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Edited Transcript of ALGT earnings conference call or presentation 29-Jan-20 9:30pm GMT

·59 min read

Q4 2019 Allegiant Travel Co Earnings Call LAS VEGAS Feb 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Allegiant Travel Co earnings conference call or presentation Wednesday, January 29, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Drew Wells Allegiant Travel Company - VP of Revenue & Planning * Gregory Clark Anderson Allegiant Travel Company - Executive VP, Principal Accounting Officer, Secretary & CFO * John T. Redmond Allegiant Travel Company - President & Director * Maurice J. Gallagher Allegiant Travel Company - Chairman of the Board & CEO * Scott D. Sheldon Allegiant Travel Company - Executive VP & COO * Scott W. DeAngelo Allegiant Travel Company - Executive VP & CMO * Sherry Wilson Allegiant Travel Company - Director of IR ================================================================================ Conference Call Participants ================================================================================ * Andrew George Didora BofA Merrill Lynch, Research Division - Director * Catherine Maureen O'Brien Goldman Sachs Group Inc., Research Division - Equity Analyst * Daniel J. McKenzie The Buckingham Research Group Incorporated - Research Analyst * Darryl J. John Genovesi Vertical Research Partners, LLC - Principal * Duane Thomas Pfennigwerth Evercore ISI Institutional Equities, Research Division - Senior MD * Helane R. Becker Cowen and Company, LLC, Research Division - MD & Senior Research Analyst * Hunter Kent Keay Wolfe Research, LLC - MD and Senior Analyst of Passenger Airlines, Aerospace & Defense * Joseph William DeNardi Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Airline Analyst * Michael John Linenberg Deutsche Bank AG, Research Division - MD and Senior Company Research Analyst * Savanthi Nipunika Syth Raymond James & Associates, Inc., Research Division - Airlines Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2019 Allegiant Travel Company Earnings Conference Call. (Operator Instructions) I would now like to hand the conference over to your speaker today, Sherry Wilson, Director of Investor Relations. Thank you. Please go ahead, ma'am. -------------------------------------------------------------------------------- Sherry Wilson, Allegiant Travel Company - Director of IR [2] -------------------------------------------------------------------------------- Thank you. Welcome to Allegiant Travel Company's Fourth Quarter and Full Year 2019 Earnings Call. On the call with me today are Maury Gallagher, the company's Chairman and Chief Executive Officer; John Redmond, the company's President; Greg Anderson, our Chief Financial Officer; Scott Sheldon, our EVP and Chief Operating Officer; Scott DeAngelo, our EVP and Chief Marketing Officer; Drew Wells, our VP of Revenue and Planning; and a handful of others to help answer questions. We will start with some commentary and then open it up for questions. The company's comments today will contain forward-looking statements concerning our future performance and strategic plan. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the SEC. Any forward-looking statements are based on information available to us today. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise. The company cautions investors not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize. To view this earnings release as well as the rebroadcast of the call, feel free to visit the company's Investor Relations site at ir.allegiantair.com. With that, I'll turn it over to Maury. -------------------------------------------------------------------------------- Maurice J. Gallagher, Allegiant Travel Company - Chairman of the Board & CEO [3] -------------------------------------------------------------------------------- Thank you, Sherry, and welcome, everyone, to our fourth quarter conference call. I'm happy to report our 68th consecutive profitable quarter. Our operating income increased 50%, while earnings per share was up 43% to $14.26. By any standards this past year has been a terrific year. As I said in our calls the past 4 quarters, we were in a good place at the end of 2018 after completing our transition. The model is alive and well with our Airbus aircraft. In fact, we, in my mind, are in a better place compared to where we were with the MDs. We said we would generate $6 million of EBITDA this year per aircraft, and we did it and [stayed] at $6.3 million, a 50% increase over our 2018 results. Again, we led the industry in operating margin for both quarter and the year. And for the airline only in 2019, we had a 21% operating margin and generated almost $16 of EPS. Our other investments in Sunseeker and nonstop are progressing well. While this past year and 2020 will be investment years, the outcomes will justify the investments. Our Allegiant 2.0 implementation is progressing nicely. We have spent the past 18 years developing relationships with our leisure customers. 2.0 is focused on providing these customers with enhanced travel experiences by utilizing our direct relationship with them through our enhanced IT tools. Said succinctly, we are focused on bringing together our 1:1 relationship with our customers through better IT tools, increasing the suite of leisure products, pricing them attractively and wrapping them in our loyalty program, which rewards participation in the Allegiant ecosystem. Critical to this effort is the -- increasing our awareness among our customers. We have had an excellent year in this category, particularly with our efforts on the Allegiant Stadium and our recent announcement of our 44 new routes. As I said in the release, we are truly becoming a national company defined by our leisure business. But we need more products than just our terrific air product. Additional hotel products, particularly in Florida, will be a critical component. We have sold over 7.5 million hotel room nights since the early days of the 2000s, and we are experienced at this effort. The majority of the room nights sold have been here in Las Vegas, but we are experienced in Florida as well as that's our second largest hotel market. Sunseeker will allow us to focus our customers on our product, selling our rooms, quite profitably, I might add, given we will sell them without intermediaries. This will allow us to generate exceptional EBITDA numbers, as we have said in the previous comments. As I said earlier, we had a remarkable year last year. Others will comment on things today as to what we did and some of the specifics. I want to turn my comments to our personnel, our great people and our management team. We have matured nicely over the past many years. People candidly are core to what you see and hear from us and everything we do. And I can say categorically, this is the best team I have been associated with in these past 18 years at both the management and the operations level, including our team members who produce our product every day. They are among the best in the industry. Our results verify this claim. We have been #1 in completion factor, 19 of the past 24 months. Our Net Promoter Scores have increased 32 points during this time, ranking us among the top air carriers in the U.S. And our bench strength as well in our management group is as deep as I have seen it. And this is not me -- just not me saying this. We have independent verification of this support of our team members via the Glassdoor findings. They are the go-to online site for people researching a company's culture and quality based on reports from its personnel. This past year, for the first time, we made the top 100 companies in the country to work for, and I believe we're the only company in Nevada in this category. This is indicative of the environment our team has created inside our 4 walls. This quality environment where our people are both proud and enjoy coming to work is the result of many years of a conscious effort to internally develop our talent and create an environment where they can succeed and grow. And while we've had a remarkable history to date, I'm convinced this team will lead us to better days in the future. Let me close by personally congratulating Scott DeAngelo on his promotion to EVP. Scott has been with us just short of 2 years, but during this time, he is had an outsized impact. First and foremost, he is a terrific person, a great leader and manager. He has been spearheading our Allegiant 2.0 development efforts to date as well. His experience and understanding of data, among other things, and how it works when talking to customers will be critical building the 2.0 in the coming months and years. We are indeed fortunate to have him on board. Thank you all today, and let me turn it over to John. -------------------------------------------------------------------------------- John T. Redmond, Allegiant Travel Company - President & Director [4] -------------------------------------------------------------------------------- Well, thank you very much, Maury, and good afternoon, everyone. Of course, I echo Maury's comments when it comes to the wonderful job that our Allegiant team has done this past year. Of course, the release reiterates our Investor Day guidance, which demonstrates the continued high expectations we have for this amazing Allegiant team going forward. So thank you to all of our team. I'll give you a quick update on Sunseeker. This project, of course, is still on time and on budget. And I'll get into a little bit more detail on that. The budget, of course, is $470 million, no change. As of year-end, we had $330 million in commitments. Again, these commitments mean that there -- we have agreements in place, including schedules. Again, out of that $470 million, $25 million is preopening, $4 million of which, of course, was spent in '19, and the balance of that will be spent in '20 and '21, and Greg will give you a little bit more color on that in his comments. So if you take that $470 million, you back out the $25 million in preopening, you have a $445 million budget. So roughly 74% of that budget, the $330 million I referenced, is committed. So we're in really good shape where we stand. Of course, if you further reduce that budget by another $45 million that relates to furniture, fixtures and operating supplies, which, obviously, those orders are always placed towards the back end right before opening, you're down around $400 million, of course, $330 million commitments out of $400 million. We're roughly 83% committed. So really good shape, we're happy with how we're progressing and look forward to '21. TPG funding, as we mentioned, we expect that to kick in around August of this year. And we also still expect around June or July of this year, our buildings to be all topped off and completely enclosed. In regards to the opening date, we talked about this a little bit in the Investor Day, but it's worth explaining again. We have put inventory out there for sale to the public already. The inventory we put out there is June of '21 through May of '22. We expect to open the building in April, but we have another hurricane season to deal with, and I don't want to be selling rooms only to potentially refund money. So while we believe we can open as early as April, well, we are quoting at this point in time a June opening date. As I mentioned before, I will pick a new month, and I expect it to be in the April time frame. We'll pick that new month in the fourth quarter of this year. So once we get through another hurricane season, we'll update you on what the month is that we expect to open. And as I said before, when we get into January of '21, we'll actually pick an opening date. I mentioned we're currently selling rooms. It's very, very soft. We're not in the heavy marketing as we're testing all of our systems that we developed. So we have, to date, 26 bookings relating to 27 rooms. Obviously, 1 person booked 2 rooms. And the ADR, so far, our average daily rate that we've received to date is right around $297. And again, we modeled $185. But I don't want to have anyone extrapolate just yet. We haven't sold enough rooms to do that, but we're very excited about how things are progressing in the amount of information we're getting in this relatively short period of time. And again, when you look at this, people are booking 18 months to 2 years out. So we never expected to be selling like crazy. We just wanted a soft start so we can test all of our systems. I also wanted to mention that we will be filing a site plan for Phase 2 next week. And before anyone gets too excited about that, Phase 2 that we're going to submit is just a ground level pool and a restaurant. So again, when you submit these types of documents for site plan approval, these don't create a obligation when the county approves it, it just creates an opportunity. So if and when we ever choose to do this project will be a decision for the Board to make down the road, but we can't put ourselves in a position to do anything without going through the normal process of submitting these things. I wanted to just mention that so it's out there and it's not something that's misinterpreted when we file. And of course, on that note, I'll turn it over to our recently promoted Executive Vice President, Scott DeAngelo. -------------------------------------------------------------------------------- Scott W. DeAngelo, Allegiant Travel Company - Executive VP & CMO [5] -------------------------------------------------------------------------------- Thank you, John. As Maury referenced, in 2019, we leveraged data and technology to lay the commercial foundation for our Allegiant 2.0 vision, a vision that capitalizes on our cost-effective, direct-to-customer distribution model to achieve not only strong air and ancillary revenue performance but also pile on top of that, by generating revenue beyond the aircraft with our third-party hotel and rental car products and our co-brand credit card program. Nearly 110 million web users visited allegiant.com in 2019, a 10% increase versus prior year. More importantly, even with this dramatic growth in web visitation, we maintained our internal productivity metric of achieving an average of more than $16 of net revenue per website visitor, which means that despite attracting 10 million more visitors to allegiant.com, our ability to convert those visitors into Allegiant customers at comparable transaction sizes remained constant. And attracting these web visitors became more cost-effective than ever as nearly 75% came to allegiant.com without requiring any paid digital advertising. Helping us achieve this was our e-mail database, which grew by more than 25%. Couple these large and growing digital audiences, with the fact that nearly 85% of our customers say that air is the first purchase they make for their leisure vacation, and we are well positioned to continue growing revenue from our third-party products. We see our customers first, and we know where they're traveling to before anyone else. This gives us unparalleled opportunity to present them with hotel and rental car options, and in the future, even sport and event tickets. In fact, we're already seeing returns from our Allegiant 2.0 approach. We ended 2019 with 20% year-over-year growth in third-party product net revenue. And please remember, this net revenue almost entirely flows through to operating income. Continuing our surgical data-driven approach to generating demand for Allegiant Air in new and existing markets while streamlining the direct buying experience at allegiant.com to reduce friction, achieve even greater attachment of hotel rooms and rental cars and, of course, continued growth of our Allegiant World MasterCard program remain key commercial focus areas this year for Allegiant 2.0. And lastly, I'll address the announcement we made today as the official airline of the Indianapolis Colts. This arrangement is simply continuing a partnership that we began in 2015 when we entered the Indianapolis market with 5 routes. Since then, thanks in large part to the Allegiant brand awareness driven in conjunction with this partnership, we've established a base there and now fly to 15 destinations. We also serve 3 other airports in the state, which also benefit from this. Like our other major sports partnership, this one has no incremental impact to our sales and marketing costs. What's more, the Indianapolis Colts are a fixed fee customer of ours. So in that sense, they're not only helping us build awareness but also contributing to the record-setting revenue levels we're experiencing in our fixed fee business. And with that, I'll turn it over to Drew Wells to go deeper into our revenue and network performance. -------------------------------------------------------------------------------- Drew Wells, Allegiant Travel Company - VP of Revenue & Planning [6] -------------------------------------------------------------------------------- Great. Thank you, Scott, and thanks, everyone, for joining us this afternoon. I'm very pleased to announce the fourth quarter TRASM of plus 2.5% year-over-year on 8.3% ASM growth. As a reminder, this result is despite a roughly 0.5 point onetime benefit we received in the fourth quarter of 2018. We received large contributions from both our air ancillary and third-party revenue sources. Air ancillaries surpassed $50 per passenger for the fourth consecutive quarter, and as Scott mentioned, third-party revenue improvements doubled ASM growth. On the year, we grew TRASM by 1.6% on plus 8.4% ASMs. Furthermore, fixed fee revenue remains a source of immense strength, setting a record for the full year and a quarterly record for the third time in the last 5 quarters. This is largely attributable to an increase in Department of Defense flying and continued incredible work by our charter planning group. In October, we released our bundled ancillary product, which we expect to be a boon through 2020. This will have a bit of a ramping period as we learn best practices and had a fairly small impact to 4Q results due to timing of the release in our typical booking curve, but we'll start to pick up in earnest during the first quarter. Shifting toward 2020. Lapping the MD-80 retirement date will drive elevated growth through the first quarter. We expect this quarter's ASM growth of plus 14% to 17% to be the highest quarterly increase since 2016. As I talked about extensively at Investor Day, we will accomplish this even with a reduction in fleet utilization that is more pronounced in off-peak periods. Looking throughout the year, we will have fairly lumpy growth in order to achieve the plus 10% to 12% annual ASM guidance, and I would like to add some clarity on that cadence. Throughout the second quarter, we will be flat to slightly positive in the first -- in the front half of the quarter, with gains coming in the back half for total ASM growth in the quarter of plus 6% to 9%. That ramp will continue through the summer, with third quarter rivaling Q1 for the highest growth in 2020 in the plus 13% to 17% range. Lastly, we are still working to finalize the holiday portion of the 4Q schedule, but we believe the quarter is likely to be 7% to 11% up year-over-year. While we've been through the MD-80 retirement for over a year, we are just now beginning to grow aircraft meaningfully versus preretirement levels. This had somewhat constrained our ability to grow the network as we ideally would have. With that final phase of the transition now behind us, we were able to announce the largest slate of new routes in company history. The 44 new routes, including the additions of Boston Logan, Chicago Midway and Houston Hobby, are a monumental next step for Allegiant. The ability to expand our footprint to over 500 routes while maintaining all of the elements of our unique business model is an exceptional feat and certainly a very exciting time for the company. So I'd like to thank all of our employees and service providers for helping us achieve this huge milestone. It is worth noting that the increase in new market ASMs will certainly put some pressure on unit revenue metrics as our network returns to a higher proportion of developing markets than we've experienced for a few years. I expect 2Q will be the best quarter of the year from a unit revenue perspective, while the elevated growth, increasing level of developing ASMs and tougher comps will put some pressure on the back half of the year. Despite global fears about coronavirus, solid demand levels have persisted. Bookings for both new routes and the system as a whole remain strong, and I'm encouraged by the current state of demand, combined with the power of the Allegiant 2.0 strategy that Scott is putting into action. And with that, I'd like to turn it over to Greg. -------------------------------------------------------------------------------- Gregory Clark Anderson, Allegiant Travel Company - Executive VP, Principal Accounting Officer, Secretary & CFO [7] -------------------------------------------------------------------------------- Thank you, Drew, and hello, everyone. In 2019, the airline completed its 17th consecutive profitable year by delivering not only an industry-leading operating margin of 21.3% but the highest income in our airline's history. This amounts to nearly $300 million of airline operating income, a $130 million increase versus prior year and 4 consecutive quarters of year-over-year margin improvement. These results capped what was truly an exceptional year at Allegiant as the airline grew EPS by more than 40% on only 10% of top line growth. These impressive results would not have been possible without the amazing efforts of our team members to support and grow our world-class airline. Because of their tireless efforts, I am happy to report for the first time in our history, we beat all of our full year 2019 corporate-wide goals, and therefore, our airline employees earn the maximum payout allowable under our airline profit sharing program. This translates to a record $38 million in total profit sharing, a year-over-year increase of nearly 80% for distribution to our airline team members. I'd like to add my personal thanks to all of our team members for their tremendous efforts. We are thrilled with these results, and everyone should be proud. While we expect our 42% growth in 2019 EPS will lead the industry, it did not come in on the -- or it came in on the low end of our latest guide in Q3, primarily due to a spike in the price of fuel during the fourth quarter. Our average cost of fuel during this period was $0.10 higher per gallon than the assumption in our guidance. However, back in January 2019, the midpoint of our initial full year EPS guide was $14, and we continually increased the range during the year, an example of how positive momentum grew for us through the year. As a reminder, our fuel guide is simply based on the price per gallon we pay about a week or so prior to our earnings release. That said, the difference between our 4Q fuel estimate versus actual cost us approximately $0.29 in EPS. We provided additional detail in our recent earnings release. Excluding fuel, airline cost performance for the fourth quarter came in slightly higher than our original expectations, with CASM ex down only 1.5% year-over-year. Although we delivered meaningful improvements in labor productivity during the quarter, costs associated with higher-than-expected profit sharing drove slightly higher-than-expected CASM ex. I should add, it's a high-quality problem when your profit sharing earned by our airline team members come in higher than planned due to a better-than-expected finish to the year, a further example of strength growing as we move through the year. Full year 2019 airline unit costs, excluding fuel, decreased by 3.3% versus the prior year. However, and not to belabor our profit sharing, if you exclude it along with fuel, unit costs would have decreased by 4.4% versus the same metric in 2018, significantly better than the range. Based on our estimates, we are the only U.S. carrier in the U.S. to report a reduction in CASM ex for the full year 2019, another benefit of being through the transition. Our 2019 exceptional cost performance provides a strong foundation for us to build upon in 2020. Our entire team is committed on cost and relentlessly searching for ways to drive the unnecessary ones out of the business. Now turning to the fleet. We ended 2019 with 91 Airbus aircraft in service, 2 short of the number we had projected. The 2 additional aircraft are now in service, and we are still on target to reach 105 aircraft by the end of '20. The shift of these 2 aircraft into 2020 did not impact our 2019 capacity, as demonstrated by the 8.3 scheduled -- 8.3% scheduled ASM growth in the quarter and the 18.5% ASM growth in December. We are pleased with both the operational and economic performance of the Airbus A320 Series aircraft. Flying an all Airbus fleet through 2019 aided us greatly in the airline delivering nearly $540 million in EBITDA, an increase of 40% versus 2018, and on aircraft -- on a per aircraft basis, this pencils out to $6.3 million of EBITDA. Our 2019 airline CapEx came in at $65 million higher than expected. The increase is primarily related to the opportunistic purchase of 7 new CFM engines and various spare parts, coupled with the better-than-expected maintenance status on 2 aircraft acquired during the fourth quarter. Now moving to our 2020 guidance. We are confident in our full year airline CASM ex projections of down 2% to flat. It is worth pointing out, we expect unit cost projections to be better in the second half of 2020 versus the first half, and we expect the first quarter to outperform the second quarter. This is largely correlated to the growth cadence Drew mentioned, along with a more difficult second quarter comp year-over-year. Additionally, we are maintaining our 2020 EPS guide of $16.50 to $19 while increasing our full year fuel cost assumption from $2.12 to $2.15 per gallon, which is the only change to our current guide. Including heavy maintenance, our total airline CapEx for 2020 is expected to be approximately $390 million. Coupling our current run rate of EBITDA per aircraft and the projected aircraft growth during the year, the airline is expected to generate nearly $250 million in free cash flow during 2020. Turning to leverage. Strong cash generation is helping us delever quickly. By way of example, we ended 2019 at 2.7 turns debt-to-EBITDA versus 3.4 turns at the end of 2018. We expect the continued downward trajectory as we grow EBITDA while quickly amortizing existing aircraft debt. Taking on secured aircraft debt was critical to support the timing of our fleet transition and expansion. If you combine our access to capital from top banks throughout the world and our ability to make money with these aircraft, it has provided us tremendous access to inexpensive financing. We compare this Airbus financing combination in a similar way to the acquisition of our MD-80s. Our all-in cash outlay is around the same amount between the 2 fleet types, primarily since the MD-80 wasn't financeable. Therefore, this type of debt is an efficient tool with a different risk profile than more traditional debt. Aircraft have the ultimate flexibility in capital assets given their mobility. At the end of 2019, we drew on our revolver to provide short-term liquidity to help fund the purchase of 7 new CFM engines and various spare parts mentioned earlier. We intend to finance most of these engines in early 2020 with the use of proceeds to pay down the revolver. Now turning to the nonairline. We remain active in negotiations to sell Teesnap, and given the sensitive nature, we do not intend to comment any further other than the -- and a reminder, the sale is not included within our EPS guide. Once the sale is complete, we plan to formally reinstate our nonairline guide. However, we will reconfirm our messaging from our recent Investor Day that our expected 2020 run rate should be similar to 2019's nonairline results. As a reminder, we still expect Sunseeker to open in the second quarter of 2021, and total project costs remain at $470 million. Included in the $470 million, as John mentioned, is $25 million of operating expense, of which we project 60% to 75% will flow through our 2020 nonairline operating loss. Sunseeker CapEx is expected to pick up in earnest during 2020, and we project over $300 million in gross CapEx during the year. The first $200 million will be funded by Allegiant and the remaining by TSSP. The remainder of their funding will be drawn during the first quarter of 2021 as we complete construction. We are well positioned for a very strong 2020, as reflected in our full year guide, and excited for the growth and continued improvements we expect to see throughout the organization. With that, I would like to turn it over to the operator for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) I show our first question comes from Savi Syth from Raymond James. -------------------------------------------------------------------------------- Savanthi Nipunika Syth, Raymond James & Associates, Inc., Research Division - Airlines Analyst [2] -------------------------------------------------------------------------------- I really appreciate the kind of quarterly color here. Just a little bit, Drew, the 2Q RASM being probably the best makes sense from -- if I look at the capacity growth, but it's my understanding that you had some new markets opened late last year. And then again, you'll have another whole bunch opening up this year. So wondering if you can talk about the kind of the progression as a percentage of ASMs of new markets and if there's anything kind of peak versus off-peak growth that you'll -- kind of variance that you'll see throughout this year. -------------------------------------------------------------------------------- Drew Wells, Allegiant Travel Company - VP of Revenue & Planning [3] -------------------------------------------------------------------------------- Sure. Yes, thanks for that, Savi. So there were some new routes when we went through 2019. I think it's important to stress that it was significantly lower really in the back half of '18 into '19 relative to any year really before that. I think I've mentioned this before, but 4Q '18, we kind of troughed under 4% of our markets being -- of our ASMs being in developing states. As we move forward into kind of 2Q '20 when a lot of these new markets, these 44 new routes will open, we'll be up over 11%, so that will more than double on a year-over-year basis. So there will be significantly more pressure on that front than we saw in 2Q '19. -------------------------------------------------------------------------------- Savanthi Nipunika Syth, Raymond James & Associates, Inc., Research Division - Airlines Analyst [4] -------------------------------------------------------------------------------- Okay. Maybe I misunderstood, so you're still expecting 2Q to be the best RASM quarter? -------------------------------------------------------------------------------- Drew Wells, Allegiant Travel Company - VP of Revenue & Planning [5] -------------------------------------------------------------------------------- Still expect it to be the best. Some of that, remember, the 2Q '19 comp that we're dealing from, can't really run away from that, so that's one of the larger impetuses as well as the lower overall growth rate. -------------------------------------------------------------------------------- Savanthi Nipunika Syth, Raymond James & Associates, Inc., Research Division - Airlines Analyst [6] -------------------------------------------------------------------------------- Makes sense. And then if I might ask on the -- I know this is a small, very small business, but on the family entertainment center side, just kind of curious how that business is performing versus expectation just from an earnings standpoint but also kind of the secondary reason for it, which is kind of to build loyalty and maybe kind of get more e-mail addresses. Just kind of curious if you can provide an update now that they've been open for a while and the thoughts around that. -------------------------------------------------------------------------------- Scott D. Sheldon, Allegiant Travel Company - Executive VP & COO [7] -------------------------------------------------------------------------------- Yes, this is Scott. I can tell you, it was really kind of a reset. It's a new management team in place. We have 2 stores open. The first one is in Clearfield, which is in Salt Lake. The second one was in Flint. If you look at January, literally, month-to-date, the profile is similar to how we thought this business would look. Top line through, I think, the 25th was around kind of $575,000, and it's running about a 35% EBITDA margin. As far as e-mails, there isn't a significant amount of overlap between kind of nonstop versus what was in our Allegiant Air database, just shows that there's opportunities to kind of cross-pollinate there. But no, I think there's a lot of things that we probably didn't do right out of the gate, which is why we made some pretty dramatic changes, really stripped a lot of unnecessary costs out. There's a lot of seasonality to FECs, if you can believe it. So we think we've got a good handle. But that's kind of the profile I anticipate going forward. I think it's going to be -- still going to be a really good business. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Our next question comes from Dan McKenzie from Buckingham Research. -------------------------------------------------------------------------------- Daniel J. McKenzie, The Buckingham Research Group Incorporated - Research Analyst [9] -------------------------------------------------------------------------------- A couple of questions here. On the 2020 plan, what's the average daily utilization you've embedded in the plan? And the reason why I ask is, to the extent higher utilization could be just simply a way to drive down cost, I know you're guiding the CASM ex fuel flat to down 2%, but I'm just trying to put that into context. -------------------------------------------------------------------------------- Drew Wells, Allegiant Travel Company - VP of Revenue & Planning [10] -------------------------------------------------------------------------------- Yes. So if utilization will be down for the year, I'm pulling up the number right now, I have -- the first half number will be down a little more than 0.5 hour per plane. We'll be holding relatively steady in March and June, in the peak periods like we expected. But something like in April, will come down a full hour. So there's quite a bit of flexibility in that, but I would expect about 0.5 hour [still] come out for the year. -------------------------------------------------------------------------------- Daniel J. McKenzie, The Buckingham Research Group Incorporated - Research Analyst [11] -------------------------------------------------------------------------------- I see. Okay. And then I guess on the room nights -- on the sold room nights, just relating to Sunseeker, I'm wondering if you can just expand or clarify that a little bit more. What are the total room nights available? What percent have been sold? And how do you plan to revenue manage? Or do you plan to revenue manage the remaining inventory? -------------------------------------------------------------------------------- John T. Redmond, Allegiant Travel Company - President & Director [12] -------------------------------------------------------------------------------- Dan, the room nights sold to date, of course, are a fraction of what the total inventory is. And we didn't -- as I said in my opening comments, we didn't expect people to be booking rooms 1.5 to 2 years out. The fact that we have quite a few people who have done that already, the 26 people I was mentioning, it is amazing to us that people are doing that. Most people -- hotels just don't put inventory out that far in advance. But we developed all of our systems internally. So it was important for us to get out there selling as quick as possible, not doing an extensive amount of marketing, just let this traffic trickle in and then allows us to tweak and monitor all of our systems and processes, so we can get those functioning exactly how we want them to. So when we start to heavily market -- so our expectation is people will start booking in a more significant way about a year out. And of course, I think that starts to ramp up as you get more like 6 months out. So that's our expectation. The fact that we're getting this traffic now has just been a great surprise to us. -------------------------------------------------------------------------------- Daniel J. McKenzie, The Buckingham Research Group Incorporated - Research Analyst [13] -------------------------------------------------------------------------------- Very good. If I could just squeeze one more in here, maybe for Scott. I'm wondering if you can elaborate a little bit more on 2.0. I think Maury talked about it evolving. What capability are you looking to gain? What are you willing to do differently, I guess, is another way to ask that question. As you kind of think about the revenue potential, what kind of revenue potential does that unlock for you? -------------------------------------------------------------------------------- Scott W. DeAngelo, Allegiant Travel Company - Executive VP & CMO [14] -------------------------------------------------------------------------------- You bet. So in essence, the whole premise of this is the fact that we invest dollars to make people aware of Allegiant and certainly come to our website. And the most accretive thing we can do once they're at that website or, as I like to put it, in our store is to have them put as much in their shopping cart as possible, and that certainly is the premise. So to directly answer your question, the things that, that requires are a website, and by that, I mean, on mobile and/or desktop laptop, that enables all the same flexibility and personalization that an Amazon does, that makes use of all of the frictionless shopping and buying the same way that you use a streaming service [that] you buy from a leading Internet retailer. And so ultimately, what it unlocks is, today, we know for every 1 hotel room we sell, there's another 9 people that put it in their shopping cart. But for the fact that -- and list a bunch of reasons, but one of them is they have to pay for it all there versus a conventional way you would pay maybe for 1 room night and/or just make your reservation and be able to pay at the front desk. These are all technical and/or commercial things that we're doing that we think boost the size of that cart in hotel and rental car and other items. The last quick comment is we view the revenue potential not just directly from the customer, people around here have heard it so much, and because they're hot right now, I'll use it again, that Apple got to a $1 trillion market cap not just by selling iPhones and iPads to all of us, but they turned right around and sold us to every software developer and media and entertainment company because they were the way that those companies would distribute to the customer, and in a very asset-light way, Apple is happy to do that, and they have their hand out for about 40% of everything they get served through there. In the same way, we believe, and we've already seen this, hotel partners, rental car partners, other dining establishments are willing to pay to ride along our website or e-mail marketing. And while this is in its infancy, this becomes a net new revenue stream that doesn't come from the customer but comes from other partners in the ecosystem that not only want to be sold in our store but are willing to pay extra to have top in the sort order and/or other advertising opportunities on the site or in our other digital marketing efforts. -------------------------------------------------------------------------------- Operator [15] -------------------------------------------------------------------------------- Our next question comes from Andrew Didora from Bank of America. -------------------------------------------------------------------------------- Andrew George Didora, BofA Merrill Lynch, Research Division - Director [16] -------------------------------------------------------------------------------- John, just a couple of quick questions on Sunseeker. I know it's a very small sample set, but just curious of the bookings that you cited, just curious how you sourced them. Were they -- are they airline customers or not? And just curious what the duration of the stay is like and if that's meeting your expectations or not. -------------------------------------------------------------------------------- John T. Redmond, Allegiant Travel Company - President & Director [17] -------------------------------------------------------------------------------- All good questions. We even had a -- we're getting people -- a couple of people, actually, book their stay by walking into our preview center, which is right on the site of where the construction is taking place. So we've had some walk-ins, which is great, and of course, the rest were all booked online. The longest stay we booked has been 7 days, and of course, the shortest stay has been 1. So -- and we booked a 7-night stay in the suites, too, which is why you're starting to see a higher rate like that. So while this traffic is slow, it's beyond our expectation that people have booked 2 years out. So we're very excited by that. We have people that have booked almost about every month we have out there, and the furthest month out is February of '22. We have a couple of bookings that far out, believe it or not. So again, when you start paying real dollars, 2 years in advance or 18 months in advance, it's significant, it's appreciated, not expected, but we do expect it, of course, as we get much closer to opening. As I said, 1 year to 6 months out is when we would start to really see that traffic pick up. And our marketing efforts will be focused around that time frame, too. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Our next question comes from Helane Becker from Cowen. -------------------------------------------------------------------------------- Helane R. Becker, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [19] -------------------------------------------------------------------------------- So I just have maybe 2 questions. The first one is, does your agreement with Indianapolis Colts preclude you from doing a deal with any other NFL teams? -------------------------------------------------------------------------------- Scott W. DeAngelo, Allegiant Travel Company - Executive VP & CMO [20] -------------------------------------------------------------------------------- No, not at all. -------------------------------------------------------------------------------- Helane R. Becker, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [21] -------------------------------------------------------------------------------- Okay. That was easy. And then my second question is, do you have -- given that the MAX is out of service, and it probably will be for the first half of the year, maybe longer, why wouldn't you grow faster? -------------------------------------------------------------------------------- Drew Wells, Allegiant Travel Company - VP of Revenue & Planning [22] -------------------------------------------------------------------------------- Sorry Helane, it's Drew. Was the question why don't we grow faster? -------------------------------------------------------------------------------- Helane R. Becker, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [23] -------------------------------------------------------------------------------- Yes, why don't you grow faster to take advantage of the fact that some other airlines can't grow because they don't have the capacity available? So why wouldn't you think about increasing utilization or somehow adding more flights? I don't know how to think about that. But grow faster than your current plan to take advantage of the fact that maybe you can steal some more share. -------------------------------------------------------------------------------- Drew Wells, Allegiant Travel Company - VP of Revenue & Planning [24] -------------------------------------------------------------------------------- Yes. So Helane, I think the most important part to remember here is, as we have such a unique network and unique business model, we weren't really benefiting from the MAX being gone. All the routes we announced were ones we've had our eyes on for a while and weren't dictated by the MAX being in or not in service. So I think we're marching to the beat of our own drum and exactly the cadence we want to. Hopping into routes or areas where American or Southwest are trying to expand rapidly doesn't really jive well with where our network is taking up. So I think at 16-or-so percent, give or take, 1.5 points, I think we're growing at a great rate, one that the entire company can kind of move forward together at. And I think I'm very satisfied with where we're at. -------------------------------------------------------------------------------- Helane R. Becker, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [25] -------------------------------------------------------------------------------- Okay. That's very -- that's helpful. -------------------------------------------------------------------------------- Gregory Clark Anderson, Allegiant Travel Company - Executive VP, Principal Accounting Officer, Secretary & CFO [26] -------------------------------------------------------------------------------- Helane, this is Greg. I was just going to add -- I mean on the MAX comment that on the fixed fee side, though, we definitely see opportunities to take advantage with the MAX being out, and that's something Drew and his team are hyper-focused on and taking advantage of that. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- Our next question comes from Michael Linenberg from Deutsche Bank. -------------------------------------------------------------------------------- Michael John Linenberg, Deutsche Bank AG, Research Division - MD and Senior Company Research Analyst [28] -------------------------------------------------------------------------------- I have 2 questions here. Drew, the announcement to do the 44 city pairs, what is your success rate now? I mean when you look at some of the launches and all the new city pairs, at the end of the day, maybe after a year of operation, I'm sure there's always some paring and some fine-tuning where some markets just maybe they look good on paper but didn't play out. And the reason I ask is that we've seen over the last few years other carriers make big service announcements, and then we see actually a sizable number drop out. And so I think as you've grown in size, how has that, call it, success rate, how has that evolved? -------------------------------------------------------------------------------- Drew Wells, Allegiant Travel Company - VP of Revenue & Planning [29] -------------------------------------------------------------------------------- Sure. So for a long time, I believe Lukas even quoted this before, we were hunting around 75% success rate as oil kind of came down in the back half of '14, '15 there. It actually elevated somewhat. We're hitting closer to 80%, 85%. We've probably come back off that just a little bit but still hitting 75% plus at this point. -------------------------------------------------------------------------------- Michael John Linenberg, Deutsche Bank AG, Research Division - MD and Senior Company Research Analyst [30] -------------------------------------------------------------------------------- Okay, great. And then just second question to Scott. It was good for the quick update on Allegiant nonstop. You mentioned Clearfield and Flint. For 2020, what's the plans there? I saw news out recently. It looked like you're buying another site. I don't know if it's the third or fourth. What's the plan for expanding that business in 2020? Is it 1 or 2 new sites, 3 sites? How should we think about it? -------------------------------------------------------------------------------- Scott D. Sheldon, Allegiant Travel Company - Executive VP & COO [31] -------------------------------------------------------------------------------- Yes, Michael. So a couple of things. I've mentioned we were -- we really spent the back half of the year unwinding some of the decisions that were made. We technically have 2 other locations that we just, knowing what we know now, were not comfortable moving forward, one's another Utah facility in West Jordan. And there's another one in Fort Wayne. The one in Fort Wayne we own, it's on the market we think we have a potential buyer. But we do plan on opening a new facility in Chesterfield, which is in St. Louis. That should be in the third quarter. So that transaction, purchase is done, and so we're in the throes of developing the space plan. Yes, that one, just knowing what we know now, like I said, we took some -- probably some unnecessary lumps on the front-end. So at a minimum, 1 store, maybe 2, there's another -- there's some other opportunities up in the Michigan area that are attractive as well. But that's kind of the lay of the land. I'm really pleased with kind of how we ended the year but, more importantly, how we're getting started in 2020. As I mentioned, through the majority of January, the profile that we're seeing is similar to what we modeled a year ago. So... -------------------------------------------------------------------------------- Michael John Linenberg, Deutsche Bank AG, Research Division - MD and Senior Company Research Analyst [32] -------------------------------------------------------------------------------- Yes. No. Thanks. 35% EBITDA is good, very good. -------------------------------------------------------------------------------- Operator [33] -------------------------------------------------------------------------------- Our next question comes from Duane Pfennigwerth from Evercore. -------------------------------------------------------------------------------- Duane Thomas Pfennigwerth, Evercore ISI Institutional Equities, Research Division - Senior MD [34] -------------------------------------------------------------------------------- Drew, you mentioned in your prepared remarks, it's been a while since we've seen you grow mid- to high teens. You guys have done a really nice job of flexing your capacity, shaping it around demand. You mentioned that new market mix was going to pressure RASM in the second half. But I wonder if you could comment, maybe just following up on Savi's question, how it's playing out here into the March quarter, the point being your new markets may not be dilutive to RASM. So do you think you can sustain positive RASM trends into March here? -------------------------------------------------------------------------------- Drew Wells, Allegiant Travel Company - VP of Revenue & Planning [35] -------------------------------------------------------------------------------- So obviously, not going to comment too much on that. We're not going to guide out any sort of RASM cadence. I'll say this much, obviously, new markets generally have a bit of a maturation curve. It all kind of depends on the type of route you launch. Anything that's connecting the dot between 2 cities you already operate, which was the predominant percentage of our 2019 market adds, will spool up a bit quicker. Anything that has a new city, especially one without G4 presence relatively close, will take a bit longer. So if you think about the type of markets, I think you can kind of glean some information from that. But I think that's as far down the kind of RASM guiding we'll go. -------------------------------------------------------------------------------- Duane Thomas Pfennigwerth, Evercore ISI Institutional Equities, Research Division - Senior MD [36] -------------------------------------------------------------------------------- Okay. And then maybe just stepping back, big picture. As you think about fuel as an input to your network plans, I think of Allegiant as one of the better carriers at keeping a fuel tailwind when you get one. Can you talk about, if these lower fuel prices sustain, how these growth projections you've given us could change? -------------------------------------------------------------------------------- Drew Wells, Allegiant Travel Company - VP of Revenue & Planning [37] -------------------------------------------------------------------------------- Sure. So within 2020, we're already kind of marching toward the top end of where we said we'd like to be long term as kind of a 8% to 12% annual carrier. Some of it will obviously depend on induction and the pipeline in which we're able to acquire planes. If fuel stays lower than this, maybe you can scratch out another couple of points, but I think we're hitting pretty close to the top of where we want to go. We've learned over time that if you grow too fast, you kind of outpace some parts of the company and that puts a lot of stress, either on the operation or other general infrastructure. So I don't want to get too far ahead of ourselves and start saying, if fuel goes really low, we'll go to 20%, because I don't know if that's the right answer for the company as a whole. -------------------------------------------------------------------------------- Duane Thomas Pfennigwerth, Evercore ISI Institutional Equities, Research Division - Senior MD [38] -------------------------------------------------------------------------------- That makes a lot of sense. And just one follow-up there. On your airline CapEx of $285 million at the midpoint, is that deals you hope to complete? Or do you have line of sight on that $285 million as we sit here today? -------------------------------------------------------------------------------- Gregory Clark Anderson, Allegiant Travel Company - Executive VP, Principal Accounting Officer, Secretary & CFO [39] -------------------------------------------------------------------------------- Duane, thanks for the question. It's Greg. No, we definitely have line of sight. All the aircraft that are scheduled in that CapEx or projected in that CapEx, we already have firm commitments on. And where -- they're with strong counterparties that we've done business with in the past, then we fully expect that they deliver on the allotted time and that, that CapEx is [kind of in place]. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- Our next question comes from Catherine O'Brien of Goldman Sachs. -------------------------------------------------------------------------------- Catherine Maureen O'Brien, Goldman Sachs Group Inc., Research Division - Equity Analyst [41] -------------------------------------------------------------------------------- So Drew, maybe one for you. Just on your recent launch, the recent announcement on launch of service in Boston, Chicago, Houston, can you tell us a little bit more about the decision-making process there? Not really your typical type of cities, but should we be viewing these as more destination than origination markets? And then any concerns on a competitive response? -------------------------------------------------------------------------------- Drew Wells, Allegiant Travel Company - VP of Revenue & Planning [42] -------------------------------------------------------------------------------- Yes, Catie. So I think you hit the nail on the head there. These are definitely more destination-type cities. If you remember back in 2016, we launched into Newark and BWI under very similar pretence. You have either very high fare or completely unserved markets going into both Newark and BWI at that time, and now with Chicago, Houston and Boston. So there's kind of a small niche in each of these for us to thrive in each of these airports. To serve it as a destination, it's going to be very expensive and very difficult to try to drive a lot of origination traffic from these cities, and that's not at all what we're after here. So within our little niche, we're not concerned about competitive reaction, we'll obviously watch the industry as we do anyway, but it's not something that we expect to rankle with others. -------------------------------------------------------------------------------- Catherine Maureen O'Brien, Goldman Sachs Group Inc., Research Division - Equity Analyst [43] -------------------------------------------------------------------------------- Okay, got you. And then maybe just a follow-on to that since you mentioned Baltimore and Newark there. How do those compare on maybe like versus system RASM or system margin? -------------------------------------------------------------------------------- Drew Wells, Allegiant Travel Company - VP of Revenue & Planning [44] -------------------------------------------------------------------------------- I'll take it at a high level. There's nothing been concerning. We're obviously not going to talk about specific margins for cities. But obviously, we've been there since 2016. Capacity has flexed a little bit. But there's obviously nothing overwhelmingly concerning there for us to continue to be able to put up 20% margins. There's obviously a high hurdle rate you have to clear in order to kind of continue with the schedules. So no concern. -------------------------------------------------------------------------------- Catherine Maureen O'Brien, Goldman Sachs Group Inc., Research Division - Equity Analyst [45] -------------------------------------------------------------------------------- Got it. Had to give it a shot. Maybe just one more quick one on Teesnap. Nothing -- no question here on the state of the negotiation or anything like that, but can you share with us when you're assuming that sale closes just underlying your 2020 EPS guidance? I believe you have a couple of quarters of nonairline expense associated with Teesnap in that. -------------------------------------------------------------------------------- Gregory Clark Anderson, Allegiant Travel Company - Executive VP, Principal Accounting Officer, Secretary & CFO [46] -------------------------------------------------------------------------------- Yes, Catherine, thanks for the question. As far as the guidance, we do have a couple -- we don't give guidance, but on the nonairline cost baked into the budget for Teesnap, we have it in there for the first half of the year. As far as timing, we've spent a lot of time on it. I'd probably prefer not to disclose when we're expecting to close that transaction. We've been negotiating in earnest with a counterparty for some time, just working through the due diligence, and we're just working through the process. Once we have some clear line of sight on the timing, we'll certainly update you guys. But right now, it's just kind of we're working through it as quickly as possible. -------------------------------------------------------------------------------- Operator [47] -------------------------------------------------------------------------------- Our next question comes from Joseph DeNardi from Stifel. -------------------------------------------------------------------------------- Joseph William DeNardi, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Airline Analyst [48] -------------------------------------------------------------------------------- Drew, can you just talk about the 44 markets you launched, how many of those were competitive versus not competitive, and then where you ended the year for the network in terms of level of competition, and then which way that's going in 2020? -------------------------------------------------------------------------------- Drew Wells, Allegiant Travel Company - VP of Revenue & Planning [49] -------------------------------------------------------------------------------- Sure. So among the 44 routes, 11% were competitive. We have some competition into the panhandle of Florida as well as a couple of the routes out of Nashville and Albuquerque going over to Orlando. So that's where we have the competition there. We ended the year right around between 20% and 25% of markets competitive, and it's been trending positively for us in some ways because of our announcements, being more noncompetitive as well as some actions from competitors. But we've been heading in a positive direction now for about the last 6 to 12 months. -------------------------------------------------------------------------------- Joseph William DeNardi, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Airline Analyst [50] -------------------------------------------------------------------------------- Got it. And then, John, not sure if I missed it in your prepared remarks, but the Sunseeker spend in 2019 was below the plan. And I know you said you're still on schedule, but as some of the schedule margin being eaten into, just maybe why it's been so far below plan? And then are you -- is it -- are you planning on continuing to give your -- how many rooms booked? Is that something you're going to give every quarter? And if so, what should we expect from that going forward, just so there is some level of expectations? -------------------------------------------------------------------------------- John T. Redmond, Allegiant Travel Company - President & Director [51] -------------------------------------------------------------------------------- Sure. Thanks, Joe. On the spend, that doesn't have any impact on speed, to be honest with you. The commitments are the more relevant or important number. So at the end of the year, I was saying at the end of '19, we ended up with about $330 million in commitments. From a cash management standpoint, if we can delay paying, I mean, that's a great thing to do. So -- and trying to predict pay dates way out like we have to just from a cash management standpoint, it's more a art than science, so that's why you'll see it kind of move around. But the opening date, no change to it. No change to the schedules, no change to anything. But if we can delay paying cash, that's a good thing for us. So I think we ended '19 -- I think as of the end of '19, we had spent about $99 million, roughly $100 million on the project in terms of cash. And again, we had $330 million in commitments. In terms of cadence of bookings, again, I don't expect a significant increase in bookings between, call it, now and the end of the quarter -- the first quarter. And I do intend to update everyone -- every quarter, as I mentioned before, there will be complete transparency on everything we're doing, whether it's construction spend, room nights, occupancy. All of that, we'll be providing you. So again, we're happy with where we are. We expect to book a handful of more rooms in the quarter. Granted, you'd like to see big numbers, but we don't expect them. The expectation, again, we think, is going to start to happen in the back end of the year as opposed to the front part of the year. -------------------------------------------------------------------------------- Operator [52] -------------------------------------------------------------------------------- Our next question comes from Hunter Keay from Wolfe Research. -------------------------------------------------------------------------------- Hunter Kent Keay, Wolfe Research, LLC - MD and Senior Analyst of Passenger Airlines, Aerospace & Defense [53] -------------------------------------------------------------------------------- Just a quick clarification on the -- Greg, I think you said you expect to do $250 million in free cash this year. Just to be clear, what CapEx number are you using in that calculation? I just want to get a sense for like a true gross CapEx number. -------------------------------------------------------------------------------- Gregory Clark Anderson, Allegiant Travel Company - Executive VP, Principal Accounting Officer, Secretary & CFO [54] -------------------------------------------------------------------------------- Yes, that would be airline-only CapEx, so that would exclude Sunseeker. -------------------------------------------------------------------------------- Hunter Kent Keay, Wolfe Research, LLC - MD and Senior Analyst of Passenger Airlines, Aerospace & Defense [55] -------------------------------------------------------------------------------- Okay. And that's not net of any like financing for aircraft, that's like a real gross CapEx number, for at least for the airline? -------------------------------------------------------------------------------- Gregory Clark Anderson, Allegiant Travel Company - Executive VP, Principal Accounting Officer, Secretary & CFO [56] -------------------------------------------------------------------------------- Yes. If you take the run rate, the $6.3 million in EBITDA per aircraft, take it over the average aircraft count that we expect in 2020, that will get you your EBITDA and then just -- yes -- just subtract out the CapEx that we're showing. Yes. -------------------------------------------------------------------------------- Hunter Kent Keay, Wolfe Research, LLC - MD and Senior Analyst of Passenger Airlines, Aerospace & Defense [57] -------------------------------------------------------------------------------- It's gross CapEx, so it's not net of like (inaudible) proceeds? -------------------------------------------------------------------------------- Gregory Clark Anderson, Allegiant Travel Company - Executive VP, Principal Accounting Officer, Secretary & CFO [58] -------------------------------------------------------------------------------- Yes, yes, yes. Exactly. -------------------------------------------------------------------------------- Hunter Kent Keay, Wolfe Research, LLC - MD and Senior Analyst of Passenger Airlines, Aerospace & Defense [59] -------------------------------------------------------------------------------- All right, all right. Okay. And then how many of the 780,000 hotel room nights that you sold through third parties are near Sunseeker or even potentially competitive to Sunseeker in some way? I'm just wondering if the Sunseeker sales effort might, at all, even marginally cannibalize the third-party room nights a little bit geographically. And I ask the question because, obviously, this is, as you said, like, really high-margin stuff that just drops straight to the bottom line, so a couple of thousand room nights not sold in exchange for Sunseeker. I'm just wondering if there's a little bit of a potential margin disruption impact we should think about. -------------------------------------------------------------------------------- John T. Redmond, Allegiant Travel Company - President & Director [60] -------------------------------------------------------------------------------- I don't think you'll see any impact there, Hunter. And of course, the numbers that Maury was quoting had to do with gross number of room nights we sold since the inception of the airline. But the number of hotel room nights we sell skews Vegas. We've always said that in the past. So the concentration of rooms we sell has always been in Vegas. The second market, of course, is in Florida. And the room nights we were selling in Florida are scattered all over, so with a skewing there towards Orlando, the Sanford market. So everything that we're going to see down in Southwest Florida is going to be accretive. We don't see any displacement-type traffic or activity that will go on down there. -------------------------------------------------------------------------------- Scott W. DeAngelo, Allegiant Travel Company - Executive VP & CMO [61] -------------------------------------------------------------------------------- Yes, I would add that the more dominant effect you'll see in its opportunity is markets that have become what I refer to as our next-gen destinations, Nashville, Savannah, Myrtle Beach, those are markets that, right now, we do virtually no hotel business, and we're scurrying to have the same type of offerings that a Las Vegas or an Orlando have. So in the sense of answering the question, that may swing the other way and represent potential upside as we get those online and start to educate customers to book there, the same way they would here in Las Vegas or down in Orlando. -------------------------------------------------------------------------------- Operator [62] -------------------------------------------------------------------------------- Our next question comes from Darryl Genovesi from Vertical Research. -------------------------------------------------------------------------------- Darryl J. John Genovesi, Vertical Research Partners, LLC - Principal [63] -------------------------------------------------------------------------------- John, on the Phase 2 stuff that you mentioned, I guess, what are the milestones in your Phase 1 plan that you'd like to pass before you do take that Phase 2 plan to the Board? -------------------------------------------------------------------------------- John T. Redmond, Allegiant Travel Company - President & Director [64] -------------------------------------------------------------------------------- I don't think we've established any milestones when it comes to Phase 2, if you will, and the reason being is because Phase 2 doesn't add any additional room capacity. Those are metrics we would be monitoring in Phase 1 before pulling the trigger on doing anything that relates to rooms. These are just -- when you look at a grade-level pool and a restaurant, they're just added amenities and added traffic generators and added revenue producers. So the important part of it, which is why we were looking at it first, is it finishes off the entire waterfront. So it takes any construction disruption that we would have had and tries to concentrate a lot of that during the current construction process. So again, it's a decision the Board will make at some point in time in the future. But in order to be in a position to make that decision, there's all this groundwork that you need to do. So that's what's taking place right now with all that groundwork. But again, it's adding a pool and adding a restaurant. The pool that's currently in the resort project is on the rooftop of one of the buildings. So this would give us a rooftop pool and a grade-level pool and be able to create additional charge points to be able to maximize the opportunity with these guests. -------------------------------------------------------------------------------- Darryl J. John Genovesi, Vertical Research Partners, LLC - Principal [65] -------------------------------------------------------------------------------- Okay. And then just a follow-up on Andrew's. The -- and I know it's very early days, all the usual caveats, but the $185 baseline that you called out for your expectation, was that associated in some way with the specific mix of rooms and suites and (inaudible) that were actually booked? Or was that just a more general assumption for everything across the entire year? Just -- again, I know it's a small sample, but just wondering, if you sort of look at this and conclude that ADR is running ahead adjusted for mix or if you sort of don't. -------------------------------------------------------------------------------- John T. Redmond, Allegiant Travel Company - President & Director [66] -------------------------------------------------------------------------------- Yes, it was just a general one. And again, that's one that we modeled, boy, in the very first financial projections we've put out there, had to be well over a year ago, maybe even closer to 2 years ago when we put that information out. We've always said all along that when we are in a position where the Board is making decisions, we wanted to be conservative in those rate assumptions even though the market is much stronger. And I think in the most recent Investor Day we had, we were pointing out just how strong those rates are in the marketplace. So while we're seeing a very strong rate, it is very early, but you could go out there and look at our inventory, I mean, that we've posted rooms out there, as I said, from June of '21 through May of '22, and there's a complete -- every single day and every single room has a posting for rooms and rates. So anyone who wants to go out there and look at it and pick their day. We have purposely priced below the market, which is one of those things that we had mentioned in the Investor Day that would be part of our strategy. It's just the market is so strong. Maury and I have always talked about that. That's what excited us about that market is just how high those room rates are there. -------------------------------------------------------------------------------- Darryl J. John Genovesi, Vertical Research Partners, LLC - Principal [67] -------------------------------------------------------------------------------- Okay. And then if I could just squeak in a quick third. When did you open booking? -------------------------------------------------------------------------------- John T. Redmond, Allegiant Travel Company - President & Director [68] -------------------------------------------------------------------------------- I want to say, like, right at the beginning of December. So call it either the first week, week or 2. And we've been continuing to upgrade the site just based on things we're finding, but we find it's best -- or in our best interest to get it out there as soon as we possibly can. It's kind of like soft opening a hotel where you sell just a small number of rooms early on to [shake out] a room. This gives us some early traffic to the site and allows us to get all of our analytic tools squared away, get all of our tweaking of the site. So we've done several changes to the site since we launched it, and we have numerous changes that will continue to happen between now and opening and, most assuredly, even just between now and, call it, the end of the first half of this year. -------------------------------------------------------------------------------- Scott W. DeAngelo, Allegiant Travel Company - Executive VP & CMO [69] -------------------------------------------------------------------------------- John, one quick add-on comment that might be good to speak to as well is we certainly are talking about the hotel right now, like we think about the airline with the free and independent traveler. But the reality is there's a strong pipeline of group bookings, and groups, of course, tend to be higher-margin business, less price-sensitive than the individual, will book much further ahead of time. And so I think in subsequent calls, there'll be updates on that, and the group has the ability to take a big chunk of hotel inventory for a set amount of time and start adding up really quickly when we think about the different customer audiences that will be booking Sunseeker. -------------------------------------------------------------------------------- John T. Redmond, Allegiant Travel Company - President & Director [70] -------------------------------------------------------------------------------- That's a very good point. And I think I mentioned before that we will be providing that level of insight on -- as we go forward here. We have a lot of group leads, but we haven't booked a large group yet. We fully expect that, that will happen before the year closes. And we expect to see quite a bit of that activity at the hotel. So that's a very, very lucrative and exciting piece of the business as we move forward. -------------------------------------------------------------------------------- Operator [71] -------------------------------------------------------------------------------- This concludes our Q&A session. At this time, I'd like to turn the call over to Maury Gallagher, Chairman and CEO, for closing remarks. -------------------------------------------------------------------------------- Maurice J. Gallagher, Allegiant Travel Company - Chairman of the Board & CEO [72] -------------------------------------------------------------------------------- Thank you all very much, appreciate your interest and your attention, and we'll be talking to you again in roughly 90 days. Have a good day. -------------------------------------------------------------------------------- Operator [73] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.