Good morning, everyone. It's great to see you all here. Thanks for joining us for Frontier's first Investor Day since we became a public company last year. I'm David Erdman. I know many of you. I'm Senior Director, Investor Relations. We've got a really informative agenda for you this morning. A great lineup of speakers that consist of Team Frontier Management. These are the folks that are actually sitting in the back of the room, so that we're not blocking your screen behind me here. We'll hear from each member of management, and then we're gonna hop into a Q&A session. For those who are on the webcast, you will have the ability to issue a question through the chat feature.
We'll be sure to be able to to try to get to those questions. Let me first cover, of course. Here's the agenda actually for this morning. Apologies. Let me quickly cover the safe harbor provisions. We will be making forward-looking statements today which are subject to risks and uncertainties. I'm not gonna go through the slide. We are gonna be referencing non-GAAP measures. There is a reconciliation in the appendix of that presentation which got posted to the website this morning. Certainly invite you to reference that. Without further delay, I'm really proud to introduce Barry Biffle, President and CEO of Frontier Airlines. Barry, take it away.
Thanks, David. Thanks everybody for joining on our inaugural Investor Day. I also wanna thank Nasdaq for doing a fantastic job putting this together. Before we get going too far, we would like to have a quick video presentation.
Welcome to the decade of the ULCC. People are returning to the skies like never before. Their lifestyles, income, and work flexibility are fueling a growing demand for affordable travel. Frontier Airlines is best positioned to exploit this leisure travel boom. Frontier operates with the lowest total cost per available seat mile over every other U.S. carrier. We intend to maintain this advantage as one of the fastest- growing domestic airlines. The introduction of the Airbus A321neo will drive significant cost savings. At 240 seats per departure and more than 120 ASMs per gallon, it will maintain our position as the most fuel-efficient airline in America. We're also re-engineering our operations and rethinking everything we do to put further downward pressure on our unit costs, such as airport automation, contactless care, and enhancing network reliability.
We're harnessing the recovery and demand for leisure travel, and perhaps nothing demonstrates this better than the performance we're seeing from our ancillary products. It's shown to be a resilient source of revenue, which enables us to keep fares low and stimulate traffic. In 2019, ancillary revenue per passenger was $57. Since then, we've grown this revenue through product expansion, optimization of merchandising and pricing, and effective selling techniques. By the end of 2023, we see the opportunity to expand this to $85 per passenger with the ability to continue to reach $100 per passenger by 2026. Our low-cost structure facilitates a growth potential of over 2,000 attractive new markets, and the opportunity set will only get better.
Today's competitive landscape is quickly evolving as regional U.S. airlines shrink, and the only other ULCC of scale will be potentially exiting the market, leaving Frontier in the enviable position to fill those voids. We'll take delivery of another 35 A321neos by the end of 2023, driving a transformational shift in our business that will expand our ability to offer more low fares to more customers in more places. We're proud to be America's greenest airline. We didn't inherit the title by chance. We worked diligently to earn it. In addition to operating the most efficient fleet, we materially reduce aircraft drag by weight-saving slim line seats, limited onboard equipment, and by financially incentivizing our passengers to pack light. This helps us achieve an industry-leading ASMs per gallon of over 100 today.
Put differently, it takes us 10 gal to move a seat 1,000 mi, while legacy carriers will burn 14 gal to fly that exact same trip. It's a meaningful part of our green commitment, and it's helping to drive financial returns. Our ability to recruit and retain pilots is a critical piece of our growth trajectory. In an industry dominated by the big four airlines, we can effectively compete for pilots by offering a lifestyle and flexibility that other airlines can't match. We offer better career growth, with captain upgrade coming within four years. That means faster seniority and the lifestyle control that accompanies it, and it provides a competitive total compensation package. We also offer an attractive profile of crew bases in desirable cities across the United States. We offer aspiring pilots a channel to realize their dreams through our cadet program.
The coming decade is ours. We will continue to deliver the lowest costs and highest ancillary performance, all on America's most efficient fleet. Our sustainable and resilient growth plan will take advantage of the unprecedented increase in leisure demand and drive winning results for our customers, employees, and all stakeholders.
Want to again thank everybody for coming and hope you enjoyed the video. We're gonna unpack many of these themes over the next hour in different areas. Wanna first just start off by talking a little bit about the explosive growth that we're seeing in leisure demand. Tyra Squires, our VP of Marketing, is gonna talk to you a little bit later about, you know, some of the details around it. Higher incomes coupled with more flexibility in work from home is driving a lot more leisure travel than we've seen in the past. I mean, I think you take today, for example, we've got several times more people that are on the webcast than there is in the room.
It's great to have a packed room, but we're packed online as well. This flexibility is translating to more leisure travel for folks, and we're positioned, we believe, to best exploit that because when you think about the surge in demand, it's being met with constrained supply of aircraft. If you wanted to order an A321neo today, good luck. It would take you five to seven years to get any meaningful number. Fortunately, we were kind of ahead of the game here, and we have a really robust order book with over 200 aircraft on order, and the backbone of those are the A321neo.
Game changer for us, and we'll show you some more details about just what 240 seats can do to your cost as well as the fuel burn a little bit later. We'll also talk about the pilot constraints that the industry is facing and how Frontier is different in that we have three different platforms for recruiting and training, and we'll unpack that as well. We're also the ancillary revenue leader, as we mentioned there. We continue to grow. We'll be at $85 by the end of next year and are planning to get that to $100. Daniel's gonna talk to you about the pipeline coming there.
You couple that ancillary with the lowest total cost, including fuel, and that gives you the lowest break-even fare. That's important because when you think about leisure customers, they respond to price. We're best positioned. We've got the supply coming to soak up the demand, and we're best positioned from an economic perspective to generate profits, which is important, and we're proud of the fact that in Q2, we returned to profitability post-pandemic, and we almost doubled that margin in Q3. To be blunt, it's not good enough. We're gonna talk today about how we get back to pre-pandemic profits, and really excited about it.
Without further ado, wanted to talk a little bit about our team that we've got here on the back row, and you're gonna meet most of them today. Jimmy Dempsey, our CFO, which many of you know from Ryanair. He's gonna talk about our financials, our fleet plan and balance sheet and overall cost structure and how we expect that to continue to widen. We've got Howard M. Diamond here on the back row, and he's our general counsel. He's been with us since kind of the beginning of the transformation of Frontier into an ultra-low-cost carrier. Steve Schuller, our head of HR. He is with us. He's got a wealth of experience in the travel space.
Actually, he was in the hotel business before the airline space, but has done a lot to help us with our employee engagement and making sure that we activate the brand. Great asset to the team. Brad Lambert is going to join Steve a little later. He's our VP of Flight Operations. I've known him for a long time, and he is going to, along with Steve, talk to you about our pilot cadet program, our rotary program and our university and school programs that bring in pilots. Jake Filene, our head of customers, he's gonna talk to you a lot about labor inflation and how you bust that inflation through innovations and changing the way that we do business.
Of course, Daniel Shurz is gonna talk about the commercial side of the business. He's gonna explain how we get to $100 per passenger in non-ticket. Talk a little bit about the overall opportunities and load factor as well as the network exploitation. Trevor Stedke is gonna talk about the efficiencies that we're getting from the A321 and also some things we're doing on the pilot productivity as well. Craig Maccubbin couldn't be here, our Chief Information Officer. He actually is feeling a little under the weather, so out of respect, we didn't wanna spread what he may have. Lastly, we'll have Tyra Squires. She's our VP of Marketing.
She's gonna talk to you about some of the data that supports our view of leisure travel, as well as some other really fun things. Bless you. May I ask you to move over a little bit, sir? Of course, he's not here, but Bill Franke, I think everybody knows our chairman, and Indigo is our financial sponsor. I'm now gonna turn it over to Jimmy Dempsey, and he's gonna talk to you through our financials and the fleet.
Okay. Thanks very much, guy. Thanks, Barry. Welcome, everybody. This is great to see you in person. We did an IPO virtually. I think this is the first time we've stood in front of analysts and investors in person, which is fantastic. We're meeting some of you for the first time, which is great, and I think you'll enjoy actually meeting the wider management team. You guys all know Barry and I quite well. One of the things I'm gonna talk about is our competitive edge. Right? Our competitive edge as a business is our costs. We work very tirelessly in the organization to ensure that we have the lowest costs in the industry. This is something that everybody that you'll meet today focuses on from a cultural perspective in the organization.
One of the things we're very proud of is beating the industry. I know everybody in the industry compares themselves to each other. Pre-COVID, we had a $0.46 per ASM advantage against the industry, which is substantial. In Q3, we widened that to $0.57 . Just to give you context on that's approximately $65 a passenger. That's something that we're very, very proud of and gives us a really good platform to grow this business materially in the coming years. That $65 a passenger gives Daniel and his team an ability to price their fares very, very aggressively and grow this business, and it's gonna be the platform that the business benefits from in the coming years.
The things that we watch in this area very closely, and we look at, and Barry mentioned it, total cost. We look at all our costs. We don't just look at CASM ex-fuel. CASM ex-fuel is a metric that was designed in the early 2000s in order to avoid a discussion around higher oil prices. We own higher oil prices. It's something that benefits our business, so it's a key part of our cost advantage, and we've invested very heavily in our fleet in order to have the most fuel-efficient airline in the United States. We benefit from that, and we also wanna talk to you about it, so we're not. We don't run from it. The other thing that we look at is our ownership costs.
Frontier has the lowest CASM ex- fuel in the industry, even though all of our ownership costs are in operating expenses. That's something that you guys as analysts should be conscious of when you're comparing us to other airlines. We want you to be focused on our cost advantage widening versus the industry, and it's continuing to widen post COVID. Now just going on to our fleet. This is something that you'll see a lot of today. The A321 order book is material to our business. We are flying at the moment 196 seats on average per departure in 2022. If you go back to the start of Frontier's transformation into a ULCC, we had 148 seats per departure.
We've made substantial advances in terms of the efficiency in the airline over the last seven or eight years, and we continue to expect to make advances in that where we go to close to 223 seats by the end of the decade. I mean, the end of the decade is a long way away for us, but that's the platform that we have. Barry's comment about the availability of A321s, we have 159 A321s embedded in this fleet on our order book. It's very challenging to get a A321 aircraft from manufacturers today. We jumped on an opportunity through COVID to advance our position in terms of A321s, and that'll get us to a very strong place.
That fuel efficiency that the A321 drives, we're over 100 ASMs per gallon today. We'll end up being 114 ASMs per gallon when you get to 2029. We'll see a material improvement over the next two or three years as we take delivery of quite a substantial portion of A321 neos. Just moving to the following slide on our unit costs. We've made no secret of the fact that our target is to get the unit cost ex- fuel down to $0.06 or below. This bridge just takes you from our Q3 adjusted CASM ex- fuel of $0.069 that we just reported. That was a report that we were disappointed in, partly to do with lower.
Flying the airline shorter stages, lower utilization drove up our CASM ex-fuel. What we're planning on doing going into 2023 is normalizing stage, normalizing utilization above 12 hours, and also bringing substantial gauge into the airline with the introduction of the A321 . We have 37 A321s delivering between now and probably early Q1 2024. That drives a substantial gauge benefit into the airline and pushes your average seats per departure in the airline from 196 to over 200. I think by the end of next year, we'll be close to 205 average seats per departure. That gauge benefit builds efficiency into the airline.
Those items and returning utilization is very important to get you from $0.069 down to $0.062. The item labeled B is the most important thing that you can take away from today. We have determined that we need to change the way we do business. Largely driven by the change in inflation that we've seen as you've migrated from pre-COVID, post-COVID. We'll go through some of the things that we're doing in the business. I'm just gonna touch on three things.
Daniel is going to talk to you about how we've redesigned our modular network and the things that we've learned during COVID in terms of our modular network, and actually the efficiency that it provides to the airline, which is different to what other airlines are doing in our space. I think it'll be very important when Daniel gets to that for you guys to focus on how we're actually achieving that efficiency. It helps obviously the fleet efficiency, but it helps crew productivity as well. Trevor will touch on crew productivity. The final area that we look at is changing the way the customer is served or serves themselves and self-serves in airports and call centers in the business.
Jake is gonna talk to you in detail about that, and we're effectively pushing customers to self-serve. One of the things that we have done, certainly in Frontier, is create an ability for a customer to negotiate at the airport. What we're trying to do is remove the negotiation from the airport, create discipline around revenue integrity, which Daniel and Jake will touch on in their sections. Also to combat the inflation that you've seen from a labor perspective, particularly in airports. They're gonna talk to you in detail about that. Just moving on to the next slide, which is just a touch on liquidity and leverage in the business.
As you can see, as the airline is returning to profitability, our leverage ratios are improving quite dramatically from where they were during the COVID period. We anticipate that the cash generation will return to levels that we've seen previously prior to COVID, and our leverage ratios will return to normal over the next kind of 18-24 months, which is very important. The one thing that we have done, which is a little bit different to most other airlines, is we've kept our loyalty program unencumbered through COVID.
It's something that we're quite proud of, but it also leaves us within a position that if we need to touch on liquidity going forward, that we have up to about $1 billion in available debt capacity that we can access should the need arise. Or it can be used to fund the growth in the airline in the coming years. One of the benefits of our loyalty program and the growth rate that we have in the business is that each of the cash flows that are coming off our loyalty program continue to grow in line with the growth in the airline. It enhances that unencumbered collateral base. With that, I'll just pause there, and we'll be back to answer questions later on.
I'll ask Daniel, wherever he is in the room, to come up and present his commercial plan for the coming year. Thanks.
Good morning, everyone. I'm for those of you who don't know, I'm Daniel Shurz. I'm Frontier's Senior Vice President, Commercial. Look, as Jimmy's talked about, our single biggest advantage is in terms of network growth is cost. We have the lowest total cost. We are growing that advantage. We're also sitting today with a situation where the industry capacity is still below 2019 levels and obviously well below a trend line you would've established prior to the pandemic. Yes, some of that gap will continue to close. There is still some undeployed capacity, but a substantial portion in the domestic market of the gap is driven by regional airline capacity.
There is a structural reduction in regional capacity driven primarily by a shortage of pilots, and obviously we're feeling that, but we're taking action. This capacity is not coming back anytime soon. This regional capacity is not about to return in the next few months. There is no magic bullet for those carriers. We see opportunity being driven by that as well. Look, this is the slide that tells the story of why we can grow in a different form. 64% of U.S. domestic capacity is at least 50% higher cost than Frontier, and 90% of U.S. domestic market capacity is at least 15% higher cost than Frontier.
If you turn to the right of the slide, compare the most obvious comparison market. We've shown this comparison before. This is the most recent data. ULCC capacity intra-Europe is 38% of capacity. In the U.S. domestic market, ULCCs make up 10% of the market. If there is a consolidation proposed, and it actually happens between JetBlue and Spirit, that share of ULCC capacity drops to 6%. At 10%, there's huge opportunity. At 6% total ULCC capacity, there's even more opportunity. That's the way we're looking at this. We have a good opportunity, really good opportunity either way. Look, this cost advantage, this is what drives our ability, as Jimmy and Barry both mentioned, this is what drives our ability to grow.
We have significantly lower costs, which means there are thousands of markets where we have the opportunity, over 2,000 markets, where there is enough demand to actually grow our service into new markets. This is an incredible organic growth opportunity. As we continue to expand that cost gap, this opportunity will only grow bigger. There's really so much opportunity in the U.S. market. With the A321XLR, potentially even more opportunity. Now turning to 2023, I know there's been interest in our growth rate as we return to fully normal production in the business.
If you look at what's happened, we've already in the fourth quarter made a significant move back towards normal utilization. We've moved back to over 11.5 hours utilization in our current schedule. If you look at the fourth quarter of 2022 and then look at 2023, the growth rate from where we are in the fourth quarter to 2023 is 17%. Still reasonably substantial, but 17% both sits within our 15%-20% sort of targeted growth range, and it's a growth rate we had as a business in multiple years before the pandemic.
We do not see a challenge in growing by this rate going into 2023. I think here's the other piece that really excites us. If you look at our performance in 2022, this is the second and third quarter combined. Obviously, the recovery quarters of 2022. You look at our unit revenue performance, and you look at growth. Of the carriers that have grown capacity, we have obviously by far the strongest unit revenue performance. If you look at the carriers that have similar unit revenue performance, they've been the ones shrinking capacity.
The combination of growth and capacity and unit revenue growth, there isn't anyone who's done better in the industry in 2022, and that also gives us confidence heading into 2023. Look, the biggest driving force behind this growth has been our non-ticket performance. As mentioned in the video, obviously, we've grown from $57 in 2019 up to $78 in the third quarter, and that $78 now puts us far ahead of anyone else in the industry globally. This is revenue that is more stable. It is as everyone says, stickier. Look, it's what's also giving us confidence that we're gonna continue to improve.
$78, that continued improvement during 2022, a further improvement we're expecting in the fourth quarter, give us confidence that by the fourth quarter of 2023, we will indeed get to $85 non-ticket revenue per passenger. As mentioned earlier, we're now setting a new longer-term goal for 2026 of $100 per passenger. We're seeing so many opportunities across the business to drive non-ticket revenue, so we're confident to set that goal today. Look, this is a portion of the roadmap. I'm not gonna give away every idea we have because obviously we'd like to save them until we introduce them. There's a variety of areas we're gonna drive non-ticket revenue.
As Barry mentioned, one is revenue integrity. We are focused on ensuring that all customers pay for the products they buy. We're focused on that today, and as we continue to add automation and technology, we think there's a certainty that we can actually get more revenue out of this and consistently collect it. Pricing optimization. We are world leaders in ancillary pricing optimization, but that doesn't mean that we have fully got the value out of this. There's a lot more we can do. There's definite value in more value in seat pricing. There's definitely bundle optimization and there's continued, again, technology development to improve the optimization capabilities.
We're obviously gonna have new product, new products. We're always thinking what else we can do. Most recently we announced and put on sale yesterday our GoWild! Pass. We're gonna continue to find new products, new ideas to sell to customers. Again, we have to get more creative at this point because we've almost run out of the ability to copy anyone else's. Look, we're gonna continue to be creative. We're obviously gonna enhance our existing products and services. We're going to redesign our app and our website. We'll add more frictionless payments.
We're gonna drive more customers to the app with incentives. We're seeing in the industry increasingly interesting technology from PSS providers, notably Sabre, who are sort of approaching the world differently today and have come up with some very interesting ideas. We think there's a lot of opportunity in this area as well. Now, we've done great on ancillary. This is one area we have underperformed, and I'll say this from the start. We are not back at our pre-COVID load factors. We've got an opportunity here, though. Because we have underperformed, we're gonna get back to pre-COVID in 2023 is the plan.
Obviously during the pandemic, we shortened the booking curve by being more because we weren't certain about what schedules we wanted to operate. Customers weren't as sure about traveling, so booked later. We're gonna see this booking curve extend out. Then we have multiple opportunities to drive additional traffic, to fill those additional seats on the 321s. We've got enhancements to our revenue management system to make. We've got the GoWild! Pass, which is designed to fill empty seats on the airline.
As Jimmy mentioned, and as Tyra will touch on some more, we've got the opportunity with Discount Den and with our Frontier Airlines World Mastercard program to drive more traffic. As we grow network scale, and these two are very much connected, we will get the opportunity to drive more traffic. We're gonna get our brand out there more. We've been relatively quiet as a brand, and we're gonna get much more aggressive. We have those wonderful animals on the tail. We have this opportunity to engage with customers. We have a positive, friendly, happy brand, and that also makes us unique in this space as well, and we're gonna take advantage of that in 2023.
Get customers more excited and get people to come back to the airline because we're a fun business. Moving on to modularity. As Jimmy mentioned, this is one of the areas where we're doing business differently. But I wanna start actually from the commercial perspective. We're doing things that are good for the business commercially in terms of driving revenue as well as operationally and from a cost perspective. One of the things we've done is we've opened and announced a significant number of new crew bases since 2019. We will have by next May nine crew bases across the country.
As you can see, the ones in blue are the ones that have opened. We're opening them in large markets. We're opening them in these markets because we see significant commercial opportunity to grow in these markets. We see a competitive position that's very interesting for us in terms of growth. It allows us to move towards a much more modular network. We're combining the commercial opportunity for the airline with an operational and cost focus. Look, building network efficiency is fun. Pre-pandemic, we were a complicated airline. We had relatively few crew bases. We had to have a complicated network design.
That led to lower crew productivity, and it led to a very dispersed approach to line maintenance. In the middle, we had to have. I'm a head of commercial, I had to have something resembling a map in this one. This is an example of flying we do out of our Tampa base. We have set up a triangle in the schedule where planes leave Tampa in both directions, a triangle between Tampa, Chicago Midway, and Dallas/Fort Worth. The airplane and the crew complete the triangle. It's approximately seven hours of flying. That's a nice productive day for the pilots and flight attendants. The airplanes return back to the place they started.
The crew's finished in one day. There's no hotel costs driven by this. By this pairing. Fundamentally, building the network with solutions like this, which has been aided by new crew bases, has a number of advantages. It shortens the average trip length, which reduces hotel costs. It's allowed us to concentrate maintenance in our key largest bases. You'll hear more about this from Trevor and Brad. It's significantly increased the average crew time with flying to above six hours per day. That's six flown hours per day. That's up significantly from where it was pre-pandemic. That's great.
The other piece, the more modular a schedule, the more reliably it operates. When you fly out and back from a base, when you fly in a triangle from a base, if you cancel that flying, you're not having any downline implications. If that airplane doesn't leave Tampa going to Midway, let's say in the morning, okay, you lose these three flights, but you recover immediately after that. It's a combination of all these pieces. Reduces cost, improves reliability, which reduces cost, and allows us commercially to be more flexible with how we design the network.
With that, I'm gonna turn over to Tyra Squires, who's my VP of Marketing, to talk about our customer research and our loyalty programs.
Thank you, Daniel. Good morning, everyone. It's a pleasure to be here. As Barry mentioned in his comments, consumer demand for leisure travel is changing fundamentally, and it's changing in our favor. We've never seen demand trends like we are seeing now. Recently, we spoke to our customers to get some additional insights into why that's happening. We discovered that not only is there a desire for leisure travel, there's also the means in both terms of time and money. When we asked our customers about their ability to travel, more than half said that they have greater flexibility to travel now than they did pre-pandemic. Almost 40% are planning to actually spend more on travel in the next 12 months than they did previously.
that adds up to a real change in the demand outlook and what we're really excited about is that almost 1/3 of our customers are planning to travel with us five times or more in the next 12 months. Five times. That's nearly double what the rate was in 2019. Those are real meaningful changes, and this data is very new. We did the survey just a few weeks ago. We feel like it does reflect some of the economic uncertainty that's in the marketplace now. We're really excited about this and feel good about it. This is further fueled by our network design, as Daniel touched upon. This map represents the number of destinations that we will serve from each of these cities.
For example, we will have 57 different nonstop destinations from Las Vegas, 42 from Atlanta, 30 from Philadelphia by the end of next year. Some really fantastic diversity of destinations and growth that are allowing us to really develop this market and have a strong customer base. We will no longer be a new name in many of these cities. In addition, we're seeing tremendous growth in very aspirational, inspirational destinations like Cancún, Jamaica, Punta Cana. Places that may have been cost-prohibitive for our customers to travel previously will now be available. What's exciting about that is what that can mean for programs like our credit card and really selling the inspiration of that kind of travel. We have three products that we focus on in driving loyalty and recurring revenue with our customers. First, we have our Discount Den.
Our Discount Den, it always offers the lowest fare guaranteed. It's an annual membership. We have our Frontier Airlines World Mastercard, which we redesigned in 2018 to really target leisure customer and their needs versus the business customer. It's been a really popular card. In fact, for the last two years, it's been named the top airlines card by Money.com. We're really, really proud of all the work that's gone into that. This week, we've announced our third important product, the GoWild! Pass, the all-you-can-fly pass. What's really exciting about this product is it is the first of its kind. It is targeted to the leisure customer, and it doesn't have geographic boundaries. It's available to all our U.S. destinations.
For one low price, you will be able to use the pass as many times in the year as you'd like, up to 300 dates will be available. The customer will be able to confirm the booking 24 hours ahead of the flight. The day before, they'll be able to actually confirm that they're gonna be on that flight. We're really excited about what this product can mean for the business. Daniel mentioned in driving load factor. Ancillary products are not included in the pass, so that's additional revenue opportunity. We feel like this will be a really great opportunity, not only from the business perspective, but for our customers who, especially those with more flexibility in their schedules, think about active retirees who have very flexible schedules.
This will be a dynamic product for them that we're really excited to deliver and be the first to deliver something like that. Over the last few years, we've really been focusing on developing and maximizing the revenue from these products, the Discount Den and co-branded credit card. We know that there's so much more that we've untapped and that we can really stimulate demand and repeat traffic. In fact, we already know that if you're a member of our Discount Den and a credit card holder, you're 138% more likely to be traveling with us on flights. That's a big number already, and we intend to grow that and really drive that repeat traffic using our products.
We believe we've only scratched the surface on what these products can deliver, and we look forward to unlocking the power and the revenue of these products next year. With that, I'd like to turn it over to Trevor Stedke, our Senior Vice President of Operations.
Thank you, Tyra. Good morning. It's a pleasure to be here with you all today. My name is Trevor Stedke. I'm Senior Vice President of Operations. I have responsibility for our flight operations organization, our technical operations organization, as well as our systems operation control center. Flight operations consists of a workforce of nearly 2,000 pilots, spread out operating out of our nine crew bases across the United States that Daniel Shurz mentioned earlier. That gives us significant agility and flexibility to make sure we have pilots when and where we need them to support our operation. Additionally, we have a chief pilot at every one of those nine bases that further supports our pilots. Our Aircraft Technical Operations organization manages and maintains all the technical aspects of our fleet across the entire system. They perform thousands of maintenance tasks every single day.
They ensure the safety, compliance, quality, and airworthiness of our fleet to make sure we deliver our aircraft where we need them every day to support our customers. Tech Ops consists of a workforce of nearly 1,000 aircraft maintenance technicians and supporting staff at Frontier, as well as multiple business partners across our system here at these 23 maintenance stations across the country, including our four major bases in Denver, Orlando, Las Vegas, and Tampa, where we concentrate our resources, which gives us increased flexibility, recoverability, and we accomplish over 80% of our maintenance program tasks at these four main locations. Finally, our Systems Operation Control Center is the head of our airline operation. It's located at a headquarters in Denver.
They manage our daily operations in real-time, including crew scheduling, aircraft scheduling, planning, routing, dispatch, aircraft maintenance control, and other supporting functions. The SOC is really the epicenter. It monitors our operation as a whole, 24/7, 365, where effective communication, teamwork, leadership, and decision-making is essential to make sure we meet the mission of delivering low fares done right for our customers every day. Turning to the Frontier fleet, you heard about a little bit about this earlier from Daniel. Our aircraft provide a distinct advantage to Frontier, to our operation and our business overall. Fuel costs are one of the largest expenses that any airline has, which is why Frontier will always be relentlessly focused on efficiency, eliminating waste, and being the greenest airline in America.
In supporting this mission, we're very excited about bringing on a new A321neo aircraft into our operation just a few weeks ago. This A321neo is a transformational aircraft. It brings extraordinary efficiency into our business. It will grow to become the foundation of our fleet in the future, and it's an absolute game changer in terms of capability, efficiency, reliability, as well as overall economics. Our Frontier A321neo is configured with 240 comfortable, reliable, and lightweight Recaro seats. That represents a 33% up gauge in the aircraft in seat capacity in the aircraft this A321neo is replacing. It also delivers a 75% fuel burn advantage over legacy airlines. I'll say that again, 75% fuel burn advantage with a A321neo over the legacy airlines. That's huge.
It further widens our cost advantage, not only tomorrow, but well into the future with this aircraft. Even before the introduction of the A321neo, we had already established a very significant fuel cost advantage at Frontier Airlines, more than the other airlines. For every 1,000 pounds of excess weight on an aircraft, there's an additional 2%-3% fuel burn required to operate that aircraft. Excess weight is a tremendous waste in terms of aircraft efficiency, and we took direct aim at that at Frontier. We reconfigured our fleet to remove thousands of pounds of wasted weight from every single aircraft, and we replaced that with additional fare-paying customers.
One of the most significant accomplishments in this program was the transformation of our fleet from a low-density cabin with full in-flight entertainment to a high-density, no-frills cabin with some of the lightest seats in the industry while maintaining the comfort and reliability of those seats. That captured a nearly 50% reduction in seat weight costs over the past seven years. This has eliminated thousands of pounds from our fleet, saved millions of gallons of fuel and tens of millions of dollars in fuel costs. We're never done looking for ways to save fuel and costs. Going forward, we have several exciting initiatives that will deliver even more fuel savings for our operation and widen our fuel cost advantage over the other airlines.
For example, we've identified a significant opportunity to save thousands of pounds of fuel beginning in 2024 through optimized flight planning and routing. We're also actively equipping our aircraft today with long-range communications and other necessary equipment to enable the capability and the economic advantage of more efficient offshore routing over the Atlantic Ocean, avoiding air traffic congestion, holding patterns, and delays that we've all heard about over Florida and the East Coast as well. Finally, one additional efficiency improvement I'd like to highlight, you heard a little bit about earlier, is our average pilot block hour per duty period. Restructuring our network to increase this average pilot block hour per duty period, as Daniel mentioned earlier, is one of a portfolio of things that we're focused on to increase pilot productivity.
We've recently implemented a network design that produces about a 10% increase in our pilot block hours per duty period, giving our pilots the ability to work fewer days per month for the same pay, or the same days per month, for higher pay, which is really good for our pilots, and it's also good for Frontier. It helps us with our pilot productivity and it even further solidifies Frontier as the place where pilots want to be in the future. With more on our pilot hiring and recruiting, I'd like to introduce Brad Lambert, our Vice President of Flight Operations, and Steve Schuller, our Vice President of Human Resources. Thank you for your time.
Good morning, everyone. I'm Brad Lambert. I'm Vice President of Flight Operations at Frontier. I'm responsible for the selection, the training, and the standardization of our pilot group. There's been a lot of talk on pilot productivity, and I don't wanna reemphasize what Trevor said, but it is really important to our pilots. Whether they choose to work less days for the same wages or work the same number of days for more wages, that's attractive to our pilots who are coming on board and also helps us retain those pilots that we see deciding whether or not they wanna leave Frontier. We wanna keep them. With that, I'm gonna hand it over to Steve Schuller.
Yeah. Now, the ability of our pilots to work as many days but earn more wages during the course of those days is gonna be another selling point for us as we attract and compete for talent. Today, Brad and I want to give you an update on the state of pilot recruitment and what we're doing now and in the future to control our supply of pilots. Honestly, we feel like we have a really strong selling point for pilots and why they should come here and start their career with us. It really starts with just the flexibility. We've got a pilot-friendly contract that affords a lot of flexibility for our pilots. Flexibility is important because that provides quality of life, and quality of life is huge for this workforce. Second is our bases.
We've talked about the new bases that we've opened for our pilots over the last several years. You know, earlier this month, we opened up Phoenix as our newest crew base for our pilots and for flight attendants, and we announced DFW as a new crew base that's opening up in May 2023. Together, those really attract pilots who want to live in those destinations. When we announced DFW, we saw an increase in the application rate for pilots just because of a base. This is not only about opening bases that make operational sense, it gives the operational efficiencies that Daniel talked about earlier, but it's also about opening bases in places where people want to live. It's a recruiting tool for us as well. Third, it's all about the money.
Obviously, we offer competitive wages. We have a competitive rate table, but that along with our fast upgrades to captain, as well as the ability to earn more each day that you're flying, allows our pilots over the course of their first 10 years of employment to earn as much or more than their peers at the legacy carriers. Finally, the growth that we've been talking about all day today really drives fast relative seniority, and seniority is key for this work group. Seniority allows you to control your schedule versus it controlling you. You want weekends and holidays off, it's gonna happen faster here than at a legacy carrier. You want to come off of a reserve line and hold the line of flying, it's measured in months and not years.
Together, these four topics have really driven a lot of interest in joining Team Frontier. Year to date, we've had over 6,000 applications for one of our first officer openings, and over the last 30 days, our social media and our advertising has reached over 70,000 people in that marketplace. We feel like we've got a compelling offer. We're starting to sell it more aggressively. Wanna take a minute just to show you a quick video of some of the pieces that we've used to really celebrate our value proposition for pilots. As you can see, we're gonna be laser-focused in on our value proposition for our pilots and continue to aggressively go after that market in a really competitive marketplace. Now, traditionally, most of our pilots would have come from the regional carriers.
You know, thanks to post-pandemic growth and thanks to the re-retirements of other carriers, it's become an increasingly competitive marketplace. Rather than hope and wait for the market to correct itself, we've chosen a different path. You know, we've been thinking about different pilot avenues for recruiting over the last several years. We actually started our university program four years ago. Over the last several months, we've really introduced some new programs to really supplement our recruiting efforts. Brad's gonna talk about these and it takes just a couple of minutes, but our new pilot cadet program, our new rotor transition program, as well as that expanded footprint of relationships with flight schools and universities, allow us to control our destiny. These are programs that we can manage and effectively meter in the pilots into our workforce.
We're not gonna wait for the regional pilots and the market to correct itself. We'd rather take a more aggressive stance. Over the next several years, these programs are gonna increase in value to us as a company, and really represent the majority of recruiting by the end of 2024. It's about controlling our destiny and not allowing it to control us. With that, I'm gonna let Brad unpack these a little bit, talk us a little bit about the new programs that we're introducing.
Thanks, Steve. Yeah, these are not months in the making. These are years in the making. As Steve said, four or five years ago, we would have thousands of applications from regional pilots for every, you know, for 100 or 200 jobs that we'd have opening. Times have changed, right? We've had to change with it. We wanted to figure out ways to diversify our sourcing of pilots, and so we've opened up these programs through a period of years. We started with major universities and flight schools. We started actually with Purdue University, and I can proudly say as an alum that our first Purdue graduate is now upgrading to captain after 3.5 Years. They've done extremely well for us. Flight schools as well, we've partnered with major flight schools, high-quality flight schools.
There are many that we have not listed up here because they didn't meet our standards. Again, we wanna make sure that we've established a pipeline for the future to grow. When we look at rotary transition program, these are typically Army helicopter aviators who need to transition to fixed-wing flying. Untapped market, 19,000 of them in the Army alone. We partner with a group called RTAG, Rotary to Airline Group, to help us really penetrate that market and really collect a lot of pilots through that. We've hired dozens of these pilots, by the way, and they're doing extremely well. Last, our cadet program. We say 1,500+ applications, but I believe we're already at 1,700+, and this slide is not very old. Great interest.
Those pilots in the program, 40% of them have some flying time. They'll feather into our operation over the next 24 months. We've established a mentoring program. There are financial incentives that we've created, a stipend to offset living costs and things like that. Also, we've established robust transition training into a jet atmosphere, towards the end of their training pipeline. We help pay for that as well. Also, we bond them for three years. That's gonna help us for retention in the future. All these programs add up to high confidence for us. Matter of fact, absolute confidence that we can staff our airline with the growth prospects we have had. With that, I'll hand it off to Jake Filene, our SVP of Customers.
Thanks, Brad, and Steve. My name is Jake Filene. I'm Frontier's Senior Vice President of Customers. I lead our customer-facing organization. These are the three groups on my team. The Airport Sales and Operations team. This is just over 6,000 team members in Airport Sales and Operations. These are the folks that you see at our ticket counter, at our gates, down on the ramp, taking care of our customers in the airports. Customer Care, which is just over 600 team members in our contact centers, our customer relations team, and then in flight. Over 3,000 fantastic flight attendants who take care of our customers in the air and keep them safe. These are obviously very labor-intensive groups, subject to the wage inflation that Jimmy referenced earlier.
As you probably know, our flight attendant group is represented by the Association of Flight Attendants. We have a collective bargaining agreement, so the wage progression there is very defined. I'm gonna focus on our customer care team and our airport sales and operations team and how we're mitigating that wage inflation. This is just one example, which I think is going to not surprise anybody in this room or online. This shows our Denver customer service agent wage over the past seven years. That wage has grown by over $10 an hour or 106%. The reality is there's not much we can do about the rate side of this equation. There's not much we can do about rate and how it affects total labor cost.
We are exceedingly focused on what we can do about the volume side. What can we do about the labor hours that are going into total, the total labor cost? We're actually gonna do this in a way that will improve the customer experience. Jimmy referenced this in self-service a bit earlier. Let's start with the ticket counter. What are we gonna do about the ticket counter? Today, at the outset, I'm gonna acknowledge that we're behind in this area. We're behind in our technology at our ticket counters. We're behind in the technology that supports the pre-travel customer experience through our website, through our app, and we see this as an enormous opportunity to leapfrog the industry.
Pre-COVID and during COVID and in this inflationary environment, the business case really didn't exist to invest in this technology to offload labor hours. Now it does. We've talked about the wage inflation. Now that business case is solid, we see a very quick payback on these investments. Getting into the slide a bit, if you take a look at the left side, these are all transactions that we are knowingly pushing to our ticket counter today. We acknowledge this. We are pushing customers to the ticket counter. We're pushing them there to interact with our team members at the counter. We're already starting to work to offload those transactions to our web upstream, to our app upstream, and in the airports, we're going to invest in new kiosk technology and self bag drop technology.
In the future, the ticket counter really looks like a bag drop depot. Virtually the only thing that our customers will do at our ticket counters is bring their bag, tag their bag, drop it on a conveyor belt, as you've probably seen more outside the U.S. than inside the U.S. today, and go. We see this as an enormous example. I'll just highlight maybe one of these examples, international document check. Today, if you're flying internationally on Frontier, you are going to our ticket counter for document validation. That's an easy one for us to offload to the web, into our app. We're fundamentally gonna change the way our ticket counters work.
Look, the reality is this technology, and Daniel referenced this, and Jimmy did earlier as well. It is also gonna serve to control revenue, ancillary revenue integrity. There's a lot of negotiation, you've probably seen this at ticket counters, between customer and, in our case, Frontier team member, over ancillary charges like overweight, oversized bags. There's a conversation that can happen there. That conversation in the future at our ticket counters won't happen through this technology. Okay, let's talk a bit about the call center. Just a few months ago, our call centers were just that. They were an inefficient, expensive one-to-one phone call from a customer to one of our agents. We were supporting higher labor rates in the voice channel, and we were limited to this one-to-one interaction.
We also had a lot of back office and transactions that were very, very labor intensive. Off the phones, but high volume of transactions that were occurring in our contact centers. Just like the ticket counters, this is a channel for negotiation between customer and Frontier. We're already well on our way to digitizing this experience. We are improving our website technology. We've installed a front-end chatbot that answers many common, and a lot of uncommon, customer inquiries. Think about the most sort of obscure question a customer might ask that would take a call center agent many, many minutes to research and find an answer to. The chatbot can answer that very quickly. We're also moving to live chat. This is a much more efficient channel. I'm sure you've all used chat.
Instead of one-to-one, a chat agent can handle three, and we think higher than three transactions, interactions with customers, simultaneously. Finally, robotic process automation is gonna go in and offload a lot of that back office work that occurs and is very labor intensive. Just like in the airports, this is gonna be a more customer-friendly experience. This is what customers want. They want self-service. They don't wanna wait on hold. They don't wanna talk to somebody. They want those questions answered quickly. What are the results? In addition to improving the customer experience, we expect ticket counter labor to go down around 60%. We expect our contact center labor to go down around 40%. All of this while adding scalable solutions that flatten that growth trajectory of unit labor costs.
Okay, so I talked a bit about what we're doing at the ticket counters, inside at the airport, but we're also very focused on efficiency at the gate and down on the ramp. One of the biggest opportunities that we continue to pursue and execute on is ground loading facilities, and using both the front and the rear door of the aircraft for enplaning and deplaning. If you travel internationally, you're probably much more used to this. It is much more common outside the U.S., and we're going to continue to expand this in the U.S. We see this as a material efficiency opportunity. The math is pretty simple. I don't think I need to tell this room that two doors is twice as many as one door.
This is the long pole in the tent for turning a plane, that the highest number of minutes on the ground is spent taking people off, putting people on. Two doors is a much more efficient operation. We're already doing this in Austin, Trenton, a few other airports around the country. You may have seen recently that we announced that our Denver operation, we have a new facility coming in Denver by 2024. Denver is our largest operation, and that's gonna be a 14-gate facility that will entirely run using this method. We're excited about it, airports are embracing it, and we're looking to expand.
Just finishing up with the simple math here, reducing ground time allows us to take those minutes that aren't being used on the ground and put them back in the air. We can either translate this into increased utilization or we can convert some of our red-eye flying into daytime flying, that's obviously higher yield. Look, lastly, Tyra talked about this a bit, we have primarily leisure customers. They are really embracing this. They like getting a little bit closer to the plane, seeing it from a new angle. We've got those great animals on the tails, and there are a whole lot of selfies that happen out on the ramp, with people taking a picture of themselves and our animal tails. I think I'm turning it back over to Barry.
Well, thanks for sitting with us for the last hour and listening to what I believe is probably the best management team in the business, talking about how we aggressively plan to manage all the crosswinds that are out there, inflation and all these concerns about the economy and so forth. We've just been really focused on things that we can control, and we think that the tailwinds that we have for Frontier outweigh any crosswinds that we might see. I mean, Daniel talked to you about the revenue side, but obviously on the ancillary, we're already the global leader, and we're headed to go to $85 by the end of next year with a good pipeline to get us to $100 within a few years.
Couple that with the fact we've been suppressing our load factor during COVID. There's obviously a couple turns that we can crank that up to drive the revenue. From a cost perspective, obviously, we intend to deliver the sub $0.06 that we've been talking about for a while. I think you can see today, not only from the stage, the gauge, and so forth, you're gonna get that benefit. But also we're gonna change the way we do business because we're pretty aggressive about delivering on our low costs. We're also gonna deliver the fuel burn through the various initiatives that Trevor talked about, as well as the A321neo, which is gonna be huge.
All that together is gonna enable us to get back to $3 million per plane profitability per year, and we expect to be there in the second half of next year on a run rate basis. Again, Bless you. I wanna thank everybody for coming today. In a moment, we're gonna turn it over to Q&A. We just need a quick changeover, I think, for the chairs.
We probably need just maybe 30 seconds. We're gonna have some chairs brought in. I'm gonna ask the Frontier management team to come on the stage. We just need to stretch your legs for the next 30-60 seconds. We'll get set up.
Can we get rid of these chairs now?
Yes. Here, let me help you.
All right. Everybody settled. Okay, excellent. We have two Frontier folks. Theresa, if you wanna raise your hand. Jesse, if you wanna raise your hand. These are the folks that have your microphones, that they'll come to you as you have questions. Jamie, I saw you put your hand up first, and so let's go ahead and get to you.
Microphone.
Thanks. Good morning, everybody. Jamie Baker with JP Morgan. Question for Daniel. The walk to $100 of ancillary that you showed, and I'm not looking at the slide, but I think there were four individual buckets. First part of the question is what sort of inflationary impact, if any, is baked into that? I suppose asked differently, if you didn't unveil anything new, where would inflation just naturally take that number, you know, by I think you said it was a 2026 target? Then I have a follow-up to that.
We haven't exactly looked at it from that perspective, but I think there's, I think there's probably. You start at 78. Let's assume we end next year at 85, right? You look at that. You look at likely inflation. We create inflation in these products because look at the industry's $25 first checked bag, legacy carriers. It was $25 in the panic summer of 2008, and it was still $25 today. So that doesn't make any sense necessarily, but maybe there's a few dollars of inflation. It's primarily the work we're gonna do to actually increase it.
The second part to the question. Is there any tax impact that you have put into that analysis? And this is a touchy subject. This isn't something that I write about because I don't want people to point at me and say, "Well, you know, he gave lawmakers the idea." I mean, they're already coming after airlines in terms of ancillary disclosures. It seems to me that someday somebody in Washington will wake up and realize that the 7.5% tax doesn't apply to that $100. I think I can probably speak for every analyst in the room if we have to suddenly take half of your revenue base down by 7.5%, I mean, that's an uncomfortable outcome. Just thoughts on that. Thanks.
Well, it's actually a lot of the $100 would be taxable, so it's not all actually tax-free. Let's also remember there's fuel tax, and if you look at the total price of a ticket, we're the most highly taxed industry out there. I think there's plenty of tax. No, it is not all taxed. In fact, Mark, if you wanna elaborate, it's a big part of the non-ticket is taxed.
Yeah. I mean, there's certainly a portion that's taxed. I mean, we've been consistent, you know, with that, you know, as an industry.
Which of those fees then, just educate me, which of the ancillaries are subject to an excise tax now?
From an excise tax perspective, I mean, they're not subject to, you know, an excise tax.
Like for example, in the the WORKS product and some of the bundles, there's a component of it that is taxed.
All right. Okay. Good follow-up. Thank you.
I'll remind everyone on the webcast, if you want to ask a question, use the chat feature. I will be giving the panel those questions here after we get through a bulk of those in the room. Teresa, you wanna. The gentleman.
Thank you. Ravi Shanker, Morgan Stanley. That's some pretty impressive guys on the stage, by the way. I think you guys are kind of practicing what you preach. Two questions. First one for Barry. Your video started with this being the decade of the ULCC. Why is this the decade of the ULCC? Is it because Gen Z finally has money and they're willing to travel? Or kind of why is this the decade? And the same follow-up question probably for Tyra. Kind of what you typically don't see ULCC carriers kind of focus on brand as much. How much traction are you getting with that? How much is the green message really resonating with your customers? And also with one of the large ULCC carriers exiting, what do you think happens to the vacuum in the space?
Thank you.
Okay. I'll answer first and then Tyra can focus on the brand. But look, I mean, over the next 10 years you can just see, I mean, Jimmy talked about it, but our cost advantage is gonna widen. We have an ever-increasing widening cost advantage at a time when you've got a structural change in leisure demand, and there's really potentially no natural competitor. We're in a situation where it's never been this good. I mean, you could say Southwest in the 1980s, but even then, I'm not sure that there was this clear of a playing field for someone like ourselves, and there's just no one else in the space with that, you know, profit potential. That's why we think the next decade is ours.
We focus not just on cost, but we do focus on the experience and the brand. With that, I'll turn it over to Tyra.
Well, one of the interesting things coming out of the pandemic that we've learned is people's sensibility has changed. What's important to them has changed. We really tried to push the green message prior to the pandemic, and it didn't really resonate with customers, to be honest. There's been a change, and we've actually surveyed our customers on the topic, and more than half now have some thoughts about how sustainable travel and how they should think about choosing an airline based on, their sustainability. We are finding traction. You know, with our animals on our tails, which are very unique, we create a really great brand story for ourselves that isn't expensive, but is a delight to the customers and adds just that extra element.
I think even as we think about green as a choice, I don't think we think, "Oh, I've gotta go fly that airline because they're the greenest." I think if it's a comparison between two airlines, we break the tie with our green standard. It has resonated with customers differently since the pandemic.
Sure. Gentlemen.
Hi, good morning. Andrew Didora from BofA. You spoke a lot in the presentation about the new way of doing business at Frontier. You spoke about the technology opportunities, trying to work getting labor hours down. Is that the mid-teens annual growth rate that you guys, you know, plan to grow at over the next few years? How much will headcount grow over that time period, and how much would have headcount grown kind of in the past pre-pandemic at those same levels of growth?
Well, the headcount won't grow as much as the actual ASMs, just simply because you're adding the gauge. For example, you'll have the same two pilots that are flying 240 seats instead of 186 or 180 or what used to be 150. You'll actually see the
Extra pilot.
Yeah. We have one extra flight attendant, but actually, you'll actually see the employees kind of per ASM should actually moderate. There's a lot more technology still to come. I mean, we didn't get into it, but I mean, you think about the world today and where we're at, we have a lot of things that we're really good at. We've invested obviously in things for ancillary, but we're kind of behind on the customer service side. There's a lot of technologies coming through. There's new PSS systems. I know Sabre is really working on a whole new system that could deliver some efficiencies as well as improve selling capabilities. We're really excited about that.
We haven't even tapped anywhere near the potential that we could do to have labor savings from a technology perspective.
Just on it, you've reiterated your sub $0.06 CASM goal, but you didn't give a timeline around that. Any thoughts on how long it takes to get there?
Oh.
Is it next year?
I'm sorry, 2023.
Okay.
I will be clear.
Thank you.
Sub $0.06 In 2023.
Okay. Savi, you wanna? Yes, right there.
Thanks. Just on the first question, you know, before there seemed to be this sense that there's a lot of price sensitivity, that like a $1 change in the ticket price and people are quite sensitive to that. Has there been a change in this kinda current environment to price sensitivity? I know you benefit from kind of pricing down and more people moving off of other prices, but just your core customer base, has there been a change in that price sensitivity?
Yeah, look, I think price sensitivity. I mean, you're not gonna change economics, right? You're not gonna change merchandising and what drives behavior. I think the difference is people have more money. I mean, we're still seeing that they have much more money than they had before. Their incomes are much higher. You know, to be quite honest, you know, 79 is the new 49. You've seen it in everything you buy. They'll still be sensitive around the edges, but we'll move up. I mean, look, we have an industry. I mean, we're sitting here bragging about it, that our cost structure is widening. Over time, that means the entire industry is gonna have to raise their fares and their prices considerably in order to get back to their pre-pandemic margins.
Many of those carriers are still burning off credit sales, which we are not. Right? If they want to get back to pre-pandemic margins, there's probably another round or two of fare increases that you're gonna see across the industry. When that happens, more people will be looking for us for value. We continue to look for ways to grow our ancillary so we can have an even lower breakeven price. That's gonna continue to attract customers.
Got it. Just for the second question, I apologize, I forgot to introduce myself. Savi Syth, Raymond James. Just on the comparison with Europe, I think, Barry, that's where you brought that up. I get that comparison's been made for a while, and we haven't really seen it go up. There are some differences in Europe versus U.S., where I think Europe has a shorter stage length. They have much more inexpensive airports. So there are probably things that doesn't get ULCCs to the same mix, but or maybe I'm wrong and just, you know, what's that right mix? Like, what do you think that makes it the-
Well, I think, look, there's people that still think the world's flat, and that's how it is. But the truth is, there's a lot of commonality between Europe and the United States. In fact, Jimmy Dempsey was part of Ryanair. Why don't we let him explain it?
Yeah. I mean, I don't know that airport charges are that different in the United States and Europe, in the major airports around Europe. One of the things you gotta look at, you know, is our ability to deliver a seat with a material cost differential to everybody else creates a huge opportunity to grow the business over the next number of years. There is no example like that at the moment around the world, where you have potentially one airline exiting the market, the ULCC space being 5% of market share over in the United States. That gives us a huge platform for growth for many years.
You know, our ability to produce a seat with the A321neo at a low cost in the United States is gonna be very difficult to match by any carrier in the next 10 years. We've got a really good platform to grow the airline. It's somewhat similar to where Ryanair was ten or 15 years ago in Europe, where you know, they really had the lowest cost seat. They'd migrated from a 737-200 to the 737-300, and they got a real benefit in terms of that efficiency that comes into the airline with the higher seat capacity and gauge. That's really our focus in the business.
I would just add, too, you know, at the Indigo portfolio airlines, we've always looked, and it's like gravity. If you can get a 30% or higher cost advantage, there's nothing that stops you. If you look around the world, there's nothing that has ever stopped you. We have considerably more than that with a lot more, kinda, you know, runway ahead of us in terms of no natural competitors. I don't think you can find dynamics in Europe or even in the United States looking back 30 years that were ever as good as we have over the next 10 years. Oh, lots more questions.
Scott, you wanna
Seems like we're getting more questions.
Thanks. It's Scott Group from Wolfe Research. You got the sub $0.06 CASM guidance for next year, but how about operating margins? You guys are operating sort of mid-single-digit margin back half this year. I think you were at 14%, you know, in 2019. When/how do we get back to double-digit operating margin?
The focus on the business is to sequentially improve our margins. You've seen this year sequentially improve our margins. You know, you saw us go from loss-making Q1 to a 2% , 2.5%, from an EBT perspective in Q2. You nearly doubled it in Q3. We'd expect to see that improve. Obviously, you've got Q1 to deal with going through next year, where you have a seasonally weaker quarter across the industry. Our expectation is that our profit per plane returns back to pre-COVID levels in the second half of next year. That will clearly drive your margins higher. If you look pre-COVID, your margin levels are based off a revenue base and an industry that's entirely different than it is today.
You have oil prices that are substantially higher. You have airfares that are substantially higher. From a percentage basis, you may be slightly below pre-COVID margins, but you're delivering the similar cash flow and actual profit per plane. That's the way we're focused on getting the airline back to about $3 million in profit per plane.
That was my follow-up question. If you look at profit per plane, if you can get back to that $3 million a plane on a much higher base of planes today versus 2019, do you think that math continues as you wanna double the fleet by the end of the decade? Can you still do $3 million a plane on a much higher number of planes, or does the math get more difficult to maintain that $3 million a plane?
I mean, it's impossible to predict, like, the next 10 years of profit per plane in this industry. You know, it's a cyclical industry. You know, our focus and what we did pre-COVID was approximately $3 million per plane. We would expect to continue to do that, and the targets in the organization will be focused on actually delivering about $3 million per plane going forward. That's where our focus is. You know, we're not going to guide multiyear profit per plane, but that's where the targets that everybody has set in our organization will be focused on.
It wasn't a 2030 guidance question. It was more of a, as you add more planes, does it get easier or harder to maintain the profit per plane metric that you talk about?
Well, we're controlling things that we can control, as we mentioned earlier. That's why we're gonna continue to innovate on the cost side, and that's why we're putting out the $100 in non-ticket because we believe that there'll be other crosswinds that happen, and we'll need to manage those. That's why we're gonna continue to focus on things like the dual boarding, as an example, which will be huge. It's gonna take several years to get in place, but we will continue to kind of stay ahead of the things that are causing challenges. Yes, we wanna continue to make $3 million a plane.
Teresa, did you have someone? Yeah. We've got quite a bit of time for Q&A that we can continue, so we ought to be able to try to get to everyone.
Thanks. Good morning. Thanks for taking my question. Chris Stathoulopoulos, Susquehanna. Just if you could dig into the three drivers, if you will, that you gave for getting back below the $0.06 adjusted CASM ex. I think it was normalization of stage, increasing utilization, the higher gauge. I understand the gauge is tied obviously to the order book, but could you give a little bit more color on the stage and the utilization piece, perhaps, you know, how you're thinking about peak or non-peak flying and then the split between, I guess, fattening up the existing schedules and then or yeah, your current schedules versus new markets. Thank you.
From a utilization perspective, you look at the result, you look at where we've been so far this year. We've been just around 11 hours per day. It's been a combination. It hasn't simply been. We're not flying as much on Tuesday, Wednesday, Saturday. It's been less structural utilization throughout the week, including on peak days. A large part of this, Chris, is just moving the airline back to fully utilizing airplanes. Whatever definition of fully, we use different days of the week. Peak days fully utilized, and off-peak still utilized somewhat less.
It's not gonna create an abnormal amount of pressure on revenue because we're focusing really the extra utilization on off-peak days. Our best performance profitability-wise has been at a higher stage length. The balance of RASM and CASM to produce profitability has been best at about 1,050 mi. We reduced stage in the pandemic somewhat to make adjusting flying more easy, and then we reduced it even further this year when oil prices went up, because historically, that would've been the right solution for higher oil prices.
We will get a CASM advantage, and we will get a profit advantage, we believe, by returning to sort of the pre-pandemic 1,050 mi. How we grow in terms of the mix of frequency in existing markets versus adding new markets, it's gonna continue to be a mix. I would expect, look, as the fleet grows, I would expect to see our average frequency per market isn't going down from where it is today. There's a lot of planes coming. As we get more relevant and as customers continue to choose us, we'll be adding frequency in existing markets. But look, this winter, we opened the Phoenix crew base.
12 new markets, all to existing stations in the Frontier system, but lots of join the dots opportunities. Barry announced the Dallas crew base a couple of weeks ago, 5 new markets from Dallas, join the dots in existing markets in the system. There's so much join the dots opportunity. There's still plenty of new markets we're gonna add. It'll be a balance.
Helane, did you have your hand up? Yeah. Then Stephen here right after. How about we get these two, Jesse, please.
Mm-hmm.
Mm-hmm.
Thanks, David. It's Helane Becker with Cowen. Thanks very much for coming to town and doing this presentation. Just two questions. One, on the 2,000 opportunities you have, those are a lot of routes, and you have big planes, A321s with, I think you said 240 seats. How should we think about you filling those planes at an 85%+ load factor since some of those cities looked a little on the small side? Thanks.
The map in the video is not meant to indicate, and if anyone's using that map to guess which cities we're opening, that's not. That's illustrative, not planned. No, we've looked at markets. We look at this with a minimum 186-seat aircraft size. We still have, obviously, a very substantial number of A320neos at 186 seats. We look, and again, we fly flexible frequencies, and this is the benefit that opening crew bases offers. If I want to fly a market two days a week from a crew base, great.
If I want to fly it three days a week, great. If the demand says it should be five days a week, great. I'll find the frequency that works. This is the benefit of all the work to get the break-even fare down. Low fares stimulate demand. The cost advantage, as Barry was talking about, the cost advantage we've got allows us to stimulate demand. Look, we've seen examples in other parts of the world in the Indigo portfolio of, yes, A321s, you can still fill them. They're big planes, but they give you even lower costs, which gives you even lower fares, which gives you the ability to add these markets.
Thanks. I just have one quick follow-up. On that bridge to under $0.06, CASM ex-fuel less than $0.06, can you just talk about how you're thinking about going from here to there? Or is it in a presentation that I might have missed?
Uh, we-
Thanks.
We have an outline. Like, are you talking about on a quarterly basis or?
No, just the bridge to going from where you are today to where you wanna be at the end of next year.
I mean, I think you'll see a progressive improvement in our unit cost. You know, you'll actually see some of that in Q4, this quarter we're in at the moment. You know, seasonally, we won't have as much capacity in Q1, so you'll probably see our unit cost rise a little bit in Q1 and then start to materially improve as you go through Q2 to Q4 next year. As the utilization that Daniel's deploying comes back into the airline, really around spring break and beyond, where you get the airline back to about 12 hours utilization, and the aircraft start to deliver. Part of the drive to get to sub $0.06 is the introduction of the A321neo. Those aircraft start coming all the way through next year.
We're delivering aircraft right now, which feeds first and second quarter. You'll deliver aircraft through Q1 and Q2, which feeds the second half of next year. You'll see that progressively improve as you get through next year.
Good morning, gentlemen, and thank you very much. Steve Trent from Citi. Two questions from me as well. I was quite intrigued by, you know, the strong growth you guys are set to put up, and this dual boarding thing you guys talked about. Any high-level view on, you know, airport infrastructure, air traffic control per capita, the adequacy of kind of TSA staffing, sort of anything that's keeping you up at night in terms of, you know, infrastructure adequacy, you know, as you move forward with the longer-term growth?
Well, look, I can talk, and then Jake can talk about airports. Look, I think overall, we've seen the TSA staffing actually looks to be very adequate. I think there's still pockets like, you know, everything from a Starbucks over here to a McDonald's over there. There's little pockets of things that but it seems that the staffing for most part in the TSA world is there. On the air traffic control, look, they get tested around the holidays. That seems to be when we have challenges. We got Thanksgiving coming up, but probably more Christmas/New Year's as a much bigger holiday for South Florida. When they start stacking up at Jacksonville Center, we'll see.
I know that the FAA is adding, I think, another 10% capacity or in headcount. Hopefully that's enough. I mean, they've come to us and said, "Hey, why don't you get over-water radios?" Which we outlined we're doing. That's a multiyear process. This isn't something we can do overnight. We can't overcome their staffing challenges with that. What we have done, and we've outlined this before, is rescheduled the airline, and Daniel's done a great job of going in with his team and making sure that every duty period doesn't have more than two times that it crosses Jacksonville Center. Meaning, you know, you go up from Orlando to Raleigh, maybe back down, but it doesn't go back through there again. It's just no more than twice.
That way, if you get these three- and four-hour GDPs, it doesn't blow up the crew and strand the plane and the crew somewhere. Airport infrastructure, I mean, that's an ongoing challenge. I know the Department of Transportation has been looking into anti-competitive things and so forth. I would tell you that if you look at a lot of the major airports in the United States, it's disappointing that they're not building more gates. We continue to look for real estate in a lot of places, and we take advantage of where we can get it. I don't know. Jake, if you wanna talk a little bit more about why the innovation of the boarding makes sense too.
Yeah. I mean, everything Barry said, plus I would say, look, airports, this is—we're really heartened and excited that Denver was. You know, this is an innovative airport that partnered with us on this facility in our largest airport, right? So we think that's gonna gain traction. Other airports have already noticed. We've had other airports reach out to us directly to Denver to talk about how do you make this happen. So, you know, I mentioned we've done this in a handful of smaller airports, now we've got a big one, and other airports are already starting to notice. Look, this is good for airports, too. It's not just good for us, right? This is a scarce resource at airports, gates, right?
Not only is this more efficient for us, but we can do, I think I had on the slide, up to 40% more turns, right? You get traction on a very scarce resource in the airports, and airports are looking for solutions like this.
No, super helpful. And just a very quick follow-up, I mean, admittedly an unfair question on my part. You know, when you think about the big three or the big four in the United States still going through this difficulty with trying to reach pilot contracts, you know, how are you thinking about kind of into next year, you know, to what degree your pilot candidates are gonna say, "Hey, I'm talking to United Airlines as well." You know, are you guys probably sort of digging into more channels than, you know, than some of the majors, I mean, or over-punching your weight relative to your scale versus them?
Well, I think there's a lot of commentary in there, and I'll try to sort out which ones were questions. Look, I think if you look at the fact that there's gonna be some new pilot deals at some point, there'll be a wave of those. Ours becomes, I guess, early amendable next summer. We'll have our new deal on the heels of that at some point. That's why we're looking at all these other ways to deal with inflationary pressures and why the airport costs are so important, as an example with front and rear boarding. I think when you think about pilot supply and if there was a timing difference, could that be a challenge for us?
That's why, you know, kind of vertically integrating our training and recruiting into the company is so important. We're very confident that with our supply that we have, we should be able to get through the next 12-24 months. Maybe not without turbulence, but we're controlling our destiny, and we've got a really good supply. I mean, these are impressive numbers. I mean, we're seeing, you know, 1,500 or 1,700 now applications for the cadet program, and it's with zero hours, 24 months. To be clear, we're accepting pilots with 700-800 hours. These are if they'd gone through the ATP program, for example, we have already started in contact with them.
That's why we're gonna start bringing in cadets in the first half of next year through that program. We're gonna control our own sourcing, and we're not concerned. You know, the big guys can do what they're gonna do.
Oh, super. Thank you.
Theresa, I think you had a question here, and then Mike, we're gonna get to you how about right after.
Thank you. Hi, Jake Gunning at Evercore ISI. Thanks for having us. On the $100 ancillary target, how does total revenue trend on the way to that? Is that offset by lower base fares at all? Are there any industry changes impacting that? Is there any sort of fare umbrella for ancillary revenue?
We look at it. We do look at it. You've heard the constant reference to lower break-even fare. Look, there's gonna be an impact on base fare. You can look at our performance as we've grown ancillary in the last three years and see the relative trends at base fare.
Yes, we will see some offset. It's a mix. I improve performance of the credit card program, no effect on base fare. I improve sales of Discount Den, no big effect on base fare. I raise prices as I optimize individual ancillary products. Yes, that's a basket price issue, and we'll see changes. There's no real industry effect, and this is about controlling what we can control. We think differently about this, I think, from anyone else in the industry. We're being more innovative.
We're being more aggressive and more innovative at the same time around ancillary. Look, if industry fares rise, if the fare umbrella improves overall, sure, if there's enough fare umbrella, you can obviously hold base fare more easily and grow your ancillary. But if the fare umbrella doesn't hold, fine, we've got the ability, we can afford to be competitive, very competitive and very aggressive on base fare. It gives us more flexibility on how to compete.
You talked a bit about utilization on peak and off-peak. Is there any commentary you can offer on on-peak and off-peak revenue trends and how that might have changed more structurally given different demand?
Yeah, it has changed. It's changed both seasonally as well as by day of week, and it's simply just driven by, bless you. By, I think the work from home phenomena, right? So you're seeing, you know, September was a better September from a leisure perspective, and we're seeing that, you know, Wednesday's not as bad as it used to be. So I think that does change how we think about utilization. You know, it's good to have, you know, good peak utilization, but maybe it's not as painful to fly some off-peak, so it's actually easier on the operation. But there's still some seasonality, and there's still. I mean, look, Christmas is still Christmas. You know, New Year's is still New Year's. Thanksgiving is still Thanksgiving.
I mean, since it's right upon us, I mean, I'll give Thanksgiving, you know, examples here. We're still seeing that the Sunday is still the best day of the year, right? This has been widely talked about, I think, my whole life. It's the biggest travel day, not by just air, but by cars as well. That remains true. However, the outbound used to be, when I got in this business almost 30 years ago, you know, Tuesday afternoon through Wednesday and Wednesday afternoon, I mean, it was just packed if you were in the airport, you know, at 3:00 P.M or 4:00 P.M on a Wednesday afternoon before Thanksgiving. I mean, it's a madhouse, right? What we're seeing now is the outbound is actually starting as early as the next few days, and then continuing through the weekend.
You're not seeing as much kinda Tuesday, Wednesday. It's still there, but a lot of people are just kinda taking that week to work from wherever they're working from. We're not seeing it quite as peaky. Which in total, I mean, we need to see a few more of these. I think you're gonna see that the Christmas season, for example, and even the Thanksgiving season, it actually enables more people to travel, right? Because when there was only just a handful of peak days, and then there was no one wanting to travel on the other days, I think it does make for a much better season overall.
Yeah. I think, look, I think this is the low fares, this is the one, this is the leisure travel. This is the issue, and Barry's right. The industry ran out of seats. I started in 1996. The industry would run out of seats on a Wednesday, and they'd run out of seats on the Tuesday afternoon. You see Thanksgiving demand starting this Thursday. I've never. We'd seen it smearing before. To be fair, we'd seen it smearing to the weekend before. We're seeing Thanksgiving demand start two days from now, which is sort of pre-pandemic would've been unheard of. You can see an improvement.
The Sunday's still really good afterwards, but you can see it smearing more into the Monday, and you can see some effect now smearing into that Tuesday. It used to be that Sunday and Monday were good, and then Tuesday was the start of that really bad off-peak period. I think the reality is the more flexibility is going to drive more demand, and that's what's sort of smoothing out some of the demand in these peaks and getting more people to travel. If you can travel, if you can work remotely and travel for a week, you're more likely to travel than if you can only go for four days.
If you can take a four-day weekend and work remotely for a couple of days, you're more likely to travel than if you could just travel for a two-day weekend. It's rationing. It makes travel more enticing when you can get more time away.
Mike?
Thank you. Mike Linenberg, Deutsche Bank. Barry, back to your point earlier about bringing on pilots with 700-800 hours and, you know, digging into that a little bit more deeply. When you have, I guess, cadets who come out of a college program, say, in Embry-Riddle or Purdue, roughly 250, maybe it's 300 hours, how many years does it take for them to get to the 1,500, number one? Number two, through that process, are you supporting them? I heard one of your colleagues talk about a bonding process. Or, you know, what are they doing? You know, what airline are they flying for? Is it a Part 135 carrier? Can you just talk about that gap between the 250 and 1,500? Then I have a second.
Sure. I'll kick us off, and Brad can explain it. You know, effectively 24 months. From zero hours to 24 months, you could have an ATP and get 1,500 hours. That is a dedicated training all the way through, and I would say a pretty diligent process to build your time. I think what we saw is that, you know, it's you know, until you have programs like ours, it's very fragmented, and they're kind of on their own, if you will. You can go on these Facebook pages and different blogs and pilots are, you know, kind of through tribal knowledge, teaching each other what to go do. That's really why we created the cadet program, was to actually mentor them through that.
I don't know if you wanna explain kind of that whole timeline.
Yeah, sure.
I think this is on. First and foremost, I want to assure everybody in the room, right, our training and evaluation standards don't change regardless of where the pilots come from. They either are safe, confident, and competent, or they are not. It's very binary. We've got the experience with the universities and the cadet programs. Again, what we found, just through being proactive is that these pilots, in some cases, do better, especially the university programs, than we had a program with TSA, for example, where we were hiring 10,000 of our pilots. Believe it or not, they didn't do as well as our university graduates did coming through these programs.
The amount of time span, we average 70 or we forecast about 70 hours per month for somebody either flying for a Part 135 charter program or for flight instructing. You do the math on that, and as Barry said, you know, university graduates typically have, you know, between 300 and 400 hours when they graduate. It takes them a year or so to get the 1,000 hours they need in a restricted program because they have a BS degree in aviation. It can take them up to a year. Again, for us, it's close mentoring. We have a lot of requirements in terms of, you know, check rides and things like that, even when they're getting their ratings, even when they're working as a flight instructor.
If they, you know, fail two check rides, for example, they're not in our program anymore. We're very selective as well.
Great. Just second, probably to Daniel. On the modularity of your network. You know, it does appear that you're pulling a page from the successful European ULCCs like the Wizz and the easyJets. I'm actually surprised that there are really no other carriers that are adopting that model where they're looking at your nine bases right now, and you look at an airline like Southwest, which is much larger, and they probably have a similar number, and a carrier like Spirit has less. What is the threshold where you make that decision to open a new base, number of airplanes, number of pilots? And is it also nine domiciles or bases for the flight attendants? Is it the same, or is there a different number there?
Well, I'll answer the last one first because it's quick. There's a 10-flight 10-only base in Chicago. So we used to have a rule of thumb of sort of minimum 20 departures a day. What we've done with this modularity is we're essentially looking at the world. It's driven by our pilot contracts and our reserve rules, and we're looking at the idea that five airplanes in a city which produces, generally speaking, two waves of departures a day, so 10 departures a day, is a size at which we can efficiently operate a base.
As we've changed going into our Q4 schedule this year, we've simplified the flying in a couple of our smaller Florida bases into a sort of very clean set of one-day turns for crews. We think that's gonna be the model going forward. It gives us flexibility because it gives us the opportunity to open bases in somewhat smaller cities from our perspective in terms of total departures. When you think about the world as we're thinking about it from a modular perspective, are there opportunities that are too complicated.
There are good network opportunities that are too complicated for us to set up without a base. I open a base in a city and suddenly, oh, great, I can introduce more routes. There's more opportunity. The great thing is we can open bases with relatively little disruption because we're a fast-growing airline. The idea is as we continue to grow, we can grow into having more bases. It is surprising. I will comment, obviously. Allegiant runs a very modular network having started that way. As I discussed, we think it's a broad competitive opportunity.
I will say it's a hard change to get from where you start to getting there. Once you do it, and we took advantage of a crisis in this situation, when you do it, you realize how much better it is to do it this way.
Yeah, I mean, in reality, it hurts RASM, right? Basing the planes the way that we're doing it typically ends up with less desirable departure times or arrival times. We took that hit during COVID. You know, we're slowly kind of getting out of that. We're almost done. I think the last few pieces are actually going into place now. We decided, look, I mean, at a time when things were already rough anyway, go, "If you're gonna take the hit..." 'Cause we've been studying. This just didn't just happen overnight. We've watched Wizz Air, we've watched Ryanair for years, and we were envious of how they operated, but we knew that the P&L hit was real.
you know, we kind of took that time during COVID to go ahead and make the investment. Now it's starting to pay off.
Thank you.
I'm gonna pause from the room just for a moment, and I'm gonna give the panel a couple questions that have come in thus far. I've got a few questions here. They're pretty short, though, from Duane Pfennigwerth. I'm just gonna pitch it, and we'll see who takes it in the panel. His first question is, can you talk about the specific systems you plan to implement and frame the investment needed to enable customer self-service? When will you get these across your system? As Barry mentioned earlier, our chief information officer wasn't able to make the trip, but Jake, maybe you wanted to start off on that.
Well, we've got a range of systems. There's potentially a PSS system. We have an operations system that for our SOC we're in the process of changing out over the next few years, which is a huge opportunity from a fuel burn perspective, not as much as on the labor cost savings. In the airport world, I think is probably the biggest near-term driver, and I'll let Jake speak to that.
Yeah. Look, I talked about the website and the app as supporting, and they really do support pre-travel customer experience. Anything that we can push upstream is a transaction that doesn't happen in the airport. I mentioned we've already started this. We're probably farther along in the contact centers moving to the digitization of that experience than we are in the airports just because of the size and scale of the airport network. But you know, we're in the RFP talking to suppliers on the technology that's gonna go into the airports. You know, that's probably into the end of 2023, beginning of 2024. And we're well on the way in the contact centers.
Great. His next question was, why is a CASM ex-fuel more appropriate than a margin goal?
Like it's quite straightforward. We're focused in the business on controlling the things that we can control. Daniel Shurz's talked about his non-ticket and the way we can actually sell effectively to get our non-ticket next year or to the end of next year to $85. It's no different from a unit cost perspective. We can control the things that we can control, and that's one of the things that's under our control. We don't see it appropriate at the moment to give margin objectives, although we have given a profit per plane focus in the business going into the second half of next year to return to pre-COVID levels. Like, the real focus in Frontier at the moment is normalizing the business back to the way we operated pre-COVID and improving it.
Daniel's talked about the modular network. That gives us real cost savings in the business going next year. In order to get to the cost savings, you've got to get the airline back to a utilization rate just above 12 hours. That's very important. We've got the aircraft that are coming from an A321neo perspective. Those 240 seats, moving from 186 seats to 240 seats is a substantial improvement in efficiency in the business, and we're in control of that. There's probably some manufacturer delays that'll occur, but they're in the two to three month variety as opposed to extended delays. We've really good line of sight to that gauge coming into the airline. We can control those items.
We finance the fleet for next year. It's in a very, very attractive place from a financing perspective, and that feeds into our operating expenses because our rent is in our operating expenses. All of our ownership costs are effectively in our operating expenses, which is different to other airlines. We're in control of these items, and that's why we focus on those two things that we can control. Will the margins deliver? Yes. We expect the airline to get back to double-digit margins as you progress through the profitability in the airline. There's the metrics that we're focused on and have always been focused on in the business is generating cash flow and delivering profitability in the airline and taking our leverage ratios down.
We've been very, very focused on that, and we expect to achieve that as you progress through next year and into 2024.
Yeah. There was a question embedded in there about fleet delays, but I think you just covered that in that response, so that's good. Another question. Historically, you've avoided high-cost Northeast airports. Are you thinking about that differently, particularly as the ULCC landscape may be evolving?
We...
Yes, we are, of course. If the merger happens and the already promised divestitures, I haven't seen quite this much in the way of promised divestitures ahead of time. Are we interested in more capacity at LaGuardia? Yes, we're potentially, you know, interested in more capacity at LaGuardia. Within expensive metro areas, we look for relatively lower-cost airports. As an example, not in the Northeast, but in Chicago this year, we moved most of our capacity from O'Hare to Midway, where we serve Chicago, and we get a lower-cost airport in the process.
We will look to serve the most cost-effective airports in a metro area to the extent possible. We're a national airline. We're gonna be in every significant metro area, but we're gonna do it in the most cost-effective manner possible.
I think we do still have more time. Were there any other questions in the room? Jamie, you had a follow-up you wanted to?
Thanks. I'm just wondering, and I know it's early, but on the A321neo, how does the RASM hit compare to the CASM improvement, or is it just too early to be relevant?
It's too early on the A321neo so far, but we have A321s in the fleet, and they have traditionally been our most profitable airplanes. You see a RASM hit. You do. But you see a smaller RASM hit than you see a CASM benefit. And that's been our experience. That's true. Okay. They're 230 seats. Yes, I have another 10 seats to fill. We're confident it will be a net benefit to the airline.
Could you quantify what that difference, I mean, basically, shorthand, you're saying a higher margin or return?
No. No, we're not. We haven't, and I'm not going to right now.
Just to follow up, though, you know, we have analyzed the A321 for a long time. We got our first nine or 10 of them back in 2015 and 2016, and it was enlightening to us to see that they immediately were the most profitable aircraft in the fleet. We had an appetite to
Buy more of them. It took through COVID to actually get the fleet into a stage where we got ourselves to about half the fleet. In the future, it takes some time to get half the fleet as A321neos. It was really the early signs from the aircraft and the profitability that it delivered in quite intense competitive fare environments that was compelling to us to actually buy more. That's why you now have the airline moving to over 50% of the fleet in A321s.
Any other questions? Mike, any follow-up?
Yeah, just, maybe this is to Daniel or Barry, just going back to your route map and seeing the number of cities that you connect to Cancún, Punta Cana, Montego Bay, and I think earlier it was tied into the credit card and aspirational type destinations. International is definitely becoming a bigger part of Frontier. Just from a percentage of ASM basis, you know, where are you today and where do we see you going? Legally, can you set up a domicile in an international city or would that be tax issues and the like? Maybe I know the answer to that.
Look, we are more focused internationally than we were in the past, and we continue to invest in it. We just announced last week, or two weeks ago, you know, more services to Montego Bay as an example. We don't believe we need a foreign domicile in order to grow. Daniel, as far as targets, I don't know if we've updated that.
We haven't. We haven't, and I'll have to go check what the current numbers are. We continue to find opportunity in the biggest. We talk about Caribbean and international because in many ways, Puerto Rico behaves more like an international market for us. We've grown since the pandemic started significantly in the three markets you mentioned in San Juan, and we've obviously also entered some small international markets on a lower frequency basis. Look, is it valuable to the credit card program and to Discount Den? Absolutely.
It's more markets that are more attractive to customers. You look at the mix of capacity in those markets, you see a significant opportunity. We love the three international markets you mentioned because, look, it's total cost of travel really does matter. You've got huge numbers of hotel rooms. You've got so much accommodation in those markets. Low airfares drive more demand. You look at the Puerto Rico market, it's a ULCC market. We're going to keep growing there. We've got a great example of where our competitive cost advantage is real, and it's the, we've got the right product at the right price for the market.
Those are all the questions I think that we have. Barry, if you just wanna close it out.
No, I just wanna thank everybody for coming to our inaugural investor day. It's been great to see everybody in person, and it's great to do it here at the Nasdaq as kind of a reminder, if everyone remembers, but last year on April first, New York City opened back up and we were here actually as the first day of our IPO and actually rang the bell here at this building. Great to see everybody, and we'll be around for the next little bit. If you have more questions, I'd love to catch up with everybody. Thanks, everyone.
Thank you.