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

So history will not repeat itself. There was one of these conferences, and this is quite some time ago, when I didn't show up to do the introduction for Alaska, and you guys just like started on your own. And in my defense, it was the year that we held this in the Westin, and some animal activists rush the stage during Air France's presentation. It kind of knocked everything off balance. But I -- yes, well, and I was thinking it was a climate, but it wasn't. It was something about carrying baboons on Air France aircraft or something. But because of that, I missed the introduction. I felt terrible.

Crowd controller.

Yes.

Okay. Fair enough.

A lot of unfortunate...

Seems West Coast-ish.

Yes. Yes, it was Grand Central -- Westin Grand Central. So Shane Tackett, CFO of Alaska Airlines. Thank you for being here.

Thanks for having me.

How is Mint? No, that's my JetBlue page. Gosh, where to start. So a little frazzled, it's been a long day. So several airlines today weighed in on how the quarter is developing. I wasn't expecting an 8-K from Alaska. Just timing-wise, that hasn't been sort of your style. It took years of prodding to get you to incorporate RASM into your forecast. I think Hunter and I were the ones that probably gave you the greatest amount of grief. But if you could just provide an update without saying anything that you can't on just how you feel this quarter is developing relative to what your thoughts were in early January.

Sure. It's like Moore's Law, Jamie, we're going to get quicker. It took years to get RASM and a few months to get an update mid-quarter before your conference. But no, look, I think that had we felt like the fuel price situation was a little less volatile and we still had a really strong shot at getting into the original pretax range, we probably wouldn't have. But fuel price has been -- and look, we talked about this on the earnings call. I think we were pretty clear that the refining margin volatility was very acute, and it was very hard to predict where we thought Q1 fuel would come in at. We felt like we had a relatively conservative range, and we -- that proved to be wrong. And we just felt like a $0.15 change in fuel was going to be consequential enough on the margin side that we should update. In terms of the other components, I think on the operations side of the business, completion rate, on-time performance capacity, we feel great about where we're going to end up in Q1 relative to our guide, our plan. We've had strange weather patterns as everybody has in the Pacific Northwest, way more days of threats of storm, threats of snow, threats of the icing. And that sort of hampered us in February. We had a week where we had to do 2% cancellation rate or something like that, maybe a couple of days a little bit over that. But we're still going to come in strong on the capacity side. Costs are performing well, right down the middle, I think, in terms of where we're seeing the company perform in the first quarter. And then revenue is -- we talked a little bit more about, I think, seeing some seasonality come back in. And I think we always had an expectation there would be seasonality. I didn't -- it was never our view that every day was a peak day from here forward. And it's natural to see January and February soften relative to December, November. So I think our revenue guide assumed that, and that's what has happened. The only thing that has been interesting is the mix between yield and load factor is a little different maybe than what we would have thought. We've got good yields and slightly less load factor, which I don't see as a bad thing. I think that's -- I'm sort of glad that the RM team is trying to figure out where the right price points are. And once they do, they'll figure out how to go drive for load factor as well. But having historically high load factors in an operational environment that's still strained, it's tough anyway. So as long as we can get the revenue in the door, I think we feel good about that trade-off for now. But yes, I think Q1 is largely sort of coming in where we thought it would be absent the volatility around fuel. And as we sit here today, fuel is lower than we forecasted for the quarter, but most of the quarter was higher.

So just on that relationship between load factor and yield, and this isn't something that I necessarily been thinking about, but part of what -- and I want to talk about oneworld in a moment. But the relationship that you now have with American, they get to essentially price your product in certain markets. I mean a traveler can go to the American website and wind up flying on Alaska metal. So in a sense, you have another revenue management department that's sort of experimenting, for lack of a better term, with your network, which hasn't been the case before. Do you learn anything from that process? I mean, does American's -- and again, everything is legal and all that. But you must see how they price in certain markets where you have your own pricing. And maybe they're pricing higher, maybe they're pricing lower. But I'm just -- I've never stopped to think that there might be sort of RM best practices that one picks up by observing a competitor in their market because American still is, just for the record, a competitor.

Yes. And -- yes, I'll preface this by saying just to make sure people know and understand, we don't coordinate anything on pricing or network decisions. We were precluded from doing so. We wouldn't do that. I do think entry into oneworld and the deeper relationship, the WCIA, which is really foundational to our future for us, has made us more like cognizant of pricing connecting trips than maybe we had before. We still operate an RM system based on segment pricing, leg pricing. So we do some of fares generally. It gets more technical than that. Whereas American obviously has been doing trip-based pricing for a long time. We haven't needed to. We don't have a lot of alternatives to Seattle to flow you through if you come out of Anchorage or out of Spokane. So there's not been a use case for it. But seeing our network become more connected certainly into American's network, into markets that we didn't participate as robustly in Southern California through the West Coast and certainly down into their hubs, you definitely see that there are things that they are doing -- that are more advanced than we are. And I think there's natural learning and education that goes on just by observation. And so it's impossible for me to tell you if that's contributing to our revenue performance or not. But RM teams are constantly learning how other people are trying to price their products and incorporate what they perceive to be a better practice than what we have today. And that's the one thing about the industry. You guys know all this pricing is very transparent. Anybody can go see what's going on.

I had just never really stopped to think about that as being a component of the relationships and the alliance structure. So it's just been something on my mind. So I appreciate that. So I want to ask you something as somewhat of a neutral party. I'm sure the audience is tiring of me making this point, but there has been an inversion in the U.S. in terms of the relative performance between the ultra-low-cost carriers and the full-service global premiums, legacies, whatever term you want to ascribe. And we can debate the persistence of that inversion, but the numbers are there, right? Ultra-low-cost carriers are the weakest-performing carriers. I want to ask you your opinion on this, in part because it doesn't seem like you have a lot of skin in that game. I do remember a period several years ago when there was sort of a run on Seattle, run on the West Coast. And based on your competitive entrenchment, based on the high-cost nature of some of those airports, those efforts seem to fail. So I don't think of Alaska as being highly vulnerable to ultra-low-cost carriers, which is why I'd really value your opinion on this industry dynamic and if it does impact how Alaska thinks about where you grow and how you grow, I'd be interested in that as well.

Yes. No, I appreciate the question, Jamie. I think you spent enough time in the industry. You sort of just observe and you consider what others are likely going through at their companies and the evolution of the business model in the industry. And I'll tell you, when I came into the industry in 2000, there was acute focus, and I think it was one of the key sort of valuable instincts that Bill Ayer, our CEO at the time; and Brad Tilden, the CFO at the time had, which was you're going to have to be able to compete with the ULCC model. It was a disruptive model. It was a model that was sort of price-first, and it was one that had started to take legs here and overseas. And I think they were sort of ahead of their time recognizing that it could be a threat. So we did a lot of work on making sure we could compete from a cost perspective in that we always had a value proposition from the product and service perspective that we felt was superior and could drive loyalty back to us as long as we were able to be in the same ballpark on fare. And it worked for a very long time for them. It worked through a period of disruption in the industry where the large carriers were largely consolidating and reorganizing. And I think they were masters at taking advantage of that climate. When you have to merge companies, you're sort of off the radar for 2 or 3 years with your own strategy. You're just working on that combination. However, I don't know -- and I'm from the West Coast. It's a little different than the East Coast. I don't know that the basic belief that passengers don't care about experience was the right sort of durable belief. I think -- and I think we're seeing that coming through the pandemic. You're seeing a surge in demand for premium experience. You're seeing, over the last 5 or 6 years, the large legacy carriers really invest in the onboard product and the product at the airport. And I think that's very attractive to travelers. I mean it's still a crazy bargain to be able to fly across country for a few hundred dollars in the amount of time it takes. And for a little bit more to get a significantly upgraded experience, I think, is starting to reshape travelers' mindsets around what they're willing to pay for versus what -- just getting from point A to point B at the cheapest price might have been motivating to them. And so I think to the degree that the consumer wants a reasonably better experience at a decent fare and gets benefit from giving loyalty to a company, I do think that the upper hand may have changed a bit for the time being. I wouldn't count the ULCCs out there. Smart people, they've done really well over the last 20 years. But I just think they're up against a stronger competitor than they were in sort of the heyday, if you will. I will note that I think we were able to be a margin leader in the industry, outperforming legacies and ULCCs over this period of time. So there are niche models that can work if you own the geography and you execute well.

On the -- well, where should we think then about the growth opportunities for Alaska going forward? Because when I think about the history of the company, I think about a onetime very seasonal business. Large losses in the first and fourth quarter, you had to make it all up in the second and third quarter. And then somebody at the airline realized, we could fly MD-80s down to Mexico and even out that seasonality. You got into the 73, started experimenting with lower 48. Boeing ultimately bought -- built a 73 that had range capability to -- the point is you now go in all 4 directions from Seattle. There's no fifth or sixth direction to choose. So are you nearing the end of your growth runway, for lack of a better term?

Yes. No, totally appreciate where you're coming from. I don't think anything imminent at all is at risk in terms of our ability to grow. I do think we cover much more of the map than we did 10 or 15 or 20 years ago. One of the things that the airline or Alaska has benefited from was the cyclicality of the industry. We were able to take advantage of downturns when others had to sort of retreat and give way. And it's one of the key reasons we fly as much as we do to Hawaii and even the East Coast now. I think it's fair to say that those opportunities, a, you can never predict them. You just have to sort of be waiting for them to happen, and they're probably less likely to happen today relative to the industry 20 years ago. The thing that we have going for us is we've got really -- if not unexciting, we've got very efficient opportunities for growth. A lot of that is starting to happen this year with the upgauging and stage length growth. And when you go from 100 -- I'm just going to -- these aren't the exact numbers, 150 seats on a flight to 175, it's about the same amount of money to operate that flight. You have 25 more seats to sell, and it's still significant capacity growth. And it's very capital-efficient, it's very revenue-positive, and it's actually very good for unit cost because you're spreading over the 25. You'll see us continue to do that as we transform our fleet and move most of our order book to MAX 9s and MAX 10s once they get certified and start delivering. And then we have a number of markets where we only operate once or twice a day still. And those are markets that we understand. We know the demand patterns. We understand the competitive backdrop. And they're very easy for us to go build out into 2- or 3-time-a-day markets. And if there were only 5 of those opportunities, it would be a problem, but there's dozens of those opportunities. I think one last thing, Jamie, I'd say is with oneworld and international opening up and sort of getting all of our technology mapped to our partners so we can more seamlessly sell and serve tickets, we'll see greater connectivity through the Seattle hub, which will support further upgauging away from regional into mainline aircraft in Seattle. Same number of operations, just much larger planes and probably opens up an opportunity to move more connectivity over Portland, which is a great airport for us. It's -- we've -- it's been going through its own CapEx expansion. It's beautiful down there. It's really good operationally. So I think the next 5 years for certain, we've got a lot of opportunity to continue to grow at the target rates we have in a way that's still a strong margin potential.

And back to the point that you were making before on premium and the strength of that market, knowing what you know now about premium, knowing what you know now or at least what you acknowledged in sort of the decommoditization of the airline industry, at least in North America, would you have done anything different with the Virgin integration and some of the product attribute? Because they were leaning, I guess, prematurely into premium before the market really exploded post COVID. With the benefit of hindsight, what would you have done differently?

The -- I think for reference, they operated A320 and cabin with 8 First Class seats, a 55-inch pitch. That's a cabin we would have put 12 First Class seats at 40-inch pitch in. And we actually were asked this question, perhaps by yourself, on our earnings call, why we were sort of going in their direction. And to us, it's all revenue per square foot on the aircraft. And in order to make that model work, we felt we needed 75% of the cabin to be sold at sort of the upper 1/3 of our fare structure at the time. And we just didn't see that being a durable model. And also upgrades are still a key component of our loyalty program. Even though they're lower in frequency than they were pre-pandemic and certainly lower than they were 10 or 15 years ago, it was still important to us to have a good rate of upgrades, 40% or higher for Elites. Because I think that's an area that we've continued to be willing to invest in that most others have moved away from. So it allows us to differentiate. And that's why we ended up moving away from the Virgin cabin. The thing that I would have changed, we were unwilling to price the product at a rate that people were willing to pay for it. We capped our prices in First Class. And we probably didn't need to do that, and that probably affected some of our math in terms of making the business case for slightly more premium. I think if we had a do-over, we would have tried to get more of our version of First Class into aircraft. And we'll have opportunities to do that with the MAX aircraft if the economics work out with the 10. And even potentially other fleet, there's a potential to get more premium seats into the aircraft. That's the one thing we probably would like to do over is just have a higher number of seats in the First Class of premium economy cabin.

And you mentioned upgrades and loyalty. So on the topic of loyalty, I think everybody agrees that that's a business where size matters. And I've always struggled to sort of figure out where that minimum size is before you can be profitably relevant from a loyalty perspective. So my -- not to beat up on Spirit, but if anybody here has a Spirit co-branded credit card, could you raise your hand? Okay. There's my point. Although I suppose a fare not such to say, if anyone has a Delta Amex, could you raise your hand? Okay. So first question, one, if you ever broken out what the Mileage Plans contribution is to your P&L? So for United, as I recall, it was about 15% of top line, somewhere around 35% of EBITDA. Do you break those figures out? And second, where do you think is sort of that critical mass? And are you at -- given the growth aspirations of American, Delta and United and Southwest, are you at risk of your program being marginalized over time? Two-part question, profit and future marginal position.

I know you're asking if we've publicly broken it out, and the answer is no. We -- for sure, internally understand both of those metrics. And look, I think over time, disclosure around this area of the business will continue to increase. But we just haven't had a reason or a chance to do it at this point. I think when we review some of the public information from other airlines as they've collateralized loyalty, we're not surprised by what we're seeing in terms of some of those values. I think it's -- I think you're right, big, broad picture, the bigger, the more likely you're going to be attractive to more people because you have the network, breadth. But I do think it matters in particular geographies as well. So if you're big in a relevant geography like we are in the State of Alaska, we are in Seattle, we are in Washington, Pacific Northwest, Portland, you can enjoy the same types of economics that maybe they get because of their breadth in their hub -- fortress hub cities. And that's what we've seen at -- in our core markets. Our rate of spend growth, our rate of loyalty growth, our rate of credit card penetration is as good or better than those competing cards in those markets. I think it's a good question about California. California card penetration is obviously outpacing the rest of system because it's coming off of a slightly lower base. But we have a significant number of cardholders. I don't know the exact number today, but hundreds of thousands, if not a million now outside of the Pacific Northwest core. The job we have to do is give them more reasons to continue to fly us and swipe the card more like the people in the Pacific Northwest do. I think it's competitive. For sure, it's more competitive in California. It's a more fractured market down there. And that's where we go back to the value that we confer. And it's -- this is a hard one for us because it's hard to educate people who aren't staring at award charts every single day. But it's -- you're quicker to Elite status with us, you're quicker to free travel with us. Anybody who sort of watches the industry knows that a value of our mile sort of implied is the highest in the industry. And we have lots of other key benefits on the card, some of which aren't copied by our competitors. And so I think our job is to become more -- ensure there's more awareness in the growing California population of the relative value of ours versus others. I think once people fly us, we're very confident that they're going to enjoy the experience and that we're going to earn loyalty from a service and operational perspective. We just got to get them into the ecosystem and then experience us and then sort of penetrate the card and then work on the spend. So I think it's an area of growth for us. We have a fabulous new bank deal that we literally put on stage at our Investor Day with Bank of America. It's got great underlying economics and a lot of incentives for growth over the next several years as we get into the core of that deal.

Okay. A question on labor. So you were the first U.S. airline to fully lock down contractually your labor cost structure for the foreseeable future, for the duration of the contract and then whatever additional amount of time it takes down to negotiate yet again. I realize that those deals were reached fairly recently, but have you seen any changes in attrition, any changes in the efficiency of the operation, anything that you could point to other than just higher expense that benefits shareholders?

Yes. Yes. So attrition certainly was an issue industry-wide for us, as you know, every work group, sort of as we rebuilt or tried to rebuild. And that clearly, it's not gone. And I'll talk more about this, especially on the pilot side. But it is somewhat lower in the 4, 5 months after we ratified the deal than it was in the 4 or 5 months going into the deal. I don't know that I would hang that entirely on the CBA. It could be more just there were huge hiring spurts last year that sort of abated a bit too. So I don't want to be like false on the reasons. I don't know the reasons. I do think it's a reality for a little bit longer that to the degree every airline is hiring in every hub and pilot base that they have. Pilots are now earning a really good living. And the next most important thing is where do I live and what's my sort of work-life balance. And they may choose -- the marginal pilot may choose, hey, I like Alaska or I don't. I want to be somewhere else geographically, and so they're going to somewhere else geographically. We're getting people from other airlines into our classes. We're certainly losing a few folks to others. And we talk to our internal labor leaders. We try to understand that. We try to get a gauge on is that a morale issue or is it just purely a lifestyle choice for the pilots. And I think that's going to continue to be in the industry with these hiring rates over the next year or 2. And it's interesting because attrition was like zero before all of this started to happen. So even 10 pilots a month, it feels like a lot to us. And it is. 10 pilots a month to us is nearly a line of flying. And so these resources matter very, very quickly. I would say on the other side of things, the rest of our attrition rates across other work groups have normalized. In some cases, they're quite low. They're not cause for concerned. And I think slowly but surely, we're seeing -- it's not a normalization. There's a change in trend relative to pre-COVID in terms of absenteeism, but it is better than was a year ago, 6 months ago, 3 months ago. Again, I can't say it's CBA-driven, for sure, but we are starting to see a better rate of absenteeism normalizing, which is important because we got a plan our operation and we plan based on our understanding of what we think absenteeism going to be. And as you know, if a flight attendant or a pilot doesn't show up, we don't operate. Sometimes if a ramp isn't there, we can figure out how to get the plane out, but we can't go without a pilot on board. So it's important for us to continue to watch this stuff and manage it best we can.

And if your peer set logs down pilot contracts by midyear, remind me, your adjustment is in October or in January?

September.

September. Okay. That was 1 of my 12 guesses. And...

You're close.

Will you quantify and advance what you think that CASM impact -- I mean it's not going to be huge.

No. No.

But you'll incorporate that into your guidance before the fact?

We will, yes. And look, it's -- if we went to somewhere around where Delta has gone, it's $10 million to $15 million to the year. So it's modest for the year. But for sure, once we have cleaner line of sight, another TA or 2, we'll start talking about it and put it into guides.

That's rounding here, okay. So you've described, I believe, corporate demand on the West Coast as anemic. Has there been any change now that we're in a new fiscal or new calendar year? Budgets have been reset and particularly given your exposure to tech, I think it's a question that people are curious about.

Sure. Is this me or our Chief Commercial Officer, who...

Well, I don't recall, but anemic is a word -- I understand the definition of it, but it's not necessarily part of my everyday vernacular. So I really seem to remember it being on an Alaska earnings call, but I'm an old man. My memory is -- I almost missed your introduction.

That's right. Yes, you paraphrased. We said something different, you read anemic. Now look, it's -- we're 70%, 75% backed by volume; 80%, 85% backed by revenue. And I think we shared this at Q1. If not, I'll share it today. That essentially is what we've -- we're expecting. That's what we've planned for. That's implied in our guide. Any tick up from that, assuming leisure stays where it's at, is potential upside for us. What we've been saying is we believe it may -- I don't know if it's going to structurally be a few points below or a few points above in terms of the overall volume of business travel over time. We're certainly trailing by a few points rest of country, which I think is principally the type of business that is headquartered in the West Coast. Now I just want to reiterate, these are some of the most profitable companies and most valuable companies on the face of planet Earth. And I don't think travel budgets are going to be a constraint for them structurally long term. I think they are now, just like some of the headcount is for them. But I don't -- I wouldn't bet against that industry or those companies. And ultimately, once things normalize for them and they get their cost structures or their profits to where they want to be, I imagine they're going to come back in travel. The other thing we've been saying is the last certainly are a big deal. They make -- headlines are important. We feel for the folks in our community that are having to look for other work. But that hasn't changed the amount of travel going on because largely, these companies haven't been traveling since the beginning of pandemic. So it's not a step down for us, which means everything should be a step up in the future when they do come back to travel. There could be a knock-on leisure effects that you might think about. I can tell you right now to their credit, the tech companies are being extraordinarily generous with severance. And I think anecdotally, I don't have data on this, but we know a lot of people in these industries, they're finding work pretty quickly if they want to, especially in a remote model, which a lot of these jobs can still do. So I don't think it's -- I think it's transitory. It's a big deal for those folks whose lives are impacted. I think for us as an airline, we don't think we need to rethink the business model. We just need to wait out the cycle a bit for them, and then we think they'll come back and it will be upside for us.

What are the building blocks that get you to higher post-COVID margins than you're admittedly very, very strong margin production going into COVID? It's a little easier for me to figure that out for American, Delta and United because there's been so much international upheaval. And that's just a huge driver, and those managements all spoke to that. You get a taste of that through oneworld, but it's not as significant for you. The goal is to have higher margins than you did pre-pandemic. What gets you there?

Sure. Let me take it for -- like 2 angles. On the cost side, our goal really is to maintain our historic relative advantage on a stage and adjusted unit cost basis. We're not assuming that is going to grow per se. But we don't -- and we don't see evidence that it's going to shrink either. And you might ask me how that could be the case when we're bringing up sort of wages to market, and I'm happy to talk about that. But we don't think that we're going to give ground on that relative cost advantage. We all participate, I thought, in the same fuel environment, although it's a little weird these days with refining margins so different between geographies. A lot of this, Jamie, is -- and we laid this out at Investor Day, is really on the commercial side of the business. The thing that we were trying to land last March was that much of our commercial road map strategy is to do things that many of our -- the big 3 have done already. And so they're known drivers of value. There's a blueprint you can essentially follow. And that started with the renegotiation of our deal with Bank of America. It then moves to selling more of our premium cabin. We're still going to upgrade more than they do, I think, but we're going to be willing to sell more premium economy seats, more First Class seats. In fact, we're seeing many of our Elites want to buy those seats just to be sure that they're sitting in them. And so that's a very clear like area you can be confident in at this point. And then the growth, again, changing out 150-seat airplanes to 175-seat airplanes, I don't think those 25 seats on peak days are going to come in at lower average fares. I think they're going to come in at average fares or better because there are peak days and by definition, we're spilling traffic in those peak days. And so all of that is the upgauging story, the loyalty road map, the premium road map, and then you add on the just starting to realize value out of oneworld and the WCIA, and you, I think -- well, we get a lot more confident that we can drive the type of contraction of our historic gap to industry on a unit revenue side. So going into the pandemic, we were probably $0.92 or $0.93 on the dollar. And I think we can close that gap, if not to parity, something very close to parity. So that's our basic algebraic rationale. We've got to go execute it and deliver it. And these things don't happen just because you say them. But we think we're going to be able to do that, obviously, and we're very focused on doing so.

Okay. Should we let Mark ask his balance sheet question?

Yes. Yes. I can't wait. Is it a hard question, Mark or...

It's not a hard question. It's just for you because you're so damn boring from my world. It's really just about aircraft and deliveries and so forth and how backed up you are and if there's any update there and if you have any plans to finance aircraft or you're just going to keep buying them with cash.

Got you. Yes. We're going to take on the order of 35 to 36 7, 8 aircraft this year. We're working super close with Boeing, obviously, on the Skyline. They have delivered to our revised plan that we agreed to them -- with them last year year-to-date. And I think we have line of sight to continuing to meet that schedule through the first -- the second quarter, first half of the year. Obviously, a lot of rides on their ability to move up to 38 units a month on the narrow-body line. So far, it looks like there's a lot of confidence that's going to happen. So we're feeling good about the second half of the year. There are a couple of potential -- we may make some decisions on the fleet side. I could see us getting out of the A321s slightly earlier than end of year, which is sort of what we've said right now, and it's in the plan. There's a chance that we would find our way to stop flying those after the summer or more quickly after the summer. I think we'd like to contain most of the transition -- sort of cost of transitioning the fleet in 2023, if we can. And then there's a couple of units at the back end of the year with Boeing that we might decide to move over into 2024, but nothing really material. In terms of how we're going to finance aircraft, I would expect mostly that we're going to continue to pay cash. I think there's a chance that we look at some sort of boring financing, not WTC or bond or anything like that, maybe at the back end of the year. We're going to be pretty focused on maintaining our leverage ratio within a range and not let it fall below. And we're also going to be very cognizant of sort of overall cash balance and not let it fall below a threshold for us. So there's a chance if there's a big sort of tranche of aircraft that we decide we need to take in the fourth quarter and we don't slip a few out to next year that we can do something this year. But it won't be that exciting. I'll let you know, though, if anything changes in we need something exotic to go to market with.

Would you look to -- United talked a little bit about this morning, some sale leasebacks with purchase options and getting the right maintenance reserves and so forth. Is that something that's attractive to you as opposed to direct ownership?

Yes. It's honestly not for us. And I'll tell you why. I mean, one, I think you really have to be an expert at end-of-lease-life planning to have confidence that you understand the economics going in. And while we're learning a ton about end-of-life-lease, reality is we didn't plan this. We just took it on when we merged with Virgin and took on the 60 leased aircraft. It's a different skill set than what we normally had to manage, which is owned aircraft and you sort of at the 25th year start parting them out to maintain the rest that are 20 years old. And it's a very efficient way to sort of maintenance plan and end of life plan of fleet, very different in the lease world. And we wouldn't do something like that until we felt like we could expertly sort of deliver on the full life cycle of the lease, notwithstanding that we also just think it's more cost of capital-efficient for us to own than to get into sale leaseback arrangements.

The 321s that are coming out this year, my last question, are those the ones that are going to Air Lease? Or do those already happen?

No. No, all of those are already out. I think Air Lease, I don't know if there's a few units left that they need to take ownership of. I think they're all gone. Now these are all leased aircraft. I think we're down to 4 or 5 counterparties with them, and they're all -- their lease lives go through 2030. So we'll -- we're working that issue still. But we'll find a home for them. I don't know if we will become a lessor to others who are subleasing for us or we'll do some sort of buyout and then sell, which would be our preference.

But to be clear, in your lease arrangements, do you have flexibility to sublease them as you choose if you remain on the hook, if you will, or...

Yes. More or less, yes. There's probably some -- there are certain requirements we have to then ensure that the operator is maintaining. And that's a -- if we can avoid it, something we don't really want to be doing is managing a counterparty. But generally speaking, we do have the ability to remarket those.

So that was marginally not boring then.

Marginally not boring. There you go.

All right. Any questions from the audience before we wrap?

I was thinking we were going to have like 3 people here, and it was like a true fireside chat, but a lot of people came out. So I appreciate everybody coming. I feel like it's the last -- like in the future, the last one of the day, we should have like, I don't know, a glass of water or something.

Well, we still...

We have one more. Oh, you've got one more. I thought we were at the end of the day. All right. Oh, [ Barry's ].

Frontier is the last thing standing between this event and the bar, except we're too cheap to have a bar. So there's actually no bar.

That is it. This is it. All right.

Quickly?

Yes. Let's see, can we discuss your fuel costs now compared to other airlines and where you're sourcing your jet fuel from? So I think that spreads on the West Coast are a little bit wider. And then can you talk about the competitive dynamic in Seattle between yourselves and Delta?

Sure. We're 2/3 L.A. refining -- like L.A. and then 1/3 Gulf Coast essentially. And they've largely inverted versus each other week over week. One day, it's $1 at L.A. and $1.50 in Gulf Coast and then the next week, it's the exact opposite. It seems like that's starting to like settle down a bit. But primarily, we purchased Gulf Coast and L.A. Delta is, I think, largely back to their pre-COVID footprint in Seattle. We've grown above our pre-COVID footprint in Seattle. Pre-COVID, we were 52% market share. I think we're 60% market share, give or take. It may change a point or 2 schedule over schedule. So we've grown our market share relative to Delta. Look, they're a good company. They are a good brand. They're smart. But I think over the last 10 years, I mean it's amazing. I think it was a 10-year anniversary this month when they decided to make Seattle kind of a focus city and then a mini hub. I think we've done really well in that experience. I think a lot of people may have predicted something different, but we've grown our loyalty. We've grown our network. We've grown our profits. And it made us a better company ultimately. We had to go and make sure that we were executing as perfectly as we possibly could when a really good competitor shows up. So I think things are going to just go along as they are, and they're going to be a large competitor in C Tech, probably our only primary competitor in Seattle. And we just have to win loyalty from guests every day, and I think we do a good job of that right now.

And then just a last question on your exposure in San Francisco area. Do you do anything with Silicon Valley Bank? Are there -- is there any exposure there at all?

No. We don't bank with them. I don't think -- honestly, the few -- we're limited partners in a couple of venture, sort of -- we have a venture capital arm, very small. We have -- we're LPs with a couple of folks that were impacted on a very small degree. You're talking like sub-$5 million. But they've gotten all their money. So it hasn't really had an issue. There hasn't been a ripple through that we're feeling or seeing or worried about right now. In terms of the immediate impact on the West Coast or investment, certainly a scary time for those start-ups and the firms that were banking with them and had 25-or-more percent of their cash with them. So I don't know that much about it. That's your guys' industry, the banking industry, more than mine. I hope that this stops and there's not sort of a spread of contagion here, but it seems like it's pretty isolated right now.

Shane, thank you very much.

Yes. Thank you. Jamie, and thanks, everybody, for being here.