Operator: Ladies and gentlemen, thank you for standing by and welcome to the Q3 2019 Allegiant Travel Company Earnings Conference Call. [Operator Instructions]I would now like to hand the conference over to your speaker today, Chris Allen. Sir, please go ahead.

Christopher Allen: Thank you. Welcome to Allegiant Travel Company's Third Quarter 2019 Earnings Call.

On the call with me today are Maury Gallagher, the Company's Chairman and Chief Executive Officer; John Redmond, the Company's President; Greg Anderson, our Chief Financial Officer; Scott Sheldon, our EVP and Chief Operating Officer; Scott DeAngelo, our Chief Marketing Officer; Drew Wells, our VP of Revenue and Planning; and a handful of others to help answer any questions. So, we'll start with some commentary then open it up to questions.The company's comments today will contain forward-looking statements concerning our future performance and strategic plan. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the SEC. Any forward-looking statements are based on information available to us today.

We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new events, information or otherwise. The company cautions investors not to place undue reliance on forward-looking statements, which may be based upon assumptions and events that do not materialize.To view the earnings release as well as a rebroadcast of this call, feel free to visit the company's Investor Relations website at ir.allegiantair.com.Just remind our investor day will take place in Los Vegas on Wednesday, November 13 as such we will use that event to speak about our expectation for 2020 rather than on this call. With that, I’d like to turn it over to Maurice.

Maurice Gallagher: Thank you, Chris and good afternoon everyone. Thank you for joining us again.Busy day for you all.

I appreciate your time. I’m happy to report our 67th consecutive profitable quarter, very profitable quarter, very profitable quarter as you saw on a year-over-year basis.And question of the day is what's caused this dramatic improvement? Two reasons. One, the one-time expenses of the transition years of 2017 and 2018 are behind us and two, the change to the all-Airbus fleet. Less than 24 months during 2017 and 2018, we added 40 new Airbus aircraft more than doubling our total to 76 at the end of last year. Today, the fleet has grown another 12, 13 airplanes to 89 aircraft.

We've showed great scale during this time managing the transition. Since 2001 operating used aircraft has been one of our core competencies. Used aircraft have been and continued to be a more capital efficient asset for our lower utilization model.Since our earliest days, we have sourced aircraft in this more complex us aircraft market including negotiating the transaction and coordinating the inductions. Because of the skill our team has been recognized as one of the best aircraft traders worldwide. And it's shown in our transition BJ Neil and his team have done a tremendous job sourcing the 53 aircraft we have added since early 2017.None of today's results would have been possible without this critical component in our model.

And unlike our Airbus are very financeable since 2013, and the acquisition of our first Airbus, we have, our team has been become very skilled and sourcing financing. Clearly we needed financing during the sprint of the past two years adding 53 aircraft today, including 13 new 186 C A320s. Today our aircraft acquisition pace has slowed and as a result our free cash flow is increasing.To this date, we have already exceeded last year’s $373 million of EBITDA. Our paper is very much in demand given our track record in the quality of our aircraft and our solid balance sheet. We do business around the world Japan, the U.S., Europe, with as many as 16 World Class lenders, aircraft lenders fighting for our business.No airline in my 40 years in this industry to my knowledge has transitioned this percentage of their fleet in such a short time so successfully.

Not only did we have to source and transition aircraft, we had to continue to run the airline. And during this 24 month period, we grew the airline by over 20% trained over 400 pilots, 300 mechanics and added 57 new routes, all while still maintaining industry leading margins.And that leads us to our second benefit. We now have one of the latest generation fleets of aircraft in the industry, a substantial improvement over our MD fleet. We understood the Airbus would materially improve our economic performance, allowing us to make more money per aircraft. Somewhere concerned our utilization sensitive model might not work with this more expensive airplane.

We told you it would and the results is proving our case.Today the peaks and valleys are the same. But the Airbus has allowed us to increase the amplitude of that curve. And during our three most productive months of the year, March, June and July, this past year, we operated in an average of 9.7 hours.That's a 40% increase over the 6.9 hours that we averaged just in 2015. The September our weakest month, we reduced our flying to five hours continuing the trend that we've done for many years. But that's 48% decrease, again compared to 2015, we operated 4.2 hours, but only a 39% decrease from the 6.9 hour peak of that year.

We're following exactly the same pattern we established many years ago, but are able to fly profitably more with each airplane each day.We told you at our 2016 Investor Day to expect this dramatic improvement in our financial results. When we competed, particularly when we completed the transition to all-Airbus. In comparison with 2016, that year, we had a 27% operating margin with 149 or $1.49 per gallon of fuel that generated $370 million of operating income. If you adjust this fuel that year to this year’s $2.16 per gallon, the 2016 operating margin drops to a respectable 18.9%. But our year-to-date 2019 airline operating margin through the end of September is better.We're north of 20%, again the power of Airbus.

We told you we would be operationally better as well with the Airbus fleet. We lead the industry in completion factor the past 18 months of the 21 months since January of 2018. This year in 2019, we have led the industry every month saved last month when we came in second because of Hurricane Dorian and its problems in Florida. The Airbus has been critical to our improved operations. But our team is also doing its part.

We've substantially upped our game in the past few years and it shows.In 2017, there were concerns as well over the changeover in some of our personnel. And we would falter because of the departure of some of our senior management. We said we didn't think so. And that we had a deep and wide bench with people who could backfill these departures.Today's management group is one of the best management teams it's been my pleasure to work with, in my years here at the company. Each one has to be congratulated on their performance in the past 18 to 24 months.

And growing our management team internally is one of the core competencies again, most important at Allegiant. I'm most really proud of the fact that we are able to do this. Quality of our product is shining through as well.You'll hear from others about our customer feedback that is ranking us among the best airlines in the U.S. What you have today in front of you, ladies and gentlemen, is a group of over 5,000 team members who are focused, dedicated to providing customers with safe, reliable, fun transportation for very low cost, what we've done the past 18 years.And none of this would have been possible without these team members and the management group out in front leading the way. We are hitting on all cylinders.

The first major component of Allegiant 2.0 is in place. And it's providing the underpinning for the other initiatives that are coming right behind.Hang on to your hats, folks, it's going to be a hell of a ride. Thanks very much. With that, I'll turn it over to John for his comments.

John Redmond: Thank you very much.

Good afternoon, everyone.Why we love the Airbus product. It all comes down to our amazing team of people with great leadership and great execution. I couldn't be more proud of what has been accomplished to-date. But the best is yet to come. More we talked about the amazing record we have going with completion.Also incredible to point out is our controllable A14 has been up year-over-year versus samemonth prior year for 21 of the last 22 months, an incredible feat again by this wonderful team of folks we have working here.

I thought to take just a minute to give you a couple quick updates on some important data points as it relates to Sunseeker realizing that will provide incredible detail around all of this when we have our investor day.With regards to construction, we're on budget, with 67% of the total budget committed to-date and by end of this year, over 80% of the total project budget will be committed. You would get by the end of this year, the building should be approximately five storeys high and all towers should be topped and wrapped in April of 2020.And again, as I mentioned before, if you go out on a website and click on the project updates tab, you could look at a drone video of the site which is posted every single week. To update you just on the branding and selling opportunities we have here, we will go on sale with the resort before the end of the year. So we're very excited by that, we have approximately 800,000 active Sunseeker emails to date, which incredibly enough, we have more than 5,000 emails from over 30 different states.Of course that speaks volume about the breadth of the brand awareness and the power of a leader carrier to develop a resort brand well before a resort opens. Also worth pointing out for anyone who's been on the website, people have the ability to go beyond just given us an email and actually register their interest with full knowledge of what room rates are, as well as providing us additional detail about how long they intend to stay, what their gender is, what their age is, whether they're retired or not, et cetera.When you look at the number of those folks who have actually registered their interest, we have 148,000 of them who are registered their interest to date.

So again, very excited by these numbers. Like we can't wait for the opportunity to start letting these people express their further interest by actually booking with us. And again, that'll happen before the end of this year. Now, on that note, I'll turn it over to Drew.

Drew Wells: Thank you, John.

And thanks, everyone for joining us this afternoon.I'm very pleased to announce the third quarter TRASM of plus 4.3% year-over-year and plus 5.8% ASM growth, despite a roughly half point headwind associated with Hurricane Dorian. As expected, the revenue momentum we saw building toward the end of the second quarter continue through the third and we further capitalize on right sizing capacity within the period with high July growth and negative September growth.For the first quarter in company history, air and third-party ancillaries combined to produce more revenue in the scheduled service line. There are many reasons for this including continued strength on bad performance, both online and at the airport and the best 3Q third-party revenue per passenger since 2013.All three pillars of third-party cobranded credit card, auto and hotel grew within the quarter. And we took home the Best Airline Co-branded Credit Card Award from the USA Today 10 best Readers Choice Awards, which is a huge honor for us and its program. Furthermore, we recently launched a bundled ancillaries, one of our revenue EBIT initiatives to provide additional ancillary runway.

But it’s far too early to comment on performance, I look forward to updating everyone at investor day.This ancillary performance was also matched with load factor expansion that improved with each month in the quarter, and I expect positive load factors to continue into the fourth. We will also begin to hit the MDA retirement comparison for growth in the fourth quarter which will create some monthly lumpiness and higher than typical growth rates.December is the first month for this and we will see growth rates close to 20%. Whereas the quarter as a whole would be between 8.5% and 9% year-over-year with lower ASM growth in the off-peak of October and early November. On a full-year basis, we have narrowed 2019 ASM guide towards the higher-end of the range and forecast growth of 8.5% to 8.9% year-over-year.As you may have noticed, we have removed system level RPMs and load factor from our releases. Non scheduled service flight in this section includes fixed fee as well as company ferry and repositioning flights.

Those other flights are generally flown empty and provide no value in terms of RPM generation, fixed fee should be judged off the revenue generated as we are in the same whether five people or 105 for that flight.That being said, fixed fee revenues had a company record with nearly $20 million in revenue in the third quarter and continues the streak of incredible performance. The success would not be possible without the incredibly well run summer that our operations folks put together. Thank you for all your efforts and accomplishing this great milestone.And with that, I'd like to turn it over to Greg.

Gregory Anderson: Thanks Drew.To recap, the enterprise, including non-airline business units reported $44 million in net income for the September quarter for $2.70 in earnings per share, which is up nearly 190% versus a year ago. For the first nine months of the year, the enterprise has produced $10.54 in earnings per share, which is largely a result of our team members executing even better than initially planned across the organization.These improvements give us confidence to increase our full-year 2019 EPS range to $14.25 to $14.75.

This is an increase of $0.50 per share from our original full-year 2019 guide communicated back in January, a meaningful improvement despite a $0.05 increase in full-year 2019 cost per gallon of fuel versus that original guide. As Maurice noted in his remarks, we are hitting on all cylinders and our customers are taking notice. During the third quarter Forbes named their best airlines to fly this fall.Allegiant was ranked number two. And as Drew mentioned, we were also recognized by USA Today's Reader Choice Award for having the number one airline co branded credit card. We are delighted about the recognition and the improvements we are seeing to our brand.

The performance of the airline produced terrific financial results as well and operating margin of 17.9% during the third quarter, more than doubling last year's operating margin of 7.6%.This will be our third consecutive quarter of year-over-year margin expansion, and since retiring our MDAD fleet late last year, we are certainly pleased with the airline's results and will remain focused on optimizing profitability. We reported airline unit costs during the third quarter down 5.6% versus a year ago.These results were better than our internal expectations and were again driven by our excellent operational performance. In addition, we are constantly drilling down in all areas throughout the organization, exploring ways to improve while maintaining cost discipline.Let me provide a couple examples that help lead to better than expected cost performance during the September quarter. Station cost, our station team had been facing pressure and increasing rates with service providers. This is largely due to stay competitive in markets because of the historically low unemployment rate.

To better balance, our team has worked with our strategic suppliers on structure, which has allowed us to significantly offset these headwinds as we scale growth together.Additionally, the improved operations has resulted in lower overall costs related to interrupted trip expense and ground handling charges. In the quarter we saw fixation cost per departure decreased by almost 7% year-over-year. Another example is with our marketing costs, Scott DeAngelo and his team are continually optimizing their approach to drive decisions based on demonstrated impact at the market and the customer level.In lieu of casting a wide net, they are better utilizing customer data to be more surgical, reaching the right customers in the right market at the right time and thereby incurring less marketing spend while still receiving improved throughput.Marketing cost per passenger is down 11% versus last year. We are pleased with the trajectory of our 2019 cost performance. During our investor day back in 2016 and 2017, we provided in initial plans suggesting the airline would reduce its unit costs excluding fuel to $6.28 cents by 2020.

We are happy to report we not only expect to meet this guide, but to beat it in 2019, a year ahead of schedule.Moving on to fuel, prices have moved around a bit during the quarter we paid $2.16 per gallon during this time with only one quarter remaining in the year and current prices in line with our full-year guide, we are maintaining our full-year fuel guide of $2.15, our fuel efficiency improvements continue to trend nicely as we saw year-over-year increase of 3.6% during the third quarter to 80 ASM per gallon. As such we tighten our full-year fuel efficiency guidance to the upper part of the range from 82.5 to 83 ASMs per gallon.Turning to our strong balance sheet, we ended up September quarter with total cash and investments of $442 million, which represents 25% of trailing 12-months total revenue. We have $1.35 billion in total debt and are deleveraging ahead of schedule as our debt-to-EBITDA is currently 2.8 turns and net debt-to-EBITDA is 1.9 turns. Our warehouse revolver at $81 million remains undrawn and we have increased our number of unencumbered aircraft since June 30 by four as we now have 30 unencumbered aircraft.Our ending third quarter blended interest rate was 4.8%, a decrease of nearly 17 basis points from the second quarter 2019 which was largely driven by reductions in LIBOR rates. Because of these reductions, we are reducing our full-year 2019 interest expense guidance to $70 million to $75 million.

Looking to cash flow, the airline generated over $115 million of EBITDA during the quarter, an increase of 81.3% versus the same quarter last year.During the first nine months of the year, the airline has generated over $400 million of EBITDA, which equates to $4.8 million per aircraft. We are on pace to well exceed $500 million in EBITDA for the year for the first time in our company's history, and hit our 2019 target of $6 million in EBITDA per aircraft.Also during the third quarter we reinvested over $100 million back into the airline, purchasing three A320 aircraft in a spare CFM engine. We ended the quarter with 89 in service aircraft and are on pace to hit our year-end plan 93 in-service aircraft.We are adjusting down our full-year airline CapEx guidance by approximately $10 million and we are reducing our full-year heavy maintenance CapEx by $12.5 million. This reduction is largely due to better cost during engine maintenance events. Our efficiency in using and managing capital enables us to consistently return cash to our shareholders.During the quarter we paid our recurring quarterly dividend of $11 million and repurchased $14.7 million in outstanding shares, our remaining share repurchase authority is around $85 million.

In regards to our non-airline initiative, we are decreasing our expected full-year $0.29 Sunseeker spend by $65 million. Our total expected project spend of $470 million remains unchanged. Included in this total is $25 million of pre-opening costs which are not capitalized.A small portion of these pre-opening costs have been expensed in this quarter’s non-airline $5.2 million operating loss. Additionally, these pre-opening costs will continue to flow through the combined non-airline P&L until the opening of the resort, which is on track for the second quarter of 2021.Our family entertainment centers non-stop they continue to improve and we expect combined same-store results to produce positive EBITDA in full-year 2020. Finally, we continue to make progress towards the sale of [Camp] and are in discussions with multiple potential buyers.

In closing, I'd like to add my many thanks to all of our hardworking team members as these outstanding results are attributed to their terrific effort day in and day out.And with that, I'll turn it over to the operator for Q&A.

Operator: [Operator Instructions] Our first question comes from the line of Savi Syth of Raymond James. Your line is open.

Savanthi Syth: And I think Greg, maybe a question for you, really good performance on the cost side. The full-year guide kind of tells, 4Q might be similar to maybe slightly lower year-over-year declines in the airline CASM-X just given the level of capacity growth in third quarter.

I'm surprised how good third quarter was and maybe given the level of capacity growth in the fourth quarter, I am a little surprised that maybe you're not seeing more in the fourth quarter then?

Gregory Anderson: Yes, Savi. Thanks for the question. In the fourth quarter on the cost side really the headwinds we're going to face are around labor, we hired pilots or we started hiring pilots for our 2020 growth and so we've hired up to 100 pilots and so that's going to impact our fourth quarter and then in addition, profit sharing given the increase in profitability that also increases our profit sharing and so that that too is putting a drag on the quarter.Those are the major headwinds other than that we see, we do expect airline CASM-X for the fourth quarter to be down but not quite as down as much as the second or third quarter like you mentioned.

Savanthi Syth: And just not looking for 2020 guidance or anything but just as we go into 2020, just any puts and takes that we should keep in mind and also the utilization that was kind of highlighted and how much it's improved on the kind of Airbus now that we have Airbus fleet any thoughts on just how much more that that can be pushed as well because I’m guessing that is the big driver of the cost benefit as well?

Drew Wells: Sure, I will take some of the utilization and Greg, if you want to back on. So I think as you look forward this year 2019 will be the top of utilization.

I would expect the peak month like March, June, and July to remain elevated at or very near, kind of the upper ninth, almost 10 we were at. But you should see maybe close to a quarter hour, I would say if utilization come off into next year.

Gregory Anderson: Yes, and Savi on the cost side for 2020. As Chris mentioned, we have our investor day in a few weeks and plan to provide further guidance there. I would say that we're really excited about providing that guidance, we've drilled down our budget, and we're ready to go.

We're at a high level or directionally, we fully expect to be under the guidance that we provided back in 2016 and 2017, that is $6.28. We expect to be under there on a cost side but I would kind of leave it at that and then we'll provide more detail in a few weeks.

Operator: Our next question comes from Joseph DeNardi of Stifel. Your question, please.

Joseph DeNardi: Greg, can you just talk about you mentioned the, I think $6 million in EBITDA for plane goal in 2020.

Can you just maybe share how many aircraft you're assuming and kind of run the fleet at the end of the year, next year? Thank you.

Gregory Anderson: Yes, so I think next year, the management presentations that we put out there have us up to about 103 aircraft by year-end on there so puts and takes to go on that. I think candidly, we expect to beat that by next year. We'll provide more detail on that at our upcoming investor day as far as the fleet plan is concerned. But what I would say we would expect to hit that $6 million per EBITDA per aircraft next year as well.

Joseph DeNardi: And then Maurice, can you just talk about yes, just given kind of, it sounds you got some good momentum on the airline business in terms of when you got to make a decision maybe on Sunseeker 2.0. Should we assume that that’s maybe a year or two down the road, or do you think you'd be in a position to say something, make a decision sooner? Thank you.

Maurice Gallagher: On a macro basis, and we've always said we do it on performance, and I don't think we've changed our tune on that. Right now, we're certainly in the build phase. But, and John can comment in a moment here, but he's going to turn it loose and start doing advanced sale here in the next 30, 60 days.And that will tell the tale if it does really well, that's a data point.

If it doesn't do as well as we liked. That's another data point. But with the data we put in there to-date, I can tell you, the board and myself are very excited having 150,000 people are there about that have specifically commented on rates, what they want for a product, size of rooms, lots of things we're doing again, we've stretched for years, we've talked directly to consumers for 18 years now we have this amazing amount of information.And we frankly didn't use it as well as we should have, until the last, I'd say 24 months, certainly 12. And but we're upping our game here. And you're seeing us able to go out and source information from folks give us data points.

It's been a very, very positive thing. And so that data will drive decisions, unlike anything I know, I've had my history in this business as we go forward. So stay tuned. John?

John Redmond: John, hi Joe we've always said that we're, we're very data driven, and we got an incredible group of people here that provide us that insight, so we can make very informed decisions based on this data. So even those 140,000 I mentioned to you we are talking to them about every aspect of what it is we want to do with the resort going forward.

And I'll share a lot of detail around that is at the investor day, but just to give you an example, one of the data points these individuals provide us is how long they want to stay.So when you look at that the website, the length of stay that indicated is expressed in a range, but like one to three months or three to six months or four to six days like that. So if you take the midpoint of those ranges that people have selected as being, some barometer for what people will want on average in each of those ranges, we have to-date demand for almost 2 million room nights. Right, so that's pretty amazing. And again, we have somewhere between 250,000 and 280,000 room nights to sell on an annual basis.So demand is amazing. The board will react to that based on how the customer reacts when we put it on the market, but we're pretty excited because of that level of interest that we're seeing.

Operator: Our next question comes from Duane Pfennigwerth of Evercore. Your line is open.

Duane Pfennigwerth: Congrats on airline earnings. I don't want to steal any thunder from your event, but I wonder if you could just give us an update on the outlook for losses on the non-airline activities, if you have any update on the sale of Teesnap and specifically into next year. One of the things we're interested in is if all the Sunseeker expenses pre-opening expenses will continue to be capitalized, or if as we get to kind of the second half or later 2020 if you'd start to see some OpEx from Sunseeker?

Gregory Anderson: Duane, this is Greg, I'll kick it off.

And then maybe John who want to provide some additional color, particularly on the Sunseeker side. As far as the non-airline cost loss that we saw this year, if we compare it to next year, I would think it'd probably be flat and why I would say that is Teesnap will likely not being in there for a full-year next year. And so that'll offset some of the perhaps increased pre-opening expenses that we could see with Sunseekers, we are nearing, getting near opening.As far as the pre-opening costs they're actually not capitalized in per se, they do run through the P&L. These are the pre-opening Sunseeker costs. And I just want to highlight that those are part of the $470 million all-in costs.

But with that, I don't know if there's anything John, you want to add or?

John Redmond: No, I think it's helpful just to emphasize it with those pre-opening are not capitalized, their expense, which is why between now and opening, you'll continue to see that. Just to give you some thoughts in that regard, we have $25 million we've mentioned is in the Sunseeker pre-opening, a few million of that will be spent has been spent to date throughout the rest of this year, of course, the balance of that will be in 2020 and 2021. And a lot of it, of course happens right before you open the resort and you start bringing on the greatest number of employees at that point in time.So, again, it's part of the $470 million but that amount is expensed until we open, I guess the only Sunseeker OpEx you would see is a small amount that relates to the golf course that we have there. It's a de-minimis amount and that's all you would see there.

Duane Pfennigwerth: And then just for my follow-up, given the success you're having in flexing up utilization.

Does it change your thinking at all regarding how far you can push it, and the types of markets you can serve? Thanks for taking the questions.

Drew Wells: Yes, Duane, this is Drew and I think what you'll see is, is as the year combined and you'll see this as soon as 2020 kind of continuing to flex utilization, different directions. So we were very happy with how the peak month reacted to the nearly 10 hours of utilization, we'll see that again next year with increased fleet growth. So pushing those even harder but we know the demand doesn't exist as you get to late January as you get in September and there's really no reason to start to push those any higher and in fact want to pull those back.So we're not changing our mentality of markets who want to operate, we'll be able to and a lot of it is because of the power of Airbus fly a bit more on off peak days particularly Saturdays on the East Coast. But our mindset is still the same that is what route mix works and scheduling to profitability like we always have.

Operator: Our next question comes from Helane Becker of Cowen. Your line is open.

Helane Becker: I have two questions. My first question is on, I guess on your unbundling initiatives, like when -- is there a point? I guess there's Part A and Part B, is there a point at which they would reach maturity? And at that point, what would the like what would the contribution be expected to be like how much opportunity is there I guess?

Drew Wells: Yes, so it’s Drew. And we've forecasted the bundle ancillary to be worth between $1 and $1.25 per passenger.

I have seen nothing that makes me move off that early on. This should hit maturity far faster than say the roundtrip discounted, this is probably kind of a six to nine month run up, I would think to kind of hit that given the booking curve and just hitting the right kind of product mix and pricing.

Helane Becker: Okay, so could it like get to $2?

Drew Wells: I think maturity we're talking $1 to $1.25 there could be well that beyond but I think that's the mature run rate, surely not what we're hitting in week two.

Helane Becker: And then my other question completely unrelated and off topic. There have been a lot of companies that have gone bankrupt in the past year a lot of airlines that have gone bankrupt and there have been a lot of aircraft, used aircraft and Maurice, that's always been your sweet spot, finding attractive, fully priced used aircraft.

Do you have that opportunity now, would you consider more or faster growth, if you could get good aircraft into the network in a timely fashion in a timely manner but in a timely fashion?

Maurice Gallagher: No, we've pretty well set ourselves as a corporate goal of a year 10%, if you know a couple of show up that'd be interesting we could certainly absorb those. The other thing that we do real well now is our fix the flying, so we can absorb airplanes and we have the pilots which we're going to be in good enough shape, you put those on in September and we're doing very well as the number show do for the Q3.BJ is here I don't think we're going to see any big opportunities for airplanes, maybe somebody goes bust and like but did we take advantage of the end of the year Berlin or anything like that?

Drew Wells: Yes, handful of aircraft coming in next year from those situations.

Maurice Gallagher: Okay. I think what it did do for us is it move forward our ability in the next year to two years to fill in, what we want to do and we're pretty well incept through next year and into 2021, for the most part are we?

Drew Wells: Yes, that and then I would just add that there's lead times from parts and kits and other things in order to transition into the FAA any more quickly than we are.

Maurice Gallagher: It is not an easy task coordinating all the pieces, because we're also modifying these typically the 186 seats.

There's this module you have to do an FAA standardization kits for my Airbus particular each serial number.So it's, as I mentioned in my comments, it's a very involved process. And the team here is we've done this consistently since 2001. And we're very good at it, B.J. and all of our team is home grown to I might add all the guys who work with him. That's real win-win for everything we do this airplane stuff.

Operator: Our next question comes from Hunter Keay of Wolfe Research. Your question please.

Hunter Keay: Hi, correct me if I’m wrong. But I thought I saw a report where Michael said you guys need to hire 1000 people for Sunseeker, I thought originally said 500 people feel free to correct that. But the real question is, how are you going to find these people because obviously have to be nice and they have to be service oriented.

And it's a tight job market down there. So, can you talk to me about how this might be a long pole in the tent. How you're thinking about it, thanks.

John Redmond: Well, we never, hi Hunter this is John. We never underestimate the challenges it takes to hire significant numbers of people.

So I don't want to sit here and say that, it's a slam dunk. Having said that, I have also been around long enough where we will be the employer of choice in Southwest Florida. There's no doubt about it. There is no one down there that offers the benefit packages and the like that we will offer down in that market, we've done a lot of homework down there Mike and the team down there.We're comfortable, we're going to be able to do this. We know it's there's some challenges associated with it.

But we're getting demand already. We talked to people, people are coming to our website. There's a lot of hospitality in the Southwest Florida market. And I think that people who are going to be more concerned are the existing operators, right?Because if you're working at one of these fine resorts that are down there, and you want a better place to work, just because of the volume of people, the benefits that we're going to offer, you're going to leave and that's no different than even used to happen here in Las Vegas, when the new property would open.Everyone would leave from the old because they want to be with the newest. And, of course, in our case, the best.

So we know there's a challenge but it doesn't bother us, it just means we have to work a little bit harder. And we're up to that challenge.

Maurice Gallagher: Hunter, as an observer of this for the last 25 years. Remember, when Bellagio opened up 9,000 people, they opened the doors. And it happened seamlessly, this town and the people that are coming from this town are used to doing this stuff.

It's just part of the background and abilities and their challenges, as John said, but there is a high degree of comfort that the anticipation, the training, all that stuff has all been planned out.

John Redmond: Yes, it's a very established market down there as all of us know whether it's from Naples, all the way north of Sarasota. There's wonderful hotels, wonderful restaurants. And all we have to do is attract people from those existing locations. So it's not like a huge training effort.

We're going to find the best and brightest out of all those properties and we look forward to it.

Hunter Keay: So that's and follow-up this is on the same topic. Are you going to use a third-party to help you recruit, are you going to rely on word of mouth? And what sort of personality traits you’re looking for looking to, for people that are experiencing for, people that are energetic and are you mainly looking to hire from the existing hospitality pool?I don't know just kind of curious how you're thinking about the type of people you're going to recruit and that you want work in representing it.

John Redmond: Right, you love people who are in the service sector, right? That you could actually fly people who work at RSW Airport, I mean host people do some of the best jobs around and dealing with people. So it's not necessarily only those that come out of food and beverage or a hotel environment, we fully expect to get a significant number of those people, but we don't think we're going to have to hire, third-parties to do any of this for us.We have the internal resources on our own HR department here.

So whether it's traditional job fairs or other approaches we will take, we are very comfortable about that, so the incredible level of excitement down there about the resort, a huge awareness of the brand and every time I'm down there and course our key people are already done, they're living there, I mean they're down living there, there and we have preview centers open, so there's a huge level of interest already come and see this, see the resort.

Maurice Gallagher: By the way, one other thing Hunter, when you've got five, six, seven, nine, storeys in the next few months, there's not going to be a bigger advertising billboards around about what's going on. And 40,000 people a day drive past this place. So there's no secret about what's going to happen and the awareness factor even I don't do that as much as John but I joke that John they could, they could make him King down there. I mean, the impact we've had in that area, on the jobs, the economic it's incredibly beneficial to both parties, which is the way things should be win-win.So people are going to know about this place to John's point is going to be the happening place in the area.

John Redmond: I'll give you one data point that I think you'll find pretty interesting. We just hired a person into a title called Reservations Manager. We had 30 applications for that one position, right. So that's just an example of what we're going to see for most of not all physicians we're going to have. And that's the experience that all of us have seen throughout our career.

Hunter Keay: Okay, thank you, John.

John Redmond: Thanks.

Maurice Gallagher: My theme in my comments is that you got a pretty good management team sitting on this side of the phone call, and that we've been down these roads before, we've done these things. And we've anticipated these problems and one of the things you pay management for, is to deal with problems and there's going to be issues and things are going to happen but this group that's running this place are world class professionals, and I don't Imagine this is going to anything's going to come up that they haven't seen before and haven't probably anticipated angle won’t react appropriately. So we’re really excited as we said in our comments about the quality of the group running the show here and people executing themselves anyway.

Operator: Our next question comes from Catherine O'Brien of Goldman Sachs. Your line is open. Catherine O'Brien: A question is on the EPS guidance my apologies for missing an obvious answer have sequential numbers here yet. But on the higher EPS it looks like you know is that really just kind of baking in the performance year-to-date or is that something is gone better in your 4Q outlook because we don’t have quarterly guidance from you guys anymore any help that will be great? Thanks.

Gregory Anderson: Cathy, thanks for the question it’s Greg.

I think what – more alluded to mentioned and Drew also on his remarks said – on the revenue side it was fixed fee that’s coming in of much stronger than what we had initially budgeted. Hope throughout the year cost have continued to come in much better. So that’s been a very nice upside as well. But with that I mean revenue has been a nice story. And so I think it will be good jump in and talk about that.

Drew Wells: Yes I mean I think kind of across the board fixed fee again with the record and third quarter that previously fourth quarter last year so it continues to turnout incredible results with the operation performing as well it did open a lot of opportunities. We have hit point with fixed fee where we’re inserting their probabilities of success into the scheduling process to ensure that they're getting the space need to maximize what they can do.I think the other thing worth noting here is a third-party that we called out all three between cobrand, auto and hotel with great jumps year-over-year that would have exceeded the expectations though. So very enthused by all that.

Maurice Gallagher: Yeah couple other points the Airbus is just much superior part to the MPs. So we got a lot of excess Airbus come September it’s not your time for us and it’s very much in demand.

And to be fair while we’re pretty good and very happy with what we're doing. We are also benefiting from the MAX capacity from the Southwest and United particularly in DoD. They just don’t – they haven’t been this year they might been in past years or maybe next year.So we had to qualify it somewhat but we’ve been able to pick up the slack very nicely because of our timing having the airplanes and the quality of the airplane has been very much appreciated by our customers. Catherine O'Brien: May this one quick clarify one before I ask my second question Maury you meant benefitting on the fixed fee side right or are you making an overall comment on your RASM growth this year?

Maurice Gallagher: No this is fixed fee I was talking about. Catherine O'Brien: And then on Drew one favor, Drew does you know solid RASM performance here notice there was kind of mix just with fare revenue down bit and yeah really the ancillaries showing strong growth.

Is that an intention switch as you kind of turning on some of the new ancillaries buckets or was that fare performance really just like industry level driven? Thanks so much.

Maurice Gallagher: Yeah so there is couple of factors there remember back 4Q last we shifted this PCB in the fare. So that’s still in the affects we still see a small effect of that next quarter maybe a little bit in 1Q before we complete last set. But also as the area and claim the third-party combine and continue to creep up it’s been best interest to drop fare where appropriate and build that load in order to capture that ancillary. So I think there is mixture of kind of both pieces there.

Operator: Our next question comes from the line of Michael Linenberg of Deutsche Bank. Your line is open.

Michael Linenberg: I guess this question is just to Maury and it just sort of speaking longer term when I look at the profitability of your airline. I mean its numbers are good they are very good, they are industry-leading and I sort of think about moving to the Airbus platform, improving your operations. But I think market selection is also big part of it and the fact that 75% of your city payers it’s basically just you guys.

And so when I think about your mouth sort of the width of that mouth that’s a big part of it.As we think out over the next 3 to 5 years and we see everybody sort of clamoring for new markets and competition sort of picking up you look at growth plans and the like. Like what is that percentage look like 3 to 5 years from now like how many more you know sort of call it Fort Collins to Las Vegas routes you know are out there and if we fast forward 3 to 5 years. Do we see similar call it 75% market city pairs where you’re the only game in town, just thoughts on that Maury? Thank you.

Maurice Gallagher: Well you're asking the wrong Michael I take all my direction from Drew and team they have prepared a long list of people who have picked routes over many years. So we’re up to 490.

Drew Wells: 470 give or take.

Maurice Gallagher: 470 yeah I didn’t know my routes but let Drew talk about that.

Drew Wells: Yes Michael we called out in the past over 600,000 incremental routes of those we believe it’s roughly 10% that are actually competitive. So I think at worse we can keep levels where we are today and under more likely Airbus scenario we can actually grow the number of noncompetitive routes that we operate. So we think we’re well poised to not just stay but even – more so into the future.

Maurice Gallagher: Yes, we’re doing things – yeah Michael we’re doing things that frankly number of years ago I don't think we would have thought. You’re seeing travel trends change, things that are interesting we’re in the early days where we really small city, mid level cities and some of the things there is just the evolution of where people want to go. We’re also I think teaching people how to go other places to with some of the stuff that these guys experiment with and play with.

Michael Linenberg: Yes, that’s one of the reason I sort of through Fort Collins out there as well I think you are going back into that market, and I think that’s going to be what an air traffic control operation that’s remote right that’s there's nobody there. You’ll be able to be fly in and out so the airport cost are probably clear out?

Maurice Gallagher: Yeah we have to get the ATC issues are still bugging us a little bit but yeah we are fully pulling in going in there very shortly?

Michael Linenberg: Just one other and this would be to the team where are you guys with respect to pilot turn over.

And I suspect that historically it's actually been pretty low for you guys. But we see the numbers of retirement this valley that the majors we know that they’re really start to higher. They are pulling from all over the place are you guys are you seeing anything there or is there anything in place that are keeping your guys there for the longer-term any thoughts on that? Thank you. GregoryAnderson: Michael, it’s Greg. No, what we see about 5% we see about 5% attrition rate and its nothing that stepped up here or there I mean it just it's been pretty level.

One thing we do have in our airline its unique as we have a great quality of life for our pilots meaning they are out and back every day. And so our crewmembers and our pilots in particular I think they really appreciate that and so it's been a nice recruiting tool but kind of retention tool as well for us in Allegiant.

Michael Linenberg: Just one quick one on that how quickly can a new pilot at Allegiant get to captain is that three, four years can it actually be that quick?

Scott Sheldon: Michael, this is Scott, new hire FOs is about 70 days of course right see and my guess at this point given the trajectory you're probably two and a half years into LLC thereafter.

Michael Linenberg: Oh well, well okay there you go all right that’s great to know thanks guys. Thanks everyone see you in November.

Maurice Gallagher: Thanks Michael.

Operator: Our next question comes from Matthew Wisniewski of Barclays. Your line is open.

Matthew Wisniewski: I wanted to come back to the utilization and just really make sure I understand that. It's been a lot higher than it has been what kind of flexibility do you have around that and I think you said is coming down next year.

But what kind of you know if markets are turn out a little bit better than anticipated or demand kind of weakens. Does that give you greater flexibility than you’ve had in the past?

Maurice Gallagher: Absolutely I mean one of things we always pride ourselves upon is our flexibility and the Airbus has only grown what we are able to do. And primarily to the upside it very easy to bring the MD-80 down, and we showcase that again this year that with the Airbus we are still lowering to bring it down under five hours day in September. You never would have seen us do 10 hours and in June, July, March with the MD-80.So we have even more flexibility today than we use to and we’re going to continue to push the bounds both on the high-end and low-end. One thing about the September you can't just manufacture demand and the week superior.

And so you're not going to see us push very high there but anywhere else we will continue to push and pull and try to find the right mix.

Scott Sheldon: Matt one other thing is kind of very low - on lower breakeven point, particularly around fuel and what's the ratio do with dollar?

Matthew Wisniewski: I think a dollar a gallon, yes.

Scott Sheldon: A dollar a gallon better so that lets you fly down the curve more to less dense markets and or weaker yield markets that you otherwise wouldn't have thought of doing with the 80s. So that flexibility to go kind of deeper into a Wednesday perhaps or a Saturday depending again regionally where you're talking. That's just the benefits of the airplane.

Matthew Wisniewski: Okay, great. And a kind of similar lines, if I look at cost next year perspectival that you probably not going to guide or anything, but I know if the utilization potentially comes down a little bit and then it looks like gauges coming up, what other things should we keep in mind just as far as they could be impactful to the cost outlook next year?

Maurice Gallagher: Yes, Matt, I think just at a high level the headwind for next year would likely be ownership. So I think is - we continue to take motors and run them through our differed maintenance program, which we're capitalizing and differing. I am just starting to see depreciation spike up a little bit. But I mean, I say that cautiously.

It's not too meaningful, but I think honestly that's one of the biggest headwinds we'll face.I would say some tailwinds, continue to perform while operationally. I mean, we expect that. And so that's been a nice tailwind this year, we hope to see that moving forward next year. I'd want to say marketing as well.What Scott DeAngelo and his team, if they've put some investment in our digital commerce. And so what that means is we're seeing a higher conversion rate and so we're then able to take our marketing spend down significantly because of that.

And as you probably noted that we signed up to sponsor the, what is called now the Allegiant stadium, but we signed that up and we're able to keep that line item flat down because of the terrific investment that Scott DeAngelo on his team have made into the digital e-commerce world.

Operator: Your next question comes from Joseph DeNardi of Stifel. Your line is open.

Joseph DeNardi: Maury, I would imagine the performance from your credit card has maybe wildly exceeded your expectations. So how do you ensure that you maximize the value from that business line? I think you guys broke out the revenue per PAX for the first time this quarter.

What can that reasonably get to in three to four years, do you think?

Maurice Gallagher: Well, I'll make one comment and then turn it over to the guy, who really understands it. We haven't - it's not wildly exceeding. We made this forecast four years ago and we're going to pretty much come pretty damn close to it, near as I can tell. So, we expect a lot out of the card and Scott and his team had taken ownership of it over the last couple of years, and Scott?

Scott Sheldon: Yes, you bet and thanks Joe for the question. You know, we'll go into this in a little more depth at Investor Day, but right now what I can tell you is, if you look at our new cardholders tying up growth, right? It's about as straight as you can draw a line without a ruler.

We have actually accelerated new card signup so we're nowhere close to plateauing. That doesn't answer your question when it can end, but I can tell you it'll go linear for at least the foreseeable next couple of years.The other tailwind we get is both by pre-negotiate and then potentially extensions of our current agreement, which help on those variable parts of the contract, right. We get paid for signing up a new card holder, but we also get paid a variable percent of what they spend.So as we aggressively kind of address both of those cardholder acquisition, cardholder retention and spin, as those parts go up, right, we get kind of even an acceleration, and so we'll go into that in more detail, but suffice it to say, I see a pretty linear growth for the next two to three years at the very least.

Joseph DeNardi: And then just on the stadium deals, I would just kind of curious, given that the network seems to have pivoted away from Vegas a little bit and it wasn't - I mean the headline numbers suggest that it wasn't cheap I guess, but can you explain kind of the rationale for doing that and is there a credit card tie into that at all. Thank you.

Scott Sheldon: Yes. So there's not a credit card tie in, but real quick the rationale three big things in this order. The first is awareness and it's not even so much the 42 million visitors that will drive by or fly over here in Las Vegas. It's the tens of millions, and then when you replayed games episodes on ESPN, the billion of viewers that will see it across the nation and the power of the NFL upon set, I like to throw out that, there is always a head scratch or 46 out of the top 50 television programs last year were NFL games. Right.

So it gets it that national exposure live from Las Vegas.The other two real quickly will be getting into sports travel. So not only will it be a name on the side of the stadium that's called out by Al Michaels and Cris Collinsworth on Sunday night, but also we will sell tickets and travel packages to fly, stay and actually attend events at Allegiant stadium.And the last that, isn't necessarily get the smallest, the B2B relationships. Right. I can't names because they haven't all been publicly disclosed, but big brewing companies, big soda companies, other like food and beverage providers have all reached out not just for promotional opportunities, but think about our airlines buy on board program, certainly Sunseeker and these relationships that started around something like the stadium that can get up to preferred deals on all of these things to reduce cost become a real big part of it that not a lot of people talk about, but now as being kind of the flagship of one of the most recognizable stadium - we have everyone from auto manufacturers to the upper mentioned companies calling us and wanting to discuss how we can do business together. So that becomes a benefit too.

Maurice Gallagher: Why don't you call that Scott on the impressions we saw literally within a week, the newest factor?

Scott Sheldon: Yes. And I know that the obscure marketing stock price all the marketing advertising we do in a year generates about 4 billion of the impression. After the announcement August [5], within 24 hours, we were about three quarters of a billion impression then and kind of now several months later we are already at 2 billion plus impressions. So about half of what we spend on in a year was accomplished simply by the announcement and the media coverage.And the last comment about this it's great to throw impressions out there the question is well, are your customers or your prospective customers actually consuming them? One of the things that went into this was the knowledge that two-thirds of Allegiant customers and/or non-customers from the Allegiant market were avid NFL fans. That was more than double the national average.So the fact that we're throwing on a lot of impressions out there via coverage in association with the NFL, and our customer perspective, customer base consumes the NFL and droves was the match we were looking for.

Maurice Gallagher: You know, not to keep pushing on this issue Scott, it might be helpful to use to launch and let them know immediately after all that top off and whatnot the increase in traffic to the website.

Scott Sheldon: Yes. Sure. So one of the things, Greg diluted to all these, we put a lot of science between the relationships between things we do, whether it's TV, advertising, email, you know, big events and how that impact visitation to our website. One of those postulates we usually don't relate, but when we do new route announcements, we typically would see 20% to 25% year-over-year increase in website visitors, right.

Newsfeeds all over the country come on and hey Allegiant entering your market, flying to a new place.The week after the stadium announcement, incidentally, we had new route announcement. They were at 35% to a full 10 percentage points higher than our typical and not only what that for that day, it actually lasted for the following date. And the point there is simply that we don't believe that having Allegiant stadium in and of itself does anything other than that. It makes Allegiant top of mind, sets that when you see that TV ads, when you get that email, when you see that new route, right, there is some fraction. It's not double, it to the terminals 5 to 10 bps of impact across everything we do and we easily hit right our mid to aggressive hurdle rate for what this investment needs to return for us.

Operator: At this time, I'd like to turn the call over to Maurice Gallagher for closing remarks. Sir?

Maurice Gallagher: Thank you all very much. Appreciate your time and interest, go get on your typewriters and started writing. You're busy. See you.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.