Welcome to the Sun Country Airlines Fourth Quarter and Full Year 2021 Earnings Conference Call. My name is Norma, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there’ll be a question-and-answer session. . I would now turn the conference over to Mr. Chris Allen, Director of Investor Relations. Mr. Allen, you may begin.

Thank you. I'm joined today by Jude Bricker, our Chief Executive Officer; Dave Davis, President and Chief Financial Officer; and a talented group of others to help answer questions. Before we begin, I’d like to remind everyone that during this call, the company may make certain statements that constitute forward-looking statements. Our remarks today may include forward-looking statements, which are based upon management's current beliefs, expectations, assumptions subject to risks and uncertainties. Actual results may differ materially. We encourage you to review the risk factors and cautionary statements outlined in our earnings release and our most SEC filings. We assume no obligation to update any forward-looking statements. You can find our fourth quarter press release on the Investor Relations portion of our website at ir.suncountry.com. With that said, I would now like to turn the call over to Jude.

Thanks, Chris. Good morning, everyone. Today, we're excited to announce full year record results in 2021. Further, our margins, adjusted for CARES Act benefit, again lead the industry. Our multi-segment business model is unique among airlines due to the predictability of our charter and cargo businesses. We're able to deliver the most flexible schedule service capacity in the industry. The combination of this schedule flexibility and low fixed cost model, allow us to respond to both predictable leisure demand fluctuations and exogenous industry shocks. We believe due to our structural advantages, we'll be able to reliably deliver one of the industry's best profitability throughout all cycles, as we've been demonstrating through the COVID crisis. First, I want to talk about operations. I continue to be amazed and impressed with the aviation professionals we put on the front lines each day to make this operation work. I'm not sure I've ever seen as challenging a set of circumstances for an operation as what we've been dealing with since the holiday peak, yet our folks have delivered, as they always do. Thank you to all my team members. To start, I want to address some of the most commonly raised concerns in our industry. First, staffing issues. We've certainly seen the effects of a tight labor market on our staffing needs. Currently we're hiring across all major labor groups. Shortages, however are most acutely felt in pilots, technicians, and ramp staff. In each of those groups, we've negotiated or announced increased pay and benefit offerings just recently. We most notably reached a new agreement with our pilot group, bringing our pilot pay above those airlines in our competitive set. It should also give investors’ confidence in our ability to staff to our growth targets. Across the industry, I believe staffing challenges will…

Thanks, Jude. We're very pleased with our results in 2021, as we accomplished a lot on a challenging year for the airline industry. In March, we launched our initial public offering, which great least strengthened our balance sheet and gave us the resources necessary to drive our growth. We grew block hours during the year by 58% versus 2020, and 13% versus 2019. We added five passenger aircraft, signed long term charter agreements with MLS and Caesars Entertainment, and we rapidly negotiated and ratified a new pilot agreement. All of this was done while maintaining five consecutive quarters of greater than 15% EBITDA margins. Our new four-year pilot agreement signed in December was negotiated in less than four months’ time, which speaks to the professionalism and dedication of our pilot group and company negotiating team. The new deal is a key enabler of our growth plans. Specific benefits of the agreement include, one, pay rates, benefits, and work rules that are highly competitive with our low-cost peers and should allow us to recruit the pilots we need to support our growth. Early indications are promising, as pilot applications to Sun Country are up by 160% compared to the months prior to the new agreement being announced. Two, new work rules that will allow pilots to start trips from their home locations, and provide for the implementation of a preferential bidding system. These changes will make Sun Country a more attractive option for commuting pilots, and reduce our costs by allowing us to more efficiently schedule flight crews. And three, the ability to assign reserve pilots to bases outside of MSP. This flexibility was a key requirement to unlock potential future Amazon growth. Our pilot pay rates were significantly behind the industry, and the changes in the new contract are expected…

. Our first question comes from Hunter Keay with Wolfe Research. Your line is now open.

Hey, thanks. Just a quick one on that last kind of Dave, that's scheduled plus charter together for the $7.8 billion ASMs?

Yes. That’s right.

All right, thanks. And then Jude or Dave, wondering kind of what your thoughts on this - the max planes that your old pal, Allegiant just bought, Jude. I was wondering not necessarily if you want to comment on that for them, but if there's any thought to maybe an evolving view that maybe that could work for you.

We always study it, but we haven't been able to make the economics work thus far and it's not closed. I mean, we're seeing used aircraft values for late model aircraft, so six to 10 years old, that aren't much above tear-down values still today. And I don't know. I just don't think the max can compete with that.

I got you. All right. Another question for you on the Spirit-Frontier deal. Again, how are you thinking about that in terms of the overall impact, the overall competitive landscape? And how does that change the algorithm for you in terms of how you're thinking about growth, or will it?

Not at all. We don't have a lot of overlap with either of those carriers. They've both been out there trying to find things that the other doesn't do for multiple years as they’ve both been growing so rapidly. And Minnesota hasn't been very successful for them. And I don't think that changes with them as a single company. So, my view is, we don't have a lot of overlap with them now. We won't have a lot of overlap with them in the future that makes it not necessarily a great thing. it's not a real positive, but it also isn't really a negative. And therefore, it doesn't really change what we're doing.

I think generally Hunter, we view sort of consolidation in the industry as a good thing. So, from a high level, we're positively inclined toward it.

All right. I'm going to get back in the queue. Thanks a lot.

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

Hey guys, nice to be speaking with you this morning. Hope everybody's staying warm.

It's actually 40 degrees today. So, a record. it's an eight-week record

Break out the sunscreen exactly. On pilot basing, which you now have this new flexibility, and you talked about how that's going to help you on the cargo side, but could you expand a little bit on how that impacts the passenger side of the business, and how it might impact your thinking with respect to new markets?

Yes. I think one of the biggest things that we got here was the implementation of the PBS system, which is going to allow us to more efficiently schedule pilots, help us take cost out and improve trip quality for our pilots. So, most other airlines have this in place. Sun Country has it. So, we’ve now got it. This ability to station reserve pilots out of Minneapolis for cargo trips was a big thing for Amazon. We needed to get it to be eligible for more growth, and we've now gotten it. So, that was a big win for us. Generally, on the passenger side, I think what this does is it improves sort of quality of life for our pilots and makes Sun Country more interesting for commuting pilots. In other words, pilots who don't live here in Minneapolis, because they'll ultimately have the ability to start trips from home locations rather than come up here to Minneapolis to start up. I don't think it necessarily changes our growth strategy or the cities we're going to fly to, but hopefully, it's going to help us get our fair share of pilots rolling forward.

Yes. Duane, it sounds like you're kind of angling towards, are we going to create another Minneapolis? And that isn't in the plan. So, our summer growth is going to be on the blueprint of our Dallas network, which is seasonal, focus on origination traffic from a summer peak market like Dallas. And we'll replicate that across major Southern cities for summer traffic. We see a lot of summer opportunities to deploy Minnesota-based capacity into non-Minnesota O&Ds. And then keep in mind, we have a significant charter business that doesn't really touch Minnesota with originations out of LA and Gulfport and (indiscernible) and Reno and AC. And so, this just - the contract just adds to the flexibility that we can deploy assets around the country.

It makes a lot of sense. And then maybe just for my follow up, you mentioned it, that this flexibility was helpful vis-à-vis Amazon. Can you talk about just broad strokes incremental growth opportunities in cargo? And maybe along those lines, how do you weigh opportunities with perhaps a larger aircraft type, which you can now support versus potentially the increased complexity of supporting a new fleet type? Thanks for taking the questions.

Thanks, Duane. Yes. On Amazon growth, I mean, we're in continual negotiate - discussions, I should say, with them about growth. And obviously, their primary business is publicly know - as we all read about, is growing rapidly. But our focus remains on leveraging into the recovery for shared service. Our preference would be to kind of be able to build out the utilization of our existing passenger fleet before we started adding more cargo aircraft. That being said, I mean, if there's an opportunity, we'll take it. We remain flexible, and I really don't have any comments on any aircraft type other than the 737s that we're operating today.

Appreciate the thoughts.

Thank you. Our next question comes from Brandon Oglenski with Barclays. Your line is open.

Hey good morning, everyone, and thanks for taking my questions. Jude, I think you mentioned that you're flying a March schedule as much as you can, based on limitations with staffing. Did I hear you correctly?

Yes, that's right. So, we started hiring pilots earlier than the rest of the industry in October, of 15 months ago. And - but there was just a lot of catching up to do. we've been continually at - so we're just in a different situation than the rest of the industry. We went into COVID with 30 or so passenger airplanes, 31, added 12 cargo airplanes, and then have been adding passenger aircraft. So, the fleet has grown substantially, and it's just going to take us a while to staff up to that. Our training pipeline, we're in the process of expanding, but we kind of have the training staff that we went into COVID with, which was 12 pilots a month of capability. And we want to make that two or three times that, and it just takes a little bit of time to ramp all that up.

Okay. Appreciate that. So, it's not something commercial you're seeing like in the spring break period. I think you had pretty favorable commentary on demand.

Yes, absolutely. So, I mean, it’s tough to forecast in a COVID environment as we've been talking about, it seems like a long time now. And the revenue in the first quarter for us is particularly heavily weighted towards the very last several weeks of the quarter. And so, what we're seeing in bookings just over the last, I don't know, two weeks, is really, really positive. And just like other waves of the COVID crisis, it is highly correlated to what we see in the fall-offs and hospitalizations, for example, across the country, and our bookings are turning the corner in the same way. And just like with other waves, this recovery begins with domestic leisure markets that we serve. And now we're starting to see it extend into some of our longer haul markets and international markets. So, that's why we have such a wide bracket of our revenue forecast in the first quarter, is that there's still quite a lot of uncertainty, but if you extrapolate out what we're seeing today, it looks like a really positive finish for the quarter.

Okay, appreciate that. And if I could just ask one more, maybe of Dave. You guys mentioned in the prepared remarks, or at least in the release, about Amazon and some impacts from operational difficulties. Can you talk about the financial implications of that, if you don't mind?

Yes. The financial implications were pretty minimal. We had some operational disruptions right towards the end of the year, sort of a perfect storm of some staffing issues that were COVID-related, really, really cold weather here. And then we had an IT outage that resulted in sort of an abnormally high level of cancellations for us. I would think of the financial impact in the fourth quarter to us of all these issues as, let's say $1 million-ish. So, not a huge in impact for us in the fourth quarter.

I mean, we kind of see - I just want to contextualize a little bit like just across the ecosystem. So, staffing issues for us, but also all our vendors that we rely on for maintenance and ground support, federal agencies like TSA and the FAA and air traffic control, are having staffing issues associated with both hiring and also sick time related to COVID, and then the supply chain. So, we're delayed in getting aircraft into service and repairs done, service bulletins and engineering work from Boeing. It's just like a weird environment right now. And I continue to believe that that's going to put kind of a governor on industry capacity as we see the commentary as airlines have announced. That'll be positive for fares as we push into the summer period.

Thank you.

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

Hey, good morning, everyone. Thanks so much for the time. So, one, just on the revenue beat this quarter, can you walk us through what drove that? I think last quarter, there was some incremental charter ops with the Afghani mission that drove part of your third quarter beat? Any charter ops here, higher Amazon, or was it just stronger passenger demand?

Yes, it was higher fare. I mean, we went into the quarter in a really uncertain environment, right? I think when we had the call, we were probably coming down off of Delta, and then the Omicron thing happened. So, we were somewhat cautious on the revenue guide, and I think the fare environment just strengthened pretty rapidly and that produced the outperformance.

Yes. If you recall back to Delta, we kind of saw this inflection point around late September that was just really dramatic where we went from a weak environment to the next day it was increasing, and we kind of saw this really strong demand increase up until really the Omicron variant and through the holiday period. And we're kind of in that same place now with Omicron as we move into the March period. And so, I I'm just really bullish on demand in the next four to six weeks as we move into our peak spring break holiday season.

Got it. Okay. So, that - you answered a little bit of my follow-up, which is, just as you're thinking about the first quarter, you spoke about how it's very back half weighted, like the last several weeks as we get into March. It’s like typical seasonality. That makes sense. But can you give us some color on how you’ve thought about forecasting the first quarter out? Is there a fair degree of conservatism in 1Q too just given the Omicron variant, or due to the amount of bookings you already have locked in, do you feel like you have more certainty than where you were forecasting 4Q? just trying to get some color on how you work it all.

I'm going to turn it over to Grant maybe who runs our revenue and for some color.

Yes. thanks, Catherine. And I would say - I would echo what Jude said. We've gotten so good at seeing these waves and sort of how things play out that as we look to forecast the first quarter, the fourth quarter was pretty instructive in terms of how that sort of return of demand after Delta performed. And we had three distinct peak periods for us, which was a little bit different. We have a holiday school break in October where we saw really good demand, Thanksgiving, and the second half of December. And so, using that, we have a pretty good sense for the first quarter. And one thing that's really notable about us, in the first quarter, we actually have an inflection point just in overall capacity. For a while, we trailed 2019. This is the first quarter where we're bigger than 2019 on a pretty substantial basis. On the scheduled side of the house, we feel really good about the schedule we have in the market. It's really Minneapolis focused. We've done a really good job building the brand in Minneapolis, connecting with customers here. So, the one thing I think that we are doing is just working really closely with our operating team, because the airline is fully deployed in March. And so, for us, it's just execution, making sure we deliver. And I can say that the team here does that as well as any airline I've seen. So, we're very focused on that. So, just anything that would bring guardrails to the first quarter, just making sure we can deliver. And I think there's a ton of confidence here that we will.

That's great. And then maybe one for you, Dave, on the - quick clarification. Wanted to follow up on the balance sheet. So, on the five aircraft you have signed LOIs for, I guess, are those part of the eight planned deliveries this year, or are those incremental? And then, given Jude's comment on your target aircraft being still for sale, not much above tear-down, like, do you have - I know there's still some training guardrails you guys are working on, but from a balance sheet perspective, like if those deals are perhaps not here to stay forever, is there capacity on the balance sheet, an appetite from management’s perspectives, maybe lock-ins on aircraft for future periods? So, thanks - a little bit of a two-part there. Thanks.

Yes. Let me just talk about the fleet situation. So, our fleet plan for 2022 has us adding eight passenger aircraft. We signed deals for two of those last year in ‘21. So, those are going to be delivering. The five I mentioned are part of the eight. So, that brings us to seven, and it's only early February, that'll be delivering through the year. And we need to find only more to hit our fleet plan. But I think it's fair to say that what you said is accurate. We continue to see attractive deals in the market. We're very active. And to the extent that we see really good deals and maybe we front load the fleet a little bit, we will do that. Balance sheet is not a concern. we're very well capitalized. We have access to whatever - to the financing that we need at really attractive rates. So, that's not a limiter for us. Really, the only limiter at this point is our ability - is really the staffing side, our ability to train pilots, get them through and fly the aircraft. There's plenty of market opportunities for us, plenty of aircraft that are available. We have the balance sheet capacity to bring them on. So, yes, we're in a good spot from the fleet perspective.

Okay, great. Thanks so much for all the time.

Thank you. Our next question comes from Mike Linenberg with Deutsche Bank. Your line is open.

Oh, hi. Yes, this is (indiscernible) on for Mike. My first question is, given the recent runup in fuel and putting cargo and charter aside, can you provide us with some more detail on your historic ability to recapture higher fares?

So, this is an important concept. It's just there's a wide spectrum of revenue outcomes on a scheduled service network. And our response to high fuel prices is to eliminate flights that are predictably under return targets. That's how we raise fares. We don't raise fares by going out across the fleet and adding a dollar, whatever, to the airfare. We just go in and eliminate flights to become marginal and as the new inputs for fuel price become clear to us. And so, that's the model. We don't have much of a relationship for unit cost and utilization. So, it just becomes, okay, what's the fuel price input? What flights are profitable and hit our hurdle rate at that fuel price? The other ones are eliminated, and that's how we run the service business. And that's how we're able to pass on - that's how we're able to maintain our margins in high - rising fuel prices.

Yes. And I think if you look across the industry, you definitely see that recapture effect that Jude's talking about as sort of, call lower profitable - less profitable flights or unprofitable flights capacity comes down, fares rise. And part of this cost is recaptured over time. It's not instant. there's a lag, but that's the trend.

Got it. Thanks. And my second question, can you give us any cost inputs that perhaps maybe run tailwinds throughout 2022 to drive the adjusted unit cost below 2019 levels? Or is it really more about just restoring the ASM growth and the better utilization of the network? Thanks for the questions.

Yes. I mean, I think continued averaging down in cost on the fleet side is part of the metric. We insourced our ground handling here in Minneapolis in 2020. That continues to provide dividends for us. A significant opportunity in ‘22 is just continued cost control and leveraging as ASMs come back. As I pointed out, we've been able to essentially absorb the cost of the new pilot agreement. that's in the numbers. So, it's cost control elsewhere and leveraging in to growth.

Thank you. Our next question comes from Chris Stathoulopoulos with Susquehanna. Your line is open.

Good morning, everyone. Thanks for taking my question. So, going back to the new work rules you mentioned with respect to the new pilot deal, curious if that was something that the union brought to you or was kind of mutually brought to the table, and whether there were sort of any atypical or out of ordinary concessions made during the bargaining period, meaning, in this kind of great resignation environment, or however you want to describe it, should we expect that perhaps we could see other changes to any upcoming deals you have with other groups? Thanks.

Yes. So, there's sort of a lot in that. Basically, some of the work rules that I talked about here were brought to the table by the company. others, like let's say PBS, I would probably characterize it as both sides had an interest in getting that in place. There's nothing - thinking through sort of the deal, there's nothing kind of out of the ordinary for the industry in work rule changes that we made, nothing particularly unique that's in this deal. Some of this, starting trips at home stuff is fairly unique, and we’re hammering out the final details on that. I think one of the things about this agreement is, our pilots were substantially behind the average of our - who we believe are our competitors in the low-cost world. So, there was a lot of ground to be made up, which is what drives that pilot class per block hour number I gave. We don’t believe, and the data would indicate that we're not in the same position with our other work groups. In other words, pay rates, benefits, and so forth, are quite consistent with what our peers pay at this point. So, I wouldn't expect to see similar moves with other work groups for us.

Just a little more commentary on the negotiation that we got done a contract that was pretty old. We got an amendment negotiated in two months. And it takes a tremendous amount of effort from our team, obviously, but also our pilot group and Alpha National and our MEC. And I was just so impressed with those guys. And I'm really excited for the pilots that have been here through all the challenges that Sun Country has had. We’ve got pilots been on payroll for 35 years, and now they're going to get, for the first time maybe in their whole career, an industry-leading contract. I'm just really excited for those guys. It's really kind of amazing that we got this across the finish line in the timeline that we did, and it took a lot of working together, and it was great that it happened.

Okay. And my second one, so we go back to, I think it was Hunter's question on the announced merger proposal with Frontier and Spirit yesterday. So, you mentioned it doesn't really impact anything you do. And I think you said that you kind of look at consolidation as favorably. But if the recovery in business and long haul international does take longer, and we have this kind of jump-all approach to managing inventory from your peers in the US, is there perhaps - there's also the upselling phenomenon that we keep hearing. So, is there perhaps an opportunity within this - if this merger goes through and everything else that's happening, to perhaps look at markets where you typically wouldn't have looked to sell inventory? Thank you.

I just want to be really clear, like, we're focused on the peakiest of days. And so, the combination of Spirit and Frontier that drives these 12 and 13-hour daily utilization of their new aircraft, is still going to have that same dynamic. So, I don't think this changes at all our opportunity set of really peaky leisure markets that have predictable peaks along a day of week or primarily seasonal sensitivities. So, there's a set of three 400 O&Ds that have these really peak contributions from late leisure demand. And they're not going to be effectively served with any other carrier than us. Spirit and Frontier just can't modulate their capacity as to what's required to pick up that demand that exists on those peak periods. So, I don't think - as Dave mentioned, I think it's a net positive. I don't think it changes the dynamic much here in Minneapolis, which is quickly becoming a two-airline market. And I think our growth outside of Minneapolis is still going to be focused on these predictable peak-season leisure markets originating from major DMAs.

And I think that I feel strong - more strongly about that with the merger. And it's new to us and we're still evaluating it. And I think we'll kind of see how it plays out, but I think it's positive for our ex-Minneapolis growth, and it's kind of neutral for Minneapolis and our plans here.

Okay. Thank you.

Thank you. And I have a follow up with Hunter Keay with Wolfe Research. Your line is open.

Yes. Thanks. I’ve got a few. Jude, that last comment you made, have you guys studied what happened in Seattle when that place became a two-airline market with Delta, and what happened with some of the tertiary competitive capacity there that maybe couldn't compete on schedule and loyalty? Any similarities you may see developing here or there?

Yes. I mean, yes, of course. look, I mean, Seattle's a bigger market than what we have here, and the geography is a little bit different, with flow over the ocean. But yes, I mean, I completely agree with you. I think it's an allegory to what we're seeing here with Delta, and we're focused on leisure market. I mean, I think more carefully, we want to be even more segmented the way we think about the twin cities and focus more directly on leisure, which I think will be less of a front than Alaska is in Seattle to Delta. But yes, I mean, I think there's a good model for coexisting, and I would put us right up there with Alaska as an example here.

Yes. You guys are flying commies now, but all right. And then - on the CASM comment that you made, just to completely be clear, you're expecting your ‘23 CASM ex-adjusted to be under $0.06 on a full year basis. you're saying you're just going to get there at some point in ‘23.

Yes. I mean, at this point, we're thinking that our full year number is going to be sub six.

Got it. All right. And then, can you talk a little bit about PBS some more, and just elaborate on some of the benefits that it's going to bring to you that might be unique to Sun Country. And also, just help people on the call understand why PBS is a beneficial thing for - to run anyway.

So, I'm super passionate about PBS, inappropriately. Like it shouldn't be so much …

You don't hear that.

… a focus to me, but I just love the product because, and I think it's going to be great for our pilots. So, what PBS does is, it just allows a pilot, while honoring seniority, to select their own schedule instead of us building a month-long schedule and then pilots in seniority order select from that set of scheduled options. And so, imagine just a portfolio of trips out there, round trips from Minneapolis, two- and three-day trips for charters, a cargo line that takes you through multiple cities on four, five days. And then, depending on your situation personally, you can select and build a schedule that's best for you. Obviously, not everybody gets what they want, but we're just a lot more likely to satisfy pilots for their own personal scheduling desires in a PBS system than an Alliance system, which is just an outdated system. Further, in 2017, the pilot work rules changed, Part 117. And the primary change was that legalities are now on a rolling basis instead of on a calendar basis. You used to be able to start the month anew, and now I think it makes perfect sense. It's a rolling basis. So, PBS, as it awards pilots or even flight attendants’ calendars, it takes into account those restrictions. It's just a lot more efficient for both pilots and the company. Greg, any other comments?

No. your passion came through. And I mean, more desirable trip construction means fewer dropped trips, which means more efficiency, the pilot workforce.

Okay. Can I ask a couple more, Chris? Are there others behind me?

Yes. I’ve got two behind you.

Go ahead. One more.

All right. One more. Fine. Why do you think your ops have been so strong while others have been so weak? Do you have folks just volunteering to pick up trips? I mean, is it a cultural thing? I mean, like, how are you getting people to show up? Is it because you're small? I mean, you can have direct contact.

Wow, I love the question. I feel like it's been really hard. Let me go over to Greg.

Yes, Hunter. I think it's a few things. I think that - as evidenced by our agreement that we’ve got with our pilots that shows that we've got a good relationship, and we have seen some leaning forward. Grant had mentioned just the close relationship that we have between the commercial team and the operations team to really pinpoint decisions that we need to make super close in. We actually have daily discussions where we're looking, not only day of, next day, next few days. So, it's just been a lot of close work and I think that the organization is very much aligned on what we need to accomplish. I mean, I think that's largely what it is, but there's a whole lot of tactics that come in on a daily basis to make this work.

We should touch on just structural advantages we have. One is, we're a single-based operator, single fleet type. we're in Minneapolis, which isn't JFK. it's not Honolulu, but kind of in the middle. And so, we didn't have to deal with a lot of the ATC constraints other airline - field congestion and things like that.

We've also got a good position at T2 in our terminal here, which helps with consistency of operation.

Yes. There are definitely some advantages such as that that we've got. Yes.

And the variable capacity that we can reset the schedule when we need to.

Yes. That's the other thing is kind of fire breaks, natural fire breaks in our schedule that exist as we schedule for demand, but if you’re Spirit-Frontier and you’re - the only recovery option is to cancel down and reset. We have today, Tuesday. that's our reset date, which is naturally scheduled.

Right. Yes. No, that makes sense. All right, great.

It is hard and it's come with a lot of work. There's a lot of work involved. So, it's very difficult.

All right. That’s enough.

Thank you. Appreciate it. I have more by the way.

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

Hey, thanks for the follow-up. This may be an off-the-wall question and not one I would ask most airlines at this point in the recovery. But can you just remind us when restrictions on capital return go away and how you'd be thinking about it if you didn't have those restrictions with your stock at these levels?

Yes. The restrictions go away, I think end of September of this year. Yes. Let me position it this way. The balance sheet is really strong. We have excess capital on the balance sheet above and beyond what our operating needs are to either buy planes or operate the business. We're strongly cash flow positive. We think that the shares - the share price is substantially undervalued. You can sort of draw from that conclusions you would, but we think our shares are strong buy at these levels.

Okay. Thank you.

Thank you. I have a follow-up with Catherine O'Brien with Goldman Sachs. Your line is open.

Hey guys. Thanks for the extra time here. I thought one of us might try for this, but just any high-level guidepost we should think about for what down versus 2019 means in 2022. Obviously, the path to below $0.06 in 2023, I'm guessing this year is a step towards that. But just any kind of like high level thoughts on how we should be thinking about full year 2022 CASM exercise and the context for that down versus ‘19 comment.? Thanks.

Yes. I think you should be thinking about it as modestly below 2019 levels. So, in other words, we're not sort of knocking on the door of six quite yet. We should be there in ‘23. So, we'll be modestly below - if everything goes according to plan, which we're confident in, we should be modestly below our 2019 levels.

I think the big variable is input around cap level and how quickly the recovery happens, and whether or not the shoulder months in particular were able to blow those out or not. And that's going to drive some effect on CASM.

Yes. Got it. Makes sense. And then just one more for me. Just on the new charter contract, can you just give us some color on the impact of those as they ramp up? I know in the fourth quarter you're still down 20% or so from ‘19 due to lower military flying. Will these contracts backfill some or all of that? And then I guess, if so, do you still have capacity to do more military flying if that demand comes back stronger? So, just helping us think through the impact of the new contracts and then what's left in the tank after those contracts are fulfilled. Thanks so much.

Great question, Catherine. This is Grant again. Yes, so this year, the successes of the team in 2021, in terms of selling ourselves, winning back business, winning new business, we feel really good about the portfolio in total for 2022. We have a lot of precision in terms of what it's going to be, and that's really helpful in these times, because this - it’s very operationally friendly. So, a lot of the flying we're going to be doing, it will be in pilot bids. we'll have good lineup sights on it. So, it's not going to drive close in changes or drive a lot of work for the organization. So, we feel really good about that. Getting our sort of casino business back to where it was and above where it was in 2019, is really important, because those are really good contracts for us. And then you're absolutely right. We will watch military very, very closely, and we can opportunistically take it when it makes sense. And military has been more competitive, just as other airlines have some spare capacity that they've been deploying to military. As things change and based on the recovery, we will keep close tabs on the military business. We do, and we will very much engage when it makes sense for us. So, yes, we have upside and we have a really good portfolio to begin with.

Okay, great. Thanks so much for that.

Thank you. And I have a follow up with Chris Stathoulopoulos with Susquehanna. Your line is open.

Thanks for taking my follow-up. So, going back to the question on cargo. So, you mentioned sick-outs and some IT issues, but just curious in the context of utilization, is the current fleet, I believe it's 12 aircraft, sufficient to handle growing or what could be erratic peaks, as well as what looks like Amazon is adding a few more dots or air hubs on the map here. Thanks.

You said sick-outs. I just want to be very clear. Like we have …

Legitimate COVID. I mean, people were …

Right. COVID (unintelligible).

I don't know. I think the answer - I mean, we have - we're running right now, a C-check line and that'll - that won't be a constant. I think what we saw in the fourth quarter for Amazon production, for our cargo production, is kind of what we would expect in a standard quarter going forward until we get more aircraft. I mean, and I think that's - my view is, it's kind of relatively likely. I think that we would intend to continue to have great operations that'll be valuable to Amazon or any other cargo partner. And we have a capability that I think is really valuable.

I mean, we’re comfortable and confident that Amazon is happy with our performance. And are -if they want to grow the 737, 800 fleet more, we’re very, very viable competitors to get more of those aircraft, but ultimately, it's up to them.

Okay. Thank you.

Thank you. And I'm currently showing those further questions at this time. I'd like to hand the conference back over to Mr. Jude Bricker for any closing comments.

Thanks, guys. Thanks for your interest. Everybody, have a great day and we'll talk to you next quarter.

Ladies and gentlemen, thank you for your participation in today's conference. You may now disconnect. Everyone, have a wonderful day.