Frontier Group Holdings, Inc. (ULCC) Earnings Call Transcript & Summary

So 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. So I'm David Erdman. I know many of you. I'm a 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. So we will hear from each member of management, and then we're going to 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 try to get to those questions. So let me first cover, of course, the -- here's the agenda actually for this morning, apologies. Let me do cover the -- quickly the safe harbor provisions. We will be making forward-looking statements today, which are subject to risks and uncertainties. I'm not going to go through the slide. We are going to be referencing non-GAAP measures. There is a reconciliation in the appendix of that presentation, which got posted to the website this morning. So certainly invite you to reference that. So without further delay, I'm really proud to introduce Barry Biffle, President and CEO of Frontier Airlines. So Barry, take it away.

Thanks, David, and thanks, everybody, for joining on our inaugural Investor Day, and I also want to thank NASDAQ doing a fantastic job putting this together. So before we get going too far, would like to have a quick video presentation. [Presentation]

I want to, again, thank everybody for coming, and I hope you enjoyed the video. We're going to unpack many of these themes over the next hour in different areas. But I want to first start off by talking a little bit about the explosive growth that we're seeing in leisure demand. Tyri Squyres, our VP of Marketing, is going to talk you a little bit later about some of the details around it. But 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've actually -- we're packed online as well. So 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. And if you wanted to order a 321neo today, good luck, it would take you 5 to 7 years to get any meaningful number. Unfortunately, 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 321neo. So a 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 3 different platforms for recruiting and training and will impact that as well. We're also the ancillary revenue leader, as we mentioned there, will continue to grow. We'll be at $85 by the end of next year and are planning to get that to $100. Daniel is going to talk to you about the pipeline coming there. And you couple that ancillary with the lowest total cost, including fuel, and that gives you the lowest breakeven fare. And that's important because when you think about leisure customers, they respond to price. And so 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. But to be blunt, it's not good enough. And so we're going to talk today about how we get back to prepandemic profits and really excited about it. So without further ado, I want to talk a little bit about our team that we've got here on the back row and you're going to meet most of them today. Jimmy Dempsey, our CFO, which many of you know, from Ryanair. He's going to talk about our financials, our fleet plan and balance sheet and an overall cost structure and how we expect that to continue to widen. We've got Howard Diamond here on the back row, and he's our General Counsel, who'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 he's done a lot to help us with our employee engagement and making sure that we activate the brand. So a 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. And then Jake Filene, our Head of Customers. He's going to 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 going to talk about the commercial side of the business. He's going to explain how we get to $100 per passenger in non-ticket, talk a little bit about the overall opportunities and load factor and as well as the network exploitation. And then Trevor is going to talk about the efficiencies that we're getting from the 321 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 little under the weather. So out of respect, we didn't want to spread what he may have. So -- and then lastly, we'll have Tyri Squyres. She's our VP of Marketing. She's going to talk to you about some of the data that supports our view of leisure travel as well as some other really fun things. May I ask you to move over a little bit -- but -- and of course, he's not here, but Bill Franke, I think everybody knows our Chairman, and Indigo is our financial sponsor. So I'm now going to turn it over to Jimmy Dempsey, and he is going to talk to you through our financials in the fleet.

Okay. Thanks very much. Thanks, Barry. Welcome, everybody. This is great to see you in person. We did an IPO virtually. And 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 going to 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 cost in the industry. This is something that everybody that you'll meet today focuses on from a cultural perspective in the organization. And one of the things we're very proud of is beating the industry. And I know everybody in the industry compares themselves to each other. Pre-COVID, we had a $0.046 per ASM advantage against the industry, which is substantial. In Q3, we widened that to $0.057. And just to give you context on that, that's approximately $65 a passenger. And so 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 going to be the platform that the business benefits from in the coming years. The things that we watch in this area very, very closely. And we look at -- and Barry mentioned the 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. And 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. And so we benefit from that, and we also want to talk to you about it. And 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. And so that's something that you guys, as analysts, should be conscious of when you're comparing us to other airlines. But 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. So we've made substantial advances in terms of the efficiency in the airline over the last 7 or 8 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. And Barry's comment about being the availability of 321s, we have 159 321s embedded in this fleet on our order book. It's very challenging to get a 321 aircraft off the manufacturers today. And so we have -- we jumped on an opportunity through COVID to advance our position in terms of 321s, and that will get us to a very, very strong place. And that fuel efficiency, that's a 321 drives, we're over 100 ASMs per gallon today. We'll end up being 114 ASMs per gallon when you get to 2029. And we'll see a material improvement over the next 2 or 3 years as we take delivery of quite a substantial portion of 321neos. 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. And 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 321. We have 37 321s delivering between now and probably early Q1 2024. And so 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 and so that gauge benefit builds efficiency into the airline. And so those items and returning utilization is very, 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 are -- we have determined that we would 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 going to touch on 3 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 will be very important when Daniel gets 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. And Trevor will touch on crew productivity. And then the final area that we look at is changing the way the customer is served or serves themselves and self-serve in airports and in call centers in the business. Jake is going to 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, but also and combat the inflation that you've seen from a labor perspective, particularly in airports. And so they're going to 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 to 24 months, which is very, very important. And the one thing that we have done, which is a little bit different to most of the airlines is we've kept our loyalty program unencumbered through COVID and it's something that we're quite proud of, but it also leaves us in a position that if we need to touch on liquidity going forward that we have up to about $1 billion in debt -- our 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. And 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 continued to grow in line with the growth of the airline. And so 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 Senior Vice President, Commercial. And -- as Jimmy talked about, our single biggest advantage is -- from -- in terms of network growth is cost. We have the lowest total cost. We are growing that advantage. But we're also sitting today with a situation where the industry capacity is still below 2019 levels and obviously, well below trend line you would have established prior to the pandemic. And 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. And there is a structural reduction in regional capacity driven primarily by a shortage of pilots. And obviously, we're feeling that, 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. And so we see opportunity being driven by that as well. But 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. And if you turn 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. And if there is the 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. And 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 where there is enough demand -- over 2,000 mark where there is enough demand to actually grow our service into new markets. And this is an incredible organic growth opportunity. And as we continue to expand that cost gap, this opportunity will only grow bigger. And so there's a real -- there's really so much opportunity in the U.S. market, and then with the 321XLR 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 moved back to over 11.5 hours utilization in our current schedule. And so 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 2023 is 17%, still reasonably substantial. But 17% both sits within our 15% to 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. And I think here's the other piece that really excites us. If you look at our performance in 2022, this is the last -- 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. And if you look at the carriers that have similar unit revenue performance, they've been the one shrinking capacity. The combination of growth in 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. And 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 $17 now puts us far ahead of anyone else in the industry globally. And this is revenue that is more stable. It is, as everyone says, stickier. And look, it's what's also giving us confidence that we're going to continue to improve. That $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. And as mentioned earlier, we're now setting a new longer-term goal for 2026 of $100 per passenger. We are seeing so many opportunities across the business to drive non-ticket revenue. So we're confident to set that goal today. And look, this is a portion of the road map. I'm not going to give away every idea we have because obviously, we'd like to say them until we introduce them. But there's a variety of areas we're going to drive non-ticket revenue. One -- 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 going to have new products. We're always thinking what else we can do. Most recently, we announced and we put on sale yesterday our GoWild All-You-Can-Fly pass. And we're going to continue to find new products, new ideas to sell to customers. Again, we have to get more creative at this point because we run -- we've almost run out of the ability to copy anyone else. So look, we're going to continue to be creative. And we're obviously going to enhance our existing products and services. We're going to redesign our app on our website. We'll add more frictionless payments. We're going to drive more customers to the app with incentives. And we're seeing in the industry increasingly interesting technology from PSS providers, notably Sabre who are sort of approaching the world differently today and coming up with some very interesting ideas. And 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 going to get back to pre-COVID, and 2023 is the plan. Obviously, during the pandemic, we shortened the booking curve by being -- because we weren't certain about what schedules we wanted to operate. And customers weren't so sure about traveling and so booked later. We're going to see this booking curve stand out. And then we have multiple opportunities to drive additional traffic to fill those additional seats on the 321s. We can -- 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 Tyri will touch on some more, we've got the opportunity with Discount Den with our Frontier Airlines World MasterCard program to drive more traffic. And as we grow network scale and these 2 are very much connected, we will get the opportunity to drive more traffic. And we're going to get our brand out there more. We've been relatively quiet as a brand, and we're going to 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 going to 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. Now moving on to modularity. As Jimmy mentioned, this is one of the areas where we're doing business differently. But I want to 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. And one of the things we've done is we've opened a significant number of -- opened and announced a significant number of new crew bases since 2019. And we will have by next May, 9 crew bases across the country. And as you can see, the ones in blue are the ones that have opened. We're opening them in large markets. And so 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. And it then allows us to move towards a much more modular network. And so we're combining the commercial opportunity for the airline with an operational and cost focus. And look, building network efficiency is -- this is fun. prepandemic, we were a complicated airline. We have relatively few crew bases. We have 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 Head of Commercial. I have to have something resembling on that in this one. And this is an example of flying we do out of our Tampa base. We have set up a triangle in schedule, where planes leave Tampa in both directions -- triangle between Tampa, Chicago Midway and Dallas-Fort Worth. The airplane and the crew complete the triangle. It's approximately 7 hours of flying. It's a nice productive day for the pilots and flight attendants. The airplanes return back to the place they started. The cruise is finished in 1 day. There's no hotel costs driven by this. And fundamentally building the network with solutions like this, which has been aided by new crew bases has a number of advantages. It allows us -- it shortens the average trip length, which reduces hotel costs. It's allowed us to concentrate maintenance in our key largest bases. And you'll hear more about this from Trevor and Brad. It's significantly increased the average crew time. We're flying to above 6 hours per day -- 6 flown hours per day, that's up significantly from where it was prepandemic. And so that's great. And the other piece, the more modular 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 just have to -- if you cancel that flying, you're not having any downline implications. When that -- if that airplane doesn't leave Tampa going to Midway, let's say, in the morning, okay, you lose these 3 flights, but you recover immediately after that. And that -- so it's a combination of all these pieces, reduces cost, improves reliability, which reduces cost. And just -- and allows us commercially to be more flexible with how we design the network. With that, I'm going to turn it over to Tyri Squyres, 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. And recently, we spoke to our customers to find out -- to get some additional insights into why that's happening. And we discovered that not only is there a desire for leisure travel, there's also the means in both in 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 prepandemic. And almost 40% are planning to actually spend more on travel in the next 12 months than they did previously. And those -- 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 this 5x or more in the next 12 months, 5x. That's nearly double what the rate was in 2019. And those are real meaningful changes. And this data is very new. We did the survey just a few weeks ago. So we feel like it does reflect some of the economic uncertainty that's in the marketplace now. So 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. So 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 Cancun, Jamaica, Punta Cana, places that may have been cost prohibitive for our customers to travel previously will now be available. And 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. And we have 3 products that we focus on in driving loyalty and recurring revenue with our customers. First, we have our Discount Den. Our Discount Den always offers the lowest fare guarantee. It's an annual membership. Then we have our Frontier Airlines World Mastercard, which we redesigned in 2018 to really target the leisure customer and their needs versus the business customer. And it's been really popular card. In fact, for the last 2 years, it's been named the top airlines card by money.com and so we're really, really proud of all the work we've done -- that's gone into that. And 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. So 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, and the customer will be able to confirm the booking 24 hours ahead of the flight. So the day before they'll be able to actually confirm that they're going to be on that flight. So 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. So 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. But over the last few years, we've really been focusing on developing and maximizing the direct benefit revenue from these products, the discounts and the co-brand credit card. But 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. And with that, I'd like to turn it over to Trevor Stedke, our Senior Vice President of Operations.

Thank you, Tyri, and 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 9 crew bases across the United States that Daniel 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 every 1 of those 9 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 performed thousands of maintenance tests every single day, and they ensure the safety, compliance, quality and our worthiness 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 4 major bases in Denver, Orlando, Las Vegas and Tampa, where we concentrate our resources, which gives us increased flexibility, recoverability, and we accomplished over 80% of our maintenance program tasked at these 4 main locations. And finally, our systems operation control center is the head of our airline operation. It's located at 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, 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 operations 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. And supporting this mission, we're very excited about bringing on a new A321neo aircraft into our operation just a few weeks ago. This 321neo is a transformational aircraft. It brings extraordinary efficiency into our business that will grow to become the foundation of our fleet in the future and is an absolute game changer in terms of capability, efficiency, reliability as well as overall economics. Our Frontier 321neo is configured with a 240 comfortable, reliable and lightweight Recaro seats that represents a 33% upgauge in the aircraft and seat capacity -- in the aircraft that's 321neo is replacing. And it also delivers a 75% fuel burn advantage over legacy airlines. I'll say that again, 75% fuel burn advantage with 321neo over the legacy airlines. That's huge, further widens our cost advantage, not only tomorrow, but well into the future with this aircraft. But even before the introduction of the 321neo, 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 is an additional 2% to 3% fuel burn required to operate that aircraft. So 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 waste of 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 7 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. But we're never done looking for ways to save fuel and costs. And 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. And 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. And finally, one additional efficiency improvement I'd like to highlight. You heard a little bit about earlier is our average pilot block hour per for 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. Given our ability -- given 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 even further solidifies Frontier as the place where pilots want to be in the future. And 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. Thank you -- sorry, 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 want to 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 onboard and also helps us retain those pilots that we see deciding whether or not they want to leave Frontier, we want to keep them. With that, I'm going to hand it over to Steve Schuller.

Yes. No, the ability of our pilots to work as days, but earn more wages during the course of those days, is going to be -- it could be another selling point for us as we attract and compete for talent. So 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. Obviously, we feel like we have a really strong selling point for pilots and why they should come here and start their career with us. And it really starts with just the flexibility. We've got a pilot friendly contract that affords a lot of flexibility for our pilots. And flexibility is important because that drives quality of life and quality of life is huge for this workforce. Second is our bases. We talked about the new bases that we've opened for our pilots over the last several years. Earlier this month, we opened up Phoenix as our newest crew base for pilots and for flight attendants. And we announced DFW as a new crew base that's opening up in May of 2023. And 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. So 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 to table. But that along with our fantastic rates 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, turn as much or more than their peers at the legacy carriers. And finally, the growth that we're 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 going to happen faster here than as a legacy carrier. You want to come off of a reserve line, hold the line of flying. It's measured in months and not years. So together, these 4 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, we've -- really our social media and our advertising has reached over 70,000 people in that marketplace. So we feel like we got a compelling offer. We're starting to sell it more aggressively. I want to 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. [Presentation]

So as you can see, we are going to be laser focused on our value proposition for pilots and continue to aggressively go after that market, in a really competitive market place. Now traditionally most of our pilots would have come from the regional carriers. Thanks to post-pandemic growth and thanks to the retirement of other carriers, it's become an increasingly competitive marketplace. So rather than hope and wait for the market to correct itself, we've chosen a different path. We've been thinking about different pilot avenues for recruiting over the last several years. We actually started our university program 4 years ago. But over the last several months, we've really introduced some new programs to really supplement our recruiting efforts. Brad is going to talk about these in a couple of minutes, but a new pilot cadet program, our new rotor transition program as well as an 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. So we're not going to wait for the regional pilots in the market to correct itself, we'd rather take a more aggressive stance. And so over the next couple of years, these programs are going to 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 allowing it to control us. So with that, I'll let Brad unpack these a little bit. Talk to us a little bit about the new programs that we're introducing.

Thanks, Steve. Yes. And these are not months in the making, these are years in the making. As Steve said, 4 or 5 years ago, we would have thousands of applications from regional pilots for every -- for 100 or 200 jobs that we have opening. Times have changed, right? So we've had to change with it. We wanted to figure out ways to diversify our sourcing and 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 alarm that our first Purdue graduate is now upgrading the captain after 3.5 years. They've done extremely well for us. Flight schools as well, we partnered with major flight schools, high-quality fight schools. There are many that we have not listed up here because they didn't meet our standards. So again, we want to make sure that we've established a pipeline for the future to grow. We took it -- when we look at rotor transition program, these are typically army helicopter aviators, who need a transition to fixed wing flying. Untapped market, 19,000 of them in the army alone. We partnered 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. And last, our Cadet program, we say 1,500-plus applications, but I believe we're already at 1,700 plus, and this slide is not very old. So 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. So we've established a mentoring program, there are financial incentives that we've created, a stipend to offset living costs and things like that. And 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 3 years. That's going to help us for retention in the future. So all these programs add up to high confidence for us a matter of fact, absolute confidence that we can staff our airline with the growth prospects we've 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 Senior Vice President of customers. I lead our customer-facing organization. And these are the 3 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. Our 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 going to focus on our customer care team and our airport sales and operations team and how we're mitigating that wage inflation. So 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 7 years. That wage has grown by over $10 an hour or 106%. And 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 costs. So 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 the total labor cost. And we're actually going to do this in a way that will improve the customer experience. And Jimmy referenced this in self-service a bit earlier. So let's start with the ticket counter. What are we going to do about the ticket counter? Today, at the outset, I'm going to 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. So 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. So 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 are 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. So in the future, the ticket counter really looks like a bag drop depot. The only -- 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. So 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. So we're fundamentally going to change the way our ticket counters work. And look, the reality is this technology, and Daniel referenced this, and Jimmy did earlier as well, is also going to 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. So let's talk a bit about the call centers. So 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 are supporting higher labor rates in the voice channel, and we're limited to this one-to-one interaction. We also had a lot of back-office transactions that were very, very labor-intensive. Off the phones, but high volume of transactions that were occurring in our contact centers. And just like the ticket counters, this is a channel for negotiation between customer and Frontier. So 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, chat agent can handle 3 and we think higher than 3 transactions -- interactions with customers simultaneously. And finally, robotic process automation is going to go in and offload a lot of that back-office work that occurs and is very labor intensive. And just like in the airports, this is going to be a more customer-friendly experience. This is what customers want. They want self-service. They don't want to win on hold. They don't want to talk to somebody. They want those questions answered quickly. So 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%. And 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 of 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. And the math is pretty simple. I don't think I need to tell this room that 2 doors is twice as many as 1 door. And this is a long pole in the tent for turning a plane. The highest number of minutes on the ground is spent taking people off, putting people on. So 2 doors is a much more efficient operation. We're already doing this in Austin, Trenton, a few other airports around the country. And 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 going to be a 14 gate facility that will entirely run using this method. So we're excited about it. Airports are embracing it, and we're looking to expand. So just finishing up with a 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, so that 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. So -- and look, lastly, Tyri 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. And 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. And 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 of turns that we can crank that up to drive the revenue. And from a cost perspective, obviously, we intend to deliver the sub $0.06 that we've been talking about for a while. And I think you can see today, not only from the stage, the gauge and so forth, you're going to get that benefit, but also we're going to change the way we do business because we're pretty aggressive about delivering on our low cost. And we're also going to deliver the fuel burn through the various initiatives that Trevor talked about as well as the 321neo, which is going to be huge. And all that together is going to 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. So again, I want to thank everybody for coming today. And in a moment, we're going to turn it over to Q&A. We'll see a quick changeover, I think, for the chairs. All right.

So we probably need just maybe 30 seconds. We're going to have some chairs brought in. I'm going to ask the Frontier management team to come on the stage. So we just need to stretch your legs for next 30, 60 seconds, we'll get set up.

All right. Everybody's settled? Okay. Excellent. So we have 2 Frontier folks, Theresa, if you want to raise your hand, Jesse, if you want to raise your hand, these are the folks that have your microphones that they'll come to you as you have questions. And so Jamie, I saw you put your hand up first and so let's go ahead and get to you.

Jamie Baker with JPMorgan. Question for Daniel. So the walk to $100 of ancillary that you showed, and I'm not looking at the slide, but I think there were 4 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 by -- I think you said it was a 2026 target? And then I have a follow-up to that.

We haven't really looked at -- we haven't exactly looked at it from that perspective, but I think there's -- I think there's probably -- you start at 70. Let's assume we have an extra 85, right? You look at that, you look at likely inflation. There hasn't -- we create inflation in these products. Because look at the industry's $25 first check [ back ] 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 going to do to actually increase it.

And 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, he gave lawmakers the idea." But 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. And 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.

Well, it's actually a lot of the $100 would be taxable. So it's not all actually tax free. But let's also remember there's fuel tax. And if you look at the total price of a ticket, we're the most priced -- taxed industry out there. So I think there's plenty of tax. But no, it is not all taxed. In fact, Mark, if you want to elaborate, it's -- a big part of the non-ticket is taxed.

Yes, I mean, there's certainly a portion that's taxed. And I mean we've been consistent with that as an industry.

So which of those fees then -- just educate me. Which of the ancillaries are subject to an excise tax now?

So from an excise tax perspective, I mean, they're not subject to an excise tax.

Like for example, in the works product and some of the bundles, there's a component of it that is taxed.

So 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. Theresa, you want to -- the gentleman?

Ravi Shanker, Morgan Stanley. That's a pretty impressive gauge on the stage, by the way. I think you guys are kind of practicing what you preach. So 2 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 maybe the same follow-up question probably for Tyri. Kind of 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 to your customers? And also with one of the large ULCC carriers exiting, what do you think happens to the vacuum in the space?

Okay. So I'll -- and I'll answer first and then Tyri 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 going to widen. So 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. So 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 profit potential. So that's why we think we -- the next decade is ours. And we focus not just on cost, but we do focus on the experience and the brand. And with that, I'll turn it over to Tyri. _

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. But there's been a change, and we've actually surveyed our customers on the topic and more than half are now -- have some thoughts about how -- sustainable travel and how they should think about choosing an airline based on their sustainability. So we are finding traction. And with our -- animals on our tails, which are very unique, we create a really great brand story for ourselves. It isn't expensive, but it's 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 got to go fly that airline because they're the greenest." I think if it's a comparison between 2 airlines, we break the tie with our green standard, and it has resonated with customers differently since the pandemic.

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 plan to grow out over the next few years? How much will headcount grow over that time period? And how much would have headcount grown had -- in the past, prepandemic, 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. So for example, you'll have the same 2 pilots that are flying 240 seats instead of 186 or 180 or what used to be 150. So you'll actually see the -- yes, we have 1 extra flight attendant. But actually, you'll actually see the employees kind of per ASM should actually moderate. And there's a lot more technology still to come, I mean, we didn't get into it. But when 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. And so 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. But we haven't even tapped anywhere near the potential that we could to have labor savings from a technology perspective.

And then just thought you've reiterated your sub $0.06 CASM goal, but you didn't give a time line around that. Any thoughts on how long it takes to get there? Is it next year?

I'm sorry, 2023. I will be clear, sub $0.06 in 2023.

Okay. Savi, you want to -- just right there.

Just on the first question, 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 kind of current environment to price sensitivity? I know you benefit from kind of the 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?

Yes. Look, I think price sensitivity -- I mean, you're not going to change economics, right? And you're not going to 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. So to be quite honest, $79 is the new $49. And so there's -- 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. But over time, that means the entire industry is going to have to raise their fares and their prices considerably in order to get back to their prepandemic margins. And many of those carriers are still burning off credit shells, which we are not, right? So if they want to get back to prepandemic margins, there's probably another round or 2 of fare increases that you're going to see across the industry. And when that happens, more people will be looking for us for value. And so we continue to look for ways to grow our ancillary so we can have an even lower breakeven price. But that's what -- that's going to continue to attract customers.

Got it. And then for the second question -- and 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, 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? Or maybe I'm wrong. And just what's that right mix? Like what do you think that mix of 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. And in fact, Jimmy Dempsey was part of Ryanair. Why don't we let him explain it.

Yes, 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've got to look at is our ability to deliver a seat with a material cost differential to everybody else, it 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 1 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, many years. And our ability to produce a seat with the 321neo at a low cost in the United States is going to be very difficult to match by any carrier in the next 10 years. So we've got a really good platform to grow the airline. It's somewhat similar to where Ryanair was 10 or 15 years ago in Europe, where they really had the lowest cost seat. They 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. So that's really our focus in the business.

I would just add, too, at Indigo portfolio airlines, we've always looked and it's like gravity. If you 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. And so we have considerably more than that with a lot more kind of runway ahead of us in terms of no natural competitors. So 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 of -- more questions.

Scott, do you want to?

It seems like we're getting more questions as we go.

It's Scott Group from Wolfe. So I want to take -- you got the sub $0.06 CASM guidance for next year, but how about operating margins? So you guys are operating sort of mid-single-digit margin back half of this year. I think you were at 14% in '19. How do we -- when and how do we get back to double-digit operating margin?

Look, the focus on the business is to -- you've seen this year, we sequentially improved our margins. You saw us go from loss-making in Q1 to a couple of percent, 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. But if you look pre-COVID, your margin levels are based off a revenue base in an industry that's entirely different than it is today. Your oil prices that are substantially higher. You have airfares that are substantially higher. So from a percentage basis, you may be slightly below pre-COVID margins, but you're delivering a similar cash flow and a natural profit per plane. And that's the way we're focused on getting the airline back to about $3 million in profit per plane.

So -- and that was my follow-up question. So if you look at profit per plane, if you can get back to that $3 million a plane on a much -- on a higher base of plane today versus '19, do you think that math continues as you want to 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 per plane?

I mean it's impossible to predict like the next 10 years of profit per plane in this industry. It's an industry that is constantly -- it's a cyclical industry. But our focus and what we did pre-COVID was approximate $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. And we're not going to guide multiyear profit per plane, but that's where the targets that everybody is set and our organization will be focused on.

It wasn't a 2030 guidance question. It was more of an 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 going to 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 will be other cross wins that happen and we'll need to manage those. And that's why we're going to continue to focus on things like the dual boarding as an example, which will be huge. It's going to take several years to get in place, but we will continue to kind of stay ahead of the things that are causing challenges. So yes, we want to continue to make $3 million a plane.

Theresa, did you have someone? Yes. Sorry, I'm going to -- and 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.

Chris Stathoulopoulos, Susquehanna. Just if you could dig into the 3 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 how you're thinking about peak or nonpeak flying and then the split between, I guess, fattening up the existing schedules and then -- or yes, your current schedules versus new markets?

So 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. And it's been a combination. It hasn't simply been I don't -- we're not flying as much on Tuesday, Wednesdays or Saturday. It's been less structural -- it's been less structural utilization throughout the week, including on peak days. So a large part of this, Chris, is just moving the airline back to fully utilizing airplanes. One of the definition of fully, we use different days of the week. Peak day is fully utilized and off-peak still utilized somewhat less. So it's not going to create an abnormal amount of pressure on revenue because we're focusing really the extra utilization on off-peak days. On stage, look, we -- our best performance profitability-wise has been at the higher stage length. The balance of RASM and CASM to produce profitability has been best at about 1,050 miles. 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 have 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 prepandemic 1,050 miles. How we grow in terms of the mix of frequency in existing markets versus adding new markets? It's going to 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. We're going to be -- and as we get more relevant and those 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 opportunity. We announced that -- Barry announced the Dallas crew base a couple of weeks ago, 5 new markets from Dallas joined the dots in existing markets in the system. There's so much join the dot opportunity, so there's still plenty of new markets we're going to add. It will be a balance.

Helane, did you have your hand up? Yes. And then Stephen here right after. How about we do -- how about we get these 2, Jesse, please?

Thanks, David. So it's Helane Becker with Cowen. Thanks very much for coming to town and doing this presentation. Just 2 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. So how should we think about you filling those planes at an 85% plus load factor since some of those cities looked a little on the small side?

So 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. But no, we've looked to markets. We look at this with a minimum 186-seat aircraft as we have -- we still have, obviously, a very substantial number of 320neos at 186 seats. And we look -- and again, we fly flexible frequencies. And this is the benefit that crew -- opening crew bases offers. If I want to fly a market 2 days a week from a crew base, great. I want to fly it 3 days a week, great. If the demand says it should be 5 days a week, great. I'll find the frequency that works. And this is the benefit of all the work to get the breakeven 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. And look, we've seen examples in other parts toward the Indigo portfolio of, yes, 321s you can still -- you can fill them. They're big planes, but they give you even lower cost, which gives you even lower fares, which gives you ability to add these markets.

I just have one quick follow-up. On the bridge to under $0.06 CASM-ex less than 6, 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?

We haven't outlined. Are you talking about on a quarterly basis? Or...

No. Just the bridge to going from where you are today to where you want to be at the end of next year?

Yes, I mean, I think you'll see a progressive improvement in our unit cost. You'll actually see some of that in Q4, this quarter we're in at the moment. And 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 through to Q4 next year. And so as the utilization that Daniel is 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 starts to deliver. Like part of the drive to get to sub $0.06 is the introduction of the 321neo. And so 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. And so you'll see that progressively improve as you get through next year.

Steve Trent from Citi. Two questions from me as well. I was quite intrigued by the strong growth you guys are set to put up, and this dual boarding thing you guys talked about. Any high level view on 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 infrastructure adequacy as you move forward with the longer-term growth.

Well, look, I'm -- I can talk and then Jake can talk about airports. Look, I think overall, I think we've seen the TSA staffing is actually -- looks to be very adequate. And I think there's still pockets like everything from a Starbucks over here to a McDonald's over there. There's a little pockets of things. But it seems that the staffing for the most part on 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. So we've got Thanksgiving coming up, but probably more Christmas, New Year's as a much bigger holiday for South Florida. And so when they start stacking up Jacksonville Center, we'll see. I know that the FAA is adding, I think, another 10% capacity or headcount. Hopefully, that's enough. I mean they've come to us and said, "Hey, why don't you get overwater radios," which we outlined we're doing, but 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 reschedule the airline. And Daniel has done a great job of going in with his team and making sure that every duty period doesn't have more than 2x that it crosses Jacksonville Center. So meaning 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. So that way, if you get these 3- and 4-hour GDPs, it doesn't blow up the crew and strand the plane and the crew somewhere. But airport infrastructure, I mean, that's an ongoing challenge. I know the Department of Transportation has been looking into anticompetitive things and so forth. And 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. And we continue to look for real estate in a lot of places, and we take advantage of where we can get it. But I don't know, Jake, if you want to talk a little bit more about why the innovation of the boarding makes sense, too.

Yes, I mean, everything Barry said, plus, I would say, look, airports, this is -- we're really heartened and excited that Denver was -- this is an innovative airport that partnered with us on this facility in our largest airport, right? So we think that's going to gain traction. Other airports have already noticed. We've had other airports reach out to us to, reach out directly to Denver to talk about how do you make this happen. So 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. And look, this is good for airports, too. It's not just good for us, right? This is a constrained -- this is a scarce resource at airports gates, right? So 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? So 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, when you think about the big 3 or the big 4 in the United States still going through this difficulty with trying to reach pilot contracts, how are you thinking about kind of into next year, to what degree your pilot candidates are going to say, "Hey, I'm talking to United Airlines as well?" Are you guys probably sort of digging into more channels than some of the majors, I mean? Or overpunching 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. But -- so look, I think if you look at the fact that there's going to be some new pilot deals at some point, there will be a way with those. Ours becomes, I guess, early amendable next summer, so we'll have our new deal on the heels of that at some point. But 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. But 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 kind of vertically integrating our training and recruiting into the company is so important. And so we're very confident that with our supply that we have, we should be able to get through the next 12 to 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 1,500 or 1,700 now applications for the cadet program. And it's with 0 hours, 24 months. But to be clear, we're accepting pilots with 700 to 800 hours. So these are -- if they've gone through the ATP Program, for example, we have already started in contact with them. And so that's why we're going to start bringing in cadets in the first half of next year through that program. So we're going to control our own sourcing, and we're not concerned. The big guys can do what they're going to do.

Theresa, I think you had a question here. And then Mike, we're going to get to you how about right after. Thank you.

Jake Gunning, Evercore ISI. So on the $100 ancillary target, how does total revenue trend on the way to that? Is that offset by lower base fares at all? And then are there any industry changes impacting that? And is there any sort of fare umbrella for ancillary revenue?

So we look at it. We do look at it. You've heard the constant reference to lower breakeven fare. Look, there's going to be an impact on base fare. You can look at our performance as we've grown ancillary in the last 3 years and see the relative trends of base fare. Yes, we will see some offset. It's a mix. Improved performance of the credit card program, no effect on base fare. Improved sales of discount then, no obvious -- 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. And if -- but if the fare umbrella doesn't hold then we've got the ability and we got -- we can afford to become very competitive and very aggressive on base fare. It gives us more flexibility on how to compete.

And then you talked a bit about utilization on peak and off-peak. Are there any -- is there any commentary you can offer on peak and off-peak revenue trends and how that might have changed more structurally given different demand?

Yes, it has changed. It's changed both seasonally as well as by day of week, and it's simply just driven by, I think, the work-from-home phenomena, right? And so you're seeing the September was a better September from a leisure perspective, and we're seeing that Wednesday is not as bad as it used to be. So I think that does change how we think about utilization. And it's good to have a 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. New Year's is still New Year's. Thanksgiving is still Thanksgiving. But I mean since it's right upon us, I mean, I'll give Thanksgiving 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. And that remains true. However, the outbound used to be, when I got in this business almost 30 years ago, Tuesday afternoon, through Wednesday. And Wednesday afternoon, I mean, it was just packed if you were in the airport at 3:00 or 4:00 on a Wednesday afternoon before Thanksgiving. I mean it's a mad house, right? And what we're seeing now is the outbound is actually starting as early as the next few days and then in continuing through the weekend. And you're not seeing as much kind of Tuesday, Wednesday. It's still there, but a lot of people are just kind of taking that week to work from wherever they're working from. And so 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 going to 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 in the other days, I think it does make for a much better season overall.

Yes. And I think this is the low fares. This is the one that's still on travel. And this is the issue, and Barry is right, one year -- industry ran out to seat -- I started in 1996. Things 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've seen it smearing before. We've seen -- so we've seen it smearing to the weekend before, before. We're seeing Thanksgiving demand start 2 days from now, which is sort of -- prepandemic would have been -- and you can see an improvement. The Sunday is 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. Which it used to be that Sunday, Monday were good, and then Tuesday was the start of that really bad off-peak period. I think the reality is more time to -- the more flexibility is going to drive more demand, and that's what we're going to -- 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 4 days. If you can take a 4-day weekend and work remotely for a couple of days, you're more likely to travel than if you could just travel for a 2-day weekend. It's rationally -- it makes travel more enticing when you can get more time away.

Mike?

Mike Linenberg, Deutsche Bank. Barry, back to your point earlier about bringing on pilots with 700 to 800 hours. And digging into that a little bit more deeply, when you have, I guess, cadets who come out of a college program, say an 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 what are they doing? 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? And then I have a second.

Sure. I'll kick this off and Brad can explain it. But effectively, 24 months. From 0 hours to 24 months, you could have an ATP and you 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. But there's -- I think what we saw is that it's -- 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 kind of through tribal knowledge, teaching each other what to go do. But that's really why we created the cadet program was to actually mentor them through that. And I don't know if you want to explain kind of that whole time line.

Yes, sure. So I think this is on. So 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. So we've got the experience with the universities and the cadet programs. But again, what we found, just through being proactive, is that these pilots in some cases, do better, especially the university programs. Then, we had a program with TSA, for example, where we were hiring 10,000-hour pilots. Believe it or not, they didn't do as well as our university graduates did coming through these programs. So the amount of time span, we average 70 or we forecast about 70 hours per month for somebody either flying for a 135 charter program or for flight instructing. And so you do the math on that. And as Barry said, university graduates typically have between 300 and 400 hours when they graduate, takes them a year or so to get the 1,000 hours they need in a restricted program because they're -- they have a BS degree in aviation. So it can take them up to a year. But again, for us, it's close mentoring. We have a lot of requirements in terms of check rides and things like that. Even when they're getting their ratings, even when they're working as a flight instructor, if they fail 2 check rides, for example, they're not in our program anymore. So we're very selective as well.

Great. And then just second, probably to Daniel, on the modularity of your network, it does appear that you're pulling a page from the successful European ULCCs, like the Wizzes and the easyJets. I'm actually surprised that there are really no other carriers that are adopting that model, where they're looking at -- you're 9 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 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 9 domiciles or bases for the flight attendance? Is it the same? Or is there a different number there?

There's a -- well, I'll answer the last one first because it's quick. There's a 10 -- flights 10 -- well, there's a 10 flight 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 and sort of -- we look -- it's driven by our pilot contract and our reserve rules, and we're looking at the idea that 5 airplanes in a city, which produces generally speaking 2 waves of departures a day, so 10 departures a day is a size at which we can efficiently operate a base. We're doing -- 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 1-day turns for crews, and we think that's going to be the model going forward. It gives us some -- 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. And look, there's the -- when you think about the world as we're thinking about it from a modular perspective, are there -- there are 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. And the great thing is we can open bases with relatively little disruption because we're a fast-growing airline. And so the idea is we grow -- the idea is we're going to -- as we continue to grow, we can grow into having more bases. So it is surprising. I will comment, obviously, Allegiant runs a very modular network, having started that way. It is -- we think it's a -- we think -- as I discussed, we think it's a broad competitive opportunity. It's a hard -- I will say it's a hard change to get from where you start to getting there. But once you do it, and we took advantage of a crisis in this situation, when you get -- when you do it, you realize how much better it is to do it this way.

Yes, I mean, in reality, it hurts RASM, right? Basing the planes, the way that we're doing it typically ends up with lower desirable departure times or arrival times. And so we took that hit during COVID. And so we're slowly kind of getting out of that and we're almost done with kind of -- I think the last few pieces are actually going into place now. But we decided, look, I mean, at a time when things were already rough anyway, go -- if you're going -- it's going to take the hit. Because we've been studying, this system didn't just happen overnight. We've watched Wizz. We've watched Ryan (sic) [ Ryanair ] for years. And we were envious of how they operated, but we knew that the P&L hit was real. And so we kind of took that time during COVID to go ahead and make the investment, so now it's starting to pay off.

I'm going to pause from the room just for a moment, and I'm going to give the panel a couple of questions that have come in thus far. So I've got a few questions here. They're pretty short though from Duane Pfennigwerth. And so I'm just going to pitch it, and we'll see who takes it in the panel. But 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?" So as Barry mentioned earlier, our Chief Information Officer was unable 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 operation system that for our -- for SOC that 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. But in the airport world, I think, it's probably the biggest near-term driver and I'll let Jake speak to that.

Yes. Look, I talked about the website and the app as supporting and they really do support pretravel customer experience. Anything that we can push upstream -- it's on, right? Yes. Anything we can push upstream is a transaction that doesn't happen in the airport. So 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 airports just because of the size and scale of the airport network. But we're in the RFP, talking to suppliers on the technology that's going to go into the airports. 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 CASM-ex goal -- why is a CASM-ex goal 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 has talked about his non-ticket and the way we can actually sell effectively to get our non-ticket next year, towards the end of next year to $85, it's no different from a unit cost perspective. And 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 operate at pre-COVID and improving it. And so Daniel has talked about the modular network, that gives us real cost savings in the business going next year. But in order to get to the cost savings, you've got to get to the airline back to utilization rates just above 12 hours. That's very, very important. We've got the aircraft that are coming from a 321neo 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. And there's probably some manufacturer delays that will occur, but they're in the 2- to 3-month variety as opposed to extended delays. And so we have really good line of sight to that gauge coming into the airline. And so we can control those items. We financed the fleet for next year. It's in a very, very attractive place from a financing perspective. 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. So we're in control of these items, and that's why we focus on those 2 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. But 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. And we've been very, very focused on that, and we expect to achieve that as you progress through next year and into 2024.

Yes. And 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 promised -- if the merger happens and the already promised divestitures, I've never seen quite this much in the way promised divestitures have done. Are we interested in more capacity at LaGuardia? Yes, we're potentially -- yes, we're interested in more capacity at LaGuardia. Within expensive metros, we look for relatively lower cost airports. We -- as an example and not in the Northeast, but in Chicago this year, we changed -- we moved most of our capacity from O'Hare to Midway, where we get so Chicago, and we get a lower cost airport in the process. And we will look to serve the most cost-effective -- to the extent possible, we will sell the most cost-effective airports in a metro area. We're a national airline. We're going to be in every significant metro area, but we're going to do it in the most cost-effective manner possible.

So I think we do still have more time. Were there any other questions in the room? Jamie, you had a follow-up or 2?

I'm just wondering, and I know it's early, but on the 321neo, how does the RASM hit compared to the CASM improvement? Or is it just too early to be relevant?

So it's too early on the 321neo, so far, but we have 321s in the fleet. And we -- they have traditionally been our most profitable airplanes. You see -- I'm not going to pretend you don't 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 okay. The 230 seats, yes. I have another 10 and another 10 seats to fill. We're confident it will be a net benefit to the airline.

Could you quantify what that different -- I think basically [ shorthand, you're seeing higher margin are much higher ]?

No, no, we're not -- we haven't, and I'm not going to right now.

Just to follow up though. We have analyzed the 321 for a long time. We got our first 9 or 10 of them back in 2015 and 2016, and it was enlightening to us to see that they were -- they immediately were the most profitable aircraft in the fleet. And we had an appetite to buy more of them. And 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 321neos. And so it was really the early signs from the aircraft and the profitability that it delivered in quite intense competitive fare environments was compelling to us to actually buy more. And that's why you now have the airline moving to over 50% of the fleet in 321s.

Any other questions? Mike, your follow-up?

Yes. Just -- and maybe this is to Daniel or Barry. Just going back to your route map and seeing the number of cities that you connect to, Cancun, Punta Cana, Montego Bay, and I think earlier it was tied into the credit card and aspirational-type destinations. But international is definitely becoming a bigger part of Frontier. Just from a percentage of ASM basis, where are you today? And where do we see you going? And legally, can you set up a domicile in an international city? Or would that -- I guess, there would be tax issues and the like, so 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 2 weeks ago, we're -- more services to Montego Bay as an example, but 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 have, and I'll have to check what the current numbers are. We continue to identify the 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 3 markets you mentioned in San Juan. And we've obviously also entered sort of -- entered some small international markets on a lower frequency basis. Look, it's -- is it valuable to the credit card program to discount then? Absolutely. It's more markets that are more attractive to customers. And you look at the mix of capacity in those markets, you'll see a significant opportunity. And we love the 3 international markets you mentioned. Because, look, it's total cost of travel really does matter. And so you've got huge numbers of hotel rooms, so much accommodation in those markets. Lower airfares drive more demand. You look at the Puerto Rico market, it's a ULCC market. We're going to keep growing that. 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.

So those are all the questions, I think, that we have, Barry, if you just want to close it out.

No, I just want to 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 -- as a reminder. I don't know if you -- everyone remembers, but last year on April 1, New York City opened back up. And we were here, actually, is the first day of our IPO and actually rang the bell here at this building. So 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.