U.S. Markets open in 6 hrs 3 mins

Edited Transcript of ALGT earnings conference call or presentation 31-Jan-18 9:30pm GMT

Thomson Reuters StreetEvents

Q4 2017 Allegiant Travel Co Earnings Call

LAS VEGAS Feb 1, 2018 (Thomson StreetEvents) -- Edited Transcript of Allegiant Travel Co earnings conference call or presentation Wednesday, January 31, 2018 at 9:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Christopher Allen

Allegiant Travel Company - Director of IR

* Gregory Clark Anderson

Allegiant Travel Company - Principal Accounting Officer, SVP of Treasury and Secretary

* John T. Redmond

Allegiant Travel Company - President and Director

* Lukas Johnson

* Maurice J. Gallagher

Allegiant Travel Company - Chairman of the Board and CEO

* Scott D. Sheldon

Allegiant Travel Company - CFO, COO & Executive VP

* Trent Porter

Allegiant Travel Company - VP of Financial Planning and Analysis

================================================================================

Conference Call Participants

================================================================================

* Daniel J. McKenzie

The Buckingham Research Group Incorporated - Research Analyst

* Duane Thomas Pfennigwerth

Evercore ISI, Research Division - Senior MD & Fundamental Research Analyst

* Helane Renee Becker

Cowen and Company, LLC, Research Division - MD and Senior Research Analyst

* Hunter Kent Keay

Wolfe Research, LLC - MD and Senior Analyst of Airlines, Aerospace & Defense

* Joseph William DeNardi

Stifel, Nicolaus & Company, Incorporated, Research Division - VP

* Kevin William Crissey

Citigroup Inc, Research Division - Director and Senior Analyst

* Matthew Aaron Wisniewski

Barclays PLC, Research Division - Research 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

* Stephen Michael O'Hara

Sidoti & Company, LLC - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, ladies and gentlemen, and welcome to the Q4 2017 Allegiant Travel Company Earnings Conference Call. (Operator Instructions) As a reminder, this conference may be recorded.

I would like to introduce your host for today's conference, Chris Allen, Investor Relations. You may begin.

--------------------------------------------------------------------------------

Christopher Allen, Allegiant Travel Company - Director of IR [2]

--------------------------------------------------------------------------------

Thank you. Welcome to Allegiant Travel Company's Fourth Quarter and Full Year 2017 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; Scott Sheldon, our Chief Financial Officer and Chief Operating Officer; Lukas Johnson, our SVP of Commercial; and a handful of others to help answer questions. We will open up with some commentary, and then, move in to questions.

Before we begin, I must remind listeners that the company's comments today will contain forward-looking statements, and they are only predictions and involve risks and uncertainties. Forward-looking statements made today may include, among others, there is references to future performance and any other comments about our strategic plan. There are many risk factors that could prevent us from achieving our goals and causing underlying assumptions of these forward-looking 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, and we are undertaking no obligation to update, publicly, any forward-looking statements, whether as a result of future events, new information or otherwise. The company cautions you of this presentation not to place undue reliance on forward-looking statements, which may be biased -- may be based on assumptions and events that do not materialize.

This earnings release as well as our broadcast of the call are available on the company's Investor Relations site at ir.allegiantair.com.

With that, I'd like to turn it over to John.

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [3]

--------------------------------------------------------------------------------

Thank you very much, Chris. Good afternoon, everyone. Happy to report that our operations continued to perform significantly better than prior year and that this performance has continued, of course, quarter-to-date as we would all expect.

By way of example, we have gone 28 days without a maintenance cancellation, and prior to that, we had gone 34 consecutive days. So this is a great testament to the efforts being made by all, great leadership, alignment, accountability and a sense of urgency, have really kicked in, in the company, and we're excited about 2018 and moving forward. I'll let Scott, and of course, the rest of the team talk about their respective areas, but the speed and significance of this improvement is definitely impressive.

I also want to mention, we have hired a CMO, who will start March 5, with the company. I can't say anything about this individual yet, given their current employment, but as we move forward, of course, you'll all come to know who this individual is.

I thought I'd take a quick moment to touch base on some Sunseeker issues, since I know a lot of you probably have some questions regarding the resort. There's been nothing significant to report beyond what was communicated on Investor Day, but I thought I'd give you a couple of points that are worth noting.

In regarding financing the project, we've had numerous parties, who have expressed great interest in that. And based on these early conversations we've had, the structure could look like a 75% to 80% nonrecourse debt, no restrictions, meaning no presell requirements or the like and a term of at least 3 years with extensions of some type. And the interest rate talk has been sub-6%, 6.5%. Again, these are very early indications. We're in the very early stages of this process, but we are extremely optimistic about how this is all going to shake out.

Regarding sales, we pretty much topped our sales efforts for the last 4 to 5 weeks, roughly, while we developed out our system capabilities and advanced the design and development of the project. Of course, I'm happy at this stage that we have now completed the hotel and condo hotel floor plans, which have been posted on the Sunseeker website.

All the interiors of the hotel rooms have been completed, and we're close to having all the interiors done on the condo hotels as well, which completed, of course, we'll also post those to the Sunseeker website.

And of course, it goes without saying that these renderings and floor plans are critical to our online sales effort. And of course, with that sales effort, we've also built out all of our CRM functionality, and we're now in a position to have 2-way communication with all of our potential buyers as well as people who register going forward. So that's monumental. Of course, all this had to be developed internally, since no one has ever done this before using a database to sell product, but we're still ecstatic about where we stand with that effort, and the fact that we have 7,000 people out there that we will start to mine going forward.

But in parallel with those efforts, we also note, we want to have an on-site sales marketing office. There's something like 30,000 cars a day on average that pass this site, and we know as we start to begin new construction, there will be a tremendous amount of excitement in that regard.

So the idea, of course, would be to start building the perimeter wall, the actual wall that will be in place. All the landscaping, of course, that would go along with that, to start to create that sense of arrival that a buyer or a guest would experience, and then, inside that wall, if you will, put the sales office. So we think this is going to go a long way to combining an online as well as a bricks-and-mortar environment to selling these units, not that dissimilar to what's happening in the retail world, frankly. So we're excited by that, and we think we can have a sales center up and operating. We're shooting for the May timeframe.

Also, just to update you on some dates. Fortunately, they haven't moved for the most part. You're going to start to see horizontal construction, meaning site work, including utilities and whatnot, start in the June, July time frame. You'll see vertical construction, the actual tower start coming out of the ground. We're shooting for the August, September time frame, and that, of course, still targets a January, February 2020 opening.

We also think we'll be in a position to complete all negotiations with the city or county, and have all agreements in place, development agreements in place, by the end of February, in a couple of months. So everything is looking great in that regard.

And on that note, I'll turn it over to Lukas.

--------------------------------------------------------------------------------

Lukas Johnson, [4]

--------------------------------------------------------------------------------

Thanks, John, and good afternoon, everyone, as well. So I'd like to give a little bit more detail into our revenue results for the fourth quarter, and while we're no longer providing formal forward guidance ranges for TRASM for the first quarter, I'd like to add some color about how we see demand shaping up as we start into 2018.

So for the fourth quarter, we're very pleased with how it ended up revenue-wise, and despite a 3-point TRASM headwind from Hurricane Irma and the Las Vegas shooting, finished the quarter in positive territory. So it's driven by an increase in our load factors in November and December, and that coincides with us ramping up the number of markets being priced on our next-generation RM system.

So as our first quarterly load factor increased since 2014, have been trending down the last couple of years. And 2 months ago at our Investor Day, I spoke at length about the new system and how we're so very close to seeing quantifiable improvements that I could start talking about, and after all the brainpower the team has spent on this I'm glad to see that we're seeing the fruits of their hard work, continue to see the outperformance of this load factors throughout the entirety of 2018.

I'd also like to point out that the fourth quarter was our highest fixed fee revenue quarter in company history. And how about all the hard work done by those teams, in delivering a record-breaking quarter. Given those numbers will dip in 2018, as we're focusing on a fleet transaction -- or transition. I'm bullish long-term in our ability to uniquely combine scheduled service and fixed fee plane capacity on our network.

Turning towards the first quarter. Again, while I won't be giving formal guidance, I can offer up some of the probably more common questions I'm going to be getting. The early Easter shift period should bump up the first quarter TRASM by 50 to 100 basis points. All things equal, we prefer a later Easter as we're already flying near or max capacity in March, and Easter tends to help second quarter more than it helps the first quarter. Also, we're going to be growing off-peak capacity day of week, about 22% in the first quarter and only growing about 8% on peak day of week for the first quarter. As we get closer to the fleet transition being completed, this headwind should start easing up, and you're going to see that as soon as the third quarter.

And finally, I know there is a lot of investor questions about excess industry capacity, overlap hub share, fare wars, all that going into 2018. It's nice knowing that we had the least exposure to all that noise, industry noise, going out there. We have in my opinion the most defensible robust network out there as best competitors, one that doesn't even exist, and we're going to kind of continue to keep doing things as we've always done it.

And with that, I will hand it off to Scott.

--------------------------------------------------------------------------------

Scott D. Sheldon, Allegiant Travel Company - CFO, COO & Executive VP [5]

--------------------------------------------------------------------------------

Thanks, Lukas. First, I wanted to just echo John's comments about the operation. I wanted to thank all of our team members across the network for a really tremendous effort.

Our performance since the summer has been nothing short of astounding. We had significant momentum into the third quarter, which has accelerated through the fourth and into January of this year in virtually every area. In particular, higher ups costs are down, operating metrics such as startage are up over 10%, and we've been running at 99.99 completion factor, really, since late November. So just really proud of the organization and what a turnaround from a real difficult summer.

Wanted to touch a little bit about guidance, as Lukas just mentioned. We have changed the approach. We communicated that at our Investor Day in late November. As opposed to providing quarterly TRASM and CASM-X, amongst other things, we're now going to a full year EPS target. We think it's the best way to align our interests with both investors and The Street.

So turning to the earnings release that just went out, we basically affirmed many of the things that we communicated back in November. We tried to give enough data points to help folks triangulate how we're viewing 2018. Fuel cost per gallon remains the same. Fuel efficiency, which is ASMs per gallon, remains the same. We gave you an interest expense number. Tax rate is an area that did change due to tax reform. We gave a spread of 30% -- up 37% -- excuse me, 37% to 38%, that's going to be 24% to 25%, which is going to drive EPS, the EPS spread from 8 to 10, to 10 to 12.

CapEx remains unchanged. We did earn the D&A per aircraft per month in addition to maintenance expense per aircraft per month. Those remained unchanged as well.

And then, maybe lastly, 2018 is a very busy year for us, shrinking by 38 MD-80s and growing by 30 is definitely unprecedented, and has got a lot of folks here with their head down. But we are hitting our targets. We are hitting our induction schedules. We think we have enough flexibility within the schedule if we do see some of the target dates slip, I think we're going to be fine.

But with that, I think, we'll turn it over to the operator for questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And our first question comes from the line of Duane Pfennigwerth from Evercore ISI.

--------------------------------------------------------------------------------

Duane Thomas Pfennigwerth, Evercore ISI, Research Division - Senior MD & Fundamental Research Analyst [2]

--------------------------------------------------------------------------------

Wonder if you would give any kind of high-level color on the trajectory of your non-fuel cost structure. Assume that the comps are far easier in the second half of the year, but I know you're not giving point guidance, but I just wondered if you could give any high-level commentary on the growth rates.

--------------------------------------------------------------------------------

Scott D. Sheldon, Allegiant Travel Company - CFO, COO & Executive VP [3]

--------------------------------------------------------------------------------

Yes, Duane. We're not wanting to start getting into individual quarter trends, what's easier, what's the harder comp? I mean, part of the EPS guidance to simply get out of the quarter-to-quarter noise. I think, maybe we can definitely talk a little bit about the first quarter because there is one individual area that is impacted. As you remember, we discontinued our credit card surcharge in January of last year, so there's going to be a little bit of an increase, specifically in the marketing area, and that's strictly related to the -- to basically, a quarter -- a half quarter surcharge last year versus a full quarter this year. So you're going to see some of the subtleties run through. But in general, directionally, we said ex fuel cost will be down. We've mentioned that at the Investor Day. But I'd rather not get into the quarter-to-quarter trends.

--------------------------------------------------------------------------------

Duane Thomas Pfennigwerth, Evercore ISI, Research Division - Senior MD & Fundamental Research Analyst [4]

--------------------------------------------------------------------------------

Okay. Fair enough. And then, it looked like fixed view was very strong in the fourth quarter. Can you just talk to what drove that, and if that's likely to continue?

--------------------------------------------------------------------------------

Lukas Johnson, [5]

--------------------------------------------------------------------------------

Yes, Duane. So yes, like I said it was our highest quarter of all time. So certainly, a good data point. But as I mentioned the last couple of months, in 2018, we do expect that to dip a little bit, because our focus for 2018 is really all about complete transition. So there's going to be some plane. What kind of spare capacity we do have is going to scheduled service. As far as what drove it, specifically, with strong, kind of ad hoc sales coming into it, the teams done a really good job of developing some of the relationships out there, picking up a lot of the sports and defense traffic. And also, the Airbus is a much, much better plane than the MD-80. We're getting calls from folks that used to never call because they wouldn't want to deal with the performance restrictions of MD-80 or just the product on the MD-80 or the reliability, and the Airbus does open up some significant paths for us.

--------------------------------------------------------------------------------

Duane Thomas Pfennigwerth, Evercore ISI, Research Division - Senior MD & Fundamental Research Analyst [6]

--------------------------------------------------------------------------------

And then, just for my last one, and I don't know if it's Maury or John, but wonder if you could talk about the transition of Scott Allard. And if you have the bench to sort of backfill? Or if you're looking to recruit in? And if you are looking to recruit in a new CIO, would you expect a sort of difference in philosophy versus creating your own systems, versus buying off-the-shelf?

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [7]

--------------------------------------------------------------------------------

Thank you, Duane. Maybe I'll take a stab and Maury can fill in after his comments. But we have some very talented personnel in our IT shop just like we do throughout the rest of the company. So over the years, this company has done a great job in developing talent in all the areas and all the aspects of what we do. And so we're able to leverage that when we have some of these issues come up. So we have an individual we've announced, Rob Wilson, who's functioning in an interim role, and his status will be evaluated as we move forward. But he's an extremely talented individual, who Scott relied on in a very significant way. So he has all the chops to do this. So we're just seeing how this works for him and us, and the ability to backfill him, to free him up to do more of what Scott was doing. We've already filled that position, so we had a gentleman who was a contractor for us. You see a lot of that in the IT world, where there's a lot of contractors working. We brought on another individual as a full-time employee now to give us a little bit -- a lot more horsepower in that area to free up some of Rob's time. I think when it comes to buy or build, I think, the decision-making will stay the same. I mean, that decision-making process is always driven, really, by users and not by IT. If we think we need the functionality, and that functionality we need is unique enough, then we will build it. And if it's something that can be acquired cheaply and easily, and it satisfies our needs, then we'll buy it. So our model and our requirements, as you know, are very unique, which has driven a lot of that decision-making to date. And I don't see any change in that philosophy going forward. I mean, both Maury and I, and a lot of others in the organization, we are strong believers in having a lot of proprietary software because of the uniqueness of what we do and the flexibility it gives us. But whether it's airline, hotel or anything else we do, if there's product off-the-shelf that we could readily buy and install, that's great as well because it does free up more time to focus on these other areas that are primarily marketing-related that have that unique aspect to it.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

And our next question comes from the line of Brandon Oglenski from Barclays.

--------------------------------------------------------------------------------

Matthew Aaron Wisniewski, Barclays PLC, Research Division - Research Analyst [9]

--------------------------------------------------------------------------------

This is actually Matt on for Brandon. I wanted to just kind of talk from a high-level, you talked about operational performance improving and kind of how we see that coming -- going through the next few years. As performance improves -- operational performance improves, with a greater reliable fleet, does that open new opportunities? Does that change how schedules are managed? Does it create career flexibility as you kind of look to manage the schedule? And can that start to take place? And if so, can that take place in 2018? Or is that more of a 2019 thing?

--------------------------------------------------------------------------------

Lukas Johnson, [10]

--------------------------------------------------------------------------------

Yes. So in terms of -- I'll speak to what we see on the commercial side as the operations have improved. So first, to jump off to what Duane had asked, I should mention just having simply better operations has improved or fixed the capability of going out and winning some contracts. You need to be a high-performer, it's a high touch product. And so as people see our performance improve, those are kind of opportunities that do pop off. In terms of timing for 2018, again, it's going to be tight. You are going to hear us repeat this over and over again, but it's going to be tight with the fleet transition, and that's our major focus. We're not looking at squeezing the operation dry this year. It's really just a transition goal. 2019 and beyond, I think sky's the limit in terms of -- if we can keep this up, like we do believe we can, we're going to be able to do a lot of things commercially that we haven't. They're going to open up some new doors.

--------------------------------------------------------------------------------

Maurice J. Gallagher, Allegiant Travel Company - Chairman of the Board and CEO [11]

--------------------------------------------------------------------------------

Yes. This is Maury. Just a general comment. We've got, arguably, the easiest system in the world to support because we primarily go out and back. And so your airplanes are in the same place all the time. The same people are touching them. And candidly, in past years, we didn't execute very well in leadership areas, in places we should have done better. So the leadership changeover, the -- we've enhanced the sparing levels, made a lot of fundamental changes that the business needed there then, it's a real tribute to not only to Scott and the team, but to the leadership out there and focusing around as quickly as we can. I'll break my arm patting ourselves on the back, but I'm expecting this group to be the most reliable airline in the country, and in minimum, just because of our schedule, when it comes to controllable maintenance events. And so that's kind of a baseline, and from there, we just get better on a number of other areas. But we see all the evidence that all these talks of unreliable and bad operations are historical conversations. So I couldn't be more excited where we're at.

--------------------------------------------------------------------------------

Operator [12]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Savanthi Nipunika Syth, Raymond James & Associates, Inc., Research Division - Airlines Analyst [13]

--------------------------------------------------------------------------------

Just wondering if there's an update on the potential -- so for the kind of the 186-seat project we're adding seats to the current fleet?

--------------------------------------------------------------------------------

Maurice J. Gallagher, Allegiant Travel Company - Chairman of the Board and CEO [14]

--------------------------------------------------------------------------------

Go ahead, [B.J.]

--------------------------------------------------------------------------------

Unidentified Company Representative, [15]

--------------------------------------------------------------------------------

Savi, this is [B.J.] No update. After what we guided to on Investor Day, we are continuing to explore at Airbus on options on the airplanes, which we thought were ineligible, but at the moment, it's just the aircraft that we showed you in November.

--------------------------------------------------------------------------------

Savanthi Nipunika Syth, Raymond James & Associates, Inc., Research Division - Airlines Analyst [16]

--------------------------------------------------------------------------------

Okay. Got it. And if I may, and then, maybe for Lukas. Just on the unit revenue trends, just kind of curious, one, if Las Vegas is kind of now we should assume that, that comes back? And then, two, as you talked about the faster growth in the kind of the off-peak versus the peak, like how much of a drag is that -- that we could probably see kind of come out as you get towards the end of the year?

--------------------------------------------------------------------------------

Lukas Johnson, [17]

--------------------------------------------------------------------------------

Sure. So in terms of Las Vegas, it's pretty much back to normal. Florida did recover from the hurricanes significantly faster than Las Vegas did and Florida actually recovered over. What we're expecting in Vegas is more -- just kind of taking the slower growth to where we are. It shouldn't be too much of an overhang now. In the first quarter, you'd know we do have a higher percentage of our network into the year than other carriers. And in terms of off-peak, I did, if you kind of went back through our Investor Day slides, you're going to see I tried to quantify that for the full year effect and 2018 off-peak, headwinds will be slightly lower than 2017. It's still going to be elevated, especially in first and second quarters. But if you remember, last summer, with elevated sparing, we actually cut -- actually kind of negative growth on peak days. That's going to flip itself. In the third quarter, we're going to be able to grow peak day capacity more than off-peak for the first time in several years. So I think it's mostly a first half issue. It may be right in the very end of the year, when we complete the MD-80 transition.

--------------------------------------------------------------------------------

Savanthi Nipunika Syth, Raymond James & Associates, Inc., Research Division - Airlines Analyst [18]

--------------------------------------------------------------------------------

Great. And can I ask a housekeeping question, just on the 4Q non-GAAP EPS. It looks like a 16% effective tax rate. Just kind of curious what's driving that?

--------------------------------------------------------------------------------

Gregory Clark Anderson, Allegiant Travel Company - Principal Accounting Officer, SVP of Treasury and Secretary [19]

--------------------------------------------------------------------------------

Savi, yes, this is Greg. So the low reduction in tax rate is -- after tax reform what happened is we had this remeasurement of our deferred tax liabilities, so originally, they're measured at 35% tax rate with a 21% or 14% of point reduction to 21%. We remeasured that, and then, trued it up this year. So that's why you saw the reduction there.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

And our next question comes from the line of Joseph DeNardi from Stifel.

--------------------------------------------------------------------------------

Joseph William DeNardi, Stifel, Nicolaus & Company, Incorporated, Research Division - VP [21]

--------------------------------------------------------------------------------

John, just want to make sure I understand the process on configure. I appreciate the days you provided for construction. But the board still needs to approve those dates and the start of construction if I'm right, and the approval will depend on your ability to get condo deposit. Is that fair?

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [22]

--------------------------------------------------------------------------------

Well, what we've been targeting and focused on mostly is the financing. And obviously, we can't and don't intent to put a shovel on the ground until we know that the project is properly financed. So that's the pacing item, if you will, and that's why we're spending a lot of our time in that particular area. Having said that, these things move in parallel tracks when you do these development work. So at the same time, we just basically started the production drawings. So taking all the pretty pictures that you see out there, and all the work that's gone into figuring out everything that we have to in a project like that, and now converting those to production drawings. So that work on production drawings starts now, the actual drawings, if you will, that are used to build the project. And when those are completed, which also is around, call it, the end of April, early May, then we're able to go to a general contractor, who we've already hired and announced, and actually, get firmed up bids, which leads up to what's called a GMP, or Guaranteed Max Price. So we intend to enter into a contract with these contractors, where they guarantee a max price. So the estimates that we will have as we start to evolve those construction documents between now and November, are running in parallel with the Board of Allegiant's review of the project. So as the board is reviewing it, as the architects are developing out those plans, and as the costs are being firmed up, those things are all working in parallel along with the financing conversations. Because then you get to a point where you know how much a project is going to cost. You have a firm bid, and we have terms from a financing standpoint that we find acceptable to us. So that confluence of issues starts to happen at the end of April, moving into May. So when we start getting around that timeframe, we'll have a lot more certainty and the board will have a lot more certainty about pricing and approval. We'll understand budgets and with some degree of estimation there, obviously, the air would be on the low side, not going over, much probably well before that. And if the board is in a position to make decisions earlier, then I'm sure it would. But we're not in any rush to do that. We're pacing it properly and in a very managed way, so we don't get out in front of our skis as they say. So happy about the progress, but it's -- the timing that you're seeing is expected, and the board has not approved anything yet until it knows that there's a little bit more certainty around all the numbers.

--------------------------------------------------------------------------------

Joseph William DeNardi, Stifel, Nicolaus & Company, Incorporated, Research Division - VP [23]

--------------------------------------------------------------------------------

Okay. Yes, that's fair. I guess, just on the sales side, I would imagine that, that's an equally important data point than pacing item as the financing side. So is there a certain number of deposits that you want to get to? Or that you can commit to and that if you can't get to that level, then you're not going to go forward with the project?

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [24]

--------------------------------------------------------------------------------

Well, that's one of the data points I'd shared when I opened, was that the lender community or the financing community we're talking to, they have no requirements on advanced sales, presales or deposits. They have none. They just -- they love the project and there is a lot of interest in it. And they have no requirements regarding it. The only thing where they come into play is, if on the equity side that they would be looking at, it offsets the amount of equity we would have to come up with. But there's no obligation. So if we had zero sales, just to throw it out there, your equity is just your percentage, whether it's 20% or 25%. But that, again, would be offset by any sales activity or sales contracts that we would have. So we aren't -- and these are dates that haven't changed, either. These are -- I had mentioned earlier -- early on, that we were hoping to go to sales contracts in the April, May time frame that's lagging a little bit into probably closer to sort of May, June, only because you have to file these contracts with the state of Florida. And in order to do that, your production drawings on how you're going to build it and what you're going to build and what a buyer gets has to be further evolved. So we can't go to a purchase agreement until those construction documents are further evolved, which as I said, we expect that to happen at the end of April, early May. So around that time frame is when we would then start going to actual purchase contracts, which is at the same time you're, again, dealing with financing and dealing with the certainty on everything else. So we're comfortable with all that pacing. That's why we want to get a sales office on site so if people want to look at the project, they can, and we'll continue to mine the database and get additional deposits. So we, again, those deposits what they do is offset the equity requirement, but they're not a condition to moving forward.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Michael John Linenberg, Deutsche Bank AG, Research Division - MD and Senior Company Research Analyst [26]

--------------------------------------------------------------------------------

Just a couple questions here. Lukas, you mentioned about the defensible nature of your network, and how the fact that maybe you weren't going to be caught up with some of the capacity additions and some of the intensive pricing that we saw earlier in -- for the latter part of 2017. Where -- can you just give us an update on the number of city pairs that you're in today, and what the number of city pairs that you have head-to-head competition at present?

--------------------------------------------------------------------------------

Lukas Johnson, [27]

--------------------------------------------------------------------------------

Yes, the number hasn't materially changed over the last year. We, slowly, are still right around the 80% or so. In terms of market pairs, we're over 400 market pairs and we're probably by the Midsummer, going to be increasing that number. And again, when we go into a market, we're not particularly looking for competition. Certainly, the competitive markets we have, we do well in or else we wouldn't be in them. But it's nothing that we're particularly going to avoid if it's an opportunity. But first and foremost, the most controllable nature, again, is if nobody's going in there.

--------------------------------------------------------------------------------

Michael John Linenberg, Deutsche Bank AG, Research Division - MD and Senior Company Research Analyst [28]

--------------------------------------------------------------------------------

Okay. Okay. That's helpful. And then, Scott, just -- look, I know you don't want to guide on the quarters, and you gave a little bit of commentary around peak and off-peak capacity and what you're doing through the year. But when I look at your fleet and the numbers, I think they're right, where you start the year, the high 80s and your fleet gets up to 100 and then back to 82. I mean, there's a lot of movement in your fleet. Should we assume that the capacity growth rates through the year are going to follow that movement in the fleet? Or are there going to be a period, where you're just going to have some airplanes that are going to be underutilized because you're carrying excess capacity?

--------------------------------------------------------------------------------

Scott D. Sheldon, Allegiant Travel Company - CFO, COO & Executive VP [29]

--------------------------------------------------------------------------------

Yes. I think you're looking at the fleet plan, and I think, that's laid out in the press release. Yes, so on an absolute basis, year-over-year, the units actually shrink, but the average aircraft during the period is up pretty dramatically because we pumped in so many in late November. Honestly, we do build in slack into the schedule-able assumptions, meaning if planes come out earlier than expected, we built in buffers for that. So we've taken a pretty conservative view on ASM production. So that's -- I know that's kind of cryptic, but there's a lot of moving parts, obviously, when you talk about how many shells are delivering, when they need to deliver in order to hit peak period flying. But there is slack in the system. So if you're looking at productivity by tail, it's going to look a little lower than what have otherwise normally been.

--------------------------------------------------------------------------------

Maurice J. Gallagher, Allegiant Travel Company - Chairman of the Board and CEO [30]

--------------------------------------------------------------------------------

Mike, it's Maury. What you're going to see with us is a material change in how we used to think about kind of scheduling/sparing the airline, particularly sparing. We'd be running anywhere from 15% to 20% spares with the 80s in high-peak periods. We'll be back to 5% by end of the year, which is -- that's why your airplane numbers will change so much, but your capacity won't.

--------------------------------------------------------------------------------

Michael John Linenberg, Deutsche Bank AG, Research Division - MD and Senior Company Research Analyst [31]

--------------------------------------------------------------------------------

Okay. Great. And then, just my last question, back to John. John, just your commentary at the beginning and how you answered Joe's question. You talked about, on the marketing side, where you basically stopped marketing over the last 4 or 5 weeks. I'm not sure if it's a sense of your initial approach and whether or not you're gaining traction and maybe now you're changing the market direction a little bit. You talked about both an online and bricks-and-mortar approach and the fact that you're going to have a sales office on the property. And I'm not sure if you're going after leasing customers, or you trying to bring some of the people off the road? It's kind of somewhat unclear when we listen to the commentary about the pace and whether the sales are going at the trajectory that you liked, or maybe they weren't sufficient enough such that you had to change direction? Or maybe modify the sales approach? Is that -- anything that you can provide on that because it's just not all that clear.

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [32]

--------------------------------------------------------------------------------

So we're selling units or selling condo hotel units using a database, which is an approach that's never been done anywhere, right? A developer typically goes out there and puts a shell on the ground, builds the things, sticks the sales office, and relies on real estate brokers and agents to bring people by and sign an agreement. I mean, that's the only way things have ever been built. We can come into the market, and we're taking an approach that we found 7,000 people who have an interest in the project that have come from 49 different states. No one's ever done that, and as a result, all of a sudden, we started getting this demand from people, and you found yourself in the position where your sales capabilities weren't completely there, meaning, we didn't have the ability to have 2-way communication with our customers. We didn't have a Sunseeker email-type approach, where they can be talking to us back and forth. So all the CRM that needed to get built out wasn't built out as fast as it needed to, and we just didn't anticipate that quick response like that. It far exceeded what we expected, and it's something, again, that we're new at and no one else has done it. But we are getting better at it as every week passes, and we're developing out our capabilities in that system, where we now are in a position that everything we need to sell and to communicate 2-way with our customers, we're able to do that. When it comes to who the buyer is, frankly, I'm not that concerned, whether it's an Allegiant customer or a non-Allegiant customer, I just want a buyer, because what we ultimately want that project for is the hotel rooms. So what we want to be able to do is put Allegiant customers in those rooms. I just need to sell all the units, so I have all the room capacity available to sell to an Allegiant customer. So whether it's an Allegiant customer or a non-Allegiant customer that buys a unit, that doesn't matter to me.

--------------------------------------------------------------------------------

Operator [33]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Hunter Kent Keay, Wolfe Research, LLC - MD and Senior Analyst of Airlines, Aerospace & Defense [34]

--------------------------------------------------------------------------------

A couple more on Sunseeker. John, the nonrecourse debt that you mentioned, is that collateralized entirely by Sunseeker assets? You're not pledging any, like, aircraft or anything? Is that isolated to Sunseeker project?

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [35]

--------------------------------------------------------------------------------

That is exactly correct, Hunter. Yes, there would be no other collateral, other than the project.

--------------------------------------------------------------------------------

Hunter Kent Keay, Wolfe Research, LLC - MD and Senior Analyst of Airlines, Aerospace & Defense [36]

--------------------------------------------------------------------------------

Okay. And when you're saying you have -- I'm sorry, I'm still a bit confused by this. You have -- the portion you're putting at risk is effectively the other 20%, 25%, the equity portion, which is...

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [37]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Hunter Kent Keay, Wolfe Research, LLC - MD and Senior Analyst of Airlines, Aerospace & Defense [38]

--------------------------------------------------------------------------------

Can give you stored of like gradually worked down by deposits, right? So what you're saying is...

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [39]

--------------------------------------------------------------------------------

That is correct.

--------------------------------------------------------------------------------

Hunter Kent Keay, Wolfe Research, LLC - MD and Senior Analyst of Airlines, Aerospace & Defense [40]

--------------------------------------------------------------------------------

Okay. So the worst-case scenario, you're going to lose 20% of whatever this land or whatever it is worth, and the other 80% would be effectively just repossessed by the lenders? Is that...

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [41]

--------------------------------------------------------------------------------

That is correct. You're looking at it exactly right.

--------------------------------------------------------------------------------

Hunter Kent Keay, Wolfe Research, LLC - MD and Senior Analyst of Airlines, Aerospace & Defense [42]

--------------------------------------------------------------------------------

Okay. And then, how does tax reform impact your willingness to maybe bill -- and I guess, this kind of compounds on sort of the build, when do you start to go forward versus deposits? Tax reform has changed the game for Allegiant. You're allowed to bonus depreciate used aircraft. It's a really big deal for you guys. Is there going to be a little bit more of a willingness based on tax reform to, maybe, build out a little bit more than you would have? Because after all, what was the point of the tax reform bill, for once, something like this? Maybe take a little bit more cash risk given you might say to yourself, net-net, even if this doesn't work out, I'm still up because of the tax reform benefits?

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [43]

--------------------------------------------------------------------------------

Well, tax -- people will always have comments regarding taxes and who benefits and how you benefit, but I guess, at the end of the day, that tax reform, that's almost like it was written for us. Because every aspect of it helps us. I mean, we've always, as you know, been a cash taxpayer, so that works out well. The bonus depreciation, it couldn't work any better, and the 5-year window to take bonus depreciation when we already have basically a project ready to go with a bow around it, it's unbelievable, the timing. Having said that, our decisions regarding timing aren't being driven by tax. We're just being benefited by it. So it makes the project that much more interesting and that much more compelling, but it's not changing our decision-making. It just makes it look better.

--------------------------------------------------------------------------------

Operator [44]

--------------------------------------------------------------------------------

And our next question comes from the line of Helane Becker from Cowen and Company.

--------------------------------------------------------------------------------

Helane Renee Becker, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [45]

--------------------------------------------------------------------------------

Just a couple of questions. John, I think you have a track record, actually, for building hotels. And I'm just kind of wondering, if the timeline that you're seeing an outline to us today and back in November is consistent with what you've seen before when you've built out other projects?

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [46]

--------------------------------------------------------------------------------

Most definitely. When you do these larger projects, you need to make sure you have the right level of expertise involved in these projects. So we've been transparent in that regard to make sure that you and the outside world understand the quality of people that we have, realizing that role, announcing a handful of them, but there is a numerous of these people underneath them, from civil engineers, to consultants of certain types, to everything you can imagine that gets involved in a project like this. So the bench of expertise is very deep and wide. And we feel very comfortable regarding these time frame of construction. I have a gentleman, who I've mentioned before, has overseen this project on behalf of us. He's an employee of the company, and he's done this his entire life. He literally has a Ph.D. on this stuff. And so this isn't his first rodeo either, and the entire team has been around for a long time. The general contractor has been around for over 100 years, and they've been doing these projects, vertical projects, condo projects here in Naples and Southwest Florida. So that's why we have the degree of comfort that we do is because we have the expertise involved in a project that we have. And Maury and I have said from the get-go, that's why we're not taking a risk here, we would if we didn't bring on the light level of expertise. We said from the get-go that we are pursuing these opportunities because it's -- we can go out and get that expertise. So whether it's building it as we are or whether it's operating it going forward, we have a long line of people who want to get involved to operate it. I mean, it's a very long list of people, but I can't accommodate them all, that would love to come work for us in the hotel world. So we're excited now as we build it with the team of people we have, and we can't wait to operate it with the list of people who have an interest.

--------------------------------------------------------------------------------

Helane Renee Becker, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [47]

--------------------------------------------------------------------------------

That's great. Now I have 2 other questions that are completely unrelated. The first question is with respect to the A320s, I don't know if this is like more of Hunter's question, but are you scouring the market for good used aircraft? Or are you happy with what you have? And I ask that because as oil prices have moved up, perhaps there are some companies, some airlines, that would want to get rid of their older aircraft and flop into newer aircraft. So I'm kind of wondering if you're thinking of going in that direction, in other words, more aircraft. And then, the other thing is, with the major carriers hiring so many pilots because of their retirement programs, is your -- how is your attrition level and how is your training going?

--------------------------------------------------------------------------------

Gregory Clark Anderson, Allegiant Travel Company - Principal Accounting Officer, SVP of Treasury and Secretary [48]

--------------------------------------------------------------------------------

Helane, this is Greg. I'll tackle the first question, and then, maybe Scott or Trent can tackle the second part of it. As far as the aircraft, we are looking for used aircraft, and we have about 10 to 15 we're looking to fill and put into service by 2020, and so that's kind of the plan now. I mean, you're right, the used aircraft from a depreciation perspective, or a bonus depreciation perspective, is attractive to us. But I would want to highlight that we have, as far as the aircraft that we've acquired to date for use, the new tax law requires that you have a binding agreement in place by September 27, 2017. And then -- so we have, basically, 4 or 5 aircraft that qualify for that, and then, moving forward, all future aircraft that are placed into service by 2022 will qualify for that 100% bonus depreciation.

--------------------------------------------------------------------------------

Trent Porter, Allegiant Travel Company - VP of Financial Planning and Analysis [49]

--------------------------------------------------------------------------------

This is Trent. To answer your question on the pilot attrition. We -- since we finished our collective bargaining agreement in August of 2016, we've seen our attrition decline significantly with the pilots to where it was prenegotiations. And it is an area that we always keep our eye on, especially given the rumors and things that are out there about pilots and a potential shortage there. But as of right now, we are happy with where the attrition level has come back down to.

--------------------------------------------------------------------------------

Helane Renee Becker, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [50]

--------------------------------------------------------------------------------

Perfect. And then, just one last one that I can maybe squeeze in. I think your credit card or loyalty program contributed $17 million in 2017. And I'm just wondering if there's any update to the program and anything you might want to add to what you said in the press release.

--------------------------------------------------------------------------------

Lukas Johnson, [51]

--------------------------------------------------------------------------------

Sure. Helane, it's Lukas. Yes. So we, at Investor Day, gave an update on the credit card program. And again, it exceeded expectations in its first year. But the biggest kind of jump in growth is, of course, going to be the programs first year, and we'll kind of slowly increase from there as we get towards maturity. So you're not going to double and triple it in out years per passenger. Of course, when we're growing passengers, so the total number will be growing. But we're certainly bullish on it. And as we go through this year and we start thinking about non-card loyalty and other ways to enhance that for the future, that number should grow.

--------------------------------------------------------------------------------

Operator [52]

--------------------------------------------------------------------------------

And our next question comes from the line of Daniel McKenzie from Buckingham Research.

--------------------------------------------------------------------------------

Daniel J. McKenzie, The Buckingham Research Group Incorporated - Research Analyst [53]

--------------------------------------------------------------------------------

A couple of quick housecleaning questions. Just, maybe, Scott, this would be for you. If you can just remind us, what's the operating income impact this year from pilot training? So factoring in lost revenue and the temporary cost impact from having the pilots kind of having a bubble in pilot training. And then, secondly, just going back to, pardon me, Maury's comments about a 15% to 20% sparing ratio that goes to 5% by the end of this year. I think if my math is correct, that should free up something like 10 airplanes. And so I'm just kind of wondering, what's the operating impact tailwind that you might have in 2019 from that inefficiency going away?

--------------------------------------------------------------------------------

Maurice J. Gallagher, Allegiant Travel Company - Chairman of the Board and CEO [54]

--------------------------------------------------------------------------------

Dan, it's Maury. No, we're not going to get more airplanes, we're just going to have fewer spares. So the operational airplanes will stay the same. We'll be able to run the network with a much lower spare numbers what it turns out to be. So don't -- we're not going to have, all of a sudden, 10 airplanes we can just give to Lukas to start scheduling.

--------------------------------------------------------------------------------

Lukas Johnson, [55]

--------------------------------------------------------------------------------

I'll qualify them.

--------------------------------------------------------------------------------

Daniel J. McKenzie, The Buckingham Research Group Incorporated - Research Analyst [56]

--------------------------------------------------------------------------------

Well, that's helpful. And the operating income from the pilot training?

--------------------------------------------------------------------------------

Trent Porter, Allegiant Travel Company - VP of Financial Planning and Analysis [57]

--------------------------------------------------------------------------------

Yes. This is Trent. We are looking at this as we'll be coming back to productivity levels in 2019 and 2020. So we are still going to be carrying pilots and seeing the productivity, extra pilots and seeing the productivity levels that we saw during 2017 and during 2016. So as much guidance as we can give right now would be that we're going to see similar productivity levels.

--------------------------------------------------------------------------------

Daniel J. McKenzie, The Buckingham Research Group Incorporated - Research Analyst [58]

--------------------------------------------------------------------------------

I see. Okay. Then, just following up on the revenue side here. Lukas, I'm just wondering what the benefit was from expanding the network under the new revenue management system in the fourth quarter. I'm just wondering how that might affect your outlook for the full year 2018. I think you talked about the benefit at your Investor Day. And then...

--------------------------------------------------------------------------------

Lukas Johnson, [59]

--------------------------------------------------------------------------------

Yes. So fixing. So we got -- certainly, got a lot of questions at the investor day about how do we measure the system? What's the effect of the system? How soon can you see it in, and we're a couple days prior to our traffic release we had at Investor Day, and it came out immediately in terms of load factor, and I think that's the easiest way, especially since we're not giving forward guidance on TRASM for you guys to measure of impact of this system, is through that increased load factor. It's been 3 years since we've kind of had declining load factors through a lower fare environment, increased off peak flying, larger cities, the original legacy system was built out 7 years ago, and it didn't have any of those impacts in there. So as times have evolved and the company has evolved, we need to get better systems and process and kind of technology there. So as we used to run in the high '80s, touching '90 for load factor, we'll probably not going to get there, considering the fundamental shifts in how we fly, but we're not going to be low 80s either. And so throughout this year, you're going to see us reclaim a lot of the load factor without as much of a yield or degradation, hopefully. So that's going to show up in total unit revenue increasing. And I guess, just for you guys out there, just watch the traffic releases to see how we're kind of coming out with that.

--------------------------------------------------------------------------------

Daniel J. McKenzie, The Buckingham Research Group Incorporated - Research Analyst [60]

--------------------------------------------------------------------------------

Okay. That's helpful. And then, one follow-up question. I guess, just Lukas going back to on earlier question on competitive capacity. I know that Fort Lauderdale in Orlando are growth markets for some of the other ultralow-cost carriers and some of the other airlines. And I know at Orlando, you operate out of Sanford. And from your remarks, it seems like you're not really feeling a pricing pinch. But I'm just wondering, if you can just elaborate a little bit more on whether or not the competitive dynamic in Florida, potentially, is having some kind of effect on how you view the revenue environment here.

--------------------------------------------------------------------------------

Lukas Johnson, [61]

--------------------------------------------------------------------------------

Yes. Yes, Dan. We don't focus on a lot of the core, certainly, any kind of hub to a major leisure destination. And places like Newark became de-slotted almost 2 years ago. We're the only carrier that didn't announce more New York City to Florida service, and that's by reason. It doesn't fit our network, and it's clear to anybody that's going to be a more competitive market. We serve more destinations out of Orlando than any other carrier, and the vast majority of those are completely unserved to small and mid-sized cities. And that's what we're going to continue focusing on. Even at Fort Lauderdale, throughout the last 9, 12 months, we've had a lot of increased competition, better capacity. It's been one of our top-performing destination cities, even with the growth we've had there. So I think we're pretty insulated, and that's, again, why kind of the power of the network that we've got here is that we can go out, we can do what we're doing and we can more or less ignore the specific hotspots throughout the industry.

--------------------------------------------------------------------------------

Operator [62]

--------------------------------------------------------------------------------

And our next question comes from the line of Kevin Crissey from Citigroup.

--------------------------------------------------------------------------------

Kevin William Crissey, Citigroup Inc, Research Division - Director and Senior Analyst [63]

--------------------------------------------------------------------------------

Can you just talk about what you expect the first thing the new CMO will -- you'd ask that person to do?

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [64]

--------------------------------------------------------------------------------

Well -- this is John. There is just such a myriad of opportunities for this person to get involved in, since we've been absent somewhat in that capacity for a long time. But this individual will be drinking water through a fire hose, but I have -- I've been developing out a laundry list of those initiatives that we want to embark on. But there's no doubt, the focus will always primarily start with the airline. So there's a lot of initiatives you want to take a look at, as it relates to the airline, and that's always going to be first and foremost. But as you all know, I mean, we have a lot of things, of course, going on with resorts and every other aspect of our business, and there's so many synergies, and so many opportunities, and so many joint marketing opportunities, if you will. I mean, even -- well I've been -- I'm actually traveling right now myself, and I've been playing a quasi-CMO role as part of my responsibilities, just in the interim, and there's a myriad of people and companies that want to, somehow, joint market with us, whether that means sharing databases, whether that means leveraging booking channels with content, there's just so many of these opportunities that we don't want to lose track and pace with that. So very -- some of us individuals have maintained those contacts and those opportunities. So -- and this individual comes on, they're going to hit the ground running. But like anything, it's going to take down -- I don't want to imply that in this individual's first month, there's going to be all kinds of findings. I think they're going to take some time to get their feet wet, get involved and figure out the organization. We'll be providing enough data and information for them to do that quickly. But we are all looking forward to having this person on because there's just -- there's so much opportunity. And we've been saying that -- I know ever since I've been here, I've been saying that bringing someone on like this is going to have a huge revenue impact. We are getting ready to start our loyalty marketing efforts. We don't have a loyalty program outside of our credit card, so we're going to be developing that and this person's involvement in that would be -- obviously, it goes without saying the impact that this person can have, and that's going to across all business lines, right? Whether it's airline or resort or anything else that we embark on, that loyalty program plays into all of that. So that's a huge initiative that we have coming on stream from a marketing standpoint or programming standpoint that we're looking forward to.

--------------------------------------------------------------------------------

Kevin William Crissey, Citigroup Inc, Research Division - Director and Senior Analyst [65]

--------------------------------------------------------------------------------

And just turning towards your guidance a little bit and some investor questions on it. I just want to make sure. Your fuel cost guidance being the same, that was -- is that reflective of your prior guidance being relatively high if I recall correctly? The question comes down to kind of 2 things. One is, we've seen higher fuel prices, generally, but you don't have that guided and I assume that was because of the prior guidance being relatively high. And then, second is related to that is on the revenue side, you're guiding to kind of, basically, the same EPS just adjusted for tax. But then, you talk about a small impact from the Easter shift and there's questions as to whether that means you were seeing kind of a little bit weaker first quarter and I know you don't want to get specific on quarters, but want to make sure that you don't send a message out there that your first quarter may have a little bit more revenue weakness, hopefully that's it.

--------------------------------------------------------------------------------

John T. Redmond, Allegiant Travel Company - President and Director [66]

--------------------------------------------------------------------------------

Well, I mean, I'll let some of these other individuals take -- try to answer some of your questions more specifically. But the guidance we provide, which is why we're at this position, is we don't want to be caught up in the short-term movements. So we provided long-term full year guidance when it comes to fuel or revenue. And therefore, these minor things that might happen within a quarter, we think it could be absorbed over the course of a year. So that's why we're sticking to the full year guidance that we have provided until there's enough data out there that causes us to report otherwise.

--------------------------------------------------------------------------------

Trent Porter, Allegiant Travel Company - VP of Financial Planning and Analysis [67]

--------------------------------------------------------------------------------

This is Trent. I mean, as far as the fuel guidance goes, John is right. The year is long, and it didn't make sense for us to make the adjustment now.

--------------------------------------------------------------------------------

Lukas Johnson, [68]

--------------------------------------------------------------------------------

Kevin, it's Lukas. In terms of the revenue thing for Easter, just to clarify, this is just a common question you always get. It doesn't -- we didn't just wake-up today and realized that Easter is going to be shifting up 3 weeks this year. So yes -- and this has been in the worst for our full year guidance, when we put it out there 2 months ago. There's no surprise. It's just people are going to ask the question, how big is Easter shifting from second quarter, first quarter? And there's no weakness at all in the first quarter.

--------------------------------------------------------------------------------

Operator [69]

--------------------------------------------------------------------------------

And our next question comes from the line of Steve O'Hara from Sidoti & Company.

--------------------------------------------------------------------------------

Stephen Michael O'Hara, Sidoti & Company, LLC - Research Analyst [70]

--------------------------------------------------------------------------------

Just on the unit revenue guide -- not guidance, but the way you report ancillary. Will that change next year, with the revenue recognition standard, et cetera? And how does that -- if it does, how does that impact things going forward?

--------------------------------------------------------------------------------

Gregory Clark Anderson, Allegiant Travel Company - Principal Accounting Officer, SVP of Treasury and Secretary [71]

--------------------------------------------------------------------------------

Steve, this is Greg. Yes. So the new 606 guidance just will likely require us to take the air ancillaries. And on the face of the financials, put it up in the scheduled service. But then, what we would do is we would include footnotes that would go back and break that out, so you could see it for comparability purposes.

--------------------------------------------------------------------------------

Stephen Michael O'Hara, Sidoti & Company, LLC - Research Analyst [72]

--------------------------------------------------------------------------------

Okay. And then, just on the credit card, can you just remind me where that revenue hit on the income statement? I mean, it looks like there was a decent uplift in non-air ancillary. And I guess, ancillary in general was relatively strong. Maybe, does the credit card hits air? And is there anything going on in the ancillary other than credit card or maybe higher fuels kind of alleviating some of the pressure on ancillary?

--------------------------------------------------------------------------------

Gregory Clark Anderson, Allegiant Travel Company - Principal Accounting Officer, SVP of Treasury and Secretary [73]

--------------------------------------------------------------------------------

Steve, this is Greg, I'll take the first part presentation, and then, maybe, Lukas, can jump in the second part. But so we split it, and the majority of it is -- which is considered the marketing opponent. That goes through and shows up in the financials and revenue under our third party. And then, the remaining, which you defer and post as revenue upon travel, goes up into the scheduled service. But again, the majority goes the marketing component. And then, which is -- I'm sorry to marketing component to the third-party revenue. And then, I might just add though, that we will, with the new rev rec 606, will look at applying a breakage rate, which probably in the second or third quarter, and once we have enough history to support that breakage rate. So you'd see a pop in that. Currently, we aren't taking any breakage on our deferred point.

--------------------------------------------------------------------------------

Lukas Johnson, [74]

--------------------------------------------------------------------------------

And just really quickly, on the second half, in terms of the area ancillary, how's that hitting? We do have some of the initiatives that we outlined at the Investor Day, started to kicking in the fourth quarter, which did take it up a little bit. And then, if you're looking just total air ancillary or ancillary as a whole, the biggest way to pump that up is just to pump up your load factor. Ancillary is pretty sticky for our passengers. You're not going to get a huge inflection that make those longer passenger yields for the airfare. So we've got an opportunity to go out there and increase this whole pie.

--------------------------------------------------------------------------------

Operator [75]

--------------------------------------------------------------------------------

And that concludes our question-and-answer session today. I would like to turn the call back over to, Maury Gallagher, for closing remarks.

--------------------------------------------------------------------------------

Maurice J. Gallagher, Allegiant Travel Company - Chairman of the Board and CEO [76]

--------------------------------------------------------------------------------

Thank you all very much. Appreciate your input and your interest. We'll see you next quarter. Thank you.

--------------------------------------------------------------------------------

Operator [77]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program, and you may now disconnect. Everyone, have a great day.