Allegiant Travel Co (ALGT) 2018 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q3 2018 Allegiant Travel Company Earnings Conference Call. (Operator Instructions) As a reminder, this conference call may be recorded.

It is now my pleasure to turn the conference over to Mr. Chris Allen, Investor Relations. Sir, you may proceed.

Thank you. Welcome to Allegiant Travel Company's Third Quarter 2018 Earnings Call. On the call with me today are Maury Gallagher, the company's Chairman and Chief Executive Officer; John Redmond, the company's President; Scott Sheldon, our Chief Financial Officer and Chief Operating Officer; Drew Wells, our VP, Revenue and Planning; and a handful of others that will help answer questions. We'll start with some commentary and then open it up to questions.

The company's comments today will contain forward-looking statements concerning our future performance and strategic plan. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the SEC. Any forward-looking statements are based on information available to us today. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise. The company cautions investors not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize.

To view this earnings release as well as the rebroadcast of this call, feel free to visit the company's Investor Relations site at ir.allegiantair.com.

With that, I'd like to turn it over to John.

Thank you, Chris, and of course, good afternoon, everyone. When I read through the release again and read the opening part of that and, of course, Maury's comments in particular, all I can say is wow. What an impressive quarter and an impressive year-to-date. It really has been special.

Starting with the fleet transition with the MD-80s coming out after Thanksgiving, that has gone off without a significant problem other than a few induction issues back in early July. Such a transition is unprecedented, of course, for a company of our size, especially given the timeframe of accomplishment. Of course, transitions put a focus on the movement of planes in and out, but one can't overlook the significant hiring and training that impacts so many departments and individuals. So incredible job by the entire team across the board.

Whilst all of that was taking place, the performance of the airline has improved beyond any of your expectations but in line with our high standards. The same incredible effort that went into the fleet transition and performance improvements is now being directed to rightsizing the organization as we move into 2019 and beyond.

From time to time, I read some of the reports, and I read some of the naysayers out there, those times when any of you doubt the company and its employees' ability or dedication to do something, just reflect on what's been accomplished over the last 18 months.

The foundation has now, of course, been set for Allegiant 2.0. Part of that foundation work in 2018 has been on our IT area, which is critical to what we do. Very key management personnel have been added, organizational changes made and business processes reinvented. All the programming effort relating to the 2020 revenue initiatives laid out in the Investor Day back in 2016 will be substantially completed by the end of '19, with the full benefits expected to be realized in 2020.

Touch base a little bit on Sunseeker. Of course, we provided complete visibility on Sunseeker during the recent Investor Day, so nothing new to report. But wanted to touch on a couple of points, given the frequent questions I get from time to time. Well, we expect to have a marketing in previous center open on-site by the end of January 2019, so just in a couple of months. We expect vertical construction to begin in February of '19, with a targeted opening around October of '20. Again, these dates have all been previously communicated. Our model rooms are currently being built here in Las Vegas at our company headquarters. We're building a standard hotel guest room and a two-bedroom suite, which will be completed by December 15. So whenever any of you are in town after that date, we'd love to show you this product.

Quickly, I want to touch base on disclosures and guidance. We expect to provide full 2019 guidance in conjunction with our 2018 year-end earnings release. Guidance will be provided consistent with that provided for 2018, with the added guidance disclosures for nonairline businesses. Again, you saw that in the current release, and we will continue with that.

So for the first time, we provided this nonairline disclosure in the release, and hope you find that worthwhile in your analysis of our business model going forward.

With regard to the nonairline businesses. We will provide 2019 guidance for preopen expenses, revenue and operating results for the going concerned businesses and CapEx. In addition, we will provide actuals at the end of each quarter and year-to-date similar to what we have just disclosed.

And on that, I'll turn it over to Drew.

Right. Thank you, John, and good afternoon, everyone. We continue to be pleased with load factor performance as we continue year-over-year expansion for the fourth consecutive quarter.

In August, we announced 8 new routes, including service to 3 new cities: Albany, New York; St. George, Utah; and Tucson, Arizona, bringing our total scheduled service airport served to 121. In the third quarter, we recorded a TRASM of negative 0.2, including the impact of new revenue recognition rules.

I believe it's important to note that we were not involved in the heavily discounted fare environment of 2017 that would have aided in the comp this year.

We talked at length during the July call about the new RM system performance during the summer. However, we are very encouraged by the return to previous performance, as evidenced by the strong load factors opened in September.

Turning to the fourth quarter. We had talked about headwinds associated with the hurricanes and the Vegas shooting last year as we entered the quarter. But noticeable load factor gains from the RM system and a stronger bounce-back for Florida bookings eased that headwind a bit.

As we saw at the end of Q3, demand looks strong, and I believe the fourth quarter will end up with the best year-over-year TRASM performance of 2018. Obviously, a contributor to the fourth quarter TRASM optimism is the ASM guidance at 4% to 6%. As we complete the last quarter of our aggressive MD-80 retirement and transition to a full Airbus fleet, the growth rate, particularly in December, will be limited as we are scheduled to retire the MD-80 fleet right after the Thanksgiving travel period.

With that, I'd like to turn it over to questions.

(Operator Instructions)

Our first question will come from the line of Savi Syth with Raymond James.

Just a little bit of a broader question. Not specific guidance for 2019, but kind of the growth over the last few years has been this kind of medium-sized market, maybe smaller, at least, secondary Allegiant destinations. What should we expect kind of the market characteristics to be going forward, especially in a higher fuel environment?

Sure. As you look out towards 2019, I think, what you'll see is some of that continuing. Primarily, the growth will be connecting the dots that exist today. There's a lot of destinations and origin cities, including midsized cities that have yet to be connected. In addition, even in a rising fuel environment, we'll constantly be looking at new cities to grow the network. We communicated before 1 to 2 midsize cities a year, and I think that's still the target, at least in the current fuel environment, as that rises, we'll certainly reconsider.

That's helpful. And then I don't know if it's been tossed around -- but I'm just kind of curious, this maintenance, it looks like there were a couple of -- some maintenance events in 2018. Does that pull forward some from 2019? Should we expect somewhat below-average maintenance next year? Or is that unlikely?

Yes, Savi. Yes, there are some kind of unique expenses in 3Q. Some of that directly relates to the MD-80 fleet in order to get that at the end of November. There were also some kind of fleet-wide campaigns to kind of baseline certain aspects of the plane. For instance, we're going through specifically the APU bay and the build spec to try to normalize on a fleet basis that you're seeing some, we think, some baseline expenses you wouldn't expect to continue. I think, directionally, we look at kind of a $75,000 per month kind of cadence as we move forward, and that's what we expect into 2019 and beyond.

So not below, kind of return to average?

Yes.

And our next question will come from the line of Duane Pfennigwerth of Evercore ISI.

On the 4Q growth rate of 4% to 6%, can you just remind us, is there an impact from fleet delays? Was that a higher number at one point? Or have you accelerated MD-80 retirements?

I guess it depends on your initial reference point there. But once we made the decision to go with a more aggressive timeline through November, we've been reasonably well set at this growth rate. So there may be a small amount of pullback, especially as fuel ran up on us a little bit, but not a material downward trend.

And then on the tax rate, what accounts for the lower or, I guess, implied negative tax rate in the third quarter specifically?

Duane, this is Greg. So during the third quarter, we were able to take a refund on, call it, Section 199, which is domestic production activities. And effectively, what that means is some of our internally developed software, we were able to take a refund on that. So that's primarily the reduction that you're seeing.

Does that impact sort of the normalized tax rate going forward? So I think your initial guidance this year was, what, 21%, 22%? Is that kind of how we should be thinking about it on a go-forward basis?

I think, for the remainder of this year, I mean, you're going to see a reduction so that year-to-date guidance was updated to 18% to 19%. But then as we move forward the following year, I think more what we initially guided to 22% to 23% is probably the right tax rate moving forward.

Okay. And then just did some quick math on new disclosure, which I appreciate, I think that's great. Maybe you could just add some light on what all is in the nonairline business. I mean, I assume that's some Sunseeker OpEx but maybe some other things. It looks like it actually grew from about $3 million in the third quarter of last year to almost $6 million in the third quarter of this year. So maybe just give us a sense for what's in there, why it's growing, et cetera.

Yes. No problem, Duane. When you look at all the entities that are currently in there, you mentioned Sunseeker. You have Teesnap. You have the Kingsway Gulf course that we acquired in August of this year. And you -- let me see. What am I missing? Oh, yes, the FECs. So I was focused on the revenue components, but there is no FEC revenue yet. So what you're seeing there is strictly Teesnap from a revenue standpoint, Teesnap and Kingsway. So going forward, we'll continue to provide as much detail as we provided now. And as those entities individually get scale, we'll consider providing a greater amount of detail for each one of them.

Not to belabor the point, but Sunseeker OpEx, I mean, how would you think about that on, like, a 2019 basis?

It's not going to be material, and we're going to give you complete guidance on that. The operating expenses that you would have, another way to look at that, I mean, the industry calls it preopening. These are expenses that relate to -- take like the 2 gentlemen that you may have met or at least were introduced to at the Investor Day, Micah and Jason. When you take those 2 individuals, for instance, some of their time that's spent on involved with the design of the project starts to change and starts to move into operation. So you may have their pay, in essence, capitalized early on. But as you get closer to an opening date, their pay is expensed as preopening. So that's the nature of what you start to see or start to happen as early on when people are rotating from being capitalized to being expensed. That's the payroll side of it. Then of course, you have all of the hiring expenses and marketing expenses and all those that have to be expensed as you go as opposed to being capitalized. So it's not going to be a substantial number, and we'll give complete guidance on what we think that range is going to be for Sunseeker for FY '19.

And our next question will come from the line of Helane Becker with Cohen.

Can you say what percentage of your recapture you've been able to do maybe year-to-date? Or is that not a way we should look at your pricing structure?

Yes. So as we commented before, we're not going to be able to recapture 100% of fuel simply through pricing. That's not how our customer reacts, and it's not core to our business model. You will see us make some capacity trims, particularly on the fringes with off-peak day of weekend season to be able to really recapture in earnest. But one of the elements I would like to call out as part of the 4Q strength is the yield we're seeing. There are certainly some elements of fuel recapture that we're getting in there. So I'm hesitant to put an exact percentage on there, but we are recapturing some through the pricing environment beyond what I would have expected maybe a month or 2 ago.

Okay. So I guess, my follow-up is more like there's a percentage you're recapturing through ancillary than a percentage through fare, right? So -- I mean, could you -- is it reasonable to look at those combined? Or based on the comments you just made, does that not even make sense?

Yes. So ancillary tends to be very sticky. So with high fuel, low fuel, ancillary isn't going to move a ton. Air is where it will have to be recaptured, and part of that comes through load factor, obviously. So as we drive load factor and gather the total ancillary spend, that's where we'll get that benefit, and that's easily -- most easily done, obviously, with capacity cuts as you have fewer seats to fill. Another point that maybe is worth talking about here is the fuel efficiency of the Airbus. If we were still in a fully MD-80 fleet, you would have seen us making more cuts to this point. By our analysis, we have somewhere between kind of $0.85 and $1 per gallon more efficient right now as we've shifted into the Airbus aircraft, which is going to give us a bit more buffer and flexibility before we have to make these changes in earnest.

And our next question will come from the line of Joseph DeNardi with Stifel.

Yes. Scott or Drew, I guess, the dollar EPS range was 2 months left. Can you just talk about maybe directionally which end of that you think you're more likely to hit at this point?

Yes. So honestly, it's looking probably the mid- to maybe slightly lower at this point, given what fuel's doing. Still think the cost execution, given the year that we've had to undertake, has been great. All the trends that we thought would be there and the pressure points that we need to drive through the business as we go into 2019 and '20 revenue. So I'm really happy with the pace. The operation continues to execute better than expected. So yes, I mean, I would say the midpoint to slightly lower at this point.

Okay, okay. And then a question for Scott DeAngelo if he's on the call. If not, John can probably tackle it. But I think you guys said at the investor presentation for Sunseeker that you got about 350,000 itineraries into Punta Gorda. Just wondering if you could talk about how many of those are really up for grabs, not locked to Marriott or Hyatt within their loyalty programs, not second homeowners, customers that you can really try and convert into Sunseeker itineraries.

You bet. This is Scott. I'll start. I can answer a part of that. So by the time Sunseeker opens, that 350,000 will be more like 400,000. And I say right now that, conservatively speaking, assume that 1 out of every 5 is already affixed to a second home, and the other 4 out of 5 or 80% are up for grabs, whether that's they currently stay at a hotel, they currently rent a vacation property and/or even involved in some flexible timeshare. We don't have information on who is tied with which loyalty program, but I'd offer up that our experience that, that, too, is more pliable than one would think as most of these customers have multiple memberships and loyalty programs, and we'll be happy to offer them ours once we have Sunseeker up.

Yes. Most definitely, and we're actually, on a trailing 12 basis, the number is closer to 365,000 inbound itineraries. And just even show you how clean that number is, we've stripped out any of those inbound itineraries that may even have a Florida address. So some people have second homes in Florida. They may originate -- they could look like a round tripper. But if they have a Florida address, we stripped it out. So that may even make Scott's numbers a little bit stronger when you look at maybe it's greater than what that data point would actually show. But the 400,000, we're comfortable believing in that number when you look at 2020, given the trajectory of what's been happening with the inbound itineraries.

Okay. Is an itinerary the same thing as one passenger? Are those interchangeable or...

No. If you, your significant other and family members, the wife or someone books, everyone on there, that's one itinerary. So you can have anywhere from 1 to 8 people on an itinerary.

And our next question will come from the line of Michael Linenberg with Deutsche Bank.

I guess, 2 questions here. So John, you did say that it sounds like groundbreaking is going to start in February of 2019, and I think you also indicated that you'd give us a bit more detail in -- on the -- when the annual numbers come out, which, I guess, is going to be sometime in January. But kind of if we think about it at this point, some cash will go out the door for construction costs. Are we going to assume that that's just coming out of internally generated funds? Or are you seeking like a construction loan, some sort of financing to kind of kick off that activity?

Michael, on those points, I think my comments are consistent with what I've been saying in the past. But we will always look at and pursue potential financing sources. So the fact that we have made commentary around being able to, as a company, to look at Sunseeker, we have the ability to fund that internally, that's true. That hasn't changed. And that's, of course, given all the work done today and the strong performance we expect going forward. But we will continue to look at financing opportunities going forward. And if there's one we like, we'll be all over it.

Okay, okay. Fair enough. And my second question, either you, John or Drew. When we think about -- and I know it's a little early since we'll get the data in January, but just kind of an early rough feel for 2019 capacity growth. The fact that accelerating out of the MD-80s, you may be coming off of a lower base as you ramp up into 2019. Should we assume that growth will be less than what we saw this year? Any color around 2019 capacity growth would be great.

Certainly. Yes, this is Drew. I think it's fair to say that we would expect next year -- I think it's fair to say we expect 2019 to be lower than 2018. As you look out, we have our first quarter schedule after sale right now. I think that's going to be on the lower end, so I would expect 2019 to surpass that. So for some really, really wide goalposts there, you can probably work with those.

(Operator Instructions)

And our next question will come from the line of Brandon Oglenski with Barclays.

This is actually Matt for Brandon. So I was just hoping that you could quickly remind us, as you receive the final aircraft and taking the MD-80s out of the fleet, what kind of overhang in pilot training or any other expenses is still kind of related and kind of lingering related to the transition?

Yes. This is Scott. If you look at the number of MD-80s shells, there will be some folks that will be going through training to be available for the March peak. And if you kind of back into any sort of pilot per aircraft metric back to when we had a single fleet type adjusted for the new 117 rules, you could come to a number where you're carrying $30 million to $35 million in excess labor as we grow into it over the next couple of years. And so it's pretty substantial. As far as the actual training events, everything then is on a scheduled cadence because everyone will be trained on the same fleet type.

Okay. And so that kind of comes down through the next year or so? Or what's the timing of that?

Yes. So we bottom, obviously, at the end of the year. I think we have nearly 76 frames. And I think we're growing upwards of 12 to 13 frames next year. And so you start to gain some of that efficiency back from a single fleet-type perspective.

Okay, great. And then just kind of on that point, as you get more shelves on the fleet, and then with the capability of having -- utilizing kind of the newer aircraft a little bit more, should we assume that there could be more peak growth or more kind of optimization in the schedule potentially?

Yes. So there's really 2 ways that we can grow the peak days. One is shelf growth, so that'll be the biggest help. Additionally, with the improved economics on the Airbus, we can push the hours of the day a little bit. So I would expect to see kind of your fleet-wide utilization, particularly on peak days, grow a bit, which is consistent with how we operate the Airbus today. But once you kind of get back the MDs out of there, you'll see a bit more in earnest.

Our next question will come from the line of Dan McKenzie with Buckingham Research.

Got a few questions here. I did join the call late, so I didn't quite follow the IT changes. But if I could just revert back to a prior Investor Day presentation. Are you still on track to deliver the e-commerce benefits that you previously outlined in 2019? Or are those likely, perhaps, to get pushed back?

No, it was -- Dan, this is John Redmond. We had talked about it in that Investor Day back in '16, I believe it was, about these initiatives being done in 2020. So the comments that we're making, that all the programming effort relating to the revenue initiatives will be done in '19. So we will see those benefits in 2020, as we communicated back then.

Got it. But it looks like there's a fairly big step-up into '19 -- in 2019 from those benefits. I think $70 million was targeted. And so, I guess, that's sort of what I'm wondering, is if that step-up is -- gets pushed back to 2020.

We never provided any guidance on any of the years in between. So we literally showed '17 to '20 without any middle years, if you will. Having said that, when we provide guidance on '19, you'll see that some of the benefits will start to come through in '19 on some of those initiatives.

Okay. Drew, I think, related to this, it looks like third party products inflected nicely in the third quarter relative to the first half of the year and even last year. And I'm just wondering, what is it that you guys did differently in the third quarter? And is that -- how do we think about that -- these initiatives as we look ahead into the fourth and next year?

Sure, Dan. Really, the biggest winner we have in the third party is the credit card, continues to exceed all of our expectations, both in September '16 when we launched it up until recently. New account growth continues to churn along very nicely. And spend has become, by far, the biggest piece of that. So there really is a big credit card picture, and I expect that to continue to expand into next year.

Good. One other question, if I can sneak one last one in here. The 186-seat project. What is the pace of the modifications currently so? What percent of the fleet was completed at the end of the -- is going to be completed at the end of the fourth quarter versus, say, the third quarter? And what percent of the fleet do you expect to complete in 2019?

Dan, this is Greg. We -- so as we take delivery of the 320 series aircraft going forward, we expect all of those to be modified to 186 seats. Also, of course, the new aircraft will come delivered with 186 seats. So the way I would think about it is from the 320 perspective, as we mature the fleet, 25 will be under the 177 variant. And then the remainder -- the remaining will be the 186-seat variant.

And that's for what period, sorry, that 25?

I think that's through the end of 2020.

Yes, 2020.

Okay. And are you -- I guess, since you've got the majority of the fleet in that modification, I guess, presumably safe to say those are seats that you're able to revenue manage or optimize that revenue at this point?

Yes. This is Drew again. We work closely with the fleet team as we think about the layout and what we view the kind of the optimal to be. So we'll continue to review, but everything we look at so far suggests that 186 is the best for the revenue team.

And our next question will come from the line of Steve O'Hara from Sidoti.

Can you just -- within the other revenue line, can you just remind me -- and I picked up in the third quarter, I guess, I would have thought that, that would have come down. I thought that was due to some aircraft you had a lease that you'll eventually take delivery of. Can you just tell me what's going on there?

Yes. So one of the biggest drivers on that is really our Teesnap program, which really exceeded, I think, of our expectations from the beginning of the year. And to your point, we do think that other revenue's going to come down more with some of the timing on the [gold planes]. But Teesnap really filled in that gap nicely.

And the other pickup we had in there, again, beginning with August of this year would have been the Kingsway Gulf course. So both Kingsway and Teesnap are part of that other.

Okay. And then maybe just on the fuel burn for next year. I mean, should -- with the MD-80s out at the end of November, I guess, I mean, should the 87 per gallon kind of revert to 85 or so next year?

Yes. It's definitely trending that way. I think if you look at the shelves we're taking next year, it's split, I think it's 6 or 7 319s, and the rest, 320s. Yes. So obviously, the target continues to be 85.

And our next question will come from the line of Joseph DeNardi with Stifel.

Scott, just on the CASM-X outlook over the next couple of years. Is the baseline for 2019 that CASM-X is down or do the labor efficiencies that you get from kind of completing the fleet transition not really come in until 2020? How should we think about that?

Yes. So the biggest impact we can have on ex fuel is definitely the labor side. I think you'll start to see moves -- movement in -- continued movement in the right direction next year with the lion's share into 2020. We continue to like -- we continue to see really nice maintenance trends. The M&E expense line item continues to come in, although there's a little noise in the third quarter. None of that should be recurring in nature. So the things -- the areas that we identified and what we thought there was going to be pressure, they're there. But the good thing is this is quite manageable. So if we can bring on additional sale -- excuse me, shelves and we can maybe pull some of that efficiency to the left, but we do have long-term efficiency targets. But flight crews, being the lion's share of that, is where we're going to see the biggest move in ex fuel. But you'll see movement into '19 and then the biggest move into 2020.

Should the expectation that CASM-X is down in '19? Or should we temper those expectations?

No. I think if you -- since we've started to show adjusted CASM-X for nonairline-related expenses, you should see very nice moves in the core business. So that's the whole point, right, is the underlying core business continues to execute. We continue to see really positive trends in the right areas and in the areas where there might be a little problematic, that's where the focus is. So we're liking what we see.

Okay. And then, John, I think the strategy is to build a property, run it effectively and then use that experience to go get some management contracts. What are those properties saying to you now if you approach them without a property? I guess, I'm a little bit surprised that you can't use the experience you have with the airline to develop that hotel management business in some of these smaller properties without actually building your own.

Well, we haven't had a conversation directly to date yet. So that's one. And when I say conversation directly to date, I had some just some periphery-type friends conversation without getting into the nitty-gritty surrounding that. There's folks that are involved, looking at new development opportunities that I started to have some conversations with. So that could be something that's an opportunity. But I think when you look at managing these properties, part of what we want to offer is several solutions. We've mentioned everything from software to management to branding, et cetera, et cetera. So there's a lot of things that would be part of that package, and the entirety of that package won't be ready for us to roll out until we're done with a lot of the IT efforts around the resort. So that puts a little bit of a governor on how quickly we can move even if there is significant opportunities. Having said that, there is stronger marketing relationships we can have with hotel properties that we've included in our booking channel. And those are ones that we're intending to strengthen as we change out the mix of properties that are in the booking channel. We've done -- because of the work we did in Florida around what we want to do there, we've done work in other markets, and we know that, in some cases, we don't have all the right product that we need on that booking channel. So we're starting to make adjustments in that regard as well and then having conversations with the properties that remain to strengthen the financial opportunities with those remaining properties. So I think there is some baby steps there along the way. There's no doubt. I would still hope that we could nail a couple of management contracts, if you will, before we open a property. But it's always easier to point to something that you have going. And that's why I think the opportunity for us is going to be after we start to go vertical. We can actually point to a project, point to a real project that's coming out of the ground, and then I think it's -- it'll be easier to make those things happen. The other thing, it's hard to have any visibility on the length of those contracts that are in place at those properties. The one takeaway I would have is given how old a lot of the properties are, I would think that those contracts, they may have shorter tails to them than what you would typically find, of course, if you only had product that was 5 or 10 years old. So keep our fingers crossed that opportunities happen quicker. But we will be chasing them down. So I'm hoping, over the next couple of quarters, I can give you a lot more visibility in that regard.

And our next question will come from the line of Savi Syth with Raymond James.

I just had a quick follow-up. On the fleet, I'm sorry, I didn't quite understand. So what do you expect the fleet -- I know you've had a few aircraft split from this year to next year. What do you expect to end your 2019? Do you feel like expecting roughly 100 aircraft there? What should we expect there?

Yes. I mean, that's what we put out there probably. I mean, we've seen some delays, as we talked about in the last earnings call. And I think, in 2019, we're still expecting that number, so obviously by 2000 -- when we give our guidance for 2019, there may be some puts and takes on that a little bit.

And our next question comes from the line of Dan McKenzie with Buckingham Research.

John, I'm just wondering if you could talk high level what you're seeing from the demand backdrop here. The stocks are incredibly volatile. I think there's a lot of worries about interest rates, the impact on the business, the stock market has been abnormally volatile here. But at least one thing that I've noticed tracking bookings is that there's not a lot of volatility in underlying demand. But I'm just wondering if you could talk about what you're seeing high level. What would worry you? What doesn't worry you from where you sit right now?

Yes. So I think you hit it spot on. I haven't seen a ton of volatility in terms of demand. We've seen a lot of strength for the last -- at least the last couple of months now in terms of forward bookings. And so I don't -- I really don't have a lot of concern there right now, particularly with fuel where it is. If fuel were to drop and spur even more capacity growth through the industry, I think you'll see a lot of issues in the off-peak periods, I think, late January. Even today, I think we're still, industry-wide, too heavy in capacity during those periods. So I anticipate we'll hear about that as we get into the April call timeframe.

And then, I guess, Drew, while I've got you, one thing I've observed over this past year is the volume of seats that the legacy airlines are pricing at -- or the bottom inventory, pardon me, that the legacy airlines are pricing at ultra-low cost carrier levels has diminished. And I'm wondering if you've seen the same thing because I know you don't compete directly with them. But there is some sort of relative umbrella that you can price under. And I'm just wondering if you can talk about sort of what you're seeing from that perspective, whether you feel like you're benefiting from that somewhat in the back half of the year and just how that's evolved for you guys.

Yes. So I'll caveat what you talked about that there is very little overlap. So from the same perspective that we weren't really effective when there were a lot of seats priced at the basic economy rates, we're not going to see a ton of windfall from that either. On the few select routes where we might have that head-to-head competition, you might see something on the margin, but it's not going to be anything noticeable or nothing that's worthy of calling out in my opinion.

Ladies and gentlemen, this concludes our question-and-answer session for today. So now, it is my pleasure to hand the conference back over to Mr. Maury Gallagher for closing comments or remarks.

Thank you all very much. Appreciate your listening in. We'll see you in 90 days. Thank you.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program, and we may all disconnect. Everybody, have a wonderful day.