Maybe I'll give each of you guys just a chance to make a quick intro, and then there's a lot to talk about, obviously, about the deal, and then we'll spend some time talking about the environment as well.
Okay. You want to go first?
No, go ahead.
Oh, really?
Yeah.
First, as it relates to what we're seeing in the environment, demand's obviously very strong. We went very late with our earnings call, so I think we were seeing a lot more of it. No reason to update right now, but everything that we said there is very consistent with what we're seeing right now. Very positive demand environment. Probably clearly unit revenues that we haven't seen in approaching a decade. Very good news there. No doubt you're going to explore where we are on the transaction. We're very excited, obviously, for the two of us to get our deal done. We have a vote with our shareholders on the 10th of June to approve the merger transaction.
We're making sure we're out there spreading the truth and eradicating disinformation, which there is some in the market right now, so we'll spend some time going through that today. Yeah, really good environment right now.
No, it's probably the best environment I've seen in three decades. I think we're finally getting the reopening trade that everybody expected, and we're seeing really good things. There's probably more room to run, right? The mask finally came off, but you've also got international testing at some point will go away. Business travel, just look at this room. I mean, it's starting to get full again, and we're probably two-thirds of the way there. More legs to run, but obviously, I think everybody, what's on their mind right now is our deal, and we might as well jump into the questions.
Now, before we get to the deal, right, so you're both saying we've never seen a pricing environment like this before. Why then are we so excited about adding so much capacity if we can in the second half of the year next year? Why not sort of stay disciplined on capacity and say, "Let's keep this unit revenue environment going?
I mean, our model is about growth and low fares. That is not the way we think about things. I think what it is telling us is there is significant demand for low fare product. We are still underflying our airline today. We are not at peak utilization. That will happen sometime in the very tail end of this year. Even though we are up year over three year in capacity, we are still not where we want to be. I think what this demand environment tells us is, geez, there is a ton of people ready to go, and that is what our model is about.
Yeah, look, and you and I talked about this. I think your first note in the industry, we were 100% aligned with you. We got burned last summer. We did not plan on the Delta variant. We had too much capacity. Then we got burned again with Omicron. Q1 was actually horrid. In fact, right when you came on, we were starting to say the same thing of, "Okay, everybody, stop worrying about CASM and let's worry about profitability." We started making changes, especially as oil started to go up, to kind of lower capacity. We are still going to be in the 10-12% this year of growth, but like he said for Spirit, we are lower utilization. We need to get those aircraft back working at some point, but we focused on profitability, and we are constraining capacity.
In fact, we have excess staff in several areas as a result, but at some point, we do need to operate and exploit our fleet. No, we agree with you. It's time to make money.
Okay. We'll turn to the merger now. I'll start. As you have questions, raise your hand. We'll get you involved. We'll get to regulatory in a second, but let's put regulatory aside for a second. Ted, I'll ask you this. Why is Spirit Frontier a better fit? Again, put regulatory aside. Why is it a better fit strategically than Spirit JetBlue?
It's hard to completely avoid the regulatory answer to that, but I'll do my best.
Maybe this is just a regulatory issue.
It starts with what we explored over the years. Look, we're an active management team and a board, and we've looked at opportunities the whole time I've been at Spirit across the space and engaged with a number of airlines on opportunities. We kept coming back to the most obvious answer. I think it shocks no one in the room to realize that these two businesses are very similar in their approach. We have nearly identical fleet types. We have a similar product, the way we approach the market. When you look at the networks, they're very complementary as well. The more we kind of explored things, the more obvious the answer became.
This is a business that can really exploit utilization and growth and drive significant value to shareholders and at the same time do it in a way that's positive in this regulatory environment because we're going to use this opportunity to drive more low fares for consumers. We're going to save consumers a bunch of money as well. Difficult to kind of just distinctly look at it that way. I think when in comparison with another transaction, in this case with JetBlue, but you could say that the same narrative would be true with American or Delta or United. That's a high fare airline buying a low fare airline. It's a very difficult narrative to sell and not consistent with the business we operate. We're not sellers.
This is the transaction that we've structured between the two of us is that we both participate in the return to normalcy. We both participate in the synergies because it's an equity deal. What's being talked about out there is there's a cash offer and a premium to what we trade at today, but what's being missed is that we're going to get significant value out of this thing over time, in fact, well in excess of our standalone plan and well in excess of any numbers that have been tossed around by JetBlue. This is a very accretive deal for shareholders, for team members, and for the consuming public. For that reason, that's why we settled where we settled. I think I'm speaking for you, but I think you guys feel the same way.
Oh, yeah. Look, I mean, from a consumer perspective, hands down, I mean, they win with a billion dollars of savings. It's all about getting more low fares to more people in more places. Contrast that to raising prices on people. I just think that's a bad idea. For our employees, look, we're both growth companies. We've laid out what that looks like, and so there's significant upside for our employees. For our shareholders, the synergies. There's $500 million in EBITDA. As you mentioned, I mean, it seems to be lost that the Spirit shareholders are getting almost half the benefit of that. We're really excited about the deal.
Okay. Let's talk regulatory. Maybe I'll give each of you a question. Ted, why are you so confident that JetBlue, Spirit can't get regulatory approval? Barry, why are you so confident that Spirit Frontier can get regulatory approval? Because someone might say that you guys have more overlapping markets. You've talked about that, so I'll give you a chance to address that.
I'll go first with why I think JetBlue can't get regulatory.
Sure. Yeah.
Okay. I already said one of the primary points, which is, and by the way, we deal with the regulatory environment and the Department of Justice and the administration we have, not the one we wish we had. Okay? The one we have today says, "We want pro-competition. We want low fares." What JetBlue has said is that they intend to take seats out of the market and raise fares. We view that as a problematic narrative. That's number one. Number two is that they're currently in active litigation with the Department of Justice on the Northeast Alliance with American. We've been a vocal objector to that alliance. It strikes me as it stretches credibility to assume that you could get a transaction approved when you thought your prior transaction was going to get approved and you're being sued over it.
When you look at the totality of what it is, and I'm hearing that their narrative is, "Well, you basically have similar regulatory risks." We disagree. I mean, I think you look at it and you say, "Well, a high fare airline buying a low fare airline, taking their product out, we're the biggest ULCC in the Americas today. You would remove all that ULCC capacity, remove about 20% of the seats from the market, and raise fares," which they've said they're going to do.
Now, just to follow up on one thing, JetBlue would say, "Hey, we'll know about the Northeast Alliance in the fall. Either they're going to approve it, in which case it's not an issue, or they're going to block it, in which case it's not an issue." That's what they would say.
That's right. In both cases, it's an issue because if the government approves the Northeast Alliance, then they have, in fact, committed a de facto merger with American. Now you're talking about collapsing a ULCC under one of the big three network airlines. Look, you don't have to be an antitrust lawyer to know that that's a problem. Right? I mean, I don't understand their narrative. The second thing would be if actually they don't get it approved, the government wins the lawsuit. At that point, they're going to appeal. Probably both airlines will appeal. That turns it into a protracted discussion. At the same time, justice will be emboldened because they've now won against an airline to fight competition. At that point, they'll probably feel like they have a pretty good argument.
By the way, JetBlue has never disagreed that they're going to get sued on this. They told us early on that they know that our transaction, to the extent that they move forward with it, they would get sued. I think that their very acknowledgment of that tells you that they don't really have supreme confidence in the idea.
Now let's go to Barry. Then Ted, if you want to jump in on this, you can too. What gives you confidence that Spirit Frontier will get approved? Do you think we'll get approved, but hey, we'll still get sued? We'll have to go through a full fight on this.
This is hard to do, but let's all rewind our brains a few months. Let's go back to January before any of this was announced. Let's think about the landscape that existed. The big four dominate this country. The high-cost, high-fare carriers dominate this country. Couple that with last month, you saw CPI, 18% higher airfares. You already had the hegemonic domination of these guys controlling the market and making it difficult for carriers like ourselves to grow. You look at a time more than ever that we need access to low fares. What this does is it enables both of us by merging together to continue to do what we do, but do it even better. It enables them to fly to places that maybe we couldn't do on our own, opens up even more markets.
That is what gives more people more choices of low fares. That is where the $1 billion in savings come from. When we look at it, we believe on the merits that the Department of Justice will, I mean, I know that they are predisposed to evaluate these and be skeptical, but I think they are going to agree with us at the end that this is really good for consumers. That is why we believe that this is the right thing to do.
The pushback from the other side is that this transaction actually has more overlapping markets?
That's having fun with math. It reminds me of a Dilbert cartoon, just fiddle with the number until you find a number that you can get to. I mean, if you look at the three to twos, you look at the two to ones, we only have two markets that together we would go to one carrier. They're day-of-week markets from Orlando that neither one of us flew to, islands, by the way, leisure islands that neither one of us flew to five years ago. I mean, it's being cute with the math. They talk about numbers, we both also fly to a lot of routes. Let's look at percentages and let's look at concentrations and look at what we do when we're by ourselves. If you look at Atlantic City, where Spirit flies, and they're 100% share, they have a monopoly, if you will.
Same in Trenton. Right? We both control these. Left to our own devices, guess what? They're in the bottom 10%-20% of fares in the country. So we do what we say we're going to do, which is provide low fares to people and enable them to escape high fare.
Yeah. Overlap in and of itself is a distracting discussion because it will shock. Maybe I will just tell you guys. We have less overlap with Delta than we have with JetBlue. Does anyone in this room think that we can get a deal done with Delta? The answer is no. There is no way it is happening. Overlap in and of itself is not the way to think about it. The way to think about it is we are low fare, they are high fare.
Got it. Let's now talk about the process from here.
Sorry. Meeting over?
I thought. Yeah, I thought it turned around.
Vote is June 10th.
Right.
What, if anything, are you hearing from shareholders gives you confidence we're going to get the yes vote that we want?
The shareholders I talk to are excited about this deal. They like what the transaction brings. They like the synergies. They like the growth opportunity, all of that sort of thing. They are asking the questions that you would expect they would ask as a result of JetBlue's insertion into it, which is around what we just discussed. What's the regulatory risk? JetBlue's an all-cash deal. You are an equity deal. How should I feel about that? They are definitely asking questions now that they probably were not asking two months ago because we just had a very attractive transaction to talk about. I think as we just kind of talked about, I think the facts bear out that we have a very good deal for our shareholders.
The vote that they put in place on June 10th is not a vote for whether or not we do a deal with JetBlue. The vote is standalone versus a merger with Frontier. In all cases, the merger with Frontier is accretive to the standalone case because our standalone case is base case. Right? In both airlines' case because we participate in the upside. I think when you think about it that way, that is what you are really voting for because if you do not approve the transaction, then we are back to standalone, which we do not think is the best answer for our shareholders.
I'm sure you love hypothetical questions, but in a world of a no vote, hypothetically, what happens from there? Is that about raising offer? Where do we go from there if we end up getting a new vote?
I'm sure he's going to love to talk about that idea.
Look, you said it's hypothetical. Let's not speculate on that. I think we've got a vote in front of us with the Spirit shareholders, and let's focus on that.
Okay. We get the June 10th vote. Hypothetically, we get the yes vote. Where do we go from here? What's the timeline from there?
We're already in the midst of our regulatory approval process on this transaction. We filed for HSR in March, and we did receive what's referred to as the second request from the Department of Justice in April. The two of us have been working with them to satisfy that request. At the time we made the announcement in February, we assumed that we would be at the second half of this year, tail end of this year for approval. That's still the target. Everything that's happened to date is very much within that expectation. That's the work that's being done.
Just one thing I was just wondering about to clarify. You're having conversations. You can have your antitrust conversations. As you're having those conversations about Spirit Frontier, can you get a feel on Spirit JetBlue from the regulator, from antitrust? Can you pursue both from a regulatory path at the same time?
I mean, the answer at the highest level, which what I'm involved in is no because we filed for approval for our deal, and that's the deal we're working on. That's the deal that we're interacting with Justice on. Look, we hired preeminent experts in this field to advise the board on the regulatory risks. We hired the best economists in the industry, former DOJ economists, to help us evaluate the JetBlue argument. It was debunked. I think that's enough. I mean, we've done our work, and we're comfortable that this is the right transaction.
Okay. Now let's talk. What does the combined Spirit Frontier, what does it look like? You talked about the synergies. Maybe just give any changing view on how those synergies are. Should we still be expecting synergies in 2023? Maybe a question, why is the majority of synergies not until 2025?
Do you want to go first?
Yeah.
Look, I mean, we do not have down to every little detail that plan. I mean, that was put together. A lot of the benefits, for example, were actually quantified by independent third parties on both of our behalves. It could be much sooner. I mean, some of the things that immediately you will get benefit from within probably 60 days, you are going to the spirit.com is going to start selling our metal. Flyfrontier.com is going to sell theirs. That will benefit Spirit in the west, us in the east, and vice versa. I think there are immediate synergies, as you mentioned. I think there is a lot of things that will happen quickly. The longer we wait, I think is the bigger problem, is the sooner we start, the faster you get the synergies.
How do we think about the growth rate of this combined business from a capacity standpoint? Meaning, if you were to take your standalone capacity growth, your standalone capacity growth, as you thought about over the next few years, are we just putting one plus one is two, or is one plus one now two and a half? Is it one plus one is one and a half? Is there a little less in aggregate capacity growth? How do you guys?
It is probably one of the more exciting parts about this for both of us. The fleet orders are the fleet orders, and those are not going to change. The standalone fleet growth on either side is one plus one is two. Okay? The value of the transaction is that as we gain scale, efficiency businesses gain more efficiency. ULCCs are at the pinnacle of efficiency businesses in the aviation industry. One of the drags on efficiency is the fat that you have in the schedule and the fat that you have in your fleet allocation, which is spare aircraft and the scheduling time itself. As you gain scale, those things get more efficient. Today, we are 180 airplanes. You are 120 some odd. We have, let's say, I am just picking numbers. We have five spare aircraft in our fleet today.
Let's say that Frontier has three. Okay? We go to 300 airplanes. We do not need eight spares. You need less than eight. So physical airplanes actually get released back to the schedule and can fly. That is the most valuable marginal accretive type stuff in an efficiency business. It is no more fixed costs and pure revenue upside. That is why one plus one is a little bit greater than two. We have been told by these third parties that they estimate it to be about $400 million in op-line benefit, which is largely what I described. Some of that is distribution and a few other things. We have not even tinkered with it yet. I mean, I am actually thinking that number might be conservative.
Look, one plus one is definitely more than two. From a certainty perspective, look, again, let's go back to what the backdrop in this country is. I mean, it's very difficult for smaller carriers like us to get a toehold in the markets. Together, this is about competing with the big four and bringing low fares. I think we will bring much more certainty to our growth plans. Probably we should be able to grow even more as a result of being together.
Help me think about this. You're talking about all the savings for the consumer, so lower fares. How does that drive the synergies for people in this room?
Yeah. For shareholders.
Yeah.
The biggest thing is actually same metal, same flying. Day one, we drive over 300 new O&Ds. You have more markets on a connective basis without any effort. That is without any optimization or even trying to schedule it. In fact, their chief schedulers sitting here in the room. I'm sure.
He can't wait.
He can't wait. I'm sure we could work together at some point and produce even more. That is what you get just naturally. Back to the distribution benefit. Day one, we're going to push more of theirs in the west. They're going to push more of ours in the east, as an example. Our load factors are going to go up. That gets more low fares for more people, and shareholders win through more revenue. It is a win-win.
Do we have anything in terms of brand and where we're ultimately going? You guys talked about that or disclosed anything there? Nothing?
Nothing new. We both have strengths. Both brands are strong in both geography and for different product reasons. That'll be a debate for the combined company board. I think the decision will come over time.
What about labor? What have been the conversations with labor so far? Can we start negotiating with them? Do we have to negotiate with them separately for now? Can we start talking altogether with labor? How does just the mechanics of how that works?
Yeah. Look, the mechanics are you need to get through two big milestones. One, you need to get through the Spirit shareholder vote. Then we need to get through the regulatory process. I'm sure when we're ready to and we can, we'll have conversations. We've had some dialogue already. We have initial agreement with the AFA. I know they're really excited about our deal, as an example. At the appropriate time, we'll be able to put together the right JCBA.
Can you guys maybe just each give an update since you've announced the deal? What's been going on with pilot attrition at each of your airlines?
Sure. I'll go first. Yeah. We've definitely seen an uptick in attrition since last year. It probably started to—we started to see it more in the very, very tail end of last year and the beginning of this year. I'd say that it's sort of leveled off and stabilized at this point. What we had to do at that point was adjust our training throughput, make sure we adapted to that, which we've done. We're still seeing applications that are good numbers. Yeah, that is something that we definitely saw. I think that's a product of the majors hiring back those people that they early retired. We've adapted to that. Yeah.
Yeah. Same thing. We've seen higher attrition than we had. We upped our throughput. The applications there, we have over 2,000 qualified applicants in our pool right now. To give you an idea, we're only hiring in the 40s per month. Plenty of applicants that are out there. A lot of people wanting to join us. We have increased our training footprint, though. We can actually train up to 80 a month, even though I only need to be in the 30s to 40s. We're preparing for the next shortage, which is going to be simulator capacity.
Can you talk about that?
What's that?
What you just said.
Simulator.
Yeah.
Yeah. The challenge is, and it's not so much carriers like us, but a lot of the big airlines that kind of have the Noah's Ark of two of every type of fleet type. When the pilots move between these and they upgrade to captain and all that, it just requires lots of sims. Those cascade events, you took, for example, some of the legacies where they took a lot of people and retired them out during COVID. They were on a triple seven or some type of wide body. That can cause up to five to seven different training events, just one movement at the top. All that cascade drives a lot of training. You need a lot more simulators. They're not building simulators just for a bulge. They need a long-term return on capital.
It's going to cause a short-term squeeze, I believe, in the simulator world.
Now we've got pilot issues, training issues, simulator issues now, aircraft issues. Is there any sort of end in sight to this that's going to sort of alleviate some of these artificial capacity constraints on the industry?
As I said, and I think I heard Barry say the same thing. We've adapted to the primary issue right now, which is increasing the throughput, increasing the size of our schoolhouse. We're hiring more pilots than them right now. We've more than doubled the size of our schoolhouse as well. Seeing good applications there. I think in that respect, we've adapted to it and moved ahead. We've acquired the necessary sim capacity we need to make that happen. The broader issue is availability of pilots. I think that tends to be the narrative of today. Yes, there is a post-COVID scarcity problem right now because of the early retirement stuff that we just discussed and that sort of thing. Our expectation is that over time, market forces will adapt to that.
More people are applying to get private licenses today than they were five years ago. More people are getting their ATP certification than they were five years ago. It's just got to kind of work its way back into the snake. It has to work its way through the snake.
Just to follow up real quick, Ted, so you've 10% ASM growth second quarter. But you've got a pretty meaningful step up implied in the back half of the year, particularly fourth quarter. Do you feel like, based on what you know today, that you can actually still hit that implied run?
Yes. Yeah. I mean, part of the issue with our summer is we would have been bigger than 10%. We throttled the airline not because of availability of resource, but because of the challenges we saw in the Florida airspace with Jacksonville Center. You guys know we're headquartered in Florida, but we also move about 60% of our capacity in and out of the state of Florida. As has been widely reported now and acknowledged by the FAA, they're having staffing issues at some of their air traffic control centers, most notably in the Jacksonville Center, which is the one that controls the choke point at the top of the state of Florida, controlling basically all the capacity on the eastern seaboard, which is the biggest O&D market in the United States or one of the biggest.
We had to throttle our Florida capacity as a result of that and could not redeploy all of it. We are actually underflying even what we were underflying before. The infrastructure is all there. The pilots are there. The flight attendants are there, which is not great for cost. Right? Moving to the tail end of the year is not about trying to ramp up anything. Everything is already there. We are just saying that we have resolved some of the issues with Florida being an issue, and you are going to see us move to that capacity.
Has Florida resolved their issues at ATC?
No. No. That's what I'm saying.
The growth is not the big ramp in third, fourth quarter capacity is not in Florida. It's elsewhere?
There are two things at play. We will be obviously deploying in other places once we have time to move the schedule in that direction. Also, we've made network changes to the way we actually crew that's going to enhance reliability in and out of Florida and other places. We're opening two new bases this summer. One of them is in Florida. That'll actually enhance reliability in the state. When they do have a problem at the air traffic control center and they shut the state down, we're going to have more recoverability to it than we had prior.
Okay. Anything you want to add to sound like when do these capacity constraints relieve and your ability to sort of ramp capacity?
Sure. Sure. Look, I think the pilot constraint is real. There are also aircraft constraints. Let's talk about both of them. In the pilot world, I mean, Ted kind of alluded to it. If you've been around a general aviation airport in the United States, you can't see any airport that's not busy. Right? All the flight schools are busy. You can't buy a Cessna 172. Right? I mean, they're all working. They're all out there training. If you talk to the general aviation aircraft manufacturers, they're booked out. I mean, year and a half, two years backlog. You've never seen the amount of interest there is that we have now. The challenge is that just takes time for them to flow through. You're talking several years for you to solve this overall, this pilot shortage, if you will.
The second issue that has not been as focused on but is real is the aircraft manufacturers. Both of us are fortunate to have order books in place. The constraint is real. If you look at the manufacturing capacity and what is out there, especially at these fuel prices and people expect it to remain elevated, you are going to have constraints on capacity for several years. That is why it is so important. Airfares for the industry are going to have to go up to cover even the debt loads and so forth. There are plenty of things that people like from your constraint point of view. That is why our merger is so important. It is because more than ever, when fares are going to be high, you are going to need access to low fares. The constraints are real. They will be there.
In that backdrop, that's why the merger is so important.
We get the question a lot about fares up so much. At some point, there's going to be demand destruction. Your view on that, Barry, and is that more of a risk for ULCC model or someone else's model?
I don't know that it's a risk for ULCC model. I mean, if you look through history, Dollar General, Walmart, I mean, if there's any kind of recession, it's models like ours that win. In fact, I'll spot you the answer. In 2008, 2009, I mean, the only airline that made money during the financial crisis was actually Spirit. Why is that? It's because people trade down. That's what happens. You'll see the same thing happen again. I think if you say, "Where are we at in what people are paying for airfares?" I'll just talk generally, not ourselves or ULCCs. If you look just generally, airfares over the last 20 years, and you'll blame us maybe for causing this, but in your travel wallet, what people spend on vacation, we've literally traded places with the hotels.
They are now the biggest portion. If you look at today, again, back to input costs, there probably needs to be some right-sizing of that share. You probably need to see airfares come up and probably cars and hotel go down as a percentage. There is plenty of room to run without the total travel wallet going down.
I finally just had one of those trips, by the way, that flew.
Where the hotel was more expensive.
No, no.
Oh, where the airfare was more expensive. Okay.
No offense. I mean, to safely and reliably fly you across this country should cost more than staying in a hotel. Let's just be serious. Right? I mean, you're involved in a lot more things, a lot more inputs, a lot more complex costs. And by the way, they don't even clean your rooms anymore. Let's just be clear. There's plenty of room to run. I think that's there. The other thing that, and this is early, but we're not sure if this is because of trade down or people are making more money. We're seeing incomes up significantly versus pre-pandemic. Again, like I say, I don't know the—we're just looking at the raw numbers, $100,000, $200,000 household incomes. It's going up. We're perplexed by it. We don't have enough data on it yet.
Again, it could be a little bit of trade down, but people have more money. They're making more money. If you look at the bottom end, you're talking huge % increases. I mean, just take what a baggage handler in Denver made seven, eight years ago, $9. It's now over $20. They've doubled. I mean, if you look, the bottom end is finally seeing the income increases that we need. It's enabling more people to afford to travel. I think that demand is there. I would be surprised if we're at anything less than the second inning of this.
Okay. We're running out of time. I just want to ask each of you one last question. Both of you, Kasim, second quarter up 30% plus year over three year. Where do you see that finishing the year? Then early thought, 2023, up, down, or more specific if you want to.
Yeah. I'll go first. Yeah. Are we talking Kasim?
X.
X.
Yeah.
We're still, as I said earlier, still underflying the airline, still not at peak efficiency. It's difficult to look at the unit right now, both at unit revenue and unit cost, to be honest. I think Barry said it well earlier. It's about profitability. Our strive is to get to profitability. Clearly, we're a unit cost business. We know that. We're focused on that. We've had a target of getting back to a much more normalized rate pre-COVID. I think that's still our objective. By the time we hit the end of the year, really the very end of the year, we'll be at about 95% peak utilization. Getting closer, it's going to be the turn of the year before we get probably to where we really want to be. Then we can start looking at the units more efficiently.
Look, what we know for a fact is that the CASM advantage is widening, both in absolute and in most cases, percentages. Everyone's seeing pressure. Inflation has been worse than I think we would have projected six months ago, although we were already saying we're seeing clear inflationary pressures on wages and airport-related expenses. It's probably worse. I think the absolute CASM number is not going to land where we want it to be. I think the advantage actually widens.
Because you said profitability, you think you can get there in third quarter?
Yeah.
Yeah, look, Scott, the irony, I mean, you were not covering the space, but in the second half last year, I was getting friction from people like yourselves and investors that, "What are you doing flying so much capacity? And why are you not focused on profitability?" We focus on profitability and now, "Oh, wait, what happened to your CASM?" It is just mechanical. We have three things. One, we are underutilizing our planes. We have surplus excess staff. We have the ATC issues. Also, we were concerned about fuel. You have underutilized planes, underutilized people. Then you have the fact that our stage shrunk significantly. We are down almost 100 mi, almost 10%. It is just mechanical. We are continuing to flow back through. By the fourth quarter, we will be near, not full, but near full utilization.
You start seeing that low six number again. As we've said, our target is to, and it's sometime in 2023, get back to that sub-6 cent. We haven't changed that.
Okay. Ted, Barry, this was great. Thank you guys for being here.
Thanks, guys.