347 - Guest Co-Host Charles Duncan. Guest: Greg Anderson, CEO, Allegiant Travel Company

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1:00Charles Duncan: Welcome to Airlines Confidential. I'm Scott McCartney, and one thing I know for sure, this podcast will be a whole lot more interesting than the Farnborough Air Show was this past week. Yawn. Not much action on airline orders or airline news. Apparently, this show was all about defense this year. Not a surprise, given what's going on in the world. For many airlines, even if the finances are okay, it's probably not the time to be announcing big orders for new airplanes given the oil shock and missiles flying in the Persian Gulf. But that's not going to stop us from making news this week and finding news and explaining news on the podcast.

1:39Charles Duncan: There was news in airline earnings. There's news in a great interview I had with my co-host this week and one of the most interesting and dynamic young airline CEOs out there. So a great show ahead. Charles Duncan, welcome back. I'm really looking forward to digging into the reality to be found in the airline's earnings reports of this past week. I do think we can learn a lot from it. And we really did have a great interview for this week's podcast. Care to share who the guest is? Hey, Scott. Well, first, great to always be here. Before I give the big reveal on our guest, just a bit on Farmboro.

2:17You know, there were it was a yawn. I agree. But 327 aircraft were order announcements were made. And that was 53 percent. Just over half went to Boeing. But boy, I mean, that is a far cry from the thousand plus orders that were announced in the air shows over, you know, whether Paris or Farm Bureau in years past before COVID. So, yeah, I agree with you. But but good to see at least some some balance, because I think last year all of the orders went to Airbus. And it's just nice to see that duopoly structure shaping up. But anyway, I agree with you. Our guest this week really is, you know, dynamic.

2:56He's exciting. It's Greg Anderson, who's the CEO of Allegiant Travel Company. And I've seen Greg a couple of times this year out on the conference circuit. I think I told you about it, in fact, after Kappa in South Carolina earlier this year. And he's fantastic. And I know our listeners are going to enjoy hearing from him. But before we get into our interview with Greg Anderson and Allegiant, let's talk a little bit about second quarter earnings, shall we? Yes, we shall.

3:27Charles Duncan: And I do think Greg Anderson was really insightful. And it's a very thoughtful conversation. I do think listeners are going to enjoy it. All right. Before I get to the good, the bad, and the ugly of airline earnings, I want to shout out to listener Jay from Chicago, who I ran into at the EAA AirVenture Air Show in Oshkosh, Wisconsin last week. Oshkosh was so much fun. If you love aviation, it is a pilgrimage you should make at least once. This was my second time 24 years ago. Wow. 24 years ago, I did a front page Wall Street Journal story on the amazing work air traffic controllers do at Oshkosh.

4:11Charles Duncan: Yeah, I remember that story. So much fun. So incredible. They still do very much do it the same way. They're out there on their flatbed trailers in their pink T-shirts, looking up with binoculars and shouting out to airplanes. And instructions are acknowledged with rock your wings and landing three at a time on a runway and taking off three at a time on a runway. It's just craziness, but so much fun. And great to be there just as a spectator this year. It was fascinating to see the air show was very much as I remember it from all those years ago. Some things have changed. Some things very proudly haven't.

4:51Charles Duncan: This time, I have to say one big highlight for me, other than being there with two grandsons, was to run into a listener, Jay from Chicago, who shares the passion we all have for aviation. I have had Oshkosh on my bucket list for a long time, have not yet made the pilgrimage, but you're bringing it further up on my list to higher priorities. Maybe next year, I'll make that track. Okay, earnings. Let's start with the good. Southwest earned$233 million in the second quarter. That was$20 million more, more, I repeat, than last year in 2025. Southwest, among the airlines we've seen so far, Southwest had the highest passenger revenue increase percentage-wise.

5:35Charles Duncan: Operating margins were down everywhere in the industry, obviously because of high fuel prices, but not down at Southwest. And obviously because of the revenue changes the airline has made, we're now a year into baggage fees. And the second quarter last year didn't have assigned seats and all of that revenue that's come in. So a completely different revenue picture for Southwest. And Newsflash, it really seems to be working for them. Southwest capacity was flat. Interesting. Delta and Alaska were both up only 1%, essentially flat. United was up 3.5%. American was up 5.4%. A lot of that's probably Chicago, right?

6:22Charles Duncan: They're battling it out. Americans playing catch up in a lot of markets. In this environment, increasing your capacity 5 % Boy, that seems like a lot and maybe tough headwinds. But I want to hear more from you, Charles, about American. Let me just run through the basics of the others. Interestingly, Southwest and United have had the best cost per available seat mile control so far, chasm, unit costs in the industry. Alaska, look at Alaska for a minute. And Alaska had net losses for the quarter, losses of$76 million. Last year at this time, Alaska earned$172 million. A lot of integration still going on, a lot of change.

7:12Charles Duncan: They launched flights to Europe. It's too early to see how it all shakes out. American, maybe you could say it's too early to see how it all shakes out. But boy, we're waiting and still waiting. American earned$71 million. Now, remember, Delta earned$1.6 billion in the same three months. United earned$805 million in the same three months compared to American's$71 million. American's passenger revenue increase was better than Delta and Alaska, but not as strong as United and not as strong as Southwest. The issue, as we've talked about before, the issue really is margins. And that's how we're comparing airlines.

8:00Charles Duncan: And the margins were not good. Americans operating margin of 2.7%. So that's operating income divided by the revenue that the company brought in. Operating margin of 2.7 % was lower than Delta United or even Southwest. And Southwest is going to have lower margins because it don't have all the fancy first class and international and every everything else, right? But American had lower margins than Southwest. American had the largest margin decline among the big four. Margins are going to go down because of all those high fuel prices. But American's operating margin was down six percentage points compared to last year.

8:44Charles Duncan: While Delta and United were down about half as much, a bit more than three percentage points for those carriers. Southwest was flat in operating margins as revenue really did offset higher fuel costs completely. United's labor costs, this is, you know, American often says, rightfully so, that United has been behind in new labor contracts and that's kept their costs lower. So United labor costs partially include higher wages from the new flight attendant contract. Flight attendants ratified that in May, so kind of the middle of the second quarter, but it's not fully reflected in the period. And United's tentative agreement with mechanics hasn't been ratified yet, so that's not going to be baked in.

9:33Charles Duncan: United still has some labor cost advantage in the numbers. And don't forget, Delta has oil refinery advantage in the numbers. But American was supposed to be narrowing the gap, and it's not. Last year, Americans operating margin in the second quarter was 8.6 percent, one point behind United's 9.6 percent. This year, American, as I mentioned, 2.7 percent, United at 6.2 percent, three and a half points behind. So a bigger gap. Last year, Delta's operating margin was four points higher than American. This year, almost seven points higher than American. And yes, you know, a third or so of Delta's earnings came from profits from the oil refinery.

10:20Charles Duncan: But I don't think that explains it all away. United and Southwest don't have a refinery. And a lot of Delta's airline numbers, which don't have an oil refinery in them, they're outperforming American even more than last year. Americans' chasm rose by a bigger percentage when compared to United, and its yield increased less than United. That's weak in both directions. Directionally, it seems America is not making progress and perhaps losing more ground financially. America says they're making progress and catching up. But a recurring problem I've seen over the years with the American catching up story is that competitors don't stay the same.

11:07Charles Duncan: I've heard it for years with Americans' operation. Hey, we're improving on-time performance. Therefore, we'll catch up. But competitors improve, too. So the bar moves higher. And I'm sort of reminded of the old line from Alice in Wonderland. The hurrier I go, the behinder I get. Americans trying to go faster after coming back from the pandemic rather slowly in key areas, losing market share, and then getting a lot more behind her with its expensive kiss off of corporate customers two years ago, at least for the recent quarter, like the White Rabbit in Alice in Wonderland, the behind her American got.

11:48Charles Duncan: Charles, what do you think? Well, hey, Scott, that was a lot. Let me just take a quick step back. And listen, on last week's episode, you and Oscar had a great discussion around some of these points. And we're just, you know, we're kind of the midway point or a little bit beyond in terms of earnings for the second quarter. Oscar made a point. And as I was listening to the podcast last week, I was just kind of pumping my fist saying he's exactly right. And I've been thinking about this as well. And it really is extraordinary that the industry is performing as well as it is with oil as high as it is.

12:24Yes. A decade or more ago, the industry would have been either seeking a bailout or filing all filing for Chapter 11. and so forth. So I think it's important to keep that context in mind as we're looking at everyone's results. But having said that, the other thing you've hit on this a little bit, there is a lot of noise in the numbers for just about every airline this quarter. You mentioned the refinery at Delta, and so I won't repeat that. But even Southwest, who I think it has really good, strong momentum, their results, well, they had a one-time charge related to frequent flyer points and breakage.

13:01And I won't get into all the accounting minutia, but just suffice it to say that their results were actually double what they reported just based on that accounting charge related to the rapid rewards program. So that was going on. And then Alaska had their loss, as you rightly point out, but they're subject to much higher jet fuel costs on the West Coast of the U.S. relative to anyone else. And I think that's impacting their results in addition to the merger integration. So there's just so many things going on. It's kind of a messy quarter, maybe hard to draw hard and fast conclusions. But I do think the pecking order in the industry, I mean, you know, I don't think there was doubt going into the quarter, but it's solidifying and more clear.

13:48And, you know, Delta is, you know, continues to be at the top of the heap. And United is trying their best to gain on them. And you said last week that, you know, even carving out the refinery benefit, the Delta performance was better. And I think that that's right. But hey, Southwest is is is right there. And I was really impressed with their results and their earnings call. And you just you just feel the momentum. And then, you know, you point out American. And just to underscore the seventy one million dollar net income result on roughly 16 billion in revenue. I mean, it's a rounding error to break even, if you will.

14:28And it reminded me, actually, of a time when I was at WestJet when we were in a similar situation. And we at that time at WestJet calculated our profits, our net income per passenger. And actually three dollars and fifty cents is what it was at the time, Canadian. And we actually used that to communicate to the front line and say, in a Canadian context, we said, hey, our profit is roughly equivalent to the cost of a Tim Hortons cup of coffee. And that really upset our employees at WestJet and motivated them to look for cost savings, look for revenue enhancements, not waive bag fees, focus on fuel.

15:12We led a whole transformation program around it. So I actually did the same math in the second quarter for American Airlines and their their net income, their profit per in plane passenger in the quarter was a dollar and 20 cents. And I wonder, I'm sure they're not articulating it in that way to their workforce, but maybe that would be effective and sort of helping to galvanize a change in direction. Because I mean, I think, you know, as you teed it up, I mean, clearly, you know, they're falling further behind and and there's a need for a reset. And, you know, and certainly it is not an easy time right now.

15:50But I think all eyes, as you talked about last week, too, with Oscar, I think we're on American. And, you know, I think Alaska deserves attention here as well with their loss and their challenges, too. The final thing I'll say, Scott, on the second quarter is we still have a handful of airlines still upcoming who have not yet released their earnings. Frontier, Allegiant, and we're going to hear from their CEO here in a minute. And JetBlue, as well as Air Canada, are all publicly traded. And, you know, just based on tone and message from Greg Anderson and Allegiant, I think they're going to be in the black.

16:28But I certainly expect that we'll see red ink at both JetBlue and Frontier, you know, just based on what we're seeing from the results of the other carriers. So it's definitely a tough time out there. High oil is hitting, impacting everyone. And, yeah, it's just this earnings season feels really impactful, you know, in that sense. Get a sense of winners.

16:51Charles Duncan: Yeah, no, it does. It does. And, you know, what we already saw with Spirit, right, it separates, it shows you who's strong and who's not as strong. And it has hit harder on the weaker carriers. So interesting. I was glad you mentioned West Coast fuel prices, by the way. I thought one of the fascinating things you saw was that Southwest had gotten an oil tanker full of jet fuel and sent it from the East Coast to the West Coast through the Panama Canal. And it did that out of supply concerns at one point. But, you know, it may have also helped financially, although it's not cheap to tanker oil through the Panama Canal.

17:36Charles Duncan: But I thought, you know, good for them for being so creative and taking taking that really unusual step to keep the operation going. It's fascinating. You know, and they may have taken inspiration from Alaska. Ben Minacucci spoke in the first quarter about their efforts to tanker jet fuel from Singapore and where it's cheaper than on the West Coast and to try to sort of flood the market with lower cost and balance the price gap out. And I think that was, you know, those efforts were underway before the Iran war effort and the most recent spike in fuel. So, you know, look, energy prices are important and they're going to have a big impact.

18:17And yeah, so I applaud both of those guys for being creative.

18:22Charles Duncan: Yeah. So speaking of creative, JetBlue won the auction for LaGuardia for 22 former Spirit Airlines takeoff and landing slots at LaGuardia Airport. $58.5 million. That was significantly less than Spirit had valued those slots, which I think was north of$80 million. $87 million, I believe, is where they valued him. So the JetBlue bid was a surprise to me. They're also looking now at moving their operation to the Marine Air Terminal, which Spirit had vacated. I really thought JetBlue wasn't so interested in LaGuardia. In fact, we had a listener question this, and the listener was correct about it.

19:12Charles Duncan: LaGuardia had become such a high cost airport, JetBlue had pulled down there and cited the expense of operating there as a reason that low cost airline service wasn't working. Some of that had to do with the Boston shuttle or things like that. But taking vacations to Florida, it's tough when the cost to operate at LaGuardia is, you know, 30, 40, 50 dollars a passenger and going higher. But here was JetBlue's bid a little bit higher than Frontier's bid. I do think the low prices kind of reset the market of how airlines are looking at LaGuardia, not as priced as it used to be. But I don't know. What did you think, Charles?

20:02Charles Duncan: Yeah. Listen, Scott, I think this is actually a good move by JetBlue. So maybe I'll just unpack why. I mean, first, you say it's 22 slots. So, you know, roughly 11 or 12 departures, if you will. And so this presence is going to be small and adding to their existing presence, which is already pretty modest. And I think the Marine Air Terminal is going to be a great home for JetBlue. Now, they have operated from the Marine Air Terminal before. I believe when if I have this history right, Delta had a split operation and consolidated. They were in the Marine Air Terminal. They left it and then Alaska and JetBlue and Spirit filled that vacuum.

20:40And then, as we know, Spirit had exclusive use of it as part of the whole renovation of LaGuardia. Now, listen, it's a beautiful Art Deco terminal. I was in there recently when Spirit was still operating out of the building. I think JetBlue can really make that building beautiful. It is small. I believe you can only have two departures at a time because the building just can't accommodate large crowds. But if you're serious about New York and you want to be New York's airline, I think, you know, JetBlue can't do that without some presence at LaGuardia. And as it relates to costs, this is this is going to be an interesting, important wrinkle.

21:20I have heard and if there are any listeners who have better information and can share, I invite this. But I believe in Terminal B at LaGuardia, the CPE or cost per employment is about$70 per passenger, you know, hitting on this thing, your cost point there. And that's there's a public private partnership and private money came in. It's a beautiful terminal, but it is expensive. And Marty St. George at JetBlue has been on the record as saying that it's, you know, it's expensive. My understanding is the Marine Air Terminal will be far cheaper for JetBlue to operate from because the fee structure is set by terminal.

22:00And so Delta has Terminal C and they funded that construction and have a lower CPE than the tenants who are in Terminal B. And I believe the Marine Air Terminal would just be a straight lease to the Port Authority. And it's a historic building and there's certainly limitations operationally. But I think it'll tie in nicely with the JetBlue brand and their presence. And again, it'll be small and modest, but sentimentally, I'll be happy to see that building being put to good use. Now, the one big question I do have is that we've seen JetBlue pulling down flights not only from LaGuardia, but also at Newark and other parts of their network to fund growth in Fort Lauderdale.

22:42And so it's not clear where the airplanes are going to come from to provide this. Maybe it'll all be a Fort Lauderdale shuttle. Who knows? Feeding a new hub down in South Florida. That could be it. But I think right now they have a flight to Martha's Vineyard or Nantucket, and then the remaining seasonal summer, and then the remaining flights from LaGuardia are all to Florida. So I would expect we'll see more of that and probably an orientation towards Fort Lauderdale as they're building that presence up. So I like it, Scott. And let's see what they do with it. Yeah. No, very interesting. They're going to have to spend some money on that terminal.

23:20They will need to spend some money to peel all of the bright yellow off of the non-Art Deco artwork around the walls.

23:29Charles Duncan: Yes. Yes. All right. All right. Before we get to our guests, let's take a moment to thank our sponsors. We want to thank long-time sponsor RTX. At RTX, a century of aerospace and defense innovation shapes a unique perspective. It takes more than technology alone to rapidly advance the future of flight and strengthen global security. It takes the vision to see what's next, adapting expertise and scaling manufacturing capability to deliver where and when it matters most. perspective is everything RTX. Visit rtx.com to learn more. Certainly saw a lot of RTX companies at Oshkosh. It's very, very interesting.

24:12Charles Duncan: They had Collins Aerospace and others had stuff set up for kids. It was great. We also want to thank Infinity Flight Academy for its sponsorship. The path to the flight deck starts long before a pilot reaches the airlines. At Infinity Flight Academy, they're proud to serve as a flight training partner for the American Airlines Cadet Academy, helping prepare the next generation of professional airline pilots. Infinity Flight Academy's training is structured, standardized, and built around the discipline today's airlines expect from day one. For future pilots pursuing a career at the highest level, Infinity Flight Academy is proud to be part of that journey.

24:53Charles Duncan: Infinity Flight Academy, training tomorrow's airline pilots through the American Airlines Cadet Academy. And thanks to Serium for making this podcast possible. Serium offers the most accurate and precise data and analytics to enable airlines to optimize planning, operations and passenger services. The right intelligence drives operational efficiencies, enables you to predict market shifts, and helps airlines respond quickly to maximize revenue, manage costs, and seize commercial opportunity. Visit Sirium.com for more. And with that, Scott, I think it's time to bring in Greg Anderson. Greg Anderson was named Chief Executive Officer of Allegiant Travel Company in September 2024.

25:38Charles Duncan: He's been Allegiant's president since August 2022 and was the CFO before that. Greg engineered Allegiant's$1.5 billion acquisition of Sun Country Airlines and got the deal closed in May, about five months after it was announced. The companies are working toward a single operating certificate and plan to unify under the Allegiant brand. Allegiant has about 125 aircraft and Sun Country 70. Greg joined Allegiant in the accounting department in 2010. Prior to that, he worked in corporate accounting for U.S. Airways and before that, Ernst & Young. Greg's a certified public accountant. He graduated from Brigham Young University with a bachelor's degree in accounting in 2006.

26:23Charles Duncan: Listeners will recall we had Allegiant chairman Maury Gallagher on the podcast about a year ago before the merger. And so it's great to have Greg with us now that the merger has closed. Greg joins us from Allegiance headquarters in Las Vegas. Greg, it's great to have you with us on Airlines Confidential. Oh, well, thank you, Scott. It's a true privilege to join. So we always start with what we affectionately call the Baldanza question, because Ben Baldanza taught me that it was a great opener since just about everyone in this crazy business has an interesting tale of what drew them to this crazy business.

27:00Charles Duncan: So the question is simply this, how'd you get into this crazy business? Well, first off, Scott, you know, it's such an honor to answer the Baldanza question because Ben was, he was a true, true visionary, you know, in our industry. He just brought so much insight and personality to the business and his presence is deeply missed. But for me, I actually found my way into the industry, I would say largely by luck. I'm a Las Vegas native and so my family we have deep roots here and I would say if Allegiant wasn't headquartered in Vegas I highly doubt I'd be here chatting with you and Charles today as the CEO of Allegiant and you know yeah I mean airlines they just it wasn't they weren't really part of my original career plan you know in fact I've always really loved learning about history and reading historical biographies.

27:54So I started out wanting to become a history teacher, but then I made the switch to accounting after my first year of college. And that was after my, well, some sound advice from my father and my brother. But I then graduated, as you mentioned, with an accounting degree. And I can't believe it's already been 20 years, but I moved back to Vegas. So I moved home and joined Ernst & Young. And I fully expected to spend my career around the gaming industry, which of course, that's what you would assume in this town, right? But that didn't happen. They assigned me to this brand new client at the time, which was preparing for an IPO.

28:31And that client was Allegiant. And I would say during my time at EY, I actually probably spent 90 % of it working on the Allegiant engagement. And I just fell in love with the company. I fell in love with the industry and really have been in and around Allegiant in the industry my entire career. You know, I've had just the privilege to have worked and continue to work with, I think, some of the most talented folks in the business, incredible mentors along the way. Of course, Maury, who you mentioned was on the podcast a year ago. He's right at the top of that list in terms of mentors. And just all in all, I just, I feel incredibly fortunate to be a part of this industry.

29:08And I just don't think there's any other industry quite like it.

29:11Charles Duncan: So people who think the airline industry is a big gamble, you come by that honestly. Well, that's true. Yeah. It kind of, you know, it flows or correlates with being from Vegas, too, right? Right. Well, you may or may not know Scott and I are both involved in an executive MBA in aviation at the University of Colorado at Denver. And Scott is teaching an aviation history course. So so he's he's channeling your inner history professor, you know, in aviation. So if you ever have spare time or want to combine your history passion with aviation, Scott is doing that with regularity in that program. That'd be great.

29:55Charles Duncan: Take it over. Yes. Hey, there you go. I'd love to hear more about that, Scott. And yeah, that'd be really interesting. The students gave rave reviews. And as Scott told them, he felt like he probably covered half of it for the Wall Street Journal back in those days of the content. But it's great to have you on with us, Greg. Thank you again for your time. And I saw you, oh gosh, about six or eight weeks ago in Charleston at the CAPLA conference. And it was great to see you there. And I shared with our listeners a lot of my learnings coming out of that conference after it happened a couple of months ago.

30:32But on the stage, Michael Bell from Corn Ferry was interviewing you. And he noted, and we actually asked Maury a bit about this as well last year, that Allegiant today has almost kind of become the de facto training ground for the current crop of executive talent around the industry in the U.S. today. Scott and I talk about this a lot. We think it's remarkable. And you can run around, and I'll probably miss a few, but whether it's Lucas at Breeze or Tom Doxey, who also shares a BYU background with you, but down as CFO at Southwest. Andrew Levy, and gosh, there's many, many more just scattered around.

31:10I mean, you guys, the Allegiant team, are all over the place. And so I think it's a real tribute to the company and what Maury has built and so on. And so I'm just curious, is that something you guys intentionally set out to do? And maybe even as a follow up to that, does it make you nervous at all? You've got so many alumni who are working for other airlines who are maybe some competitors, you know, it's fascinating. Yeah. Well, thanks, Charles, for that question. And it is remarkable what we're seeing. And but I also think I just want to say this, that I do think we have the deepest bench of proven leaders and emerging players in our company's history today.

31:50So I want to make that point. But as you noted, we have just such an impressive number of Allegiant alumni across the industry. And I totally agree with you that it is remarkable. And I too, I think it speaks to one of what I would say is like the most enduring aspects of Maury's legacy and his contributions to this industry is like we know, we all know that Maury, he's been just such an early pioneer in the industry. He's recognized for us at Allegiant just the importance of differentiating ourselves. And as a founder and as our long-term CEO, he always emphasized a simple but what I think just powerful principle for everyone you mentioned, Charles, I think just adhere to this, and that's to think like an owner.

32:37And that philosophy, in my mind, has just really helped shape our culture over the years where we operate lean, we break down silos and, you know, we entrust people with meaningful responsibility and even early in their careers. And at Allegiant, there's like, there's nowhere to hide. And I mean that like literally, because we don't have offices here at our headquarters, everyone from interns to executives, we all work in the same open floor environment with just same modest workspace. And, you know, I think that is helpful for folks to fill and be a part of the action. And you also, you're working closely together.

33:17And so people tend to learn the business more quickly, you building strong relationships. And I just think it better allows our team members to understand the impact that their work has on our success. And you mentioned a few of the names there, Charles. And it's interesting because I think a good example, at least for me and on a personal level is that here's the group I started with at Allegiant nearly 17 years ago. And you mentioned a couple of them. One, Tom Doxey. He's now the CFO of Southwest. Trent Porter. He's now the CFO of Breeze. And Lucas Johnson, now the chief commercial officer at Breeze.

33:53We all started right about the same time. And we were all given like significant responsibilities early in our careers. And we just constantly were pushing one another. Let's get better. And you know what, just as important to us pushing one another is that we were learning from what I think are some of the best. Maury, of course, but we had Andrew Levy, who went on to be the founder and CEO of Avello, and Jude Bricker, who went on to become the CEO of Sun Country. And you know, with Jude, I think there's a nice full circle there, because now that Sun Country has joined the Allegiant family, he's back working alongside us as a member of our board.

34:32But to answer that second part of your question, Charles, and sorry, I was a little long winded there, but of course, like, you know, I never want to see top talent leave, you know, but I really don't view it as a competitive challenge. I kind of see it as this is a community of strong leaders who share similar principles and hopefully helping their organizations succeed while all of us contributing more positively to the broader airline industry. And at the same time here at Allegiant, as I mentioned with the great team we have in place today, we are just laser focused on our mission. I'm very confident that if we just continue to execute, continue to deliver great, valuable, reliable service and perform in the communities that we serve, we'll continue extending our lead in the value segment of this industry.

35:23Charles Duncan: Yeah, it's also interesting. One aspect, tell me if this is part of it, but one of the things I've always appreciated about Maury is he's willing to try new things. And if they don't work fine, he cuts it. And it seemed to me that would be a great opportunity to learn. Has that been part of it too? too. That's a great point. And 100%, you know, try new things, entrepreneurial type spirit, be innovative. And if they don't work, fail fast and move on and learn from that. I think one of the early conversations he and I had in my career here, it was, you know, it's okay if you make mistakes, just don't make them again, right?

36:05Like learn from them. And so I think you're right, Scott. That's been a key kind of foundation as well that has a culture around here in terms of trying new things, always trying to find ways to get better and improve the company. Interesting. And you guys have tried a lot of things. I mean, I, and I think we talked more about a few of them. I mean, and, and man, I mean, I think about, was it Teesside, like, you know, golf course software and the family entertainment centers and 757s on ETOPS. And of course the hotel in Southwest Florida, but I mean, you know, all those, I mean, I mean, you know, I can probably fit in that model of let's try something.

36:41And if it connects to the model. Great. And if not, we'll shut it down. And we've still got the airline to fall back on. But, you know, you were pretty pointed with Michael Bell back in the Kappa conference, Greg, that, you know, I believe you used words to the effect of, you know, you're primarily an airline. I mean, you know, so it's less about these ancillary adjacent travel businesses, but the airline's the core of what you guys do. And I'm not sure that was always the case, but certainly that was the impression you left me with that I came away with. Yeah. You know, there has been to your point, Charles, some tangential type businesses and different initiatives that we've looked at.

37:21But when I took the seat a couple of years ago, we really just wanted to get back and really focus on our core strengths, which is the airline, get back to our roots. And I would say that is 100 % of the team as just, you know, how do we continue to find ways to always get better? You know, it's a company first time mentality, but always improve the airline. We see a lot of opportunity, candidly, of just what's happening, what's happened in the industry structurally in our segment or our sector of the industry. And we think we have just a terrific model in what we do. We just view a lot of, you know, our, well, I guess I should say we view a very bright future ahead and we want to continue to, you know, take advantage of that.

38:06Charles Duncan: So in that context, that kind of leads into my next question. And we've talked a lot on the podcast and the industry has talked a lot about the reasons that the ultra low cost carrier sector has struggled post-COVID. Allegiant and Sun Country are very much the exceptions to this. But I'd really love to hear why you think the ULCC sector overall has struggled. I mean, you know, we've talked a lot about basic economy and the reliance on spill traffic that big guys took away, the shift to premium, credit cards, loyalty, upgaging aircraft, cost convergence, labor and everything else, inflation, now oil prices, the K-shaped recovery of the economy.

39:00Charles Duncan: I mean, it's a long list, but what do you think of the ULCC sector overall? You know, Scott, and I appreciate you saying it and hitting on this, that fortunately, not all ULCCs are the same. And at times, I think that has been overlooked, not as much anymore. But what I would say is that we here, we just have a much different playbook than the high utilization ULCCs, for example. But to answer your question a little bit more directly, Scott, I think basic economy of the list that you just mentioned, I think basic economy has probably been the biggest headwind, particularly for the high utilization ULCCs, just given their dependence on rapid growth, high utilization in order to achieve their unit cost goals.

39:53And I just also, it's just these carriers that focus on the high utilization, they just have far less flexibility, I would say, to adjust capacity when conditions change. And, you know, in my view, that increases the likelihood of flights that you're going to fly that don't provide good enough returns. So what I would hit on, though, is that at Allegiant and at Sun Country, we take like the opposite approach. We are low utilization airlines. We built our models to optimize margins by concentrating flying during peak leisure period because that's when demand and that's when unit revenue are the strongest.

40:34And we pull back capacity when the returns are weaker. And, you know, to help frame that today, just today, it's a Friday and here in Vegas, and it's a high demand day. And the combined airlines between Allegiant and Sun Country, we're going to operate roughly 700 flights today. And you compare that to on Tuesday of this week, it's only 200 departures. And Tuesday, of course, being a lower, a much lower demand day. And that level of fluctuation is very normal for us. And that's what helps us continue to drive that industry leading financial performance.

41:14Charles Duncan: It's also allowed you to focus on small towns. And I think one of the problems that the high utilization carriers have is when you get big planes and you got to fly them a lot, you end up flying to big cities. And that's where the network guys are. Yeah, I think just to your point, it gives us enormous flexibility because our cost structure allows us to fly into communities that many of which are underserved. And we can go in there and we could fly less than daily. You know, it's a weekly type service and really try and match the capacity to the demand environment. And when you think about it, and I feel really strongly about this, and this is at Allegiant and at Sun Country as we come together, we have to earn the right to grow.

42:08Because, you know, that mindset for us, it helps us drive a discipline that maintains as much flexibility as possible. And by doing so, that turns out for us to allow us to better protect margins, to better protect our balance sheet. and especially during those challenging times. But to get to your point, Scott, we're able to go into different communities and try different things because of that flexibility. And one of the biggest things I think that we have is that we own our aircraft and we acquire them at the right price. That is so important to our model. I think it may be one of the biggest structural differences between us and the high utilization ULCCs that they tend to rely more heavily on leasing their fleets.

42:56And back to like what we're talking about, that can just limit flexibility, particularly when market conditions change. So we'll add that to the list, Scott. Aircraft ownership versus leasing. I like that. Yeah, absolutely. And I hadn't thought about it in that way of high utilization, low utilization, but it makes a ton of sense, Greg. That's really helpful. Thank you. Hey, as we're recording here on a Friday, as you mentioned. I know we're a couple of weeks away before, at least I think roughly before you release your second quarter earnings. And I know there's only so much you can share with us, but I'm curious, we have had a couple of airlines as we record this release.

43:37And what can you just tell us about financial results? And of course, everyone's focused on fuel prices and also revenue strength. And we're hearing a lot of, we have been hearing a lot of positivity around fares and revenue. And then I'm also mindful in this quarter, you've closed the acquisition of Sun Country and still have now the operating certificate and really probably a lot of the hard work for the ops teams. But anyway, a lot going on for you in the second quarter. What can you tell us about how results are going to look? Yeah, let's start. What if we started where we just entered the quarter and then I'll move into the second quarter.

44:16But because we came with some really strong momentum as we entered the second quarter. In fact, the first quarter Allegiant standalone, I want to say we generated an operating margin of 14.8%, 14.9%, which was the highest among US airlines. And then as we move into the second quarter, that momentum is carrying us in. But I should point everyone, we did provide an update, Charles, that we issued at the end of June. And within that update, we raised our guide and we now expect the combined adjusted EPS to be at least$1.25. And there's a little bit of a nuance here. This reflects the Allegiant plus Sun Country results as of May 13th.

45:03And that's when we closed the deal. Whereas the initial guide, we didn't have the combined entity in there. So there's a bit of of pro forma in there for Sun Country. But the beat to get to kind of hopefully answer your question, the beat was really just driven by a couple of factors. And one, it's that demand has remained exceptionally strong at both airlines. And on a standalone Allegiant basis, we now expect second quarter unit revenue to increase more than 23 % year over year. And that's accelerating from the 16 % growth we saw in the first quarter. And then the other factor, of course, is fuel.

45:42Fuel continues to remain a significant headwind. Oil prices, they've slightly declined in June, but that resulted in fuel coming in a little bit better than our original expectations, but the beat was mostly on the revenue side of the house. On your question around the merger update, I have found it helpful sometimes when talking about the merger to separate the actual closing of the transaction from the integration of the two airlines. And as we mentioned, the completion of the acquisition was on May 13th, and that was much sooner than we expected, because that's largely a regulatory milestone.

46:21But while integration, of course, is an operational process, as both of you know really well, integration will take some time. And I think that time should probably be measured more in years than in months. Our teams, though, they're making just excellent progress as we work towards really that single operating certificate and ultimately bringing both airlines together under the Legion brand. And as we do that with the value creation, we're going to continue to build that over time. We've talked about publicly that we expect to achieve at least 140 million in annual run rate synergies, and that's by year three.

46:58And we continue to remain very confident in getting to that number. Wow. That's great. Congratulations and just amazing momentum there and having lived through one of the mega mergers of the past decade. It's fun to watch the speed at which you guys are moving. So congratulations. It's going to be fun to watch what you guys do going forward.

47:18Charles Duncan: I want to get to that branding, but I'm curious. One thing you said about the second quarter and the revenue increase. Obviously, you've had to raise fares because oil prices have gone up. But, you know, it's one thing when we talk about, especially in the K-shaped economy, it's one thing to say, oh, Delta customers paid higher fares. But your customers are absorbing price increases as well and demand has stayed strong. That's a great question, Scott. The way I think about it is, and this kind of builds on the flexibility of our model, as we were talking about just earlier, but the way we're able to adjust or increase fares is we really do that through capacity adjustments.

48:14And so, like by way of example, we're pushing a lot more of our flying into those peak periods where you can command a higher unit revenue and then we're reducing the flying in the off peak or we're just reducing capacity in general to help increase the fares to offset the higher fuel prices. And on the K-shaped economy, none of this matters if you don't deliver for our customers, for your customers. And what I'd say about Allegiant, which I think is often a misconception, is that we serve both the price sensitive, but very price flexible customers throughout our network that, you know, more affluent than I think people would expect or realize.

48:58And it's because of that, the value proposition that we offer. And a lot of that is convenience. So it's a nonstop flight where they don't have to, where some of those customers don't have to connect in a hub and they have maybe a second home that they're getting to. And now that you bring it up, though, Scott, too, I just want to say that, you know, really, really proud of the team is just how we execute, how they're executing operationally, adjusting capacity as quickly as possible. And in 2025, we were able and the team was able to deliver a 99.9 % controllable completion rate. And that was with the fewest cancellations in the industry.

49:37And that helps us so much because it's expensive to run an airline that's not operating well. And we also earned the number two spot in the Wall Street Journal airline rankings. But so, yeah. So, no, it's these are obviously uncertain times. But what we what I think is a real strength of our model is that we have the flexibility built in to adjust. And we like to be able to protect, you know, our balance sheet, our earnings. And during bad times, I think our goal is to be able to outperform the others, too. Yeah.

50:12Charles Duncan: Yeah. So as you bring Sun Country under the Allegiant brand, I'm curious whether the strategy is you're going to be branding a bigger discount airline. Is Allegiant going to be held out as kind of the alternative airline or just is there a brand strategy going forward? And with that, I'm really curious how you're going to sell Allegiant to Minneapolis, because it strikes me that Sun Country is very much a hometown airline for Minneapolis. And I think probably there's some civic sadness in Minneapolis, not only losing Northwest headquarters years back, but now losing Sun Country's headquarters.

50:58Charles Duncan: So do you have a is there an extra effort to win over Minneapolis? yeah yeah definitely i mean to that to the last part of the question there scott you know that's our goal is to to win over minneapolis and as you as you mentioned sun country is a beloved brand uh with more than four decades in minnesota but we're really confident that we can can build on that success and uh and over time the combined company will be headquartered in las Vegas, but we still plan to maintain a significant presence in Minneapolis-St. Paul, and it's going to be by far the largest base in the combined network. And our intention really is to deepen our presence there, and we're going to do that by creating more destinations and more opportunities, not fewer.

51:48And I was thinking about it because we've had this conversation or a flavor of it a number of times, but to help put it into perspective, when Jude took over Sun Country, he successfully transformed the airline, but continue to preserve its strengths. And we intend to just build on that same foundation to make the combined company even stronger and even more relevant. And then on regarding the, I think the question on the brand integration. Yeah. I do like to think Scott, that we are taking a very thoughtful approach. We've partnered with Cole McVoy. They're a leading Minneapolis-based creative firm.

52:29And they're going to help us preserve what people value most about Sun Country and the Twin Cities. And we're going to carry the best of that legacy forward. And then at the same time, I think you had a question like on the broader Allegiant brand and approach. It's, you know, our brand will continue to evolve. but the way I think about it is it's really all about consistently delivering unbeatable value to our customers. We're going to always stay true to who we are, our core principles, and then we'll step up our game in the right ways and where that makes sense. And I think that positioning will resonate in Minneapolis as just as strongly as I think it will throughout our entire network.

53:09And there's another broader point, if you don't mind, if I can make, and that's because I think it's at the heart of the community concern that you mentioned. Many airlines, as both of you know, have disappeared over the years because they've lacked the financial strength to withstand industry shocks. And when you combine two strong, successful airlines, like we are with Allegiant and Sun Country, you're just creating a more resilient company that's better positioned to serve our customers, our team members, and our communities for the long term. And so, you know, at the end of the day, ultimately, what we're going to focus on is we're going to earn Minnesota's trust the same way we've earned trust everywhere else.

53:53And that's really by consistently running a great airline and delivering for our customers each and every day. Greg, I'd love to just double down and ask another sort of Minneapolis-related question. And super, I'm impressed. It never dawned on me that Minneapolis-St. Paul would be your largest operating base go forward. But, wow, I mean, I would have guessed, yeah, Sanford or Vegas or Mesa or somewhere else. So that's extraordinary. And, you know, it speaks to the scale of Sun Country and what you're acquiring. You know, when I think about your success, I think so much of it is, you know, at Allegiant, you know, that you fly markets that, you know, generally don't have nonstop competitors.

54:38And, you know, I think about markets like Minot to Vegas or from Allentown down to Sanford, Florida. And, you know, as a former revenue management person, there are certain words we can't use to trip up lawyers and I won't use them. But ultimately, these are markets that you serve uniquely nonstop. And when you look at some country, I think they're actually the opposite. I mean, as Scott laid out, I mean, it's a beloved airline and brand in Minneapolis and Minnesota, broadly across the state. But most, if not all of their roots from MSP have nonstop competition from Delta. And that's a real departure from the historical Allegiant model, as I think about the network and how it's deployed.

55:21And so I'm just sort of curious as you were doing your due diligence and focusing on this merger. I mean, I get the shared DNA and the great work that Jude and his team did. But how did you sort of get comfortable with that distinction and still choose to acquire Sun Country? Or did you look at it, you know, am I off base and you look at it a different way? I'm just sort of curious. Yeah. I mean, ultimately with that difference, that distinction of having an operating base from Minnesota and with a lot of head to head competition from Delta's hub there. Yeah, Charles, it's a really good question.

55:55And I think we've looked at it every which way you can and then some. But maybe just to hit on some of the points you made first. And that's yeah, we have we've historically preferred markets where we're the only nonstop carrier. And in fact, of what the roughly 550 routes that we serve on Legacy of Legion today, 75 % of them have no nonstop competition. And it's just like those markets you mentioned, Charles. Right. So how do we align with acquiring some country who overlaps, to your point, with Delta at Minneapolis-St. Paul in several markets and most of the markets? And the way I think about it, just I'll try to be more concise here.

56:36While the competitive landscape is different, Allegiant and Sun Country, we both execute on the same core scheduling philosophy. And that's simply put, that's just deploy aircraft when they can generate attractive returns. And so if you go back to when Jude took the helm, let's say at Sun Country in what, 2017, they adopted a very similar model to ours at Allegiant. low utilization, flexible capacity, own your aircraft, and then focus on the value-oriented leisure travelers. And both airlines, we were hitting on this a little bit earlier, but both airlines were built around weekly and seasonal service.

57:15And so we take a whole market's worth of leisure demand and we consolidate it into well-timed departures. And so our approach isn't, and it's never going to be, we're not going to try out Delta Delta, but we're going to continue to succeed just as some country has at Minneapolis, St. Paul for so many years. And that's by flying when leisure demand is greater than supply. And it is a consistent approach that we followed at Allegiant and the same playbook in a lot of ways, because we've successfully built positions in large markets such as Boston or Newark or Chicago, DC, Philly. But so back to just, I guess, getting to your question, Charles, on like, how are we ultimately getting comfortable?

57:57I just simply put, it's the same race we've always run here at Allegiant. We fly our aircraft when they make money in the markets where we're relevant and that we can deliver. And Sun Country does the same thing. They just do it really well in the Twin Cities.

58:10Charles Duncan: So with that, walk us through your fleet plan. How are you going to operate? You've got 737 NGs and MAX. You've got A320s. What's it going to be going forward? All right. Well, operating a mixed fleet, I should say this is nothing new for us at Allegiant. We're really comfortable with it. Over the years, we've operated and flown the MD-80s, the 7.5s. And now, of course, we're flying the 320 series and the 737 MAX. And if you look at the combined fleet together, let's say Allegiant, currently we operate over 100 Airbus A320 series. We have 20 737 MAX on property with 30 firm MAX remaining and 80 additional options on top of that.

58:56And with Sun Country, we have about 70 Boeing 737 NGs. And that includes the 22 freighter aircraft, which we just operate. They're not owned by us. But let me just briefly touch on, if you don't mind, the MAX fleet, because I think it's such a good driver of efficiency for the combined company. It burns roughly 20 % less fuel than our A320 series fleet and the NGs, but while carrying similar ownership costs. And that's largely due to the well-timed placement of that order. And on the MAX fleet, we're also seeing, Scott, we're just seeing an earnings benefits of greater than 25%. So I point that out because that makes every delivery of a MAX aircraft a structural improvement to our business.

59:44And that's especially important in higher fuel environments like we're seeing today. But a common question we get around our fleet is whether just candidly operating a mixed fleet becomes too expensive and too complex. And this is where I think our basing structure really helps because we have over 20 bases spread throughout the United States. And the way we think of a base, it's almost as like an airline within an airline because each base is largely self-contained. Crews are domiciled there. Aircraft are based there. The parts and resources, they're all right there together. And everything's out and back.

1:00:20Everything flies out and back. So isolating different fleet types by base, it does help mitigate some of the complexities that a mixed fleet can bring. And then, Scott, just on the fleet plan, another, I think, really important consideration that's going to determine how we operate the multiple fleet types is that it's not like not all flying is created equal, right? Our aircraft today, they operate between a range of four to 10 hours per day, where you'll have the 737 MAX. They'll generally be located at the higher utilization basis. And many of our Airbus aircraft, which are perfect for lower utilization flying.

1:01:02And that's back to the flexibility we have by owning our fleet. That flexibility gives us. So, by the way, you know, on that point, I think this is such a core competency that I should mention for the company. And it's just we don't we don't just operate aircraft. We actively manage them as a portfolio of assets. And our fleet teams are truly experts in aircraft values and market cycles and maintenance economics. And that's, again, because we own our aircraft. We have just such significant flexibility in how we can monetize them. And it's a skill we built over 25 years. I think it's a real edge.

1:01:37But at the end of the day, we like having options. And as we bring Allegiant and as we bring Sun Country together, over time, we're going to have more options and even greater flexibility to match the right aircraft with the right market at the right time. Yeah, no, that's really interesting, Greg. You know, it reminds me in Maury's book, I mean, to your point doing it 25 years, he waxes poetically about the relationship. I forget the guy's name, but the SAS fleet manager and buying the MD-80s from SAS. And he was on a first name basis with that guy in Cebu Pacific later on with, you know, Air 319s and so on.

1:02:11I think you guys are aircraft traders better than, you know, focus not more than maybe any other airline, certainly in the U.S. I mean, you've really got that down and that makes sense. I'm just curious with the Max's, knowing it's new metal, it's more expensive. I understand you'll want to deploy those aircraft to the higher utilization routes. But will you be able to park Max's on a Tuesday and a Wednesday? Or and that would seem to if not, how does that work in a mixed in a base if you would have a low utilization airplane paired with a high utilization airplane of a different type? Or I'm just how does that low utilization work with with all the new metal coming in?

1:02:52Yeah, I think. Yeah, definitely. I mean, when we place the max order, we needed to make sure that we can continue to maintain our model and our approach, which is we park aircraft on lower demand days. It's a core part of what we do, and it's central to how we make money, Charles. And I think that's overall supported by our cost structure, which, in my opinion, is second to none in our industry. By way of example, both Allegiant and Sun Country, we average roughly seven hours of aircraft utilization per day. And you compare that with an industry average that's closer to 10. And so if those other airlines, they were to reduce their utilization to our levels, their unit costs would balloon.

1:03:35And it just goes back to the fleet strategy. And so with the MAX aircraft in particular that you mentioned, we placed that order at attractive prices that allowed us to maintain the same very similar ownership costs as the used 320 series. Oh, wow. And so we're able to keep those ownership costs low. And the way we think about it, just from a more broad perspective, is that if a flight isn't expected to generate a positive contribution margin, we're likely not going to operate it. And again, this applies across the combined fleet, and that includes our 737 MAX aircraft. And perhaps because, and perhaps this goes without saying, but flying aircraft around, it's just really expensive.

1:04:21And every departure, as you both know, consumes fuel, requires crews, and it just uses valuable maintenance life. And you know what? On the maintenance costs, those are continuing to rise. You can just have parts escalation, labor, engine shop visits, all of it. And so when you fly, Charles, when you fly marginal flights on low demand days, not only are you potentially going to lose money, but you're consuming increasingly expensive maintenance value. And so hopefully that helped answer your question. But when you boil it all down, I just I feel like very confident that the combined company that will maintain our ability to keep doing what we're doing.

1:04:59And that's concentrate flying on the days where these are when your customers want to travel. Yeah. Where the demand supports it and be able to park aircraft on those low demand days. Yeah, that's great. Yeah.

1:05:11Charles Duncan: So interesting. So interesting. So so another part of of ownership is there's a lot of pressure out there to do sale leaseback deals to generate cash. Frontier and other small and low-cost carriers have been doing it. It seems like that's a reason why Castle Lake was interested in EasyJet or other private equity companies may be interested in the airline business. What's your feeling about sale leaseback deals? And are other folks making a mistake by taking the cash and living with higher leasing costs in the future? Yeah, that's a really deep question. The short answer is we'd much rather own our aircraft.

1:06:00And it's kind of going back to what we've been talking about. It is a key reason we're able to operate a low utilization model. But so for us, it's pretty straightforward given that approach. And as we look at it in the math over the life of an aircraft, ownership costs are roughly half if we own it versus if you're leasing that same airplane. Half? Really? Yeah, that's when our team does the analysis. That's usually generally what it comes out at. Now, not everything is always the exact same, but that's as a general rule of thumb. And so, and we believe, by the way, that we have some of the lowest aircraft ownership costs in the industry.

1:06:38And that's a durable margin advantage over carriers in our minds that tend to rely heavily on lease fleet strategies. But to get, because part of your question there, Scott, and I think it's worth considering why airlines pursue sell leaseback transactions in the first place. And I think in many cases, right, it's a liquidity tool. An airline sells an owned aircraft, leases it back, and then use those proceeds to raise cash. And that's going to be helpful for near-term funding. But what often happens, it means you're giving up some long-term cost advantage in exchange for that short-term liquidity.

1:07:17So what I would just say about Allegiant and our approach, we've been very deliberate. We've been fortunate, candidly as well, enough to be able to avoid that tradeoff. Our balance sheet is really strong. Our liquidity ratios are amongst the highest in the industry. And our own fleet represents billions of dollars of embedded equity. But that said, the fleet team, I don't want to overstep here or sound too dogmatic, but we regularly receive inbounds from leasing partners. And we would consider a transaction from time to time, excuse me, if the economics were compelling enough. But our clear preference It's to own our aircraft and it's to leverage our credit strength to finance them as efficiently as possible rather than trade away that structural edge for a short term boost.

1:08:06Charles Duncan: Well said. Interesting. Yeah. Yeah, it really is. Yeah. And quite a contrast. Yeah. As you say, with with a number of a number of other players who are using it as a financing tool, we've certainly seen that. Hey, Greg, I think we've just got one final question here for you. I know Scott and I could go on for hours. It's a Friday afternoon, you're busy, you've got an airline to run. But just circling back to the merger overall, just curious to get a sense, maybe even just a temperature check on, I mean, how is morale broadly? I mean, with your labor groups, even your corporate offices there in Vegas primarily and in Minneapolis, I mean, how are folks feeling?

1:08:44I mean, you're performing really well financially, but mergers, as we all know, can be fraught with integration of seniority lists and contracts and so on. Just share any insights there just in terms of just labor relations and how the broader combined Allegiant and Sun Country teams are feeling these days. Yeah, happy to. Maybe start on the labor side of the house. And since the announcement of our merger, Charles, we've met with all of our organized labor groups to discuss the vision and the rationale behind the decisions. And those conversations are ongoing. But in addition, I've been out visiting our bases across the network of the combined company and feel very fortunate to hear the perspectives of hundreds and hundreds of our frontline team members.

1:09:33And candidly, the feedback has been constructive. Now, I do think everyone appreciates that we're building a stronger airline together with greater scale, more resources, more opportunities for long-term growth. And you know what? One thing that I think is also genuinely different about our combination, and this is an important point, is that we don't have the crew base overlap that can make airline mergers more painful. And a lot of mergers, you know, those overlapping bases that have been in place, they'll drive displacements or they'll force relocations of frontline crews, which, again, we don't have.

1:10:11But, you know, bringing the two workforces together is a multi-year process. We will obviously will work with the NMB. We look forward to when they're finding single carrier status for each of our represented work groups. And so that we can begin working with them on the JCBA process. process. And I'd be remiss too, if I didn't mention, because this is on a related note, that I'm very pleased to share that we recently reached a tentative bridge agreement with our Allegiant pilots. And this is an incredibly important milestone. I believe it helps recognize our pilots for their contributions, but also supporting the unique way that we scheduled the airline that we've just talked about on this podcast.

1:10:54I don't want to get ahead of myself, though the agreement is subject to ratification by our pilots. But I just, that said, this is a meaningful step forward. And I just want to thank everyone involved for their efforts in getting here. So that's on the labor side of the House. On the corporate side, you know, it's, if you compare or contrast between Las Vegas and Minneapolis-St. Paul, I would say for natural reasons. The level of uncertainty has been higher on the Minneapolis-St. Paul side of the house. Over time, as we've announced, the corporate HQ, we expect to be here in Las Vegas. We'll continue to offer more roles in the combined company here in Vegas than I think team members that are currently based in corporate Minneapolis, St.

1:11:46Paul, corporate headquarters there. So more than they'll take, but more roles than folks will move for. But what I'll say is, yeah, there's a lot of uncertainty and there's been angst. What we've tried to do is be accessible, communicate as much as we can when we can to help remove some of that uncertainty. We've also just tried to be as fair and generous as possible, whether that be through those team members that are going to make the move to Summerlin or in Las Vegas here. And that's with generous relocation packages or retention grants or, you know, just with severance for those that have moved on or are going to move on as well.

1:12:29So we're just trying to do the right thing everywhere we can. But hopefully, you know, as time passes, that we'll continue to to be able to bring the two airlines together. And not hopefully we will, but as time passes, you know, the culture will continue to come and as we unify and become, become one. Yeah. Well, good luck with that. And I know it's, it's always such a challenge when you're dealing with, you know, actual human beings and I know you're a family man and have kids at home, but you know, people's lives. And I know it's, it's tough, but great to hear you in the system and hear you directly from people.

1:13:02And yeah, I'm sure it'll be, you've got great momentum. I'll tell you, when I when I was at United and we merged with Continental, one company had made money one year of the previous 10 and the other company had made money two years of the previous 10. So, you know, you've got much better momentum going into this, but certainly doesn't make the task easy for sure. But but thank you. Thanks for that answer. And thank you so much. I know, Scott, this has been fantastic, hasn't it?

1:13:28Charles Duncan: Absolutely fascinating. Greg, congratulations on all the success. Congratulations on the merger. Good luck with all that's ahead. And we really look forward to checking back with you on how it goes. But just appreciate all your insights today. And it's just been great having you on Airlines Confidential. Oh, it's my pleasure. Thanks for having me on and look forward to checking back in with you soon. Thanks again so much. All right. We will be right back with more on Airlines Confidential. Promotional support provided by the ultimate avgeek website, theairchive.net, a vast collection of airline memorabilia, timetables, route maps, rare cabin and airport photos, special flights and more, all at theairchive.net, the hub of air transport history.

1:14:17Charles Duncan: Thanks again to Greg. Really great conversation. Loved it. Charles, I know you have some thoughts about it. But let me first, I'm thinking, Greg, say thanks again and again and again to Ontario International Airport for its support of Airlines Confidential. ONT just launched the ONT Bold Program, a proposed vision to transform the airport's facilities to streamline the passenger journey while also creating jobs, growing the regional economy, and building on ONT's legacy as a global gateway. The program includes plans for a new terminal, a multi-story parking garage, upgrades to existing terminals, enhanced roadways, and new utilities.

1:15:02Charles Duncan: The ONT Bold program is early in the planning phase. Visit flyontario.com slash bold, B-O-L-D, to learn more and join the journey to Ontario's boldest chapter yet. In addition, thanks to the Executive MBA in Aviation at the University of Colorado, Denver, for its support of Airlines Confidential. I'll be teaching Scott in the program next April, and I'll be designing my aviation strategy class here this fall, which I'm really looking forward to. And as we talk about every week, the Executive MBA in Aviation at CU Denver is the first degree of its kind in the world, taught by industry experts and designed for ambitious leaders from across the aviation ecosystem.

1:15:48With classes located at Denver International Airport and week-long residencies in Washington, D.C. and at airports around the world, including, I believe, Ontario International. Students experience a hybrid, flexible course structure that balances in-person and online classes without a career interruption. So go to business.ucdenver.edu to learn more.

1:16:14Charles Duncan: Excellent. So Charles, thoughts on Greg Anderson's comments? Yeah. Well, hey, First, I really want to appreciate Greg for joining us in his time. You know, my big takeaways, as I reflect, there was so much in there. But, you know, I thought when you asked the question about, hey, what is it that makes a ULCC successful? What I took away was, number one, having an owned, not a leased fleet. And he has this bifurcation of a low utilization airline versus a high utilization airline. And that's really directly linked to the fleet ownership, isn't it? So an own fleet, low utilization, and then he didn't harp on it.

1:16:54But I do think, you know, an important element here is sort of having their own markets, you know, like the Minot to Vegas and, you know, markets without direct nonstop competition, I think is really important. I was surprised to hear him say that Minneapolis-St. Paul is going to be their largest base going forward post-immigration. It makes sense given the size of Sun Country and how many bases that Allegiant has. And I'll tell you, going forward, I'm going to be watching Delta and their sort of competitive posture at Minneapolis-St. Paul and just see if anything changes, you know, given the Allegiant ownership and the structure there.

1:17:34And I'll also be watching labor relations at Allegiant and just see how that work goes. You know, there have been, you know, some tensions in the past. Well, you know, shall we say, in particular with the pilot group at Allegiant. And so hopefully it all goes well and certainly wish wish them the best. And they've got great momentum right now. So it's been fun to watch. And again, I just enjoyed enjoy that discussion with him so much.

1:17:58Charles Duncan: Yeah, I do think it's going to be fascinating to see how they market in Minneapolis, how they. Yes. How they can be kind of the local airline when they're not going to be based in Minneapolis anymore. Right. They're going to be based in Las Vegas, asking people at headquarters to move to Las Vegas. That may be a tough sell for people in Minneapolis. But I think, you know, he he talked about the the hometown pride that people in Minneapolis had in Sun Country. And it's going to be a challenge to hang on to that. So that that part's going to be interesting. I agree the distinction between low utilization LCCs and high utilization low cost carriers.

1:18:49Charles Duncan: I thought that was fascinating. And my first thought was that's so different from what you would think of as a low cost carrier model, right? You need to achieve this cost. But then the more you think about it, it's exactly kind of the original low cost carrier model. Because what he's really saying is, as you pointed out, is you need low costs of aircraft ownership. Right. And right. Discount carriers, they started out buying cheap used airplanes. Right. Or loosing cheap used airplanes. But the point was they were cheap. And and and couple that with markets you own. Well, that you know, that was the original alternative airport strategy.

1:19:34Charles Duncan: strategy, right? So in many ways, that's the strategy that Southwest Airlines started with way back and plenty of other carriers. But interesting how it's been adapted into today's marketplace and how successful it's been. I think he's really onto something that when you look back at Spirit, which bought bigger and bigger airplanes. And then to fill those A321s, that small town strategy didn't work. You had to go to big markets and that puts you in direct competition with big airlines. And that just proved untenable. And you want to keep your costs down so you're flying the heck out of them, out of the airplanes.

1:20:20Charles Duncan: But that gets expensive itself because you've got to have more employees and everything else. No, it sure does. Look, I think it's why this industry is so much fun, Scott. It's ever-changing, always just so dynamic and fast-paced. And listen, I mean, I think back, you mentioned Southwest. Southwest, remember, acquired Airtran and with that, a large Atlanta presence. And if you look at that Southwest presence in Atlanta today, it is far, far smaller. and they've really been beefing up Nashville where they have a bigger presence and they're just a sliver of what they were historically. And so I think in the same vein, Allegiant here is buying a large presence in Minneapolis, another Delta hub, and it'll just be interesting to see over time, you know, how the two compete and if anything changes.

1:21:08And yeah, just competitively, it'll be a good one to watch.

1:21:12Charles Duncan: Yeah, yeah, absolutely. All right, that's all for this week. Thank you all so much. We'll be back with more next week and really looking forward to seeing how this summer really shapes up for airlines. Take care, everybody. Have a great week. This podcast is produced by Mass Media. Info at MassMedia.net.