Allegiant Travel Co (ALGT) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Allegiant Travel Company's fourth-quarter and full-year 2014 financial results conference call. We have on the call today Maury Gallagher, the Company's Chairman and Chief Executive Officer; Scott Sheldon, the Company's Chief Financial Officer; and Jude Bricker, the Company's Senior Vice President of Planning. Maury Gallagher will provide us with some brief comments, and then we will begin our question and answer session.

First we wish to remind listeners that the Company's comments today will contain forward-looking statements that are only predictions and involve risks and uncertainties. Forward-looking statements made today may include, among others, references to future performance and any comments about our strategic plans.

There are many risk factors that could prevent us from achieving our goals and cause the underlying assumption of these forward-looking statements and our actual results to differ materially from those expressed in or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the Securities and Exchange Commission.

Any forward-looking statements are based on information available to us today, and 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 users of this presentation not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize.

The earnings release as well as the rebroadcast of the call are available at the Company's investor relations site irallegiantair.com. At this time, I will now turn the conference over to Maury Gallagher. Please proceed.

Thank you, operator. Operator, would you go through the process of lining up calls? We're going to be very short, here. If you would do that right away, that would be great.

Yes.

Well, go ahead and give the announcement. And then, I'll just comment while people are keying up.

(Operator Instructions)

Thank you, operator.

Just as we've come to approach these calls, we're going to keep things very short. We had a very good quarter. You can see it in our results.

We're looking forward to answering your questions. So why don't we go right to the questions? And take them when they're ready, operator.

Duane Pfennigwerth, Evercore.

Just on the capacity growth plan for this year, Maury, I wanted to ask if you could just qualitatively talk about where the new growth is going to be as you accelerate into the second and third quarter? And what the mix of fleet type will look like if we play out first quarter into second quarter, into third quarter -- what does the mix of A320, A319 flying look like?

Jude?

You're going to get a mix of growth. As in years past, we'll continue to add new cities, which will provide most of our growth -- new cities and new markets, which will be a mix of new cities and connecting the dots in the form of new markets. This year, different from the runs in the past, we're going to provide significant growth in the form of increased utilization, which is going to come from a variety of things, to include extending our flying season in seasonal markets and extending our flying weeks in markets that can handle an increase in frequency.

Can you just touch on what exactly is driving the -- what, practically, is driving the 4% growth in the first quarter versus a mid-teens level for the rest of the year? Why is it so constrained in the first quarter?

It's constrained because pilot availability, quite simply. We would fly more if we had more crews available to fly more, based on our current projections of what the opportunity for flying is.

And so you can see us, as we catch up on pilot availability towards the back of the year, in order to meet those full-year capacity growth guidance targets, we'll have to grow significantly more second, third, and fourth quarters. And that's what you expect to see from us.

Okay.

And then, I'll just sneak one last one in. When did you effectively stop doing the sub-service. I appreciate the disclosure that you had in the press release about how much of that you incurred in 2014. And appreciate that that's, effectively, an easy comp. But can you say -- was there any in the fourth quarter, and is there any in that 4% growth in the first quarter?

And thanks for taking the questions.

This is Scott.

Yes. There's a little bit in the first quarter, call it, $1.5 million. Maybe a little bit more. In the fourth quarter, there was roughly, call it, $3 million, which would've been down from the prior year.

Thank you.

Thanks, Duane.

Joe DeNardi, Stifel.

Maury, if you could just provide what management's view, in terms of how to plan, given the current fuel price environment. I mean, if oil stays in this range or even a little bit higher, does that change the way you think about the airline's growth or fleet plans at all? I mean, do other aircraft types become profitable? Just how you're thinking about how to plan around fuel prices, going forward.

Well, I think, a general rule -- as fuel comes down, older airplanes get more valuable, so to speak. The economies of an MD-80, while they work very nicely for us, get just that much better.

We've had this growth plan in place, now, for probably six months to a year, and we don't intend to go out and get more airplanes. We're opportunistic, just to begin with, with picking up airplanes where we can find them. Jude and his team are very much in the market, looking for partner deals we can do.

But what we can do that will be, I think -- which you'll see in a number of places, perhaps. Who knows? But we can add flying at the margin. And though we've had our daily utilization down in the low fives hours per day, we can probably take that up a 10% factor to maybe 13%, 14%, and approach the high five, six hours a day, maybe in the back half of the year. And those -- that type of expansion should be very profitable, given the fuel levels.

Jude, I don't know if you have anything add to that, but --

There's a practical limit on how quickly we can take and use airplanes. And so we're still expecting to grow the fleet seven to eight airplanes a year. I would think, given where fuel prices are, the MD-80 is much more viable than it has been in years past. And so we expect that fleet to stay where it is.

I saw great quote from the American guides -- fuel prices were $100 a barrel for four years. They've been at $50 or less for three months. So you probably shouldn't read a lot into the change, at this point in time.

Yes. That's fair.

In terms of the capacity guidance for first quarter, is March still potential to get the pilot availability issue ready for March flying, or is that still going to be constrained at that point?

We've already scheduled what we are able to add. So the first-quarter capacity guidance is pretty tight. And we'll have some more flexibility as we enter into April and second quarter and beyond.

Okay. Thanks.

Thanks, Joe.

Bob McAdoo, Imperial Capital.

Yes. I didn't see anything in here that talked about what you thought fuel might be at, going forward. But if I take a look at what you did spend on fuel, it looks like it was about $0.33, $0.34 above the average of Gulf Coast for the whole quarter.

Is that spread a normal thing, going forward? Can we use that? Or as you get into more and more of your flying is in bigger cities -- Cincinnati, Tulsa, et cetera -- are you going to have more and more fuel that doesn't have an extra cost stuck into it because of trucking versus pipelines?

Yes. I mean, the spread between LA and Gulf Coast isn't that large right now. And if you use $0.30 above those, that's probably a good proxy. We are paying about $1.80 or just above that right now.

Okay. That's what I had. Thanks.

Thanks, Bob.

(Operator Instructions)

Savi Syth, Raymond James.

Just a question regarding the Boeing 757 write off. Just wondering when it makes sense to get out of Hawaii. I'm guessing that fleet eventually goes away?

The thing that we want to stress on the 757 write-down is that we impaired the fleet based on the most likely outcome, which was the retirement of each of those aircraft at their scheduled S4C check. That's the biggest C check in the cycle for that airplane.

And all that -- so I would view that impairment as giving us the flexibility to do with the fleet what we think the best thing to do with it at the time that those events come due. So we're not committing to anything on that airplane, and I would expect us to remain in Hawaii for the foreseeable future.

Got it.

And, Jude, could you remind us when those aircraft come for C checks?

There's one that comes due this year, and then the rest, there's three in the back of -- at the tail end of 2016 and two at the tail end of 2017. Tail end meaning that winter -- between 2016 and 2017 and then between 2017 and 2018.

Perfect.

And then, my last question, on the non-fuel cost guidance this quarter. I know the full year didn't change, I'm curious what's driving the higher cost? Is it just the ASM production, or is there some kind of maintenance timing in there, as well?

This is Scott.

Yes. It's two things, primarily. It's -- you did have some maintenance slip from the fourth quarter to the first. We gave you some full-year maintenance guidance. I believe it was $95,000 to $105,000 per aircraft per month. First quarter is, by far, the highest in the year. So that's a piece of it.

In addition, there's some pilot productivity costs in there. Our pay-to-block was down in the 50% range in the fourth quarter. We should start to see that start to increase in the first quarter, albeit there's going to be some inefficiency there. So there's incremental costs in there, just by getting these pilots up and going and on the line.

So those are the two impacts. If you exclude those, you're probably down in the 3% range.

Dan McKenzie, Buckingham Research.

I'm wondering if you can help us put that PRASM guidance into perspective for the first quarter, here. And so, I'm looking at much slower growth, relative to the fourth quarter. Yet a mid-single decline in the PRASM.

So it looks like there is a step function in the revenue outlook. And just given the strength in the East Coast, I wouldn't have guess that.

So I'm wondering if this is, perhaps, some increased competitive capacity that you're seeing. And I guess, the reason I'm asking is, as we move to the second quarter, growth does step up pretty sharply. So I'm just wondering if there's some things that you're seeing or some things you could point out, just to help us frame that?

Maybe we should just stop guiding PRASM at all. I mean, I think the number to watch is TRASM, and we're basically guiding flat in that respect.

And, I want you to think about our unit revenues in the light of a couple of things that are going on. First one is, the year-over-year effect of the increase in the in 9/11 Security tax, which went from $2.50 to $5.60. We have to pass that on.

We've also implemented an increase in the convenience fee from $10 to $13 per segment, which will be TRASM neutral, but take down PRASM and increase ancillary. And then, we've enacted a credit card surcharge -- we talked about it in Investor Day -- which came into effect in December. And that will move -- whereas before, we had a debit card discount, which hit the fare -- increased the fare, effectively. That will now go to a [contra] expense on marketing expenses.

So considering it's flat and we're riding through all those things on a year-over-year basis, I think things are very positive.

Okay. Thanks for the clarification. And I did notice that the TRASM was flat, but that helps --

But going forward, Dan, let me just give you a little bit more. As we go forward, and as we said before, we're going to be real focused on trying to take up utilization in today's fuel environment. And that will have a negative effect on unit revenues, as we try to drive more flying into off-peak periods.

Understood. Okay.

And then, for a second question, here, an update of a question I asked last quarter. And that's just, as you think about your aircraft in financing and in CapEx, are some these deliveries -- just given the cheap financing that's out there -- are you thinking to take advantage of some of the cheap financing? Or is the thought simply to pay cash?

Our strategy is very simple. We're going to pay cash until it needs to be replaced, at which time, we'll go to the loan market and take out some bank debt.

Understood --

But you're right. I think rates -- so we've been financing variable rate 3% and fixed rate 4%. I think we could beat those numbers substantially in today's market. It's just about finding the use of proceeds.

Understood.

So should we think about these six aircraft that are coming, potentially financing a portion of this, just to take advantage of the cheap financing?

It depends on how -- where our cash balances go. But we're not ready to commit to that today.

I understand. Okay. Thank you. Appreciate it.

Thanks, Dan.

Thanks, Dan.

Hunter Keay, Wolfe Research.

So it looks like -- on lower CapEx this year, 2015 is going to be a really good free cash flow year for you guys. Maury, can you talk about, strategically -- obviously, we saw the dividend, here -- can you talk about, maybe strategically, how we should think about you guys deploying cash, either in the context of a percentage of free cash flow basis or maybe on a percentage of net income basis? How should I think about modeling in what you're going to return to shareholders, assuming -- let's call it -- a confident fuel price environment?

Well, you're getting me down into technical math, here. So we're, certainly, going to have a very good year. I think I was reading where someone -- American suggested they've got a $5 billion surplus coming out of their system for fuel savings being non-hedged. And we're certainly seeing a lot of that.

We haven't finalized what we're going to do with the cash yet. Certainly, we did enhance our distribution to shareholders with the dividend that we announced -- $0.25 a quarter.

We will certainly look to purchase stock. We've got an $86 million remaining line still open. And the Board is very supportive of that.

And so, between dividends and stock buybacks, those are certainly available to us. And we'll look to use those, the way we've done, historically.

We have some flexibility as well, though, because we can buy some of our airplanes cash now and think about using it that way on the balance sheet. So you'll just see more of the same, I think, Hunter.

As far as the percentages go, I think our average fuel price was $3 and change in the second quarter. And we're probably looking at $1.80 for the year -- a $1.90 now. So you've got a $1.20 difference times 150 million gallons.

That's a lot of free cash. So we'll have to come up with some good ways to do that, though.

Yes. That's true.

And I mean, the limited -- the light float in the stock doesn't necessarily deter you from buying more of it at this point, though, right? I mean --

No. Not at all.

Okay.

You're also paying $180 a share. That's -- we've always had our debates at the Board level as to, is that too much? And you look back -- we were having that debate when we were at $50 a share. So the Board certainly supports it, and we think we're a good buy, even at these prices. We feel pretty bullish about the state of the airline right now.

Okay, great.

And as you think about Allegiant in the context of the other, bigger airlines, where do you think, Maury, Allegiant does better? And where do you think you do worse?

And in those areas where you do worse, is this, maybe, the year to spend some money and close the gap, whether it's an IT issue or an IFE-type thing? Is there anything that you've envied -- without naming any specific competitors -- about another airline that you haven't wanted to pony up and spend the cash to close the gap that you might consider doing that this year?

Well, envy is an interesting -- isn't that one of the seven deadly sins? (laughter)

But I think -- what we've said internally -- we have two major projects. We're dealing with our labor groups, which we want to get something put to bed on that. That's certainly something that needs to be addressed quickly, and we're willing to work hard at that part and plan on it.

The second thing is, we've got housekeeping issues to deal with that we've talked about internally. And frankly, we don't answer our calls as fast as we'd like. That's a combination of staffing and IT issue, I think. And we're looking hard to work on those things better.

IT has certainly been a big push for our -- internally -- for the last three, four years. And we'll see a lot of culmination, I think, in some of those projects.

So we're definitely -- got our head down and looking. Maybe a good analogy is, we're still in short pants and trying to become the adult, as we go into our 13th or 14th year, here. And we'll get a lot of these things cleaned up that we're a little rough around the edges on. So we're definitely focused on that type of thing, Hunter.

And maybe I am envious. Southwest -- they do a great job of answering their phone calls. But I'm not sure I want to be quite that good.

Okay. Thanks a lot, everybody.

Helane Becker, Cowen Securities.

When I look at the numbers for the fourth quarter, and I see that rental car days were really up quite a lot. In fact, significantly more than the full year. So can you just mention what might have driven that, and if we can expect to see that kind of growth in 2015?

I think rental car days are up primarily because of the growth that we're experiencing in Florida. As we go into the first quarter, the East Coast, I think, for the first time, will be more than 50% of the entire scheduled service network. And rental cars sell much better out there.

Now that understates the work that's been done by our third-party team. And we've launched, recently, some new technology that's gaining some traction. And so I think we'll continue to have unit revenue uptick, even in those areas looked in isolation.

So I'm very bullish on rental cars. I think we're going to continue to see those trends go forward.

Okay. That's great.

I think most of my other questions were asked and answered. So I will turn it back to you. Thank you.

Thank you, Helane.

Thanks, Helane.

Of course.

Glenn Engel, Bank of America.

The comment on the gap between the TRASM and the PRASM -- is that gap likely to remain as wide, really, throughout the year, since the two things you mentioned, really, just occurred at the very end of 2014?

It will continue to expand, actually.

And on the growth side -- I guess you touched on it -- can I assume that the growth is going to still be more on the East Coast than the West Coast?

Glenn, this is Jude.

Yes. We expect -- you can look at -- our schedule is very public, clearly. So yes. Through the selling schedule, we expect to see the predominance of our growth remain on the East Coast.

And lastly, there was just a conference call with the Teamsters. Any comments on that -- any inaccuracies you'd like to correct?

Glenn, it's Maury.

I didn't hear the conference. I'm not sure what was said, particularly. They're trying to promote their issues and the like, and so they are out talking to people. But I didn't listen to the conference, so I couldn't tell you.

And is there progress going on, or is there just still -- how much closer are we, in the last 2 1/2 years?

Well, the average contract -- first contract -- takes four years or longer. And so we're two years into it. And there's been some posturing by us and by the Teamsters. I'm not going to sit here and say otherwise.

But we've committed to getting things moving along. We want to get our guys and ladies -- they want a contract, and we would, too. It's, certainly, all this rhetoric and histrionics is distractive to both of us.

I will say that we had meetings scheduled in December and January that got changed because of the negotiator lost their money from the federal government. So we had to reschedule back to Washington DC to have a meeting. And we were prepared to go, and the Teamsters chose not to come. So we missed two months of negotiation, which was very disappointing, as far as I'm concerned.

But we'll get through it. We've got to focus. We've got a management team and a group that we want to get together. And it's a good time for everybody. We should be working on the positives.

And -- I lost my thought.

Appreciate the buy, by the way, Glenn (laughter).

Good. And it's, unfortunately, late in coming.

No, that's all I have. Okay, thanks.

Thanks, Glenn. Have a good day.

Oh, I'm sorry. I did have one more.

Pilots -- is there any sign of -- are you having any difficulty finding pilots? You heard that with regional jets. Is that an issue for you at all?

Not at this point.

Okay.

We certainly seem to be -- have very qualified, good numbers are available to us.

Okay. Thank you.

Steve O'Hara, Sidoti & Company.

Just a quick question. Just quickly, I guess, can you talk about the competitive capacity you're seeing in your markets? Has there been any change?

And then on a hedging thing -- I know you guys haven't done it for quite some time and, really, have been against it. I'm just wondering, have you been looking at it at all, or is it something you'd consider more as an offensive rather than a defensive move, at some point?

Steve, it's Maury. I'll take the hedging question first, and Jude can comment on the competition.

We wouldn't know how to hedge now, it's been so long. We're -- I'm a big believer that the cost of hedging is just amazingly expensive. And it's very non-transparent, so you don't quite know what it is.

But we take the difference I'm just seeing in notes from folks like yourselves. I thought I saw, this coming year, American is going to have a $0.45 gap in their cost per gallon for the year because of hedges. That's a huge -- that will pay for a lot of sins.

And so, yes. I guess you could think about hedging down here. But it's just, we feel that, that's not our business. It's speculation. We don't understand it. We don't understand what it costs, and so we are just better off to keep it simple, stupid.

Jude?

Well, the business model hasn't changed. We try to go where no one else is.

I think you're going to see the percentage of markets that are competitive in our network increase over. It has been going on and will continue to go on, as we expand in the larger cities and Frontier tries to figure out what they're going to do and who they're going to be.

But we are winning everywhere, right now. So we're looking for all markets. Everything is on the table, right now, in today's environment.

But the core is, flying where no one else is. Finding opportunity in either seasonally underserved markets or day week peaks that we can provide capacity without influencing those that are in the market, or if there is anyone there, at all.

Okay.

And then, just, maybe, a follow up on the hedging. In terms of your internal planning, what fuel price do you guys use -- are using right now for, let's say, 2015 and 2016? Are you maybe leaving too much on the table if fuel stays right here for that period of time? Or if it ratchets back up, maybe, quicker than expected, are you putting too much out there?

I mean, how do you think about that? And maybe you could talk about your sensitivity analysis, internally.

Well, candidly, Steve, for planning purposes, we use a forward curve, which is published. They're out there. You've got a contago curve, now.

So if we wanted to go buy hedges in the future and walk up $0.10 or $0.15, or out there, you're going to pay more to begin with. So I think that ability to hedge and, quote, put a cap on it, has already been priced into the forward curve, at this point. So the cost would be even greater to go put that hedge on.

And as I said before, we really don't think of that as part of our business model. Frankly, fuel hasn't been that volatile. If you go back the last three or four years -- I draw four graphs when I talk to people about fuel. One is with the line going up very gradually left to right, another with the line coming down left to right, another with a line that's just a wave, and then another one with a spike that goes up -- it's directly up -- and then falls straight off.

So which one of those do you want to hedge on? If you did the latter one, that's what you did in 2008, and you almost lost your business, if you're putting swaps on.

I mean, the best time to hedge was 2002 to about 2008 or 2009. And after that, hedging, I think, really got upside down. And Southwest made that game work very well for about six, seven years. But my guess is, if you went back and looked at hedging costs and benefits in the last five years, if you hedged, you lost money compared to those that didn't.

Okay. Thank you very much.

Yes. Thanks, Steve.

Savi Syth, Raymond James.

Just a couple of questions. One on -- to follow up on Helane's question on the third party. The hotel, year over year -- it did better than it's been doing in the last few quarters. Is that because we have lapped that contract issue, and we should expect a similar level, going forward?

Yes, that is the reason. And you should expect a similar level, going forward, on a dollar basis.

Okay.

Now understand that Vegas remains the most productive hotel market. And Vegas, as a percent of the network, is declining.

That makes sense. Got it.

And then, on the fixed fee, it looks like fixed fee was very good, here, in the fourth quarter. I was wondering what drove that. And maybe, is it the pilot tightness that's limiting the outlook on the first quarter?

We've got a great charter team (laughter).

Yes. I mean, that's not really -- part of it is that we aren't able to, with the pilot situation happening the way it's happening, we have excess assets -- aircraft. And so when pilots become available, we can commit to charters, which has allowed us to grow the charter program in the last couple months. And we hope to have a big charter quarter for the first quarter, as well.

All right, great.

So the pilots, then -- we're pretty much caught up, here, as we head into the second quarter, with, I'm guessing, very little sub-service, then, going forward?

Yes. I think we can schedule the airline more normally, beginning in April.

Got it. All right. Thanks so much.

Thanks, Savi.

Michael Linenberg, Deutsche Bank.

Just two questions, here. Can you give us an update on where you are, with respect to offering near international service -- how that capability is progressing? Or has it just, maybe, been pushed to the back burner, since you are starting to see a lot more opportunities in some of these medium-sized markets, like Indianapolis, Jacksonville, Pittsburgh, et cetera?

I'll give an overview comment, and Jude can give you more particulars.

Yes. The low-hanging fruit is certainly domestic. And it's just easier, operationally -- every aspect, with customs and things like that. So to the extent we can keep growing in this market, we don't believe we're losing anything in the south-of-the-border type of markets or the Caribbean, at this point in time.

But there's work to be done to get ready to do that. And there are just other things we're focused on, at this point, Michael.

Jude?

Yes. I don't have much to add. It's just about relative opportunity.

Is there any sort of milestone or timeline or the way we should think of that? I mean, in the past, I remember you were saying, late 2013, 2014. And then, maybe, late 2014. Or is there just no date?

No. We're not ready to commit to a date today. It would be a winter launch. So it either gets done this year for this fall, or otherwise, we have to wait another year.

Okay. That's helpful.

And then, just a second question, and this is to Maury. Just on your stock price -- you're right up at $180. We talk about -- I know, earlier, Hunter had asked about the liquidity of your stock. Have you ever thought about a split -- splitting the shares, maybe making it more available to a retail investor who, typically, will buy and hold and add some stability to the stock price?

Does that make any sense, or are we on the Warren Buffett Berkshire Hathaway path? (laughter)

No. Well, let me have your recommendation, Michael. I'm always looking for experts. You sound like you endorsed a split, there, with the --

Yes. You know what? I mean, if you look at the studies that are out there -- there are lots of studies out there. And if you think about more technicals rather than fundamentals, if you think about liquidity and even with respect to earnings guidance, you get companies out there that guide to the penny on EPS ranges. And that's actually easy to do when you have 1 billion shares out there as opposed to less than 20 million shares.

And I'm not saying that you're guiding on an EPS basis. But it opens up those opportunities.

And then retail? I mean, my sense is that there are people who fly you and enjoy the experience and consider investing in your stock. And when they look at the fact that to buy three or four shares, it equals the price of a vacation, they probably balk.

Yes. Well, we don't debate --

Just a thought.

No, no -- point well taken. We've certainly talked about it.

We've had debates at the Board, and it's hard to get a consensus. Some think that it's indicative of certain things if you split. Others think that -- anyway.

But I appreciate your input. And we've certainly had discussion. We have not reached a consensus yet.

Well, very good. And listen, I like $180 price. So I'm not upset here.

Well Michael, if you were involved with us, oh, many years ago in late 2006, we're up 10-fold in eight years.

I know.

So we bid at $18, if you remember.

I know. It's been fantastic (multiple speakers).

Yes. It's been good.

Very good. Well, thanks. Thanks, guys.

Thanks, Michael. Appreciate it.

Duane Pfennigwerth, Evercore Partners.

Just wanted to ask a market-specific question. Obviously, a tiny piece of what you do. But you had some service directly into the Bakken -- I think it's Minot, if I remember correctly, in terms of pronunciation. Please correct me if it's wrong.

But again, small for you. Are you seeing any change in fare levels or bookings out of the shale-driven area that you serve? Thanks for taking the question.

Not yet. I think that the demand will shift on production, not price. And they're still producing up there, and there's plenty of work up there, still.

But we are watching -- Bismarck is the same -- Bismarck, Minot. We have several economies up in that region that are shale economies. Thus far, everything looks good.

Thanks.

Thanks, Duane.

Hunter Keay, Wolfe Research.

I guess, a little bit a follow up to that. Jude, I don't think we've really asked the question directly.

Can you maybe just describe how demand is, right now, at a high level? And maybe where you're seeing pockets of strength and pockets of weakness? Or if you don't want to do that, just at a high level, how you're seeing demand in response to lower fuel prices?

At the high level, things are good. We're holding unit revenues where they are and growing into the first quarter.

We aren't affected by -- as much as any other low-cost carrier -- by competitive encroachment or what's going on in the competitive environment. So we're off here, operating on our own. And in that respect -- same-store, same capacity level, no competitive interference. Things are pretty good.

Okay.

We are seeing -- if I could get a little more granular -- we're seeing a little bit of pressure in the West, when there is opportunities for flow travel through Salt Lake, by way of example, from the Montana markets, things like that. So we're seeing some regional weakness, but we're also seeing some real strength coming out of the Northeast and the High River Valley.

Okay. Good. Thanks.

And just a procedural question for you, without getting into any opinions about what's going to happen with this pilot situation. I believe they have proffered the NMB for arbitration.

And I'm wondering if someone can help us all understand about what the possible outcomes are with timing for this? When do you expect the NMB to rule on this?

And if they do proffer you, maybe the potential outcome for that? And if they don't, what the next step would be? Just to help investors get a sense of timing around this whole crazy situation would be helpful -- if you can. Thank you.

Yes. Well, first thing is, Hunter, it's not that crazy. It's pretty tactical, at this point. The NMB proffer is when one side puts in an offer to go to arbitration and the NMB then comes back to the other side and says -- are you willing to do this? And if you decline arbitration, then the other side has the ability to go into a 30-day cooling-off period -- as I understand it.

I could be technically wrong. It's a bit of a technical area, but I'm pretty sure that's what it is.

We have been told by counsel that we're very premature in our state of the negotiations. And again, we've been in mediation with the NMB mediator for, what? Seven months?

Seven times.

Oh, seven times. Maybe six, seven, eight months, meeting month to month. And they're -- we're very early on in all of the basics of putting a contract together. Like I said earlier, it takes, on average, four years or more to do this.

So our counsel and discussions with NMB suggest that this is very premature. There won't be any recommendations from current management at the NMB to do this without getting much further down the road, if at all.

I don't know if you've noticed, but you haven't seen one 30-day period pop up since the Spirit strike of, what, three or four years ago, now? And you have people that are six and seven years in negotiations under mediation.

So there's just been a real trend, at least, that I've seen, where the NMB is not releasing people or letting those types of events even get to the front burner, let alone happen. So those are personal opinions, and we'll have to wait and see what the NMB does. And we'll respond to it. But I don't expect that we'll see any untoward actions, here, in the near term.

Okay. Thanks a lot.

Sure.

Dan McKenzie, Buckingham Research.

The question really ties to non-fuel CASM. We're looking at up 6% to 8% for the first quarter, essentially flat to down 4% for the full year, if we exclude the non-cash aircraft impairment charge.

And I'm just wondering if you can talk about the cadence? And maybe some of this is self-explanatory, just given ASM growth by ASMs by quarter. But if the cadence -- if there's something we should keep in mind, with respect to the cadence, that would be helpful.

Yes. This is Scott.

There's really not a whole lot to look into it. If you look at the uniques that happened throughout the 2014, there's upwards of -- call it -- $80 million in uniques, roughly $25 million, $26 million in training and pilot availability issues. You had goal depreciation that's non-ASM producing. You had the big write-down in the back of the fourth quarter. Andrew Levy leaving in the third quarter.

So if you look at the timing on those events and strip those numbers out -- I think what's interesting is, if you strip those out in the full-year 2014, you basically have flat [CASMex] year over year. It's roughly $0.056.

So as far as the interruptions -- it's first-half 2014 was the severity. And then the back half was the write-down.

So try to give you some full-year guidance on M&E -- it's front-half loaded. The [D&A] line item is relatively flat -- that's the ownership piece. So piece those together, and you can see the seasonality in the CASM trend.

Okay. Very good. Thanks, Scott, I appreciate that.

Joe DeNardi, Stifel.

Pardon the interruption. It looks like that question was cleared from the queue.

Any other questions, Operator?

At this time, we have no further questions. I would now like to turn the call back over to management for closing remarks.

Thank you, Operator. Thank you, all, very much for your time. And we appreciate your interest and your questions.

We'll see you again in 90 days. Have a good day. Thank you very much.