Good day, and thank you for standing by. Welcome to the Q3 2022 Allegiant Travel Company Earnings Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your speaker today, Sherry Wilson. Please go ahead.

Thank you, Chris. Welcome to the Allegiant Travel Company's third quarter 2022 Earnings Call. On the call with me today are John Redmond, the company's Chief Executive Officer; Greg Anderson, President and Chief Financial Officer; Scott Sheldon, President and Chief Operating Officer; Scott DeAngelo, our EVP and Chief Marketing Officer; Drew Wells, our SVP of Revenue and Planning; and a handful of others to help answer questions. We will start the call with commentary and then open it up to questions. We ask that you please limit yourself to one question and one follow-up. The company's comments today will contain forward-looking statements concerning our future performance and strategic plan. 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 the 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 John.

Thank you very much, Sherry, and good afternoon, everyone. The quarter saw our airline operations getting back to more acceptable performance levels more in line with where we were in 2019 before the pandemic. The respective teams have done a lot of hard work getting to these levels, and the effort and results have continued into Q4. The revenue picture was also solid, with total average fare just shy of $126 and up 15.5% over Q3 of '19. Q4 should exceed Q4 '19 by a similar percentage, assuming no severe weather issues in the balance of the quarter. In this rising fare environment, we are uniquely positioned to not only capture customers trading down, but to continue to grow total average fare given the significant domestic average base fare gap between us and other carriers. With the exception of the other ULCCs, all other carriers' average base share is somewhere between 2 and almost four times higher than us. After adjusting for one-off items such as the Sunseeker Resorts special charge of $35 million, the employee recognition bonus of $9.3 million and the $5 million loss on extinguishment of debt, the quarter was strong and encouraging going into Q4 and '23 as well. Turning to our balance sheet. One important point to make regarding our outstanding debt given the interest rate outlook is the fact that we are 83% fixed and only 17% floating. Our floating rate debt is all secured by aircraft and primarily shorter duration or less than 5 year maturities. All this debt is very flexible, prepayable and refinanceable. Equally important, our current maturities are only 8% of our outstanding debt. In regards to Hurricane Ian, which struck on 928, we are currently operational at all Florida airports. Punta Gorda is the only airport shutdown post Ian,…

Thank you, John, and good afternoon, everyone. Before I touch on third quarter results, I first want to say thank you from this management team and to all of our team members and partners throughout the network. Your efforts throughout the third quarter and particularly through the devastating hurricane that impacted Southwest Florida in late September were tremendous. Our ground maintenance and flight crew volunteers enabled a movement of nearly 25% of our fleet, countless passengers well in excess of 100 team and family members out of our Florida basis. My hat is off to you for an outstanding effort. A few quick comments on the operational environment before I touch on labor. We continue to see improvements in our operational performance on all fronts during the third quarter. It was a relatively clean quarter in that it wasn't solely dominated by labor and stability. As discussed on prior calls, our network is more complex and dispersed than it was in the third quarter of '19. Year over 3 year scheduled departures were up 8.4% and our crew base growth and aircraft growth of 21% and 31%, respectively. This month, we plan on opening our 24th crew based in Provo, Utah, up from 19 bases in 2019. The breadth of our operational footprint requires individual bases to operate as stand-alone franchises and to drive high completion factors and on-time performance, we needed to see some significant improvements in dispatch reliability and unplanned absence trends. We remain cautiously optimistic, but we are seeing nice traction on both fronts. We ended the quarter with nearly 99.5% controllable completion and A14 production of just over 70% through the end of October. Uncontrollable factors such as air traffic control staffing and flow control programs in Florida will continue to be on-time performance headwinds, but…

Thanks, Scott. Q3 saw sustained strong leisure travel demand for Allegiant across both web traffic to allegiant.com and passenger segments booked. Just as we saw during the pandemic and as we're seeing again in the face of negative economic factors threatening to impact consumer discretionary spending, our direct-to-consumer distribution approach gives us an advantage by enabling us to stay close to our customers and engage with them in ongoing two way communication to ensure that the Allegiant brand is top of mind at addressing the two most important buying factors for leisure travelers, low fares and nonstop flights. During the current economic climate, we're seeing our brand proposition what we positioned as living the nonstop life to affordable, accessible leisure travel, resonate more than ever to attract new customers and retain existing ones. Year-to-date, total visitation to our website remains up by nearly 30% versus 2019 and new first-time visitors are up by nearly 50% versus 2019. In addition, the number of new customers booking their first Allegiant flight is up by nearly 25% versus 2019 levels. We also continue to see the strong positive impact to leisure travel from the unprecedented number of baby boomers who retired the past 2 years and now have the discretionary time to travel more. Year-to-date, the number of new Allegiant customers age 60 or older is up by more than 60% versus 2019 levels. As I referenced last quarter, our addressable customer audience continues to grow as more new customers consider Allegiant for their leisure travel needs. They're seeking relief from sky high fares, as well as avoiding the risk, inconvenience, and time associated with connecting flights through crowded airport hubs. This past week, in a survey of customers who flew with Allegiant this year, we asked them whether economic considerations, such as…

Thank you, Scott, and thanks, everyone, for joining us this afternoon. Third quarter revenue was tracking nicely to come in a bit above the original guidance of plus 29% versus the third quarter of 2019. However, due to Hurricane Ian, we lost approximately $3.5 million in revenue to finish with total revenue up plus 28.4%. Similarly, we lost 1 point of scheduled service capacity to finish at plus 17%. The resulting 12.60 TRASM in the quarter is the best third quarter since 2008. Perhaps most importantly, through an immense amount of communication and collaboration, the planning and operational groups have done an incredible job balancing the needs across the enterprise to set the operation up for success, and we're excited about the improvements we've seen on that front. There are generally three distinct pre-hurricane periods to the third quarter. The peak summer weeks were marked with lower growth and strong demand that was strong unitized metrics. The ensuing 4 weeks saw roughly 45% ASM growth and high rates of cash positive line. And while unit revenues were relatively challenged due to the growth, they were still positive. The rest of the quarter until the hurricane was likely the start of the quarter based on relative outperformance. While ASM growth was elevated between 25% and 30%, TRASM growth still performed in the double digits, and September load factors were the highest since 2011. We long theorized the changing dynamics of leisure and hybrid travel should lift the floor on September and other off peak periods, and we're pleased with how that is manifested through the first trial. Scott touched on the emerging significance of hybrid travel to our business, and everyone around this table believes in the structural shift of both how travel is valued as a life experience, but also…

Drew, thank you, and we appreciate everyone joining us today. And of course, a special thanks to Team Allegiant. We are extremely proud of the amazing work you continue to accomplish. So operational stability has been one of our top priorities and third quarter results did not disappoint. Controllable completion for the quarter of 99.4% was 2.1% higher than the first half of 2022 and very much trending in the right direction. However, as we were closing out the quarter, we experienced an uncontrollable disruption as Hurricane Ian ripped through Florida. First and foremost, our heartfelt thoughts are with those impacted by the storm. As announced earlier this week, we deepened our partnership with the Red Cross to support the recovery and rebuilding of this area. When Ian made landfall in Southwest Florida, it devastated the surrounding areas, including the Port Charlotte and Punta Gorda area. This hit home for us, in many ways, as Punta Gorda is one of our largest aircraft bases and Port Charlotte is home to our Sunseeker Resort. Over 550 Allegiant and Sunseeker team members live in and around the surrounding areas. We are grateful to report that all of our team members were safe and accounted for, although the recovery for many of them continues. We estimate the hurricane headwind to our operating margin to be 1 point and 3 points in the third and fourth quarters, respectively. And regarding the damage to the resort, we still have limited information, but preliminary estimates suggest approximately $35 million of physical damage primarily caused by subcontractor cranes hitting the building. We believe we have ample insurance to cover these estimated damages. And from an accounting perspective, GAAP required us to record a preliminary loss estimate of the $35 million, which will be offset in subsequent quarters…

Hey, thanks. Good afternoon, everyone. I'm just kind of curious if you could provide just a little color on -- are you seeing your crew levels and attrition levels improving? And as you kind of think about 2023, if you're expecting an improvement into 2023, how much of that will be kind of offset by having to kind of hire and train ahead of the MAX kind of coming into the fleet?

Savi, this is Sheldon. I appreciate the question. Yes, there are certain months definitely throughout '22 where we saw first officer attrition specifically reached 30% on an annual basis. If you look at the complement of pilots throughout the system, it's running about 15%. We've put in more than 350 folks through the school, the schoolhouse this year. And if you look at the net seniority list increase, we're up about 135 folks. So that's a lot of sort of thrash in order to sort of obviously get ready for the introduction of the Boeing fleet. That being said, with the launch of a pilot program. And more importantly, we got to get a deal done. At the end of the day, our rates are so far underwater. I think directionally, we know where the contract needs to be and we're just plowing through it as quickly as we can. So I think aspirationally, we want to have classes of 25 each month, which should more than offset any sort of attrition. But that's sort of how we're looking at modeling this into '23.

And Savi, it's Greg. On your question around the cost headwinds from incorporating the MAX aircraft, where we're looking at today, 2023, we'd expect that to be roughly $0.05 of CASM-X headwind. '24, I think where we hit the top there would be about $0.10 of CASM-X.

That's super helpful. Thanks for all that color. If I might, on the fuel efficiency side, it seems like the seal efficiency of the Airbus fleet hasn't really been showing up. Wondering if you could just provide a little bit more color and what the trend there might be.

Sure, Savi, it's Greg. Let me take that. I think overall, the -- we target the fuel efficiency on the A320 fleet to be roughly like 86 ASMs per gallon. It also is impacted season by season, so by quarter. The third quarter is generally the hottest and so that will be the lowest or least efficient quarter in terms of ASMs per gallon. So where I think we're going to end the year is probably 84 ASMs per gallon. I would expect a little bit of step up next year in 2023. And then once we take that, the Boeing aircraft, I think you'll -- those are roughly mixed in the fleet, those - or mix between the 2 types, the 7 and the 8200s. I think you're about 110 ASMs per gallon. So I'd like to see in 2024 get closer to 90 ASMs per gallon and then in 2025, where we have more on, going above the 90 ASMs per gallon.

Got it. Thank you.

Thank you. Our next question comes from the line of Duane Pfennigwerth at Evercore ISI. Your line is open.

Hey, thank you for the time. So your guidance implies some sequential improvement in margins from 3Q to 4Q. And honestly, we haven't had a lot of time to dissect the special bonuses, the debt charge, the hurricane charge. But it looks like ex all of that, you still lost some money, which is historically unusual for Allegiant. What would you point to as the biggest drivers of your loss in 3Q? And what are the fundamental reasons you see margins getting better? Is this really about like we're going to be chugging along here at similar levels until you guys have more confidence in your ability to flex up in the peaks? And I'd love your comments on if you think that confidence is increasing yet.

Duane, thanks for the question. It's Greg. Why don't I kick it off here and the others I'm sure will want to jump in. But I think in terms of the sequential improvement in margins, the fourth quarter is just stronger than the third quarter seasonally. So we should see strength and that should help drive revenue. Some of the tailwinds that we should see as well is operational reliability. Third quarter, we did a nice job there, but it's even trending much better into the fourth quarter. Some of the headwinds, I think, Drew pointed this out in the fourth quarter will still be the lingering of Hurricane Ian. We have some of the Sunseeker operating costs that have been trending up over the quarters as we get closer to opening as well. I think what I'd say, though, is we think about like optimizing aircraft utilization and how we get there. Scott mentioned a focus on labor, but also with the operational reliability improvement, I think we've seen a reduction in unplanned crew absences and sick time. Which if you think about that and you take that crew stability, that can give you more of an opportunity to increase utilization in those peak periods. Candidly, this year, we've capped our peak periods, and that's where, as you -- I know, Duane, you followed us for so many years, you know that's where we make most of our money. I think in March in the summer, we make 60% of all of our earnings in those peak periods. So having that capped, I mean it has been more difficult for us to produce those type of results, but we see line of sight in getting back there. And as we mentioned, with operational stability, that's the first step, and then we'll continue to layer on and kind of torque up utilization where we can and where it makes sense at the right time, right appropriate time. I'll pause there if there's anything anybody else. Did that help, Duane? Did we miss anything?

I appreciate those thoughts. And then just on CapEx, I think we can back into the remaining spend on Sunseeker next year from the disclosure that you have. Can you just remind us, total aircraft CapEx and maintenance-related CapEx you'd expect next year?

Duane, it's Greg. It's a great question. And what I'll caveat it with is it's just -- it's fluid at this point given the uncertainty of timing around MAX deliveries, not only in '23. But as you know, a big part of our CapEx is going to be PDP payments and trying to understand all that between -- for the entire order. So what I'll say is where we sit today, I think CapEx next year as a floor should be at least $500 million. So I want to say we'll end this year at $350 million for the airline. So for next year, the airline will be at least $500 million. But what I want to say maybe, put BJ on the spot here, but ask BJ to add some color because of that CapEx, I think he's done a really nice job of making sure we have the appropriate financing to support it. But BJ, anything you want to add?

Maybe just Duane, the moving parts are, of course, the actual deliveries to Boeing airplanes, like Greg mentioned, the 2024 schedule will impact PET CapEx in '23. And then there's a couple of other things in there, whether or not those first deliveries or those early deliveries in 24 end up being MAX 7s or MAX 8s. And then finally, just movement in the used A320 acquisitions that we may need to bridge that gap.

Okay. Thank you very much.

Thanks, Duane.

Thank you. Our next question comes from the line of Michael Linenberg from Deutsche Bank. Your line is now open.

Good afternoon, everyone. Greg, I want to go back to the 8% adjusted operating margin that you sort of threw out earlier on the call. Is that incorporating like the 3 points from Ian? So we should be thinking more like a 5-point margin, 5% margin ex-Ian ? Or are you rolling that through? And then also just the employee recognition piece, I know you called it out as a special for the last 2 quarters. Is that going to feature as a cost item in the fourth quarter because I know you don't include it in CASM. So we're just trying to get to that 8%. Any color?

So for the fourth quarter, I'd say the adjusted op margin of 8% will exclude that recognition or the bulk of that recognition bonus. And I'll tell you here why in one second, Michael, but it would include the impact from Hurricane Ian. So save the Hurricane Ian, it would be 11%, if that makes sense. And the reason we excluded this year the recognition bonus is we've had a policy for many, many years to - you'd have to achieve a 5% operating margin before we started accruing a bonus profit sharing for our team members. Given this unique environment from labor across all of our team members, and they're just going above and beyond, we wanted to make sure that we did the right thing, and we approved and had bonuses ready for them irrespective of where our profit came in or lack of thereof. What I would say is next year, we're going to pull that out. So next year when we expect to be back to earnings again and providing profits, we're not going to peg it to a recognition brand. It's going to be based on profitability, and we would not exclude that in CASM-X.

Okay, that helps. And then just a quick one to Drew on capacity fourth quarter. You mentioned 15%. I think the schedules are still indicating a bit higher than that. So I guess we should be -- we should assume that we're going to see some additional cuts through additional filing schedules over the next month or so. Is that accurate?

I think essentially we just need to file the changes that have been made. Things that happened around Ian will never be reflected in the public sources because they were so close in. So we took an impact there. So I think we're scheduled - and I thought we were going to do this last weekend. I think a new filing is coming soon. But the deal will remain or public forums will remain slightly elevated just due to those closing cancels associated with EM.

Fair enough. Okay, thanks. Thanks, everyone for answering my question.

Thank you. Our next question comes from the line of Scott Group at Wolfe Research. Your line is now open.

Hey, thanks. Good afternoon. So I want to see if you have any thoughts on CASM next year. So if ASMs are up about 10%, it sounds like maybe you'll be expensing the employee recognition, maybe you get a new pilot deal. How are you thinking about CASM-X next year? Do you think it can be down on a year-over-year basis? Any directional color?

Scott, it's Greg. Maybe just directionally, we're still in the process of budgeting for 2023. So I want to be careful and not get too specific here on where we expect CASM-X to be. You mentioned that 10% ASM number that we've, of course, mentioned as well. I would say that growth is generally -- you should expect that to be back half of '23 loaded. So the first half is going to be limited ASM growth or generally flat. When I say some of the tailwinds or at least a big tailwind in 2023 versus 2022 to the unit cost will be the IROPs being down, right? I think that should be super helpful. And then some of the headwinds are, Savi asked earlier on Boeing, incorporating the Boeing aircraft. So that's about the $0.05 CASM-X headwind you have. FTEs are up with the exception of pilots to kind of support this infrastructure to be larger. I mean, candidly, a year ago, at this time, we thought in 2023, we'd be 20% larger than we're going to be. But we have that infrastructure in place. And as we kind of loosen up and get the pipeline as Scott Sheldon mentioned, put the pilots coming in and the ability to kind of make up utilization and growth. The good thing is we're spring coiled and ready to go. And so we have that foundation in place. And then at some point, I think you could see nice growth, but I wouldn't expect that to even begin happening until the back half of 2023. And again, that's going to be contingent on a labor deal being done or likely being done. And then just everything I talked about here directionally is that doesn't assume a pilot deal in the cost. But I would say for internal forecast is that's what we're expecting. We're building that in for our forecast. But I don't want to give numbers to negotiate publicly if you will.

And so I know you're guiding to margin improvement next year and just it feels like double-digit margin is tough to get to, but let me know if you think differently. But I guess, what is the path to getting back to double-digit margin, operating margin, which you guys consistently used to have? How do we get there?

Yes, it's a great question. Let me kick it off here again. And I'd say -- and I keep saying it, op stability, getting rid of IROP. It's got to come out of the business, $60 million incremental in total IROP costs this year versus 2019. So that's one. That stable ops, as we mentioned, is stabilizing ops, that gives us crew stability so we could peak up more -- we can fly more in those peak periods, which is the most profitable time for us to fly. So that's two. Labor deals getting done, which helps with utilization with growth. That's 3. Aircraft. The aircraft we're bringing in. If you think about 2019, are we -- we talked EBITDA per aircraft of $6 million per shell. The 320, 186-seat or even the 320 that's going to be Allegiant Extra, we -- that has an earnings potential of $7 million of EBITDA per copy. So we think bringing those in along with the 30% economic advantage of the Boeing aircraft is going to be key there as well. Cost discipline. Like as I mentioned, we're going through the budget and austerity is a big theme here at Allegiant this year to make sure that we're cutting out any unnecessary costs, but that we can support the opportunities that we have ahead. And maybe I'll pause and I don't know if Drew or Scott want to hit on some of the commercial initiatives such as systems like Navitaire or Viva. I mean we think these can really drive earnings potential -- or drive margins higher, not to mention loyalty and everything that's happening on that side of the house as well. But anybody else want to add?

I think you covered quite a bit.

I think I probably took too much time and answered for everybody, so I apologize. But yes, I think that covered kind of where we wanted to hit.

Thank you, guys. Appreciate the time.

Thank you. Our next question comes from the line of Andrew Didora from Bank of America. Your line is now open.

Good afternoon, everyone. John or Greg, I know in the release, you highlighted the removal of the suspension on the existing buyback. Obviously, all the government restrictions were lifted at the end of September. Just curious how do you think about capital allocation today now that these restrictions have been lifted. And would you consider buying back stock before, say, getting a new pilot deal? Just curious of your thoughts there.

We're not going to try to predict timing in that regard. I think our Board wanted to make sure that the capital allocation strategies we had [Technical Difficulty] in the past, we opened those back up as soon as we are able to do that, which is why they lifted the restriction that we put in place due to the Cares Act. So now we no longer have that restriction, if you will. So we do have the flexibility to do what we historically have done in the past going forward, trying to predict timing. We're not going to try to do that here. But it is nice to have those restrictions gone.

Understood. And maybe for Scott DeAngelo or Drew. Look, I think a lot of your ULCC peers have some pretty aggressive goals for their non-ticket revenues over the next few years. Just curious what do you think your opportunity is for non-ticket? And how do you think about the trade-off between ticket and non-ticket? Thanks.

I'll kick it off here, Drew here. I think in the last call, we talked about an incremental $10 being quite plausible over the next 5 or so years. I continue to believe that that's a very firm target. There's a number of initiatives, Greg hinted at Navitaire and that will unlock some capabilities for us on the ancillary side that we have not had internally really in the history of Allegiant, that'll provide a lot more flexibility in terms of how we approach the ancillary program. I think we've been dynamic, more capable, particularly around seats, but in other areas like bags, we've been fairly handcuffed by our own doing and can really unlock a lot there. So pretty bullish on that. Allegiant Extra was also mentioned, which will drive a lot to the seat line. Greg mentioned, can take the A320s up to $7 million EBITDA per copy if we can return to some of the '19 bandwidth. Beyond that, we have a lot of -- and I'll kick it over to Scott, you guys hear a lot of the co-branded stuff and some third-party elements that he can develop.

Yes. That's exactly what I would add to that, and thanks for the question. The next point, as Maury would put it if he was in the room, is selling outside the aircraft. So even if there are capacity challenges, part of the IT transformation that John spoke about includes really being able to add hotel inventory beyond just Las Vegas, where traditionally we've been strong. But also to streamline the buying and the adding of hotels and rental cars to be at parity with leading OTAs, which is -- it's something we don't currently have, but we'll have in the near future. So that additional hotel and rental car sales, in addition to what Drew says, I think helps us outpace from a revenue perspective.

I think maybe just in closing, the idea is not to just focus on ancillary as the opportunity but base fare as well. So everyone can deploy a different strategy, if you will, on getting to a larger total average fare. But as we get there, it's not strictly a focus on ancillary but a focus on base as well.

Thanks, everyone.

Thank you. Our next question comes from the line of Daniel McKenzie of Seaport Global. Your line is now open.

Hey. Thanks, guys. A couple of questions here. Just following up on an earlier question on CASM-X for next year, should we be including the upfront Sunseeker cost in that cost outlook? And the reason I ask is just because there's no real offsetting revenue until that opens, I guess, now September 1. Or I guess maybe if you can provide some perspective on at least how you're initially thinking to report that. And then more broadly, just going on this point of expanding margins for next year, I'm just wondering if you can elaborate a little bit more on that. What kind of economic scenario does that contemplate? I think Bloomberg has said there's 100% probably a recession. I think the market is assuming 60%. So if you can just elaborate a little bit more on those topics, that would be great.

It's Greg. Why don't I kick it off. I'll try and hit them both. On your Sunseeker comment, next year, we're going to segment reports, so we'll break all that out, so you'll see it separately. So we're planning to begin that next year in '23. And then in terms of -- just as we're thinking about next year, I think in face of a recession, to get to your point, 1, we focus on leisure customers, which generally it's a stickier we've got historically -- been a stickier kind of customer base. Scott DeAngelo, I think mentioned it in his opening comments, 80% VFR and second home, which if you peel that back a little bit on the leisure customer, I think that's probably even more sticky, right, if you think about it from that perspective. So measure growth. We're going up to 10% next year. I think Drew and the team are planning on that to be in existing markets. So it's derisking that type of growth. And then we have our flexible model, the network, the direct distribution. But overall, I mean, with the capacity somewhat constrained and where GDP is outpacing 2019 more so than even the industry, I mean we think even if a recession were to come and there's some headwinds to the consumer that we can continue to stimulate demand, and we're going to be just fine. And I think we're better if not as well -- if not better positioned than most other carriers where we sit today, given all our unique facts and circumstances.

Dan, maybe just to elaborate a little bit on the Sunseeker piece you asked about. The expense you'll see we're incurring now, and you'll see next year is primarily all preopening, right? So next year, we'll blow out all the remaining part of that leading up to the opening of the resort. And most of that will skew in Q3 of '23. So we'll have it, of course, in the first 2 quarters, but most will skew into '23. And we'll share with you what that number is in Q4 when we finish the quarter. We'll break it out and let you know what that number is, and then give you some thoughts as to what the order of magnitude is for all of '23. The other thing, of course, that will impact that is just the delayed opening. Preopening is larger just due to the delay. But having said that, we would expect to recover some of that through insurance as well. So a lot more guidance you would, if you will, on that we'll share with you after Q4.

Second question here for, I guess, Scott DeAngelo. Total visitation (inaudible) to the website was up 30% versus '19. To what extent is this data feeding into your revenue management systems or at least informing how the revenue management system should work? And is the reference -- go ahead, I'm sorry, I was going to just follow up with one more. You go ahead and finish, my apologies. Well, I was just going to ask, the reference to the up 30% versus 2019 and kind of the second part of this question, is that our best indicator of pent-up demand as we think about the 2023 revenue picture? Or does it really more reflect the [indiscernible] referenced earlier in the script, so a structural change in demand? So kind of a 2-part question.

You bet. So we'll take the second part first, and it's the latter. We think it's structural demand. I commented versus 2019 just to keep it consistent, but I'm happy to share our total web users were up by 34% versus last year. So you actually see it gaining steam. So that suggests structural, as Drew had mentioned. And then on the first question, marketing and the revenue management and network planning teams do work extremely close, especially as you think about off peak being able to grab some of what we might not be able to grab on peaking the peaks as it were. And so where we -- when we drive those users and where we're driving them from market wise, it's something we do in lockstep with network planning and revenue to make sure those users are coming at the right time and wanting to fly from and to the right places.

Maybe just - this is Drew here. just expand slightly on the actual RM model. It's probably more art than science. It's integrated into the model, but not in a way that's driving significant automated changes or recommendations at this point. It still falls on the analysts to interpret and react accordingly.

Yeah, understood. Okay. Thanks for the time, guys.

Thanks, Dan.

Thank you. Our next question comes from the line of Conor Cunningham from Melius Research. Your line is now open.

Hey, everyone. Thank you. Just on the 10% capacity growth, it seems like you're sizing that to your resources that you have right now, but there's still a lot of issues in terms of aviation infrastructure, ATC being a major problem. Just curious on how you plan on navigating a lot of those issues outside of your own control next year.

Sure. As we look at next year and really using '22 as the baseline, ATC has certainly caused some A14 issues. I wouldn't call it anything major after probably the first quarter of the year, we struggled a little bit through March. It didn't really feel a material impact through the summer outside, as like I mentioned, some A14. Not a lot of cancels being driven by that. So at this point, we're not restructuring our network plans or our schedule around that. I think a similar story on TSA and other infrastructure issues. There's probably one-offs that get pointed to. But at this juncture, I would not plan on material changes to our plan in 2002 based on infrastructure that you're referring to.

Okay. And then just the changing dynamics from like the flexibility. You talked about a little bit in the press release from a monthly standpoint. But some of the other airlines have talked about like day of weeks changing a fair bit. And when I think about you guys, like you barely fly on Tuesdays and Saturdays. I'm just curious on how that trend may be changing or how you're looking at that trend now going forward and seeing if you're making any adjustments to your model as a result of it? Thank you.

No, I think you hit the nail on the head that we don't have a ton of exposure to markets that are beyond two and three times per week. Where we are running 6 or more times a week, we certainly have seen some of that same shift to where Wednesdays, primarily Wednesdays would come up a bit more toward the week average. Tuesday is still lagging a little bit behind that. And I don't think it necessarily changes our philosophy at all. We've had the compressed schedules even on larger markets a little bit given the constraints we have in place, and we'd love to be able to restore that and take better advantage. We would be doing that with or without the results that we've been seeing, I believe. So seeing what you're indicating, but it's not something that needs to change our approach in my opinion. And I think the other part worth mentioning, and this came up just the other day. As you think about load factors exceeding our 90% booked, that kind of implies more than just your peak patterns that are booking, right? So instead of just a heavy Friday to Monday, or Thursday to Sunday weekend pattern coming into the destination, you're also experiencing those going out of the destination as well as covering kind of the midweek type of travel. So that's more of how we'll see the dynamic shift and kind of the dynamic that you need to adjust in order to facilitate book load factors at those levels.

Okay. Thank you.

Thank you. Our next question comes from Christopher Stathoulopoulos from Susquehanna International Group.

Thank you. Good afternoon, everyone. So John, on the 10% ASM growth for next year, what is your risk-adjusted view on the order book? So meaning you're contracted to receive ex-aircraft, but you're expecting a minimum of, let's say, Y? And then on the 10%, could you give us some color on the moving pieces there, how much you're expecting to come from departures, gauge and stage. Thank yoiu.

Well, I'll let Greg or BJ talk about some of the more - those kind of details. But at the end of the day, we have an agreement in place with Boeing. We're not going to renegotiate, if you will, over the phone. As we come into more information through conversation with Boeing, we will react in a way that makes sense for Allegiant, but we're just going to stay tuned and see what happens. But right now, there's nothing really to add beyond what Greg and BJ mentioned about the 23 deliveries that we expect. But go into other detail that you're talking about?

Sure, Chris. I think on the 10% growth, and Drew may fact check me here, but the departures are going to lag the ASM growth because we've gauged slightly, maybe a point or two, but we'll get back on that. We'll see where that comes out with next year. And then to John's point, what I would say on the Boeing deliveries, they're always going to be back half of next year. That's what we're expecting. We're eager to get these aircraft in. We're planning on it. We have a whole team set up and working towards that. As I mentioned, they're 30% earnings advantage with that -- with those aircraft. We have bonus depreciation, which it's 100% in 2023. It steps down to 80% in '24 and then 60% in '25. That's very helpful for us in terms of offsetting cash taxes and part of our decision-making candidly. So we want to get these aircraft in. They are game changers, particularly in a high fuel environment for us. But we're planning, we're preparing and being flexible depending on when that time comes. But I don't know, BJ, if I missed anything, if there's anything else you want to add?

Yes. just to your question on contractual deliveries and expected deliveries. So we're contracted to take originally 10 aircraft during 2023. We had mutually agreed to reduce that to 8 aircraft shortly after signing the agreement. That was for some operational reasons to help us with onboarding the airplane type. And then we've now received notice from Boeing that it will only be 3 aircraft delivered in 2023, and we're still working with them to determine when the 5 airplanes that fell out of '23 will deliver. To Greg's point, we want to be made whole on that. There are a lot of things we were counting on with those, but we're not sure they're going to fit into 2024. So we'll have to update that maybe on the next call.

Okay. And Greg, on the CASM-X breakout for 4Q, how much of the 10 points that you outlined, do you see carrying over into 2023? And then also, I believe you suggested in response to Scott's CASM-X question that you were anticipating some CASM-X relief in the second half, which sounds like just a function of where your capacity is expected to be plus these 3 aircraft. So is that the case? And then B, is that including a labor deal in that scenario? Thank you

That is not including a labor deal. But what I would say is getting a labor deal done gives us a path to take up utilization or optimize utilization per aircraft, which I think is really meaningful. In my prepared remarks, Chris, I think I mentioned every hour of increase in utilization per aircraft per day is worth like $0.05 of CASM-X. So that could be a meaningful a tailwind for us there. I think to your question about kind of what's rolling over 4Q costs versus next year -- into early next year. One of the things that I think that maybe Linenberg was getting at, but there is going to be the headwind in unit costs when it comes to our bonus accrual as mentioned. We're excluding it this year, but we'd add that back in next year, so that will be a headwind. But also some of our cost -- unit costs are seasonal depending on just ASMs. First quarter, we're going to generally have more ASMs than we would in the fourth quarter. So we'd have to take that into account as well. But yes, I mean I think like -- I mean, I'm just going to pause or stop there because I want to be careful for not getting into too much detail and guiding for already too. Because, again, we're still working through the budget, and I want to be fair to that process.

Okay. Just the integration from Boeing, did you say that was $0.5 or $0.05? Thank you

$0.05 of CASM-X. And then that's added in by 24 at a mature $0.10 [ph] of CASM-X.

Okay. Thank you.

Thank you. I would now like to turn it back to John Redmond, CEO, for closing remarks.

Well, we appreciate the questions.