Alaska Air Group, Inc. (ALK) Earnings Call Transcript & Summary

Okay, everybody. Moving right along. So I'm pleased to now turn the attention to Alaska Air Group and just in chatting with Shane Tackett, the CFO of Alaska, I didn't realize that this was your first JPMorgan Industrials Conference since you, I guess, just ascended into the seat as COVID was setting in.

I'm very, very nervous, Jamie, to be at your conference for the first -- for the conference for the first time.

The conference, right. And I also didn't realize until I was reviewing your bio, I was all smitten with myself this morning that I just celebrated my 20-year anniversary. But I see you've been with Alaska for 22 years. So coming on, you make me feel young. So that's good. So I've got to start out with the obvious, following the bevy of disclosures today. When do you file your 8-K?

Yes, not today, not today, not today. We put out a...

No, but timeliness is for a reason...

For kind of middle of the quarter, see if people are updating, yes, I get it. We put out a small one last week, which was capacity guidance update and fuel update, but we haven't updated other metrics. We are going to be back in the city next week for our Investor Day and we may have more to share there.

Okay. That's a good answer. Well, have you seen any of our notes, my competitors' notes, any of the presentations this morning? Has any of the remaining airline complex in the U.S. cited any trends that really caused you to perk up and say, "Well, that's unusual. How come we're not seeing that?"

No, I have started to regularly read your notes. Jamie, I have seen a couple even from today. I think none of them were shocking to us. And it's -- I think it's generally been good to see that there's some resiliency on the demand side of the business even in a really uncertain backdrop in the world with oil and the situation in Europe. And by the way, that's sort of more important than any of the stuff is what's going on over there and it's tragic and it shouldn't be happening. So I think I was at another conference a week ago that was just really becoming the focus of the news. And I think we were maybe a little more uncertain about the future. And I think this -- even in a week, it's felt like it's at least in our industry and domestically that there's some stability and resiliency to the demand that is out there right now.

Well, let me -- after just asking you for making disclosures at my competitor's conference and understandably holding back ahead of your Investor Day, let me give you an opportunity to take a victory lap. I have personally, I mean, as an analyst, been an opponent of fuel hedging for quite some time. I think it has proven to be very costly, very few airlines are any good at it. I think it has destroyed more value than it has created. And I was humbled by what Tammy had to -- what the Southwest had to say a couple of panels ago. So bring us up to your speed -- or bring us up to speed on your thought process there. Where your hedge book looks now, how you think it looks going forward?

Yes. No, great.

At least for right now, you look really, really brilliant.

Yes. Well, yes, we tend to not focus on it too much when we're a net payer. And we're always happy on a relative basis when it's working in our favor. But number one, I'd say, Jamie, I think your perspective is a really, really solid perspective. And historically, we were a little more aggressive. We hedged half at the money. And I'm not going to give you credit for influencing it, but we have modified our approach to hedging over the years. We now hedge half of our consumption 20% out of the money. But for us, it's always been viewed as an insurance policy. We know that this is inherently a very volatile business. And we think that trying to mitigate some of that potential volatility helps you think longer term, be focused longer term, not have to be as reactive. And I think airlines when they have to sort of be in crisis mode and react can easily make suboptimal decisions. And so this has always been about in a moment of crisis, buying ourselves a little bit of time to make really smart and informed decisions. And so our net expense on this thing typically in the year is $20 million to $30 million relative to a size of the company and the profitability profile of the company that's been very manageable. And then when we get into a situation like this, it tends to give us some flexibility on just how quickly we have to make capacity decisions. So we aren't really rethinking the program right now. We're glad that we have it. I think we'll continue to do, as we've always done, 50% hedge starting 18 months out, 20% out of the money call options only. We don't do exotics. Our counterparts down in Texas are very good at hedging the hedge with a lot of different tools than we do, but they're really capable and sophisticated and we try to be very simple with it. So we're in good shape for the next 3 or 4 quarters. We're just now putting hedges on into the middle to back half of next year. So if we see fuel prices at this level out into next year, that advantage that we have right now, probably it tails away at some point.

So you're formulaic and consistent about it because there's no oil gyration that would cause you to do more or less, you're just basically constantly in the market.

That's exactly right. We've got a policy in place. It's robotic and automatic.

Okay. So let's shift to demand. We had a very bullish presentation from Doug Parker at American, who is of a view that skews close to our house view that there will be no meaningful corporate impairment. For most of the large U.S. airlines, financial services, manufacturing and tech in that order are their 3 largest buyers of air travel is -- but given your network construct, I've got to imagine that maybe tech is higher on that list. This came up on the last conference call, are you seeing any recovery in that market? And could you address broader corporate demand trends? But again, with a specific focus on tech because that does seem to be a material laggard right now, and I would argue perhaps the one that would be more embracing of air travel substitute.

Right. Yes, yes, yes. Same reason I'm not doing virtual conferences. I'm only flying places. Ours is it's tech, retail and manufacturing. So that's -- if you think about some of the really large global names in sort of retail, consumer goods up in the Pacific Northwest, we do quite well with those. And I think we ended the year about half recovered. I would say that give or take, half of our corporate travel is small, medium business. That seems close to fully recovered. It's hard to track because it's individuals, they don't buy through sort of business travel agencies, but that feels like it's pretty much back. A big dip in January and February, obviously, with Omicron, and then I would say we're back to 50% or better recovered as we sit here today. I do agree like tech is probably the one that is most likely to consider substitutes. It's the one that's furthest behind. The 2 things I would say, Jamie, is number one, tech tends to be frequent in travel, but not as high quality in yield. So they command very good deals from airlines. And so those yields tend to not be as rich as some of the other sectors you might focus on. And my guess is they pay less than you pay when you travel. And so that's number one. Number two, we've been, look, more leader focused. So our reliance on business travel as -- in terms of mix is less acute. And then beyond sort of what the corporate contract looks like, we've largely not really focused on participating in the highest end of business yields. So $1,800 transcontinental fair, we don't actually sell those and never have. And so all of that is to say that we don't need as much of a yield recovery to get back to our pre-COVID yields on business. I think that the other piece that we've got going for is that maybe others don't have relative to pre-COVID is we've got new joint corporate contracts with American that we just didn't have pre-COVID, the oneworld Alliance will give us access to more international connecting traffic that we didn't have access to before. And we've actually started working with sort of the largest business travel agent out there, Amex, and we didn't have a relationship with them pre-COVID. So my guess is that we're going throughout this year, assuming all else equal, that business recovery continues by volume, I think we'll get back to pre-COVID levels as we exit the year -- this year even if others don't. And I think by yield mix, I'm pretty confident that if yields hold up, we'll have business yields that are very similar to we had pre-COVID, just because we were never really participating in the $1,500 fare category. Does that make sense?

Yes, absolutely. So JetBlue spoke quite a bit this morning about the Northeast Alliance and identified actually some of the cost pressures that accompany the revenue upside. I've never gotten the sense -- I mean the deal that you have with American on the West Coast, I don't know if it's that you've been more quiet on it or it's just received less attention overall. And of course, it's not a mirror of what's being done in the -- around the East Coast. But talk to us about that alliance and whether investors should be uniquely focused on its profit contribution. And then I'm going to ask you the same question about oneworld.

Yes, oneworld, yes. And they are a little bit overlapping. But I think -- and we'll talk more about this next week, I think we were extraordinarily excited for the company to become part of oneworld and to join this West Coast International Alliance with American. It solved a big gap that we had strategically which was we just didn't have a seamless way to get people around the world, and we knew that there was a subset of customer demand that we needed to be able to satisfy, which required sort of seamless international travel. At some point, that will be back, we believe, it's hard to say when. And even though we had a robust alliance network, they were all bilateral. It was really hard to transfer bags and recognize status and sell each other's tickets and it was -- there's just a lot of friction in that process. It was great for redemption if you were a loyalty member and you had a lot of miles saved up. You could get to places for really reasonable redemption values on great carriers, but we didn't have that ability to really, on a daily basis, service the traffic that we wanted to serve and we had competitors who are able to do that. And so we've now resolved that issue. We've got -- already we're selling tickets seamlessly on a number of our partners and we're seeing our ability to smooth traffic into our partner networks that were different than pre-COVID. I think we've been -- we always like to sort of focus on ourselves. And while that's a very important strategic element, I don't think we want to overplay it relative to the core underlying business of Alaska. And I think we're more focused on maintaining our cost structure, our balance sheet and our own loyalty penetration in our markets and sort of growing our brand preference in our key geographies that, that's what you hear us talk more about. So maybe a choice of where we like to spend our attention and energy in terms of talking about our business model and why we think it's really positioned to outperform the rest of the industry. But it's -- this solved the key problem, it is giving us a larger demand pool to sort of ultimately serve, which should help us with yields and load factors across the network. I think this thing specific about American that stands out separate from oneworld is the ability to go and do joint contracting so we can walk into a corporate entity and offer one contract through both of us. And American has been very receptive to that approach and the vast, vast majority of corporate clients have welcomed us in, and we've been very successful gaining new contract footprints within people that we didn't have access to before. They're not flying yet. But once they do, those are going to begin to really produce for us. And then the other thing that we're seeing, and we've talked about this a bit is flying into our partner's hubs from obviously our hubs, but even key sort of secondary cities or focus cities, you might call them, that flying has become very attractive very quickly and I think there's more potential for that. So Boise to Chicago is a really good example that we're now flying routinely, we didn't fly that before. You'll see a lot of our Boise network. It's a small city, on a relative basis, it's starting to mix into mainline assets instead of purely regional. And those are all driven by the ability to connect into other networks behind Chicago. So Boise behind Chicago to the rest of the East Coast is a viable option for folks in Boise that wasn't before. And it helps I think everybody, I think it gives consumers more choice and it helps American fill up their planes out of Chicago and certainly gives us access to more service in the markets we probably would have struggled without that connectivity.

So is there -- and I just thought of this as you were delivering your answer. I mean, is there sort of an internal cap on how much connectivity you'd want to have in place? I mean I do remember a time in a place when I believe 13% to 15% of the business was Interline, Delta was a big chunk of that. That business went away. Does that influence what you're willing to do both with American and the Alliance or is that just kind of unrelated?

No, I think it's -- I think that -- I don't know that, that was...

It's a different environment.

It was, yes. And it wasn't -- we didn't like land at 18% and said that's a natural cap. I think that was a natural place where the like demand flow sort of settled and it made sense on both sides. I do think you've got to ensure that both partners are getting benefit from the partnership and there's going to be sort of gives and takes in terms of accrual rates and sort of how you connect itineraries and those sorts of things. But I would expect that -- I don't know that we'll get back to 15% to 18% because we've done a really good job of backfilling the traffic that we lost through previous partnerships, and I think we'd prefer to hold on to the customer just like American would prefer to hold on to the customer. But I think in growth markets where we don't have strength on one of the ends, that's where all of a sudden, this can make a lot of sense. We've got strength perhaps in places American doesn't have as much and vice versa. And those are the areas you're starting to see really come alive through the partnership. And then I just go back to be a sort of dead horse, this joint corporate contracting thing is a big deal. And part of that is because; A, we now have access to some revenue streams and demand that we didn't before. But you all know like capturing the corporate demand translates to future leisure demand as well. Most people stay within one ecosystem, right, for all of their fly and they're not going to move leisure outside of the ecosystem. So it becomes really important that you're able to get all of a person's flying over time, and that's what the Alliance and the joint contracting gives us a chance to do.

And is there a loyalty kicker? I mean as your brand is being brought into networks in cities and hubs that you ordinarily wouldn't have the same presence in without these deals, are you seeing an uptake on cards and...

That one is hard to allocate between what's sort of relative to oneworld and WCIA, the West Coast Alliance, versus what we're doing on our own. But there's definitely an impact to the degree that the network got larger because of connectivity and partnerships, it's a more valuable asset for a loyalty member, for sure. And so we've had really robust mileage plan enrollments in our base sort of mileage plan loyalty program, and we've had really strong credit card penetration growth, both in the Pacific Northwest and then multiples of that rate of growth down in California and non-Pacific Northwest geographies. The problem, Jamie, is I don't -- we did all of this stuff at the same time. So I can't tell you how much was driven purely by oneworld per se versus our own sort of network reshaping and marketing ourselves and sort of becoming better known in some of these geographies we weren't historically well known in. But -- and we'll talk more about this certainly next week. We're seeing pretty exciting growth in both Mileage Plan membership and credit card penetration within those groups outside of the Pacific Northwest.

Give us an update on where you are with the fleet, the gradual transition to single fleet type, what sort of CASM benefit investors can expect? Also now that you're hitting more of a critical mass on the MAX, any sort of economic feedback on that particular type?

Sure. Well, we started with 71 Airbus aircraft, just as a reminder, 10 of those were owned A319s, the smallest of the Airbus family, 10 were A321s. Those are leased. They're actually leased through essentially 2030 and the other 51 were A320s, all of those A320s were leased. The 10 A319s, we transacted a year-ish ago, maybe a little bit more than that, we've sold all of those aircrafts, which we felt like -- we felt very good about being able to do that in the middle of sort of the worst part of the COVID impact. And those will all be replaced by 737-9s ultimately, they come off the Boeing production line. The other 51 A320s that are leased...

Are you emphasizing eventually as a dig at Boeing or you were just saying...

No, event -- no, Jamie. I was not digging at our partner. I adore Boeing, I really do. No, it's just meaning like we can't wait to get them, that's what I was saying. Eventually, we'll finally get those aircraft which we want right away. Boeing is doing a phenomenal job for us. The 10 A321s, I'll go there first, I'll talk about the other 52. Those are longer-term leases. I would not be shocked if we found a home for them over time, so they were out of the fleet before then, but we don't have line of sight to that. We haven't worked super hard on that fleet yet, but we will. The other 52, most of them have been returned. I believe, we have 30, so maybe not most yet, but we're getting close to half have already been returned. All of them are due back to lessors by the -- essentially the end of 2023, maybe a couple slip into 2024. And we honestly would love to accelerate that time line. I think the quicker we get to a single fleet, the better. We've done this once before in our history. It had a massive benefit to the company. You just start with simplicity. One fleet is way simpler than 2 fleets to operate. You operate better, you operate more efficiently. And when you do that, you can start to cut cost out of the operation. You can cut minutes off of block times. You don't have to reserve your staff, your crews as heavily as anybody. Any pilot can fly any aircraft at that point. You don't have to be as sort of deliberate about where you fly different fleet out of. So we sort of have to lock aircraft in a certain bases to do certain missions because we're hoping we don't -- they're not interchangeable. So we have to keep as many of the Airbus together and as many of them Boeing together, we can worry less about that. We've verbally, I think, said that the cost savings is $50 million to $75 million a year relative to the sort of pre-COVID cost basis. And that's really before -- that's like sort of hard crew cost, maintenance saving costs, ownership costs. That's before you get into the operational efficiencies of just a simplified single fleet, how much more efficiently can you drive those assets? How much more utilization can you get. I believe this is true if the most profitable airlines in the world over time have been single fleet operators. So I think there's a lot of reason and justification to do this. Like I said, we've done it once before. The other thing about this, Jamie, is we're going to be upgauging along the way. So the 52 A320s were 150-seat aircrafts. Most of those will be replaced with 178-seat aircraft, Boeing MAX aircrafts that are 20% more efficient from a cost basis on a per seat basis. And then we announced a week or so ago that some number of these will ultimately also be replaced with Dash 10 aircraft, which could have upto 189 seats on them. And so I think between the Dash 9 and Dash 10, we're going to have a very nice tailwind of upgauging, which is hyper efficient kind of take it to the growth. It's very low cost for incremental seats, which gives you upsized -- outsized revenue capability for almost marginally very low extra trip cost. So we're -- we can't -- we talk and so I just want to wake up 3 years from now and have all of this through, have our fleet here, have a lot of the strategic stuff executed on. But we're glad we've made the decisions we've made, and we're sort of in the midst of executing that.

Well, so if you're starting -- and you said $50 million to $79 million. So if you take a $60 million sort of direct cost impact that's before you factor in some of the efficiencies, and that's before you incorporate fuel burn at all?

Correct.

And let's hope when you wake up in 3 years, fuel prices are manageable.

Yes, yes.

But on a fuel constant basis combined with the increased seat count, I mean we're approaching 3 points or 0.75 of cost per available seat mile. I mean give or take -- it seems like fairly fuel inclusive on a neutral basis. Not quite a point of CASM really. It's a lot.

Correct. And it is a lot. And we've got 92 on an order, and I'm going to get some of these numbers slightly mixed up. But if they were all growth aircraft after the replacements, we'll have 300 or so aircraft in the fleets. So there will be 1/3 of the fleets pretty quickly. And if we take all 145 under the order by 2025 or 2026, they could be half the fleet within the next 5 years.

What are some of the other -- review for us how your cost structure overall evolved during COVID?

Yes. Yes. It's initially, I think in April, I'm just trying to get my timing right, April or May, we immediately undertook a structural cost reduction initiative, $235 million-ish, I'll give my numbers. There's so many things that have happened in 2 years. A lot of that was supply chain savings. A lot of that was -- our single fleet was part of that number. And then we did do a large sort of management reduction, and all of those were still intact. And so our -- I think we ended up sort of being on the leading end of cost reductions proportional to the size of the business. And I think we executed fairly well. In the depth of the crisis, we were able to get to 50% or 60% variable cost relatively close in. That's not a place you can live in the airline industry long term. So as we were flexing capacity with only 45 days' notice or something, we were able to shed half of the cost of a flight really close in. And so I think we've generally felt pretty good about where the cost performance was. We were in the middle of the pack of capacity deployment. So if you look at CASM ex, there are some folks who are deploying a lot more capacity. And so they had a slightly better unit cost profile. But on an absolute basis, we were doing better on profits because I think we were managing capacity a little more tightly with demand. I think we led -- I know I'm moving into an area you didn't ask about, but we were close to leading the industry certainly on unit revenues. I think we're second in yields, we were quite high on load factors. And with our cost performance, I think we ended up being the most profitable company last year, certainly in the industry in terms of the carriers we look at. And I think we're poised to maintain that type of momentum, hopefully, as we go through this year. The real like -- the real question we had 1.5 years ago or 2 years ago was what was the ultimate size of the company going to be? And there's a lot of uncertainty. And so I think what we said is, even if we were 10% smaller, we wanted to get back to our 2019 cost structure. That is where we got the number, the cost savings number. Our plans are now to be back to pre-COVID size by the summer and beyond that by the end of the year. And so we're not really in that construct anymore of being a smaller company. And because of that, we are onboarding costs to get ready to get bigger. We're getting staffing in. We're buying simulators. We're increasing our training footprint. But my belief, and if you look at the guide this year and if they hold true to some degree, is we are going to improve our cost structure against every other airline we compete against as we come out of this. And I think that's a really good position to be in because costs ultimately are what drive long-term stability and success in this industry.

So one of the structural advantages that I have felt Alaska enjoys perversely enough, I suppose, is a presence in some higher cost areas of operation. And I think the benefit to that is that you've not experienced the same level of ultra-low-cost carrier penetration as had some of your peers. And in recent years, there were a few runs on Seattle for, lack of a better term, JetBlue and Spirit and Frontier that those airlines then backed off of. We now have a proposed merger between 2 of those entities. Do you think that potentially revises the combined entity's interest into making another run on some of your more profitable higher cost airports? And do you disagree with my higher cost observation as I don't want to quite call it a moat around your business, but it's a disincentive for airlines of certain fare structures really.

Yes. No, I think it's fair. I mean, I might expand that and say that I feel like the value proposition that we offer, the ability to compete aggressively on price even at those fares that they like to offer and to do so in a way that still we can have success as a business because of our cost structure and our balance sheet and sort of the brand preference we have in the Pacific Northwest or -- I would give all of those reasons as reasons that perhaps people don't focus a lot of attention on some of the places that we're strong in. I think it is true that over the years, there have been some attempts to sort of create maybe some footholds into places we're relatively strong, and they haven't for whatever reason stock. And whether they had better strategic options in front of them or we did a good job competing against them and sort of holding our ground, I don't know, which is true. But I think historically, we've done very well against some of those companies. I think we have a very good product and then we're willing to again offer it for relatively the same price. And if you're in our loyalty program, you live in the Pacific Northwest, you want to fly regularly, why wouldn't you sort of take the benefits of being loyal to us and enjoy our product and our service and sort of the quality we have on board, if you can get it at relatively the same fare. And so I think we have a good setup. Those are really resilient business models. They're smart business models. They're really successful companies. So I take nothing away from Spirit or Frontier certainly. And sort of we wish them well, these mergers are not for -- they're tough. They're not for the faint of heart. They're tough. It takes a lot of -- they know what they're getting into. It's a lot of strain on both organizations to go and put 2 companies together and they're well aware of that. And I think they're doing it for whatever good reasons, but I wish them well in that endeavor because we've just gone through it. It's a tough haul.

Well, I want to leave a little bit of time for questions. But just ahead of next week, not expecting you to say precisely what the answer is going to be, but do you plan to update for the first quarter? It sounds like a yes.

I suspect we will, yes.

Okay. Do you plan to make statements about the pre-COVID pretax margin range, which you had earlier identified? Will we get an update?

Yes, I think we want to lay out longer-term targets again.

Okay. Should investors expect to come away with timing, and again, not asking what the timing will be, but more clarity on capital returns once you pass the October 1 prohibition against dividends and buybacks.

Yes. Yes, I think we'll be in a position to be talking about when we feel like the business may be in a position to consider those seriously, not again any thinking in terms of specific timing of when we might do it. But we've talked early on like we want to be one of the first who is in a position to do that, whether we take advantage of that or not is still to be seen. And we're not going to be sharing long-term sort of specifics along those lines. But certainly, we will be talking about that's in the long-term capital allocation strategy.

And presumably a full year update as well as capacity plans moderate. I mean the original plan was to be larger in 2022 than 2019, but with an inflated ex fuel cost structure within reason, adding some of your peers. So we should expect an update on those metrics as well.

Yes. Yes. We'll give updated guidance for the full year. And then the longer-term guidance, which we won't peg to a year, but we're not talking like 10 years from today, we're talking within our relative investment horizon lifetimes here, but yes, exactly, my 3-year comma when I wake up. Yes, for sure. We will talk about those.

Well, let's open it up. We've got a little bit of time. There's a guy here in the front. Mark Streeter.

Hello. So just on your comments about the Airbus aircraft and your willingness to maybe move those early. Certainly, pre-Ukraine and Russia and so forth. The lessors were scrambling to get back narrow-body slots that they had deferred and there was sort of a land grab and so forth. And maybe that continues. We'll see -- we're going to hear from all of them tomorrow and so forth. But have you been engaged with those discussions with the lessors? And if they are willing to maybe work with you on moving those aircraft out early, is it all dependent on what you can get on the other side from Boeing in terms of matching that up? Maybe just talk about that a little bit.

Yes, sure, Mark. For certain, I think our interest wouldn't -- would be to have some sort of very close trade out of A321 into a Boeing aircraft, whether that's part of our order book or part of lessors. And so that's going to be important. I don't think we want a large gap between those 2 unless fuel stays super high, and we feel like the capacity is unnecessary. We've just started to talk and think about this. There's actually quite a bit of demand to convert some aircraft into freighter configuration. So I think there's other markets that we hadn't anticipated would be there that are starting to potentially come together. And so I suspect over the course of this year, we'll get real clarity on whether there's an appetite to find a home for these in the relatively near term or not.

And I'm trying to think when it was, but you did one of these trades with Air Lease, right, where they took back some of the Airbuses and you took some of their Boeing order book.

So Air Lease took our A319, our 10 owned A319s and part of that overall transaction is we leased, I think, ultimately 13 Boeings from their order book, yes.

And then just what is your experience right now with your Boeing delivery pipeline? How backed up are they? Any update there or color you can give us on sort of that? Jamie was sort of alluding to it, wondering whether you were making that dig at Boeing or not, but just some color, please, on what you're seeing from Seattle.

Yes. No. Boeing is doing a phenomenal job. We walked the line recently, and we've been in very close touch with their program lead on the MAX program, who is a long-term employee, who's done a number of different projects for them and is very, very detail oriented. And I think they have an extraordinary command of their supply chain at this point. Like Boeing needs to sort of speak for themselves, I think all of us who have labor-intensive industries, that's a current concern. It's not lack of desire to do these jobs, it is just trying to restart a production line, trying to restart an airline, you need a lot of people to do that, and it just takes a while to get people back in position and sort of super proficient. And in terms of our deliveries, we've had several right on time, several that have been a couple of days late, maybe 1 or 2 that have slipped by a week, but nothing really material like we're not seeing a large sort of backlog buildup in terms of delivery timing. I do think like the whole system is more tightly wound than maybe pre-COVID, where we are scheduling these aircraft more close to the date we expect delivery. And so even a week's slip might have a little bit of impact on us. But it's an operating sort of -- it's a jigsaw puzzle hassle. It's not material to the growth of the company or the ability to get capacity up. It's just like we thought it was Wednesday, we got it Monday. We got to construct 4 days of flying out of the existing fleet because we don't have that new plane. They're super committed to ramping up their productive capacity and getting things right on time. And I can tell you they're taking every possible step they can to do that. So we've been nothing but happy with their performance.

Okay. Anything from the room before we hit time?

I have one more, will make it quick. Just in terms of funding the business, how do you -- ideally, how does the balance sheet look in a couple of years? How do you fund the business? Is it just investment-grade unsecured, buy aircraft for cash, maybe selectively layering some leases or some EETCs? Are you going to have probably or will end up maybe one of the more simplistic balance sheets out there?

Yes. Yes. I think we'll be simple on a relative basis. I love this question actually. Lease content for us isn't preferred and largely is not needed. We'll do it in specific instances where it makes sense, like the selling of the A319s because I don't know that we would have had a buyer for those, but for the fact that we were willing to lease. I think we've always done what we call vanilla bilateral mortgage debt on our aircraft, usually 1 unit at a time. And that has worked really well. We had an all-in blended financing rate of sub-3%. We've never had to roll debt and we've been fortunate that we've had enough cash to pay for planes that we've been able to really manage to a very low-cost, simple sort of debt structure. The one thing that myself and Nat Pieper, who is our Treasurer and leader of fleet and leader of alliances, and I are thinking about is at the depth of the crisis, we didn't have the types of instruments others had on the shelf to go to market quickly. And I think that's one thing we'll rectify, not that we'll pull a lot of it, and we won't pay a ton more to have that sort of ability to move quickly, but we didn't have a corporate bond in market. We didn't have a structure for a corporate bond. We didn't -- we had to go create EETC and there was a lot of demand for it. But you can imagine before CARES Act money came through and not having access to that, it was just too much stress. I don't want to feel that again now. I don't think we'll ever be in that type of duress again. But just in case, we'll probably be thinking about how to make sure we've got some sort of asset that's out there and actively ready to be offered to the market or trading that you can do another tranche on or something. But that's probably 2 or 3 years from today.

Does that include loyalty, having something where you can fit in loyalty?

I think we haven't taken anything out of the possibility set, but I wouldn't necessarily say that, that's a likelihood either.

Thank you very much.

Thanks, Jamie. Thanks everybody.

Appreciate it, Shane.