Good afternoon, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Allegiant Travel Company's Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Sherry Wilson, Managing Director of Investor Relations. Please go ahead.

Thank you, Kelvin. Welcome to the Allegiant Travel Company's Third Quarter 2025 Earnings Call. We will begin today's call with Greg Anderson, CEO, providing a high-level overview of the quarter, along with an update on our business. Drew Wells, Chief Commercial Officer, will walk through demand commentary and revenue performance. And finally, Robert Neal, President and Chief Financial Officer, will speak to our financial results and outlook. Following commentary, we will open it up to questions. We ask that you please limit yourself to 1 question and 1 follow-up. 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 the rebroadcast of the call, feel free to visit the company's Investor Relations site at ir.allegiantair.com. And with that, I'll turn it to Greg.

Sherry, thank you and thank you, everyone, for joining us today. As I reflect back on the past year plus as CEO, I'm proud of the great strides we have made to strengthen our core airline and our focus on making sure we return to our roots as a solid double-digit operating margin business. A hallmark of our success is that we are the leisure carrier of choice in the communities we serve by offering convenient non-stop flights at the lowest fares. That success is also because of Team Allegiant's dedication and execution that underscores our ability to provide consistent and reliable operations for our customers. Our performance is demonstrated by our industry-leading completion factor for July, a peak period that set a new monthly record for the number of customers flown. It is also reinforced by our net promoter scores, which remained near all-time highs, reaffirming the loyalty of our customer base and the strength of our brand. I'm particularly proud that we were recognized by USA Today's Reader's Choice Award for the Best Airline Credit Card for the seventh year in a row, and Best Frequent Flyer Program for the second consecutive year. We designed our programs to serve the needs of our leisure customers, which include high value and frequent travelers. The success of our loyalty program and the fact that we are on pace to generate $135 million in remuneration from it this year underscores our relevancy in the markets we serve, and we see a lot of opportunities to enhance these programs to drive outsized growth in the years ahead. Turning to the third quarter. We saw steady improvement in the demand environment, allowing us to outperform our initial forecast in both revenue and costs. As expected, we reported a modest operating loss in what…

Thank you, Greg, and thanks to everyone for joining us this afternoon. We finished the third quarter with $553 million in airline revenue, approximately 0.5% above the prior year, producing a third quarter TRASM of $0.1119. This was down 8.4% year-over-year, in line with our internal expectations from our mid-quarter update and consistent with the original expectation of sequential year-over-year improvement. Allegiant grew total ASM 9.7% versus 3Q '24, with overall utilization up 10%. Also consistent with our August call was the expected unit revenue improvement in same capacity markets versus the second quarter, which recovered approximately 1 point to down about 5% year-over-year, again, perhaps oversimplified. With a growth expected TRASM headwind of approximately 4 points, we slightly outperformed the combination of core flat capacity performance and the expectation from our elevated growth rate. Further, within the quarter, we saw all 3 months produce better year-over-year unit revenue figures than any month in the second quarter, and the best load factor results for its prior year of any month year-to-date. Meanwhile, the profile of new market ASMs as a percent of the total will steadily tick higher. The third quarter ended around 5%, while the fourth quarter will ramp up to over 5.5% of scheduled service ASMs and is expected to rise again in the first quarter. 51 routes operated in the summer of 2025 that did not operate in the previous summer. Of those, approximately 85% of them contributed positively to earnings in their first summer of operation. The results from these markets rolled into announcing more new and exciting route opportunities through the third quarter. 19 new routes are set to begin Thanksgiving to early spring, including 14 cities: Fort Myers, Florida; Huntsville, Alabama; Atlantic City, New Jersey; and Burbank, California. We're encouraged by the early performance…

Thanks, Drew, and good afternoon, everyone. I'll go ahead and walk through our results and provide an update on our outlook and financial position. As with prior calls, my comments today will reference results that have been adjusted to exclude special items unless otherwise noted. This afternoon, we reported a consolidated net loss of $37.7 million or a loss of $2.09 per share. We had a net loss in the Airline segment of $29.5 million, or a loss of $1.64 per share. Our Airline segment generated a negative 3.1% operating margin, which was at the better end of our original guided range as suggested in our August traffic release. The quarter came in ahead of our forecast on both costs and revenue, while a reduced tax benefit brought EPS slightly below our September expectations. This was driven predominantly by a change in our estimated tax rate, which reflected an improved revenue outlook for the remainder of 2025. Notably, the sale of Sunseeker Resort closed on September 4, marking a significant milestone for the company, supporting balance sheet improvement and driving better consolidated earnings. Airline EBITDA for the quarter was $41.5 million, giving us an EBITDA margin of 7.5%. Through the peak summer season, our team delivered operational excellence for our customers, which underpinned cost performance that continued to exceed our forecast. Third quarter non-fuel unit costs were down 4.7% year-over-year. Our ability to leverage existing infrastructure, grow into our workforce and execute on the cost initiatives outlined on prior calls has resulted in industry-leading cost performance year-to-date with a nearly 7% reduction in CASM-ex fuel through the first 9 months of the year. Our unit cost performance kept the shape we expected at the start of the year despite removal of 4.5 points of capacity growth during the year, primarily…

Your first question comes from the line of Savi Syth of Raymond James.

Congrats BJ, and maybe I'll give you the first question to you as a result. You mentioned a little bit about CapEx stepping up, but not meaningfully impacting leverage. But could you talk a little bit more about how you're thinking about the balance sheet now that there's a little bit more kind of stability across kind of the operation and with Sunseeker out of the way, just how you're thinking about cash levels and leverage and just cash flow generation?

Thanks, Savi. Appreciate the comments. Yes. So when we think about next year, I guess I would remind you, we had a limited amount of PDP CapEx in 2025 because we were catching up from pre-delivery deposits that have been made in prior years in the face of some of the aircraft delays. So, I expect those to come back into the CapEx profile next year. As I think you're getting at, we were carrying quite a bit of cash at the end of the quarter. That was partially a result of the Sunseeker sale. And then also -- and I think maybe I mentioned on a previous call, we kind of overfinanced our MAX deliveries at the beginning of the year, and that was just out of caution with what we were seeing in some of the economic headlines back around the April timeframe. So, I do think we can get to a point where we're carrying a little bit less liquidity on the balance sheet. We've historically talked about 2x air traffic liability. And as things have started to stabilize and Sunseeker is behind us and especially as we have aircraft finance further out, we can bring those cash levels down a little bit. And we'll continue to use cash to invest in the business though for the rest of '25 and of course, '26.

That's helpful. And if I might, just on the -- I'm not sure if this is Drew or Greg. On the kind of AI and data infrastructure side investments that you're talking about, generally, you think of kind of large organizations as having an advantage there. Could you talk about just maybe how it's being implemented at Allegiant and maybe what advantages, disadvantages you have versus some of your bigger peers?

Sure. Let me kick it off and Drew will add some color, I'm sure. But starting on the AI front, Savi, just as an organization, really proud in the way we're embracing AI to make our business better. We've been working over the past year or so on our structured and unstructured data to ensure that it's in the right place for advanced technology and deploying solutions here at HQ across the board, such as Copilot for our developers, GitHub, which is improving productivity. In that regard, we're reshaping functions across the board, but in areas specifically like the call center, our operations where we're using AI and use cases to drive more efficiency, productivity, and we're just scratching the surface. One of the things though I think that's important is a lot of the changes that come from AI are through case management. And as an organization, we're building that muscle. And the reason we're feeling confident about kind of building that muscle and it's let's crawl before we walk, walk before we run type attitude is because of the transformational technology stack that's in place now, which is best-in-class. And we've talked a lot about it what the IT team has done over the past couple of years. They've definitely taken what the whole airline was built on proprietary software and moved it to state-of-the-art systems. We've talked about Navitaire, SAP, Trax and other systems. And so now that we have all those in place, we're really able to start harnessing and leveraging where that's at to be a little bit more nimble. And Drew has got a whole list of priorities and initiatives along with the rest of the team. But Drew, I kind of went off on it a little bit. Anything to add though from your perspective?

No, I'll be fairly quick. On the AI front, there's wins we have as it pertains to revenue modeling, how we think about offer management as we think about rightsizing the combination of air pricing and ancillary pricing, which has historically been a major challenge to solve. There will be some wins there. You're right, a small organization, we have to be a little bit more nimble. We won't get the benefits of scale that the larger ones will. That's not to say there's not wins here. I'm really bullish on what this could mean for '26 and beyond, where we're kind of in the development phase now.

Your next question comes from the line of Duane Pfennigwerth of Evercore ISI.

On the flattish '26 capacity outlook, how are you thinking about the shape of that by quarter? And specifically, how are you thinking about 1Q growth? And I don't know if it's too early, but could you characterize maybe the difference between the shape of off-peak versus the shape of peak within that flattish outlook?

Sure, Duane. I'll give it a shot here. So the shape will be kind of down low to mid-single digits in each of the first couple of quarters, just following the shape of fleet. We'll be slightly down, I guess, more down on off-peak at that in the first quarter, while keeping relatively flat utilization through the March peaks in particular. With Easter pulling forward a little bit, you'll see April come down a bit more, but similar story in the second quarter as off-peaks will underweight relative to peak periods to form that. Back half of the year, it will kind of inverse and it will be up low to mid-single digits to get back to that flattish outlook.

And Duane, I'll just add to Drew's point there. There's going to be a higher percentage. We're planning on a higher percentage of peak capacity next year than, say, this year.

That's helpful. And then I don't know if you're able to do it, but on the MAX, can you speak to how you were able to deploy those aircraft? What base limitations you may have had this year and how those constraints ease up? I guess I'll stay with you, Drew. Maybe you could just speak to the types of routes the MAX had to fly this year versus the optimal routes you'd like them to fly on?

Yes. So through -- I mean, really, from the time of the first delivery until kind of this week, next week, we've flown them very heavily on short-haul market, trying to maximize the number of takeoffs and landing needs to help facilitate some of the transition training needs. We had to get pilots certified and ready to fly. As we beefed up that number of pilots sufficiently, we'll see that shift more towards longer hauls, taking a little more advantage of the stage length and fuel burn benefits there. As we flip the Fort Lauderdale base to solely Max, we'll get stage length benefit there as well, but a little bit longer haul than Orlando and St. Pete. We didn't necessarily have base constraints. We opted to split Sanford and St. Pete to start just help provide a little bit of resiliency in the event of changes to the delivery schedule from Boeing, have a little bit of a shock absorber there where Airbus could replace that and we can do more Boeing flying as the deliveries shaped up. And then with Fort Lauderdale, we're keeping things fairly geographically centralized to ease just some of the logistics that may come about. As we get to the back half of next year, we'll kind of hit our next wave of base considerations as more deliveries come in and stay tuned. But as of this point, there's no real constraints at least that I'm aware of. I don't think the rest of the team has any, but this has all been kind of our choice on trying to maximize both the efficiencies of the introduction of the fleet but as well as just the continued operation.

Your next question comes from the line of Scott Group of Wolfe Research.

Can you maybe just talk a little bit about some of the underlying RASM, CASM assumptions for Q4? And then I don't know any color on what you're seeing with the government shutdown? Do you think -- maybe are your smaller airports being less impacted or starting to have any impact on demand? Just any thoughts there.

Scott, it's BJ here. I'll start on the CASM side. It's probably a bit easier. I talked about the shape of our CASM performance this year, generally holding with comments that we made at the beginning of the year, which should get us to mid-single digits by the end of the year. And I guess you can back into what that does for the fourth quarter. But I would tell you that we expect continued goodness year-over-year in the salaries and benefits and D&A line that you've seen in the prior quarters and then continued pressure in the fourth quarter in the maintenance line and the rent line, both of which I think are transitory.

On RASM, I mean, all we've really said publicly is that we expect to see continued sequential improvement on a year-over-year basis. We know that kind of the implication here is what we're pushing towards the extreme of the fourth quarter versus third quarter performance, but I tried to address that a little bit in the prepared remarks that it's as much a 3Q story as it is 4Q as those are kind of diverging from just a customer base and demand base it seems. On government shutdown, we haven't seen anything meaningful flow-through of bookings or demand at this point. I do feel pretty confident that the longer this drags on, the more likely we are to see impact. And certainly, if it does stretch all the way to Thanksgiving, that will be a huge problem for the industry as a whole. I have some confidence that we will get through this as a country and the government is ahead of that, and strongly urge Congress to unlock this.

And then your comments about TRASM exceeding CASM next year, I guess, if you have any more color there, that would be great. And then as I think about what you were saying on one of the earlier questions, first half capacity is down a bit, so pressuring CASM a little bit. Do you think you see TRASM exceeding CASM all year? Or is that -- should we think about that more as a back half TRASM exceeding CASM sort of comment?

Scott, it's Greg. Maybe I'll start at a high level and then Drew or BJ will add in some color, I'm sure. Just kind of taking a step back, we've accomplished quite a bit here in 2025, strengthen the airline. We're going to build on those accomplishments in 2026. So as I think about the margin improvement for 2026, and if you break it into 3 or 4 areas: one, the TRASM tailwinds, which at a high level, with flattish capacity, that should also obviously help on the unit rev side, but also flying a higher percentage of peak days, right, versus off-peak helpful. The commercial initiatives that we've been talking about all year, Allegion Extra, Navitaire are larger contribution next year than in '26 than this year. Loyalty contributions are exceeding revenue growth. Drew may want to hit some more on the TRASM front there. But on the cost side, just BJ and team, they've gone through a couple of paths into the budget. So while we're not final, we're in the, I guess, mid-innings of it. And I think the costs have come in to a point where it gives at least us confidence today in the area that we can control on the cost side that we can keep those to a point at which if all else being equal on the demand side or the revenue side that we'd be able to see margin expansion. The MAX performance, we talked a lot about that. 20% of our ASMs next year will be flown on the MAX. To kind of frame that and the benefits we get from a fuel perspective, the ASMs per gallon on a MAX are just over 100, like 105, I want to say, versus the A320 series is closer to 80. So, call it about a 30% benefit in that regard with the same ownership cost. So that, and then coupled with all the technology initiatives and just continuing to get better, drive more productivity and efficiency, our plan now has margin expansion next year, and we think we can build off of that. All right. Drew, BJ?

Yes. I'll just add a couple of things here. So Scott, we're in kind of the second phase of our budget planning for next year. So it's not final. I don't want to go so far as to give guidance. But you can kind of lead into what Drew talked about in terms of the shape of capacity next year relative to fleet counts with being down a little bit in the first 2 quarters, that's going to put the most pressure on CASM-ex in the first 2 quarters of next year. And then like Greg said, I'm relatively optimistic that even given limited growth that we can hold the line on cost next year, just given some of the structural cost improvements that we've made this year.

Your next question comes from the line of Ravi Shanker of Morgan Stanley.

So it seems like it's a clear coast ahead. Obviously, Sunseeker is behind you now. Margins are starting to improve. It seems like you're on a better path with kind of stable capacity and the CASM, TRASM issue everything else. So, can we start to dream the dream about what normalized EPS looks like again? Obviously, coming out of the pandemic, it is a very different level than you guys are right now. How do we think about what that long-term trajectory looks like in that destination as well?

Thanks, Ravi. Let me kick it off. Again, we're not going to guide 2026 or long-term EPS at this point. But our goal is to get back to solid double-digit operating margins, and that's what we're executing towards. We talked about the work -- the great work that's been performed by the team this year and harvesting all that work into 2026, and we expect margin expansion there. And all else being equal, I think in 2027, there's still more initiatives as we prioritize and continue to improve in different areas of the business, we think continue to expand into 2027. Drew and his team, I think, have done a really good job of kind of walking through a framework of our commercial strategy, and this is more tied to the longer term, I think margin -- improving margins are driving higher margins. And I mean, it's from continued loyalty enhancement to different products, non-ASM revenue in different areas on that front. I think BJ and team on the cost side have done a terrific job. We're unique in the industry in the sense that we have high variable costs, low fixed costs, but it doesn't mean the fixed costs aren't material for us. And so when demand softened this year by way of example, I think the team reacted quickly. We scaled back growth, but then we went in and took out some of the structural costs. And so I mentioned that because looking ahead towards 2026, 2027 and beyond, we're always going to take a hard look at our cost structure. We're going to continue to find ways to better optimize the business. I think the MAX fleet as well. If you think about '27, '28, the efficiencies we're seeing there by the time we get to 2028, I expect 50% of our ASMs are flown by the MAX aircraft and driving a nice tailwind on the fuel side. So, we've talked about it. We teased it on the last earnings call. We probably think it's helpful at some point next year to have an Investor Day to really walk through some of these initiatives, the guardrails and what we think our objectives are and our opportunities are. But I think it just a high level on the earnings call today, where we sit, we feel confident that 2026, we could drive higher margins, all else being equal in the demand and fuel backdrop, and we can continue to build on that momentum in 2027.

Got it. Those are helpful building blocks. And maybe as a follow-up, can you just give us an update on the Vegas market and kind of what you're seeing there and remind us of seasonality there again, also kind of easier comps next year, kind of do you think that can bounce back from some of the headwinds earlier this year?

Yes. Obviously, Vegas still underperforms where we'd like it to be. It has definitely shown improvement through the summer and through the fall. Maybe on the seasonality front, it's historically been a very unseasonal market. Pre-pandemic, it was very reliable year around. It definitely feels more seasonal today than it has, which is little bit unfortunate given how much of a rock star it has been for so long. Seats are definitely coming out of the market. I think there's room for more improvement. I've seen more from the Vegas resorts in terms of innovative ways to recapture customers and recapture trips. So, I think there's better times ahead for Vegas, but we're still kind of climbing out of the hole a little bit.

Your next question comes from the line of Michael Linenberg of Deutsche Bank.

This is Shannon Doherty on for Mike. For starters, congratulations on your promotion, BJ. This first question is probably not for you, but maybe to Drew. Can you guys speak to how your competitive landscape is evolving moving into new cities like Atlantic City and Burbank? And I'd also be very interested to hear more about the 15% of new routes that you launched this summer that did not perform to expectations. What did you see there?

Yes. So, maybe first on what I think was about kind of the new city selection. It continues to be the same pillars that guide all of our network selection, looking for unserved and underserved markets that fit our customer profile well. Atlantic City, we've seen some reduction in seats. It's a market -- an airport we've been talking to since 2017, 2018, and we felt like the time was right for us to move in there. On Burbank, and we've talked at length about LAX and the cost structure there was becoming a bit untenable for us. And so we kind of diversified our basin capacity between Burbank and SNA, where we've been in for a few years now. I think Burbank is going to be a great addition. So, that's going to be helpful for us. On the competitive capacity front within those cities, obviously, there is some capacity on Atlantic City and on half of our Burbank selection. It's not something that we're running away from capacity -- competitive capacity from. We're trying to do what's right for Allegiant to run our rates, and we found success on some of these markets. And on the 15% where we weren't successful, we'll take a look at each of those some. It's the first year. It may or may not be meeting expectation, but there should be some level of maturity and run rate associated with those. And for those, we don't see a future, they'll come out. We won't operate them next year. It's kind of that simple. We've got a long runway of new opportunities. So, I have no issue cutting bait on those and finding something new.

Shannon, it's Greg. I just want to add to Drew's commentary there that for serving the domestic leisure space, our low utilization tactical capacity model works well. I was interested, I thought Drew provided an interesting comment in his opening remarks, I paraphrase, but it's just along the line of the resilience of our leisure customers who they represent all facets of the economy. They like to travel, and they have the means to do so. And what he and his team are doing are continuing to find those markets that are low fares and convenient non-stop service. It's a strong value proposition.

That's great. And maybe just bigger picture, right, is the demand that you're seeing today supportive of higher growth in the peak periods than flattish that you're expecting next year? I'm just trying to figure out how constrained you are from a utilization perspective.

For the most peak periods and really, that's the holidays and spring break sprint. We're maybe not 100% at our max utilization, but we're pretty close. We're pushing as hard as we've ever pushed through the holiday period. I think we have just a little bit of slack in March, kind of more growth would come in the off-peak such that the environment calls for if demand were to peak up or fuel were to meaningfully come down, can find a little bit more in there. I think as we get towards the summertime and that schedule comes out as out now will be in the public things in the coming weeks. We'll see a little bit more slack that we can add into on that front.

Your next question comes from the line of Conor Cunningham with Melius Research.

Congratulations, BJ, on the promotion. I was hoping to -- we could talk -- so yes, the MAX situation, you're obviously talking that up a fair bit with -- I think, Greg, you mentioned that it's going to be 50% of your capacity in 2027, 2028 or something in that time frame. Can you just talk about -- in the past, you've talked about like a rule of thumb around EBITDA or EBITDA per aircraft. And I would just think that there's -- the MAX EBITDA contribution is way higher than the current A320 fleet. So just any like high-level thoughts around that? I think you mentioned 30% fuel efficiencies. But is there anything else that's within it that could be helpful in building that type of thought process?

Yes. Maybe let me kick that one off. And we talked in the past, Conor, quite a bit pre-pandemic, I think the $6 million of EBITDA per aircraft was our true north. I want to say right now, what are we roughly $3.5 million of EBITDA per aircraft thereabouts. I won't go into all the detail on the initiatives that we've either completed or completing or plan to complete that I'm talking about around margin expansion because I think you want to zoom a little bit more on the MAX aircraft. A couple of comments that I think are interesting. One, that the earnings on it today, now it's still early, are 20%, 30% higher than the A320 series fleet. And I want to dig in on that a little bit here. But the other thing is the operational reliability is outstanding. It's not quite a point, but nearly a point higher than the 320 series fleet. But some of the questions as you think about the way we deploy capacity, Drew and his team and you think about utilization, think about it in third, so in terms of lines of flying. So yes, the first 1/3 was through utilization roughly 8 to 10 hours per aircraft per day in the middle 1/3 of the middle tranche, roughly 6 hours and then you go from 3 to 4 hours on the lower tranche. So obviously, with these aircraft, we're going to put them in on our highest lines of flying just because of their performance and their reliability. But Drew did an interesting study where because of our base structure was comparing the highest lines of flying in base A versus MAX performance in respective bases. And it's still like-for-like, significantly outperforming the 320 just given the economics that we've talked about in the past. But Drew, I'm excited about the MAX and what we're seeing, continue to take more deliveries of those aircraft. We have the same ownership cost in general as the 320. So it's commercially a good deal for us. And Drew, BJ, anything else you want to add?

I'll take one step and that was comparing the highest lines of flying regardless of base on the Airbus to the MAX performance and outperforming in that 20% to 30%, putting it on a highly utilized base like Fort Lauderdale is going to have immense benefits, and we'll continue to be selective on where those aircraft go to make sure that we're getting the most value for those going forward. It's incredible.

Yes. I'll just add one thing Thanks, Conor. We've talked about the overall earnings of the MAX at this point being about 30% better than the just an average. As you would expect, most of that comes from fuel efficiency. But there's still a bit of improvement in other OpEx as well, primarily coming in on the maintenance line. Just don't want to underappreciate the value of the maintenance honeymoon. We had gone a few years where we weren't adding any new airplanes. And that meant 2 things. One, we weren't getting any relief on maintenance cost of aging aircraft. But two, we had a larger percentage of our overall fleet unavailable during peak periods for revenue service. And so by introducing some component of new aircraft again, we've got more of the fleet available for service.

Okay. Super helpful in detail. Just around the co-branded credit card program review and nearing a completion, I was hoping you could drill down on that a little bit more, just talk about what you've learned, what needs to be tweaked? Just if there's anything else there behind it. I know that you've talked about it for a couple of quarters. As we're closing on the end, just any thoughts in general?

Yes. And probably, it's still a bit early for me to get too detailed, but there's obviously a lot of work left to go. What we've learned, I think, some was in my remarks. We do have a fairly affluent and well-off customer as a subset of our overall base. And we haven't been providing, I think, probably the best value proposition to all of the subsets of customers that we can. So, I think something that's a bit more segmented, something that provides a better value proposition than what we're offering 10 years ago is going to be really helpful. You've watched most other carriers go through a few evolutions of their programs since, whereas our annual fee is still the same today that it was at launch. So, there's a lot of opportunity there just in terms of how the overall market has evolved, as well as leaning a little bit more into what we know with our customers specifically. One area that's pretty obvious and something that I've heard mentioned elsewhere, we weren't giving our customers a great reason to spend on our card, right? It's great when you're interacting with Allegiant specifically. But how do we broaden that to be a bit more relevant more often? And I think that's been pretty low-hanging fruit to drive very scalable and efficient volume in terms of contribution to us.

Your next question comes from the line of Dan McKenzie of Seaport Global.

BJ, congrats on the promotion here. So, I know you guys are guiding to flat capacity in 2026, but probably the biggest change over the past quarter is just Spirit filing for Chapter 11 and downsizing. And I know that your overlap with them is very de minimis, I think 2.5% or something like that. But I guess the question really is, is Spirit's downsizing causing you to rethink the network composition? So, have you picked up more gates either at Fort Lauderdale or elsewhere? Or just kind of thinking about the percent of flying that you have either in the West Coast versus into the state of Florida?

Yes. We haven't -- I mean, we haven't seen kind of those direct benefits to date. I'm sure if we will, I think there's still a lot of support for Spirit maintaining a fairly large Fort Lauderdale presence. We have certainly seen some pull down of capacity out there. We're very excited about Fort Lauderdale. We obviously have been putting our MAX aircraft there, trying to grow capacity where we can. So, we're very interested, but I don't know that point to a lot of direct benefit yet. We'll remain opportunistic and mindful of what happens, but maybe not as much to point directly then.

Yes. Understood. Okay. And then CapEx above 2025 and 2026, but not meaningful pressure on leverage to go back to the script. I'm just wondering if you can provide a little bit more perspective on that. Are you planning to pay cash for some of the aircraft next year? Or how should we think about the decision to lease versus to purchase? And how do we think about year-end leverage at 2026 versus 2025?

Thanks, Dan. Yes, I'll give it a shot here. So when I think about next year, I kind of mentioned in response to Savi's question. Some of the CapEx I guess, lift, if you want to think of it that way next year, is really going to be driven by PDPs. And those will come due throughout the year. Our aircraft delivery schedule is back half weighted. And so with the way the business produces cash in the first quarter, certainly, we could pay cash for the amount due to Boeing at delivery for our airplanes probably for the first half of the year. That said, we'll be opportunistic and keep our ear to the ground on the markets to look for the most attractive way to finance those airplanes. I would tell you, we've spent a lot of time on this this year. I would tell you that we expect to continue owning airplanes and that's why we try to grow at the pace that the balance sheet allows for. Owning airplanes in our mind is half the cost of leasing airplanes over the life of the asset. And we think that, that's one of the key ingredients that supports our low utilization model. So, I would suspect that we'll continue to be focused there. We'll always keep an open mind and look at offers that come in, but that's my expectation.

Your next question comes from the line of Brandon Oglenski with Barclays.

Congrats as well, Robert. Greg, I guess I've heard a lot of questions tonight around growth. And now that the hotel is behind you, I think like what's the next phase for Allegiant here as you focus on the core of the business? Historically, we've always heard there's, what, 500 or 600 markets out there that could be Allegiant-esque. Is that still the case? And especially in line with Dan's question just previously, I mean, airlines are still losing money even as some of the low-cost capacity comes out. So, do you just need to see the industry still rightsize itself in the next year before you can start thinking again about future network expansion?

Thanks, Brandon. And I'll kick it off and ask Drew to come in on his views around the growth in a little bit more detail. But the good thing about us is we have optionality. As BJ just mentioned to Dan, we own our aircraft. We plan to own the new aircraft that are coming to us, and we own our used 320 fleet. In prior calls, I think we've talked at least at a high level about the importance of earning the right to grow. And so that fleet flexibility advantage, I think that's something we have that gives us the ability to determine what that growth rate looks like. And this is to drive better discipline to ensure we grow that we grow profitably and that we run a really good airline. I think what we've seen from Tyler Hollingsworth and the operational teams over the past couple of years, our ops team has really stepped up and we're pleased with what we're seeing, but we're not going to push it to a point to where it's going to be do more harm than good. In terms of our model and what we do, we think it's unique. We think there's a lot of opportunities for us to continue to grow. And as the industry -- as you kind of mentioned there, Brandon, I think as the industry, particularly our sector or segment of the industry, I guess, for lack of a better term, find this equilibrium kind of works its way through. We think well-run carriers like Allegiant, there's going to be opportunities for a flexible capacity model like ours. But Drew, I mean, you feel like there's a lot of network and runway ahead. So, do you want to talk about how you view the opportunities?

Yes. I'll kind of take it in 2 pillars here, maybe. Number one, right, we talked in the remarks about over 50 new routes that operated this last summer that weren't operating the summer before. I believe there's an immense amount of opportunity that remains. We've talked about 1,400-plus, well beyond the 500, 600 that I think will work well for us. Certainly not all of them will, but I think the vast majority are perfect for what we do. So, I think there's no shortage there. Second, and Greg mentioned kind of this post-Navitaire implementation time frame. It's not a big secret that we didn't have the cleanest of implementations with our Navitaire system. And it's taken us a little over 2 years to start to turn toward, okay, what's the next thing that we can start to build on our new foundation to help further develop the commercial stack and how we're interacting with customers, providing the right experience throughout the journey. And that's where that next phase goes. It's kind of a little bit of catch-up candidly to where others have seen success, which tells me there's a lot of low-hanging fruit for us to be able to get it. So it's not just on the network front. It's about the entire commercial strategy to make sure that the current network and future network work as well as we possibly can.

Appreciate that response. And I guess, Greg, as you think about potential industry M&A, if that does play out, I don't know where does Allegiant fall within that context?

Thanks, Brandon. Just some high-level thoughts, right? 80% of the domestic market is controlled by the big 4 carriers and what the industry is showing is that size, scale and relevancy, I think, have their advantages in our industry. And we believe that it's in everybody's best interest, well, certainly consumers' best interest, I should leave it at that and having stronger airlines competing against the big 4. I'll tell you for us, we like our model. We like our ability to outperform, especially given everything we're doing and that we've been talking to the Street about for some time now. So, I don't want to -- I don't think consolidation is needed for us to get back to our historic earnings profile. But at the end of the day, what we're focused on is driving shareholder value.

Your next question comes from the line of Catherine O'Brien of Goldman Sachs.

Congrats, BJ. Maybe a follow-up to Shannon's question earlier. Is the flat capacity outlook next year a function of the fleet being maxed out? Or if demand got significantly better, could you and would you delay retirements or push utilization higher in the off-peaks? And I guess, like if the answer is yes to that, how much better would demand have to be for you to consider doing that? And what are the guardrails you assess in making those kinds of decisions?

Yes. So we're -- I think like I mentioned, we're operating probably about as heavily as we're able to in the peak weeks through Thanksgiving through Christmas and into spring break. There's absolutely room for us to grow in the off-peak periods or even some off-peak days within those peak weeks such that we have a booking curve if the demand environment were to improve or fuel environment were to get meaningfully cheaper. I don't know that I have a specific value would be looking for, say, demand needs to get 5% better to add one. I'm not sure that I have that for you today. But it's something we'll continue to monitor. We certainly have the bandwidth for anything in the spring and then summer is so far away that lots of time to react regardless of what may happen.

Catie, I'll just take the fleet side of that. Just keep in mind, the aircraft reduction that we see in the first part of '26 is a result of 8 leased airplanes returning, really exiting service from late third quarter through late fourth quarter. These were transactions that originated back in the pandemic and those airplanes need to go back because they're much, much more expensive if we had chosen to keep them. And then as we move through the year, there's probably some more flexibility with a few shells to extend retirements, but just don't underestimate how expensive that gets when you start talking about 24-year-old A320 family aircraft. The return is just much better when we invest that capital into our MAX order. And we start to see the MAX deliveries pick up in the back half of the year anyway.

Sounds like a prudent plan. I guess as you -- for my second question, as you've increased the proportion of the fleet with Allegiant Extra over the course of this year, any updates on the impact of the financial impact of that configuration versus your aircraft without it? And then just annualizing the higher proportion of Allegiant Extra in '26 that you put in place over '25 on flat capacity, roughly speaking, any sense of how much of a RASM tailwind that could be into next year?

Yes. So the contribution has remained pretty flat around that $500 per departure. Obviously, as we put more and more on to that layout, it gets a little bit harder because our counterfactual or our control gets a little bit smaller. So, that remeasuring gets a little more challenging moving forward. I feel good about the $500. From a full year basis, I think we'll be something around 10 points of departures incremental on a full-year basis. So, you can think about the $500 per departure across roughly 10% more flights or 10 points of distribution.

Your next question comes from the line of Atul Maheswari of UBS.

Congrats on the promotion, BJ. I had a question on the fourth quarter RASM. Last year's fourth quarter was really a tale of 2 halves for the industry, and I also think for Allegiant as well. First half was difficult last year with the elections and some weather, and then the back half of fourth quarter, especially December last year was very strong. That would create very lumpy year-over-year compares for you for this fourth quarter. So the question really is, does your guidance assume some slowing in RASM over December as you lap difficult compares? Or are you simply expecting current book yields for the fourth quarter to persist for the rest of the quarter that's unbooked?

Yes. I mean the lumpiness is nothing new for Allegiant, right? Being a leisure carrier, we're going to ride in the highs and lows of leisure demand, which means in just about every year, Thanksgiving and Christmas are good, and the shoulder and off-peaks are a little bit weaker. We'll certainly get the benefit of having the weather in our comparison through October. I would expect more of that flat capacity weakness to persist in the off-peak period, call it, early November, early December, while the holiday periods, I think, will be much closer to on par with last year, probably not flat, but much closer to on par. So very, very resilient holiday periods with kind of typical fluctuation within the quarter between the peak and the off-peak.

Got it. That's helpful. And then just quickly, are you able to share what portion of the fourth quarter is booked by month, if you can?

The portion booked, I can talk to the quarter maybe. We have about 75% of the fourth quarter booked at this point. We do have about 100% of October booked. So, we have some pretty good line of sight. The fourth quarter, in particular, the holidays tend to be the longest booking curve of the year. So, we can give you a little bit of forward insight there. Looking forward to the first quarter, it's obviously much lower. We're probably something closer to 15% booked as well. So, we won't get a lot of insight to the first quarter until the calendar slips really.

There are no further questions at this time. And with that, I will turn the call back to Sherry Wilson for closing remarks. Please go ahead.

Thank you all for joining the call. We'll chat again next quarter.

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