Hawaiian Holdings Inc (HA) 2007 Q2 法說會逐字稿

Good day, everyone. Welcome to the Hawaiian Holdings second quarter 2007 earnings conference call. During the presentation, all participants are in a listen-only mode. Following the formal comments, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded. I would now like to turn the call over to Allyson Pooley from ICR. Please go ahead.

Thank you, Natalie. Welcome, everyone, and thank you for joining us today to discuss Hawaiian Holdings second quarter 2007 financial results. On the call from the Company are Mark Dunkerley, President and Chief Executive Officer, and Peter Ingram, Chief Financial Officer. By now everyone should have access to the press release which went out at 4:00 Eastern time. If you have not received the release, it is available on the Investor Relations page of Hawaiian's website at www.hawaiianairlines.com.

Before we begin today, we would like to remind everyone of the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. The following prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore, undue reliance should not be placed upon them. For a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements, we refer you to Hawaiian Holdings' recent filings with the SEC, including the most recent annual report filed on Form 10-K, its recent quarterly reports filed on Form 10-Q, as well as recent reports filed on Form 8-K. And with that, I would like to turn the call over to Mark.

Thank you, Allyson. Good afternoon, everybody, and thank you for joining us today. I'm going to start by discussing the highlights of the quarter. Peter is then going to discuss our financial results in more detail, as well as our current outlook. And then as usual, we will open up the call to your questions. Despite seeing bookings come in very late, our Transpacific business was somewhat stronger in the second quarter than we had anticipated. Inter-island remains as competitive as it was earlier this year, with competitive fares dropping periodically to $9 one way, and in a couple of instances, to $1. We've done a good job of controlling costs, and there is more to come in this regard, even though the rising price of fuel is offsetting some of the gains. In the midst of this, our employees continue to deliver a level of service and operational excellence that is unmatched by any of our competitors.

Our second quarter schedule fully reflected the completion of the modifications to four aircraft we acquired in early 2006. The last of these entered service on May 31st, and we took advantage of the spare aircraft that this provides to complete deferred interior modifications on the aircraft which entered service in September of last year. It is perhaps not widely understood that the addition of these aircraft into our fleet has made Hawaiian the industry's fastest-growing airline in 2007. It is usual to see declines in not only yield, but also load factor when an airline grows as quickly as we have done, and so we are pleased to have been able to fill the same proportion of seats in the second quarter this year as we did last year. At the same time, we have maintained a high quality of service that is Hawaiian's hallmark. The credit for this, as always, goes to our dedicated employees, who are the best in the business. And as a result of their efforts, we are confident that the fleet additions position Hawaiian well for the future.

Our fleet additions helped drive a 9% increase in operating revenue on a 19% increase in capacity. As a consequence of both, the mix effect of growing our long haul lower yielding business faster than the short haul business, and also of course, the level of competitive pricing in both of our main markets, revenue per available seat mile declined 8.5% year-over-year, and our yield fell 8%. Our load factor, however, increased slightly versus a year ago to 87.1%. With last year's additions -- aircraft additions now in service, we don't anticipate any further fleet changes as we progress through the end of this year and into 2008, although our capacity for the rest of 2007 will reflect a full-year impact of the aircraft added into service late last year and earlier this year.

On the revenue front, our results continue to be affected by several factors. The first is intense competition in the Inter-island market. June marked the anniversary of the entry into the inter-island market of Mesa's go! operation. On the Transpacific side of our business, industry capacity expansion has slowed in 2007 after several years of rapid growth. However, the market remains very competitive and the pricing environment continues to be challenging. Additionally, last quarter, we indicated that we had seen some signs of a softer U.S. economy, particularly in the western part of the country, where most of our Transpacific passengers originate. In spite of these indications, for the portion of the second quarter which is in the peak summer travel period, basically June, we're encouraged to see that demand was reasonably healthy.

Let me spend a minute discussing the Transpacific and Inter-island businesses in a little more detail, and I will start with the Transpac operation. For the second quarter, our Transpac routes generated about 70% of our total passenger revenue, a percentage which has increased year-over-year both as a result of our wide body fleet expansion, and also due to the decline in revenue from our Inter-island routes. As we discussed last quarter, we've seen our bookings this year building much, much closer into the date of travel than has been our historical experience. Despite this, demand for June came in well, leading to a narrowing of the gap between last year's yields, and those of this year. With somewhat firmer pricing, our second quarter Transpac RASM declined 1.9% year-over-year, that's relative to a 6.6% decline in the first quarter. Load factor was down 1.5 percentage points, while yield was basically flat, declining by 0.2%. Passenger numbers were up a healthy 16%.

Turning to Inter-island, our results reflect the heavy discounting initiated by Mesa as it tries to establish a position in the market. Fares continued to decline, and though there is some stimulation and the summer is a stronger travel period for Inter-island competitor, RASM for all competitors is low. Suffice to say that when the low fare offered by a competitor includes the $9 and $1 promotions I mentioned earlier, all competitors can fill seats. For Hawaiian's part, load factor on our Inter-island routes has been higher each month in 2007 than during the corresponding month in 2006, and higher than that of our competitors, as customers continue to indicate a preference for Hawaiian's superior service, our fleet and our schedule. Revenue performance has been in line with our expectations, albeit considerably lower than last year's level given the excess capacity in the market. For the second quarter, our Inter-island RASM declined 21% on a yield decline of just over 24%, and a load factor increase of 3.1 percentage points.

Turning to expenses, the initial benefits of cost reduction initiatives that we've been emphasizing over the past year are reflected in our cost per available seat mile decline of 4.4% during the quarter. Excluding fuel, our CASM was down 4.9%. Importantly, the full benefit of a number of our initiatives is not yet reflected in these results. In fact, our expenses for the quarter reflect several significant charges associated with implementing our cost savings initiatives. Notable among these are charges for employee separation expenses which totaled $2.5 million.

We've discussed a number of initiatives which are driving our improved cost structure, and I'm going to update you all on a few. First, in the middle of last year, we commenced a thorough review of several key third-party contracts, and targeted a number of areas for savings, most notably, maintenance, ground handling, catering, and insurance. The last of these projects culminated just last week, with the signing of a five-year agreement for airframe heavy maintenance on our 767 fleet, with Air New Zealand's maintenance division, and this we expect to generate savings of approximately $15 million over its term, relative to what we would have spent with our previous vendor. These savings, coupled with the improvements we made in the other areas I mentioned, have allowed us to comfortably exceed our targeted savings of $10 million per year from the contract review process. Notably, we have achieved this objective without sacrificing quality or service levels. Our catering initiative is a prime example of this, in that we achieved our cost containment objectives without removing meals from our flights or sacrificing meal quality. And this, as you all know, stands in marked contrast to what many of our competitors have done.

In addition to this, our outsourcing efforts continue. During the second quarter, we began transitioning our call center activities to a third-party provider. And though a surge in call volume has put a lot of strain on our reservations performance, we are confident that this will be a success. Also during the second quarter, we began transferring some of our transactional accounting activity to a third-party vendor. This transition is going extremely smoothly, and we look forward to completing it in the back half of 2007. As part of these changes to our operations, we offered voluntary separation packages to employees in the affected areas. About 80 employees accepted these offers, the cost of which is reflected in our salary expenses for the quarter.

The next major outstanding initiative we are working on involves IT, where in the past quarter we started to transition our IT infrastructure help desk and selected application support to our outsource provider. We expect to complete this transition during the fourth quarter of 2007. Also during the quarter, as part of our broader effort to realign our business with the changing needs of the airline industry, we released 98 nonunion employees in administrative positions throughout the Company. An additional 38 unfilled nonunion positions were also eliminated. Decisions like this are not taken lightly, as the individuals affected each contributed to the success of our business. But as the industry changes, we must adapt. And in this case, adapting means significant reductions in certain areas of overhead. As I mentioned earlier, the combined impact of the voluntary separation packages related to our outsourcing activities, and the severance charges relating to our organizational restructuring, was $2.5 million, which is reflected in the wages and benefits line of our income statement for the second quarter.

Before I turn the call over to Peter, I would like to update you on our lawsuit against Mesa. Our day in court is September 25th, and we look forward to presenting our case that Mesa breached a confidentiality agreement in using Hawaiian's confidential information for the purpose of entering the market. Damage has been substantial, and we eagerly anticipate demonstrating this to the court. Of course, there can be no assurance as to how the court may rule.

In summary, I would like to say that we're encouraged by the stronger than originally anticipated bookings in June, and the cost savings that we've been able to achieve. Although some of our cost reduction initiatives have generated transitional expenses, we are confidence that these represent sound investments that will generate future savings and bolster our competitiveness in the days, weeks and months ahead. With that, I will turn the call over to Peter for a bit more detail on our financial results. Peter.

Thanks, Mark. Let me start with expenses, and then I will touch on the balance sheet and provide some color on our outlook for the third quarter. Our operating expenses increased by 13.6% in the quarter on a 19% capacity increase, and as a result, our cost per seat mile declined 4.4%. Excluding fuel, CASM declined 4.9% to $0.0764. Our fuel expense grew by 15.1% in the second quarter to $68.2 million, which represented approximately 28% of overall operating expenses. This reflects a 16.6% increase in block hours flown, with the 767 fleet contributing a relatively higher proportion of the growth. Our average cost per gallon of jet fuel declined 2% year-over-year, to $2.11 for the quarter, which includes taxes, delivery, and hedging impact. Fuel consumption per block hour improved about 1% on each of the fleets, although the relatively larger increase in 767 flying yielded a small increase in our combined consumption per block hour. Overall, these consumptions savings were worth about $500,000 to us in the second quarter. As of the end of June, we had hedged approximately 3% of our consumption for the third quarter at an average contract price of $2.11. Additionally, we've hedged 3% and 1% respectively of our consumption for the fourth quarter of 2007 and the first quarter of 2008, at average prices of $2.17 and $2.25 respectively.

Wages and benefits expenses increased 6.9% year-over-year to approximately $60 million. And as Mark mentioned, this includes a charge of approximately $2.5 million for severance payments associated with the reorganization that Mark described, as well as charges related to the voluntary separation packages offered to employees affected by our outsourcing initiatives. Ignoring for a moment the cost of these charges in the quarter, our base wages and benefits expense rose less than 3% in a quarter where our capacity grew about 19%. This improvement in general productivity is a key element of what we have been striving for with our recent expansion, and reflects our commitment to controlling overhead expenses.

As we've discussed in detail during the last two calls, our maintenance expenses will be higher during 2007 as a result of year-over-year increases in periodic maintenance activities, escalation in some of our long-term power-by-the-hour contracts, as well as the growth in our operations. As you will see, our second quarter numbers reflect these trends. Maintenance materials and repair expense increased by $5 million dollars versus a year ago to $23.2 million, and the biggest driver of this in the quarter was engine maintenance on the 767 fleet. We entered 2007 with three engines from the 767-300ER fleet which were not in our power-by-the-hour program. When these engines entered our fleet, they weren't scheduled to be enrolled in the power-by-the-hour program until after their next maintenance overhaul, so when they go through that overhaul, we take the maintenance hit on an expense as incurred basis under our accounting policies. The second of the three went into overhaul in the second quarter, compared to zero in the second quarter last year. And the last of these engines is expected to be overhauled later this year. Additionally, we saw higher expenses in the quarter for engines in our power-by-the-hour program as a result of more flying and increases in the contractual rate.

Aircraft rent expenses declined by $2.7 million or approximately 10%, compared to last year's -- and for a total of $24.4 million. This reflects our acquisition in December 2006 of three 767s that were previously leased, offset a bit by some supplemental rents that we reported in relation to nonrefundable maintenance deposits that we don't currently project will be required to fund future maintenance expenses. The aircraft acquisition also resulted in higher depreciation and amortization expense, which increased by $4.2 million to $11.2 million for the quarter. And this increase reflects depreciation of the formerly leased aircraft, as well as the four 767-300EMs that have all now entered into service.

Other operating expenses increased approximately 26%, which is a bit higher than our ASM growth. Contributing to this increase was the initial set-up of our outsourcing functions, including professional fees and training costs. We view these costs as sensible investments that will lead to future cost savings, but needless to say, we look forward to them declining as these activities achieve steady state. Below the operating line, we reported nonoperating expenses of $4.6 million versus nonoperating expenses of $31.1 million in the second quarter of 2006. Included in the prior year period is a $28 million charge related to Holding's redemption of its then outstanding 5% subordinated convertible notes in April of 2006. Our interest expense increased by $1.9 million year-over-year, primarily due to the debt we took on in December of 2006 to purchase the three formerly leased 767s.

Turning to the balance sheet, we ended the quarter with $202 million in cash, restricted cash, and short-term investments, a solid increase of about $34 million from where we were at the end of 2006. Despite our ongoing revenue challenges in the markets we serve, we're pleased that our cash generation over the first half of the year provides us some cushion as we move into the fall and winter.

I would like to spend a minute discussing our debt levels and the debt covenants we discussed on last quarter's call. Our balances under the Term A and Term B loans stand at $50 million and $58.2 million respectively, at the end of June. For clarification, these amounts reflect that we record the Term B debt on our balance sheet at a discount, so the face value of the loans are $50 million and $62.5 million respectively. Under the terms of the A loan, we make quarterly principal payments of $2.5 million, while the B loan is repayable in full at its term in 2011. Both of these loans contain covenants related to our level of unrestricted cash and the ratio of our trailing 12 month EBITDA to outstanding principal. On last quarter's call, I indicated that we were monitoring these covenants closely, and that we would be closer than we would like to be to the EBITDA covenants at the end of the second quarter. I'm pleased to be able to report that based on this quarter's results, we remain in full compliance with the covenants, and we didn't need to seek relief of any kind from our lender. Based on our current projections for the remainder of the year, we expect to continue to exceed the covenant threshold.

Before I turn the call over to the operator, I will spend a few minutes on the outlook for the third quarter. Reflecting the full impact of our 767 fleet additions, we expect capacity to increase approximately 19% to 20% in the third quarter compared to last year. I should reiterate that this does not reflect any additions to the fleet relative to the end of the second quarter, but instead, the full impact of the capacity we've added since last year, given that the first of the 767s we purchased last year came into service in September of '06. As always, our outlook is leveraged to the revenue environment in our two key markets, as well as to the price of jet fuel.

On the revenue front, we expect the trends we have seen recently to generally continue. Given this, and the disproportionate growth of our long haul operations, which are lower yielding than the short haul Inter-island business, we expect RASM to continue to decline year-over-year in the third quarter. We currently forecast third quarter yield declines between 6% and 8%, with generally a flat load factor of about 86%. Including the impact of nonpassenger revenue, this would produce a total RASM decline of 7% to 9%. And again, this number reflects the mix change.

On the expense front, cost per available seat mile excluding fuel is expected to decline again in the third quarter, mitigated somewhat by the benefit we saw last year in the third quarter of some nonrecurring credits on our benefit line. Taking this into account, we project that our CASM excluding fuel will decline by 3.5% to 5.5% in the third quarter, compared to the same period last year. As we've said repeatedly, our cost reduction efforts are all the more important given the challenging revenue environment, so much of our attention looking forward continues to be on minimizing costs. With that, I will turn the call back over to the operator, and we will spend a few minutes fielding any questions you might have.

(OPERATOR INSTRUCTIONS) Nick Capuano, Imperial Capital.

A couple of quick questions for you. First of all, on the Transpac business, with the late start in bookings this year, how do you expect -- given that late start, I mean, might the seasonality be that this season extends longer? Or is it just a matter of on the front end, it just kind of took longer to get to the front end of the bookings for the holiday season?

To be clear, I don't think we're saying that the summer travel season started later, and would therefore hopefully end later. Frankly, the summer travel season, basically the same dates on the calendar year after year, and if anything, it moves slightly earlier with schools going back earlier. What we were saying is that, we monitor how close into the date of travel people book. And one of the things that we have seen this summer is that people have been willing to book their vacations very, very, very late. Close in, in other words, to their date of travel.

Understood. I see what you mean.

So that is the effect that we're seeing. And I think the relevance of that is that we made several decisions about the amount of inventory that we would hold back for last-minute bookers. And in the month of June, we're pretty pleased with the decisions that we made. Of course, we operate in a competitive marketplace, and we always have to be mindful of what our competitors are doing, and many of them don't do the same thing.

Okay. Great. And the incremental spending on professional services to get the outsourcing programs going, is that something that is going to be continuing at close to the same levels in the next few quarters? Or when might we see a drop off, and of what magnitude might we see a drop off of that over time?

Yes, Nick, this is Peter. I would generally expect that to start to taper off as we go into the third quarter. There is really two elements to it. One relates to the contract review process, and those expenses are basically fully in the rear view mirror at this point in time. As regards the outsourcing activities, we still have some spend going into the third quarter, and that will probably on that piece, be similar or slightly smaller to what we had in the second quarter. But then we would expect that to start to taper off, as well. So in general, I would say the third quarter should be a little bit lower than the second, and similarly, the fourth may go down a little more even from there.

Okay. That's helpful, Peter. And lastly, looking at the wages and benefits line, with that $2.5 million charge there in the second quarter, now, going forward, will that be -- will we have likely any further charges on that line relative to the reduction in force? And can we look for that wages and benefits line to look something like a run rate of what you had achieved minus that $2.5 million charge for the next few quarters?

Yes, I think you're right on that. The $2.5 million basically fully accrues for all of the separation charges related to both the organizational restructuring and the outsource affected folks. So what you will see going forward is, if anything, a reduction as we start to see the savings from having less head count on our active payroll.

Okay. And I guess I will sneak one more in. Relative to just the promotional environment in Transpac, any recent changes in it? Or if you would just add some more color relative to what you see there, and are certain players especially promotional? Or just any incremental color on the Transpac pricing environment would be helpful.

I think the pricing environment remains very competitive. There are a number of carriers out there with relatively low fares. But of course, it is not just the bottom fare, it is how you allocate your inventory amongst the different fares that you have on offer. And I think the -- what was certainly hoping for during the summer is that we will continue to see what happened in June roll through the first two months of the third quarter. Once we get into the fall, it is likely to be a different dynamic, and we're going to have to see how things come out there. But at the moment, there are some very low fares in the market. But again, we've said we've been actually reasonably pleased with how late people have been willing to book, and we've held back inventory to accommodate them.

Robert Barry, Goldman Sachs.

A few questions. First of all, on the cash flow, what is the general seasonal pattern of the cash flow? Is it generally stronger in 2Q, and what is the outlook for the back half?

Peter, why don't you -- ?

Yes, generally what we see is a peak here in the middle of the year, sort of between the end of the second quarter and into the third quarter a little bit, typically driven by our ATL, and you know our revenue is seasonal, with the second and third quarters being the strongest period on the Transpac revenue front. So you should expect to see a little bit of a use of cash as we go into the second half of the year seasonally.

Do you think that for the year you will be free cash flow positive from operations?

I think we will be -- the answer to that is sort of roughly yes. And I would say roughly, because of course, we absolutely stand by our ability to make some investment decisions during the year that might use cash for future benefits. But if you're talking about the kind of -- just from operations, the answer is going to be roughly yes.

Okay. And I appreciate all the detail on the various cost-cutting initiatives. Is it possible to just give us kind of a macro cost-cutting target that you have to kind of add everything up?

Yes, generally, I think what we've said as a target was something north of $15 million, which included the third-party contract restructuring and the outsourcing activities. That candidly, is a reasonably conservative number and internally, we've set the ball higher than that. So I think generally, from where we started about a year ago, something in the $15 million to $20 million range is a reasonable number. And we believe we're on track with that.

And I'm sorry, if you could remind me of the timing a year ago to over what period would you hope to achieve the $15 million?

I would expect us to be in a steady state run rate on the projects that have been initiated at this point in time as we enter 2008.

Okay. And as you look at the markets on the West Coast, I know you've cited in the past that California is particularly weak. Is the pressure really concentrated in California? Or are there other markets up and down the coast that are particularly strong or weak, as well?

Well, what happens to our markets up and down the West Coast is they move from weakness to strength to weakness to strength, and generally not all in the same direction at the same time. I think rather than thinking of it in terms of sort of California and the rest, I think we look at it in terms of big cities and small cities. Big cities generally provide plenty of load. There is always the ability to fill the airplane in the big cities. The prices tend to be set by our competitors. And so they will, in terms of sort of RASM terms, move up and down quite a lot. I think our smaller cities, we don't have quite the same level of demand that we do in the big cities. We have slightly better stickiness on fares. And depending on how those two work against one another, sometime we like -- sometimes we like small cities and other times we're looking at big cities and wishing we had more of them. So it ebbs and flows.

Which category is Seattle in?

It is a small city becoming a big city at the moment. And I think it is going to be an interesting market for us. We continue to like our position in Seattle. We actually today, have more service into Seattle than we do to any other West Coast city.

And then just one last question, I was curious if you would care to comment on what you think the impact is of the -- what United is doing with Aloha? Is that impacting the market? Or could you see it impacting the competitive dynamic in any way?

We've not seen anything. I mean all we've seen is what has been printed in the newspapers. And that is sort of remarkably bereft of detail. So they may have some relationship there that will generate some benefits for them. But at the moment, we don't see it, and they certainly haven't announced anything that constitutes sort of a material change in the competitive environment. So I think we know about as much as you at this stage.

Okay. Thank you.

(OPERATOR INSTRUCTIONS) Michael Rosenthal, UBT Financial.

I know you probably don't like to go into this level of detail, but given sort of the year-over-year comparison with Mesa coming on last year in this quarter, for a full quarter, could you talk maybe a little bit about how the 7% to 9% RASM breaks down, maybe even if just directionally?

I'm not sure that I understand the question, Michael. Could -- ?

I guess last year, your yields were down, or your RASM -- or your yields were down maybe 15% Inter-island in the third quarter of last year. So I'm just trying to figure out how 8% decline this year breaks out between your three segments.

Okay. Well in terms of -- I mean we've broken it out. I think in the text of our script, I think we broke it out. Transpac we said was down 1.9%.

I mean in the third quarter in terms of -- .

No, I don't think we're giving that level of detail. I think what I would say in general terms is the third quarter has sort of six weeks of summer in it and six weeks of fall in it, so there are some seasonal issues for the Transpac business. I think with respect to Inter-island, all I can say, not that I'm trying to be difficult, but because we spend a lot of time reacting to the competitors efforts to try and break into the market, is that we have seen fares in 2007, which have so far been lower in 2006, but of course as loads build, we have some ability to offset that with yield management.

Okay. And have your -- has your capacity in Inter-island been stable since the third quarter of last year?

That's a good question. I want to say yes, we did increase our capacity at some point. I can't remember if it was the -- if we did in the second quarter or the third quarter of last year. We can get you -- in fact -- . We're looking for the numbers now. I want to say yes, but it all depends on the timing of when we increased capacity last

Yes, actually, our Inter-island capacity should be roughly flat in the third quarter year-over-year.

Okay. Good.

[George Shultz], private investor.

Two quick questions. Capital expenditures during the quarter?

During the quarter, someone is grabbing that right now. One second.

In terms of that same number, I'm wondering if you have -- if you can give a projection for what your total discretionary capital expenditures would be for this whole year?

Okay, go ahead.

For the second quarter, capital expenditure was about $8.4 million. And over the back half of the year, we expect roughly $10 million in capital expenditures, the bulk of which is on IT projects. And frankly, all of that is -- virtually all of that we would consider discretionary for some of these projects that are underway. So we're disinclined from slowing down at this point, when things are almost done. But it is about $10 million for the back half of the year.

And we're very happy with the idea that these are investments in future cost saving, so we're happy to be doing it.

Okay. Thanks. One last question. Cash on the balance sheet, given that you're -- doesn't seem like you'll spend cash, at least in the near term on operations, do you have any intermediate plans for cash on your balance sheet?

I think the message that we're trying to send out is that actually we expect to see some seasonal fluctuations in cash that are in basically the ordinary course. And that otherwise, as management, we would never say that we have too much cash. But otherwise, we're not seeing a cash event coming down the road at the moment.

Thank you very much.

(OPERATOR INSTRUCTIONS) Robert Barry, Goldman Sachs.

(inaudible) follow-up, if conditions persist, and certainly given our outlook for housing on the West Coast, I think we could continue to see some pressure. How are you thinking about optionality perhaps around reducing the fleet size? I know there is generally very good demand globally for the kind of airplanes you fly Transpac.

I mean we always have in the back of our mind options for both growing and reducing our fleet size. I would say that I think we're pretty pleased with our fleet size at the moment. We are filling our airplanes pretty fully, so the issue isn't one of demand for our business. We are actively looking at other potential destinations which would help us diversify our business, as we've mentioned before. That is a work in progress at the moment. So I think the main message I would send to you is that we're actually pretty comfortable with our fleet size for the time being. It clearly is the case that were we to determine that our fleet size is too large, then there are many potential outlets for the aircraft that we have in our fleet today. You are absolutely right, they are aircraft in very, very high demand. And again, the main message here is I think we're very, very comfortable indeed with our fleet size.

And do you think we would hear anything on a potential reallocation or new market this year? Or is that more a potential of an '08 event?

Well, I think -- I mean we're looking at a range of options and alternatives, some of which include international flying, which has quite a long lead time. So the first thing you're likely to hear from it is a big press release. We're unlikely to hide this one under a bushel. We will be screaming from the heavens about how we're going to take care of everybody's frustrated transportation needs.

Okay, guys, thanks again.

Good.

And there are no further questions at this time. So this does conclude today's conference call. We thank you all for your participation, and have a great day.

Thank you, all. Bye-bye.