Thank you for standing by. At this time, I would like to welcome everyone to the Surf Air First Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Taylor Giles to kick things off. Taylor, please go ahead.

Thank you, operator. Welcome to Surf Air Mobility's first quarter 2024 Earnings Call. I'm joined today by Stan Little, Surf Air's outgoing CEO; and Oliver Reeves, Surf Air's CFO. Please note that we released our results this afternoon, which are available in filings with the SEC and on Surf Air's Investor page at investors.surfair.com. Before we begin, I would like to remind everyone that we may, during this call, discuss our outlook and future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate or other similar such statements. These statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our earnings release and our periodic reports filed with the SEC. During today's call, we will also present both GAAP and non-GAAP financial measures. Additional disclosures regarding non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures, are included in the earnings release we issued earlier today, which has been posted on the Investor Relations page of Surf Air Mobility's website and in our filings with the SEC. With that, I'll turn the call over to Stan.

I'd like to begin by addressing the announcement today that I will be stepping aside as Surf Air Mobility's CEO this week. It has been the highlight of my career so far to build Southern Airways into America's largest commuter airline and then to be invited to join Surf Air Mobility as CEO following our merger. While I will miss my day-to-day interaction with so many of our team members, I'm honored to assume the role of Founder of Southern Airways, a vantage point from which I will continue to actively advise the company and bring my expertise to bear, especially in industry and government relations. I'm also pleased to announce that Surf Air Mobility's Board of Directors has appointed Deanna White as Chief Operating Officer and Interim CEO. Deanna is a seasoned industry leader. She melds intimate knowledge of the company and its people, an unparalleled depth of experience in the aviation industry and a track record of success in the C-Suite of multiple innovative companies across the Air Mobility sector. Deanna has been with the company since 2021 and has already made a valuable and long lasting contribution as both CFO and Senior Advisor. Moreover, Deanna's previous experience in C-Level positions at a large private jet company, Bombardier Flexjet, and an eVTOL company, Kitty Hawk, now Wisk Aero, will continue to guide and inspire her as she brings about Surf Air Mobility's next chapter that will herald a renewed focus on balancing growth and opportunity with profitability. I look forward to supporting Deanna as she takes on the mantle to reshape the industry and deliver on Surf Air Mobility's massive potential. To the entire Surf Air team, many of whom I've known for over a decade, I'd like to personally thank you for your continuous hard work, for being the heartbeat of this company and for allowing me to go on this exciting journey with you. With that I'll turn the call over to Oliver to provide more detail on our first quarter.

Thanks, Dan, and thanks to everyone that has joined our call. Please note that the company will be providing a comprehensive strategic update at our upcoming Investor Day, which will now take place in the third quarter of 2024 in order to give Deanna time to take charge, drive the company's most important priorities, and prepare an in-depth Investor Day Briefing for your information and input. With that said, I do want to give you a preview today of our investor relations objectives over the course of this transition for engagement. First, we plan to provide the investment community with a comprehensive overview of our business, which includes our leading regional Air Mobility platform and our expanding technology platform, which encompasses our aircraft-as-a-service, other software products and electrification initiatives. Secondly, we intend to provide visibility into the various ways in which we plan to rapidly achieve profitability for the regional Air Mobility business, which today includes our Southern, Mokulele and Surf Air brands, as well as our [Technical Difficulty] operations. Third, we intend to illustrate for our investors the underlying unit economics today and contrast them against achievable future unit economics for these platforms at scale and at a steady state. Finally, we aim to provide context that more clearly frames and explains our projections regarding the size of these opportunities and compare them to the chronological evolution of regional and mobility industries can. Surf Air Mobility's regional Air Mobility platform, which encompasses our commuter airline operations as well as our charter operations services our current growth engine. The platform's first quarter revenue growth was driven by an 80% year-over-year increase in EAS scheduled service revenue and a 4% year-over-year increase in on-demand charter revenue. With regard to scheduled service, we anticipate that the refreezing of Southern, coupled with the…

Thank you. [Operator Instructions] And it looks like our first question is from Austin Moeller at Canaccord. Austin, please go ahead.

Hi. Good afternoon. Is this strategic review expected to primarily focus routes on essential air services flights or on Tier 1 routes?

Well, to answer your question, the strategic review is going to be on all of the routes that we currently fly. But as you know, we mostly fly. Sorry, I thought I was on mute. We mostly fly central air service routes. So that so obviously, by that calculation, it would be on EAS routes mostly.

Okay. And in terms of the strategic review, do you see it as more likely that the electrified powertrain tech, is what you would sell, or are you looking at potentially selling some of the caravan fleet?

No. So just so we're clear, the strategic review is something that we're doing from a profitability standpoint. What we intend to do is to look at each of the routes to which we currently fly and assess whether they're profitable, and if they're not profitable, what we can do to make them profitable. Once we've done that, we're going to look at other operational efficiencies that we believe are low hanging fruits and then assess on top of that revenue growth such as what you were talking about, which is our growth network, in which case we would take some of our Textron planes that are coming from our order that we disclosed, which is 128 planes. Some of that would go obviously to [indiscernible] Southern, but the rest of that would be deployed to our growth network.

Great. Thanks for all the details.

Thanks, Austin. And our next question comes from the line of Alex Potter with Piper Sandler. Alex, please go ahead.

Hi, there. This is Ben Johnson on for Alex Potter. I guess, can you kind of remind me of the mechanism by which the EAS program subsidies work and exactly how this FAA Reauthorization Act will impact Surf Air. And then, like, were you previously receiving, like, the maximum cap of $200 a passenger, and how much do you expect to be receiving going forward?

Hi, Austin. This is Stan. I'll be glad to handle that as I have been intimately involved with the FAA Reauth for, I guess, over a year now. So the way the system works is that, when an RFP, a request for proposals goes out to all of the airlines, essentially asking for bids at the cities, each airline is then able to put in a proposal of the number of flights that they will fly, the proposed subsidy, the proposed airfare that goes in. And then, at the completion of each fiscal year, the DOT computes what the actual subsidy was per passenger. So they take the total amount of subsidy paid to an airline, they divide that subsidy amount by the number of passengers who actually flew, and in theory, that number has to be below $200 or the city risks being eliminated from the program. There have been some waivers, lately, so it has not always happened that if you're above 200 when it's said and done, you are eliminated. But at least during the proposal period, you have to anticipate a subsidy below $200 per passenger. As you may or may not know, airlines have been working for 25 years or more to get the subsidy cap raised. I believe that cap has been in place since the early '90s. So there's been no inflationary raise on that whatsoever. We have been working hard in Washington for the last, as I said, over a year to get that raise to realistic levels, so that when we put in bids, we have the flexibility and the ability to put in a bid that accurately reflects our costs and, you know, some degree of profit margin. So moving from a $200 subsidy cap to a $650 subsidy cap is quite a big deal because now we won't have to, we won't have to cut all the way down to the bone as it were, in trying to do our forecasts and make our proposals. The other important thing to note in the FAA Reauth this time around is that in addition to raising that cap by 300 plus percent. There's also been a language change that says that the DOT must look at the cost of the subsidy when awarding the bid. So you can't come in necessarily and bid a bigger, faster, newer aircraft and get the proposal even though it may be, you know, twice as much as Southern's or Mokulele's or Surf Air's did maybe. So it makes the program competitively based from a dollars standpoint, but it also allows us to increase the dollars in our bid, which should be healthy for the company. We anticipate that this could add as much as $5 million to our bottom line in the near term without increasing costs since we're already flying flights.

Awesome. Thank you. And I guess would it be fair to say that the increase of the cap substantially increases the amount of potential, EAS routes, EAS viable routes?

Well, you know, the EAS program is limited in the number of routes that are out there. There are only a certain number of cities, a 120 something cities, I think, that are in the program. So it won't change that. What it will do is probably increase the number of cities in which we may be interested in bidding because with the increase in the cap, we now, you know, have the ability to look at all of them and say, with that kind of cap, can we still make money there? So it's quite possible we may be able to increase the number of cities on which we bid.

Awesome. Thank you very much.

Certainly. Thanks.

And thanks, Ben. [Operator Instructions] And it looks like there are no further questions. So ladies and gentlemen, that will conclude today's call. Thank you all for joining and you may now disconnect.