Welcome to the First Quarter 2021 Conference Call. My name is James, and I'll be your operator for today's call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. I'd now like to turn the call over to DeAnne Gable, Senior Director, Investor Relations.
DeAnne, you may begin.
Thank you, James, and welcome everyone to Spirit Airlines' Q1 earnings call. This call is being recorded and simultaneously webcast. A replay of this call will be archived on our website for 60 days. Presenting on today's call are Ted Christie, Spirit's Chief Executive Matt Klein, our Chief Commercial Officer and Scott Harrelson, our Chief Financial Officer. Also joining us on the call today are other members of our senior leadership team.
Following our prepared remarks, there will be a question and answer session for the Southside analysts. Today's discussion contains forward looking statements that are based on company's current expectations and are not a guarantee of future performance. There could be significant risks and uncertainties that cause actual results to differ materially From those reflected by the forward looking statements, including the risk factors discussed in our reports on file with the SEC, we undertake no duty to update any forward looking statements. In comparing results today, we will be adjusting all periods to exclude special items. Please refer to our Q1 2021 earnings release, which is available on our website for
I've had the pleasure of visiting several of our stations recently. And once again, I am proud to see the well orchestrated coordination between team members. Together with the rest of the Spirit team, we once again delivered strong operational results. For the Q1, completion factor was 98.6% And our on time performance was 85.3%, an excellent result all around. As we enter the next phase of recovery, Thanks to the contributions of all our team members, we are well positioned to capture the many opportunities that lie ahead of us.
The Q1 started slowly, but as demand dramatically improved during the last few weeks of March, we were very pleased with how the domestic network performed And how the international network results progressed, driving positive cash from operations for the full Q1 2021, even when excluding the payroll support funds received. Our Florida roots saw particular strength during this period As the typically strong spring break period was further supplemented by pent up demand for leisure travel. Assuming the current trends continue, We believe we can achieve a positive adjusted EBITDA margin for the full year 2021. The leisure travel demand recovery has taken root. There may still be some bumps ahead, but as vaccines are more widely available, case counts abate and travel restrictions ease, Spirit is stronger than ever and well prepared to bring our low fares to more places and offer more guests the opportunity to travel.
With that, I'll turn it over to Matt and Scott to discuss more details of our quarterly performance.
Thanks, Ted. I echo Ted's thanks to the team for doing a great job. Even as loads increase and airports get busier, our guest satisfaction scores remain higher than ever. We are committed to excellent service While providing the best value in the sky and maintaining our industry leading low cost structure. Earlier this month, we named Lania Rittenhouse As our Vice President of Guest Experience and Brand, furthering our commitment and focus to improve our guests' experience on the ground and in the air.
Lonia has served as our Vice President of In Flight Experience since December 2015 and has been a key contributor To our improving guest satisfaction metrics since joining Spirit. We are delighted to have Lonnie to take on this new role. Turning to our Q1 results. Demand in January February suffered as many jurisdictions were faced with another wave of the pandemic. In addition, about 12% of our network was negatively impacted by the new testing requirements for inbound U.
S. Itineraries. However, March brought better performance across the network, and the second half of March came in much stronger than we had initially anticipated. Load factor for the Q1 averaged 72.1%, but the last 2 weeks of March Averaged well over 80% with many days flirting with 90%. Total operating revenue in the first quarter Declined 40.2% year over year on a capacity decline of 26.9% year over year.
Although the sequential change from peak December to off peak January February was greater than usual this year as COVID-nineteen case counts had spiked again, We were encouraged by the steady improvement in operating yields and TRASM throughout the quarter even as we continue to add back more capacity. For the March quarter, fare revenue per segment remained significantly depressed, down 24.2% year over year. Non ticket revenue per segment continued to show relative strength, decreasing only 10.8% year over year. As has been the case since the start of the pandemic, non ticket revenue per segment for the Q1 was impacted by the suspension or reduction of certain booking related fees. However, as the quarter progressed and domestic and international demand strengthened, non ticket revenue per segment Began to improve significantly as well.
Furthermore, non ticket rate for April has rebounded strongly, and we can see a path to a 2nd quarter non ticket rate that is all the way back to flat compared to the Q2 of 2019. Moving ahead to the Q2 outlook. International demand has stabilized, and both our leisure and VFR international markets are doing relatively well. Florida remains strong. And as restrictions ease in other domestic jurisdictions, We are seeing balanced strength across the network with search and booking trends for the summer looking very solid.
Regarding future capacity, given the extreme pull down in operations for 2020, we believe it is helpful to compare 2021 estimates to 2019. Compared to the same periods in 2019, we anticipate capacity in the second quarter will be down about 5.5%, With April down 11%, May down 3% and June down 2%. For the full year 2021, we estimate Our base plan assumes capacity for the full year 2022 will be up about 30% compared to 2021. In 2023, the year over year growth rates should normalize back to our typical 14% to 17% compounded annual growth rate. Scott will add a bit of color surrounding our ASM targets And aircraft delivery stream updates in his prepared remarks.
In closing, I'd like to add that the revenue recovery has been bumpy as we had anticipated. However, the momentum we're seeing is strong and continues to prove out our low cost business model is alive and thriving. Our progress on non ticket production is 100% back on track, and peak travel periods are finally starting to see some yield firming. Our network opportunities continue to grow. The early numbers on our new cities starting in May June are encouraging, We are looking forward to full airplanes and continued revenue improvements this summer throughout the rest of 2021 and into 2022 and beyond.
And now here's
Scott. Thanks, Matt. It certainly feels good to now start talking about our return of demand and an eventual return to profitability. I'm proud how our team has rallied throughout the crisis and has handled the adversity in such a professional manner. I know they are excited to see where things are headed.
Now turning to our Q1 2021 financial performance, our adjusted net loss was $243,000,000 Or a loss of $2.48 per share. Our EBITDA margin for the Q1 was negative 43.3 percent, Which was better than our initial guide of negative 45% to negative 55%. Both revenue and non fuel operating expenses Came in at the better end of our implied guide. A stronger demand environment in the back half of March improved margins for the Q1 And provided a nice platform to think about a return to positive EBITDA at some point in the Q2. Now for the balance sheet.
While we obviously had a number of ins and outs, we started the Q1 with $1,900,000,000 in liquidity and we also ended the quarter with 1 $9,000,000,000 in liquidity, which includes unrestricted cash, short term investments and the undrawn amount available under our revolving credit facility. During March, we finalized an amendment to our revolving credit facility extending the due date from March 2022 To March 2024 and increasing our lending commitment by $60,000,000 bringing the total lending commitments to $240,000,000 The additional $60,000,000 remains undrawn. We also received a total of $184,500,000 during the quarter related to PSP2. We have been notified by Treasury that we will be receiving approximately $28,000,000 of additional funds under PSP2 that will be received in the 2nd quarter. In addition, under PSP3, we now expect to receive about $198,000,000 during the Q2 as well.
This will bring our total received under the payroll support programs to just over $750,000,000 Regarding our fleet, during the Q1, we took delivery of 2 direct leased A320neo aircraft. We ended the Q1 with 159 aircraft in our fleet. By the end of the Q1, we had 12 of our 31 A319s back into service and we expect to have about 20 in service by the end of the second quarter. During the quarter, we completed a purchase of 2 A319s off lease. This was a quick developing transaction and was not contemplated in our We've also elected to reaccelerate our seat replacement program.
With these changes, our new total capital expenditure estimate for 20 21 is now between $220,000,000 to $250,000,000 When we placed our fleet order in late 2019, We knew the order would not fill our entire capacity need, particularly in the early years. Since then, we have been able to move a few deliveries around to plug some of the holes in our During the Q1, we accelerated 6 deliveries from 20252026 into 2023. There is a modest increase in PDPs for 2021 driven by these accelerations. We will also be looking to A few additional 20222023 deliveries, most likely from less ore capacity to fund our targeted 14% to 17% Now for our forward looking guidance, we estimate our EBITDA margin for the 2nd quarter We'll range between negative 5 percent to breakeven. This assumes total operating expenses will be between $885,000,000 $895,000,000 Assuming a fuel price per gallon of $1.95 assuming D and A of about $74,000,000 the implied revenue range based on this guide is $782,000,000 to $811,000,000 And while the booking trends have been encouraging, it is still difficult to predict with precision Where demand, unit revenues and profitability will end up.
But given all of that, it is likely that we will get to positive EBITDA territory We will likely be negative on a net margin basis, but we do expect to be positive on EBITDA margin for the full year despite the rough start early in the year. As we look out further into the future, our base case for capacity for 2022 will be between 54,000,000,000 to 56,000,000,000 In 2023, we'll be between $0.62 to $0.65 On our last call, I talked about our CASM ex estimates for the airline will be below $0.06 once we get the airline back to full utilization around the middle of 2022. To reiterate, This CASM ex level is based on these levels of capacity. And as I mentioned on the last call as well, how far below We get will depend on few decisions we will make over the next 12 to 24 months. From a profitability standpoint, We expect we will be at or above our 2019 operating margin in 2023.
In closing, we are Pleased to see the Q1 close on a stronger note than we had anticipated. We remain committed to our goal to get the airline ready for full production by the summer of next year. Our focus in the near term, Mr. Brang, our parked aircraft back into service and get our crew levels ready to run the full airline, both while maintaining our reliable operations and we're right on track to do just that. With that, I'll hand it back to Tim.
Thanks, Scott. Since February, we've been busy on the hiring front and I'm excited to welcome all our new team members and to progress in our efforts To restore the airline to full utilization. While we acknowledge that the recovery is still in progress and may not be linear, We are very encouraged by the improvements we are seeing in the demand environment throughout our network. In addition, our guest satisfaction is high, Operations are running smoothly and our team remains focused on driving efficiencies throughout the business. Combine all that with an We are well positioned for the future, which gives me confidence that we'll be among the 1st U.
S. Carriers to reach Sustained Profitability. With that, back to DeAnne.
Thank you, Ted. James, we are now ready to take questions from the We ask that you limit yourself to one question with one related follow-up.
Thank
And our first question is from Mike Lindenberg.
Hey, Good morning, everyone. I guess, Scott, I just it's one accounting question. I know you've sort of given EBITDA targets and I think you mentioned that By 2023, I think you said that the plan is for EBIT to be at or above 2019. Did I hear that right, That it was EBIT?
That's right, Mike, operating margin.
Great. So just a question on when we think about I know that there was an accounting change in, I think, the last year or 2 with respect To how gains on tight to sale leasebacks are accounted for. Now do you run that through Operating expense or do you run that through non op?
I'm assuming you're talking about the accounting for leases?
Yes. Yes.
That still runs through operating expenses through aircraft rent.
So when you take a gain on a sale leaseback, you just run it through against the rental?
You're talking about the gain on the sales side. Yes.
So I know in the past, I think it was amortized against You take that gain and you would amortize it against the aircraft, right? I think now it's moved to operating expense or other operating expense?
Yes, that flows through the rent line.
Okay. Okay, great. And then just sort of related okay, so then that you answered my question. That's all I needed to know. Thank you.
Thanks, Matt.
Our next question is from Savi Syth.
Hey, good morning everyone. Matt, just help I'm trying to understand this a little bit more. Some of your competitors have talked about leisure fares 2019 levels this summer. If kind of leisure fares remain kind of flat with 2019 for the rest of the year, does that mean yield should be flat at Fair enough or does kind of the lack of corporate demand kind of create some fair bucket mix impact there?
Well, thanks, Salvi. I'm not sure I 100% understand your question. I understand the first part about it of Leisure Fares, so what some of our competitors talking about this summer and we do anticipate to see some strength this summer From a yield perspective, but I'm not sure I follow completely about how corporate comes into play.
And that's what I'm I guess I'm wondering is If there is corporate demand that's not really there, does that really impact your yields because you don't really fly corporate? Or does it have an impact because Maybe the fare buckets are a little bit different because you have more capacity going after leisure.
Okay, great. Thanks, Tommy. I understand the question Yes. So overall, as we talked about, I know you know this, it's just about supply and demand. So at the end of the day, we'll have to see Exactly how the capacity matches up.
It's definitely going to be different by region that's out there. We're seeing strength now. We do participate usually, it's more like the fall Q4, Q1 when there's more convention traffic out there. We do carry some of that traffic As people do tend to book a little bit further out on that and they're looking for the best rates they can find. But generally speaking, we're not In that corporate world, if your question is related to less corporate traffic means less demand for some of my competitors, Then we'll just have to see how that capacity flows through the network overall.
What we are encouraged by is our ability to See in peak periods that some amounts of yield management, we're able to deploy, which is a nice break from where we were as recently as say 6 weeks ago. So that's what's the most encouraging to us now. And we're able to deploy more yield management and not seeing a fall off in bookings at the Which is exactly what we hope to be seeing for the summer, and we're starting to see that occur as early as June and into the July 1st period.
Makes sense. Thank you for that Matt. And just maybe a clarification to you. Just you mentioned the peak to off peak drop off in January, February was a little bit bigger. How are peak off peak is kind of performing now?
Because I'm guessing you're seeing some off peaks in 2Q as well. Is that Similar to kind of prior or is there a bigger variance there?
No, it's definitely stronger now. So the trough in January February was exaggerated For sure. Like for example, May is typically I mean, it's an okay month, it's a shorter month. And we're not seeing anywhere near the kind of demand fall off that we In January February, we expect to have a relatively strong load factors throughout the entire second quarter. The yields Aren't as strong in May as they would have as they were, say, over spring break Easter, but that's totally expected, and that's what you'd expect to see.
So from a revenue management perspective, it's nice to see some semblance of seasonality also creeping back into the revenue management world. And that's That's just because it's you can plan better and you can make better risk decisions when you have an idea that seasonality is starting to Trend back to normal.
That's helpful. Thank you.
Certainly.
And our next question is from Duane Pfennigwerth.
Hey, thanks.
Just with respect to spooling backup, as you recall, crews and employees, Is everyone showing up that you expect to show up? Are you having any trouble finding folks? Are there any friction points in Pulling back up that you could point to.
Thanks, Duane. The good news is no. We've been Able to get people back through the training machine, I guess, As well as do new hiring. As is the case countrywide, in lower wage type categories, there is A pinch for I think for overall people, so you're finding that more at airports and places like that, where there's a lot of demand for those types of jobs. I'm talking about macro.
But we found that our ability to attract pilots, flight attendants, Technicians, all that stuff has been very favorable actually.
Okay, great. And then just with respect to the kind of more Specific or more explicit longer term growth plans. Is this new or is this sort of As the plan was contemplated and I guess from the perspective not that you've given us sort of full year cost guidance, but is there Cost pressures we should be thinking about as you look to execute this growth plan into 2022 and 2023? And thanks for taking the questions. Sure.
Well, let me cover the forward looking growth stuff and Scott can comment on how we've used costs, although he mentioned somewhat that in the prepared remarks. But I think given the ins and outs of the drawdown in the airline, the weird year over year comparisons, the 2 year comparisons, we wanted to just make sure we are clear on what our growth expectations were going forward. The answer to your question is not new. We've been consistently saying that we intend to resume our growth Trajectory of the mid teens, which this is consistent with, by the way, the numbers we talked about in our script. So Just want to make sure that we had full understanding of how that plays out from a growth perspective.
Scott, you want to provide any additional color on What that means for cost?
Yes, Duane. I think the point of what we were trying to do was to give some detail around it, because I know some of The numbers we have put out around our fleet and the order book, and it's kind of filling in the gaps and some of the changes that we've had The fleet have been a little confusing, so we wanted to just go ahead and put that out there and to reiterate the fact that the capacity that we were talking about here was Already contemplated when we talked about our CASM ex sub-six numbers. So this has been in the works. It's more clarification than anything We've just heard that there's been some discomfort around not understanding what our numbers are going to look like from a capacity perspective. So it's just clarification.
Got it. And then maybe just one follow-up there. If you think about the level of OpEx that's running through today, What are you sized for today? In other words, are you sized for 10%, 20% bigger than 2019 today? Or Are you going to sort of staff up to hit early 2022 growth expectations?
And thanks for these detailed answers.
Yes. Hey, Duane. That's a great question. It's a little bit of both. Right now, we have 3 19s that we're bringing out of Bringing out of the desert.
And so we're flying probably about an equivalent number of aircraft as did in 2019, probably around 140 ish aircraft. And so we have A crew level that is pretty similar, but we're going to have to hire a large number of crew Between now and the end of the year because the fleet will grow from an operated fleet from 140 to the end of the year we'll have 170 3 ish aircraft. So that's a pretty quick additional aircraft plus bringing aircraft back on the service. So That sort of infrastructure component is what we're talking about when we mentioned on the last call, of about $30,000,000 number of additional expense, Which is going to be maintenance and getting crew, flight attendants and pilots and some mechanics back into the fold, So that we can handle the aircraft level by the end of the year.
Okay. Thank you.
Our next question is from Jimmy Baker.
Hey, good morning everybody. At the end of 2019, I don't know how granular your profit plan for 2022 Was. But I assume you at least had something penciled in. Is your current 2022 forecast Suggest higher, lower or the same pretax income as what you were thinking pre COVID?
I'll give it a whirl, Jamie. It's Ted. I think the answer is lower because we're still in the midst of a And we still anticipate that the airline won't reach, as Scott has said, full utilization until the call it 2nd quarter, somewhere in there, but really the later part of that. So there's a drag on fixed expense because of that. So you've got the mix of a recovering revenue story and the airline getting back to the size.
I think those are both probably Net net negatives to what the story would have been in 2019 versus what we see today in 2022. Yes,
I would totally agree with that Jamie. And I think Another way that we're sort of looking at it is taking 2019 and really pegging a future date that we expect to get to a run rate, Our sort of run rate period is probably 2023. Like that said, there's a lot of water in 'twenty two. So really sort of book ending sort of 'nineteen And then beyond 23 is you're back to sort of status quo. But that period between now and probably 23 is murky.
Okay. It could be a range of outcomes.
Got it. That's helpful. And second, so I was recently reviewing your Schedule and obviously there have been a fair amount of sort of new market gyrations and changes in the last year. But overall, I would characterize Spirit as an airline that once it decides to enter a new market, it most likely Sticks with said market for a measurable period of time. Is that a fair representation?
And if so, why is that your decision? I mean, is there a downside to churning markets more quickly the way that Some other low cost airlines do?
Hey, Jamie, it's Matt.
Hey, Matt.
Yes. We believe the answer to your question is yes, there's a downside to churning markets like that. Now, let me clarify that yes, once we We spend a great deal of time making those determinations and calls. I spent a lot of time researching the city, making It fits our long term network plan and growth strategy. Once we're in the city, we will then see not every market It always works right out of the gate for us.
So if we go into Intercity announce 5, 6 new routes, if one of them isn't performing, We're not going to be stubborn about it and just sit there with it. We will then redeploy capacity and find what the right routes are for us in that city. But generally speaking, we're of the opinion that you make the call, you go into the city, and there's a long term intention to be there.
Got it. Okay, very interesting. Thanks everybody. Appreciate it. Take care.
Our next question is from Hunter Keay.
Good morning, everybody. The EBIT margin on 23%, that's a big number and I'm assuming you're talking about that in reference to the 13.5% margin you did in 2019. So the question is, is TRASM above 0.09 $2 is CASMex below $0.055 or is it fuel?
Hey Hunter, this is Scott. So I'll answer part of it. You guys But yes, that's right. It's around 13.5% is the baseline for 2019. I think there's a couple of points in there.
One is that, we've talked about our CASM ex number being sub-six. So that would imply some trends from appreciation and we That's there and Matt can talk about some of the details around that. But it's also a lower fuel number than in 2019 assumption as well.
And I'll add the fuel number is a mix of potentially the forward curve, but also more importantly burn.
Right.
That's right.
Okay. Thank you. And then, Matt, why did you change the name of the $9 Fair Club? And Thomas, did You have an opinion on that decision?
Thanks, Hunter. $9 Fare Club Has definitely had brand recognition and name recognition. However, the Spirit Savers We feel as we revamped the overall loyalty program and how all the programs work together, we felt it was more encompassing of the overall sort of Brand value that we give to people. And it's not just about the Savers Club isn't just about getting a fare. It's about saving overall and how the Savers Club has big benefits to ancillary revenue sales as well For the guests and that translates into revenue for us.
And since he's not going to say anything, I'll just say Thomas always
has an opinion on these kind of
things since you know him.
Yes. Well, I mean, the question was really about the DOT rulemaking, of course. And it's really an embedded question about sort of your expectation on The unfair just have to practice this in how this the branding of that might fold in, but we can save that for another time unless you want to chime in on it Thomas. I guess that's a no.
All right. Thank you.
Thank you.
Next question from Helane Becker.
Thanks very much, operator. And hi, everybody. Thank you very much for your time. Just two questions here. As you take in more leased aircraft, are you having to also So do maintenance reserves or are the lessors at this point comfortable with your balance sheet and your Track record that you don't have to account for those?
Hey, Elaine, this Scott, yes, we have not had any leases with maintenance reserves since 2013, 2014. So no maintenance reserves for us.
Okay. And then the ones on balance sheet, can you recapture that cash?
We generally do that in a couple of ways. Obviously, the reserves are meant to be recouped once you do the maintenance. So that's generally how that cash comes back to us. But we have also through the years renegotiated and extended some of the leases. And in that, we will typically have a discussion around what to do with maintenance reserves, and a large majority of those would generally get those back with an extension.
Got you. Okay. Thanks very much.
Our next question is from Catherine O'Brien.
Good morning, everyone. Thanks for the time. With the strength you've seen in non ticket per passenger throughout the pandemic, These products have driven a higher proportion of total fare than they have historically. Do you expect to see this trend continue Or with maybe some of the positive commentary we've gotten over this first part earnings season from some of your competitors on yields this summer, is that more normalized back towards fifty-fifty we've seen historically? Just any thoughts there would be helpful.
Yes, sure, Catherine. It's Matt. And thanks for the question. So We do expect we will see yield firming on the fair. That will take some time to get all the way back.
Between now and then, it's hard to predict exactly when Zen is going to be when the ticket yields are all the way back. There's a lot that goes into that, the supply demand environment being, of course, the largest factor there. So for a period of time, we will anticipate That non ticket production will be stronger than the ticket yield, but that's not necessarily the long that's not the long term design. We would expect to fifty-fifty in a more normal environment. And really we've always said that we feel like there's more room on the ticket yield To improve as well.
Non ticket will continue to go up. We're back on track there, and we anticipate we'll start to resume our March upwards on ticket over time in a very methodical pragmatic way. The ticket yields will catch up. And one of the things how that can happen is through network deployment and how we think about the network. And Unfortunately, the pandemic caused lots of issues across the entire world and especially for our industry.
One of the things that we Talked about pre pandemic was how we were going to think about our network moving forward and capitalize on our strengths and continue to build on our strengths And think about that a little bit differently than we had in the past. So we didn't get to deploy that plan. That is our anticipation moving forward, Which is why we're continuing to think strongly about Latin America and the Caribbean and how we think about our strengths in Florida, Las Vegas, California, New York, where leisure travelers want to go. And as we build upon that strength, we'd anticipate the upward ability for ticket yields to not just come all the way back to fifty-fifty with non ticket, but eventually get back higher than fifty-fifty over time. That might take a couple of years from where we are today, But we do anticipate we can get there through network deployment.
Okay. Very interesting. Thanks. And maybe just a follow-up Related to the network and capacity decisions, with legacy carriers just allocating more capacity to non traditional Leisure routes for them, at least for the short term here and some new low cost service entering the market. Like how does that impact your overall just what level of capacity you're adding back and maybe some of your route decisions?
And if it does, how? Thanks so much for the time.
Yes, sure. So the answer to your question is yes. Of course, we're taking a look at what's going on out in the network overall. Where we think there's good ideas, it's We're not we don't have a monopoly on good ideas. Other airlines can clearly do analysis and think about what they think are good ideas as well.
It doesn't bother us. We know where we think we can grow. I think the new cities that we're adding, we're making it Clear, I think, that we believe we're strong to Florida, Las Vegas, California, all the leisure destinations that are out there. And that's where you're going to see us grow. And we will continue to add new dots on the map that we think connect well to those places.
We did have a little bit of a hiccup in our international network solely because of the international inbound testing requirement. We redeployed some capacity in the latter part of the Q1 and into the second quarter. In fact, we took our Latin America and Caribbean capacity down from around, say, 19%, 20% like it was in the fall. We brought that down to around 15%, 16% in March, April time frame. By June, we're back to that same mix ASMs in Latin America and the Caribbean back up to the 19%, 20% level.
So we will move the network around where we think it's best And how we think about deployment of capacity. And yes, the whole industry is one big ecosystem in a way, We know that when we go into markets, we grow them, and that's the most important thing for us in our business model.
Understood. Thanks, Matt.
Absolutely.
And our next question is from Joseph DeNardi.
Thanks. Good morning.
Scott, just on the I think you said sub-six CASM ex in 2022. Is that for the full year? And then what's the trend for CASM ex Kind of after that, if you're growing 15%, like is the expectation that CASM ex is down every year after that? I think Pre COVID, there was a little bit of pressure on that. So maybe just an updated view there.
Yes. Hey, Joe. So I think the sub 6, We said it was going to be a product after we get to full utilization, which we said would happen probably around The middle of 2022. So the sub-six CASM, would happen at some point after that once we get the full utilization. And that's really sort of a marker for a full year number.
So we'll probably be in that range as we get there in the 3rd Quarter, but it's really meant for a full year barometer. Now obviously after that, we're going to continue to have the inflationary That are normal for our business. We saw that pre COVID. Those are not going away. We saw them in wages, we saw it at airports and amortization for us.
So those are not going away. But we're going to do what And to manage those, but those are still going to be headwinds. So I would expect the same sort of trend that we were looking at pre COVID to still be there. It's difficult to say what it will be in 2023 or 2024, but I think that's a good proxy.
Okay. That's helpful. And then Matt, I'm wondering if you
could just talk a little bit about demand stimulation as you see it just in the context of There's probably limitless demand to go down to Florida if the fare is low enough. Can you talk about how sensitive that is? Like if your average fare is $50 the market is
Yes. You're describing classic elasticity, right Joe? Yes. So and we Yes, for sure. So Every market is going to be a little bit different.
So I don't have a really like a rule of thumb to give you, Because the size of the market or the size of the city coming down to Florida or going anywhere for that matter will matter In that calculation, but what we do know is that we can stimulate demand and drive load factor We talked about in the prepared remarks the load factors that we saw and we're going to see strength in loads throughout the Q2 And the summer, it wouldn't surprise me if we're at or near the top of load factor for the industry For the foreseeable future. And that's from us being able to do that with our cost structure and the non ticket revenue production, while it took a dip In the Q1, which was really hammered in January February and there's a couple of different reasons for that, but the fall off in some of the issues we had with international Traffic had an impact. And as that regains its strength and comes back, we start to see that production come back. And when we go into new routes for that matter, we do think about non ticket versus ticket. So this does come into account and how we think about Where we go, where can we stimulate travel with a low fare, but where do we anticipate the attachment rate for products to be on top of that.
That's All part of how we think about it.
Okay. That's helpful. If I could just sneak one more in. Matt, why don't you fly to Hawaii and where does that rank on kind of the priority list Next few years. Thank you.
Yes, I can I guess Matt's looking at me? I'll hand it over
to Ted.
Yes. So Initially, let's start with what we know. Lower 48, Latin America, Caribbean, as far south as our equipment can go, that's the focus of the airline. There's a massive opportunity in that window or that geography and that's why we are focused there. Up until the introduction of the Neo, Hawaii was physically off limits for Spirit, because We couldn't
get there.
The airplane now can reach it. But it's as I said earlier, it becomes a Prioritization discussion and right now there's so much opportunity where we live and we know the markets well. It's better for us to stay focused there.
Thank you.
Our next question is from Andrew Didora.
Hi, good morning everyone. So first question is for Matt. I guess we're hearing over the course of earnings the past week or So a lot of airlines adding capacity into the peak periods, and there are more airlines now going after leisure than before. How are you thinking about your revenue management? Are you changing any tactics here in light of all of this, if at all?
Yes. Thanks, Andrew. So yes, there is more capacity coming back. We expected this capacity to come back. What's been nice at least for us is we've been able to deploy more constraint on our revenue management strategies in the peaker periods that are upcoming and we're very comfortable with the pace of demand that is transacting Relative to the constraint that we put in place.
It's still I wouldn't call it as strong as We would have hoped to see say for the close in period of late April into May, it's been relatively good compared to where we were a couple of months ago. But the we're definitely in a shoulder right now. As we head into the summer, what's been nice is, as we said as I just Yield Management has been able to hold, and in some cases, pretty decent fare levels. Our normal yield management strategy Is to pressure test yields and see what we can get relative to the bookings that come in. And then as we talked about before is generally I don't care where on the booking curve we get the demand.
We just know what we think we can go get from an average fare Perspective. So that's been holding. Now we'll see as we get in closer to the summer what the closer in demand Looks like our anticipation right now is that it will be relatively strong, and that we'll be able to hold our yield management strategies, Especially when we talk about the weekends of the peak periods, Tuesdays Wednesdays are usually the days where we can drive Extra demand, if we have to at lower levels. Generally, that traffic doesn't always just go 7 days a week, though. So it might go on an off peak day one direction, Peak day in another direction, and that's how we kind of mix the yields together for the best outcome.
Got it. Makes sense. And then just I have a follow-up to Hunter's margin question earlier. I guess what gives you the confidence in that PRASM appreciation over the next few years that you talked about, especially when you're growing, say, almost 50% between now I just don't there isn't just a whole lot of precedent for that type of RASM growth in the model. So just curious your thoughts there.
Right. So I think it's 2 things. 1 is, it's where we're deploying within the network and how we think about development On new routes versus capitalizing on the strengths that we know exist. So I think that's one piece of it is network deployment. And the second piece of it Is our non ticket strength and the way we expect non ticket to very methodically just kind of march up Slowly but surely over time and hold where we are and then keep moving up from there.
We've been able to get we anticipate We will be able to get back to flat in the Q2 this year versus 2019. We can see a path to get there And that is while we're in the pandemic. So a lot of the strategies and new technologies that we've been able to put in place, we think Will set us up well as we come out of the pandemic as well. And that's on top of just relaunching our new loyalty program and the Savers Club rebranding. There's a lot of different pieces that feed non ticket that give us confidence in that statement.
Got it. Thank you.
Certainly.
Our next question is from Brandon Oglenski.
Hey, good morning everyone and thanks for taking my question. Ted, I appreciate the outlook from the team here and definitely a strong one in 2023. But we have a couple more public comps now in the group. And if we look at valuation, it does appear that investors are a little bit skeptical on your ability to And I guess that's somewhat warranted because we did have some prior execution issues pre pandemic. So What can you give the investor base confidence and that the outlook can be achieved and that lessons have been learned from the past?
Thanks, Brandon. So yes, there are a couple more comps in our space. I don't know that we have enough information to say for sure that there is a premium devaluation because we haven't seen any numbers. There's a market cap discussion, which could be related to a variety of things, which could be balance sheet, Could be forward looking estimates, could be a bunch of stuff. But to get to the heart of your question is, what are we doing to ensure that we are I think we have 10 years of track record here as a public company.
I think our I think we've shown that we while you mentioned, for example, we have had operational struggles maybe in 2019. I think We've proven to ourselves and to the market broadly that those things are behind us. I think we were starting to enter into a phase of really renewed growth opportunity pre COVID. I was feeling like and I think We were hearing back that our network deployment decisions and the way we were going was very much in line with that. So the best answer to all of this is execution.
It's delivering upon the promise. It's hitting the numbers. And I think our At least our history to date has gives us credibility and I think we're going to build on that. And We'll worry about the comparisons later because we're focused on being the best airline in the business and I think we're on our way.
I appreciate that response. Thank you.
Our next question is from Christophopoulos.
Good morning. Thanks for taking my questions. So just getting to the topic of yields here in If you could comment on what you're seeing on fares now and if business and long haul international Stays longer on pause for your competitors. How if you could give some color on how you're thinking about Managing yields, whether that means more opportunistic on closing yields. And second question, with the recovery in ASMs here, any color on the cadence Of cost or CASM ex and just remind us what percent the mix of fixed versus variable cost and if there's a benchmark As ASMs recover, whether that's marginal cost per mile or something else that we can look at here to get a sense How productive ASMs and costs are being deployed here?
Thanks.
Hey, Chris, this is Scott. I'll start And then Matt can fill in the first part of your question. I'll talk about cost. So for this year, I mean, we've talked about 2.1, we ended Q1 at about $0.074 from a CASM ex perspective. We've talked about sub-six Towards the back end of 2022, and so we'll probably see probably somewhat linear progression between 1st quarter and the sub 6 number.
So, we're looking at 2nd quarter probably in the high 6s, we'll end the year probably in the low 6s And that will trend towards a sub 6 number in 2022. So I think that's probably the best way to look at it. And we've talked a little bit about What that means for beyond that? And from a fixed variable perspective, as we've mentioned before, The best barometer is probably fifty-fifty, but obviously that moves and we're going to get into technical components, but that fixed variable component moves closer you get to departure, but if you generally thinking about it at a medium term level, it's around fifty-fifty.
Okay.
Okay. And for the your yield management question, Chris, I'll try to restate to make sure I'm getting it right here. But If corporate demand and or long haul international takes a little longer to recover, then what does that mean in terms of Spirit being able to deploy proper yield management and how we think of yields. There's a couple of different ways To think about that, in the grand scheme of things, in the big picture, we want the economy to be all the way back and roaring back, which it will. We want that too.
So it's just great overall for everyone involved when that occurs. So we are not rooting against these kinds of things at all. We want the economy to rebound. In terms of if it takes a little bit longer to recover, we may see that. And we talk about that, and we're anticipating as we get past the summer Into the early parts of fall, that's a question mark.
And it's not anything that I'm actually really worried about as well. So if we see a little bit of a lull In September or October, maybe not dissimilar to just a normal shoulder period, that's fine, because once we get back to Thanksgiving and Christmas and beyond, we'll be back into the Giving and Christmas and beyond will be back into the heart of leisure peak season and we know we will perform extremely well. And then as we head into 2022, everything will move along fine. So if there's another 6 or 8 week, lull Post summer, it's not anything we're worried about. And in fact, we're already thinking about that and thinking about how we deploy yield management strategies in the event It's nice to be the low cost provider.
We have the ability to stimulate travel and work and use elasticity to our benefit and just get more people on the aircraft and make it through till we get to the holiday periods. So that's the way that we're thinking about it right now.
Thank you.
Sure thing.
James, are there any more questions?
No. No more questions.
Awesome. Thank you everyone for joining us today and we'll catch you next quarter.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.