Ladies and gentlemen, thank you for standing by and welcome to the Q4 2019 Allegiant Travel Company Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]I would now like to hand the conference over to your speaker today, Sherry Wilson, Director of Investor Relations. Thank you, please go ahead ma'am.

Thank you. Welcome to Allegiant Travel Company's fourth quarter and full year 2019 earnings call. On the call with me today are Maury Gallagher, the Company's Chairman and Chief Executive Officer; John Redmond, the Company's President; Greg Anderson, our Chief Financial Officer; Scott Sheldon, our EVP and Chief Operating Officer; Scott DeAngelo, our EVP and Chief Marketing Officer; Drew Wells, our VP of Revenue and Planning; and a handful of others to help answer questions. We will start with some commentary and then open it up to questions.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. 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 a rebroadcast of the call, feel free to visit the company's Investor Relations site at ir.allegiantair.com.With that, I’ll turn it over to Maury.

Thank you, Sherry and welcome everyone to our fourth quarter conference call. I'm happy to report our 68th consecutive profitable quarter. Our operating income increased 50% while earnings per share was up 43% to $14.26. By any standards this past year has been a terrific year.As I said in our calls the past four quarters we were in a good place at the end of 2018 after completing our transition. Our model is alive and well with our Airbus aircraft. In fact, in my mind we're in a better place compared to where we were with the MDs. We said we would generate $6 million of EBITDA this year per aircraft and we did it and stayed at $6.3 million, a 50% increase over our 2018 results.Again we led the industry in operating margin for both quarter and the year and for the airline only in 2019 we had a 21% operating margin and generated over $16 of EPS. Our other investments in Sunseeker and Nonstop are progressing well. Will this past year and 2020 will be investment years, the outcomes will justify the investments.Our Allegiant 2.0 implementation is progressing nicely. We have spent the past 18 years developing relationships with our leisure customers. 2.0 was focused on providing these customers with enhanced travel experiences by utilizing our direct relationship with them through our enhanced IT tools. Since particularly [ph] we are focused on bringing together our one to one relationship with our customers through better IT tools, increasing the suite of leisure products, pricing them attractively and wrapping them in our loyalty program which rewards participation in the Allegiant ecosystem.Critical to this effort is increasing our awareness among our customers. We have had an excellent year in this category, particularly with our efforts on the Allegiant Stadium and our…

Well thank you very much Maury and good afternoon everyone. Of course I echo Maury's comments when it comes to the wonderful job that our Allegiant team has done in this past year and of course the release reiterates our Investor Day guidance which demonstrates the continued high expectations we have for this amazing Allegiant team going forward. So thank you to all of our team.I'll give you a quick update on our Sunseeker. This project of course is still on time and on budget. I'll give you little bit more detail on that. The budget of course is $470 million, no change. As of year-end we had $330 million in commitments. Again these commitments mean that we have agreements in place including our schedules. Again, out of that $470 million $25 million is preopening, $4 million of which of course was spent in 2019 and the balance of that will be spent in 2020 and 2021 and Greg will give you a little more color on that in his comments.So if you take that $470 million, you back out the $25 million in the preopening you have the $445 million budget, so roughly 74% of that budget, the $330 million I referenced is committed. So we are in really good shape with where we stand. And of course if you further reduce that budget by another $45 million that relates to furniture, fixtures and operating supplies which obviously those orders are always placed towards the back end, but right before opening, you go down around $400 million and of course $330 commitments out of $400 million we're roughly 83% committed. So really in good shape. We're happy with how we're progressing and look forward to 2021.Key funding as we mentioned, we expect that to kick in around August of…

Thank you, John. As Maury referenced in 2019 we leveraged data and technology to lay the commercial foundation for our Allegiant 2.0 vision, a vision that capitalizes on our cost-effective, direct-to-customer distribution model to achieve not only strong air and ancillary revenue performance, but also pile on top of that by generating revenue beyond the aircraft with our third-party hotel and railcar products and our co-branded credit card program.Nearly 110 million web users visited allegiant.com in 2019 a 10% increase versus the prior year. More importantly, even with the dramatic growth in web visitation we maintained our internal productivity metric of achieving an average of more than $16 of net revenue per website visitor which means that despite attracting 10 million more visitors to allegiant.com our ability to convert those visitors into Allegiant customers at comparable transaction sizes remained constant. And attracting these web visitors became more cost-effective than ever as nearly 75% came to allegiant.com without requiring any paid digital advertising helping us achieve this with our email database which grew by more than 25%.Couple of these large and growing digital audiences with the fact that nearly 85% of our customers say that air is the first purchase they make for their leisure vacations and we are well-positioned to continue growing revenue from our third-party products. We see our customers first and we know where they are traveling to before anyone else.This gives us unparalleled opportunity to present them with hotel and railcar options and in the future even sport and event tickets. In fact, we're already seeing returns from our Allegiant 2.0 approach. We ended 2019 with 20% year-over-year growth in third-party product net revenue. And please remember, this net revenue almost entirely flows through to operating income.Continuing our surgical data driven approach to generating demand for our…

All right, thank you Scott and thanks everyone for joining us this afternoon. I'm very pleased to announce the fourth quarter TRASM of plus 2.5% year-over-year on 8.3% ASM growth. As a reminder, this result is despite a roughly half point one-time benefit we received in the fourth quarter of 2018. We received large contributions from both our air ancillary and third-party revenue sources.Air ancillary surpassed $50 per passenger for the fourth consecutive quarter and as Scott mentioned third-party revenue improvement doubled ASM growth. On the air, we grew TRASM by 1.6% and plus 8.4% ASMs. Furthermore, fixed fee revenue remained the source of immense strength setting a record for the full year and a quarterly record for the third time in the last five quarters. This is largely attributable to an increase in Department of Defense flying and continued incredible work by our charter planning group.In October, we released our bundled ancillary product which we expect to be a boon through 2020. This level fit of a ramping period as we learn best practices and had a fairly small impact to 4Q results due to timing of release and our typical booking curve, but will start to pick up in earnings during the first quarter.Shifting toward 2020, lapping the MDA retirement date will drive elevated growth through the first quarter. We expect this quarter's ASM growth of plus 14% to 17% to be the highest quarterly increase since 2016. As I talked about extensively at Investor Day we will accomplish this even with our reduction in fleet utilization that is more pronounced in off-peak periods. Looking throughout the year, we will have fairly lumpy growth in order to achieve the plus 10% to 12% annual ASM guidance and I would like to add some clarity on that cadence.Throughout the…

Thank you, Drew and hello everyone. In 2019 the airline completed its 17th consecutive profitable year by delivering not only and industry leading operating margin of 21.3% with the high income in our airline's history. This amounts to nearly $300 million of airline operating income, $130 million increase versus prior year and four consecutive quarters of year-over-year margin improvement. These results in capital was truly an exceptional year at Allegiant as the airline grew EPS by more than 40% on only 10% of top line growth.These impressive results would not have been possible without the amazing efforts of our team members to support and grow our world-class airline. Because of their tireless efforts, I'm happy to report the first time in our history we beat all of our full-year 2019 corporate wide goals and therefore our airline employees are in the maximum payout allowable under our airline profit-sharing program. This translates to a record $38 million in total profit-sharing, a year-over-year increase of nearly 80% distribution to our airline team members. I'd like to add my personal thanks to all of our team members for their tremendous efforts.We are thrilled with these results and everyone should be proud. While we expect 42% growth in 2019 EPS will lead the industry it came in on the low end of our latest guide in Q3 primarily due to a spike in the price of fuel during the fourth quarter. Our average cost of fuel during this period was $0.10 higher per gallon than the assumption in our guidance. However, back in January 2019 the midpoint of our initial full year EPS guide was $14 and we continually increased the range during the year, an example of how positive momentum grew for us through the year.As a reminder, our fuel guide is simply…

Thank you, sir. [Operator Instructions] Our first question comes from Savanthi Syth from Raymond James. Please go ahead.

Hey, good afternoon. I really appreciate the kind of quarterly color here. Just a little bit, Drew, you know the 2Q rather than being probably the best makes sense from if I look at the capacity growth, but it's my understanding that you had some new markets open late last year. And then again, you'll have another whole bunch opening up this year. So wondering if you can talk about, the kind of the progression as a percentage of ASMs as new markets and if there's anything kind of peak versus off peak growth kind of variants that you'll see throughout this year?

Sure, yes thanks for that Savi. So there were some new routes that went through 2019. I think it's important to stress that it was significantly lower, really in the back half of 2018 into 2019, relative to any year really before that. I think I've mentioned this before, but 4Q 2018 we kind of troughed under 4% of our markets being – of our ASMs being in developing states. As we move forward into kind of to 2Q 2020 when a lot of these new markets these 44 new routes will open we will be up over 11%. That will more than double on a year over year basis, so there will be significantly more pressure on that front than we saw in 2Q 2019.

Again maybe I misunderstood, are you still expecting 2Q to be the best RASM quarter?

Sill expect it to be the best. Some of that remember the 2Q 2019 comp that we're dealing from, can't really run away from that. So, that's one of the larger emphasis as well as the lower overall growth rate.

Thanks. And then if I might ask on the, I know this is a small, very small business, but on the family entertainment center side, just kind of curious, how that business is performing versus expectations just from an earnings standpoint, but also kind of the secondary reason for it, which is kind of to build loyalty and maybe going to get more email addresses. Just kind of curious if you can provide an update now that they've been open for a while and the thoughts around that?

Go ahead Scottie.

Yes hey, this is Scott. I can tell you, it was really kind of a reset. It's a new management team in place. We had two stores open, the first one was in Clearfield, which is in Salt Lake. The second one was in Flint [ph]. If you look at January, literally month to-date the profile is similar to how we thought this business would look. Top line through I think the 25th was around kind of 575 grand and it's running about a 35% EBITDA margin.As far as emails, there isn't a significant amount of overlap between kind of Nonstop versus what was in our Allegiant Air database. Just shows that there is opportunities to kind of cross pollinate there. But no, I think, there's a lot of things that we probably didn't do right out of the gate, which is why we made some pretty dramatic changes, really stripped a lot of unnecessary costs out.There's a lot of seasonality, you have to actually see it you can believe it, so we think we've got a good handle. But that's kind of the profile I anticipate going forward. I think it's still going to be a really good business.

All right, thank you.

Thank you. Our next question comes from Dan McKenzie from Buckingham Research. Please go ahead.

Hi, thanks. A couple of questions here on the 2020 plan. What's the average daily utilization you've embedded in the plan and the reason why I ask is you know to the extent higher utilization could be just simply a way to drive down costs, I know you are guiding the CASM-X field flat to down 2%, but I'm just trying to put that into context?

Yes, so utilization will be down for the year. I'm pulling up the number right now. I have – the first half number will be down a little more than half an hour per plane. We’ll be holding relatively steady in March and June in the peak periods like we expected, but something like an April will come down a full hour. So there's quite a bit of flexibility in that, but I would expect about a half hour to still come out for the year.

I see okay. And then I guess, on the room nights, on the sold room nights, just relating to Sunseeker, I wondered if you can just expand or clarify that a little bit more, what are the total room nights available? What percent have been sold and how do you plan to revenue manage or do you plan to revenue manage the remaining inventory?

Hi Dan. The room nights sold to-date of course are a fraction of what the total inventory is and we didn't, as I said in my opening comments, we didn’t expect people to be booking rooms year and a half to two years out. The fact that we have quite a few people who have done that already, the 26 people I was mentioning it is amazing to us that people are doing that. Most people we know hotels just don't put inventory out that far in advance.But we developed all of our systems internally. So it was important for us to get out there selling as quick as possible, not doing an extensive amount of marketing, just let this traffic trickle in. And it then allows us to tweak and monitor all of our systems and processes so we can get those functioning exactly how we want them to. So when we start to heavily market.So our expectation is people will start booking in a more significant way about a year out. And of course, I think that starts to ramp up as you get more like six months out. So that's our expectation, the fact that we're getting this traffic now has just been, a great surprise to us.

Very good, if I could just squeeze one more here maybe for Scott, I'm wondering if you can elaborate a little bit more on 2.0. I think Maury talked about it evolving. What capability are you looking to gain? What are you looking to do differently I guess is another way to ask that question, as you kind of think about the revenue potential, what kind of revenue potential does that unlock for you?

You bet, so in essence the whole premise of this is the fact that, we invest dollars to make people aware of Allegiant and certainly come to our website. And the most accretive thing we can do once they're at that website or as I like to put it in our store, is to have them put as much in their shopping cart as possible and that certainly is the premise.So to directly answer your question, the things that that requires are a website and by that I mean on mobile, land or desktop, laptop, that enables all the same flexibility and personalization that an Amazon does. That makes use of all of the frictionless shopping and buying the same way that you use a streaming service or you buy from a leading internet retailer. And so ultimately, what it unlocks is today we know for every one hotel room we sell, there's another nine people that put it in their shopping cart, but for the fact that and list a bunch of reasons.But one of them is, they have to pay for it all there versus a conventional way you would pay maybe for one room night and/or just make your reservation and be able to pay at the front desk. These are all technical and/or commercial things that we're doing that we think boost the size of that cart in hotel and rental car and other items.The last quick comment is, we view the revenue potential not just directly from the customer. People around here heard it so much and because they're hot right now I'll use it again that that Apple got to a $1 trillion market cap, not just by selling iPhones and iPads to all of us. But they turned right around and sold up every software developer and media and entertainment company, because they were the way that those companies would distribute to the customer and in a very asset lightweight. Apple was happy to do that and they have their hand out for about 40% of everything they get served through there. In the same way, we believe and we've already seen this hotel partners, rental car partners, other dining establishments are willing to pay to ride along our website or email marketing.And while this is in its infancy, this becomes a net new revenue stream that doesn't come from the customer, but comes from other partners in the ecosystem that not only want to be sold in our store, but are willing to pay extra to have top, in the sort order and/or other advertising opportunities on the site or in our other digital marketing efforts.

Very good, now, I appreciate that. Thank you.

Thank you. Our next question comes from Andrew Didora from Bank of America. Please go ahead.

Hi, good afternoon, everyone. John, just a couple of quick questions on Sunseeker. I know it's a very small sample set, but just curious of the bookings that you cited, just curious how you sourced them, where they – are they airline customers or not? And just curious what the duration of this stay is like and if that's meeting your expectations John – expectations or not? Thanks.

Well these are all good questions. We even had a – we're getting people, a couple of people actually, both their stay by walk-in into our preview center, which is right on the site of where the construction is taking place. So, we've had some walk-ins, which is great and of course, the rest of all booked online. The longest stay we booked has been seven days and of course, the shorter stay has been one. So, and we booked a seven night stay in the suites too, which is why you're starting to see higher rate like that.So, while this traffic is slow, it's beyond our expectation that people are booked two years out, so very excited by that. We have people that are booked, almost about every month we have out there and the furthest month out is February of 2022. We have a couple of bookings that far out, believe it or not. So again, when you start paying real dollars, two years in advance or 18 months in advance, it's significant, it's appreciated, not expected.But we do expect it of course as we get, much closer to opening as I said, year to six months out as when we would start to really see that traffic pick up. And our marketing efforts will be focused around that time frame too.

And make sense, that's all I had. Thank you.

Thank you. Our next question comes from Helane Becker from Cowen. Please go ahead.

Thanks operator. Hi, everybody. Thank you for the time. So I just have maybe two questions. The first one is, does your agreement with the Indianapolis Colts preclude you from doing a deal with any other NFL teams?

No, not at all.

Okay, that was easy. And then my second question is do you have – given that the MAX is out of service, and it probably will be for – the first half of the year, maybe longer. Why wouldn’t you grow faster?

Helane it’s Drew. Was the question why don't we grow faster?

Yes, why don't you grow faster to take advantage of the fact that, some other airlines can't grow because they don't have the capacity available? So, why wouldn't you think about increasing utilization or somehow adding more flights, I don't know how to think about that. But grow faster than your current plan to take advantage of the fact that, maybe you can steal some more share?

Yes, so Helane, I think the most important part to remember here is – as we have such a unique network and unique business model. We weren't really benefiting from the MAX being gone. All the routes we announced were the ones we've had our eyes on for a while and weren't dictated by the MAX being in or not in service. So I think we're marching to the beat of our own drum and exactly the cadence we want to. Hopping into routes or areas where American or Southwest are trying to expand rapidly doesn't really jive well with where our network is taking us. So I think at16 or so percent give or take one and a half points I think we're growing at a great rate, one that the entire company can kind of move forward together at. And I think I'm very satisfied with where we're at.

Okay that’s great, that’s helpful.

Helane this is Greg. I’m just going to add, I mean, on the MAX comment that on a fixed fee side that we definitely see opportunities to take advantage with the MAX being out, and that's something Drew and his team are hyper-focused on and taking advantage of that.

Okay, that's really super helpful. Thank you.

Thanks Helane.

Of course.

Thank you. Our next question comes from Michael Linenberg from Deutsche Bank. Please go ahead.

Hey, good afternoon, everyone, I have two questions here. Drew, the announcement to do the 44 city pairs what is your success rate now? I mean, when you look at some of the launches, and all the new city pairs, at the end of the day, maybe after a year of operation, I'm sure there's always some pairing and some fine tuning, where some markets just maybe they look good on paper, but didn't play out.And the reason I ask is that we've seen over the last few years, other carriers make big service announcements. And then we see actually, sizable number drop out. And so, I think as you've grown in size, how has that, called it success rate, how has that evolved?

Sure. So for a long time, I believe Lucas has even quoted this before, we were hunting around 75% success rate as oil kind of came down in the back half of 2014/2015 there, it actually elevated some we're hitting close to 80% to 85%. We probably come back of that just a little bit but still hitting 75% plus at this point.

Okay, great. And just second question to Scott. It was good for the quick update on Allegiant Nonstop, like you mentioned Clearfield and Flint. For 2020 what's the plans there? I saw news out recently, looked like you're buying another site. I don't know if it's the third or fourth. What's the plan for expanding that business in 2020? Is it one or two new sites, three sites, how should we think about it? Thanks Scott. Thanks everyone.

Yes, hey Michael. So, a couple things. As I mentioned we were – we really spent the back half the year unwinding some of the decisions that were made. We technically have two other locations that we just knowing what we know now we're not comfortable moving forward one and anther Utah facility in West Jordan and there's another one in Fort Wayne. The one in Fort Wayne we own it's on the market. We think we have a potential buyer.But we do plan on opening a new facility in Chesterfield, which is in St. Louis. That should be in the third quarter. So that transaction purchases is done and so we're in the throes of developing the space plan. Yes that one, just know what we know now, like I said we took some probably some unnecessary lumps on the front end.So, at a minimum, one store, maybe two. There's another, there's some other opportunities up in the Michigan area that are attractive as well. But that's kind of the way of the lands. I'm really pleased with kind of how we ended the year, but more importantly, how we're getting started in 2020. As I mentioned, through majority of January, the profile that we're seeing is similar to what we modeled a year ago, so...

Yes. No, thanks, 35% EBITDA is good, very good.

Yes.

So, thanks everyone.

Thanks, Michael.

Thank you. Our next question comes from Duane Pfennigwerth from Evercore. Please go ahead.

Hey, thanks for the questions. Drew, you mentioned in your prepared remarks it's been a while since we've seen you grow, mid to high teens. You guys have done a really nice job of flexing your capacity shaping it around demand. You mentioned that new market mix was going to pressure RASM in the second half.But I wonder if you could comment, maybe just following up on Savi's question how it's playing out here into the March quarter. The point being your new markets may not be dilutive to RASM. So, do you think you can sustain positive RASM trends into March here?

So, obviously I'm not going to comment too much on that. We're not going to guide out any sort of RASM cadence. I'll say this much. Obviously, new markets generally have a bit of a maturation curve. It all kind of depends on the type of route you launch, anything that's connecting the dots, between two cities you already operate which was the predominant percentage of our 2019 market add will flow out a bit quicker. Anything that has a new city, especially one without G4 presence, relatively close will take a bit longer. So if you think about the type of markets I think you can kind of glean some information from that, but I think that's as far down the kind of RASM guide and will balance [ph].

Okay and then maybe just stepping back big picture, as you think about fuel as an input to your network plans. I think of a Allegiant as one of the better carriers at keeping a fuel tailwind when you get one. Can you talk about, if these lower fuel prices sustain how these growth projections you've given us could change?

Sure. So, within 2020 we're already kind of marching toward the top end of where we said we'd like to be long-term as kind of a, 8% to 12% annual carrier. Some of it will obviously depend on induction and the pipeline in which we're able to acquire planes. If fuel stays lower than this, maybe you can scratch out another couple of points, but I think we're hitting pretty close to the top of where we want to go.We've learned over time that that if you grow too fast, you kind of outpace some parts of the company and that puts a lot of stress either on the operation or other general infrastructure. So I don't want to get too far ahead of ourselves and start saying if fuel goes really low we’ll go to 20% because I don't know that that's the right answer for the company as a whole.

That makes a lot of sense. And just one follow-up there on your airline CapEx of 285 at the midpoint, is that deals you hope to complete or do you have line of sight on that 285 as we sit here today?

Hey Duane, thanks for the question, it is Greg. Now we definitely have line of sight all the aircraft that are scheduled in that CapEx or projected in that CapEx we already have firm commitments on and with strong counterparties that we've done business with in the past. And we fully expect that they deliver on it a lot of times and in fact CapEx is kind of in place.

Okay, thank you very much.

Thank you. Our next question comes from Catherine O'Brien of Goldman Sachs. Please go ahead.

Hey good afternoon, everyone. Thanks for the time. So Drew, maybe one for you, just on your recent launch, the recent announcement of launch of service to Boston, Chicago, Houston, can you tell us a little bit more about the decision making process there, not really your typical type of cities, but should we view these as more destinations than are duration markets and then any concerns on the competitive response? Thanks.

Yes Cathy. So, I think you hit the nail on the head there. These are definitely more destination type cities. If you went back to 2016 we launched into New York and [indiscernible] under very similar pretence. You had either very high fare or completely unserved markets going into both New York and [indiscernible] and now with Chicago, Houston and Boston.So there's a kind of a small niche and each of these for us to thrive each of these airports to serve it as a destination. It's going to be very expensive and very difficult to try to drive a lot of origination traffic from these cities and that's not at all what we're after here. So within our little niche we're not concerned about competitive reaction. We’ll obviously watch the industry as we do anyway, but it's not something that we expect to rankle the others.

Okay got you. And then maybe just a follow on to that since you mentioned Baltimore and New York there. How those compare or maybe like versus system RASM or system margin? Thanks.

Yes, I'll take it. At a high level there's nothing been concerning. But we're not going to talk about specific margins for cities. But obviously, we've been there since 2016 capacity is fluxed a little bit, but there's obviously nothing overwhelmingly concerning there for us to continue to be able to put up 20% margins. There's obviously a high hurdle rate you have to clear in order to kind of continue with the schedules though, yes, no concern.

Got it, I had to give it a shot. Maybe just one more quick one. On Teesnap nothing, no question here on the state of the negotiation or anything like that, but can you share with us when you're assuming that sale closes, just underlying your 2020 EPS guidance, I believe you have a couple quarters of non-airline expenses associated with Teesnap in that? Thank you.

Yes Catherine, thanks for the question. As far as the guidance, we do have a couple, well we don’t give guof while we don't give guidance on the non-airline costs baked into budget for Teesnap we have it in there for the first half of the year. And as far as timing, we've spent a lot of time on it. I'd probably prefer not to disclose when we're expecting to close that transaction. We've been negotiating in earnest with a counterparty for some time, so we continue due diligence and we're just working through the process. Once we have some clear line of sight on the timing we’ll certainly update you guys, but right now it's just kind of we’re working through it as quickly as possible.

Great, thank you so much.

Thank you. Our next question comes from Joseph DeNardi from Stiefel. Please go ahead.

Yes, thanks good evening. Drew, can you just talk about the 44 markets you launched, how many of those were competitive versus not competitive? And then where you ended the year for the network in terms of level of competition and then which way that's going in 2020?

Sure, so among the 44 routes, 11% were competitive. We have some competition into the panhandle of Florida, as well as a couple of the routes out of Nashville and Albuquerque going over to Orlando. So that's where we have the competition there. We ended the year right around between 20% and 25% of markets competitive and it's been trending positively for us in some ways because of our announcements being more non-competitive, as well as some actions from competitors. But we've been heading in a positive direction now for about the last six to 12 months.

Got it. And then John not sure if I missed it in your prepared remarks, but the Sunseeker spend in 2019 was below the plan. And I know you said you're still on schedule, but as some of the schedule margin being eaten into just maybe why was spend so far below plan? And then are you planning on continuing to give your – how many rooms booked, is that that something you're going to give every quarter and if so, what should we expect from that going forward? Just so there's some level of expectations? Thank you.

Sure, thanks Joe. On the spend that doesn't have an impact on speed to be honest with you. The commitments are – the more relevant or important number. So at the end of the year, I was saying at the end of 2019, we ended up with about $330 million in commitments. From cash management standpoint, if we can delay paying, I mean, that's a great thing to do. So and trying to predict payday its way out like we have to just from a cash management standpoint.It's more art than science. So that's why you'll see it kind of move around. But the opening date, no change to it. No change to schedules. No change to anything. But if we can, delay paying cash, that's a good thing for us. So I think we ended 2019. I think as of the end of 2019 we had spent about $99 million, roughly $100 million on the project in terms of cash. And again, we had $330 million in commitments.In terms of the cadence, bookings again, I don't expect significant increase in bookings between call it now and the end of the quarter, the end the first quarter. And I do intend to update everyone – every quarter as I mentioned before. There will be complete transparency on everything we're doing, whether it's construction, spend, room nights, occupancy, all of that we’ll be providing you.So again, we're happy with where we are. We expect to book a handful of more rooms in the quarter. Granted that you would like to see big numbers, but we don't expect them. The expectation again, we think it's going to start to happen in the back end of the year as opposed to the front part of the year.

Thanks John.

You’re welcome.

Thank you. Our next question comes from Hunter Keay from Wolfe Research. Please go ahead.

Thank you. Just a quick clarification on the – Greg I think you said you expect to do $250 million in free cash this year. Just to be clear what CapEx number are you using in that calculation? I just want to get a sense for like a true gross CapEx number?

Yes, that would be airline only CapEx. So that would exclude Sunseeker.

Okay. And that's not net of any like financing for aircraft, that's like a real gross CapEx number for at least for the airline?

Yes, if you take the run rate of $6.3 million and EBITDA per aircraft, take it over the average – aircraft count that we expect in 2020. That will get you your EBITDA and then just yeah – is just subtract out the CapEx that we're showing yes.

It's gross CapEx so it's not net of like proceeds?

Yes, yes, yes, exactly.

All right, okay. And then, how many of the 780,000 hotel room nights that you sold through third-parties are near Sunseeker or even potentially competitive to Sunseeker in some way? I'm just wondering if the Sunseeker sales effort might at all even marginally cannibalize the third-party room nights a little bit geographically. And I asked the question because obviously this is as you said, like really high margin stuff that just dropped straight to the bottom line. So couple of thousand room nights not sold in exchange for Sunseeker, I was just wondering if there's a little bit of a potential margin disruption impact we should think about?

I don't think you'll see any impact there Hunter and of course the numbers are more I was quoting had to do with gross number of room nights we sold since the inception of the airline. But the number of hotel room nights we sell it skews Vegas, we've always said that in the past. So the concentration of rooms we sell has always been in Vegas. The second market of course is in Florida, and the room nights we were selling in Florida are scattered all over. So with a skewing there towards Orlando, the Sanford market, so everything that we're going to see down in Southwest Florida is going to be accretive. We don't see any displacement type traffic or activity that will go on down there.

Yes, I would add that the more dominant effect you'll see and it is an opportunity is markets that have become, what I refer to is our next gen destinations, Nashville, Savannah, Myrtle Beach, those are markets that right now we do virtually no hotel business and we're scurrying to have the same type of offerings at Las Vegas or Orlando have. So, in the sense of answering the question, that may swing the other way, and represent potential upside as we get those online and start to educate customers to book there the same way they would here in Las Vegas or down in Orlando.

Okay, thank you. I appreciate it.

You’re welcome.

Thank you. Our next question comes from Darryl Genovesi from Vertical Research. Please go ahead.

Hi guys, thanks for the time. Hey John, on the phase two stuff that you mentioned, I guess what are the milestones in your phase one plan that you'd like to pass before you do take that phase two plans to the board?

I don't think we've established any milestones when it comes to phase two, if you will. And the reason being is because phase two doesn't add any additional room capacity. Those are metrics we would be monitoring in phase one before pulling the trigger on doing anything that relates to rooms. These are just when you look at a great level pool in a restaurant they are just added amenities and added the traffic generators and added revenue producers.So the important part of it, which is why we were looking at it first is it finishes off the entire waterfront. So it takes any construction disruption that we would have had and tries to concentrate a lot of that during the current construction process. So again, it's a decision the board will make at some point time in the future. But in order to be in a position to make that decision, there is always groundwork that you need to do.So that's what's taking place right now is all that groundwork. But again, it's adding a pool and adding a restaurant. The pool is currently in the resort project, is on the rooftop of one of the buildings. So this would give us a rooftop pool and a grade level pool and be able to create additional charge points to be able to maximize the opportunity with these guests.

Okay. And then just to follow up on Andrew’s, and I know it's very early days all the usual caveats, but the $185 baseline that you called out for your expectation, was that associated in some way with the specific mix of rooms and suites and counter rates that were actually booked or was that just a more general assumption for everything across the entire year? Just, I know it’s not that, but just wondering, if you sort of look at – conclude that ADR is running ahead adjusted for mix or if you sort of don't?

Yes, it was just a general one. And again, that's one that time we modeled for in the very first financial projections we've put out there have to be well over a year ago, maybe even closer to two years ago and we put that information out. We've always said all along that, when we were in a position where the Board is making decisions, we wanted to be conservative in those rate assumptions even though our market is much stronger.And I think in the most recent Investor Day we had, we were pointing out just how strong those rates are in the marketplace. So while we're seeing a very strong work rate it is very early, but you could go out there and look at our inventory. I mean, we've posted rooms out there as I said from June of 2021 through May of 2022. And there is a complete - every single day and every single room has a posting for rooms and rates.So anyone who wants to go out there and look at it, pick their day. We have purposely priced below the market which is one of those things that we had mentioned on the Investor Day that would be part of our strategy. It's just the market is so strong; Maury and I've always talked about that. That's what excited us about that market is just how high those room rates are there.

Okay, thank you. And then if I can just squeak in a quick there, when did you open booking?

I want to say like right at the beginning of December, so call it into the first week or two. And we've been continuing to upgrade the site just based on things we're finding, but we find it's best or in our best interest to get it out there as soon as we possibly can. It’s kind of like soft opening a hotel where you sell to say a small number of rooms early on to shake out a room. This gives us some early traffic to the site, and allows us to get all of our analytic tools squared away, get all of our tweaking of the site.So we've done several changes to the site since we launched it. And we have numerous changes that will continue to happen, between now and an opening and most assuredly, even just between now and call it at the end of the first half of this year.

John, one quick add on comment, that might be good to speak to as well as we certainly are talking about the hotel right now like we think about the airline with the free and independent traveler. But the reality is there's a strong pipeline at group bookings, and groups of course tend to be higher margin business less price sensitive than the individual will book much further ahead of time. And so I think in subsequent calls, there will be updates on that. And a group has the ability to take a big chunk of hotel inventory for a set amount of time and start adding up really quickly when we think about the different customer audiences that will be booking in Sunseeker.

No it’s a very good point. And I think I mentioned before that we will be providing, that level of insight as we go forward here. We have a lot of group leads, but we haven't booked a large group yet. We fully expect that that will happen before the year closes and we expect to see quite a bit of that activity at the hotel. So that's a very, very lucrative and exciting piece of the business as we move forward.

Perfect, thanks guys.

Thank you. This concludes our Q&A session. At this time, I'd like to turn the call over to Maury Gallagher, Chairman and CEO for closing remarks.

Thank you all very much. I appreciate your interest and your attention and we'll be talking to you again in roughly 90 days. Have a good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.