Hello, and welcome to the Frontier Group Holdings First Quarter 2021 Conference Call. My name is Cherry, and I will be moderating today's call. This call is being recorded, and a replay will be available on flyfrontier.com in the Investor Relations section. [Operator Instructions] It is now my pleasure to turn the conference over to Susan Donofrio, Head of Investor Relations. You may begin.

Thank you, operator, and welcome, everyone, to Frontier's first earnings call as a publicly traded company. This call is being recorded and simultaneously webcast. A replay of this call can be found on our website. On the call with me today are Barry Biffle, Frontier's President and CEO; Jimmy Dempsey, EVP and Chief Financial Officer; and Daniel Shurz, Senior VP, Commercial, as well as other members of the management team. [Operator Instructions] We also wanted to remind everyone on the call that today's discussion contains forward-looking statements that are based on the company's current expectations and are not a guarantee of future performance. There could be significant risks and uncertainties that cause actual results to differ materially from those reflected by the forward-looking statements, including the risk factors discussed in our reports on file with the SEC. We undertake no duty to update any forward-looking statements. In comparing results today, we will be adjusting all periods to exclude special items. Please refer to our first quarter 2021 earnings release, which is available on our website, for the reconciliation of our non-GAAP measures. With that, I will turn it over to Barry for his opening remarks.

Thank you, Susan, and thanks, everyone, for taking the time to attend our first earnings call as a public company. In a moment, Daniel and Jimmy will bring you through the details of the first quarter and our expectations going forward. First and foremost, we're pleased with what we're seeing in the demand for travel. The vaccine is truly unlocking the pent-up demand everyone anticipated, and bookings are getting stronger every week. We believe our focus on leisure travel, coupled with our Low Fares Done Right strategy, positions us as an industry leader in this recovery. While this has been a challenging year across the industry, we're very thankful to all of our Team Frontier members for their commitment and diligence to ensuring our successful navigation through the pandemic, and they have helped us ensure we are well positioned to succeed in the recovery. I also want to thank our union leadership as they have partnered with us on a range of solutions to help keep our employees and customers safe over the past year. One thing is certain, Team Frontier is stronger than ever as we emerge from this crisis. As we position the business to maximize the rebound opportunity, we're adding routes to both new and existing cities in our domestic network and growing our near international network footprint as well. As an example, we added leisure destinations for the summers that include Nassau, San Jose, Costa Rica and St. Maarten. These additions come on the heels of new service already introduced to Guatemala City, San Salvador as well in Central America. We've also added new nonstop routes from Atlanta, Dallas, Denver, Las Vegas and Salt Lake City. Further, our commitment to being America's greenest airline was enhanced by the addition of 3 new A320neo aircraft added to the fleet during the first quarter of 2021. In addition to the fuel efficient engines, they were the first aircraft in our fleet to feature our new Recaro lightweight seats, which are 30% lighter than our existing seats and considerably more comfortable. We achieved significant milestones during the quarter, including executing an IPO to enhance our liquidity, becoming cash positive in March 2021 and getting our departures back to 2019 levels in March 2021. We're now focused on moving the business back to profitability in the second half of 2021 and operating at full utilization next year in 2022. Overall, there's positive energy across Team Frontier as we move beyond COVID. Our momentum aligned with the growth trajectory of the fleet position Frontier to maximize shareholder value and the recovery ahead. I'll now turn it over to Daniel, who will provide more details on our performance for the quarter.

Thank you, Barry, and I want to join you in thanking all of Team Frontier for continuing to take such good care of each other and our customers. I also want to reiterate how pleased we are that all our first on right travel model has resonated so well with our customers. We firmly believe you shouldn't have to pay a high price to get a high-quality family-friendly travel experience. Our low-cost model has allowed us to roll out reasonably priced unbundled and bundled options, and we continue to listen to our customers and fine-tune these offerings. This content subscriptions providing members with exclusive access to Frontier's lowest available fares continue to grow. Working with our loyalty partner, Barclays, we just launched some new offers to attract even more card members. The benefits offered by the Frontier Airlines World Mastercard have already been recognized by Money.com as the best airline card of 2021. And we were one -- among the first to initiate a variety of heightened health and safety initiatives early on in the pandemic, and we will continue to make our customers our foremost priority with respect to comfort, safety and operational performance. As Barry mentioned, we continue to increase our Caribbean and Latin America footprint. And this summer, the region is expected to account for over 13% of our capacity. We're also targeting additional new international growth over the next few years. We're also excited to be adding 5 new domestic cities to our summer 2021 schedule, including the return of Frontier service to Alaska. Now on to the trends we are seeing within our quarterly results. Similar to other airlines, our January and February performance reflected the third COVID wave across the United States and the impact of new travel restrictions. After President's Day, we saw demand for our travel improve as we moved into the spring break and Easter booking window, with a significant step-up in March demand. Operating revenues for the March quarter declined due to the impact of COVID, causing a 36% decline in capacity year-over-year, which led to a 50% year-over-year decline in operating revenues. On a per passenger basis, we saw ticket revenue declined 30% in the quarter, while nonfare and other revenue declined 19%. We saw the nonfare and other revenue remained strong overall at $52.55 per passenger, and our total revenue per passenger for the quarter was $83.38. Our capacity levels are trending at or above 2019 levels as we progress through the coming months. We're seeing a recovery in load factors as the appetite for travel continues and demand returns moving into the summer months. With that, I will turn it over to Jimmy to provide more detail on our financials.

Thank you, Daniel. I share Barry and Daniel's optimism on the demand recovery we are seeing. I want to thank all of the Team Frontier members who rolled up their sleeves in challenging times during the pandemic and put Frontier at the forefront of the recovery in air travel. Our growing confidence in the recovery enabled us to begin hiring pilots and flight attendants in February and restart projects that were paused as we managed through COVID. In addition, our IPO strengthens our balance sheet and puts Frontier in a strong liquidity position, enabling us to emerge from COVID with limited incremental debt. Now turning to the quarter. Our GAAP net loss was $91 million. Our adjusted net loss of $173 million or $0.86 per share excludes a number of special items. These include $136 million of CARES Act credits, a $20 million mark-to-market related to the warrants held by the U.S. Treasury and a $4 million cost associated with the early lease termination of our remaining A319 aircraft. With respect to our revenues and liquidity position, we timed our capacity deployment as the quarter progressed to take advantage of our expectation of a recovery in air travel leading up to spring break. This enabled our revenues and cash receipts to finish the quarter on a strong note. As of March 31, 2021, we had $853 million of total available liquidity, inclusive of the $424 million of undrawn amounts under the Treasury loan facility. The liquidity as of March 31, 2021, excludes the net IPO proceeds of $265 million given its April 6 closing. Our liquidity was enhanced in April by the receipt of $96 million in payroll support funding from PSP2 and 3. We expect to receive the final payment of $75 million relating to PSP3 in the second…

Thanks, Jimmy. It's been a year of enormous change for our company, and we continue to thank all of our Team Frontier members for going above and beyond what was expected of them. We've got the right team in place to navigate what's ahead, along with the right cost structure and the right low fare product. With that, operator, please open up the call for questions.

[Operator Instructions] Our first question comes from the line of Ravi Shanker from Morgan Stanley.

A couple of questions on the current environment as you see it. When you look at the incremental traffic that they're coming on right now, do you have any data on whether you are expanding the pie and the traveler you're seeing right now are like new to air travel, if you will? Or are you just taking share from other airlines in ULCC and legacies?

Daniel, why don't you take this one?

Thanks, Ravi. I think what we're seeing right now is a pent-up return of travel in the U.S. I think we're seeing lots of customers come back to travel. And I think, as always, our low costs are allowing us to offer extremely low fares and continue to stimulate demand. And that's a combination of new customers and also key to the ULCC model, key to our model is customers flying more frequently because they can afford to do so because we deliver lower fares in the marketplace.

Got it. Just a follow up to that, I mean do you feel like there's an environment where the ULCCs can meaningfully grow their market share and kind of close the gap to maybe the kind of share that you have in -- that ULCC have in Europe, or do you think it takes a little while longer for the market to go in that direction?

Go ahead. Sorry.

Yes. Well, look, I think if you look at our share in the United States, I mean we're just getting started, right? We're at 10% of all the ULCCs compared to approaching half over in Europe. So yes, there's a lot more room ahead.

Our next question comes from the line of Mike Linenberg from Deutsche Bank.

Good job on the first quarter here, gentlemen. I guess a couple here. Barry, when you were on the road on the deal, what, 5, 6 weeks ago, I mean you were -- you had a pretty encouraging -- I mean a positive outlook. I mean trends look like that they were moving in the right direction and things seem good. And yet, here we are 5 or 6 weeks later, and yet you have a much higher fuel price, and I would argue a more favorable margin guide than I think what we saw as recently as 5 or 6 weeks ago. Is the right interpretation that things have maybe gotten even better than sort of what you were seeing 5, 6 weeks ago when you're on the road? Because it -- the guidance would suggest that it does seem like that maybe we're seeing some acceleration here. Is that the right interpretation?

I think that's right, Mike. I mean look -- I mean I feel better today than I have probably since, I guess, last January when I first heard of coronavirus, right? And I feel better than I did yesterday, and I feel better than I did last week. Look, it's real, right? You're seeing it every day. The vaccine is slowing the cases. It's slowing the hospitalizations, and people are feeling free. I mean this last question, we were talking about stimulation. But I think what's happening is the demand is just being let loose from the vaccination. So it just keeps getting better. And so yes, we're feeling really good about the world and couldn't be more excited about the recovery.

Great. And then just my second question to Daniel. Look, I get the whole story about getting away from the A319s. You'll have higher gauge. It's going to help your unit costs on one hand. But then on the other, I guess there's an argument that maybe it precludes your ability to fly into some of the smaller markets. And you do fly into a lot of smaller cities right now. You look at some of your competitors, and they have stayed with whether it's the A319s or even the 737MAXs in the case of Southwest. Do you think that getting out of that smaller gauge, and as your gauge moves up, that there's just going to be a whole slew of city pairs that either don't work or maybe it's a less than daily strategy? How do you think about that? Just your response to that.

Thanks, Mike. You're absolutely right. As we go to a lot higher gauge, we get lower costs. And we already have a strategy of applying the right frequency to the right market. We fly low frequency markets. We fly our smaller markets in general today on the A320neo, which is the bulk of our fleet today -- majority of our fleet today. And we found that worked. We fly some small markets at low frequency on the 321 and find that worked. We have the lowest cost. We are going to be a low cost leader, and that enables us to fly a lot of -- to fly as many markets as we can. And I think that's the right strategy to maximize our opportunity.

Our next question comes from the line of Jamie Baker from JPMorgan.

Question on aircraft leases. I know you've engaged in sale leasebacks at various lessors. But for future deliveries -- for the pipeline, do aircraft have to be sourced from the Indigo pool? I mean the order -- the big order back from 2017. Or if somebody like, I don't know, pick a name, AerCap came to you with a more attractive lease rate, could you take it?

Yes. Jamie, it's Jimmy Dempsey here. Yes. No, like in 2017, we were part of a joint purchasing initiative that delivered 430 aircraft into airlines in the Indigo portfolio. We contracted for our aircraft, like all the other airlines in the portfolio, separately. And so Frontier contracted for 134 aircraft. We're committed to those aircraft, and they deliver over the next kind of 7 years or so. We could look at aircraft that pop up beyond that order book like any other airline can. And if there are opportunities, we'll certainly look at it. And we are looking at potentially adding 321s -- incremental 321s to our fleet, and they could come either directly off the manufacturer or through leasing companies. And so yes, we have absolute flexibility to do that.

Okay. All right. That helps. And also second question, do you have any ability to track how much basic economy competitors are putting in your markets against you? Given the strength in summer demand, I would think that they'd be allocating less than usual, and United said as much on its call. I'm just wondering if you had a way to actually measure it and if you have any idea as to how those trends might look.

Yes. Look, I mean I think if you look at basic economy, I think there's a lot of confusion out there. So basic economy is a product, and then there's price points, right? So it doesn't matter how much basic economy is out there. What matters is the prices that they're charging. But I will tell you, both the product is less than it was. There's less of it out there. And the price points, as -- I mean many of you report on -- I mean they're slowly moving up. I mean the demand is coming back. ATLs are filling up. Load factor is going up. It's just how revenue management work, right? The fares are going up. And so I think everybody is looking at this and realizes in the next few months, your demand is going to outstrip supply.

And if I could just sneak in a third. We're in the middle of May now. Between now and the end of June, how much inventory hasn't been sold? And how much higher would fares have to be on that remaining inventory for you to break even in the quarter? I mean are we talking $5, $50? I'm just trying to get a feel for how close you might actually get. But if you don't have that at your fingertips, I get it.

Well, it's algebra. I'm sure we can calculate it real fast. I'm not sure we would disclose that.

Okay. Fair enough.

But look, I will tell you, we said it in the opening remarks, we feel very confident with the trends that we will be profitable in the second half of the year and feel pretty good about it.

Our next question comes from the line of Hunter Keay from Wolfe Research.

Congrats to the IPO. The -- Barry, what would you say your top 1 or 2 financial targets as you think about the next couple of years? Just running the business for the long term, would you -- is it just raw dollar profits? Would you trade a little bit of margin to drive more EPS? I mean obviously, it's a balance. But what are the top 1 or 2 of the year are going to prioritize over the next couple of years?

Well, profitability and costs, all right?

Just raw -- yes. Just like absolute raw profit dollars.

Well, I mean I would actually expand it, and I would say there's 1 and 2. So profitability, one; and cost, #2. But within profit, there's a 1a, which is margins themselves in those levels; and 1b is aggregate profit, which drives EPS.

Okay. Cool. And then a couple of quick ones here. When you talk about full utilization you said in your script in 2022, are you talking about you're -- at one point, you're going to hit 12.2 hours per day? Or are you actually going to average that over the course of the year?

We expect by the end of the year to be in a position to begin and operate all of '22 at full utilization.

Okay. So you'll be exiting '22 at full utilization is what you're saying, basically?

No, no, no. '21. We're investing today, we're investing today and -- in hiring and ramping everything up so that we can be ramped up to full utilization by the end of the year, such that 2022 will be a full operating year.

I got you. Okay. And then just a quick one here. What are your thoughts on potential PSP4 program? Is that something you would support?

I doubt it's going to be necessary.

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

Could you characterize -- I'd love to hear your answer on what inning you think we're in from a leisure recovery perspective -- domestic leisure recovery. Some have suggested bookings are kind of all the way back to 2019. It feels like there's more recovery still on the table here, even in the U.S., certainly in places here like New York. And of course, part of that view is going to depend upon how folks are revenue managing. So maybe just to follow on relatedly to Jamie's question, how are you managing inventory now versus, say, this time in 2019? And how do you think the industry is? In other words, is the industry opening up more future inventory now at low price points?

Yes. So look, I don't know what inning -- you're somewhere between, I guess, the second and third inning. And what I would mean by that, Duane, is we've started -- we started trickling bookings up in February, and they continue to accelerate through March. They're accelerated through April. We're now seeing them just continue to build. But there's another factor, right? So as the demand recovers, then capacity recovers, right? Everybody talks about pent-up demand, but there's also pent-up capacity. The good news is now you're starting to reach pretty close to 2019 levels this summer. And so you're now going to probably -- if the demand continues to go, you're going to see demand outstrip supply. And so that will move us to, I don't know, inning 4 or 5, and that's what's going to cause fares to go up and yields to go up. And that's revenue management. And so I think you probably -- you don't get to inning #7 until you get towards the end of the year. And you're probably going to have pretty aggressive Thanksgiving and Christmas just because so many people missed it last year, right? So you're going to have way more demand than you're going to have seats. As it compares to last year at this time, well, there was 0 inventory management.

Sorry, 2019. The basic point being…

2019.

Exactly. Like how are you managing your inventory in May 2021 versus what you might have been doing in May 2019?

Yes. I think we're still behind because not everyone has reflated their booking curve completely, and I think there's also still certain segments that aren't quite there. Order may be great, but certain cities aren't quite there. But I think if you look at even today, I mean just this recent announcement, if you can have your mask off in the last few hours from CDC, if you're indoors, well, that's big news. There's also now another leg of demand. You've now got 12- to 16-year-olds eligible today for the vaccine. So I think there's more to come, but I think we're still a little bit soft versus where we were, right, because the fares aren't back to where they were in 2019. But again, I think in the next few innings, if you will, call it, the next 6 to 12 weeks, you should start seeing that.

That's great. Makes a lot of sense. And then just for my follow-up, I'm sure you got asked this question a lot when you were on the road. I didn't get to hear your answer to it. So I'm curious if you could share it now. Can you provide your views on industry consolidation, how likely that is, specifically in the low cost sector?

Okay. Well, look, we're focused on profitability and starting to hit that in the second half and focused on shareholder value. And for that reason, obviously, we're leaders in the industry, and we'll look at any opportunity that presents itself. But right now, we're focused on returning to profitability.

Our next question comes from the line of Brandon Oglenski from Barclays.

Congrats on the first public quarter here. So Barry, I guess following up from that question and the target to be at full utilization, I think, by the end of this year, right? Are you managing towards reaching -- I mean you do have a goal of profitability in the second half of the year, but are you managing towards a certain profit target right now? Or is it just that we can be in the black in 2022 is where we readjust and focus on getting margins up? Is that the right way to think about it?

Well, I mean yes, you've got to cross over the line and move to the black first and then you start focusing on increasing that and getting back to previously expected levels, if you will, from profitability. But like right now, we're just really excited across that mark, and we feel like we're on the eve of it, as I just kind of answered in that last question. We feel like we're on the eve of it, given the way that the demand is recovering and starting to shape up. And I think that will drive it in the second half. And look, '22 is still a ways away, but there's a lot of positive things to happen before then. But yes, we'll be focused on maximizing margins in '22.

Okay. And Jimmy, do you mind helping us with the fleet changes that you announced? So I think you're going to take delivery of 10 additional aircraft this year. So are you going to end the fleet in the year with a fleet of like 115, is that about right?

No. There's no real change in the total fleet count for the year. We're just laying out that there's 5 in this quarter and 5 in the following quarter. So 10 for the rest of the year. We'll end the year with about 110 aircraft. And just to recap what Barry said, one of the things that you got to be focused on for our business is at the end of '19, we had 98 aircraft. At the end of 2022, we'll have 120 aircraft. So the business is significantly bigger between pre-COVID and post-COVID size. So I just want to point that out. But no, there's no change to our fleet plan right now. What we did with the 319s was effectively accelerate them from redeliveries at the end of the year towards the early part of next year to remove them from the fleet now. Clearly, we're removing fleet from storage and bringing them back into service. And our view at this stage was it didn't make a whole lot of sense to redeliver -- or to return those aircraft to full service across the summer months and suffer some of the maintenance costs associated with them. So it made sense to actually remove them from fleet early, and that's something that we did and took advantage of something that cropped up very quickly.

Okay. I appreciate that. And then I guess the last one for me. You guys did announce a couple of new international destinations. Is that looking more lucrative in the future here? Or is domestic and international kind of an equal opportunity at this point?

Yes. Look, I mean if you look at international versus domestic over the last several years, not -- let's go prior to the pandemic, and we had seen that yields were considerably higher, and we had begun investing and going back in the '18, '19 period in the international. So as we recover, we are looking back again at making that happen. And we think the dynamics will actually be even better than pre-COVID just because of the competitive landscape and our relative cost advantage in the near international, but also just the fact that the international is being delayed, if you will, from a recovery compared to the domestic. And so when it does come back from a demand perspective, we think it's going to come back with a vengeance. So we're positioning ourselves so that we can exploit this in '22 and '23. And we think that, that really does a lot to position our revenue backdrop to be a lot stronger than even what it was before.

Our next question comes from the line of Helane Becker from Cowen.

Let's see. When you talked about cash burn being positive in March, did that -- did you say that, that continued at that same rate in April and May? Or is it continuing at that same rate? Or is it accelerating?

Thanks, Helane. It's Jimmy here. Yes. Look, we turned cash positive just as we turned into March. Really, bookings started to improve, a big change post President's Day. The airline performed reasonably well through March, and the ATL started to fill out for forward bookings. That's continued. Our anticipation is that we're cash positive through the quarter and really moving on from a liquidity discussion and back into really getting the airline back up to full utilization.

Perfect. Is there -- my next question is, is there a choice or is there a time when you would -- when it would make sense for you to switch from a fully leased fleet to a partially leased fleet and a partially owned fleet? Would you consider that?

Yes, we would. We talked about this a lot when we were doing the IPO. It's something that we can look at as we develop like this year, and we've chosen to use operating leases all the way across this year. We've actually 1 aircraft left to finance at the end of Q3. We can look at it in terms of how we shape going forward. It's really a commercial decision around tax, whether you have to put any equity into the aircraft and what the cash position is at the point of delivery of the aircraft. And for us, commercially, we haven't found anything that makes commercial sense on an NPV basis, like an operating -- sale-leaseback transaction for us. And so we'll continue to do it and benchmark against other forms of financing. But at the moment, operating leases make a lot of sense, particularly when you're growing the business quite dramatically like we are and not burdening the cash flow in the business with funding that growth. We have been funding a big portion of the business in our PDPs into delivering these aircraft. And so that's the focus of some of our cash flow that's over the last like 5 or 6 years has been to manage our pre-delivery payments to Airbus as opposed to managing the actual delivery itself. And so it's been quite successful for us.

Right. Right. I'm not sure it ever makes sense to own an aircraft, but that question does come up -- now. The other -- my last question is, are your aircraft ETOPS certified? And is Hawaii a realistic option for you at some point in your future?

Helane, it's Daniel. No, our current aircraft are not capable of flying to Hawaii with a full passenger load. And therefore, we don't -- we're not ETOPS certified as a result. There's no need to be across the business. We do have A321XLRs on order. And when they join the fleet in a few years, we will look at Hawaii, amongst other opportunities, for deployment of that aircraft. And it may become part the network at that time, but it's not a short-term possibility for the airline.

Our next question comes from the line of Andrew Didora from Bank of America.

Congrats on the IPO. I guess first question, Barry, where do you think your pretax margins can go over your growth period? Is this a -- I think 2019 pretax was like 14% or so. Is this a mid- to high teens business? Or are you at some level below that? What are your thoughts there?

Well, look, I mean when we get back to 2019 levels, we will then focus if we can make it bigger. But I think our focus right now is to just get back to 2019, and we feel good about our cost relative advantage and where that's headed. And we think that expands over the next year to 2 years. And so we feel good about getting it. And once we get to '19, then we can probably talk about if we can exceed it.

Okay. Fair enough. And then, look, I guess when you think about the leisure recovery, clearly, you see kind of this pent-up demand environment extending into the holiday period. But when you think about kind of beyond that, do you think leisure reverts to the growth rates we're seeing, say, prepandemic? Or is there something that you're seeing or you believe in that -- you think there's some maybe more positive structural change going forward here from the leisure passenger? We'd love to get your thoughts on that.

Yes. Thanks. So look, listen, we talk about this all the time, and all we have are a bunch of anecdotes at this point, but people are starting to form judgments and views. And look, I mentioned I think Thanksgiving is going to be the best Thanksgiving we've ever had in the industry; same thing for Christmas and same thing for New Year's. And I think you're going to see the same thing for President's Day and even spring break. By the time we get to spring break next year, there will have been some people that didn't go on spring break for -- basically, they missed 2 in a row. It's almost 3 years. So I think you're going to see the surge continue for at least 12 to 18 months until people get caught up on vacations, caught up seeing family and friends. And so I feel very good about it. And then when you think about getting past kind of the pent-up demand component that I think the last 12, 18 months, then you get to this new phenomenon of all this work-from-home that's going on, and -- which is really translates to work-from-anywhere. And we're seeing more and more people traveling midweek, changing cities and working off their parents' couch in North Carolina this week. And then next week, they're in California. And so that's just a whole new travel segment that we didn't have, plus with the additional flexibility, people can travel more. And Jimmy and I, we've debated this in the past. And when we look at carriers in Europe, like Ryanair and easyJet and Wizz and all those, when you look at the vacation that the average European has, how many days is off they have per year, and you compare that to the average American, how much we have, they literally have double -- more than double the vacation days. And so I look at what that does for us in terms of all this additional flexibility that people are going to have, that's just going to create much more leisure travel. So I think this can last for several years.

Our next question comes from the line of Savi Syth from Raymond James.

Congrats on the IPO. First question for me is actually a math question. Are you implying the revenue for 2Q is down about maybe around 16% on a year-over-2-year basis, if I'm doing that math correctly?

Sorry, Savi. We'll have to come back to you on the exact math on that. Like we gave you a range of outcomes of a nice income of minus 10, minus 15 and gave you the operational costs associated with that. We're not guiding the exact revenue numbers at this stage.

Okay. Understood. And then just on the comment about getting back to utilization by the end of this year, that's faster than I had anticipated, what does that mean from your ability to kind of get back to maybe precrisis trend on unit cost? And how should we think about that unit cost trend?

Yes. Look, our view hasn't changed since we talked about the -- or during the IPO when we talked about unit costs. There is some inflation across the industry that we had to deal with. We're very focused on our total costs. And so our CASM plus net interest, we continue to invest very heavily in the fleet, and we're very different to other airlines in terms of how we finance the airline through 100% operating leases. And so therefore, our CASM ex fuel gets slightly inflated by the fact that we pay rent as opposed to having some of the ownership costs down in the interest line. And then we get a huge benefit from the fuel efficiency that the neo aircraft is delivering into the fleet. By the time you get to midyear next year, we start delivering 321s again. And so a change in the business that has happened in the last 2 years or 3 years or so is the fact that 321s have become less than 20% of our fleet. They will actually start moving back up in terms of a percentage of the fleet as you progress beyond 2022 and into '23 and '24, and we get to about half the fleet operate as 321s by the time you get to about '25 or '26 -- 2025, 2026. Our anticipation is that our unit costs are similar to where we talked about them a few weeks ago. And there's no real change in our utilization that went into our thoughts during the IPO process. So we think we'll be on track for that.

I appreciate that. And if I might ask one last question just on -- I know business demand is not a big component, but you do carry some business, and it tends to be SME where I think the recovery is faster. Curious what you're seeing on that front and if you're seeing any improvement, along with the improvement you're seeing with leisure here near term.

I'll take that.

I'll take -- go ahead, Dan.

Yes. Savi, it's a very small portion of our traffic. We've seen from the data we've got, we've seen a little bit of an improvement in that in the last couple of months. Yes. Yes, definitely, it seems to be recovering a bit. We obviously don't have a lot of data on the rest of the trends in the industry. So I don't know if our recovery is any better than anyone else's. But it is a small portion of what we take. And obviously, the much bigger story is how much the leisure demand is recovering.

I would just add one other thing to -- just on this business discussion is -- I look at my calendar, and I'm traveling almost every week for the next 6 weeks. And I'm starting to hear more and more of this. And as offices reopen -- I've joked about this a lot, but do you really think people are going to be sitting in a cube or do you think they'll go back to Marriott? And I think you will see business travel return. But in our case, it's going to be small business. It's not corporate managed.

Our next question comes from the line of Myles Walton from UBS.

I was wondering if you could maybe touch on the ATL performance in the quarter. And when you talk about the recovery to normal breaking curve, should we expect that to expand towards sort of where you were in 2019 from an ATL perspective, maybe adjusted upward given the larger fleet towards $300 million by the end of the year?

Yes. Myles, it's Jimmy here. Look, our ATL has been recovering. At the end of December, it hit its -- the lowest point given the seasonality but also the effect of COVID. And it's been slowly and gradually improving. It certainly accelerated in March and the run-in to spring break. And you'd expect it to recover across the year. Really predicting where our ATL is at the end of the year is difficult to do at this stage, but you would expect it to somewhat normalize as the year progresses, and there's still a ways to go on that.

Okay. Okay. And Barry, I guess in the -- I don't know who asked the question around innings, but I think seventh inning was when you put the line towards pricing has normalized to 2019. Is that -- is that sometime towards the end of the year where yields have filler -- baked in and recovered?

Yes. I mean I think in the United States domestically, for sure. The international will obviously, I think, lag that. I think it's going to take you till probably mid-'22 or even to '23 for certain regions, just depending upon how they're able to control the coronavirus. But I think domestically, I think you should be by the end of the year. And I'll even go back to your earlier question about ATL. In the back of my mind, I'm looking towards the next few holidays and peak periods. And I think there's a risk for the consumer that they're going to get shut out of where they wanted to go or they may have to fly a day or 2 earlier or later for Thanksgiving, and that's going to cause them to book further out when they get burned. And so look, I mean when they're not able to -- it's one thing to say fares are likely to rise. It's another thing to say, well, they may not even get a fare because there's going to be more demand than there is supply. So if you're thinking about traveling, you're going to want to do it sooner rather than later. And I think when that happens this summer, they're going to start booking the holidays. And then when they get burned at the holidays, they're going to start booking the next summer and spring break. So I think you can see ATLs across the industry go up just from that phenomenon. But as far as pricing firming up, look, you got to be full before you can focus on price. And I think that takes to -- for the industry, I think that takes to the latter part of the year for all the industry.

Our next question comes from the line of Stephen Trent from Citigroup.

Just two quick ones for me. I know you guys don't have a massive exposure to the Southeast. But given the disruption we saw with the gasoline supply in parts of the country, did you guys feel any of that in any of your operations? Or was it not really an issue for you?

Yes. So we had some challenges. We did some tankering, but -- and -- but we didn't have to do any tech stops, and we think it's largely -- it looks like it's going to be largely resolved now.

Okay. Great news. And just very quickly, during the IPO, a number of investors were intrigued by how high your ancillary revenues are. And when we go forward, you mentioned the Barclays co-branded card and what have you. Do you see kind of additional opportunities to kind of push the envelope even further than you have?

This is Daniel. We -- look, we see -- we do see continued opportunity. And we're focused on ancillary on the highest profit margin with our ancillary offerings. And as the airline gets bigger, the relevance of both our credit card program with Barclaycard and our discount then continue to get better, the more customers, more routes, more opportunity to take advantage of the benefits. We're focused on continuing to work with Barclays, as we said in the opening remarks, on improving offers. And on the Discount Den, we're looking to continue making enhancements to the program to increase the value with offers, to increase the number of customers who sign up for it. It's a paid loyalty program, and it's a very good program as a result, and there's a lot of opportunity to continue to build it.

At this time, I'm showing no further questions. I would like to turn the call back over to Barry Biffle for closing remarks.

I just want to thank everybody for joining us today, and we look forward to updating you on our next quarter. Thanks, everyone.

This concludes today's conference call. Thanks for participating. You may now disconnect.