Spirit Airlines Inc (SAVE) 2015 Q3 法說會逐字稿

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  • Operator

  • Welcome to the third-quarter 2015 earnings conference call. My name is Ellen, and I will be your operator for today's call.

  • (Operator Instructions)

  • I will now turn the call over to Deanne Gabel. Miss Gabel, you may begin.

  • - Senior Director of IR

  • Thank you, Ellen, and welcome to the Spirit Airlines third-quarter 2015 earnings conference call. Presenting today will be Ben Baldanza, Spirit's Chief Executive Officer; and Ted Christie, our Chief Financial Officer. Also joining us for the Q&A session today are Thomas Canfield, our General Counsel; John Bendoraitis, our Chief Operating Officer; Ted Botimer, our Senior Vice President of Network and Revenue Management; and other members of our senior leadership team.

  • This call is being recorded and simultaneously webcast. A replay of this call will be archived on our website for 60 days.

  • Today's discussion contains forward-looking statements that represent the Company's current expectations or beliefs concerning future events and financial performance. Forward-looking statements are not a guarantee of future performance or results and are based on information currently available and/or Management's beliefs as of today, October 27, 2015, and are subject to significant risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements, including the information under the caption Risk Factors included in our annual report on Form 10-K and quarterly reports on Form 10-Q. We undertake no duty to update any forward-looking statements.

  • In comparing results today, we will be adjusting all periods to exclude special items. Please refer to our third-quarter 2015 earnings press release for further details regarding our assumptions for the reconciliation to the most directly comparable GAAP measures. And with that, here is Ben.

  • - CEO

  • Thanks, Deanne, and thanks to everyone for joining us. I want to start by thanking our team members who contributed to our record third-quarter results. Despite a very challenging revenue environment, our team used lower cost to deliver high returns, which emphasizes the resiliency of our model.

  • For the third quarter 2015, we reported net income of $97.3 million or $1.35 per diluted share and a pre-tax margin of 26.9%, an excellent result especially considering our average total fare decreased 13.1% year over year. The competitive environment has been getting justifiable attention recently, and before we go into particulars for the quarter, let me briefly comment on that.

  • In some of our markets, we continue to see very low prices from all competitors, including legacies. We think that may continue, perhaps for longer than people expect.

  • At Spirit, we will continue adjusting to market conditions while keeping foremost in our minds our company's long-term future and competitive advantage. We have steered Spirit through some diverse challenging environments over the years: fuel spikes, a global recession, various competitive capacity incursions, a labor strike and also some more recent times when conditions allowed us to perform to the upside.

  • Through all of those periods, we have made continual adjustments, but we have avoided knee-jerk gyrations in reaction to current conditions. Instead, we've taken an active approach while keeping a focus on what will allow us to compete effectively in the longer term, keeping costs low, improving reliability and offering great low prices to the many people who need them. I will share a few thoughts in my closing remarks regarding how we think about our long-term strategy and what that might mean in terms of earnings.

  • Now back to our third-quarter performance, the decline in total revenue per passenger segment for the third quarter 2015 was primarily driven by a 20.8% decrease in ticket revenue per passenger segment. The declining ticket revenue per passenger segment was attributable to lower fare levels in our markets, driven by increased competitive pressures as well as a higher percentage of our markets being under development compared to the same period last year.

  • Non-ticket revenue remained stable, declining only 1.2% year-over-year on a per-segment basis of $53.39. The decrease in non-ticket revenue was primarily attributable to the outsourcing of the Company's onboard catering to a third-party provider under our revenue share agreement as well as slightly lower bag revenue per segment. These declines were partially offset by a higher per-segment convenience charge as compared to the same period last year.

  • Total revenue per ASM decreased 17.5% year-over-year. About 40% of the RASM decline was attributable to the ramp of our growth and about 60% driven by price compression in a number of our markets. As for operations, our system-wide controllable completion factor -- that is, excluding weather-related cancellations -- was 99.4%, and our on-time percentage averaged about 70%.

  • In the third quarter, we launched service between Los Angeles and Baltimore, Kansas City and Atlanta, and between Atlanta and Boston and Fort Meyers. We're very pleased with the performance of the new routes launched so far this year.

  • Thus far in 2015, we've added service on 38 new routes, and next year we are planning to add about 20 new routes. About half of our overcapacity growth next year is attributable to the run rate of new markets launched in 2015.

  • With that, here is Ted to tell you about our great cost performance in the quarter. Low costs matter, and no one is more focused on low costs than Spirit.

  • - SVP of Network and Revenue Management

  • Thanks Ben, and again, thanks to all of you for joining us today. I want to thank our team members for doing a great job managing costs and keeping us on track to deliver full-year 2015 CASM ex-fuel of down approximately 6% year-over-year.

  • For the third quarter of 2015, CASM ex-fuel decreased 9% year-over-year to $0.0539. Compared to the third quarter last year, the decrease in CASM ex-fuel was driven primarily by lower aircraft rent per ASM and lower labor expense per ASM. The decrease in aircraft rent per ASM was driven by a change in the mix of leased and purchased aircraft. As the Company increases its percentage of owned aircraft, we will continue to produce lower unit costs associated with our fixed aircraft expense.

  • Labor expense per ASM in the third quarter 2015 was lower compared to the same period last year, primarily due to scale benefits from overall growth and from larger-gauge aircraft. As of September 30, 2015, we have spent approximately $99 million of the $100 million share repurchase authorization approved last December, repurchasing approximately 1.5 million shares, and our unrestricted cash balance as of September 30 was $749 million. As mentioned in our earnings release this morning, our Board has authorized the Company to repurchase up to an additional $100 million in value of common stock.

  • We ended the third quarter with 76 aircraft in the fleet, including three new 228-seat A-321 aircraft which delivered during the quarter. Also during the third quarter 2015, we issued our inaugural EETC in the amount of $576.6 million. Proceeds from this EETC will be used to finance three aircraft scheduled for delivery in the fourth quarter of 2015 and 12 aircraft scheduled for delivery in 2016.

  • Turning now to our fourth-quarter 2015 cost guidance, we estimate our fuel price per gallon for the fourth quarter will be $1.66, protected approximately 23% of our fourth-quarter volume using out-of-the-money jet fuel call options which allow us to participate 100% in the movement down in fuel price. More details will be provided in the investor update filed later today.

  • Capacity is expected to be up 31% in the fourth quarter for an increase of 30% for the full-year 2015. For the fourth quarter 2015, we estimate our CASM ex-fuel will be down approximately 5.5% year-over-year with the largest drivers of the decrease coming from lower aircraft rent per ASM and capacity increases outpacing increases in salaries, wages and benefits.

  • Partially offsetting these benefits is higher depreciation and amortization, driven by accelerated depreciation of heavy maintenance events related to leased aircraft scheduled to return to lessors beginning next year. This pressure will be a headwind throughout 2016 as well.

  • We are not yet prepared to give CASM ex-fuel range for 2016, but I will discuss the puts and takes. First, it should be noted that only a minority of our non-fuel costs are indirect and thus benefit from increased scale. This is why running a good airline is so critical and why we so intensely manage the indirect overhead expenses.

  • Second and primarily for that reason, there's no linear correlation between the percent of capacity growth and the change in ex-fuel unit cost. We describe 2015 as a step function year for CASM ex-fuel.

  • Contributing to this were several initiatives achieved in late 2014, which had a full run rate benefit in 2015, including a modified and extended credit card agreement, a revamped rotable spare parts supply and repair agreement and the benefits from renegotiating and extending leases on certain aircraft and engines. We will continue to benefit from those initiatives in 2016, but their value is already included in the run rate from this year.

  • We're currently targeting capacity growth to be approximately 20% next year. While lower relative utilization puts overall pressure on unit cost economics, it should help us to improve our operational reliability. The benefits of running a better operation should mitigate this cost pressure.

  • In addition to the accelerated depreciation related to the aircraft returns I mentioned, next year we will also have cost head-winds from return conditions related to these aircraft, which will show up in the aircraft rent line as supplemental rent. As for tail-winds, we will see additional benefits of bringing more aircraft on the balance sheet. And we will see continued benefit from overall growth and growing with larger-gauge aircraft.

  • In conclusion, even though we anticipate the year-over-year percent change in CASM ex-fuel for 2015 to be non-repeatable and we face considerable headwind pressures, I remain confident that the trajectory our CASM ex-fuel will continue to be stable to declining throughout our growth cycle. With that, here's Ben.

  • - CEO

  • Thanks, Ted. In our investor update last week, we previewed that we were lowering our revenue forecast for the fourth quarter. Prices in the markets we serve are low, and we do not expect that to change in the foreseeable future.

  • Based on our view of October and bookings for the remainder of the year, we expect the year-over-year unit revenue decline in the fourth quarter will be greater than the year-over-year unit revenue decline we experienced in the third quarter. Together with the cost estimate that Ted provided, our guidance for fourth-quarter operating margin is approximately 17.5%.

  • Regarding the full-year 2016, we're still working through our plan for the year and don't have specific guidance to share at this time. We are anticipating that from a pricing perspective, the first quarter will look a lot like the fourth quarter, and we won't lap the price structure changes we experienced this summer until the second half of next year. This could indicate that will make less money next year than we did this year. It's just too soon to know for certain.

  • Are we reacted to this environment? Yes, of course we are. However, we believe it is in the best interest of our shareholders to use a scalpel versus a chainsaw such that we maintain the long-term value of our franchise.

  • Our long-term goal is and always has been to be a high-growth carrier, earning mid teens margins and delivering high returns. Clearly, as we have demonstrated, we will take advantage of short-term opportunities to earn margins higher than mid teens when conditions permit. However, at our core, we are an earnings story, and growth is a great lever for us to increase earnings over time.

  • You could imagine a set of circumstances where our margin percentage would be higher as a smaller airline, but our math suggests that drives significantly less overall earnings, which is not in our shareholders' interest. Just because we can earn margins this high during favorable periods, it does not mean we're going to say no to growth opportunity if we can deliver margins in line with our long-term story.

  • Our costs are lower than ever, our planes are full even when others matching our fares more aggressively, our addressable market has grown, and we have improved our customers' understanding and acceptance of our business model. We remain focused on leveraging the strengths of our business model while offering the lowest fares in the marketplace.

  • In any economic environment, there is a segment of customers that demand the lowest price, and we built our model to uniquely serve that segment profitably. Now back to Deanne.

  • - Senior Director of IR

  • Thank you, Ben and Ted. Ellen, we are now ready to take questions from the analysts. We do ask that you limit yourself to one question with one follow-up.

  • (Caller Instructions)

  • Operator

  • (Operator Instructions)

  • Duane Pfennigwerth, Evercore ISI.

  • - Analyst

  • Regarding the lease returns, can you just remind us the number and type of aircraft that you plan to return in 2016 and if that plan changed over the course of the last three to six months? In other words, did the number of aircraft you plan to retire next year increase?

  • - CEO

  • Hey Duane, it did not change. We plan to return -- there's three airplanes going back in 2016. Those are all 319s.

  • There are also aircraft -- you can see this on our schedule online -- there are some airplanes that start returning in 2017. And the way we evaluate lease returns is over a broader calendar window than just 12 months.

  • So we are always looking forward beyond that. And so it's a mix of what's happening next year as well as the year beyond and maybe a little bit beyond that too.

  • - Analyst

  • Okay. And then Ben, can you just remind us what your average frequency is in the large markets that you serve? And as the model has evolved, have you been tempted to increase your frequency advantage to be more relevant to maybe the business traveler or as a competitive response?

  • - CEO

  • Duane, I don't have that exact number, but it's about 1 point low. It's a little over 1 per segment, and there's only I think a single market that we fly over twice a day or maybe still a couple of markets that we fly over twice a day, two or three.

  • We have no interest in increasing frequency as a broader strategy. We size our markets based on what we think we can stimulate with lower fare, and we add capacity to meet that demand. And generally, that's what we want to serve in the marketplace.

  • That means some markets are large enough that they justify more than a single frequency, but that's usually from the outset. So as we grow, we're likely to add -- do what we do in more places, but not do it more in the places we already are.

  • - Analyst

  • Thanks, and then just lastly, as you look at bundling initiatives in the industry where they're unbundling their product with some new technology and offering a low fare price point, have you considered going in the other direction and perhaps offering a higher fare with some of the ancillaries bundled? And thanks for taking the questions.

  • - CEO

  • Thanks, Duane. We've looked at different ways we can merchandise our fares to customers. We like the full choice approach that customers can choose to pay for what they use and not pay for what they don't use.

  • However, if we can find ways for them to select common features more easily, we would certainly look to that sort of thing. But we are not seriously looking at a world where we would charge a fully bundled, significantly higher fare just for customers who might want everything in the pallet.

  • There's actually very few customers who buy everything that we sell. The advantage of our model is they pick and choose what they want.

  • Operator

  • Savi Syth, Raymond James.

  • - Analyst

  • Good morning. Ben, I noticed on your components of pricing pressure this quarter, you mentioned that the low pricing environment was about 60%. Was Dallas not part of that? I know in the past you provided Dallas as a component of that, or has the pressure from all those [capacitive additions] in Dallas now gone away?

  • - CEO

  • Dallas is included in that 60%, but we've decided not to break Dallas out anymore as part of the overall price pressure for a couple of reasons. We've not grown Dallas since 2013.

  • And we're actually a smaller percentage of Dallas today, the city, than we were a couple of years ago as a result of the two largest carriers in Dallas have grown individually greater than Spirit's capacity in the last two years. And as we grow in other areas, Dallas becomes a little bit smaller percentage of our total.

  • So we're looking at a price-dilutive environment across the US, and we just bundle that all into one thing. There's no particular shining star looking at Dallas.

  • - Analyst

  • That's helpful, and then just the ancillary components. Should that then be subsiding here as we go into the fourth quarter and beyond just as the outsourcing portion starts to anniversary here?

  • - CEO

  • Yes, once we lap that structural change to outsource the catering, we will lap that and that will be helpful. We continue to see ancillaries as an important piece of our business, that's a strong and largely stable segment of the revenue steam even while the ticket prices are volatile, and we continue to look at initiatives to help that side of the business.

  • - Analyst

  • And one last question, just on the follow-up to that first portion, the new routes, have you seen a difference? Historically I think when you guys provided the table, it looked like maybe new-route margins were somewhere around 10 percentage points lower than the mature routes. Does that still hold, and is that the tailwind we can expect next year?

  • - CEO

  • Yes, that absolutely holds in terms of the new-route development. The new routes that we added in 2015 are spooling very well and consistent with what we have done in the past.

  • Operator

  • Mike Linenberg, Deutsche Bank.

  • - Analyst

  • Good morning, everyone, I have two questions. Ben, you mentioned that some of the pressure was due to the percentage of markets under development. I'm not sure if you gave that number. What is that this quarter, and what was that number a year ago?

  • - CEO

  • We said that about 40% of the current RASM decline is due to our own market growth and 60% due to price compression in other markets.

  • - Analyst

  • No, but what percentage of your ASMs are under development this year, and what was it last year?

  • - CEO

  • Oh, it's about 30% this year. Last year it was around 20%, 21%, 22%, something like that.

  • - Analyst

  • Perfect. Then just my second question, you talk about improving reliability. And over this last quarter, the numbers were better than what we saw in the prior quarter, and I know the prior quarter you had a lot of weather.

  • But when you look at where you stack up relative to the industry, you're still down at the lower level. And I'm curious about what that impact is on a cost and revenue basis.

  • I know Ted indicated that 2016 may be a potential good guy would be just running an improved operation that could mitigate some of the cost pressures. I mean, what do you think -- even in this quarter alone, what points of CASM excluding fuel or even points of PRASM since I'm sure there's probably some associated reaccommodation cost that's weighing down on your numbers or weighing down on the revenues.

  • - CEO

  • Yes, let me give a generic answer, and then Ted can talk specifically about how the numbers might be affected. The thin nature of our schedule as we talked about in one of the earlier questions, creates a bit of a challenge when there's tight weather or other issues going on.

  • And we run a very high utilization model. High utilization model, flying the planes many hours a day, generally more than our competitors, allows us to offer lower fares more profitably. But it puts pressure on things, and what we need to do and what we believe we can do is get better at running -- maintaining high utilization although maybe a little lower next year that this year.

  • We're thinking about that now in terms of that balance. And we believe that we don't have to completely throw out the operation in terms of running a high-utilization, low-fare model.

  • We think we can balance it a little bit better, and that's what we're working on for our 2016 plan. I don't know if Ted wants to comment.

  • - SVP of Network and Revenue Management

  • Mike, there is direct expense associated with operational disruption that flows through our other operating line, most notably in the form of what you said, which was like trip interruption to our customers, if we have move them on another airline. It gets expensive for Spirit because of what Ben said, we don't have frequency in the market we serve. And so we end up pushing customers to other airlines and quite frankly buying tickets.

  • So that gets very expensive for us, and we're talking about millions of dollars a year. And so the bucket we tackle is going after that as best we can without sacrificing the overall benefits of the model associated with high utilization. And so the dials we twist, they're fine movements.

  • We're not talking about massive gyrations in the way the airline's structured, but those fine movements we look to the interplay of saving the money here but providing a better, more reliable operation which is we believe, has halo effects throughout the cost structure that are difficult to quantify on an individual basis but you can see in the form of overtime with your crews and what's happening on the ground and that sort of thing. And quite frankly, there is probably a little benefit on the unit revenue side as well.

  • So we're not structurally changing the airline. We're just looking to optimize.

  • - Analyst

  • Okay, very good, thank you.

  • Operator

  • Helane Becker, Cowen.

  • - Analyst

  • Thanks very much, thanks for your time. I just want to follow-up on Mike's question with respect to the operation because I thought two years ago, you guys went on this program with a maintenance based on the mid-continent, trying to deliver a better product then to the customer for these issues. What happened in the past one year that caused these issues to come back?

  • - CEO

  • It's a little bit -- it's not really the same thing, in a sense.

  • - Analyst

  • Okay, that's fair.

  • - CEO

  • As the Company has grown, we're 45% bigger company now than we were then. And what we have done is the initial changes that we made a couple years ago were to reflect the fact that we were no longer just an East Coast carrier. That meant setting up maintenance bases, pilot bases such in the mid US and on the West Coast. And that was to provide better service to our fleet even though they may not come back to Fort Lauderdale every day.

  • We also then implemented the change, there was the FAR 117 change that changed some of the way we could use our pilots a little bit, and that's been affecting things. But in 2015, we set a very aggressive plan, and we pushed for a higher utilization plan than the prior year with more airplanes.

  • And we've gotten caught a couple of times because of weather and some other things that we were not as fully prepared to handle as we could. We've learned from that, and we're adjusting our operation to help ensure that we do not think that will happen again.

  • - Analyst

  • Okay, great, and then just as a follow-up, another follow-up question, do you have a long-term target on what percent of your ASMs you would want under development at any given time?

  • - CEO

  • Well, our fleet plan has us -- and we like our fleet plan -- that plan has us growing at 15% to 20% a year. And so that would suggest that is where the number of ASMs that are going to be in development at any given time.

  • And we're finishing the year here where we grew more than that, but that was a function of timing as, as much as anything. And so next year will be a low 20% growth year again or 20% growth year again next year. So that's good way to think about what our development will be for the long term.

  • - Analyst

  • Okay, so we should always think that whatever capacity growth you're doing will all be in new markets?

  • - CEO

  • Yes, I think that's generally --

  • - SVP of Network and Revenue Management

  • The vast majority.

  • - CEO

  • The vast majority.

  • - Analyst

  • Okay, thanks. I will get back in queue because I have more questions.

  • Operator

  • Julie Yates, Credit Suisse.

  • - Analyst

  • Good morning, thank you for taking my question. As you think about future growth, has the current pricing environment changed the types of markets that are most attractive to you?

  • - CEO

  • No, not really. The reality is, is we serve a discretionary traveler who may choose to fly or not fly based on whether the price is high or low at the particular time they are making their trip. And they're generally comparing whether or not to fly versus another large discretionary purchase they may choose to make.

  • So in that world, to find the most number of those people, you look where there's the most number of people. And that tends to be in larger cities, so our business model is a big-city to big-city model because in big cities, you find everything.

  • You have business, you have leisure, you have visiting friends and relatives, you have rich people, you have less rich people. And there's everything. Our model works really well in that environment.

  • So we certainly look at the current environment, and that determines where we will fly our planes most certainly. But the set of markets that we choose from is generally going to be from in and among the larger cities in the US.

  • - Analyst

  • Got it, okay. Ted, and then one for you, is there any initial guidance that you can offer on interest expense for 2016 just to make sure that consensus is fully capturing the full run rate from 2015 and then how many aircrafts you will be financing in 2016?

  • - SVP of Network and Revenue Management

  • Sure. It will be on our Investor update that will come out just after the call. But we're thinking 2016 gross interest expense of around $50 million, but then we have the cap benefit just like we had this year of about $15 million. So net $35 million is what we're looking at for next year.

  • - Analyst

  • Got it, okay, and then when you talk about pressures in 2016, how should we think about what you are embedding for labor? I don't think you specifically called it out, but you've got I think a two big contacts open.

  • - CEO

  • Yes, when we are in open negotiations, we don't really forecast what's happening with those as we think about -- when we offer guidance, which we have not formally done yet as it relates to 2016. Assuming those contracts remain open, they will not be included in that. That's just the way we would look at that while we're open.

  • - Analyst

  • Okay, got it, thank you.

  • Operator

  • David Fintzen, Barclays.

  • - Analyst

  • For Ben, I'm trying to square two comments you made, which is 60% of the competitive pricing -- or the RASM decline as competitive pricing and the scalpel versus chainsaw comment. If that 60% is fairly widespread around the system, how does the scalpel address that problem? Or is that just the acknowledgment that within the network, there's just not a lot you can do to get past some of this competitive pricing?

  • - CEO

  • Well, David, we watch our numbers very closely. And we make active decisions about where to fly our planes based on the returns we are earning from our asset base.

  • And so absolutely we're earning at a lower rate right now because of lower prices in our markets than we were when the prices were higher. But that doesn't suggest that there's a lot more money to be made by just wholesale pulling up a big chunk of the operation and putting it somewhere else.

  • So what the scalpel means is thinking as diligently and with as much deliverance as we ever do about how much capacity to put in each market, how to flow the airplanes so that they can drive the lowest cost with highest utilization, and we are building the network for the long term. We expect -- we understand what we believe that the market for the ULCC business model is. In Europe, it's 20% of the market.

  • Maybe it's that big in the US, maybe it's a little smaller, I don't know. But it's a lot bigger than the amount of $0.055 capacity that's flying in the US.

  • So I think it's important for our investors and it's important for the business over the long term to build our position in the places we need to build. And as long as we're earning what we believe are reasonable returns in those markets, that's what we're going to keep doing.

  • - Analyst

  • Okay, and maybe if I think about in the past when you've seen competitive incursions and I'm thinking about places like Lauderdale a few years ago, you were fairly quick on a route level to move things around. It feels like this time you have maybe not been as quick on a route level.

  • As you have gotten bigger, are there infrastructure limits in like a Chicago, a Dallas et cetera, especially as you spread crew bases and maintenance bases around that force you to keep a certain amount of flying in these bigger cities? Does that limit your ability to move things around?

  • - CEO

  • No, in fact I don't think I would agree with you that we have been less active. In Fort Lauderdale when we saw basically JetBlue go from 20, 30 flights a day to 70, 80 flights a day, we adjusted our capacity, but we didn't wholesale pull out of a whole bunch of markets and dramatically change the gauge of things like that.

  • We changed some things, we stopped flying -- we stopped flying to Nassau principally because the taxes went to $135 a passenger. And maybe some places we're flying twice a day, we went to once a day.

  • But I would say that was a little bit of a scalpel approach, and Fort Lauderdale is still the largest individual operation within our system and produces very high margins for us. That was a good approach, and I think if you look at what we've done in other places, outside we've had the same kind of adjustments.

  • I mentioned earlier in the call that we have not grown Dallas since 2013. I mean, Dallas would have grown but for some of the other environment things we have seen there. And so I think we're being as active with the rest of the system as we have in places we have seen.

  • And certainly we put our crew and maintenance bases where we want to fly. We don't fly because we have a crew or maintenance base there. We can move the crew or maintenance base if we have to. We set up the crew and maintenance bases to support the flying that we believe will be long-term accretive for our shareholders.

  • Now, I will say that we certainly do bias some of our growth toward places where we know we have a long-term ability and desire to be. So in places like Dallas and Chicago and Houston and Los Angeles and others, we are building positions in those cities because we believe long term that's going to provide very good returns for shareholders to do that.

  • - Analyst

  • Okay, appreciate that. I will hop back in the queue.

  • Operator

  • Joseph DeNardi, Stifel.

  • - Analyst

  • Ben, I'm wondering if you could just talk about, in terms of load factor trends on some of the new markets versus mature, what you're seeing there. And then when do load factors bottom out? Are you still -- is the model still catching up to the pricing environment? When should we expect the load factors to start to stabilize?

  • - CEO

  • Well, I think our load factors are generally pretty stable in the mid-80%s. The new markets operate one or two points, a little below that generally, but they spool pretty quickly up to the system average.

  • We charge -- we price to fill the airplane. So generally we're going to try to run high loads because especially with our ancillary revenue strength, it's a revenue optimal decision for the airline to be full.

  • We don't carry high-revenue customers. So there's not the trade-off that some airlines have of maybe it's better that I take the risk the seat might be empty because I might sell a $500 ticket. We never have that decision at the airline.

  • So we always will choose to sell when there's an active sale available there to drive our load factor high. So basically we're going to run in the mid-80%s as a system because that's how we price the product to run.

  • - Analyst

  • Okay, and I just want to make sure. I think you said there are only maybe a handful of markets that you serve more than one times daily.

  • - CEO

  • More than two times daily.

  • - Analyst

  • More than two times daily, okay. I think the business model at this point has been to stimulate your own demand when you go into a market.

  • So I'm just curious what happens when you don't stimulate your demand and maybe you take share from others? Is that acceptable to you, do you stay in that market, or is that an indication that you need to move capacity elsewhere so that you're not competing with somebody else?

  • - CEO

  • We don't have data to suggest that's happening. I mean, generally if you look at markets before Spirit flew into the market and after, the fare goes down a little bit and the traffic goes up a little bit. And we carry an amount equal to that.

  • If you look in places we have flown, I mean other carriers have grown as much or more than Spirit in their passenger count and in their seat count. So you don't see situations where we're stealing share. The market defined as number of passengers flying is larger because of Spirit.

  • - Analyst

  • Okay, I will get back in the queue, thank you.

  • Operator

  • Dan McKenzie, Buckingham Research.

  • - Analyst

  • Ben, the investor question I'm getting is on Spirit's opportunity set, 500 markets. And one of the things we're beginning to hear on some of the calls is that some of the larger airports are going to be gate constrained next year, so Los Angeles, Chicago. How do we think about Spirit's growth over a multi-year period just given some of physical constraints across the United States and also just in the context of the price compression we're seeing today?

  • - CEO

  • Well, there certainly are gate and other constraints in airports around the country. The New Yorker airports and Washington Regan have slot controls. Other large airports, many of them have limited gate availability and such.

  • However, Spirit is good for airports. We pay our bills on time, we bring a lot of people in. We don't feed our customers so the concessionaires like us in the airports. So the reality is we are working aggressively with the major airports in the US to find ways over time that we can build the positions where we are.

  • And the other thing is we don't need that much space. We fly 8 to 10 flights on every gate we fly, so we can add 10 frequencies a day with one more gate. Not a lot of airlines are willing to do that, but we're not connecting -- the simplicity of our product allows us to do that.

  • So the reality is for the size of market that we believe the ULCC business model can attract independent from what the 85% plus carriers in the US are going to carry, we believe that is going to make a little different size in each city based on the size of those cities. But the ability for us to meet that capacity over time we believe is reasonable.

  • - Analyst

  • Understood. Okay, and then just another question following up on Mike's question earlier, with respect to the operations. What are the metrics -- so on-time, completion, in baggage? And I guess what I'm really asking is how much of a CASM headwind is it here in 2015 because referring back to the commentary that it was potentially going to help the CASM tailwind next year as you slow the growth.

  • - SVP of Network and Revenue Management

  • Hey Dan, it's Ted. As we mentioned at our second-quarter call, we had a tough June that hit the Company from an expense perspective as well as we lost ASMs during that period, which was -- both of those factors, both the direct expense as well as the lower denominator, inflated the unit measure.

  • So that acted like a headwind this year, and our objective is to create that into a tailwind next year, which is helpful as we think about those headwind pressures that we face going into 2016, which I outlined in my comments around accelerated depreciation and supplemental rent. And so I don't know if we got specific with dollars in the second quarter -- yes, we did think that it was about, what, $15 million in the second quarter hit us in direct expenses, both interrupted trip as well as overtime and those kinds of things.

  • Some of that money you may or may not have at any given quarter because we're not going to be perfect in our execution just based on what we know about how the airline is built. So some of it we hope acts as a tailwind next year, and that's the objective in trying to turn that into tailwinds and help us offset those headwinds next year.

  • - Analyst

  • Got it, so did the metrics improve in the third quarter relative to the second quarter then?

  • - SVP of Network and Revenue Management

  • They do.

  • - Analyst

  • Thank you.

  • Operator

  • Stephen Trent, Citi.

  • - Analyst

  • Hi, good morning everybody and thanks for taking my question. Most have been answered, but just quick ones if I may. Could you refresh my memory as to, if you thought you needed, to what extent you could delay some of your aircraft deliveries?

  • - SVP of Network and Revenue Management

  • Hi Stephen, it's Ted. Our aircraft order is a firm order with our manufacturer as is the case with basically everybody in the industry, which means that those aircraft are coming and we have committed to them.

  • And clearly our objective, by the way, is to deliver every one of those airplanes and fly it under our model. We're looking forward to having those come online.

  • To directly answer your question, given the fact that they are firm commitments from the manufacturer, there is no contractual right or obligation from the manufacturer to defer. There is always negotiation ability between ourselves and one of our major suppliers as we think about flexibility going forward, and quite frankly we've exercised some of that today in that our firm delivery schedule has moved in the three and a half years I've been here both forward and backwards.

  • So those always exist, every airline deals with it exactly that way. But to reiterate again, we have no objectives to do anything of the sort right now. We view our delivery stream right now as very digestible and correct for the airline.

  • - Analyst

  • Okay, Ted, very helpful. And very quickly, you might not be able to tell us, but when you mentioned some of the price pressure in some of your routes, any broad sense as to whether it's primarily coming from the legacy carriers or if there's another source, another major source?

  • - CEO

  • Stephen, it's basic supply and demand. There's just more seats flying, and to fill -- for the industry I'm talking about, there is more seats everywhere. Larger carriers have grown as well as our own growth.

  • And to fill those seats, you need a little lower price to fill those seats, and that's what's happening around the US. As bigger carriers are growing in this environment, as well as the smaller carriers, so it's just a supply/demand issue.

  • - SVP of Network and Revenue Management

  • The good news is that our supply is appropriately cost built to carry that traffic.

  • - CEO

  • That's right. In a low price revenue environment which we're in now and we expect to continue as we've said, it is good to be the $0.055 cent, excluding fuel, CASM guy.

  • - Analyst

  • Great, great, very helpful guys. I will get back in line.

  • Operator

  • Steve O'Hara, Sidoti & Company.

  • - Analyst

  • I guess I'm just wondering, maybe to play devil's advocate, why not push the envelope on growth? I mean, it looks like your margins are going to be -- it looks like at least in the fourth quarter ahead of your peers. And I'm just wondering if you think it sends the wrong signal in terms of future growth that after a little bit of pressure and maybe a lot of pressure I guess, that you guys maybe change your strategy in a way that's maybe more favorable to your peers.

  • - CEO

  • Well, thanks for that contrarian view. But next year, a 20% growth year on a bigger base, we're a bigger airline now than we've ever been, is still pretty heady growth. And it is a lot to deliver that and produce the kind of -- and maintain our focus on things.

  • And so to try to grow meaningfully faster than that, it would be hard to accelerate new equipment, put the financing in place for that or to take on used or older equipment would add complication to things. So we can certainly affect our growth by dialing utilization up or down. Certainly with some minor changes of whether an airplane retires or a lease gets extended, we can make some changes in that.

  • But beyond that, we like growth path of the airline. The 15%- to 20%-a-year growth we think is stable, the Company can handle that growth well. We can train the people we need, develop the markets we need with that, and we think that is the right growth path for the airline.

  • - Analyst

  • Okay, and it looks like your margins should be ahead of peers. At least in the current environment, is it maybe a better way to think about it in terms of you guys being, maybe instead of 1,000 basis points above everybody, maybe you're 400 basis points above the legacy carriers or 200 basis points?

  • Is that the way to think about margins going forward? And then maybe you see some expansion as fuel prices go up actually in terms of margin or versus competitors I guess in terms of the margin as fuel prices go up?

  • - CEO

  • Directionally I think what you're saying makes sense, although the reality is as we sit here today, it is really hard to say what 2016 is going to look like. The revenue environment is volatile. It's a difficult revenue environment, and we expect that to continue.

  • So relatively small change in that environment in either direction could make the numbers look a lot different. So overall, I mean I think you're right. I think we're -- our business tends to perform at better average margins, that the rate at which we over perform has shrunk in the lower fuel price environment, that's absolutely true.

  • - Analyst

  • Okay, thank you.

  • Operator

  • Andrew Didora, Bank of America.

  • - Analyst

  • Ben, just curious in light of all the pricing pressures that we've been hearing about, can you give us a sense for how your TRASM has been in peak- versus off-peak periods? And I guess it's probably much, much more difficult given your utilization levels, but is there any opportunity in the near term to maybe shift around some capacity to more peak flying times versus off-peak?

  • - CEO

  • It's a weird thing to tie this back to operations in a sense, but one of the reasons we had some challenges with some of our operations is we flew a very heavy, high-utilization schedule during the peak. So we have biased the schedule.

  • Even though on an annual average we're a high utilization carrier, we're higher than that average in peak periods and lower than that average in off-peak periods. We fly more in July than we do in September, and that is because the economics suggest that.

  • On the margin, the question is how much can we push it in the peak and maintain the operational integrity. That's the challenge we play. To increase in the off-peak would generally not be at the best RASM performance. If we believe it would be earnings accretive, we might still do that, but that's going to put pressure on unit revenue if we did that.

  • - SVP of Network and Revenue Management

  • In fact, we did that in the third and fourth quarter of last year. We took utilization up in the off-peak, we saw earnings momentum from that, but it is RASM dilutive. And we evaluate that along with what Ben said, which is utilization in the peak and trying to make sure that we run the airline we want to run in the peak.

  • - CEO

  • When you think about it, there are multiple aspects of our business model that are by their nature RASM dilutive. We put more seats on our planes than our competitors. We fly our planes more hours per day and such, and both of those things tend to push --

  • - SVP of Network and Revenue Management

  • And our gauge is walking up.

  • - CEO

  • And our gauge is walking up. All of those things tend to put pressure on the RASM, which is why we look at RASM but we've said multiple times that it's not the only thing you can look at in a growth carrier to forecast earnings or to determine success.

  • - Analyst

  • Got it. And any sense you could give us in terms of how that RASM performance has been peak versus off-peak?

  • - CEO

  • Generally it's higher in the peak because you have the ability to sell some higher fares. The question is what percentage of the plane is the lowest fare on the plane? And in off-peak, it might be close to 100% is that lowest fare, and in the peak it might be 85% is that lowest fare.

  • And that extra 15% that is a dollar higher than the lowest fare, that pumps the RASM a little bit. That's the whole difference, and it's --

  • - SVP of Network and Revenue Management

  • I think Andrew, if you look at our absolute numbers over the last few years and you see the movement between peak and off-peak -- I'm talking about not year-over-year change but just absolute numbers, you can see what happens in our shift between off-peak flying and peak flying on unit revenue. And although we did a few things last year to increase utilization in the optic which may have been more dilutive than normal, nonetheless you can see the seasonality effect of that.

  • - Analyst

  • Okay, fair enough. And my last question, given the move in the stock and everything, you now have 25%, 35% of your market cap sitting in cash. I know you put in the new buy-back program just recently, but any thoughts around potentially accelerating any of that near-term uses of this cash would be helpful, thanks.

  • - SVP of Network and Revenue Management

  • Yes, I think we have been relatively consistent about the way we view our cash balance. We view that amongst other things to be a strategic asset of the Company. We use it for a variety of different reasons which I have outlined before as it relates to flexibility and financing and making sure that we're keeping costs low by keeping an available asset that we can use to lever our vendors and that sort of thing.

  • But at the same time, we deploy it in ways that we think are accretive to our shareholders, and investing in assets of a variety of types is one way to do that. We buy airplanes, we buy spare engines and equipment and we buy our stock. And we're continuing to do all of those things, and so the incremental authorization is just merely a continuation of that long-term strategy.

  • - Analyst

  • Okay great, thanks guys.

  • Operator

  • Savi Syth, Raymond James.

  • - Analyst

  • Thanks for the second question here. Ted, just a question on the next year on the cost side. I know you're not looking for ranges here, but with the updating that's going on with all the A321s coming in, how should we think about maybe the improvement to the fuel efficiency and maybe the contribution to unit cost?

  • - SVP of Network and Revenue Management

  • Yes, that's a good point, Savi, because we talk so much about excluding fuel we neglect to pay attention to the 30% elephant in the room. But nonetheless, we pay attention to it over here.

  • There's a benefit as you up gauge for two reasons. One is new equipment obviously is more fuel efficient than the average, and so that's going to provide assistance. And the 321 -- and we said this about the 320 and the 321, both of which are about 10% more efficient than its predecessor or its smaller airplane -- that includes the fuel as a component of that.

  • So they are a better, on a unit basis, burner than the smaller gauge, and that's helpful. That's a tailwind to burn.

  • Of course, offsetting that is we have an aging fleet, and they go through a variety of cycles of engine overhauls, meaning when it goes through an overhaul, it refreshes it both from a maintenance perspective as well as a fuel burn perspective. But in there you've got general degradation, fuel burn offsetting that. So it's helpful, but you will see from -- as we think about when we get to gallons in our guide, we will be able to take that at more into account for you.

  • - Analyst

  • Great, thank you.

  • Operator

  • Hunter Keay, Wolfe Research.

  • - Analyst

  • I know this has probably been a frustrating and challenging year for you guys from at least how you're communicating with investors and with stock, and I'm sure you're getting tired of answering the same questions about what other airlines are doing. So did you feel like -- there's a little bit of a lack of control here as it relates to your investment story, and is there a way that you guys can maybe retake control of the story, whether that's even showing a little bit of nimbleness in the network, moving planes around, maybe targeting a lower sustainable margin and hitting the numbers or figuring out a way to stop talking about other airlines for the first 15 or 20 minutes of investor meetings when you have them.

  • - CEO

  • Hunter, we're focused on Spirit, and we're focused on the long-term growth of our company, building a long-term sustainable franchise that will provide good returns to shareholders over that long term. And we just assume every other [air] company, airline or not, thinks the same way on that side.

  • We've taken a little change obviously in our most recent guidance and what we've said even on this call, right? We're talking about the environment as we see it, we're not making expectations that the macro environment's going to improve.

  • What we're saying is how do we run our airline successfully in the current environment, how do we deploy our capital, how do we continue our growth to keep our costs in control and keep pushing low fares out to consumers in a way that is good for those consumers and that allows all people who want to travel in the US to travel? And that's what we are going to keep doing.

  • So we are pretty nimble. I think we are pretty nimble, and I think that we're frustrated obviously that the Company has lost half its value in the last -- in the stock drop. And that's frustrating to us, and we know it's frustrating to people who have held the stock during that time.

  • But we believe that the way to address that is by running a really good Company, making smart decisions, and building the long-term franchise. And if you look at other growth companies in lots of industries, over a long-term period, they all have had periods of 12 months where the growth and things didn't necessarily line up perfectly.

  • But you look over a period of time, and they have been good, long, sustainable growth earnings kind of stories. And that's what we believe Spirit is and will be over time.

  • - Analyst

  • Ben, I think you may have made a comment in the past -- just two quick more for me -- that the highest margin -- the best margin that Spirit could do is the highest margin you can do. Please feel free to disagree with that if I got that wrong, but I thought you said that.

  • If you did say that, which is by the way a very logical thing to say for any businessman, do you still believe it to be true? Is maybe the best margin for Spirit something maybe a little bit lower than you could do in a best case scenario?

  • - CEO

  • Well, I think we could for some short-term periods produce higher percentage margins if we were to radically change some piece of the business. We could have not grown as much this year, and maybe some aspects of the margin might have improved. I'm not sure if they would have because our costs would have been higher too.

  • Right, but the reality is, is we believe -- from the time we IPOed the Company, we talked about ourselves being a 20%-ish grower and mid-teens margin performer, which we think is a nice combination of growth and returns, and generally that does outperform what the airline industry typically does in all fuel environments. And believe that, that's where things are.

  • We're not going to say no to 14%, 15%, 16% growth opportunities just because in the short term we might be producing over 20%. That's not good long term for the franchise, that wouldn't position us properly in the big cities we need to be in, so we're going to look for -- so I guess the answer is -- hard to say what best is.

  • - Analyst

  • I hear you.

  • - CEO

  • But the right margin for the Company is the margin that over the long term can support the growth story and produce the best earning story over time.

  • - Analyst

  • I'm with you. I think that's a good answer, and just one more on the CASM [ex] guy. I know you guys don't want to be specific on the CASM ex guy, but without being specific, we're running the risk of the analyst community putting out estimates again that you're going to miss throughout the course of the year, and that's how stocks go down when estimates are being cut.

  • So can you give us -- based on the wording in the release, should we assume that flat CASM, excluding fuel, is the worst-case scenario at the high end of the bracket absent any weather or irregular operations stuff or other operational issues? I just want to make sure we try to avoid a situation where we're going to have to continually haircut numbers again as we move along the year because people aren't going to buy your stock I think in volume until we know we've stopped cutting estimates.

  • - SVP of Network and Revenue Management

  • Hey Hunter, it's Ted. I think the way that we've talked about long-term unit cost guide has always been flat to declining, which implies that there's a worst case and a best case in that. And so we manage the Company that way.

  • Just to throw some data points at you, for the last three years, the Company has declined its unit cost every year. In 2013, it was down about one. In 2014, it was down about one, and this year we think it's going to be down about six.

  • And we've alluded to that fact being a step-function year and being -- I think in my comments I even said nonrepeatable in some respects. And so when you think about that trend, being down one feels more like what we target, or at least what we think about, especially on the 20% growth year. We're always going to try to outperform and do better and that sort of thing, but flat or stable to declining does by itself give you at least on one end a book end and on the other end benefit.

  • - CEO

  • Hunter, let me add -- if you look at 2014, that was a low 20% growth year for the Company versus 2013. And we guided initially that CASM was going to be up a little bit because of headwinds, of funding the growth for next year and things like that. And we ended up producing 1% lower CASM in that year even though we guided to the fact that there were going to be a lot of headwinds and we might actually see a short-term increase in CASM, even though we still expected the long-term CASM story to be a good one.

  • Next year is a growth year more like last year rather than this year, and while as Ted said they are not linearly correlated, the reality is, is this year was an exception in that sense. And so I think Ted's commentary, 2014 -- when you look at 2014, that's more like what next year's going to look like in terms of the growth profile of the Company.

  • - Analyst

  • Okay, I get it. Thanks very much for the time. I really appreciate it.

  • Operator

  • David Fintzen, Barclays.

  • - Analyst

  • Thanks for the follow-up. If we're looking at this environment, we're in this low-oil, weakish economy, pretty high-capacity growth in the industry. Is there an argument that maybe you need to be more aggressive in seasonality in your schedules? Is that an environment where you maybe have to take a page from Ryanair and not necessarily park airplanes like they do but be more mindful of cuts in Q1, Q4?

  • - CEO

  • It's a good comment, we think we are pretty aggressive on that. We do have a seasonal schedule, we talk about annual kinds of numbers on utilization and such, but the month by month variance is actually quite high through the year for us. A number of things we fly, we fly only seasonally.

  • Even some stations are only open seasonally for us, so we tend to think of ourselves as a real seasonal operator. And generally when we can make more money by flying more in the peak and less in the off-peak, we will do that. When we can be accretive flying more in the off-peak, we will do that too.

  • - Analyst

  • But you don't feel we're in an environment where marginal revenue is now -- even though fuel is so low, marginal revenue in the off-peak is now lower than marginal cost?

  • - CEO

  • Oh absolutely not. Ticket revenues are down, but ancillary is stable, and that's absolutely not the case.

  • - Analyst

  • Okay, thank you. I appreciate the color.

  • Operator

  • Joseph DeNardi, Stifel.

  • - Analyst

  • Ben, just a follow-up. I think you mentioned that possibly next year you guys could earn less money than this year. I'm just wondering what the context of that is. If the pricing environment stays the way that it is now, do you see that as possible, or does the pricing environment need to deteriorate more for that to come into play?

  • - CEO

  • The current pricing environment is highly dilutive right now, and it's an aggressive competitive environment. And if you -- we don't start lapping some of those changes till late next year. So if just run that math, you could see the results like -- maybe we could make less money next year.

  • The crystal ball is just really cloudy though. We just don't know right now, and that's why we're not putting a formal guide out for 2016 yet. But, we're not going to build -- we're certainly not going to guide to an optimistic upside, and we're certainly not going to build our plan to something that we hope will happen. We will look at the current environment and structure our airline to be as profitable as we can be within that environment.

  • - Analyst

  • Okay yes, I understand you only have so much visibility, but you did say that first quarter maybe looks a lot like fourth quarter from a RASM standpoint I think. So does second quarter look like first quarter if you don't start to lap some of these until much later in the year? Just trying to -- to Hunter's point, get expectations as in line as we can.

  • - CEO

  • We said that the price structure in the first quarter looked like the fourth quarter. We did not make a comment about RASM change.

  • - SVP of Network and Revenue Management

  • Yes, that's right. So you've got, Joe, it's Ted, you've got unit revenue changes that happen throughout the course of 2015 that we in staggered forms lap throughout the year. Really, at the very end of the fourth quarter of 2014 but mostly into the first quarter of 2015 was when additional capacity was added into the Dallas market and the pricing of that capacity took effect.

  • So you start to see some of the lap of that in the early part of 2016. However, then we saw another change in the overall pricing environment in the summer, but we really don't lap until the latter part of the third quarter.

  • Even though the environment remains, to Ben's point, remains stable, there are different comps year over year. And that's why we say it's a bit cloudy still.

  • It's a challenge to translate that any more than that, but you should see the same pressures that we face today, we believe we will face going forward at least the first half of next year. There are some positive-comp stuff that you lap in that period that help offset some of that, but not the vast majority of it.

  • - Analyst

  • Thank you Ben and Ted.

  • Operator

  • Mike Derchin, Sterne Agee CRT.

  • - Analyst

  • I just want to follow-up on the heavy maintenance headwinds for next year. Is that going to be spread out by quarter or is that going to be a lumpy type of cost?

  • - SVP of Network and Revenue Management

  • Hey Mike, it's Ted. I think I would think about it as being a little smoother than lumpy. The airplanes next year that return happen in the second and third quarter I think or the early part of the third quarter and second quarter. So those can create expense that may act, quite frankly they run off the run rate when you get to the latter half of the year, but then we still have stuff happening in 2017 and 2018 that takes its place. So I don't know that I would expect it to be lumpy. I think it's smoother than that.

  • - Analyst

  • Okay, thank you.

  • - Senior Director of IR

  • Ellen, we have time for one more question.

  • Operator

  • Steve O'Hara, Sidoti & Company.

  • - Analyst

  • Thanks for taking the follow-up. Just wondering, in terms of as your growth starts to slow, these routes mature, and assuming, I don't know what you want to assume for fuel, but does the route maturation process outweigh the cost pressures that you will see from the aging of the aircraft? And then slowing growth. If you could just talk about that maybe long term, do you see the RASM improvement in a normalized environment let's say outweighing some of the cost pressures you might see just from the overall aging of the fleet or wage pressures.

  • - CEO

  • Let me try to address that, and then Ted will certainly want to make some comments as well. We have said that we believe that we can maintain a flat-to-declining unit revenue story through our growth period -- I mean CASM. CASM through our growth period. And that's because the growth helps mitigate natural cost increases due to aging labor, aging airplanes, and higher airport costs and things like that.

  • Our growth, if you look just at 2016 versus 2015, our growth is slowing from 30% to 20%, but the growth rate of the airline is not slowing over the next couple of years if you think of the multi-year growth rate of 15% to 20%. That's what we said we were going to grow, that's what we are growing.

  • In any given year, that number might be higher or lower than that. But the growth rate of the airline isn't slowing right now. And that growth is what helps support that CASM outlook.

  • - SVP of Network and Revenue Management

  • I think that's right, and the maturation of the business over time means that the growth is helping us from a unit-cost perspective go through that maturation process. So there are plenty of other airlines that are obviously much larger than us and have -- that are much more mature that do that trade that you just described, Steve, which is they have a low growth model, they assume that unit revenues will offset whatever cost pressures they have in order to maintain their margins. And I'm talking about decades from now, you could be having that conversation about Spirit, but we're not in that spot right now.

  • We're in the spot where we're growing, and that's providing unit-cost benefit for the business. And the maturation of our markets are a piece of that, but our objective remains the same, which is to drive lower costs and deliver those kinds of mid-teens margin with that growth over time. And we think that's the best answer for our shareholders.

  • - Analyst

  • Okay, so that implies that any positive pressure on RASM is going to be very, very accretive to the bottom line?

  • - CEO

  • Well, we've certainly seen that a couple years -- over the last couple years, we saw that for sure.

  • - Analyst

  • Okay, thank you.

  • - Senior Director of IR

  • Thank you all and this concludes the call. Thank you all for adhering to our one question and one follow-up and back in the queue. That was very impressive. We will talk to you all next quarter.

  • Operator

  • Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.