Hello, and welcome to the Frontier Group Holdings First Quarter 2021 Conference Call. My name is Cherry, and I will be moderating today's call. This call is being recorded, and a replay will be available on flyfrontier.com in the Investor Relations section. It is now my pleasure to turn the conference over to Susan Donofrio, Head of Investor Relations. You may begin.

Thank you, operator, and welcome, everyone, to Frontier's first earnings call as a publicly traded company. This call is being recorded and simultaneously webcast. A replay of this call can be found on our website. On the call with me today are Barry Biffle, Frontier's President and CEO; Jimmy Dempsey, EVP and Chief Financial Officer; and Daniel Shurz, Senior VP, Commercial, along with other members of the management team. We also want to remind everyone on the call that today's discussion contains forward-looking statements based on the company's current expectations and are not a guarantee of future performance. There could be significant risks and uncertainties that cause actual results to differ materially from those reflected in the forward-looking statements, including the risk factors discussed in our reports filed with the SEC. We undertake no duty to update any forward-looking statements. In comparing results today, we will adjust all periods to exclude special items. Please refer to our first quarter 2021 earnings release on our website for the reconciliation of our non-GAAP measures. With that, I will turn it over to Barry for his opening remarks.

Thank you, Susan, and thanks, everyone, for taking the time to attend our first earnings call as a public company. In a moment, Daniel and Jimmy will bring you through the details of the first quarter and our expectations going forward. First and foremost, we're pleased with what we're seeing in the demand for travel. The vaccine is truly unlocking the pent-up demand everyone anticipated, and bookings are getting stronger every week. We believe our focus on leisure travel, coupled with our Low Fares Done Right strategy, positions us as an industry leader in this recovery. While this has been a challenging year across the industry, we're very thankful to all of our Team Frontier members for their commitment and diligence to ensuring our successful navigation through the pandemic, and they have helped us ensure we are well positioned to succeed in the recovery. I also want to thank our union leadership as they have partnered with us on a range of solutions to help keep our employees and customers safe over the past year. One thing is certain, Team Frontier is stronger than ever as we emerge from this crisis. As we position the business to maximize the rebound opportunity, we're adding routes to both new and existing cities in our domestic network and growing our near international network footprint as well. As an example, we added leisure destinations for the summers that include Nassau, San Jose, Costa Rica and St. Maarten. These additions come on the heels of new service already introduced to Guatemala City and San Salvador in Central America. We've also added new nonstop routes from Atlanta, Dallas, Denver, Las Vegas and Salt Lake City. Further, our commitment to being America's greenest airline was enhanced by the addition of 3 new A320neo aircraft added to the fleet during the first quarter of 2021. In addition to the fuel efficient engines, they were the first aircraft in our fleet to feature our new Recaro lightweight seats, which are 30% lighter than our existing seats and considerably more comfortable. We achieved significant milestones during the quarter, including executing an IPO to enhance our liquidity, becoming cash positive in March 2021 and getting our departures back to 2019 levels in March 2021. We're now focused on moving the business back to profitability in the second half of 2021 and operating at full utilization next year in 2022. Overall, there's positive energy across Team Frontier as we move beyond COVID. Our momentum aligned with the growth trajectory of the fleet position Frontier to maximize shareholder value and the recovery ahead. I'll now turn it over to Daniel, who will provide more details on our performance for the quarter.

Thank you, Barry, and I want to join you in thanking all of Team Frontier for continuing to take such good care of each other and our customers. I also want to reiterate how pleased we are that all our first on right travel model has resonated so well with our customers. We firmly believe you shouldn't have to pay a high price to get a high-quality family-friendly travel experience. Our low-cost model has allowed us to roll out reasonably priced unbundled and bundled options, and we continue to listen to our customers and fine-tune these offerings. This content subscriptions providing members with exclusive access to Frontier's lowest available fares continue to grow. Working with our loyalty partner, Barclays, we just launched some new offers to attract even more card members. The benefits offered by the Frontier Airlines World Mastercard have already been recognized by Money.com as the best airline card of 2021. We were among the first to initiate a variety of heightened health and safety initiatives early on in the pandemic, and we will continue to make our customers our foremost priority with respect to comfort, safety and operational performance. As Barry mentioned, we continue to increase our Caribbean and Latin America footprint. This summer, the region is expected to account for over 13% of our capacity. We're also targeting additional new international growth over the next few years. We're excited to be adding 5 new domestic cities to our summer 2021 schedule, including the return of Frontier service to Alaska. Now on to the trends we are seeing within our quarterly results. Similar to other airlines, our January and February performance reflected the third COVID wave across the United States and the impact of new travel restrictions. After President's Day, we saw demand for our travel improve as we moved into the spring break and Easter booking window, with a significant step-up in March demand. Operating revenues for the March quarter declined due to the impact of COVID, causing a 36% decline in capacity year-over-year, which led to a 50% year-over-year decline in operating revenues. On a per passenger basis, we saw ticket revenue decline 30% in the quarter, while nonfare and other revenue declined 19%. We saw nonfare and other revenue remain strong overall at $52.55 per passenger, and our total revenue per passenger for the quarter was $83.38. Our capacity levels are trending at or above 2019 levels as we progress through the coming months. We're seeing a recovery in load factors as the appetite for travel continues and demand returns moving into the summer months. With that, I will turn it over to Jimmy to provide more detail on our financials.

Thank you, Daniel. I share Barry and Daniel's optimism on the demand recovery we are seeing. I want to thank all of the Team Frontier members who rolled up their sleeves in challenging times during the pandemic and put Frontier at the forefront of the recovery in air travel. Our growing confidence in the recovery enabled us to begin hiring pilots and flight attendants in February and restart projects that were paused as we managed through COVID. In addition, our IPO strengthens our balance sheet and puts Frontier in a strong liquidity position, enabling us to emerge from COVID with limited incremental debt. Now turning to the quarter, our GAAP net loss was $91 million. Our adjusted net loss of $173 million or $0.86 per share excludes a number of special items. These include $136 million of CARES Act credits, a $20 million mark-to-market related to the warrants held by the U.S. Treasury and a $4 million cost associated with the early lease termination of our remaining A319 aircraft. With respect to our revenues and liquidity position, we timed our capacity deployment as the quarter progressed to take advantage of our expectation of a recovery in air travel leading up to spring break. This enabled our revenues and cash receipts to finish the quarter on a strong note. As of March 31, 2021, we had $853 million of total available liquidity, inclusive of the $424 million of undrawn amounts under the Treasury loan facility. The liquidity as of March 31, 2021, excludes the net IPO proceeds of $265 million given its April 6 closing. Our liquidity was enhanced in April by the receipt of $96 million in payroll support funding from PSP2 and 3. We expect to receive the final payment of $75 million relating to PSP3 in the second quarter. This puts Frontier in a very strong liquidity position. As such, we are unlikely to draw further funds under the Treasury loan facility. We have a current tax receivable of $161 million that provides us with an opportunity, when received, to assess the repayment of the $150 million currently outstanding under our Treasury loan without utilizing other existing liquidity. The repayment of our Treasury loan will unencumber our co-brand credit card program and related brand assets that are currently collateralizing the facility. We believe that our loyalty program, encompassing our co-brand credit card and discount den subscription program, together with the Frontier brand, could generate substantial liquidity should the need arise. We ended the March quarter with 107 aircraft in our fleet after the addition of 3 new Airbus A320neo aircraft that were financed through send leaseback transactions. In addition, in early May, we executed a contract with one of our lessors to accelerate the return of 4 remaining A319 aircraft from the company's fleet. 3 of the A319 aircraft will exit Frontier's fleet during the second quarter of 2021, and the fourth aircraft will exit the fleet in the third quarter of 2020. This is the completion of an early objective of the transformation of Frontier into an ultra low-cost carrier by replacing all 319 aircraft with larger and more fuel-efficient A320 and 321 aircraft. We anticipate delivering 10 A320neos and 2 spare engines during the remainder of the year, with 5 aircraft delivering during the second quarter and 5 aircraft in the third quarter. As we look forward into the second quarter and reflect on the improvement in demand, we expect our net income margin to range between negative 10% and negative 15%, reflecting total adjusted operating expenses, excluding fuel, ranging between $480 million and $490 million, an average fuel cost per gallon of $2 and an effective tax rate of 22%. Our expectations for Q2 exclude any adverse operational impacts or fuel price spikes caused by the cyberattack on the Colonial pipeline. To close, our financial discipline and Low Fares Done Right strategy has positioned us well as the recovery strengthens the demand for travel returns. 2021 is the year that we continue to invest in the recovery of the business and position ourselves for successful growth in the coming years, with the immediate focus on getting our airline back to full utilization as we enter 2022. With that, I will hand it back to Barry for some closing remarks.

Thanks, Jimmy. It's been a year of enormous change for our company, and we continue to thank all of our Team Frontier members for going above and beyond what was expected of them. We've got the right team in place to navigate what's ahead, along with the right cost structure and the right low fare product. With that, operator, please open up the call for questions.

Our first question comes from Ravi Shanker from Morgan Stanley.

A couple of questions on the current environment as you see it. When you look at the incremental traffic that they're coming on right now, do you have any data on whether you are expanding the pie and the traveler you're seeing right now are like new to air travel, if you will? Or are you just taking share from other airlines in ULCC and legacies?

Daniel, why don't you take this one?

Thanks, Ravi. I think what we're seeing right now is a pent-up return of travel in the U.S. I think we're seeing lots of customers come back to travel. And I think, as always, our low costs are allowing us to offer extremely low fares and continue to stimulate demand. And that's a combination of new customers and also key to the ULCC model, key to our model is customers flying more frequently because they can afford to do so, because we deliver lower fares in the marketplace.

Got it. Just to follow up on that, do you believe there is an environment where the ULCCs can significantly increase their market share and close the gap to the share they have in Europe, or do you think it will take a bit longer for the market to move in that direction?

Yes. Well, look, I think if you look at our share in the United States, I mean we're just getting started, right? We're at 10% of all the ULCCs compared to approaching half over in Europe. So yes, there's a lot more room ahead.

Our next question comes from the line of Mike Linenberg from Deutsche Bank.

Good job on the first quarter, everyone. Barry, when you were out on the deal about 5 or 6 weeks ago, you had a pretty positive outlook. It seemed like trends were moving in the right direction and everything looked good. However, now 5 or 6 weeks later, we find ourselves facing much higher fuel prices and, I would argue, a more favorable margin outlook than what we saw back then. Should we interpret this as things possibly getting even better than what you observed during your recent travels? The guidance suggests we might be experiencing some acceleration. Is that the correct interpretation?

I think that's correct, Mike. I feel better today than I have since last January when I first learned about coronavirus. I'm feeling better than I did yesterday and last week. It's a real situation that we see every day. The vaccine is reducing cases and hospitalizations, allowing people to feel more liberated. Regarding the last question about stimulation, I believe demand is being unleashed by the vaccination efforts. Things just keep improving, and yes, we’re very optimistic about the world and are excited about the recovery.

Great. And then just my second question to Daniel. Look, I get the whole story about getting away from the A319s. You'll have higher gauge. It's going to help your unit costs on one hand. But then on the other, I guess there's an argument that maybe it precludes your ability to fly into some of the smaller markets. And you do fly into a lot of smaller cities right now. You look at some of your competitors, and they have stayed with whether it's the A319s or even the 737MAXs in the case of Southwest. Do you think that getting out of that smaller gauge, and as your gauge moves up, that there's just going to be a whole slew of city pairs that either don't work or maybe it's a less than daily strategy? How do you think about that? Just your response to that.

Thank you, Mike. You’re completely correct. As we increase our aircraft size, our costs decrease. We already have a strategy that matches the right frequency to the right market. We mainly service low-frequency markets with our A320neo aircraft, which constitutes most of our fleet. This approach has proven effective. We also operate some smaller markets at low frequency using the A321, and that has been successful as well. We boast the lowest costs, which positions us as a low-cost leader, allowing us to operate in as many markets as possible. I believe this is the optimal strategy to enhance our opportunities.

Our next question comes from the line of Jamie Baker from JPMorgan.

Question on aircraft leases. I know you've engaged in sale leasebacks with various lessors. But for future deliveries, do aircraft need to be sourced from the Indigo pool, specifically from the large order made in 2017? Or, if a company like AerCap offered a more attractive lease rate, would you consider that?

Yes, Jamie, it's Jimmy Dempsey here. In 2017, we participated in a joint purchasing initiative that provided 430 aircraft to airlines in the Indigo portfolio. We procured our aircraft separately, just like the other airlines in the portfolio. Frontier contracted for 134 aircraft, which we are committed to receiving over the next seven years. We can look at any additional aircraft that become available, similar to other airlines. If opportunities arise, we will certainly consider them, and we are exploring the possibility of adding more A321s to our fleet. These could come either directly from the manufacturer or through leasing companies. We have full flexibility to pursue that option.

Okay. All right. That helps. And also second question, do you have any ability to track how much basic economy competitors are putting in your markets against you? Given the strength in summer demand, I would think that they'd be allocating less than usual, and United said as much on its call. I'm just wondering if you had a way to actually measure it and if you have any idea as to how those trends might look.

Yes, I think there's a lot of confusion regarding basic economy. It's a product that has its own price points. The amount of basic economy available isn't what matters; it's the prices being charged that are important. The product itself is less available than before. Although it's becoming less common, prices are gradually increasing. Demand is returning, flights are filling up, and the load factor is improving. This is how revenue management operates; fares are rising. Everyone can see that in the coming months, demand will likely exceed supply.

And if I could just sneak in a third. We're in the middle of May now. Between now and the end of June, how much inventory hasn't been sold? And how much higher would fares have to be on that remaining inventory for you to break even in the quarter? I mean are we talking $5, $50? I'm just trying to get a feel for how close you might actually get. But if you don't have that at your fingertips, I get it.

Well, it's algebra. I'm sure we can calculate it real fast. I'm not sure we would disclose that. But look, I will tell you, we said it in the opening remarks, we feel very confident with the trends that we will be profitable in the second half of the year and feel pretty good about it.

Our next question comes from the line of Hunter Keay from Wolfe Research.

Congratulations on the IPO. Barry, what are your top one or two financial targets as you consider the next few years? When running the business for the long term, is it solely about raw dollar profits? Would you be willing to sacrifice some margin to increase earnings per share? It's clearly a balancing act, but what are the top one or two priorities for the upcoming years?

Well, profitability and costs, all right?

Just absolute raw profit dollars.

Well, I mean I would actually expand it, and I would say there's 1 and 2. So profitability, one; and cost, #2. But within profit, there's a 1a, which is margins themselves in those levels; and 1b is aggregate profit, which drives EPS.

When you refer to full utilization in your 2022 remarks, are you indicating that at one point you'll reach 12.2 hours per day, or will you be averaging that over the entire year?

We expect by the end of the year to be in a position to begin and operate all of '22 at full utilization.

Okay. So you'll be exiting '22 at full utilization is what you're saying, basically?

We are currently investing in hiring and ramping everything up so that we can achieve full utilization by the end of the year, allowing us to operate at full capacity throughout 2022.

I got you. Okay. And then just a quick one here. What are your thoughts on potential PSP4 program? Is that something you would support?

I doubt it's going to be necessary.

Our next question comes from the line of Duane Pfennigwerth from Evercore ISI.

Could you share your thoughts on what stage you believe we are in regarding the domestic leisure recovery? Some people have indicated that bookings have returned to 2019 levels. However, it seems there is still potential for further recovery in the U.S., particularly in places like New York. This perspective will likely depend on how you are managing revenue. Following up on Jamie's question, how are you handling inventory now compared to this time in 2019? Additionally, how do you perceive the industry as a whole? Specifically, are companies opening up more future inventory at lower price points?

Yes. I don't know exactly where we are in the process, but I would say we are between the second and third stage. We began to see an increase in bookings starting in February, which continued to grow through March and April, and they are still building now. However, we must also consider that as demand recovers, capacity does as well. There is a lot of talk about pent-up demand, but we also have pent-up capacity. The positive aspect is that by this summer, we are nearing the booking levels we had in 2019. If demand keeps increasing, we will likely see demand surpass supply, moving us into a further stage that could result in higher fares and yields. This is part of our revenue management strategy. I believe we won’t reach the later stages until the end of the year, especially with the upcoming holiday seasons likely to be very busy since many people missed out last year. There will be significantly more demand than available seats compared to this time last year when inventory management was non-existent.

Sorry, 2019. The basic point being…

2019.

Yes. I think we're still behind because not everyone has reflated their booking curve completely, and I think there's also still certain segments that aren't quite there. Order may be great, but certain cities aren't quite there. But I think if you look at even today, I mean just this recent announcement, if you can have your mask off in the last few hours from CDC, if you're indoors, well, that's big news. There's also now another leg of demand. You've now got 12- to 16-year-olds eligible today for the vaccine. So I think there's more to come, but I think we're still a little bit soft versus where we were, right, because the fares aren't back to where they were in 2019. But again, I think in the next few innings, if you will, call it, the next 6 to 12 weeks, you should start seeing that.

That's great. Makes a lot of sense. And then just for my follow-up, I'm sure you got asked this question a lot when you were on the road. I didn't get to hear your answer to it. So I'm curious if you could share it now. Can you provide your views on industry consolidation, how likely that is, specifically in the low cost sector?

Okay. Well, look, we're focused on profitability and starting to hit that in the second half and focused on shareholder value. And for that reason, obviously, we're leaders in the industry, and we'll look at any opportunity that presents itself. But right now, we're focused on returning to profitability.

Our next question comes from the line of Brandon Oglenski from Barclays.

Congratulations on your first public quarter. Barry, in relation to your goal of achieving full utilization by the end of this year, are you currently working towards a specific profit target? You have a goal of being profitable in the second half of the year, but is your main focus on simply being in the black for 2022 while adjusting to improve margins? Is that the right perspective?

Well, I mean yes, you've got to cross over the line and move to the black first and then you start focusing on increasing that and getting back to previously expected levels, if you will, from profitability. But like right now, we're just really excited across that mark, and we feel like we're on the eve of it, as I just kind of answered in that last question. We feel like we're on the eve of it, given the way that the demand is recovering and starting to shape up. And I think that will drive it in the second half. And look, '22 is still a ways away, but there's a lot of positive things to happen before then. But yes, we'll be focused on maximizing margins in '22.

No. There's no real change in the total fleet count for the year. We're expecting 5 in this quarter and 5 in the following quarter, totaling 10 for the rest of the year. We will conclude the year with about 110 aircraft. To recap what Barry mentioned, at the end of 2019, we had 98 aircraft, and by the end of 2022, we will have 120 aircraft. This indicates that our business has significantly grown from pre-COVID to post-COVID. I want to emphasize that there’s no change to our fleet plan at this time. We accelerated the 319s from being returned at the end of the year to the early part of next year to remove them from the fleet now. We are clearly taking aircraft out of storage and bringing them back into service. Our current decision was that it didn't make sense to return those aircraft to full service during the summer months and incur associated maintenance costs. Thus, it was logical to remove them from the fleet early, which we acted on quickly.

Okay. I appreciate that. And then I guess the last one for me. You guys did announce a couple of new international destinations. Is that looking more lucrative in the future here? Or is domestic and international kind of an equal opportunity at this point?

Yes. If you examine the international and domestic markets over the past several years, particularly before the pandemic, we noticed that yields were significantly higher. We began investing in international routes around 2018 and 2019. As we recover, we are looking to reinvest in that area. We believe the conditions will actually be more favorable than they were before COVID, given the current competitive landscape and our cost advantages in the near international market. Additionally, the international sector is experiencing a slower recovery compared to domestic. When demand for international travel does return, we expect it to rebound strongly. We are positioning ourselves to take advantage of this in 2022 and 2023, which we believe will enhance our revenue potential beyond previous levels.

Our next question comes from the line of Helane Becker from Cowen.

When you mentioned that cash burn was positive in March, did you mean that it continued at that same rate in April and May? Is it still at that rate, or is it increasing?

Thanks, Helane. It's Jimmy here. Yes. Look, we turned cash positive just as we turned into March. Really, bookings started to improve, a big change post President's Day. The airline performed reasonably well through March, and the ATL started to fill out for forward bookings. That's continued. Our anticipation is that we're cash positive through the quarter and really moving on from a liquidity discussion and back into really getting the airline back up to full utilization.

Perfect. My next question is whether there is a time when it would make sense for you to switch from a fully leased fleet to a partially leased fleet and a partially owned fleet. Would you consider that?

Yes, we would consider that. We discussed it extensively during our IPO. As we develop this year, we have opted to use operating leases throughout the year. We have one aircraft remaining to finance at the end of Q3. We will evaluate how to shape our strategy going forward. It’s primarily a commercial decision related to tax implications, equity investment in the aircraft, and our cash position at the time of delivery. Currently, we haven't identified any options that make commercial sense on a net present value basis, such as a sale-leaseback transaction. Therefore, we will continue with our current approach and compare it to other financing methods. Right now, operating leases are a strong choice, especially as we significantly grow the business without straining our cash flow. A large part of our funding has gone into our pre-delivery payments for these aircraft, so our focus has been on managing those payments to Airbus rather than the actual delivery process. This strategy has proven successful for us.

I'm not sure it ever makes sense to own an aircraft, but that question does come up now. My last question is, are your aircraft ETOPS certified? And is Hawaii a realistic option for you at some point in your future?

Helane, it's Daniel. Our current aircraft cannot fly to Hawaii with a full passenger load, and as a result, we are not ETOPS certified. There is no requirement for that across the business. We have A321XLRs on order, and when they join our fleet in a few years, we will consider Hawaii among other opportunities for deploying that aircraft. However, this is not a short-term possibility for the airline.

Our next question comes from the line of Andrew Didora from Bank of America.

Congratulations on the IPO. My first question is for Barry: where do you see your pretax margins heading during your growth period? I believe the pretax margin in 2019 was around 14%. Is this a business that operates in the mid- to high teens range, or is it below that? What are your thoughts on this?

Well, look, I mean when we get back to 2019 levels, we will then focus if we can make it bigger. But I think our focus right now is to just get back to 2019, and we feel good about our cost relative advantage and where that's headed. And we think that expands over the next year to 2 years. And so we feel good about getting it. And once we get to '19, then we can probably talk about if we can exceed it.

Okay. Fair enough. When considering the recovery in leisure travel, it's clear that pent-up demand is continuing into the holiday season. Looking beyond that, do you think leisure travel will return to the growth rates we saw before the pandemic? Or do you believe there might be a more positive structural change for leisure passengers in the future? We'd appreciate your insights on this.

Thank you. We discuss this frequently, and currently, we only have anecdotes, but people are beginning to form opinions. I believe this Thanksgiving will be the best we have ever seen in the industry, and I expect the same for Christmas and New Year's. The same trend will likely continue for President's Day and even spring break. By next spring break, some individuals will have missed two consecutive years of travel, nearly three in total. I anticipate a surge in travel for at least the next 12 to 18 months as people catch up on vacations and reconnect with family and friends. I'm quite optimistic about this. Additionally, when we move past the pent-up demand from the last 12 to 18 months, we will encounter the new trend of increased flexibility from work-from-home arrangements, which translates to work-from-anywhere. More people are traveling midweek, shifting cities, and working from various locations, such as their parents' home in North Carolina one week and California the next. This represents a completely new segment of travel that did not exist before, and with the added flexibility, people can travel more often. Jimmy and I have previously discussed this. When we examine European carriers like Ryanair, easyJet, and Wizz, we notice that the average European has more than double the vacation days compared to the typical American. This increase in flexibility is likely to boost leisure travel significantly. I believe this trend can persist for several years.

Our next question comes from the line of Savi Syth from Raymond James.

Congrats on the IPO. First question for me is actually a math question. Are you implying the revenue for 2Q is down about maybe around 16% on a year-over-2-year basis, if I'm doing that math correctly?

Sorry, Savi. We'll have to come back to you on the exact math on that. Like we gave you a range of outcomes of a nice income of minus 10, minus 15 and gave you the operational costs associated with that. We're not guiding the exact revenue numbers at this stage.

Okay. Understood. And then just on the comment about getting back to utilization by the end of this year, that's faster than I had anticipated, what does that mean from your ability to kind of get back to maybe precrisis trend on unit cost? And how should we think about that unit cost trend?

Our perspective remains unchanged since our discussions during the IPO regarding unit costs. We are facing some industry-wide inflation, but we are focused on our total costs. Our cost per available seat mile, plus net interest, reflects our significant investment in the fleet, which differentiates us from other airlines, as we finance through 100% operating leases. This financing method slightly inflates our cost per available seat mile excluding fuel since we pay rent rather than owning our aircraft outright. However, we benefit significantly from the fuel efficiency of our neo aircraft. By mid-next year, we will resume deliveries of 321s, which have decreased to less than 20% of our fleet in the past couple of years. We expect this percentage to increase as we move into 2023 and 2024, potentially reaching about half of our fleet by 2025 or 2026. We anticipate that our unit costs will remain in line with what we outlined a few weeks ago, and there are no significant changes in our utilization that were factored into our IPO discussions. We believe we are on track with these expectations.

I appreciate that. If I could ask one last question regarding business demand, I know it's not a major component, but you do have some business, particularly in small and medium enterprises where I believe the recovery is quicker. I'm curious about what you're observing in that area and whether you're seeing any improvement alongside the recovery you're experiencing in leisure in the near term.

I'll take that. Savi, it's a very small portion of our traffic. We've seen from the data we've got, we've seen a little bit of an improvement in that in the last couple of months. Yes. Definitely, it seems to be recovering a bit. We obviously don't have a lot of data on the rest of the trends in the industry. So I don't know if our recovery is any better than anyone else's. But it is a small portion of what we take. And obviously, the much bigger story is how much the leisure demand is recovering.

I want to add one more point to this business discussion. Looking at my calendar, I see I'm traveling nearly every week for the next six weeks, and I’m increasingly hearing about this trend. As offices start to reopen, I've often joked about it, but do you really think people will prefer working in an office cubicle, or will they choose to return to Marriott? I believe we will see a resurgence in business travel, but in our situation, it will primarily be small business rather than corporate managed travel.

Our next question comes from the line of Myles Walton from UBS.

I was wondering if you could maybe touch on the ATL performance in the quarter. And when you talk about the recovery to normal breaking curve, should we expect that to expand towards sort of where you were in 2019 from an ATL perspective, maybe adjusted upward given the larger fleet towards $300 million by the end of the year?

Yes, Myles, it's Jimmy here. Our ATL has been recovering. At the end of December, it reached its lowest point due to seasonality and the effects of COVID. It has been slowly improving, especially in March and leading up to spring break. You would expect it to continue recovering throughout the year. While it's challenging to predict where our ATL will be at the end of the year, it should begin to normalize as the year goes on, though there is still some distance to cover on that front.

Okay. Barry, I think the question about innings refers to when you mentioned that pricing has normalized to 2019. Is that something we can expect by the end of the year, considering yields have been stabilized and recovered?

Yes. I believe that in the United States, things are improving domestically. However, international recovery will likely take longer, possibly until mid-2022 or even 2023 in some areas, depending on how they manage the coronavirus. Domestically, you should see improvements by the end of the year. Regarding earlier comments about average ticket lengths, I'm considering the upcoming holidays and peak travel times. Consumers might face challenges in getting to their desired destinations, potentially needing to adjust their travel plans for Thanksgiving, which could lead them to book further in advance after experiencing difficulties. While it's one thing to predict that fares will increase, there's also the possibility that travelers may not find availability due to higher demand than supply. Those planning to travel should consider doing so sooner rather than later. I expect this summer to prompt holiday bookings, and after holiday complications, travelers will likely begin reserving for next summer and spring break. This trend could lead to increased average ticket lengths across the industry. However, regarding stable pricing, the industry needs to reach full capacity before focusing on prices, and I believe that process will extend to the latter part of the year for the entire industry.

Our next question comes from the line of Stephen Trent from Citigroup.

Just two quick ones for me. I know you guys don't have a massive exposure to the Southeast. But given the disruption we saw with the gasoline supply in parts of the country, did you guys feel any of that in any of your operations? Or was it not really an issue for you?

We encountered some challenges and did some tankering, but we didn't need to make any technical stops, and it appears that the situation is mostly resolved now.

Okay. Great news. And just very quickly, during the IPO, a number of investors were intrigued by how high your ancillary revenues are. And when we go forward, you mentioned the Barclays co-branded card and what have you. Do you see kind of additional opportunities to kind of push the envelope even further than you have?

This is Daniel. We see continued opportunity and are focused on the highest profit margins with our ancillary offerings. As the airline expands, both our credit card program with Barclaycard and our Discount Den become more relevant, benefiting from an increased customer base and more routes. We are committed to collaborating with Barclays, as mentioned in the opening remarks, to enhance our offers. Additionally, we plan to further improve the Discount Den program to provide more value and attract more customers to this paid loyalty program, which has significant potential for growth.

At this time, I'm showing no further questions. I would like to turn the call back over to Barry Biffle for closing remarks.

I just want to thank everybody for joining us today, and we look forward to updating you on our next quarter. Thanks, everyone.

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