Good day and thank you for standing by. Welcome to the Full Year and Fourth Quarter 2022 Allegiant Travel Company Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sherry Wilson. Please go ahead.

Thank you, Justin. Welcome to the Allegiant Travel Company's full year and fourth quarter 2022 earnings call. On the call with me today are John Redmond, the Company's Chief Executive Officer; Greg Anderson, President; Scott DeAngelo, our EVP and Chief Marketing Officer; Drew Wells, our SVP and Chief Revenue Officer, Robert Neal, SVP and Chief Financial Officer; and a handful of others to help answer questions. We will start the call with commentary and then open it up to questions. We ask that you please limit yourself to one question and one follow-up. The Company's comments today will contain forward-looking statements concerning our future performance and strategic plan. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the SEC. Any forward-looking statements are based on information available to us today. We undertake no obligation to update publicly any forward-looking statements whether as a result of future events, new information or otherwise. The Company cautions investors not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize. To view this earnings release as well as the rebroadcast of the call, feel free to visit the Company's Investor Relations site at ir.allegiantair.com. With that, I'll turn it over to John.

Thank you very much, Sherry, and good afternoon, everyone. I'd like to begin by taking a moment to thank our team members for all their efforts this past year. 2022 was yet another difficult year. The operation was hit with countless challenges from COVID spikes to hurricanes and most recently, winter storms, but you stepped up and made sure our customers were taken care of. Your commitment to safety and service is remarkable, and I am proud of how you responded to these challenges. You likely heard the news that our COO, Scott Sheldon has made the decision to resign to pursue other opportunities. I want to thank Scott for his many years of service and dedication to our airline, and we wish him all the best in his future endeavors. With Scott's departure, Greg Anderson will continue to serve as President and will assume oversight of the Company's operational teams. As you all know, Greg has been with the Company for more than a decade. There is no better person to take on this role. He is highly respected both internally and within the industry, and I have the utmost phase he will execute on the numerous strategic initiatives we have in store this year. I'm pleased to report that despite the operational difficulties during the first half of the year, the last half of 2022 is a testament to the success of the challenges we implemented. We exited the year with a controllable completion percentage of 99.5%. Earlier this year, I noted we are a margin-focused company, and with operational improvements, margins would grow. This is exactly what happened we saw during the fourth quarter. We recorded an operating margin, excluding employee recognition bonus and Sunseeker special charges, just shy of 16% for the quarter. In addition, we…

John, thank you, and I echo your sentiment around wishing Scott the best of luck in his future endeavors. He and I have worked shoulder to shoulder for nearly 15 years here, which has been an amazing and fun ride. One of the best compliments I can provide, Scott, is the organization is in terrific hands. We have an incredibly strong team with an incredibly bright future. As announced, Keny Wilper will take on the interim COO role. Over the past 20 years, Keny has demonstrated his strength as an operator and as an exceptional leader. Additionally, Tracy Tulle will serve as our Chief Experience Officer. Tracy has vast operations experience overseeing both flight ops and in-flight as well as sharing our customer experience leadership team. In this new role, she will focus on improving the customer-centric experience for our team members while also helping to develop leaders internally and drive organizational alignment. Finally, and I have to admit it's pretty awesome to be able to say, Robert Neal is now our Chief Financial Officer; and Drew Wells is our Chief Revenue Officer. BJ and Drew are both A plus leaders, the best of what they do, and I feel no further introduction is needed, given they are already well known to our investors. I look forward to working even closer with and supporting each of them in their expanded roles. While I have mentioned only a few names, the depth and breadth throughout this organization is the best and strongest it has ever been. As we look forward to the amazing opportunities in front of us, I can speak for the team when I say we are fired up in establishing Allegiant as the most exciting story in the space. While 2022 brought its unique -- its own unique…

Thanks, Greg. Fourth quarter saw continued strong leisure travel demand for Allegiant across both web and app traffic to allegiant.com as well as passenger segments bulk, capping off a record-setting year for Allegiant on both measures. Surging awareness and preference for the Allegiant brand, along with our direct-to-consumer distribution approach, continues to give us an advantage in capturing demand by being able to satisfy the two most important buying factors for leisure travelers, low fares and non-stop flights. For full year 2022, 136 million web users came to allegiant.com, up 24% from 2019. And notably, despite the fact that no new route -- that new route grows limited, excuse me, new web users to allegiant.com were up by nearly 40% from 2019. Why? Because as I referenced the past two quarters, our addressable customer audience continues to grow as more new customers enter the ULCC category and consider Allegiant for their leisure travel needs. Their seeking relief from sky high fares and looking to avoid the risk inconvenience and time associated with connecting flights through crowded airport hubs. What's more, 77% of our allegiant.com users came via our most direct and lowest-cost channels. That's direct URL, our app, e-mail marketing or organic search. That's up 37% from 2019. It means we're relying less and less on paid advertising as awareness of and preference for the Allegiant brand continues to grow in a scalable fashion based on our fixed investments like Allegiant Stadium and our Live Nation partnership as well as our Always Rewards loyalty programs, both co-brand credit card and non-card. We continue to outperform expectations with our co-brand card program, ending the year with more than 400,000 active cardholders and more than 150,000 new cardholders acquired in 2022. That's more than 40% higher than we had acquired the previous…

Thank you, Scott, and thanks, everyone, for joining us this afternoon. I'm extremely pleased to close out the year with a record $2.3 billion in total revenue, easily the best number in company history and 25% higher than the previous best in 2019. When accounting for seasonality, nearly all metrics improved sequentially through the year to produce the record results. And while we remain flexible through a lot of the year to find the right capacity levels, the teams continue to optimize incredibly well within shifting constraints to produce great results. The fourth quarter had the most stability throughout the year, and our results reflect that. Fourth quarter revenue came in nicely above the range at $612 million and 32.6% above the fourth quarter of 2019, despite ASMs ending approximately 2.5 points lower at the system level and 3 points lower for scheduled service. We did take a benefit of approximately $9.6 million associated with updated guidance on breakage factors for the co-branded credit card and the initial guidance for the Always Rewards program. Even excluding that benefit, the divergence between revenue and ASMs produced an all-time best TRASM just under $0.14 and nearly 20% higher than 4Q 2019. The yield performance in the quarter was the major upside catalyst, particularly in December. The roughly 75% sequential improvement exceeded our expectations and drove almost 6.5 points of upside to the quarter. Total ancillary per passenger exceeded $70 for the first time at the quarter level and total revenue per passenger of 151 was also an all-time high. On the weather disruption front, Winter Storm Elliott saw a revenue loss of $8 million and nearly 2 points of lost capacity. The close-in demand, some of which was rebooking of impacted customers and some incremental was exceptional around the holidays to round…

Thanks, Drew, and thank you to everyone on the call for joining us today. This afternoon, we reported fourth quarter net income of $52.5 million. Adjusting to exclude the 2022 employee recognition bonus, special charges related to Sunseeker, earnings per share was $3.17 in the quarter, well above our initial guidance. Catalysts behind the strength of our fourth quarter results included, of course, the sustained strong demand environment, operational improvements, which brought decreased irregular ops costs, a favorable -- more favorable fuel cost than we had anticipated and a better-than-expected non-fuel cost performance. Fourth quarter unit costs, excluding fuel, employee recognition bonus and the Sunseeker special charge was 7.56 cents, up 12.2% as compared with the fourth quarter of 2019 on 10.9% more ASM capacity. The cost increase as compared to fourth quarter '19 was primarily comprised of 5.5 points for reduced aircraft utilization, 3.8 points in labor productivity and 1.5 points related to Winter Storm Elliott. As you've seen in our release, we will temper capacity growth in '23 to ensure that operational integrity is prioritized. Even with this reduced capacity, we are forecasting full year airline only earnings per share of approximately $7. On an assumed average fuel cost of $3.60 per gallon and increased labor cost assumptions related to pilot and flight attendant contracts, which for our guidance purposes, would begin midyear. With respect to Sunseeker, we expect to record our normal quarterly operating expense run rate of roughly $5 million to $7 million in each of the first two quarters of the year. We are not prepared today to provide -- to guide full year preopening expenses or operating income associated with the property until we have a firm opening date on our next earnings call. Turning to CapEx. We expect total CapEx for the airline…

[Operator Instructions] Our first question comes from Catherine O'Brien from Goldman Sachs. Your line is now open.

I just wanted -- so I just wanted to think about some of the puts and costs -- putting things across this year. Trying to think about what the impact adding the flight attendant and pilot contract for half a year and then slowing capacity growth will mean I think the last time we talked about cost was kind of flattish on high single-digit growth ex-labor contracts. So just trying to think about the walk from there, underlying your current EPS guidance?

Hey, Catie, it's great to hear you. This is Greg. Why don't I kick it off here? So just on your point on the -- as BJ mentioned, beginning in the back half of the year, so July 1, we've incorporated labor deals, both CBA deals for our pilots and flight attendants. And for a half year basis, what I would expect this to be about 1/3 of CASM hit for a half year again basis. In terms of some of the other puts and takes, IROP, I think that would be a tailwind. So call it about two to 3 points year-over-year on the IROP side, we'll see there a slight headwind in inflation, the D&A, I think there's going to be a slight headwind there from about a point or two based on lower productivity. I mean you called out the ASMs being lower than what maybe we are anticipating at that 10%. I think that's worth roughly 4 points to year-over-year. But the other thing that's probably just worth mentioning is the bonus this year -- I'm sorry, last year '22. We carved out that recognition bonus, but this year, that -- in '23 that will be included in so that too will be a headwind. But really, if you kind of compare those two year-over-year, I think they kind of wash each other out. But I'll pause there. Obviously, we're not giving formal guidance, if anyone else wants to add anything or if that help to answer some of your questions there, Catie?

Yes, that was great unless anything else to add. I do have a follow-up. So this might be front running some of the initiatives you're going to talk about at Investor Day. But now you set a new record ancillary per passenger over $70, should we think about growth from here being a little bit more tempered going forward? Like you hit a lot of little fruit or some of the new levers that get along with Navitaire? You think there's upside to that? Just kind of like, I don't know, blue sky like next couple of years type number, if you have it.

Yes. Thanks, Catie. Glad to have you back. Yes, I do think that there are more step-ups to come. We have not yet rolled out Navitaire that will come likely in the second quarter. And I would expect a little bit of a tapering as that kind of builds into what it could become. Additionally, we talked about Allegiant Extra. There are only seven tails in that LOPA at the end of '22, we'll be up to 14 by the end of '23. A lot of these things would be back half loaded, but really -- fully pronounced at 24 stories. We will certainly get into those more at an Investor Day in terms of valuation and whatnot. Scott, I don't know if you would like to add any more?

Yes. No. And I would say that even -- still to just say, as we think about our bundled ancillary, which has been a big driver of people being able to not just buy a la carte, but have that fuller ancillary. We are still at levels of penetration that we think have plenty of room for upside. And last but not least, as we just continue to leverage the technology foundation that Greg mentioned would be going in to create just a better user interface and user experience. We think there's small but material gains along the way as we make it easier to merchandise and easier for our customers to add these things to their card.

Our next question comes from Daniel McKenzie from Seaport Global. Your line is now open.

Congrats to Drew and BJ. I've got a few questions here. I guess, first, just RASM up mid-single digits, second quarter through fourth quarter. Obviously, that's pretty strong. I'm just wondering if you can elaborate on that a bit. How big is the benefit that you just spoke to Navitaire and the, I guess, the Extra comfort, is there more from Navitaire that can help drive that? And then, I guess, secondly, related to that, if there is a mild recession, to what extent would that potentially change the forecast?

Yes. Thanks, Dan. Maybe I have a slightly different perspective. I didn't view mid-single-digit positive and overly aggressive given kind of the growth cadence we have in place. It's been a long time since we had a series of quarters in the low to mid-single digits. And historically, we've had some really strong revenues along with that. If you remember back to last summer, we did have to pull out a material amount of our capacity. We actually did in April and took out 15% to 20% of our summer ASM, which did contribute some thrash as we think about final results, and I think that will be able to buoy this year a little bit more. Navitaire coming online will certainly support. Like I mentioned, we'll get into a bit more in terms of valuation, whatnot through Investor Day, but that will provide a little bit of upside there. So all in all, I do think it's a reasonable revenue target and not something particularly aggressive.

Hey, Drew, and this is Greg. I might add, Dan. Just some other puts the items to think about last year, we talked about IROP already in our opening remarks, then $100 million full year, right? But a big chunk of that is lost revenue. So that's going to be a helpful comp year-over-year on these unit revenue numbers. The growth, although it's limited that Drew is looking at, it's measured, it's de-risked. It's in markets that already exist today. So we're not going out and trying to add new markets. There's already a maturation there. And then the other thing, maybe just to your point about potential recession is our utilization per aircraft going into this year is low, 6.2 hours, right? In 2019, by way of comparison, it was eight hours. And so we already have the lower utilization and our model is built to flex in those peak periods to capture that demand. So I think we're just very well positioned in the event we do see a slowdown.

Yes. I think as we look at the next couple of quarters, the only 20% to 25% of our capacity likely be on off-peak day a week kind of going up what Greg was mentioning. So we're very well aligned with where the leisure customer wants to travel already, well positioned for that. And we know that the leisure customer is incredibly resilient. We'll see what that means for far kind of broadly across the industry in the event that, that happens. But -- so the leisure customer is still able to be stimulated to travel just finding that right price point to get there.

And on the inflation front, I mean, we have great visibility on the first half of the year, for sure, the first quarter. So, to the extent there is any modest inflationary pressures, we just don't feel or see it, but it's going to be back ended in the year to the extent there is anything.

Wow, that's a great perspective. I can get a second question in here. I guess, BJ, I'm already getting inbound on negative free cash flow this year. It's a solid outlook to be sure, but I'm just wondering if you can speak to that. And if the plan is to use cash on the balance sheet, potentially equity or additional debt if we could potentially just take that worry off the table?

Yes. Thanks, Dan. Most of the CapEx this year is debt financed. Greg, I don't know if you want to talk to specific numbers here. We can -- if you think about where the CapEx is and just use sort of like rough historical LTVs, we can bring in north of $450 million in new debt that's at our discretion as we navigate throughout the year. But then there's between $150 and $200 million in principal payments. The thing I'd mention is we have a line of sight to really fantastic terms on attractive financing where all of the CapEx coming in. As you know, Sunseeker is already financed at an interest rate that's in the money now, something that we're really pleased with. And then on the aircraft, the appraisal values are up, I think, $3 million, $3.5 million since we placed our order at the end of 2021, which just gives us a great ability to go out and raise financing and draw a lot of interest for supporting the airlines.

This is Greg. I was just going to add two things, just to BJ's point, maybe just to crystallize here. That's while we are going to add leverage, if you just take the midpoint of our guide for '23 that gives you about $500 million in EBITDA. If you take the net leverage, so I think BJ said, we'll end the year with $1 billion in cash and you kind of take the waterfall of debt that gets you $2.5 billion in debt; net debt, $1.5 billion. So three turns net leverage still comfortable. But these are -- this is a time when we're investing back in the Company. We're investing in assets that are yet to be revenue producing. We're doing it with a strong credit. And so -- but when we get on the other side of this '24 and beyond, you're going to see that that de-lever pretty quickly as our expectation.

And our next question comes from Helane Becker from Cowen Securities. Your line is now open.

Two questions. One is, as you think about your ASM growth being so low single digits this year, how are you thinking about where to prioritize the growth? Or you -- in other words, is it new markets? Is it increased service in existing markets? How should we think about that?

Sure. Thanks, Helane. It's not a lot of new markets. For the first half of the year, only about 4% of our ASMs will come from markets in their first 12 months. And within that, it's been -- we have a few new markets starting here in the first quarter, and that's about it. It's pretty minimal. I focus more on the restoration of a little bit of that frequency that's where we can get it. But when we're talking 1% in the first quarter and a small step up, there's not a ton beyond that.

Okay. That's helpful, actually. And then my follow-up question is -- as you're thinking about the resort, Sunseeker, Punta Gorda, the region and so on, climate has been an increasing issue for a lot of companies. And obviously, it was a big issue last year for you guys. How are you thinking about hurricane seasons going forward in the hurricane season this year? Maybe it's how do you protect the resort from hits like this in the future?

Helane, this is John. I'm stating the obvious when I say hurricanes have been around in Florida forever. And the state has reacted to those over time by changing building codes by doing a lot of things with technology that allowed buildings to be built differently in operations to be run differently. So when you take the resort, we thought about that when we were designing it, frankly. A lot of you probably didn't understand when we were first chatting about it, but we built the resort 16 feet above the mean height pipeline. So we wouldn't have had any damage, but we're falling cranes. If you look at the worst hurricane, a lot of people referring to, that's happened to the state of Florida. So put another way, if the resort was done and if the type of storm surge that hit Port Myers hit where the resort is, it would have gone underneath the building and out the other end. So we wouldn't have had any damage. So we're the only resort in the entire state of Florida that don't like that to be able to withstand it and also we're built to Category five standards. So I think that's how we reacted to what we've seen in the state of Florida, and I'm sure that's how others have reacted and whether they're building office buildings or anything else, they're building them differently. And I'm sure homeowners will build differently going forward as well after seeing what happened down in Fort Myers. So we like -- we obviously love what we did. We're positioned fantastic going forward to weather any kind of the storm in Florida. And I guess this was a test to that. Again, but for these hurricanes falling down in the building, we wouldn't have an issue. And it's also worth pointing out, the last major hurricane that hit Southwest Florida like that was Charley in '04. So it's not like these are annual events. They might be annual to a certain extent, somewhere in the state, but not always in the exact same region. So you went from '04 to '22 before it had the next major one. And that one, which was the worst, would not have hurt us at all that we were completed.

And our next question comes from Brandon Oglenski from Barclays. Your line is now open.

Congrats on all the promotions. But John, I guess, as you look at 2023, you have had some leadership changes. You're pulling back growth, as noted in the earlier remarks, since I think 2011, so how do you put this in context? Like what are the strategic priorities for the organization this year? Is it preparing for the MAX? Is it really giving some figure up? What do you want investors to take away from this year?

I mean you're hitting on them, a couple of them right there. We get touched on it a little bit, but we've been starting in '21, we started it in '22, significantly invested in it, which was all of our, call it, our plumbing and electrical, all the package, if you will, we've been spending significant sums of money to make sure that we are at the leading edge of technology in all of our systems. So by the end we will be at that leading edge with everything and all of them turned on in operating. So all the system investments, Greg touched on SAP tracks, Navitaire, NAVBLUE that's a heavy lift. You look at in '22, for instance, we spent in the neighborhood of about $50 million alone on all the technology upgrades, if you will. So that's a big initiative, which allows us to do everything from Viva, that relationship to obviously operate and yield what we're doing in a much better format. The Viva relationship is very strategic for us. We had to fix some of the technology in order to accommodate that. We reached to do that, and we're in great shape to do that. Now we're just waiting on all the regulatory approvals. Boeing in the MAX mean that's well understood. We know it's back-end driven, Q4 really driven. But there's a lot of work that has to be done leading up to the receipt of any plane. So that's all being done. So we're -- we like where we're at. I mean the resort is an obvious one. We've been working on that for some time. We've actually had delays that have and longer than what it has taken to build it. Obviously, I had nothing to do with anything we did, but we are scheduled to open that in '21. But all of these are major initiatives that are driving major CapEx in the last 1.5 years to 2 years that we're not going to see any revenue benefit from until the back end of this year. And BJ and Greg touched on that. But we are in great shape with all these initiatives. The team has done a great job. We have a lot of people focused on it. They're working burning the midnight oil, as I say. But we like where we stand. We're not falling behind on anything, and we're well positioned to be able to absorb all of this significant growth that the Company has taken on with all these new opportunities.

And John, if I might add, and you hit on this in your opening remarks, and Brandon, maybe it's already stating the obvious, but the airline is at the heart of everything we do, operational integrity, as I hope you heard in the opening remarks, number one, too, that's top priority. And as John mentioned, getting a deal for our crew members, our flight attendants and pilots is at the highest priority our Executive Chairman, Maury Gallagher, continues to spend time or has been time trying to make sure we continue to move and advance this ball and get a deal done with our crew members as soon as possible. So I know that probably went without saying, but -- and all of that, that too is a very high priority for us as we think about '23.

It's very worth -- very much worth reiterating, that's for sure.

John and Greg, I appreciate that. And I guess specific to the growth this year because you had been planning for more. And I think, Drew, you spoke to this a little bit, but is this really demand-related cost related or operational integrity, what are the constraints right now? Is it really pilot availability that's constraining your ability to grow? Or is this commercial as well?

The demand environment is still extraordinarily robust. So that is not a concern. We're generally scheduling up to our first operational constraints in many months. That's going to be our pilot headcount in others, it might be the number of available tails we have given our heavy maintenance lines and how we try to structure that with some peaks and valleys. So that's primarily the driver. As we get into the back half of the year, in preparation for the first MAX deliveries, we will have to start pulling some crew members off the line to begin training in order to be ready to fly those as early as possible. So we'll run into a little bit more of that being kind of the constraints as we get later into the year.

And Drew, sorry, I might add, and the team is going to tease me here, Brandon, because I use this term that we're screen coiled and ready to go. And as you alluded to in your comment is that we plan for a larger organization. And so there's some pacing items, crude constraints being one. But when those loosen up, if you will, I mean, you were spring coiled and ready to go. The infrastructure is going to be able to support that, and that's how we're viewing it long term. So we're excited about that and we're working towards that. But you may see next year or in '25, maybe higher growth than normal like if you were to compare it to aircraft count because you'll take the idea as you have the potential to take utilization of -- so we're flying 6.2, 6.3 hours per day per aircraft per day in '23. If you take that up an hour, that's going to obviously improve capacity as well. So I just want to make sure we mentioned that also.

[Operator Instructions] And our next question comes from Duane Pfennigwerth from Evercore Partners. Your line is now open.

I don't know if the one question was just meant for me, but I'll respect it. On the 4Q revenue outcome, you touched on the breakage, I guess if you could go into a little bit more detail on what were the drivers of the upside and on base fares in particular. Any particular markets and I think the pattern we've seen in the last couple of quarters is that there was kind of an inability or constraints to flex up in these peak demand periods, and that was kind of holding you back. Is there something that has changed or something you're doing differently that is helping you kind of flex back up in the peaks again unlike the last two or three quarters?

Duane, I don't know that that's necessarily true. I mean some of our best performance before the holidays was in the summer and what we were able to do on a yield basis, it certainly wasn't to this extent. I think there's a little bit of a difference in -- there always has been in terms of the holidays and spring break versus summer, where we have this very tight window in which travel occurs, right? I think giving is very heavily concentrated around the holiday, same with Christmas and New Year versus a much kind of longer and drawn out summer that's good, but it's kind of the spread drawn out good. So we were really able to capitalize well on that very concentrated window of demand, probably in a way that you're -- at least I thought we were not able to be at the same level in summer. The opting stuff still looks good. October was healthy as well. So there's not necessarily any individual piece to call out. It all looked good with maybe some slight outperformance in the holidays, like I mentioned, tight windows.

I guess -- sorry, I'm going to contradict myself. On the guidance, is that just airline EPS? Or is that consolidated EPS guidance?

Yes, Airline EPS.

And our next question comes from Michael Linenberg from Deutsche Bank. Your line is now open.

Congrats to the team on the promotions. Just one here. I guess Scott DeAngelo, you called out, you talked about the loyalty of your customer base and you provided some qualifiers around it. I thought it was interesting that you called out Southwest and other airlines of where you were getting passengers or picking up new customers. Is the Southwest mention? Is it because of the overlap that you have with them? Or more recently, are you actually seeing meaningful traction in the markets where you may compete head-to-head or just in their backyard?

Thanks, Michael, for the question. It is more of the former. We've tended to overlap with them the most. So when you ask our customers, who did you last or most recently fly with about 1/3 of the time that answer is going to be Southwest West. And then the other carriers, even though it's convenient, I know for the market to classify us alongside other ULCCs, the reality is we don't have much overlap there. And so the next three airlines that are answered when asked who did you last or most recently fly with are always Delta, American and United in that order with, obviously, many of our customers actually flying the regional arms, but identifying with right, the overall brand of those airlines. And so -- it was meant simply to show that in this environment, even if there was some type of recession, I would just ask the market to -- in as much as there was any contraction at any point in leisure travel, also look at the slice of pie that is ULCC because our data would indicate that even if the overall pie were to shrink, our slice of that pie would continue to grow as customers of -- whether it's Southwest or other network carriers are increasingly buying down and/or coming into the ULCC category, given our brand of non-stop travel. So hopefully, that's helpful in providing some color there.

Well, Scott, on the survey, when they give you the airline, what is the number one reason? Is it because of fares? Or is it because they had a lousy experience? I'm just curious.

Oh, yes. No, great, it's usually non-stop flight and fares. And those can go one to two, but those are far and away the top two. Schedule is the third one, but it's usually way down and then preferred airport everything else ties for fourth and beyond. But we don't -- we haven't seen that there's just a swell given just one bad experience, but we undoubtedly know that right overall disruptions, especially when it involves connecting flights we'll draw someone now to look for non-stop flights. And as you all know, all of our flights are non-stop. So that's really the key driver, I think, in times of disruption, whether it's weather, whether it's just irregular operations over the summer, over the winter, it happens to every airline. But if there's one thing we know, it's one thing to potentially get canceled delay in your origin or your destination, there is nothing worse than getting stuck in the middle. And that's what we're seeing a lot of customers react to and be drawn in by an airline that only flies non-stop.

And our next question comes from Andrew Didora from Bank of America Merrill Lynch. Your line is now open.

Just a question on the CapEx, right? I think last call you said a floor of like $500 million on CapEx. I guess at the time I never thought it could be north of the $700 million you just guided to. I guess, one, what are the big buckets of CapEx kind of that are coming in this year ahead of plan, particularly on the non-aircraft side? And then when you think about the CapEx, and I know you can finance a lot of this. How do you think about minimum liquidity going forward? Because I would think with the MAX is pushed out to 2024 deliveries, CapEx will be pretty high next year as well.

Andrew, it's Greg. I'm going to kick it off real quick and BJ will walk through a little bit more detail just because I think I'm the one that threw out that floor of $500 million of CapEx next year. And really, it was -- we just -- there was a lot of uncertainty around the timing of the Boeing aircraft being delivered in '24 and PDPs. And so -- we wanted to throw that out of the floor that will be no less than. And so we've had more time to work through that and understand the timing, which is now why we're updating you with those numbers. But with that, BJ?

Yes. Andrew, just on that same point, I mean, if you think about a large portion of the aircraft are paid for in the calendar year prior to delivery, so with so many aircraft moving into 2024, you've got a lot of CapEx going out for PD this year. I think that's actually our largest CapEx commitment this year is pre-delivery deposits. And then you have the two aircraft delivering from Boeing in the fourth quarter of this year. And then remember, we also slid for placeholder aircraft from 2022 into 2023. So a lot of this CapEx was sliding from '22 to '23 and then paying PDPs for '24 and '23.

And then liquidity, I think BJ mentioned it in his opening comments, 2x, roughly 2x ATL, which gets you right now, ATLs run at about $400 million. I think total liquidity would be around $1 billion is what we're targeting for the year at the end. Is that fair?

Yes. And then maybe just mention that our revolver facilities are undrawn today, which are $225 million and then the better part of our $200 million PDP financing facility is undrawn as well. So, using those as necessary throughout the year.

Understood. And just what are the big buckets of the non-aircraft CapEx?

It's -- I think it's about $135 million in total non-aircraft million, $60 million $70 million, that's going to be that IT investment that we were talking about. You have some sims and simulators that we're going to be acquiring to take card delivery to the Boeing aircraft or fleet. And then the remaining would be just your normal kind of standard CapEx, maintenance CapEx, such as parts, tools, things like that.

And our next question comes from Savi Syth from Raymond James. Your line is now open.

Just on the kind of the pilot and flight and an also on the pilot side. What have you seen in terms of attrition levels are kind of being able to staff that well? I'm just kind of curious with if you're only getting a deal by midyear that means as you head into the summer. You will be kind of having a headwind versus a lot of other airlines that have increased pay deals. So just curious on what you're expecting there and what you're seeing there?

Savi, it's Greg. Why don't I give this one a stab, and what I would just say and the big takeaway is that I think as we plan the schedule for '23, we've taken a very conservative approach in terms of attrition and onboarding and making sure that we have the available resources and crews to support those peak flying season, such as March in the summer. Just to put some more color around that, for the full year '23, we're expecting about a 25% system attrition on the pilot side. To put perspective in that in '22, it was 17%. The last three months, however, it's been roughly 20%. But again, the point being we're expecting higher or we're planning and scheduling for it to be higher than what we've seen historically or at least in the past three months and past year. In terms of the school house and our ability to attract and bring on pilots, I think just to give some perspective there, we're -- every class, we're anticipating around 12 new hires or pilots. We had two classes in January. There's 30 pilots in that class. All in all just to kind of -- to bring this together, I think we're expecting roughly 200 to 250 new pilots join Allegiant during 2023. Really excited about what Tyler Hollingsworth and [Rod Hardisty], Rod, our Chief Pilot, Tyler, our VP of Flight Ops. They're also out there on the recruiting front and putting in additional pathway programs. So I think there's five creative pathway programs today. They're taking that to eight. And so we're really doing -- taking the appropriate steps, I think, to kind of protect and control our destiny. And -- but we're planning for kind of the -- we're planning for a down case scenario. And so far, we feel good about that plan.

I am showing no further questions. I would now like to turn the call back over to John Redmond for closing remarks.

Well, we appreciate everyone's time and questions, all great questions. You can see why we're excited about '23 in the out years. Great uses the term spring coiled as he mentioned for '24, we wouldn't be in a position but to the investments in '21 and '22. So we're jazzing. And of course, those investments as we touched on our -- not only all the IT infrastructure, et cetera, that we're doing. But all the employee investments, everything from pilots, flight attendants, everything else we're doing. So it's a heavy CapEx lift, but it's needed and required in order to take on the growth that we're doing going forward. So stay tuned, '23 is going to be amazing, but '24 will be really something else. Thank you everyone.

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

Great job, everyone, great time.