Sun Country, Inc. (SNCY) Earnings Call Transcript & Summary

Let's turn the podium over to Sun Country. I believe only the second time that you've presented at our conference, but it's great to have you back. Grant Whitney, who runs up revenue management, is going to be taking the stage. And thanks again. It's good to see you.

Thanks, Jamie, appreciate it. Thanks, everyone. I appreciate you all taking the time to come listen to our story. We're pretty excited about it. I'm joined here by Bill Trousdale, a esteemed member of our finance team; and Chris Allen, who runs Investor Relations. So as Jamie mentioned, it's our second time here, but the airline has been around for -- this is our 40th year. So this airline has been around for a long time. Jump right into it. Based in the Twin Cities, started as sort of a charter operator, ex-branded folks. The airline business, if you can believe this, in the '80s, went through a turmoil, and some folks decided to start their own business. And so this airline has been around for 40 years and really give credit to the folks who came in, in the 2017-2018 period because we've really set up the airline for success. But there's a whole body of folks who've been around at this airline for a long time, and there's 1 theme I'll sort of come back to, and it's just the operational capabilities of the airline. It really allows us to do some of the innovative things that we do. So we've created a diversified business. We're a scheduled service airline, but we're also a charter airline. And we've gotten into the cargo business. And we do that sort of in an integrated fashion, and it drives the benefits that we show here on the slide. And we feel really good about our ability to operate really in any environment and the agility and flexibility of the airlines, really important. So on behalf of the 2,500 employees from Sun Country, thanks again for showing up. As I mentioned, it's a diversified business model shared across 3 lines: passenger leisure, charter, cargo, 70% revenue generated by the scheduled service business; charter sort of 20%; and the balance being the cargo business. And in sort of the last -- and we're feeling really good about the environment. We're really excited and feel like we're positioned well in the passenger leisure, which has been doing very, very well. But we're also really cognizant of the value that our charter and cargo businesses bring because they're long-term contracts with fuel pass-through and they give us a resiliency and some diversification depending on what the environment is, so really important there. Aircraft, we currently fly 54 airplanes. 42 of those are the airplanes in scheduled service, and then 12 of them are essentially Amazon airplanes. Amazon owns the airplanes, gives them to us. We're the operator of those airplanes. Pilots, it's a story that we've talked a lot about. As we sort of grow the airline, we've grown the pilot pool. At the end of the year, we had over 570 pilots, and we continue to grow, filling our classes. And attrition is actually running lower than we expected in the plan, so really good news story on that and a really efficiently run business. So all of this has led -- we've grown the airline pretty significantly. Again, I go back to sort of the turnaround and the reformatting of the airline 2017-2018. All that sort of positioning the airline for success has meant that we've grown tremendously, and we're well ahead of 2019 levels when you bring it all together. So we feel really good about what we've accomplished, but we also feel like there's a lot of growth left in this business model, and we're really excited about where we're taking the airline, almost regardless of environment. As you can see through COVID, we outperformed pretty significantly. And that again goes to the diversification of the airline, our ability to really reduce capacity -- align capacity and demand depending on the environment. And so if you just look through 2020 and 2021, we significantly outperformed. Into 2022, the rest of the industry sort of caught up to us. And again, we had our contracted businesses, which didn't enjoy the same yield appreciation that we saw in the scheduled service side. But for the benefits that we've talked about, we still are really happy with those results, and we're poised for a successful 2023. So -- and now we'll go into each of the segments a little bit and just sort of how we think about these. For a little airline based out of Minnesota with only 42 airplanes, we have a pretty good map in terms of our breadth of coverage, and not so much depth of service, but we are really, really experts at moving the airplanes around to take advantage of seasonality and demand profiles. And so we're really excited about what we've built in Minneapolis. We've legitimately secured ourselves as the second airline in that market. But we also move the airplanes around. You'll see actually out of Dallas, we have a really innovative Mexican network that we stand up really in the summer just to take advantage of demand spikes there. So this is something that, again, is a testament to the employees and how we're able to sort of move the assets around and really put together a really compelling network service for our customers -- our leisure-focused customers and really intent on meeting them where they want to go for seasonality and everything else. We do that with a product offering that we feel is differentiated from other ULCCs. On this chart, you'll see it's much more similar to Southwest. And it works for our markets and our customers, and we feel that it sort of helps us as we deliver what we think is really good unit revenues. It's a combination of that and our ability to really move the business around due to demand fluctuations. And so you'll see on the far left chart just how seasonal we can be, May and September being really dreadful leisure demand months, in our markets. We bring the airline significantly down in those periods. The cargo business and the charter business are more stable, so they can fill in the troughs there. But we just bring the airline down. We also do that across the course of the week to take advantage of unit revenue peak sort of on those best leisure days. And so what this allows us to do, and we're really proud of it, is deliver really strong unit revenues. So just to dig into that a little bit deeper. You can look at sort of our departure context. We have this really interesting kind of first quarter March seasonality in the Twin Cities. Again, it harkens back to the airline's roots as sort of taking people the name, Sun Country, so taking people to warm weather destinations are really valuable business in the first quarter. And then as we go through the rest of the year, you see the trough months. But the summer comes up a little bit, but what we also show here is, in Dallas, we stand up this pretty legitimate Mexican destination -- or service, primarily out of DFW that is really summer focused and takes a lot of expertise. I want to give a shout out to our operational team. Standing up this type of operation for an airline our size requires significant execution and it gets back to those operational routes that the airline has been able to develop over the last 40 years. L.A. would be a market that you can see that we keep on -- our seasonal profile is across the course of the year, but we really focus on the summer when demand trends there at its strongest. And you can just look at March and July markets, and our top served markets are vastly different. North, South in March; East, West in the summer, and it's a really dynamic and agile capability of the airline. So what this has led to in Minneapolis, where we have our home base is we've been focused on being the leisure airline of choice in Minneapolis, and we realize all of you know the competitive dynamics of Minneapolis. So what we're happy to say is, throughout COVID, the 2 largest airlines, and we'll focus on ourselves, have gained share. And the way we keep score and share is point of origin, leisure domestic customers. And so on that basis, we've done very well through the pandemic. We've been growing Minneapolis that we talked about. We've been broadening the scale and scope of our network. But the leading carrier has also gained share. So the carrier is giving up share, those who through the pandemic had to make tough choices and sort of deemphasized Minneapolis, which was the economically right thing to do because they needed to put their assets in better places. And so this is the framework off of which we now continue to go forward. And we do believe that there's continued growth opportunity in Minneapolis, and it's not so much, again, a game of us stealing share from the biggest carrier. It's really just putting our best foot forward and letting value-based leisure customers sort of come to where they're comfortable. And what we're really happy with is the brand is resonating definitely more with customers now than it used to. So this just goes into that a little bit in more detail. We -- since 2018, we've grown markets substantially in Minneapolis. At the same time, we've grown ASMs, driving those share benefits we saw. As we look to where we can grow from here, we have same-store opportunities of growth just because we're in 71 markets, which will actually be 86 this year because we have a whole slug of new ones coming on. We start with a really small footprint. We'll usually start a market 2 times a week in its right season. So we can put a 100% capacity growth in a market, and we're still not even close to daily service. So for a business customer, somebody like that, we still probably -- we aren't the right answer. But for leisure customers, BFR customers, we become really compelling. We also -- there are a lot of unserved markets from Minneapolis, where we can continue to grow, start with our small framework. One thing I'd point out here is integrated scheduling. We do a really good job, and it's a testament to the team we have back in Minneapolis who does our aircraft scheduling. We drive a lot of value by getting integrated between our lines of business. A good example would be MLS, big charter customer, in scheduled service. We are starting flights this year. We'll start flying to Charlotte, North Carolina, which will work for us. We're going to do it a couple of times a week. But what it allows us to do is actually optimize the charter flying too because one of the inefficiencies of charter flying is that you have to position the airplane many times with empty legs, ferry flights and those are highly inefficient. In this model, we can fly the airplane full of scheduled passenger paying customers to Charlotte, transition the airplane over to the FBO and then fly the soccer team. It's really never been done before. And we are -- this year, I just give the team a huge amount of credit. We're taking it to the next level, and it's going to be a win-win certainly for us, but also will be helpful for a big charter customer. As we think about non-Minneapolis, it hasn't grown a lot since 2018 baseline here. The markets are down a little bit. ASMs are pretty well flat. All I want to say is that there's still a lot of growth opportunities for that. We focused on Minneapolis for all the reasons I've talked about, but we still have non-Minneapolis growth capabilities. Over the last couple of years, we've had to not fly Los Angeles to Honolulu. But the airline did that successfully for a couple of summers just taking advantage of the natural demand spikes there. We didn't fly it not because it wasn't going to be profitable. It was just we -- the opportunity cost was really high when it came to pilots. And that's just an example of the type of markets that we can take advantage of as we grow out of Minneapolis. So again, the growth opportunities are significant. And in a lot of regards, they're low risk, low risk for us partially in due part because we have that operational capability, but the playbook has really been established. Ancillary growth continues to be something that we focus on, and we believe we'll deliver growth. As you can see through 2018, we have been successful in increasing ancillary growth, and we absolutely expect for those numbers to continue to increase. Some of that will be a function of just being a bit more optimized on pricing and how we sell it to customers and then some sort of that growth will also come from new products and new third-party products. And so we will continue to grow that. And it has helped the airline sort of get to where we are in terms of our unit revenue strength that we have previously shown. So now we'll move on to charter, which I said was again about 20% of the business. It's just fundamentally -- Sun Country has always been a pretty good charter operator, and now we really feel good about saying that we are kind of best-in-class for domestic narrow-body charter block hours just in producing them. There are certain airlines that do a really good job with high-end VIP products and other types of products. But we're sort of across the board. We've done a really good job of building our portfolio. Really happy about the customers that make up our portfolio and the contract nature of the business that we've really focused on is helpful, especially in this environment where pilots are a constraining resource, our contracted business, so think of the casinos and MLS. We're getting the flying request for these customers well in advance of our crew bids, so it gets put into the crew bids. So it's actually a really, all things being equal, efficient way for us to do business in a world where we take very little revenue risk. And we get passed through on some of the important costs. And so charter revenue, sort of back to where it was in 2019, and I'll tell you 2019 was a really high baseline for a variety of reasons. But our market share, we really feel happy with what we've produced. And again, it speaks to some of the really strong customers that we've signed up. MLS was sort of, as they've evolved as an entity, they historically had a limited -- each team got a few charter flights per year, and then they had to do commercial flying. So as the league has sort of not to say grown up, but as they -- COVID was something that they sort of said, "Hey, maybe we should think about chartering," and the league has been doing a really good job of just growing and differentiating itself. But they're not ready to pay for a high-end VIP product that some of the other sports leagues are. And so the fit with us was really, really good. And it harkens back a little bit to some of those scheduling efficiencies I talked about. We're able to deliver for them a really -- a fulsome product where we fly every team, and we do it at an efficient rate for them and a really compelling contract for us. And the other nice thing about MLS, which differentiates it from some of the other pro sports leagues are as we negotiate just with the league. It's not like we have a one-off bilateral discussion with each of the teams, and that's typically how it happens in other leagues. So they've really shot up to be one of our biggest customers. Caesars Entertainment -- we do a really -- a lot of business with what we call track charter customers. And so these are casinos that would be Biloxi, Mississippi; Laughlin, Nevada, places that aren't that easy to get to from a scheduled service perspective but the casinos have invested in these places. They have properties that are really attractive to certain clientele, people that may not want the hustle and bustle of Vegas. I will tell you when these airplanes come in, many times, we have more wheelchairs than some of our other flights. But it's good, durable business. These people continue to go back to these places, and so we partner with the likes of Caesars, MGM, the Riverside in Laughlin, Nevada. And again, we -- they essentially get to have their own airline. They give us their schedule. We go and fly it, and we've been working with them for so long that it's a really, really symbiotic relationship. Caesars, I will tell you, they left us for a while. And we won that business back, and we've won it back with an additional airplane. So now we're flying 3 airplanes with them and feel really good about the future there. We also have a couple of VIP programs that we've started. So 2 of our airplanes are outfitted as VIP airplanes. They do program charters. One flies L.A. to Kona. And then the other one, we just started it early February, goes Oakland L.A. to Cabo, San Lucas. There's a private airport on the Cabo, San Lucas side. So we do private -- a program charter on that. And it's our sort of first foray into VIP. It's something that we feel good about. Those airplanes justify themselves. We also get some ancillary benefit with them on the MLS side for the West Coast teams. But it definitely dips our toe in VIP. You lose some of the schedule efficiencies that I talked about, but it's an intriguing growth market as we think forward. And like I said, the percentage of our business that's under contract in the charter world has dramatically gone up. And in this environment with pilot constraints, that's really, really helpful because we have much better line of sight as to where our folks are going to be flying. But what I will say is that there's still opportunity to grow the ad hoc business, which is military and some of the other stuff. Right now, March Madness is a huge driver of that. So those are growth opportunities, and we haven't lost sight of those customers. They really like us. They know how to get in contact with us. The charter -- or the cargo business gets -- I think it's -- we're partnered with Amazon. They have 12 airplanes that they give us. They -- the way I think of it, I came out of the network world. I feel like we're sort of the Amazon Express. They tell us where to fly, when to fly, and we're purely the operator. They handle the logistics on the ground. Again, asset-light business, they handle all of that and so good revenue. And then it's a business that, right now, I will tell you there are some days where like, oh, man, I wish I could use those pilots to go fly an extra Minneapolis, Fort Myers, but as we all know, this world can be volatile. And so it's a really consistent revenue stream that -- and I think we're pretty convinced we fly a really good, reliable schedule for Amazon. So it's an important component of what we offer and a part of the business model. Ratified pilot contract. Pilots get a lot of time with us in terms of our story. We were one of the -- we were the first to get sort of a new contract done. We were, to be perfectly honest, below our peer airlines. We got a contract done. It got our pilots to where they need to be, where we felt good about that. And that sort of went into reality sort of the end of '21, the beginning of '22. And what we expected from that is our costs were going to go up somewhat, but we would have much better ability to attract pilots and our retention would be higher. And I will tell you that, like we said earlier in the deck, 571 pilots, that's significant growth from where we were. We're still filling our classes. Just had a class start. It was totally full. Everyone showed up, and our attrition, as I mentioned, is running lower than planned. So -- and on the cost side, there are a lot of cost pressures in this business. We've all talked about them. But one of the things last year is because the efficiencies in the business and other places we drove value on an [ ex ] fuel basis in 2022, our block hour costs were nearly identical to 2019. So we've been able to do it. We said, keep your pilots. Give them a place to work. Focus on quality of life. Have Sun Country be a place that you could build a career. It's a different career, albeit than sort of going the path of a major, but it's pretty fun. We have one of the most unique setups in America. Our headquarters is essentially an old, converted hangar on the base -- or at Minneapolis airport. So it's -- you walk not very far, and you go from kind of corporate, not Minnesota corporate, so there's plywood on the walls. But you go through the hangar. Before you know it, you're on the ramp. And I think -- those of us who worked at other big airlines, it's a different feel and people come in and interview in that context. It's kind of fun and so really excited about that. The balance sheet at Sun Country, very high liquidity. The airline has done a really good job of managing -- because of our aircraft, our fleet, there isn't a ton of CapEx, no non-aircraft debt. So the business actually delevered through the pandemic. Credit to Bill, Dave Davis, the team there. There were some trying days early on. But I think once we got past the hump, it was pretty amazing what was able to be done with the assets the airline had and again, the work of the finance team. And we've been pretty aggressive in returning -- being aggressive in stock buybacks. We were a leader in that last year and have returned $40 million to shareholders so far, and so definitely a stakeholder focus at the airline. For those who may not have known, we were sort of Apollo private equity purchase in 2018, correct? And they still own 33% of the company, but that's come down of late. So this is the last slide. It's sort of a, well, conclusionary slide, but responsible fleet growth. So it's a really important component for us, is we don't have an order book per se. We grow organically. I will tell you that the experts who do fleet deals at Sun Country are pretty unparalleled. The team is really, really good at finding deals. And so the fleet will grow. And there's definitely commentary in the marketplace about OEMs and fleet delays and those sorts of things. Our fleet -- we had a lot of airplanes join the fleet at the end of last year, have already found a few deals and are continuing to work on deals. So that will not be a hamper to any growth efforts, but it's also not going to be a constraint from a balance sheet perspective, either the 737-800 is still a very reliable airplane for us. And we put it -- even though we're small, and we only have 42 of them, we put some pretty crazy schedules at them. And we have pretty -- we got to get -- you can't not get the MLS team to their game. That's not an acceptable answer. And so the reliability of the airplane is -- remains very high for us. Credit to our operating team again in the back half of December when all craziness was happening. Minneapolis got hit with a lot of storms. We Were really happy. I think our completion factor was the highest of any airline, so again, a testament to everyone at Sun Country who's able to deliver on that. And with that, I think we're ready for questions. Yes.

Could you go back?

Yes. Thank you.

Could you go back to Slide 7? So this is what I have been harping on all day, and I apologize to folks that have sat through the entirety of the airline panels because I do sound like a broken record. But the third area, the adjusted EBIT margin, just ignoring Sun Country for a moment, and I'll get back to you. Big 4 versus low-cost carriers, that's inverting. That's not the way it's supposed to look. It's not the way it has looked in the U.S. It's not the way it has looked around the world for 30 years. There has been an inversion in the U.S. in terms of the relative relationship between those 2 business models. The sustainability of that inversion is open to debate, but facts are facts. So now let's introduce Sun Country as you have obviously for good reason. Does this impact how you think about competitive behavior? Does this impact the route selection process? Because now can you advance to Slide 12? At least in Minneapolis, it looks like you have the competition on the run and you're perfectly capable of taking on Delta out of the blue. You do call it Delta as opposed to host carrier [indiscernible].

Be careful with the connotation while speaking on Delta, yes.

So between those 2 slides, I mean, you seem to have them on the run. Is this influencing how you manage the business?

Yes. And I think it's important to know that those who are on the run are both the big carriers as well as the ULCCs because the airline has been around for 40 years, and they're really good people. The airline wasn't managed all that well throughout the 40 years. And I think what you had was an airline that sort of wanted to be a business airline. So it flew first class, and it wasn't managed appropriately. So in the 2010.

You could have just stopped at DC10.

But Spirit and Frontier actually got pretty big in the Twin Cities. And so as some countries, as we sort of have that strategic framework to be the preferred leisure carrier in the marketplace, a lot of those share gains came at sort of the expense of the ULCCs. And Delta is a very fierce competitor. They have an unbelievably strong hub there. No business traveler has any business not being on Delta. Really what we're going after is the leisure carrier. But I agree with you, we're a little bit different than them. And we are very cognizant of what we're doing in Minneapolis. You will never see us do any stuff that the old Sun Country did, first-class seating, sales team, sales contracts, that sort of stuff. It's very much about leisure travelers. You can go one step further and you look at sort of the makeup on the legs, if you look at the segments of certain carriers to Chicago, for instance, there's a lot of flow on that. People are going to Orlando, and they're going to Fort Myers. There's an opportunity -- all things being equal, it's a good product. They're going to want the nonstop, and those are the customers, as we continue to grow, we want to get them off connecting itineraries. It's not going and competing for high-value folks from another carrier. Yes, sir.

You talked about combining the MLS with the charter business. How far -- logistically, that sounds like it's a hard thing to do, at least from the schedule because you got a schedule to that city. Can you discuss that and elaborate that?

Yes. It is a hard thing to do. And we're blessed with really good aircraft schedulers, also a really good partner with MLS. So the way our contract with MLS works is they are obligated to give us their schedule well in advance. So we already have the entire season schedule and when they want to fly and all these sorts of things. So we're going to put out our fall schedule extension. We're going to extend it next week. I'm proud to say that the team who schedules that, we have all those integrations done. So in September, we know where MLS is flying, and we've also scheduled the opportunistic schedule or the opportunistic passenger flight that's going to fly into that. So we're going to have a long lead time to sell it. And it's going to -- again, it's going to be a win-win because the beautiful thing about MLS, it's all in these relatively large cities. And so these are hundreds of PDUs a day in these marketplaces. And for somebody who's very price sensitive, they don't really care how they get there necessarily. But if they're a Minneapolis point of origin customer, as we can show by this chart, our brand is really resonating, so they're going to potentially go to an OTA, but potentially go to our site and figure it out. But it is difficult. There's a lot of effort that goes into transitioning airplanes from the terminal to the FPO back again. They're -- we meet -- and I say this, Greg Mays, the COO, and I our teams meet constantly. There's a lot of chatter about this, how good airlines have commercial and operational integration. I will say, we do take it to an extreme. We're constantly meeting. We're constantly going through -- like the next weekend, we have a lot of these transition and pain points, and we're always coming up with contingency plans. I was telling somebody we had a flight the other day, where we brought an MLS team out of Central America because it had a CONCACAF game. The airplane went to Philadelphia. The President was on the ground. We had a maintenance delay. The secret service wouldn't let our maintenance vendor get to the airplanes. So we took an additional delay. We had to ferry the airplane up to New England to get a team to L.A. The pilot's timed out. But our operating team was able to do it, tech stuff in Minneapolis, change out the crews. And it was still a 3-hour delay, so we're going to have to account for that. But just put that in the context of other 40 aircraft airlines and would they have been able to do that on the fly. So we schedule it well. We plan it well, but then the execution is there as well.

Second question, at this conference 3 airlines -- at least have talked about Wi-Fi. I haven't gone through every presentation. You guys don't have it. One of them is Delta. I mean you also have Southwest and even Spirit as low-cost competitors. I know you're going leisure and you're not catering to the traditional business customer, but is there some time you have to bite the bullet and add that? You also have this VIP business.

Yes. So the VIP is interesting. We actually have Wi-Fi in one of our VIP airplanes. So they were airplanes -- so we do have a Wi-Fi equipped airplane. It flies on the VIP side. So we have the capability to do it. We know who to talk to. I'm not -- I think, at some point, we have that commercial decision. At this point, we haven't done it, but you're right. It's a question that's out there.

What we do have onboard flights, we have a fleet -- we have onboard Wi-Fi systems. It's just not connected to the ground. But what we do about there is we have an entertainment offering so that -- because our flights tend to be fairly long haul compared to a lot of airlines, having entertainment, having a pretty decent movie selection, television show selection for those families to help them keep the children at bay is very helpful.

That's a good point. Yes.

Yes. So you have this mix of business passenger versus charter versus cargo. Would you characterize that percentage is roughly as optimal? Or put it differently, if Amazon were to come to you next year with 10 more aircraft that you'd like to operate, would you be comfortable with additional exposure to a single party? Or would you rather have more passengers?

Yes. And I think is it optimal for right now? I think we feel really good about it now. I will tell you, our bias right now would be all marginal capacity kind of goes to the scheduled service side of the business. That's where the opportunity is. Just in the last week, how things can change, the agility of the model is really good. If what we're currently flying is no longer optimal and we need to rejigger it, you should have a lot of confidence in the team and the capability to actually do that. As we talked about, we have sort of taken -- we've ad hoc charter flying. We've sort of deemphasized because, for a variety of reasons, it's been sort of the marginal business unit. So we've taken less military flying. March Madness bids were due to the NCAA. It pained people at Sun Country yesterday that we didn't participate fully in March Madness. So if the world changes, we can adjust. But at this point, I'd say we are relative -- Amazon is a little different because it comes in big chunks. It's sort of like, on the margin, we can move between charter and cargo. And so the Amazon relationship is really good. And so they know where to find us. But I feel like we're optimized and you can trust that this business model is agile enough that it can reoptimize based on what's going on in the broader economy.

Yes, sir?

Yes, a question on staffing for pilots in terms of your ability to ramp for the summer, ability to get first officers to move up to captain, just how that progression is occurring.

So it's going -- it's busy. There's a lot going on. But as we put together our budget, we're currently meeting our budgeted plans and the efforts that we've talked about are underway and are successful at this point. And the other thing that's important is the attrition number. Attrition is coming in lower than budget, so some of -- that's taken away some of the criticality of that. And it's -- we're a growing airline. So the -- if you're a new pilot at Sun Country, not only will you have the opportunity, we will be wanting you to upgrade in sort of a year, so -- and bringing in -- and now there's some of that, that goes on where the new -- we had big classes last year, sort of at this time, we were coming up on that year. But it's very complicated, but all the math is sort of working. The process is working, and we feel good about our plans for the balance of the year, where we had -- I would say, our growth is going to be more back-end loaded. That's sort of the plan. So it comes into fruition here in the summer time frame. Yes, sir.

Grant, just curious on the cargo piece. How -- is that flying stable? Or is there a counter seasonal element where you can deploy the pilots and complement your scheduled service.

Pretty stable. So we -- there's a little bit of volatility in terms of block hour use, but the Amazon team, when they build schedules from what we've seen, it's pretty much a 7-day schedule. There's not a whole lot of change that happens over the course of the scheduled period. Where we've gotten a little bit of synergy, and it's been helpful, is that those airplanes go through their natural heavy maintenance cycle. And what we've been able to do is we've been able to line up some of the heavy maintenance into March specifically. So you'll find that like in March, we have 12 airplanes. We may fly 10 or 11 because of heavy maintenance schedules. And we've worked closely with them to optimize that as much as possible, but it's a pretty stable business, of course over the course of the year. They have their peak times when they fly a lot bit harder.

Anybody else? Yes, sir.

So you had a chart -- I didn't see what page it was on, but it showed for the passenger service sort of the dayality of operation. Yes, I realize dayality is an English word, but I'm working on that. Disclosive, that should be a word. Some companies are more disclosive than others. Not a word. Everything we're hearing today from other airlines on the post-COVID shifts in terms of travel is that things are beginning to flatten out, not perfectly linear, but there's a shift. Are you just not seeing that in your demographic?

And I think that it's very important to disaggregate the leisure traveler. We feel really good because seasonality -- seasonality is a part of our business. It's like what we do is seasonality. So there's been a lot of commentary on seasonality. And as we came into this first quarter, it was really important for us to, frankly, knock it out of the park because, last year, our results that we talked about on the previous slide, we would say were a little understated because our biggest quarter was the one that still had the effects of COVID. So we came into it. And we sort of -- because of the way the holiday fell, we knew January wasn't likely to be all that great, so we were a little bit smaller. But for us, the dayality, it still is important for us to do it. I will tell you, we have a utilization opportunity as well. For those of you who've followed us, you will hear us talk about as we get sort of the pilot staffing where it needs to be, the aircraft utilization comes to be. So I think in this environment, we actually get to take advantage of any flattening that's happening because as we add capacity back, it's by default going to be on what we've sort of said were more suboptimal days or a little bit more marginal days. And if the revenue environment is actually better on those days, we're going to get the cost benefits of getting better utilization out of the airline and get some of the revenue benefits. So still feel good about this, but I feel like we can take advantage of it.

And then last question. So what I said last week, John Plueger of Air Lease was asked which aircraft is experiencing the sharpest rebound in value. It was the 737NG. And it wasn't clear to me from his answer if that spoke more to where rates are coming from or where they are headed next. And admittedly, you don't have enormous growth ambitions in terms of just shell count. But anything you're seeing in that market? I mean you mentioned the OEM delays, but if anything, that's only firming used values So I don't see how that helps.

Yes. No. And it may not in the short run. What I will say is back to your point about small fleet counts. We -- an incremental shell for us is a materially different impact than a big airline. And so what also is helpful is our capability to do the deals on onesie, twosie airplanes. We don't need the whole swath of them, which -- and so again, the folks starting with Jude, some of the most astute aircraft folks in the world, we can still find those deals. But no, you're right, as that firms up, it's going to have impacts. But the deals we were doing sort of in the depths of COVID were really, really good, so maybe there's a relative change, but not we still...

Have we lost any campaigns?

I'm not aware of any that we've lost. Yes.

All right. Thank you very much.

Awesome. Thanks, everyone. Appreciate it.