Q4 2023 Allegiant Travel Co Earnings Call
Participants
Sherry Wilson; IR Contact Officer; Allegiant Travel Co
Maurice Gallagher; CEO and Chairman of the Board; Allegiant Travel Co
Gregory Anderson; President; Allegiant Travel Co
Scott Deangelo; Executive Vice President, Chief Marketing Officer; Allegiant Travel Co
Drew Wells; Senior Vice President, Chief Revenue Officer; Allegiant Travel Co
Robert Neal; Chief Financial Officer, Senior Vice President; Allegiant Travel Co
Savi Syth; Analyst; Raymond James
Brandon Oglenski; Analyst; Barclays
Conor Cunningham; Analyst; Melius Research
Presentation
Operator
Hello, and welcome to the Allegiant Travel Company fourth-quarter and full-year 2023 earnings call. (Operator Instructions).
I will now turn the conference over Sherry Wilson, Managing Director of Investor Relations. Please go ahead.
Sherry Wilson
Thank you, Sarah. Good afternoon, everyone, and welcome to the Allegiant Travel Company's fourth-quarter and full year 2023 earnings call. On the call with me today are Maury Gallagher, the company's Executive Chairman and CEO; Greg Anderson, President; Scott DeAngelo, our EVP and Chief Marketing Officer; Drew Wells, our SVP and Chief Revenue Officer; Robert Neal, SVP and Chief Financial Officer, and a handful of others to help answer questions.
We will start the call with commentary and then open it up to questions. We ask that you please limit yourself to one question and one follow-up. The company's comments today will contain forward-looking statements concerning our future performance and strategic plan. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the SEC.
Any forward-looking statements are based on information available to us today. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise. The company cautions investors not to place due 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. And with that, I'll turn it to Maury.
Maurice Gallagher
Good afternoon, ladies and gentlemen. Thank you for your time today, and welcome from Super Bowl headquarters here in Las Vegas. As you saw in our release, we continued to move ahead in our efforts to return pre-pandemic performances.
I'm happy to report on a number of areas that we're moving forward on all fronts. Sunseeker opened on December 15. It's a terrific nation of (inaudible). Micah Richins, who's on the call with us today and his partner in crime, Jason Shkorupa and their team have done (inaudible) work completing and operating this magnificent and destination resort. Stay tuned for more updates in the coming months.
Our operational performance for this year -- the past year, our completion factor and on time, (inaudible) our 2019 industry-leading stats, and we were among the top 3 in operating margin for the year. Aircraft deliveries, while Boeing deliveries will be delayed based on recent news and comments, we are excited about our introduction of the MAX 8200 aircraft. It's one of the most reliable airplanes in the world. Its performance profile as well will provide us enhanced economic benefits in the coming years. On the labor front, we've been plagued for the past 3 years by a number of labor issues, particularly with our pilots. However, I'm cautiously optimistic with our recent progress. Our updated labor agreements will allow us to continue to do what we do best, to grow Allegiant in our noncompetitive markets in the coming months and years.
As I mentioned, at Super Bowl week here in Las Vegas. The town is on fire and amazing stuff that's going on. This week will be a large payback for our investment in the naming rights for the Las Vegas [ Radar ] Stadium. The exposure to the impressions we have already received and will continue to receive in this next week have been and will be exceptional. Allegiant stadium has a nice ring to it. We made this investment in 2019, a big step for us. But it was part and parcel of our efforts to separate ourselves from the crowd and promote our Allegiant brand.
As I mentioned, our operations this past year were industry-leading. This level of performance in today's social media world is critical. Consumer products are continuously on stage. There is nowhere to hide. It seems simple. We want a reliable, on-time airline with friendly people. Easy to say, but tough to do. But our focus on this approach for the past many years is paying dividends.
Our Net Promoter Scores are industry-leading. In recent surveys of our own customers, they assigned us what we believe to be the top of the field on NPS of 51. It's coming in ahead of all of the domestic carriers as far as we know. Our results compare extremely well when compared to other low [ boss ] players, some of whose scores are meaningfully negative. In the past 12 to 24 months, as you all are aware, our competition has become much more intense for a number of the low-fare carriers. The majors have come down market and have a low-priced competing product and a better reputation against -- again, the NPS scores tell the tale Being the carrier of last choice in today's world is a (inaudible) decline.
Over the past 20 years, there's been a generic low-fare labeling or ULCC moniker assigned to a number of us carriers. Practically, this label is for the start-up since the 2000, specifically us, Frontier, Spirit and more recently, carriers such as Sun Country, (inaudible) and Novello. Well, we all have this time line in common. What we don't have in common is the same model and how the companies have been managed. Unlike the other carriers in this grouping, our model has allowed us to build a robust moat around our business. Over the years, we are focused on building that noncompetitive nonstop network.
Today, 75% of our routes do not have any direct competition. This approach is paying substantial dividends in today's more confrontational environment. With most of our routes operating just 2 to 3 -- 2 times per week, we can support a much larger network of cities and routes. 124 cities today with 555 routes, 450 of which are noncompetitive. In contrast, Spirit and the Frontier have on average just 300 routes each rather, but only 30 are noncompetitive or a 10% factor.
One might analogize the ULCC crowd by comparing them and us to the famous bank robber Willie Sutton. When asked why Rob Banks his answer was because that's where the money is. Well, in today's airline space, the banks are the big cities and the major air carrier hubs and networks. Virtually all of the ULCC labeled airlines are focused on these big banks. Historically, they've been easy money, but not anymore. The banks have developed ferocious tools to fight off their historic robbers. Allegiant has stayed away from those big banks. Allegiant is focused on earning its money in the old-fashioned way by creating our own customers, those that heretofore have gone unnoticed. Said another way, we've created our own private [ swimlane ] and are proud to be in it.
In the coming months and years, we will continue to grow our model. It is strong. It works and it has a great deal of room to run. Lastly, I want to thank our team members. This has been a difficult 3 to 4 years, as we all know. You have been supporting our passengers (inaudible) today, reliable and friendly service and you have run the best airline this year, an industry-leading 99.8% controllable completion factor. Well done. In today's era, poor service and cancel flights, you will put us back where we belong at the top of the pack. Thank you. Greg?
Gregory Anderson
Thank you, Maury. Entering 2023, one of our primary objectives was to step up our operational gain and drive down our op costs. Team Allegiant delivered a (inaudible), closing out the year with an industry-leading 99.8% controllable completion and a reduction in IROC costs of nearly $100 million. These results didn't go unnoticed at the Wall Street Journal ranked Allegiant of the best-performing airlines of 2023, trailing only Delta [ in ] Alaska. This turnaround performance isn't possible without a dedicated and highly talented team. I know I'm biased, but I think they're the best in the business.
Throughout 2023, I had the great privilege of traveling our system to visit most of our '24 basis. The passion of Team Allegiant truly a site to be seen. Our base structure, coupled with our out-and-back model, allows us to provide our frontline team members with the rare industry part. Their work shifts begin and end in their home cities. This unique feature plays a key role in helping us retain and grow our flight crew rings. As evidenced by the increase of more than 100 net new pilots during the back half of 2023.
While being home every night is a value benefit, we are overdue in getting our inflight and fly (inaudible) group's updated labor contracts. This remains a top priority and is in the best interest of all parties. Once in place, these agreements should help unlock meaningful value. And as mentioned last quarter, an area of value to keep an eye on is our restoring of utilization during peak leisure demand periods.
We have been strengthening our foundation to begin ratcheting up our peak day flying which should provide us a decent tailwind in 2024. We expect this tailwind to gain momentum into 2025 with the potential of increasing peak utilization by as much as 20% compared to 2023. As you know, one of Allegiant's key differentiators is our adherence to peak season and peak day week flying patterns, something that will continue even with the new Boeing MAX aircraft.
We are confident the recent issues facing the MAX will be solved by Boeing and the FAA. The continued uncertainty around the timing of our MAX deliveries means we are being extra flexible with our 2024 capacity plans. Each MAX delivery will come equipped with Allegiant Extra, and we are concurrently configuring our A320 aircraft to carry this premium product. This improved cabin layouts should continue to be a big hit among our customers through our expansive domestic network of roughly 124 communities and 555 crowds.
Interestingly, we are the only nonstop option on roughly 450 of the routes we currently serve. Surprisingly, Allegiant serves more unique nonstop domestic routes than JetBlue, Alaska, Spirit, Frontier, Hawaiian, Sun Country, Freeze and Novello combined. And we are positioned to meaningfully grow our number of unique one-stop flights via the 1,400 incremental routes we have identified including the many unique nonstop routes we expect to serve into Mexico's premier beach destinations alongside our JV partner, [ Viva Airbus].
While the timing of governmental approval of our ATI application is uncertain, we remain confident its approval is a matter of when, not if. In addition, we have upgraded our systems by transitioning to [ Navitaire], which will help support our long-term growth plans, including international expansion. We migrated our legacy passenger service system in Navitaire in the back half of 2023 and a dedicated team working to further seize on its capabilities by improving our dynamic pricing formulary products and unlocking further efficiencies. We expect these enhancements in place by the first half of 2024.
Our Sunseeker Resort opened in mid-December. It is elegantly designed and features popular amenities as well as a spectacular service-oriented staff. Guests are having a wonderful experience. The resort is still in its infancy as it has only been open for roughly 45 days. Encouragingly, each week, we see meaningful improvements to booking trends as we continue to build further awareness of the Sunseeker brand. While we are still very early, we expect the resort could contribute as much as $15 million in EBITDA in 2024.
In closing, we are extremely proud of the Team Allegiant taking back our rightful spot at the top of the industry, both operationally and financially in addition to the great progress made in strengthening our foundation. We have positioned ourselves to enhance utilization during peak leisure demand periods. Our brand has never been stronger. The number of unique routes to further expand our network has never been greater. Aspirational products such as Allegiant Extra and our always loyalty program remain in high demand. Sunseeker is open and contributing. Many more opportunities remain on the horizon, including our international expansion with Viva Aerobus. We will continue to build off this momentum to strengthen our competitive advantages and further reshape the leisure travel space. With that, I'll turn it over to Scott.
Scott Deangelo
Thanks, Greg. Fourth quarter completed the year that saw post-pandemic normalization of domestic leisure travel demand. But with Allegiant nonetheless, driving booking and passenger levels that slightly surpassed the historic highs of 2022 despite minimal capacity growth. This was achieved thanks to our continued distinctive ability to match capacity with demand and in particular, to generate and fulfill demand for peak travel periods. Demand has never been greater for our Allegiant brand, which differentiates itself on the 2 factors that matter most to leisure travelers, low fares and nonstop flights.
As Maury referenced, this week, a good portion of those nonstop flights will be Super Bowl bound here in Las Vegas where the Allegiant brand stands to gain an unprecedented boost in awareness from the more than 100 million U.S. viewers expected to tune into Super Bowl 58 at Allegiant Stadium on Sunday and we stand ready to capitalize on this brand awareness boost during one of our busiest booking periods as leisure travelers book in earnest for the spring break and even early summer peak travel season.
For full year 2023, we retained nearly 1/3 of customers who flew us the prior year, and those customers accounted for nearly half of our total revenue for the year. This year-to-year customer retention rate was 16% higher than it was in 2022. Our loyalty programs always rewards and the always Rewards Visa card continue to engage a greater portion of customers and motivate those engaged customers to travel and spend more with Allegiant year after year. 2023 was the fifth consecutive year that the Allegiant co-brand credit card was named Best Airline Credit Card in USA TODAY's Readers' Choice Awards. We ended the year with 484,000 cardholders, up 16% versus 2022. And total co-brand credit card compensation was nearly $120 million for the year, up 18% versus 2022. We expect similar growth rates to continue for both new cardholders and program compensation in 2024.
In addition to the direct compensation we received from the program, our cardholders continued to exhibit strong travel frequency and spend. During 2023, card holders flew and spent more than 2x that of non-cardholders. We also continue to see strong impact from our Always Rewards noncredit card program. 2.8 million always rewards members had activity during 2023, 25% more than prior year, and these members flew 24% more and spent 69% more than nonmembers. Our ever increasingly loyal customer base is enabling us to further differentiate by showing interest in premium economy products such as Allegiant Extra and buy on board products as well as our third-party hotel and rental car products and now Sun Seeker Resort, Charlotte Harbor, which as was noted, opened this past December. Nearly 3/4 of our customers say they are aware of the resort, and nearly half of those in cities with Allegiant service in the Southwest Florida, so they would consider staying there.
To date, nearly 2/3 of Sunseeker bookings have come from allegiant customers, 40% always rewards members and 20% are Allegiant co-brand credit cardholders. Sunseeker is a welcome addition to the Allegiant Travel Company family and enables us to give our customers more leisure travel products and rewards and then enabling them to, as we like to say, live their best nonstop life with Allegiant. And with that, I'll turn it over to Drew.
Drew Wells
Thank you, Scott, and thanks to everyone for joining us today. A strong fourth quarter capped off our first full year revenue figure over $2.5 billion. While our 4Q TRASM of $0.1316 was down 6.2% versus the prior year. It was still more than 4% better than any fourth quarter before that.
Further, the full year TRASM of $0.338 was nearly 6% better than any prior year, punctuated by record ancillary performance more than $5 better year-over-year.
The fourth quarter featured some modest ASM growth at plus 5.7% and ended on a high note with incredible close-in demand for the holiday periods. These weeks were -- these were weeks with already high expectations, and they exceeded those lofty goals. And as expected, the resilience in the peak weeks was met with normalizing peak to off-peak variants as in a typical leisure environment.
Lastly, for 2023, on the heels of a monthly record in September, fixed fee strength continued to ramp in both the fourth quarter and full year set revenue records. Really a great all-around effort to achieve $611 million in total revenue for the quarter and a sincere thank you to all our Allegiant team members for making that happen.
As we shift attention to the first quarter, growth will be back to muted at roughly 1%. Across the industry, weather took a toll on mid-January, and the impact to Allegiant was approximately 0.5 point ASM headwind for the quarter and about $2.5 million of revenue impact. Hats off to our operations teams for their excellent performance in keeping the airline on track amid the cast of the storms. I expect many of the same attributes discussed last quarter to persist. The peak weeks will remain incredibly strong, likely in line to higher than prior year in fact. Easter shifts into March, while it should be a TRASM good guide to the final week of the month, the shift is generally negative overall.
A meaningful portion of spring break travel is compressing to one week, and we have only so much capacity to deploy. Good for unitized figures in that week at the expense of some total potential and the contribution of the other weeks, including weeks earlier in March future spring breaks moving to a line with Easter this year.
Continuing the overarching theme of normalcy in my remarks recently, I expect the first quarter sequential increase in TRASM to look normal relative to the 4Q '23 TRASM. As with most first quarters, the revenue will hinge on the peak weeks at the end, and with more than 50% of the revenue left to book, there is still a long way to go. Another result of the Easter shift will be a decent pull down of April capacity around 10% year-over-year.
However, we're excited to bring much more capacity into our summer plan than originally anticipated. Our June through August capacity should see each month's ASM up mid- to high single digits versus the same month in 2023, utilization increase of hour per aircraft per day. We still have a hill to climb to get all the way back to our peak utilization levels, but accomplishing these gains while still having the Boeing Max transition training headwind is incredibly exciting. And for some additional context, our plan starting around June is largely in line with our 2018 utilization levels. One for a reminder of how large our '18 to '19 utilization jump was and two, in line with Greg's comments on our 2025 potential.
We also anticipate that we'll begin retrofitting existing 186-seat A320s with our popular Allegiant extra seating configuration in the second quarter as well as introduce a new to us travel insurance product through our partners at (technical difficulty) goals both should help bolster our already strong but still improving ancillary program.
For the full year, we are guiding an ASM range of positive 2% to 6% year-over-year. This will include a more conservative approach to planning capacity in the back half of the year to provide downside risk mitigation at Boeing MAX deliveries are delayed and upside if one time. There's a lot of unknown and we wanted to be prudent in our process. I'll turn it over to Robert Neal to provide a bit more color on this and so much more.
Robert Neal
Thanks, Drew, and good afternoon, everyone. Today, we reported our full year 2023 financial results, which included an adjusted consolidated net income of $2.4 million and an adjusted earnings per share of $0.11 for the fourth quarter. This number includes approximately $12.8 million in preopening expenses for Sunseeker Resort. The airline recorded $15.9 million in adjusted net income for the quarter, yielding an adjusted airline-only EPS of $0.86.
Adjusted consolidated net income for the full year 2023 was roughly $137 million, yielding an adjusted earnings per share of $7.31, including approximately $33 million in expense related to Sunseeker. EBITDA for the full year was $472 million, excluding special charges, which is a 45% increase over 2022. The airline recorded an adjusted net income of $165 million for the year, yielding an adjusted airline full year EPS of $8.82, which was slightly ahead of our initial expectations and the airline generated over $500 million in EBITDA, excluding special items during the year. (inaudible) came in at $3.09 per gallon for the full year, approximately 17% below the 2022 level.
Our adjusted nonfuel airline unit costs ended 10.8% higher at $0.0812 for the full year, which was driven primarily by wage increases for frontline labor groups. This accounted for about 8.5 points of the increase. That's inclusive of our pilot retention bonus accrual, which was in effect May through December.
The other main driver of unit cost increase was depreciation expense on lower asset utilization, which drove 1.5 points, and the rest of the increase came from a handful of other items.
On the balance sheet, we ended the year with just over $1.1 billion in total liquidity comprised of $870 million in cash and investments and $275 million in undrawn revolvers. Net debt at year-end was just under $1.4 billion. During the year, we prepaid approximately $210 million in 2024 debt maturities, including a $150 million payoff of senior secured notes in the fourth quarter. Fourth quarter inline capital expenditures were $143 million, comprised of $120 million for payments related to aircrafts and engine and $23 million in other airline CapEx. Deferred heavy maintenance spend was $17 million during the quarter. Total airline CapEx for the full year was $568 million and CapEx for Sunseeker Resort construction came in at $321 million, including $53 million in the fourth quarter.
Turning to fleet. We retired 1 A319 aircraft during the fourth quarter, and we took delivery of 1 A320, which began revenue service during January 24. We expect to take delivery of one additional A320 aircraft during the first quarter, which should enter service in the second quarter of '24. As of now, we are planning to retire 8 of our oldest A320 aircraft during the year, down from 11 previously planned. As you might expect, we are actively discussing with Boeing changes to our 737 MAX delivery schedule for 2024. At the time of our last investor update, we were expecting to take delivery of our first MAX aircraft in the first week of 2024. As of now, we are estimating that deliveries will begin in late March or early April.
Our current estimates differ from contractual commitments as we are conservatively planning to take delivery of 12 and place into service 10 737 Max 200 aircraft by the end of this year. While the timing of these deliveries is uncertain, we are estimating capital expenditures by year-end to be approximately $790 million for the airline and $10 million for final payments related to Sunseeker construction. Airline CapEx is inclusive of $85 million for heavy maintenance spend and $160 million in non-aircraft CapEx, with the remaining $540 million attributable to aircraft and engine related payments.
With respect to 2024 financial results, given the uncertainty around timing of the estimated 12 aircraft deliveries, we are only prepared to speak to the first quarter of 2024 at this time. We expect to record an airline operating margin between 8% and 10% on ASM growth of just over 1% in the March quarter. This guidance assumes an average fuel cost of $2.85 per gallon. We do expect year-over-year nonfuel unit cost pressure in the first quarter related to our pilot retention bonus accrual, which was not in place during the first quarter of 2023.
In closing, I want to hand my thanks to all of our Allegiant team members for all they've accomplished in 2023. Our people worked tirelessly throughout the year, in particularly managing various major systems implementations. Delivering a 99.8% controllable completion is a key driver in improving financial performance and a stabilized operation provides us the strong foundation necessary for us to improve peak period fleet utilization and better leverage our investments. Thank you. And with that, Sarah, we can begin taking analyst questions.
Question and Answer Session
Operator
(Operator Instructions) Savi Syth, Raymond James.
Hey, good afternoon. And if I might, I can appreciate the lack of clarity on the full year with capacity. But I was wondering if you can provide a little bit more color on what's a historical Q-over-Q for unit revenue is? And also just on the unit costs, like what you're expecting for the first quarter on a year-over-year basis?
Savi Syth
Sure.
Drew Wells
I'll take the first part of that. And if you go back probably 2011 through 2019, yes, that has been right about 2.5, give or take on travel and then view on it on the cost side, as I mentioned in the first quarter, should be elevated on a year-over-year basis.
Robert Neal
That should be the high point for a year-over-year comp. And that's nearly all driven by increases in wages for frontline labor, labor groups. You will see on some some elevated costs, again, costs throughout the year and I would expect that on a full year basis, we would have a unit cost level that's below what we print in the first quarter.
Sherry Wilson
That's helpful. And if I might just follow-up in terms of what you're seeing on the demand side, is there or is there any improvement on the pricing? I know in the fourth quarter you called out off-peak pricing really weak. It sounds like peak pricing still holding on. Just curious if you're seeing any change in the offtake pricing or the fact that you're pointing to normal historical Q over Q then that maybe not much of a change there?
Drew Wells
Yes, I would look back to just normal leisure seasonality right now. The spread we see between where peaks are and off peaks are while obviously everything is meaningfully above pre pandemic still that spread looks about like it did pre-pandemic. So whatever you deem as the normal variance there is kind of what we're seeing content.
Sherry Wilson
Your next question comes from the line of Brandon Oglenski with Barclays. Your line is open.
Gregory Anderson
Hey, good afternoon and thanks for taking the questions. Maybe following up on David's line of questioning there. I know you guys are only providing narrow and only guidance for the first quarter, but how do we think about margins, seasonality going into 2Q maybe any initial indications on bookings, especially, I think, Greg, you said that your peak capacity is going to be up pretty significantly versus where you were in 23. Is that right, Dave, Brandon, it's Greg here at a high level and then Drew can add any color kind of on the peak capacity. But my point on that, though, is that we level set operations to build back and fly more in the peak periods. I don't think it in margin will be a little bit more difficult for us to start ramping that up, particularly given the timing of the uncertainty around the Boeing deliveries. However, we have clear line of sight to be able to start taking data in the summer this summer, but really hitting that or at least a path to hit the 20% increase by 2025. But as I think about the full year, just kind of back to the uncertainty of the delivery of the MAX aircraft. As you know, for us the months matter in a year, right, 80% of our earnings come in March this summer and holidays so we need to make sure that as we're planning, you know, we're trying to get up and peak in those periods is drew it on and a little bit. But I would say the cadence second quarter, I would expect op margin. That's usually the best quarter for us. So I'd expect second quarter sequentially to be higher in the first quarter and full year, I expect us to be at or near industry-leading margins that our base case. I mean, maybe there's some upside in there, but we still think we'll put out a strong 2014, but we just were there some uncertainty with some of the timing of moving parts.
Drew Wells
But Jerry, do you want to hit anything on a I'll add maybe a little bit just be mindful Easter comes out of April, which will be a meaningful revenue headwind as well.
May events, like I mentioned, about 10% coming out of April. There will be a headwind from the lift we see in terms of that summer capacity will start really at the end of May into early June, and it kind of based on timing of when we had confidence around the number correctly, the pilot has we have to be able to declare that we're a little bit closer and to be able to realize that in March.
Robert Neal
So we'll see that.
Drew Wells
I think it will be the good news will be kind of back half weighted for the second quarter, but I would not agree with Greg's comment.
Gregory Anderson
Appreciate it, guys. And then a quick one for Robert. How are you guys looking at financing that capital spending this year? What are alternatives that you are looking at now?
Sure. Yes.
Robert Neal
No, I'm glad you asked actually put out an RFP just in the first week of the year, and I've been really pleased with the results that came in to finance the MAX aircraft. You probably recall our first four aircraft are already committed to the financing agreement that we signed with us last year, which it's kind of a blend between a finance lease and like a double ETC structure. So I have two traunches and their financing at 100% of their appraised value. And then after that, I suspect will happen to the bank market a little bit and look at finance leases, we're pretty focused right now on products that give us a lot of flexibility. And then late in the year, depending on the number of deliveries we have and what happens with the MAX seven certification, it was regarding the WACC price as well. But I think, well, those things haven't commented. Those are financing products that lead the assets on the balance sheet.
Gregory Anderson
Appreciate it. Thank you.
Sherry Wilson
Your next question comes from the line of Conor Cunningham with million.
Gregory Anderson
Your line Hi, everyone.
Maurice Gallagher
Thank you. Scott, you mentioned that your pilots and flight attendants are currently up and there's been a fair bit of movement Kam with Southwest and so on. Can you just level set where discussions are today and then have your accruals changed at all given where the market is this column, I'll tee it up and then BJ may want to comment on the accruals.
Gregory Anderson
But in terms of where our labor agreements are at today, Conor one, I mean, we're very eager to get full agreements in place with our flight attendants You may recall that went out to vote late last year. That was turned down, I think by 60 40%, 60% voted against. So we've come back at the table to the table with the TWU leadership and really working to address some of the areas of which that we think will fly. It was voted down and get that back out to vote soon. So we're happy with the progress there.
In terms of pilots, we're actually a federal mediation. And so we started that at the early part of last year. I'm encouraged by some of the progress that was made late in 23. And we actually TA in the past few months have come with TA, had a couple of sections were about TA one or two more. We think there's been changes to the union negotiating team on their side, which we're cautiously optimistic with that. How is the Company has and will continue to do. We're ready and prepared and we want to get a deal done that for both our five flight attendants and pilots that they deserve to be.
Did you have anything on the approved service timing?
Robert Neal
Not really just I'll just share the on the accrual for the pilot retention bonuses, but at the end of the year. So that will continue to build up until we until until we have an agreement with our pilots. And then we haven't made any changes to that or started accruing for anything on the flight attendant Thank you. I mean in place to payout on any type.
Gregory Anderson
Okay.
Maurice Gallagher
That's helpful. And then you mentioned the Sunseeker contribution and how it's going to take a little bit to get to maturity, but can you just speak what needs to change there? Does? Is it really just an occupancy comment or is there a reduction in costs that are kind of hitting at the early part of this year.
Gregory Anderson
Just any thought process? Thank you.
Maurice Gallagher
And there's going to be some additional costs just to get it finalized data while we opened up probably quicker than we ideally would have liked, but got they're doing very well on putting all that together.
On the on the London, just the revenue side, there's just the normal growth that you go. We were unfortunate again that we slipped from a planned October opening date into December. And of the advanced bookings as a result were being pushed in the most difficult year the end of the year, December is always the weakest sales month, but we're seeing an uptick in the like. I think the of the really good news is that it's been a tough period well received on the food and beverage side and a very, very nice clouds and things down there. The rooms are coming on, Mike, you want to just giving a quick overview of what what's going on Michael Riches is running the show for us down there.
Brandon Oglenski
Happy to Maury, and I appreciate the introduction on that. We've been doing a lot of things over the past 45 days here at the property. Maureen mentioned that we opened with a couple of the venues not ready to go that have recently coming online or have come online already. One of them was the rooftop pool. We brought that opened last week. We've got one of our one of our main restaurants, blue line, which will come on this week. And we opened in December without one of our towers, that one of the sweet towers, Iris and that will also open up is actually opened up on Friday. We've been able to host several groups here in January, and we'll host several more in February. That bodes well for us. We need to be able to put the group business through the House and then let them talk about the services they get. So we feel like we're on the right track. The property is performing well and the last thing I would say is a shout out to our employees. Literally every seems like every bit of feedback that we get, even if even if someone is noticing a shortfall. They rave about our employees. They rave about how hard they work, how much they enjoy being here and how attentive they are to customers. So we like where we're headed and go into the right direction. We just need to keep building.
Gregory Anderson
Appreciate the thoughts.
Maurice Gallagher
Thank you.
Sherry Wilson
Your next question comes from the line of Duane Pfennigwerth with Evercore.
Gregory Anderson
Your line and thanks. Maybe I'll stay right there.
Drew Wells
So can you just just to expand on what you were just saying, Can you let us know when you get to the full operational room count of seven 50 or maybe like a room count by quarter until you're fully there?
Brandon Oglenski
Absolutely, Duane, this is Micah. We'll be we'll actually have about 700 rooms occupied as of tomorrow, we start to host a couple of groups and then we'll be at a full day seven five by by probably the end of this month.
Gregory Anderson
That's great.
Maurice Gallagher
Thanks. And then, Tom, maybe for you or or Maury, any anecdotes you can share on? I know it's early, but on distribution so far attach rates on Allegiant Air.com is this being purchased by customers who happen to be go into Punta Gorda any way?
Drew Wells
Are you able to convince people to kind of make the trip given given the proposition down there and how do you think about them other channels like OTAs?
Maurice Gallagher
Over time of note, we put an overview on that. We are at this very robust database for upwards of 15 million emails that we're sending out. And the unfortunately, we didn't get started as soon as we probably should have, Duane. And so what we've been doing the last month, six weeks is introduction of stuff in. I'll let Scott DeAngelo and Mike will give you some overview on that. But you know, we probably are going to have we'll see that start to really, I hope grab in is doing okay. And we see some good results when we have sales, for instance, toward sales. These are very powerful with the guys were purchasing on but it's just got to build. We've got to find the right avenues and the like we've decided to go with the OTA of the point right now, just to make sure we can get ourselves going.
The interesting thing when you look at the OTAs, they really aren't that impactful as the cost side on very much percentage-wise. It's not like the entire place is going to be sold by the online travel agencies. So that will be a nice way to boost the sales in the nearer term, Scott?
Scott Deangelo
Yes, a couple of additional thoughts. Just reiterating one of the points I raised in my opening comments right now about two thirds of the bookings are coming from Allegiant customers. So customers that we can maximize a database regardless of whether they bought it at Allegiant.com or the Sunseeker Resort website. And you can look back for the couple of other stats. I mentioned about how many are rewards members and cardholders on the OTA front. The other thing we discovered on, you know, in the last couple of months, but early once it once it opens was the amount of website traffic coming from big metro feeder markets like Atlanta, New York and Chicago. And so when you think about the 15 million customer e-mail database that Maureen mentioned Paul, that does have strength in the Midwest and other feeder areas, right? We don't play out of Atlanta and we don't really serve New York City and Chicago in earnest and so as a result, the OT. also became a great way to be able to reach those customers that we don't quote unquote know and my guide. So it over to you for any final thoughts?
Brandon Oglenski
No, I think that's exactly right, Scott. I think the final thing I would say to doing something that I mentioned is for us a good chunk about 33% or so of the business that we will have here at the property will be related to groups and it's in for us, January and February have been critical in housing and in handling those groups and then making sure that we execute on them. That's it's easier said than done in a property that's been open for 45 days. It's important to note that they have gone well. Our clients have been very, very happy and excited. Groups are notorious for trying to avoid and new properties specifically because they are challenging and there are all kinds of kinks that need to be worked out. But we're excited about the responses that we've gotten. Those people become raving fans, and we'll speak to other people who can bring us business that will help us for what we think we'll see, but the back half of 24 and certainly into 25.
Gregory Anderson
Okay, great. I have more questions on it, but I'll leave it there for now.
Thank you.
Sherry Wilson
Your next question comes from the line of Mike Linenberg with Deutsche Bank. Your line is open.
Gregory Anderson
Hey, I'm just a couple of here. And maybe just to kind of continue down this theme on Sunseeker. You've given us some the number of rooms you've given us the occupancy rate and the daily our average daily rate of you know, as we sort of multiply that out to get to a top line number, what would be the gross up to get to a final number, like what percent of total spend is this maybe the room piece, some represent like if you're staying there, is there another 50% on top of that that you ultimately spend at either the golf course, the restaurants, et cetera? I'm just trying to get to a top line number here for Sunseeker.
Brandon Oglenski
Well, Michael, yes, I feel like I think 50% is close. I guess it depends on the customer. It depends on how many people are in the room. But by the time you look at the 2020 different venues that you've got on property to consume food and beverage, which incidentally has been performing extremely well.
When you add to that, the opportunity for SPAR for retail and certainly for golf, I think that's a good number to use as a measure.
Savi Syth
Okay.
Gregory Anderson
Great. And then on just my second question on on the OTA piece. I mean, very young. This is very on Allegiant two to actually do some distribution outside of your control. Is this just to get them up and running with Sunseeker And then ultimately, you bring it all back in-house? Or is this are maybe the start of what I will refer to as maybe a bifurcated type model? And I guess just as kind of a corollary let's see I go through an OTA and I book Sunseeker, how do I do the airline on? Do I do I have to then separately go through the Allegiant website or can I actually know is it possible that I can buy the Allegiant airline piece by way of the OTA?
Maurice Gallagher
Curious how that's likely you're going to you're way ahead of us Michael on, you know, we didn't consciously think we'd be doing OTA going into this. But given just where we were and more importantly, what really kind of made me think that we could go do it is it's just not a big component of the sales. And we have a normal hotel that just sells workloads and it's 95% of their revenue for that 20% off the top is a big number. But where this is going to be, I'm guessing 10% to 20% of our room revenue type of thing how can you kind of costs, but it's just not a big number that's going to be meaningful.
And to get Scott to these points, you know, we need to ask some distribution and some of these bigger cities. So Mike is very experienced.
Scott Deangelo
We're working with these people and you know, he made the case and we thought it was a good idea yes, I would simply just add to that, we take a very vigilant approach of unlike here where you really lose your chance to sell third party and or certain ancillary when you go through OTA, does the hotel right? As soon as you're their F&B golf's, Bob, all of those things are sold directly. And so we we grab that revenue without any it chunk out there also on a very vigilant strategy to add Allegiant or an airline is not as highly had been engaged purchase as a resort, of course. And so capturing someone's information and being able to target them directly for their second trip. That's something that is obviously going to be done throughout your resort.
Stay right here. We know who you are we have information. So we feel good about our chance, even if you book through a third party, your first say that you'll be coming back and booking directly to Allegiant or Sunseeker Resorts.com, your second And Michael, just one just to answer one of your question, the airline, there's no plan or intention for the airline to be listed on the OTAs.
Gregory Anderson
That'll all that'll remain direct distribution and IT package were to take place with the airline that would you'd go through Legionella.com to get that package. And I think it makes a lot of sense on what you're doing. So thanks.
Thanks for answering my question.
Maurice Gallagher
No problem.
Gregory Anderson
No, we agree.
Maurice Gallagher
It's a it's a good short-term thing. Just a little tidbit. We've gotten back in the early 20s, 2030, a third of customers on our appliances to be buying a hotel. We don't get a third of the customers now because the M GMs of the world have got their data and they go direct to home, which is we'll be attacking, we'll use.
Gregory Anderson
Okay. Thank you.
Thank you.
Sherry Wilson
Your next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is open.
Savi Syth
Thanks.
Robert Neal
And maybe one sorry, you guys have done a really good job on the airline side of improving operational reliability and kind of basically getting the service back in the year. When do you think we get back to like a normalized level of EPS and kind of where does that look like compared to what you guys did in 2023 to 2014 or 25?
Drew Wells
And I went the normalization of growth, Ravi.
Gregory Anderson
Hey, it's Greg. Why don't I kick it off here and then the restoration, I think we have a clear path to restore margins back to pre-pandemic levels, labor costs. That's a big headwind that we're facing today, not just us the industry, but we think a lot of the tailwinds utilization, and we've talked about peaking the peaks. We think that can offset it.
And then maybe even some on the on the labor cost, you can talk about the MAX aircraft, bringing those on. They have a 20% economic advantage fuel burn advantage that we think will be helpful in that regard.
Several revenue revenue initiatives, co-brand, the insurance pop per home, Drew talked about trip insurance with Allianz Navitaire, and there are some enhanced efficiencies that we're working through that we think will be meaningful. So I don't see how it all down to review.
Yes, Veeva as well, which will we'll see the timing on that. I think all in all, you're managing costs as well is key in our variable cost components where we can make sure that we're matching capacity with demand. But the short answer is, I think we step up, we continue to step up and buy 25, 26. I think those are years some that if we were peaking the peaks, that's really shows the power of the model. And we think by 25 in those peak periods, we can be back to that based on what we see today. And that's only going to be 70 Got it.
Robert Neal
That's really helpful on topic of Viva and there were some headlines out of Mexico recently. Kind of any thoughts on what that does to the leverage?
Gregory Anderson
No, I am not mistaken that merger. But yes, I'd say we're still very confident that the RATI. approval will take place, not a matter of fact.
Yes, but when you know, it's very pro competition, pro consumer, and we're working as diligently as we can to get it approved as soon as possible, but to get caught up in some of the the apologies, yes, between Mexico and India and the DOT and everything.
Maurice Gallagher
But more if you're pretty close to it as well as iA Auto, I think three of the U.S. government and the Mexican government are swallowing over skeptical things candidly are good power procured or should I repeat? It will get us all but done. That does seem to be in the works in the next week or two. So we also have a labor front where we have to deal with it. So hopefully, we'll get it done by the back half of the year, but don't take that as a forecast, but I'd like to see us move forward. It's going to be a terrific partnership.
Robert Neal
I think, Maury, if you do the tequila meet up at Sunseeker, please invite some of us, but not from across the company.
Savi Syth
Yes.
Sherry Wilson
Our next question comes from the line of Helen Becker with TD Cowan. Your line is.
Thanks, very much Operator.
Maurice Gallagher
Hi, everybody.
Sherry Wilson
As soon as I look at the numbers for the airline only for now and can you speak to how we get there 2018, 2019 margin?
Gregory Anderson
Well, okay. I mean, yes, I think it's pretty similar type equally to just chatting with Ravi, but I'm trying to give it from another perspective. One, I think fuel 2019, I think fuel was at 12 per gallon. It's a little bit higher right now. While fuel can be somewhat of a pass through that lower price would be helpful from a margin perspective, I think on the pilot situation where we talk about one hour and what our peak in addition and sort of what our increased utilization of peak periods, the pilot situation is kind of where that's been the largest constraint of peak period. That's loosening at some above. And so we're able to kind of layer that in on top in one hour more and peak flying is worth roughly in a full year's worth $100 million. So that's four points of margin right there that you could add that keep in mind, we are accruing for the pilot costs. We started that in May of last year.
And then just some of the other initiatives that we talked about, Legion extra co-brand I mean, those are ways of EVA that we think those are ways it will be accretive to where we sit today and continue to grow and help us restore our pre-pandemic earnings. I congratulate our numbers.
Drew Wells
And then since Dave, you mentioned fuel is directly related to how much you want to operate the airline in off-peak periods as well. And we are constrained operationally, but rather by the offset of demand and fuel in the off peaks. And we think there's probably 30 to 60 minutes of 2023 overall utilization that was impacted by the high fuel price to bring that back down, brings us more operations in an off-peak period, which have outstripped the bottom line, of course.
Maurice Gallagher
Otherwise, we also if you average the first and second quarters. Last year, we were at 17, 18% operating margins, even with over $3 a gallon fuel in the first quarter. So we know how to play at that level. But there's just things that are going on. There are one-offs, particularly labor costs in the back half of the year that we're having to readjust and get to and we need productivity as well to get back to we very much intend to get back to those numbers. And we had a very, very good first half of the year.
Gregory Anderson
Right?
Maurice Gallagher
Exactly. So.
Sherry Wilson
Okay. Thanks very much.
I must Michael, it's really Thanks, Will. And of course, your next question comes from the line of Dan McKenzie with Seaport Global your line.
Gregory Anderson
Hey, good afternoon. Thanks, guys. On a clear request clarification on one of the prior questions here. The 20% upside in utilization, and if I heard that correctly, I think the timing was 2025 or 2026 on based on the response to an earlier question, I guess just clarifying that messaging, you know, is it that we could potentially be looking at normalized earnings, say, in 2025 or 2026?
Drew Wells
Is it that simple or are there other things that you're looking at here as well you've got a lot of things.
Gregory Anderson
But yes, I mean that's that's the key. We think the key driver to normalizing and restoring those earnings.
Then how do you justify a little bit more detail like, for example, in 2023, July of a very peak month, our average aircraft utilization was 7.5 hours compared to 9.8 hours in 2019. And so that's a little over 20%. And we think we have a plan to restore that by the time we get into 2025 and in 2024, we're going to layer in to narrow that gap. But we think by the time we get to 25 is when we could come fully restore it.
Okay. And then in the past, you guys have called out a booking experience for Sunseeker that was not in line with the resort hotel peer set. And can you mind remind us of when that is remedied and and how big the revenue penalty in 2024 is?
Drew Wells
I guess I'm just trying to reconcile the occupancy rate here in the average daily rate of $300,000, it just seems a little bit low. I mean, it's I know it's a lot higher than the I think the $255 or so that you base the resort on. But if you could maybe just add some some additional color there, Michael?
Brandon Oglenski
Yes, I would I would say that based on what we're seeing right now and the sequential growth that we're going and seeing that we feel comfortable with that guide. There's certain there's certainly the opportunity for it to be better, depending upon if we gain traction more quickly, but we wanted to present something that we felt was a good level set and expectations.
Maurice Gallagher
Understood.
Gregory Anderson
Okay.
Maurice Gallagher
I ask you're going to continue to service other comments, there's been so many ups and downs over when we started this thing in terms of the pandemic and the pricing that went on and a 21 I'm ever looking $2,000 a night of hotels were off the charts and on the cost of construction and all the things that are, it's just a different animal in many ways and what we talked about in the early days with John and the likes of my expectations are we're going to have to reset and level set, but the demand should be there and we're getting a pretty good go either revenue on a daily basis off. So we'll have to we'll be talking to you over the coming months as we get a baseline underneath it.
Gregory Anderson
Okay.
Maurice Gallagher
Thanks for that.
Conor Cunningham
And then just the last question is the booking experience. Is that up to is it competitive with the peer set at this point?
Scott Deangelo
I'm not on allegiant.com and that with our apologies, we just figure out what you're asking. If you're talking about that functionality where at Allegiant.com, right, you have to pay for everything at once versus being able to just leave one night deposits that should be delivered by end of March. And at that point at Allegiant.com, we'll be at the same functionality. In the meantime, though it's worth mentioning on the website. If you go play around there and typing anything into Punta Gorda, Sarasota, et cetera, you'll you'll see a pop up that will direct you straight to their site. So that's how we're getting so many of our eyeballs, given that we see 100, 50 million unique web users a year to get over to the Sunseeker site and get that streamlined functionality. So we're trying to bunch of ways while we wait for the the late March specs to be in and understood.
Gregory Anderson
Well, congrats on Sunseeker. It's a beautiful resort. You guys.
Maurice Gallagher
Thanks for the time. But I think just so the audience knows that we're behind probably candidly, where we might have been if we really had integrated and had a very focused start date and we're putting all that together now was the team's Reno start testing and finding out what works, what's effective and things like that. And the two websites, you know, candidly, as Scott said, we have 150 million people coming through. There was at 3 million a day type of thing and Sunseeker doesn't get here that type of traffic. So we definitely want to be mindful of how to balance that and push the traffic over to those guys efficiently and easily.
Savi Syth
Yes.
Sherry Wilson
Your next question comes from the line of Christopher.
That's a lot.
Gregory Anderson
Your line is open to say good afternoon.
Maurice Gallagher
Thanks for taking my questions.
Gregory Anderson
I just want to clarify your comment on with respect to the non RevPAR, I guess, non room revenues. So by getting to an implied RevPAR around to 10 for the non room piece today today, are you say 50% of the total?
That's correct.
Drew Wells
Okay, great.
Gregory Anderson
And then on the airline side, if you could just give some color in terms of the perhaps composition and distribution of your capacity this year, including the new Boeing aircraft. So thinking about departures stage and gauge and the markets where you anticipate growing the most.
Drew Wells
I'm sure you're going to probably stop short of telling everyone where we're going to be growing the most on. But I think in general, you're looking around mid singles for growth and or two to six for the year with some upside coming in the summer that talked about in the prepared remarks, I think we have a little benefit from stage and gauge on this year that will outpace simply the seat growth and kind of similar to Robert's comments, it's a little hard to give you great detail on the back half of the year that there's still some detailed mainly worked out in terms of the kind of the cadence and timing of Boeing deliveries to fully round out that answer. But as we think about summer. We're not as dependent on the MAX, certainly through 2Q and then only slightly so into 3Q. So I feel pretty good about where we stand there.
Just stay tuned for DO updates in the next couple of weeks that also will have a lot more for you.
Operator
That is all the time we have for Q&A. I will turn the call to Maury Gallagher for closing remarks.
Maurice Gallagher
Thank you all very much for your time as usual. And we appreciate your interest and your questions. Follow-up questions direct through Sherry and her team, and we'll be talking to you in 90 days. Thank you very much. Have a good week. (multiple speakers)
Operator
This concludes your conference call. Thank you for listening. You may now disconnect your lines.
