of our business. And there's so many synergies and so many opportunities and so many joint marketing opportunities if you will. I mean even while I've been, I'm actually traveling right now myself and I've been planning a kind of quasi CMO role as part of my responsibilities just in the interim. And there is a myriad of people and companies that want to somehow joint market with us whether that means sharing data bases, whether that means leveraging booking channels with content. There's just so many of these opportunities that we don't want to lose track and pace with that. So very - some of us individuals have maintained those contacts and those opportunities. So this individual comes on they're going to hit the ground running. But you know like anything it's going to take them I don't want to imply that this individual's first month there is going to be all kinds of findings. I think they're going to take some time to get their feet wet, get involved and figure out the organization. We'll be providing enough data and information for them to do that quickly, but we are all looking forward to having this person on because there is just, there's so much opportunity. And we've been saying that I know ever since I've been here, I've been saying that bringing someone on like this is going to have a huge revenue impact. We are getting ready to start our loyalty marketing efforts we don't have a loyalty program outside of our credit card. So we're going to be developing that and this person's involvement in that would be obviously goes without saying the impact that this person can have and that's going across all business lines right? Whether it's airline or resort or anything else that we embark on, that loyalty program plays into all of that. So that's a huge initiative that we have coming on bringing from a marketing standpoint or programming standpoint that we're looking forward to.

Thanks for that John. And just turning towards your guidance a little bit and some investor questions on and I just want to make sure your fuel cost guidance being the same that was, is that reflective of your prior guidance being relatively high if I recall correctly? The question comes down to kind of two things, one is we've seen higher fuel prices generally but you don't have that guided and I assume that was because of the prior guidance being relatively high? And then the second is related to that is on the revenue side, you got into kind of basically the same EPS just adjusted for tax, but then you talk about a small impact from the Easter shift and this question is just to whether that means you are seeing kind of a little bit weaker first quarter? And I know you don't want to get into specifics of course, but I want to make sure that you don't send a message out there that your first quarter may have a little bit more revenue weakness.

I mean, I want some of these other interesting individuals try to insert some of your questions more specifically, but that the guidance we provide which is why we're at this position is we don't want to be caught up in the short term movements. So we provided long term full year guidance when it comes to fuel or revenue and therefore these minor things that might happen within a quarter we think it could be absorbed over the course of a year. So that's why we're sticking to the full year guidance that we've provided until there's enough data out there that causes us to report otherwise.

This is Trent and as far as the sales guidance goes, John's right, the year is long and it didn't make sense for us to make the adjustment now.

Hey Kevin, it's Lukas. You know in terms of the revenue things we need to just to clarify, this is just a common question you always get it and we didn’t wake up today and realize that each was going to be shifting up to three weeks this year. So and this is then in the works for our full year guidance when we put it out there two months ago. There's no surprise there just people are going to ask the question how big is the shifting from second quarter, first quarter and there's no weakness all at in the first quarter.

Thank you very much for the time.

Thank you. And our next question comes from the line of Steve O'Hara from Sidoti & Company. Your line is now open.

Hi, good afternoon. Thanks for taking my question. Just on the unit revenue guide and not guidance, but the way you report ancillary, would that change next year with the revenue recognition standards et cetera and how does that, if it does, how does that impact things going forward?

Hey Steve this is Greg. Yes, so the new 606 guidance will likely require us take the air ancillary and on the face of the financials put it up in the scheduled service. But then what we would is we would include footnotes that would go back and break that out, so you could see it for comparability purposes.

Okay and then just on the credit card, can you just remind me where that revenue hit on the income statement? I mean it looked like there was a decent uplift in non-air ancillary. And I guess the ancillary in general was relatively strong and maybe there's the credit card hit there and then is there anything going on in the ancillary other than credit card or may be higher fuel is kind of alleviating some of the pressure on ancillary?

Hey Steve, this is Greg again. I take the first part of the presentation and then maybe Lukas can jump in on the second part. So we split it and the majority of it is which is considered the marketing component. That goes through and shows up in the financials and revenue under our third party and then the remaining which we defer in both the revenue upon travel is it goes up into scheduled service, but again the majority goes to the marketing component. And then which is, I'm sorry, the marketing component goes through the third party revenue part. And then I might just add though that we will with the new rev 606 will look at applying a breakage rate which probably in the second or third quarter and once we have enough history to support that breakage rate, so you'd see a pop in that. Currently, we aren’t taking any breakage on our deferred points.

Just really quickly on the second half in terms of the air ancillary how that hit in, we do have some of the initiatives that we outlined on Investor Day started kicking in the fourth quarter which did take it up a little bit. And then if you're looking at just total air ancillary as a whole the biggest way to bump it up is just to bump up your load factor ancillary is pretty sticky for our passengers. You're not going to get a huge inflexion and make those longer passenger yields for the airfare. So yes, we've got an opportunity to go out there and increase the total pie.

Okay, all right. Thank you very much.

Thank you and that concludes our question and answer session today. I would like to turn the call back over to Maurice Gallagher for closing remarks.

Thank you all very much. I appreciate your input and your interest. We will see you next quarter. Thank you.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program and you may now disconnect. Everyone have a great day.