Thank you for your patience. My name is Mandeep, and I will be your operator today. I would like to welcome everyone to the Allegiant Travel Company Third Quarter 2024 Earnings Call. Thank you. I will now hand over the call to Sherry Wilson, Managing Director of Investor Relations. You may begin.

Thank you. Welcome to the Allegiant Travel Company's third quarter 2024 earnings call. We will begin today's call with Greg Anderson, President and CEO, providing an update on our business and a high-level overview of our results; Drew Wells, Chief Commercial Officer will walk through our revenue and customer performance; and finally, Robert Neal, Chief Financial Officer, will speak to our financial performance. We have added a slide deck to be viewed in conjunction with today's call. Following commentary, we will 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 the earnings release as well as the rebroadcast of the call, feel free to visit the company's Investor Relations site at ir.allegiantair.com. And with that, I'll turn it to Greg.

Thank you, Sherry, and good afternoon, everyone. As you know, Hurricanes Helene and Milton caused extensive damage and destruction to areas of Florida and North Carolina. We extend our heartfelt thoughts to all the families and individuals impacted by those storms, which affected communities where Allegiant team members live and work. As an organization closely connected with our communities, we are dedicated to aiding recovery efforts. We have and continue to provide essential aid to affected areas by working with national organizations; we deployed our care support team to assist and operated relief flights to help get individuals out of harm's way. I'm incredibly proud of our team for prioritizing the safety of our customers and one another. Thank you to the Allegiant family for all you've done. Now, let me provide an update on our business. As you saw in our August traffic update reported in September, our business continues to improve. With demand coming in stronger than expected, TRASM turned positive in the latter half of September and fuel prices were slightly lower than previously estimated. For the third quarter, airline operating income was positive in what is typically our weakest quarter of the year. These results account for the significant disruptions from the hurricanes and the industry-wide CrowdStrike outage as team Allegiant quickly acted to minimize the impact on our customers. Looking briefly at the fourth quarter, we now expect airline operating margin of about 7%. The impact on demand from the hurricanes resulted in a four-point headwind; excluding this, we estimate that fourth quarter airline operating margin would have been in the low double digits. We anticipate our affected markets in Florida and Asheville will largely recover by the first quarter of 2025. Additionally, we have taken proactive steps to support our longer-term goals around improving operational efficiency, including realigning certain areas in the organization and implementing other cost-saving actions. These changes, while difficult, have reduced redundancies and are expected to save approximately $20 million annually. Drew and BJ will provide more details on numbers and outlook shortly. I'd like to update you on our three key near-term priorities that we previously discussed. First is restoring our peak period utilization. Second is bringing our MAX aircraft into service, and third is driving higher unit revenues, including adding new features to our Navitaire reservation management system. We believe restoring peak utilization rates is a strong catalyst for improving margins. In July, our average daily utilization was 20% below 2019 levels. By December, our goal is to reduce this gap to just 6%. We expect further improvement in 2025 by increasing capacity during periods of strong leisure demand with largely the same infrastructure we currently have. Our next key initiative is getting our MAX aircraft into service. We received our first aircraft in September, and I'm happy to report it entered revenue service in mid-October, a quick turnaround that demonstrates our team's preparedness and dedication. Importantly, the early results have reaffirmed our enthusiasm for the margin potential of the MAX, which offers significant operating efficiencies, including up to a 26% improvement in fuel burn on an ASM per gallon basis. Overall, we estimate the MAX could contribute roughly $2 million more in annualized EBITDA per aircraft compared to our A320 series fleet. The Boeing strike has introduced additional uncertainty in our latest delivery forecast, and we do not expect clarity until the strike ends. We have incorporated some additional fleet flexibility to help address these challenges and have taken the necessary measures to better protect our schedule. Moving to our third key initiative, which is increasing unit revenue. We have always succeeded in allowing customers to choose optional ancillary products that best suit their needs as we enhance our offerings. Therefore, we continue retrofitting our aircraft to include Allegiant Extra for customers interested in premium seating. We are also progressing in integrating important features into our Navitaire reservation system, including our popular third bundle product offering. Drew will provide more details on this shortly. Aside from factors outside our control, such as the hurricanes and the Boeing strike, I am very pleased with our execution of the plan we laid out and the strong demand we are witnessing in our unaffected markets. While some other low-cost carriers face challenges, our airline remains profitable, and we see a clear path to expanding margins. Structural changes are occurring throughout the industry; however, our unique position should help shield us from these difficulties. Most importantly, Allegiant is a great airline with a distinctive approach. We boast a long history of delivering industry-leading results, having built our company around our unique business model designed to optimize margins. Our network is a significant advantage, as no one has been able to match it over the years. In fact, as we have mentioned before, 75% of our routes lack direct non-stop competition, and we are often the largest carrier in many of those markets. We also maintain scheduling flexibility to align our capacity with leisure demand. Taken together, we have a strong brand and reputation, and to customers in many markets, we are their best and often only option for reaching their destinations. This is supported by our consistent demand for repeat customers and the ongoing growth of our loyalty program. A key factor in our success is the commitment of team Allegiant. Our dedicated team understands the importance of our brand and their role in serving customers, consistently striving to deliver exceptional service. This is why we believe our airline is well positioned for a strong 2025 and beyond. Before I hand it over to Drew, I want to briefly comment on our Sunseeker Resort. Despite being in the path of two major hurricanes, the resort performed well, demonstrating the strength of its construction and the resilience of its staff. Sunseeker is a fantastic resort with excellent accommodations, outstanding dining options, relaxing pools, and a variety of recreational amenities. Our current goal is to optimize this asset, which is why we have engaged best-in-class advisors to help enhance its value and navigate discussions with potential partners. We are committed to making decisions that serve the best interest of our stakeholders. We will share more updates as our team progresses. From my perspective, I am focused on executing our plan to restore historical profitability levels for the airline. Having the right people in place at Sunseeker allows the airline team to concentrate on our primary goals and objectives. In closing, I want to express my heartfelt gratitude to all our team members for their commitment and hard work. You are truly among the best in the industry, and your dedication is what makes Allegiant a special company. Now, I will turn it over to Drew Wells.

Thank you, Greg, and thanks everyone for joining us this afternoon. Third quarter airline revenue was $549 million, down slightly year-over-year due to the available pilot crew hour constraints during summer flying as well as the impact from the CrowdStrike outage and two hurricanes in the quarter, Debby and Helene. TRASM strengthened each month of the quarter, both year-over-year and versus expectations coming in at $0.1221 and 300 basis points higher than the initial guidance we provided on our second quarter call and approximately 100 basis points better than the update we provided in mid-September, which is before Helene took shape. Fixed-fee performance also beat expectations and set a record 3Q performance. Our approach to deploying capacity drives increased exposure to portions of the quarter. In 3Q 2023, roughly 44% of quarter ASMs in July meshed excellently with elevated summer demand, as it does most years, and enabled Allegiant to have the only positive year-over-year TRASM performance. In the third quarter of 2024, our roughly 44% of quarter ASMs in July, along with every other carrier's July ASMs faced the most pressure. However, the response in demand over the final half or so of the quarter was a positive signal for the future. September month unit revenue was near breakeven overall on a year-over-year basis and positive year-over-year in the last three weeks of the month. Prior to the hurricanes, we had seen those trends continue into the fourth quarter with October travel expectations trending low to mid-single-digit positive on a unit revenue basis. Overall, we are pleased with the third quarter results. The pickup in demand and yield we are seeing is a positive indicator as the booking curve shifts to the holidays in 2025. In fact, the booking performance over the last seven days is the strongest we've had on a year-over-year basis since the arrival of Helene. As Greg alluded, hurricanes Helene and Milton had an outsized impact on our business, with approximately 37% of our anticipated fourth quarter seats in the markets affected. Some regions, such as Punta Gorda, have recovered faster, while other areas like Asheville are expected to recover in the coming months. As of today, we estimate approximately 25% of our seat capacity continues to be impacted to varying degrees. Over the course of the quarter, we canceled or removed from the schedule close to 1,000 flights scheduled between the end of September and early January or 2% to 3% of our capacity. About two-thirds of which was a direct result of the hurricane weather, and one-third was due to the residual impact to the regions. We believe the total revenue impact to the fourth quarter will be in the range of roughly $30 million to $40 million or approximately 5% to 7% of the total. On a per aircraft basis, aircraft utilization is on track to approach 2019 levels in the month of December despite the hurricane impact, with December ASMs expected to grow approximately 16% year-over-year. The vast majority of that growth is expected to take place over the holiday period, including a late Thanksgiving with those travelers returning home in December. Our pre-hurricane forecast would have called for fourth quarter scheduled service ASMs to be up approximately 3.5% to 4% versus 4Q 2023, with TRASM performance flat to down 1%. Our current revenue forecast anticipates scheduled service ASMs up approximately 1.5% and TRASM down approximately 4.5%. Looking forward, our optimism has continued to build for our strategic initiatives. Utilization increases continue into the on-sale schedule for early 2025, and we still have capacity slack for opportunistic market and frequency additions. Allegiant Extra, our premium cabin configuration is doing very well in the market. We've retrofitted another 13 aircraft in the third quarter and including our new Boeing MAX that entered service in October, we expect to add another 14 aircraft before Thanksgiving, bringing us to over 50 total aircraft or 40% of our fleet in time for this year's holiday flying. Revenue production is maintained above $3 per passenger on flights with the extra layout, even with continued expansion. Our loyalty programs are leading the market. Allegiant’s co-branded Visa credit card program was named the best airline credit card in USA Today's 10 Best 2024 Readers Choice Awards for the sixth consecutive year. We are also proud to see that USA Today recognized our Always Rewards loyalty program as a favorite among their readers for the second time in three years. Revenue from these programs is up approximately 20% year-to-date, reflecting the success of our efforts, strong customer relationships, and continues to generate immense value for the airline and our cardholders. As Greg noted, I'm extremely proud of the work the team delivered in the third quarter to expand our bundling capabilities, which we expect to add roughly $1 to ancillary revenue per passenger going forward. The team continues to work diligently to secure the remaining expected benefit of $3 per passenger, which we expect to have fully implemented during the back half of 2025. Additionally, the team delivered both PayPal digital wallet and pay later payment options to our booking flow in the quarter. While early and complicated by weather events, we're seeing approximately 6% of bookings select a PayPal option. In particular, it is outperforming in our mobile channels as the most convenient mobile option other than always rewards points. We'll have more detail as we gather more information. Lastly, and as expected, the early feedback from our passengers has been extremely positive for the new Boeing MAX aircraft. Customer feedback has been very positive, thanks to in-seat USB power and enhancements to the overall cabin experience. Our foundation is solidifying and our initiatives are taking shape. Our award-winning loyalty programs are best-in-class and our enhanced premium cabin offerings are reaching more customers than ever before.

Thanks, Drew. Now I'll comment on our financial results and guidance this afternoon, excluding any special items. We reported a consolidated net loss of $36.1 million for the third quarter or a consolidated loss per share of $2.02. Consolidated EBITDA was $46.3 million in the quarter for an EBITDA margin of 8.2%. Airline results were much better than expected with operating income slightly positive in what is typically our seasonally weakest quarter. We had an airline-only net loss per share of $8.8 million, resulting in a loss per share of $0.49 in the Airline segment. These results included a headwind of approximately $0.40 from the CrowdStrike systems outage in July. The airline reported $56.6 million in EBITDA for the quarter, bringing the airline to an adjusted EBITDA margin of 10.3%. Cost performance exceeded our expectations during the third quarter, on a slight capacity increase of 1.5%, non-fuel unit costs were up by 4.7% compared to the prior year quarter, much better than the 7% we were expecting back in July and in line with revised guidance we provided in our August traffic update. Higher labor expense from updated CBAs drove roughly 2.5 points of the increase. Other increases included a point from irregular operations from the systems outage and weather events, a point from pressure in airport related expenses and a point from further delays on Boeing aircraft where we continue to carry extra headcount in anticipation of additional 737 aircraft in service for the fourth quarter. And then we had some offsetting reductions in maintenance and other expenses. We are taking action to manage costs that are structurally higher in today's post-pandemic environment. We continue to scrutinize the business to uncover cost-saving opportunities and find ways to operate more efficiently. As Greg outlined, we have already identified approximately $20 million in annual run rate cost savings, some of which have been implemented in the quarter. Meanwhile, our unit costs will improve as we drive peak period utilization higher with our current December and March monthly schedules nearing 2019 levels. Bringing more of our MAX aircraft into service should provide a nice cost tailwind, driving better utilization while more fuel-efficient equipment enters the operating fleet. As I mentioned on the last call, we are currently recognizing higher labor costs associated with ratified contracts and accrual for a pilot retention bonus, but without the full benefit of improved infrastructure productivity during peak leisure periods, something we expect will be constructive heading into 2025. And fuel was down nicely beginning in August, allowing us to finish the third quarter with an average fuel cost per gallon of $2.69 as compared to our initial expectation of $2.80. Moving to the balance sheet. We feel very good about our capital position. Total liquidity at the end of the quarter was $1.1 billion, including $805 million in cash and investments and $275 million in undrawn revolver capacity. In addition, we have just over $380 million in committed financing for aircraft delivering from our order book. During the quarter, we made principal payments totaling $107 million, of which $60 million was prepayment of debt on PDP loans ahead of the associated aircraft deliveries. We finished the third quarter with total debt just below $2.2 billion, marking the fourth consecutive quarter of debt reductions; and we anticipate some further debt reduction in the fourth quarter. Our consolidated net leverage at the end of the quarter was 4.1 times, which includes $94 million in costs related to the pilot retention bonus. We previously discussed our expectation for net leverage to peak in mid-2025. With updates to our planned aircraft delivery schedule and expected EBITDA improvement from increased utilization, we now anticipate net leverage has peaked during the third quarter and we expect to begin modest deleveraging from here. Strength of the balance sheet remains one of our top priorities, and I'm pleased with the progress we're making on this front, especially considering earnings constraints in the trailing 12 months. Now turning to fleet. We retired four A320 aircraft during the quarter and we took delivery of one aircraft, our first 737 MAX in September. I mentioned on the last call that we've been working together with Boeing on an updated delivery schedule since early in the second quarter. As you might expect, this process has taken longer than expected in light of the ongoing machinist strike. That said, Boeing and CFM have been very supportive, and we expect to disclose an amendment to our purchase agreement during the fourth quarter. The updated schedule, along with delays from the current machinist strike will result in a slower delivery profile than we had originally planned through 2025. Based on delays resulting from the stoppage so far, we are planning to end the year with just one MAX aircraft in service alongside 121 A320 family airplanes. As such, we have reduced our capital expenditure forecast for the year by $75 million and now expect aircraft related CapEx to be approximately $115 million for the full year 2024. Other airline capital expenditures are now expected to be approximately $110 million, down $15 million from our prior guidance. And we continue to expect heavy maintenance to come in at $85 million for the full year, unchanged from the last quarter. For 2025, we are currently planning to take delivery of 11 MAX aircraft and remove 10 A320ceo family aircraft from operation, which would result in a total fleet count up by just one unit at year-end. That said, the bulk of our A320 retirements in 2025 are expected to take place late in the year, leaving peak summer aircraft availability similar to 2024 numbers with better peak period utilization expected. As a reminder, our expectations on aircraft deliveries differ from our contractual obligations. As we think about managing our fleet plan through anticipated delays on new build aircraft, we're fortunate to own 86% of our operating fleet and to have continued flexibility to support the business. Now looking ahead, we expect airline earnings per share of approximately $1 for the fourth quarter, including a $1.25 headwind attributable to Hurricane Helene and Milton. On a consolidated basis, we expect to earn $0.50 at the midpoint of today's guidance. With capacity up about 1% compared to the fourth quarter of 2023, we expect fourth quarter CASM-ex fuel to be flat to up 2% as we start to grow into some of our existing staffing and infrastructure in December. Now let me provide a quick update on Sunseeker. While the resort experienced minimal damage from the hurricanes, we did see some impacting cancellations. As a result, we are tracking slightly below our prior guidance of a $25 million EBITDA loss for the year. Looking forward to 2025, we expect significantly improved cash burn and look forward to sharing more details on our strategic review in the new year. And finally, before I turn it over to Q&A, I want to extend my thanks to all of our team members throughout the system for their dedication to Allegiant. On top of close in changes to our fleet and capacity plans once again, they've also managed through a series of major severe weather events disrupting our network. Many of our team members were personally impacted by Hurricanes Helene and Milton, and still they delivered on their commitment to take care of our customers. So thank you once again to team Allegiant for your dedication and support. And with that, Mandeep, we can now go to analyst questions.

Our first question comes from Savi Syth with Raymond James. Please go ahead.

Hi, good afternoon, everyone. Regarding capacity, given the uncertainty with Boeing, how are you approaching the situation and considering it for the fourth quarter? What are you observing in terms of increased utilization during peak travel days and periods compared to off-peak times? How do you expect this to evolve as you look ahead to the first quarter and into the summer?

Sure, Savi, I'll take that. So for December in particular, we're going pretty full throttle over the holiday period. Day week isn't quite as sensitive as you can imagine around Christmas and New Year's since so many days are not in school already and off from work. So that goes pretty much all the way through with some exceptions around the actual holiday itself. Going into the first quarter, we'll still have a higher percentage of our ASMs on peak days in January and February than we did in either last year or 2019. In March, we'll go slightly more off-peak day than last year, but still higher peak day than 2019. Summer is not yet released for sale, so I'll stop short of talking on that. But hopefully, that got to your question.

Savi, hi, it's Greg. I just want to add one comment to that point regarding the growth as we look into next year. We mentioned that this growth is primarily based on utilizing our existing infrastructure. It's essentially a one-time adjustment, and we believe it will positively contribute to our operations.

No, good point. And then just on Allegiant Extra, given kind of what you're seeing there, can you talk about how many you have today and then just kind of the plan in 2025?

Yes. So we are sitting at, I believe it's 39, 40 today actually with the Boeing. We should bring on 13 more here in the next couple of weeks; we get those retrofitted. All of the rest of the Airbus aircraft that are eligible, the ones that are 186 seats today will be retrofit likely during the first half of next year. And then obviously, every Boeing we receive will have the Allegiant Extra on board. So every aircraft that intends to have it will be there next year.

Our next question comes from the line of Duane Pfennigwerth with Evercore ISI. Please go ahead.

Hi, thanks. Just to follow-up on Savi's question there on the premium seating. Can you just remind us how the seating configuration is changing, how many premium seats you're adding, and if the total seat count is going down? And I see you called this out as a $3 in ancillary. Is it all ancillary, or are there effectively different fares for these premium seats that you're selling? And then maybe just lastly, given that you are still ramping it, where are you in your ability to actually merchandise it effectively, given that it's just a subset of your fleet?

Yes, Duane. For the Airbus, we are adjusting the seating from 186 to 180 by removing one row, which creates 36 extra legroom seats at the front. It's an easy decision to reduce the seat count to gain so many premium seats. On the Boeing, we will have 21 premium seats upfront labeled Allegiant Extra, along with additional legroom seats after the exit row, but not the entire premium offering. We have a clear timeline for retrofitting the Airbus aircraft and integrating them back into the schedule, and we believe we can market them effectively. However, it's too early to provide details on the Boeing aircraft since we haven't completed a full booking cycle for those yet. Please stay tuned for updates in about 90 days.

Okay. Can you provide more information about the fare increase you are observing for those 36 seats compared to the rest of the cabin?

Yes, sorry about that, Duane. Yes, that will all hit the ancillary bucket, we continue to have kind of one fare at the beginning of the bookings flow with various options as you go through, but that would not hit an airline.

Okay. And then maybe just on Sunseeker, can you comment if you've been able to pick up any recovery business, I mean, I don't really know the state-of-the-art situation there, but sometimes you pick-up FEMA business or contractor business after a big event like this and we had actually heard that some locals were trying to write out the storm at your asset, but that you actually didn't allow that and had it, I guess, shut down. So I guess, any line of sight into recovery business and maybe are you in the right channels to even pick that up?

Hi, Duane, this is Greg. Why don't I kick it off and maybe Micah can add a little bit more detail on the recovery business? It's a good question, an important one. I just want to hit that on our full year 2024 guide, the adjustment, we were coming in close to that guide, but for the hurricane, that set us back a bit. Some of our group business though, I think Micah told me about 80% of the group business that was booked in 2024 moved to 2025. So that was positive. And then on the FEMA side of the house, Micah, if you're able to provide some feedback or at least on that recovery business, if you don't mind jumping in.

Yes, that's a great question. I think Greg addressed it well regarding the group. We managed to secure about 85% of the group business that had to be moved from October, with some rescheduled for November and December, and some extending into Q1. Regarding FEMA, we are definitely engaged with that channel, and we are seeing solid production that will begin to reflect in November. There isn't a lot of additional spending associated with it, but the average daily rate is good and the stays are extended. We are actively collaborating with FEMA in that area.

Okay. Thanks for the thoughts.

Thanks, Duane.

Our next question comes from the line of Scott Group with Wolfe Research. Please go ahead.

Hi, thanks. Good afternoon guys. So just on the hurricane, I totally get the impact on capacity, but can you just help me understand why there's such an outsized impact to RASM? And then maybe along those lines could be helpful. Can you just talk about some of like the monthly RASM trends that as you see Q4 playing out?

I may not provide monthly trends, as that's not something we typically share. However, we are still operating to all these destinations, and there are varying degrees of impact on our revenue. We maintained some flights shortly after the hurricanes because we felt a responsibility to assist customers in Asheville in getting out and helping others to reach the city. I believe those flights were still profitable, but it was more than just that. Moving forward, we are evaluating the flights that still make sense for us and our customers, but they will not have the same revenue profile as before, given the demand following the hurricanes. The impact on revenue will not directly correlate with the number of flights we cancel. We are also forecasting how demand will recover in these destinations in the weeks and months ahead. Asheville is still in quite poor condition and will take some time to return to normal, which previously accounted for about 6% or 7% of our capacity for the fourth quarter. We definitely feel the effects there.

Okay. Okay. That makes sense. And then just at a high level, just directional thoughts on capacity growth next year, what that should mean for CASM, what it could mean for RASM, if we're seeing outsized growth next year in ASM?

Yes, I can provide a quick update on our capacity situation. We have sales ongoing until mid-May. The public deal appears to be in the low double digits for the next four months. We expect some of the utilization gains we achieved to continue throughout the summer. While it's not available for sale yet, I believe the performance we see in March will carry into the summer months. However, we may have to scale back a bit in the latter part of the year. In December, we plan to recapture some of this utilization for 2024, so we won't benefit from that comparison in 2025. There is some potential for growth driven primarily by our current infrastructure, which does not require substantial capital expenditures. Any growth will likely exert pressure on unit revenues. Navitaire initiatives will primarily impact the second half of the year, and I don't expect to advance that timeline significantly. We are also increasing our bundle options, which should provide some positive momentum. Robert, do you want to discuss CASM from here?

Sure. Yes. So if you just go through kind of the puts and takes that I gave you on fleet for next year, you should have a fleet count relatively flat throughout the year, in particular in the peak periods. We've been clear about our plan to increase peak day and peak season utilization, trying to get back to 2019 levels. Obviously, we will be keeping an eye on revenue and fuel and other inputs as we move through next year. But the way I think about that from kind of the finance side of the house, we need to grow ASM capacity about 5% next year, I guess depending on fleet composition a little bit, but about 5% next year to keep CASM-ex flat. And with what we just kind of gave you on fleet and the comments from Drew there, there's opportunity in existing infrastructure and really existing staffing levels to be kind of north of 15% next year. So based on the CASM guide we gave you for the fourth quarter, hopefully that gives you some good direction for 2025.

If we're considering double-digit growth, particularly around 15% in capacity, how should we approach RASM with that level of growth?

Yes. I probably won't say a lot more than we are today. Any kind of growth will likely put pressure on unit revenue metrics. That's not a big surprise. We talked about some of the initiatives that we have in place to kind of help bolster and provide some tailwinds there. In particular, when you're growing in March and growing in the summer, that's some of the best flying that's out there. First, and maybe not first, but foremost here, right, this is about driving earnings and EPS more so than making sure that we're maximizing unit rev or minimizing unit costs. So we're going to do the right thing by earnings at least as we forecasted out, and I think the unit metrics will shake out where they will.

And Drew, maybe it's just worth hitting, as we think about that growth in those peak periods in particular, kind of reinstating some of the capacity that was there before into some of our mature and stronger markets, is that fair to say?

Yes. I mean, that's a great example there. And in the first quarter, right, for markets that we operated in 2024 and 2019, over 50% of those markets actually had fewer seats in 2024 than it did in the first quarter of 2019. So there's a lot of probably somewhat lower ceiling, but higher floor kind of adds that we can put in place given the history there and more so than maybe our traditional adds that would be very heavily skewed towards new markets. So yes, I think there's some maybe more narrow error bars that come along with this as well.

Our next question comes from the line of Thomas Fitzgerald with TD Cowen. Please go ahead.

Thanks so much for the time. Would you mind just walking through the cadence of the Navitaire optimization in 2025?

Yes. And then might be fairly easy. The vast majority of the upside and benefit recovery that we see will take place at the time of cutover in the back half of 2025. We did release in the third quarter kind of expand the bundle offering that we had ahead of the first implementation that will show benefits through the entirety of the year and we'll continue to work to find upside in the meantime. But I believe the vast majority of what we'll uncover will happen towards the end of next year.

And I might just add on that, Tom, just at a high level, with our tech stack with Navitaire being a big step-in strengthening that foundation. And we want to make sure that we get the commercial tech stack right for the long-term. So Drew and the IT team have really gone through to set that up properly. But what we're encouraged by is not only will we get some of these wins that we talked about in the past from Navitaire that full cutover, but the system should enable us to be much more nimble in the future, introduce new features, dynamically adjust pricing, things like that that we're encouraged by as well.

Okay. That's really helpful. If you could, please refresh us on the concept of the airlines within the airlines and how you manage the different segments of the fleet. Thanks again for your time.

I'm glad to start this discussion. We currently have 24 bases in our network, each equipped with infrastructure, including crew accommodations, maintenance technicians, aircraft, parts, and tools. When it comes to managing a split fleet, which we've done in the past with three fleet types—MDs, 75s, and 320s—we can organize different fleet types by base. For example, we could have an all Airbus base and an all Boeing base. This segregation within an airline could significantly reduce the complexity of operating a split fleet. It's also important to note that we often receive inquiries about whether new aircraft will fit into Allegiant's operations. I want to highlight that we have introduced 13 new Airbus aircraft recently, and we are confident that the new MAX aircraft will integrate well with our model. As a company that primarily built its operations around used aircraft, we believe establishing a foundation of new aircraft is a wise strategy. We have various flight lines, and we plan to deploy the MAX aircraft primarily on routes with higher utilization. Early indications show that fuel consumption is meeting or exceeding our expectations, reliability is excellent, and we are prepared to incorporate more MAX aircraft into our fleet.

Our next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.

Hi, good afternoon. This is Katherine on for Ravi. So thank you for taking my questions. I just wanted to follow-up on a few questions asked before. One, just given the frequency of storms that we've kind of seen over the last couple of years. Does this change your view on the strategic process at Sunseeker?

Let me kick it off, Katherine, and Micah may want to add some color on it. But after each storm, what I would say, and had the chance to go and visit a lot of our bases that were impacted, including Sunseeker by the hurricanes, I feel like the team gets better on recovering and responding to the hurricanes and particularly talking about the Sunseeker team. But put that aside, as we think about the strategic review of Sunseeker what we talked about, we are focused on multiple paths, parallel paths, one is optimizing the existing resort, the other is a distribution partner, and the third is the strategic capital partner. We're in early discussions in that regard. And I think the asset is positioned on the water with the amenities that we talked about with the opportunity with vacant land to continue to grow. So I don't know that it hurts the thesis. I think it just hardens the team in terms of being better prepared for hurricanes coming through that area. But Micah and his team eat, sleep and breathe this, and they've been involved in all the storms there.

I completely agree with what you mentioned. I couldn't be prouder of the team. With every event, we improve and gain more insights about the building. It's important to highlight that we've only been operational for 10 months, during which we've faced three different storms. The asset has performed exactly as intended based on its design. Each time we experience a storm, our team becomes more efficient and gains valuable knowledge that helps us prepare for future events. While we hope to avoid storms, we are confident in our ability to manage them. I'm proud to say the asset is currently functioning well, especially compared to several locations along the coast of Florida that are not. I want to commend the team for their outstanding work in getting it opened and for being transparent with customers about the challenges we face.

Maybe just let me add one more point, Katherine. And I meant to mention this and I apologize, but the way it was designed to withstand the hurricanes that it's seen, when we were there for the customer, the guest experience, they wouldn't have noticed really that too much of an impact from the hurricane because all of that went through the lower area that the resort was built like 14 or 16 feet off the mean high tideline.

It's very helpful. And just as a quick follow-up, we've been talking about premium and other peers increasing premium products, etc. So with Allegiant bringing in newer planes and the extra room, do you think this kind of creates an opportunity for you guys to push the floor of premium pricing higher as maybe peers are increasing products and fares as well?

I mean, we're continually testing our pricing across all products and premiums no different. Hats off to our ancillary pricing team that have been trying to push on this for since really the inception in 2018, 2019. Yes, I think the ceiling has probably been a little higher, candidly lately than we saw early on in our testing, which probably lends credibility to what you're saying there. But we'll keep testing. Hopefully, there's more to go.

Our next question comes from the line of Brandon Oglenski with Barclays. Please go ahead.

Hi, good afternoon. Greg, I guess, can we come back to the idea that you want to get back to full aircraft utilization? Maybe this is just nuance, but is it truly during just the peak period so we should be thinking in aggregate, you won't see the type of utilization did pre-pandemic, or is the idea over time you're flexing network up to full utilization throughout the week? Or am I missing something?

Well, let me hit it and Drew can add some color on that, Brandon. In 2019, I think we on average over the year, our utilization was about eight hours per aircraft per day. Fuel was at a different point. I think it was a 212 or 215 in 2019. So generally in those off-peak periods, fuel is going to be the constraining factor when you're going to want to take-up utilization, and if it's lower or if it's higher, you pull back utilization in a higher fuel environment to drive up payers. And in terms of the peak periods where kind of where we've been framing this message around, that's where we're focused on. The demand maintains for our network and the leisure demand remains very robust and strong in those peak periods. And so that's why we're kind of isolating it more to the peak periods when we talk about restoring utilization to 2019 levels. Is that fair, Drew, anything you want to add?

Yes, the thought process moving forward is no different than it looked in 2019. To Greg's point, your peak periods have rarely been constrained by demand or fuel. It's been about your first operational constraint. So having a lower or constraint being either the crew of pilot headcount hours available or the number of aircraft we have, that lifts, right, as we move forward. But like a September decision is the same. What's demand look like, what's fuel look like because we're not running into one of those operational constraints. So no change in the thought process. Certainly changed the demand environment and a massive change coming with Boeing's in terms of the operating economics that we'll have and how we choose to utilize those but nothing beyond that.

Our next question comes from the line of Andrew Didora with Bank of America. Please go ahead.

Hi, good afternoon, everyone. Thanks for taking the questions. First one, just one, thank you for the fleet update next year. Obviously, CapEx schedules across the industry are changing pretty rapidly here because of Boeing. I guess, Robert, any guidepost on how we should think about CapEx next year, maybe 2026 based on what you know, today out of Boeing and maybe kind of how is that split between aircraft and non-aircraft?

Hi, Andrew. Sure. We expected this situation, and we're not ready to provide guidance on CapEx for 2025 or 2026 just yet, but I can share our current thinking. What we know about Boeing at this point is quite limited. As you can guess, discussions regarding the restart of deliveries have mostly been on hold, except for our understanding of the aircraft currently in production, which informs what I mentioned in my prepared remarks about the fleet dynamics. If I project that we'll end the year with a flat fleet count or 11 deliveries next year and adjust the 2025 schedule accordingly, I expect that total CapEx will be between $400 million and $500 million. This estimate differs from our contractual obligations, and while I typically would lean towards the lower end of that range, it's worth noting that this already factors in potential delays. So I'm anticipating something in the mid-$400 million range for next year, and we'll provide a more detailed update in January.

Got it. That's helpful. Thank you. And then for Greg, regarding the pilots, I know you're in mediation, and they're voting on a potential strike authorization. It is difficult to strike in this industry, but the last airline to do so was a ULCC. How do you view this risk? Is there anything you can do to potentially mitigate what could happen? Thank you.

Thank you, Andrew. I appreciate your question, which is indeed very important. As you noted, it's common in our industry to conduct a strike authorization vote, but that doesn't necessarily mean that a strike will occur. It's crucial for labor to unite and demonstrate solidarity during this process. Currently, we are actively and will continue to engage in good faith throughout mediation. Our goal is to reach an agreement on the outstanding issues. We aim to establish an agreement that our pilots will support while also safeguarding our business model. We have exceptionally skilled pilots at Allegiant, who are vital to our success, and we are dedicated to securing a contract for them, which I know they also desire.

Our next question comes from the line of Michael Linenberg with Deutsche Bank. Please go ahead.

Hi, good afternoon, everyone. I want to revisit the revised range for Sunseeker, which is between $25 million and $30 million. I noted in the release that you mentioned the Hurricane Milton impact is still being evaluated, and you'll give an update in the December quarter. Is this related to insurance for damages, or does it pertain to overall bookings and their performance in the fourth quarter?

Hi, Mike, it's nice to speak with you. I want to set aside the damages for now. The $25 million to $30 million figure mainly relates to revenue loss. Before the hurricane, we anticipated being close to our guidance, but some of the damage from the hurricane, particularly damage from Milton, has pushed some of the bookings into 2025. However, we're now seeing some bookings from FEMA and are working to clarify that. Once we have more information, we will provide an updated EBITDA guidance. Regarding the damage to the lower areas of the property, we are still assessing that. This includes impacts from both hurricanes and the repairs needed, but it will not be included in the $25 million to $30 million EBITDA loss.

Okay. That's super helpful. And then just my second question, just the BJ, you talked about owning 86% of your fleet and that's always been one of the positive attributes where the aircraft is high for you versus some of your other ULCC counterparts. If I were to sort of translate that into unencumbered asset value, I suspect that maybe some of those airplanes they may have debt on them, they may not, they may be completely free and clear. How can I think about what your unencumbered availability is, whether it's fleet and non-fleet, just to kind of get a sense of where things sit today? Thanks.

Sure. Thanks, Mike. Yes, the way I would think about that is we're at 51 of our aircraft in the fleet today are unencumbered. I would think about that along with unencumbered spare engines, some of which we bought brand-new just before the pandemic. And then maybe add in sort of the under-levered value in some of the aircraft that are financed that you referenced. I think all in there you about $650 million, maybe $700 million, something like that.

Awesome. Thanks, BJ. Thanks, everyone.

Thanks, Mike. Our next question comes from the line of Dan McKenzie with Seaport Global. Please go ahead.

Hi, thanks. Good afternoon, everyone. Greg, I’d like to follow up on the comments regarding 2025. The messaging over the past few quarters suggests that full utilization has contributed approximately 6 percentage points to margin improvement this year. With fuel prices around 260 to 290, is that 6% mentioned in earlier calls related only to peak flying? I understand you’re not providing guidance for 2025 metrics, but is that 6 percentage point range a reasonable way to consider the margin potential for next year?

Yes. I think to your point, there's different elements for the backdrop, whether that be fuel or the revenue environment. And in 2023 and during those peak periods coming into 2024, we valued that incremental peak utilization would be worth, I think, I want to say up to 4 to 6 points of margin. And so as you kind of extrapolate that into 2025 without giving guidance, we think as we continue to restore the peak utilization and execute on the plan that we've laid out, we expect meaningful expansion on the margin side of the house higher than 2024.

Yes. Drew, my next question is a clarification about the guidance. September unit revenues have been positive for the last three weeks, but it seems the forecast for fourth quarter RASM is down 4.5%. I'm curious if the guidance includes weaker year-over-year RASM during the holidays, considering the 16% growth. I understand that the increased flying during peak times is beneficial, but I want to know what's assumed in the guidance.

Certainly, there will be some RASM headwind associated with growth, even in the holidays growing 16% for the month will have its pressure. The biggest impacts really are hurricane-related and some question marks around the cadence of recovery around some destinations. At the outset before the hurricane, we thought or we mentioned that we thought the unit revenue forecast would be flat to about down one with the bulk of the headwind there coming from the growth in December on a unitized basis. But I mean, hurricanes are a big deal for our network.

It's a big deal. Yes. Understood. And then if I could squeeze one last one in here, BJ. I know that Sunseeker was written down during COVID. And can you just remind us of the book value currently? And then secondly, if there is a loss, let's say, you were able to sell it sometime in 2025 or sell some partial or some stake in it. I'm just curious if the auditors would want to strip that out as a special item or report it as continuing. And I guess I'm just trying to get a sense of that's something we should anticipate in our models.

Hi, Dan. We have some of our accounting leaders here in the room as well. So I was just looking to them. Maybe start with the first part of your question. I think you were asking about like after the write-down what the book value was on the resort. Is that what you're asking?

Yes, correct. Thanks.

Yes. If you think about the CapEx guide that we gave and then the write-down that we would have announced, I guess that would have been late 2020, and I really don't have the number right in front of me, but I think you should end up with something in like the mid-$600 million area on that.

The write-down, the impairment, I think, Dan, if I recall, was like over $100 million, like $120 million to $140 million.

Okay. That's fine. That helps. But thanks so much for the time, you guys.

Of course, Dan. Thank you.

That concludes our Q&A session. I will now turn the call back over to Sherry Wilson for closing remarks.

Thank you all for joining today's call. Please feel free to reach out if you have any questions. Otherwise, we will chat with you next year.

This concludes today's call. You may now disconnect.