Duane Pfennigwerth

Duane Pfennigwerth asked about the deployment strategy for the MAX aircraft, specifically if there's more flexibility now compared to when fewer were in the fleet, and the biggest opportunities seen from combining the MAX fleet with Sun Country's fleet. He also inquired about the earnings seasonality for 2025, asking which quarter had the most upside potential for normalized earnings power on a standalone basis.

Answer

Chief Commercial Officer Drew Wells explained that MAX deployment shifted to longer-haul, commercially driven flying since mid-November, contributing positively. CEO Greg Anderson highlighted the flexibility and potential upside from owning aircraft in the combined fleet. Regarding 2025 seasonality, CEO Greg Anderson noted a focus on turning Q3's negative margin positive, while Chief Commercial Officer Drew Wells suggested Q2 and Q3, which saw the largest core demand impact, pose the biggest upside capability.

Duane Pfennigwerth asked about the deployment strategy for MAX aircraft, specifically if there's more flexibility now compared to when fewer were in the fleet. He also inquired about the biggest opportunities for the combined Allegiant and Sun Country fleet. Additionally, he sought insights into earnings seasonality, identifying which 2025 quarter has the most upside for normalized earnings power on a standalone basis.

Answer

Drew Wells, Chief Commercial Officer, explained that MAX deployment shifted to longer-haul, commercially driven flying around mid-November, contributing positively to economics. Greg Anderson, CEO, expressed excitement about fleet flexibility and potential upside from the Sun Country transaction. Greg Anderson identified the third quarter as having significant upside, aiming to turn its negative margin positive. Drew Wells added that Q2 and Q3, which saw the largest core demand impact in 2025, pose the biggest upside capability.

Duane Pfennigwerth questioned the five-point headwind to RASM from growth in Q2 and asked how this impact might trend for the rest of the year. He also inquired about the progress on achieving cost leverage from the MAX fleet transition, asking what 'inning' the company is in.

Answer

SVP & CCO Drew Wells confirmed the five-point headwind was a fair year-to-date estimate and expected it to improve slightly. SVP & CFO Robert Neal described the MAX cost leverage as being in the 'early innings,' with MAX ASMs expected to reach 20% in 2026 and route optimization still to come. President & CEO Gregory Anderson added that ASM per gallon is expected to improve by 2-4% in 2026.

Duane Pfennigwerth inquired about the expected trajectory of airline-only margins for the second half of 2025, particularly concerning the seasonally soft third quarter. He also requested an update on the Sunseeker Resort sale process and the sustainability of its revenue mix between hotel guests and local patrons.

Answer

President and CEO Greg Anderson stated that optimizing margins is the company's "true North," and they will aggressively manage capacity and costs. He confirmed Q3 is seasonally the weakest quarter but noted the goal is to improve upon last year's results. Regarding Sunseeker, Anderson confirmed the sale process remains on track for completion by summer 2025. Executive Micah Richins added that the resort's food and beverage revenue is split 70/30 between hotel guests and locals, a model he described as sustainable and driven by strong group business.

Duane Pfennigwerth inquired about the financing used to pay down Sunseeker-related debt and asked for an expected timeline for separating the resort from Allegiant's balance sheet.

Answer

Chief Financial Officer Robert Neal clarified that the debt was repaid using cash from operations, asset sales, and a loan repayment, not through new financing, to provide maximum flexibility. President and CEO Gregory Anderson stated that a competitive process for a sale or stake sale is underway with a goal to conclude by summer 2025, noting promising interest from several high-quality investors.

Duane Pfennigwerth asked for details on the Allegiant Extra premium seating, including configuration changes, whether revenue is ancillary or fare-based, and merchandising effectiveness. He also questioned if the Sunseeker Resort has captured any hurricane recovery business, such as from FEMA.

Answer

Chief Commercial Officer Drew Wells clarified that Airbus jets are reconfigured from 186 to 180 seats to add 36 premium seats, with all revenue recorded in the ancillary bucket. Regarding Sunseeker, President and CEO Gregory Anderson and executive Micah Richins confirmed that while some group business was pushed to 2025, the resort is actively working with FEMA and seeing 'decent production' from recovery-related stays.

Duane Pfennigwerth asked about the ongoing discussions for placing new aircraft from SkyWest's order book, specifically for deliveries beyond 2028. He also inquired about the underlying trend in aircraft utilization, the company's target, and its progress toward utilization recovery.

Answer

Wade Steel, Chief Commercial Officer, confirmed that 24 of the 69 aircraft on order are under contract, with 2027 deliveries fully allocated and most of 2028 spoken for. Discussions for 2029-2032 are ongoing and optimistic. He also noted positive trends in aircraft utilization, expecting better utilization in spring and summer 2026, which contributed to the increased block hour guidance.

Duane Pfennigwerth inquired about the evolution of discussions regarding the placement of new aircraft from SkyWest's order book, specifically for deliveries beyond 2028, and the underlying trend in aircraft utilization, including targets and recovery progress.

Answer

Wade Steel, Chief Commercial Officer, confirmed that deliveries through 2028 are largely spoken for, with ongoing optimistic discussions for 2029-2032. Chip Childs, President and CEO, noted positive trends in aircraft utilization, with spring and summer 2026 schedules showing continued improvement, leading to an upward revision in block hour guidance.

Duane Pfennigwerth from Evercore ISI asked for an early outlook on 2026 block hour growth, assuming tariff issues are resolved, and whether the current quarter's operating leverage was a good proxy for the future. He also sought clarification on a non-operating gain during the quarter.

Answer

CCO Wade Steel and CFO Robert Simmons indicated that while they are not providing specific 2026 guidance yet, growth opportunities remain intact due to the reactivation of parked CRJ aircraft and overall fleet flexibility, regardless of tariff outcomes. Simmons confirmed a non-operating gain of approximately $10 million, or $0.20 per share, from mark-to-market equity investments and opportunistic asset sales.

Duane Pfennigwerth of Evercore ISI asked if SkyWest is seeing changes in how partners schedule regional flying given the dynamic of stronger peaks and weaker off-peaks, and questioned the process for increasing aircraft utilization.

Answer

President and CEO Russell A. Childs explained that while historically partners use regional jets strategically during economic shifts, there have been no conversations about a 'massive pivot' yet, as schedules are set far in advance and demand for their specific services remains strong. Chief Commercial Officer Wade Steel stated that utilization increases are currently driven by partner demand, as SkyWest has communicated that its staffing is stable and it can support partners scheduling aircraft as they see fit, leading to very good utilization for the summer.

Duane Pfennigwerth followed up on the faster loyalty revenue recognition, asking how many points of the 10 points in RASM growth for Q1 are due to these policy changes. He also inquired about early data or learnings on the receptivity of seats and uplift in core Southwest markets versus 'jump ball' markets.

Answer

CFO Tom Doxey stated that the exact quantification of the revenue recognition shift is not publicly disclosed, but it involves a reallocation from ATL to other and passenger revenue. COO Andrew Watterson reported that the new product is generating a strong tailwind across all markets, customer segments, and geographies, which is encouraging.

Duane Pfennigwerth followed up on faster loyalty revenue recognition, asking how many points of the 10 points in RASM growth are due to these policy changes, including bag fees and new seat products. He also asked for any early data or learnings on the receptivity of new seating products in core Southwest markets versus 'jump ball' markets.

Answer

CFO Tom Doxey stated that Southwest has not publicly quantified the exact percentage of RASM growth due to revenue recognition changes, noting that more details are available in Qs and Ks. COO Andrew Watterson reported that the new product is generating a strong tailwind across all markets, customer segments, and geographies, not just traditional strongholds.

Duane Pfennigwerth asked about the learning curve associated with new initiatives from a revenue management perspective, seeking anecdotes on early learnings, tweaks made since the initial rollout, and whether any initial disruptions are now settling down as the booking curve matures.

Answer

COO Andrew Watterson contrasted the immediate rollout of bags and basic fares with the long run-up for assigned seats. He noted that customer reaction to bags and basic fares initially affected Q3 RASM by one percent but stabilized by mid-July. For Q1 2026 assigned seats, tweaks are minor due to the extended booking window, providing comfort in the rollout. CEO Bob Jordan emphasized that the $1 billion contribution from assigned seating and extra legroom for next year already contemplates a ramp-up period for value optimization.

Duane Pfennigwerth of Evercore ISI asked for an update on managed business travel trends through March and April. He also sought details on the upcoming premium seating product, including its go-live date and potential RASM impact.

Answer

COO Andrew Watterson stated that managed business travel, excluding government, was up and stable, with corporate earnings holding up. CEO Bob Jordan clarified the timeline for new seating products, stating they will be sold in Q3 2025 for flights in Q1 2026, making it a 2026 benefit. Watterson elaborated that the monetization comes from multiple 'zones' in the cabin, including extra legroom and preferred seating, creating several buy-up opportunities.

Duane Pfennigwerth of Evercore ISI asked about the long-term potential for modest unit cost growth on modest capacity growth and requested an update on the certification process for the new seating configuration.

Answer

CEO Bob Jordan affirmed that achieving sustained low single-digit CASM-X growth is "absolutely doable" long-term, pointing to the 2025 exit rate as the goal and noting labor rate certainty from recent contracts. Regarding the new seating, Jordan updated that cabin layouts are finalized, with key FAA certifications expected in Q1 and Q2, which will enable aircraft retrofits to begin mid-year as planned.

Duane Pfennigwerth sought clarification on whether the 'fleet monetization' strategy includes outright aircraft sales in addition to sale-leasebacks and asked for guidance on 2025 cost trends.

Answer

CFO Tammy Romo and CEO Bob Jordan both confirmed that the fleet monetization plan includes both potential outright sales and sale-leasebacks to maximize value. Regarding 2025 costs, Tammy Romo stated that specific CASM-X guidance would be provided on the next earnings call but affirmed that the operating margin targets from Investor Day remain unchanged.

Duane Pfennigwerth asked for more details on the "demand strength" observed by JetBlue, specifically inquiring about changes in the booking curve and the extent to which competitive capacity in the first half of the year is contributing to this strength.

Answer

President Marty St. George explained the recovery in domestic coach, converging domestic and international performance, and a normalization of the booking curve, contrasting it with the close-in bookings seen in mid-2025. He acknowledged a favorable competitive capacity environment, particularly with a major competitor's reduction in Fort Lauderdale, but clarified that the guidance does not assume further competitive pulldowns or significant changes, emphasizing the execution of the Jet Forward plan.

Duane Pfennigwerth asked for more details on the 'demand strength' JetBlue is experiencing, particularly regarding changes in the booking curve, and the extent to which competitive capacity in the first half of the year is contributing to this strength.

Answer

Marty St. George, President, highlighted a recovery in the domestic coach market and a return to a very normal booking curve, contrasting it with the close-in bookings seen in mid-2025. He acknowledged a favorable competitive capacity environment, noting a significant reduction from a major competitor in Fort Lauderdale, but clarified that guidance does not assume further competitive pulldowns.

Duane Pfennigwerth of Evercore ISI asked for an in-depth explanation of the Paisley travel products business, including its margin generation model, whether it's commission-based, and how the margin on a third-party customer like United compares to JetBlue's own.

Answer

President Marty St. George detailed that Paisley operates as a high-margin, low-capital 'leads business,' earning commissions on non-air ancillary products like hotels and rental cars. He stated the EBIT margin is in the 50s, climbing towards the 60s. For the United partnership, JetBlue will add a massive volume of leads and split the resulting commissions, though the specific split was not disclosed. He also noted they are in discussions with other potential partners.

Duane Pfennigwerth inquired about the timeline of the recent change in booking patterns, subsequent adjustments to revenue management, and the current demand environment, particularly the assumptions for the remainder of Q2.

Answer

President Martin St. George explained that booking trends deteriorated in February and March after a strong January, leading to aggressive capacity cuts. He noted that demand has plateaued over the last 3-4 weeks and the Q2 guidance assumes this stability continues. St. George also highlighted that data from partners like Mastercard indicates the demand slowdown is more pronounced in the Northeast and on the West Coast, influencing their strategy to cut trough capacity on Tuesdays, Wednesdays, and Saturdays.

Duane Pfennigwerth asked for more detail on the expected shape of Q2 CASM relative to the elevated Q1 outlook, and for an update on performance trends in the Caribbean and Latin America, excluding the Easter holiday shift.

Answer

CFO Ursula Hurley stated she expects a step-down in CASM ex-fuel growth in Q2 from Q1 levels, aided by a more positive capacity environment, though the pilot wage rate headwind will persist until August. President Marty St. George reported that Latin America has fully recovered and is a strong point, with robust fundamental demand, despite some capacity-driven pressure in San Juan.

Duane Pfennigwerth asked about the shape of travel bookings surrounding the U.S. election and sought commentary on how Caribbean RASM is expected to perform during the upcoming winter season.

Answer

President Marty St. George explained that the election impact, which was factored into their forecast, includes depressed travel during election week and a 7-10 day period of slower booking activity. Regarding the Caribbean, he noted it has always been a strong, above-system-average market for JetBlue. While too early to provide a specific Q1 RASM forecast, he expressed confidence in the region's performance, supported by recent capacity additions to San Juan.

Duane Pfennigwerth inquired about American Airlines' outlook on government travel, specifically signs of stabilization or growth following the Q4 government shutdown, and the company's relative position and growth plans for premium seating compared to network peers.

Answer

CEO Robert Isom stated that Q4 government traffic was down 50% due to the shutdown, and while it's too early to assess Q1, American expects to actively win back this business, viewing Washington National as a long-term upside. He detailed plans for 30% premium seating growth and 50% lie-flat growth by the end of the decade through new aircraft and modification programs, noting that premium offerings drive about 50% of American's revenue.

Duane Pfennigwerth asked about American Airlines' outlook on government travel, seeking signs of stabilization or growth in the segment, especially when comparing against last year's severe D.C. impacts. He also inquired about the current percentage of premium seats relative to total seats compared to network peers, and where this percentage is projected to go with planned growth over the next few years.

Answer

CEO Robert Isom noted that Q4 government traffic was down about 50% due to the shutdown, but he anticipates a return of government travel over the long run, benefiting American's strong Washington National hub. He also stated that American expects 30% growth in premium seating and 50% growth in lie-flat international seats by the end of the decade, with premium offerings driving about 50% of total revenue.

Duane Pfennigwerth of Evercore ISI asked for a ranking of sequential RASM improvement by geographic entity for Q3 and whether early aircraft deliveries would alter the capacity plan for Q4.

Answer

CFO Devon May indicated that the domestic market will see the most improvement through Q3, while the transatlantic will be softer in July and August before recovering. He noted some pressure in Latin America. He stated that while there is potential for positive system unit revenue in Q4, it is not in the guide. He also mentioned that early deliveries might add a small amount of capacity in Q4 but it would not be a huge amount.

Duane Pfennigwerth of Evercore ISI asked what factors are offsetting the expected RASM and margin benefits from corporate share recapture, and requested a comparison of the benefits in Charlotte versus the investment in Chicago.

Answer

Vice Chair Steve Johnson explained the benefit is "overwhelmed by the weakness in our main cabin demand," with CEO Robert Isom adding that government business has also declined. Johnson clarified that the Chicago growth strategy is separate from Charlotte, which is operating near its capacity limits.

Duane Pfennigwerth of Evercore ISI asked for details on the build-out of American's northern hubs, including its progress relative to pre-pandemic levels, and for an assessment of competitive capacity trends.

Answer

CEO Robert Isom stated that LaGuardia and DCA will see their largest schedules since the pandemic and that restoring the regional fleet will benefit Philadelphia and Chicago. Vice Chair Steve Johnson added the goal is to return Philadelphia to its pre-pandemic size. Regarding competition, Robert Isom emphasized a focus on profitability over reacting to competitor capacity, noting American's young fleet provides flexibility.

Duane Pfennigwerth inquired about the impact of fleet delivery delays on 2025 capacity planning and asked for an update on aircraft utilization expansion. He also asked where geographically the previous distribution strategy caused the most harm and where the recovery efforts will be most beneficial.

Answer

CEO Robert Isom confirmed that 2025 capacity is impacted by delivery delays and that growth would have been higher otherwise. He noted that utilization expansion next year will be most material for regional aircraft. Vice Chair Steve Johnson specified that the previous strategy hurt the most in large, highly-competed markets like New York, Los Angeles, and Chicago, and that these are the areas where the recovery is now beginning to take hold.

Duane Pfennigwerth inquired about the 20% increase in managed corporate travel, asking if it represents deferred Q4 travel or seasonal differences, and sought clarification on remaining systems integration risks after the selling cutover, specifically regarding unifying guest experiences post-April.

Answer

Andrew Harrison, EVP and CCO, stated that the corporate travel increase aligns with general bookings, driven by volume and significant bumps in technology, manufacturing, and financial services sectors, attributing it to expanded network penetration. He also confirmed that all major guest-facing commercial systems are single and in place, with the final major milestone in April being the operational cutover for flights, expressing full confidence in a smoother guest experience in 2026.

Duane Pfennigwerth asked about the 20% increase in managed corporate travel, questioning if it's catch-up from Q4 deferrals or seasonal differences, and sought clarification on 2026 systems integration milestones.

Answer

Andrew Harrison, EVP and CCO, Alaska Air Group, explained that corporate travel growth aligns with overall bookings, driven by volume, expanded network penetration, and increased relevance for corporate travelers. He also confirmed that major guest-facing commercial systems are unified, with the final passenger service system (PSS) cutover for flights occurring in April 2026, ensuring a smoother guest experience.

Duane Pfennigwerth asked for a deeper analysis of the margin opportunity from repositioning wide-body aircraft and the timeline for realizing these benefits. He also inquired about fleet simplification as a potential margin driver.

Answer

CCO Andrew Harrison provided anecdotes of successful wide-body deployment, such as on the Anchorage-Seattle route, and noted that reconfiguring the A330s with more premium seats will be a significant revenue generator. CFO Shane Tackett stated that while fleet simplification is a long-term goal, there are no imminent plans, as the current diverse fleet is well-suited to its respective missions.

Duane Pfennigwerth asked for a recap of demand trends in late March, noting their tone seemed more constructive than peers who were guiding down. He also requested an update on capacity recovery and the booking curve for Maui following the wildfires.

Answer

Executive Shane Tackett clarified that their tone was not intentionally different and that they have seen stabilization in demand. Executive Andrew Harrison stated that from a demand perspective, the impact of the Maui fires is "somewhat behind us," with capacity restored. He noted booking curves are holding, though yield is being used to maintain pace. CEO Benito Minicucci concluded that Hawaii is a "bright spot" for the company.

Duane Pfennigwerth from Evercore ISI asked for an update on the ramp-up of wide-body aircraft into Alaska's hubs and the expected seasonality of these new international routes. He also inquired about where the company is seeing a greater benefit from competitive capacity cuts, on the Alaska or Hawaiian side.

Answer

CCO Andrew Harrison detailed the wide-body delivery schedule, with flights to Narita and Incheon launching in May and October, respectively. CEO Benito Minicucci added that the future international network will be a mix of year-round and seasonal routes. Regarding competitive capacity, Harrison stated he is not seeing anything abnormal, noting that overall industry capacity growth is very low and the environment is stable, with some relief seen in the Neighbor Islands starting in April.

Duane Pfennigwerth inquired about the competitive capacity growth in Alaska's markets during Q2 and its expected evolution in Q3, and also asked for context on the 65% of Q3 revenue being booked, comparing it to historical levels.

Answer

CCO Andrew Harrison acknowledged that competitive capacity was elevated in Q2, citing over 20% growth in the Alaska long-haul market. However, he noted a significant reduction ahead, with seats in September and October looking flat to low-single-digits up. Regarding the 65% booked figure, Harrison explained it is in line with the past year or two, typically ranging from the mid-60s to high-60s at this point.

Duane Pfennigwerth asked about Hyatt's intermediate-term capital allocation priorities, specifically if deleveraging is a greater focus, capital return less emphasized, or if growth acceleration opportunities are still sought.

Answer

Joan Bottarini, CFO of Hyatt, reiterated a near-term commitment to deleveraging, including using Playa sale proceeds to pay down debt and aiming for investment-grade leverage by the end of 2027 through asset sales. Mark Hoplamazian, President and CEO of Hyatt, emphasized consistent reinvestment in the business and returning capital to shareholders through share repurchases and dividends, even while pursuing strategic growth opportunities in profitable segments.

Duane Pfennigwerth asked about Hyatt's capital allocation priorities in the intermediate term, specifically if deleveraging would be more of a focus, capital return less emphasized, or if there would be less emphasis on growth opportunities.

Answer

Joan Bottarini, CFO, Hyatt, confirmed a near-term commitment to deleveraging, including using Playa asset sale proceeds to repay the delayed draw term loan and aiming for investment-grade leverage by the end of 2027 through asset sales. Mark Hoplamazian, President and CEO, Hyatt, reiterated a consistent history of prioritizing reinvestment and returning capital to shareholders through share repurchases and dividends, even while pursuing strategic growth opportunities in profitable segments.

Duane Pfennigwerth of Evercore ISI asked if the company's "inflection point" implies scaling SG&A with growth or an efficiency opportunity, and requested clarification on the remaining asset sale target after the Playa transaction.

Answer

CFO Joan Bottarini clarified that core SG&A is guided to decline year-over-year, with any increase driven by acquisitions, demonstrating cost discipline. CEO Mark Hoplamazian stated there is no specific remaining asset sale target amount, reiterating that "everything is for sale" but the company will not get to zero owned assets.

Duane Pfennigwerth asked for details on the favorable all-inclusive pacing, specifically regarding shifts in point-of-sale from different geographies like Canada. He also asked for the outlook on asset dispositions for the year, excluding the potential Playa transaction.

Answer

President and CEO Mark Hoplamazian confirmed an increase in Canadian travelers is boosting all-inclusive results, while the U.S. remains the dominant and consistent source market. Regarding dispositions, he noted that timing is currently less predictable due to capital market volatility affecting buyer financing, but they still expect to close on some of the previously mentioned assets.

Representing Duane Pfennigwerth, a speaker asked for expectations for the business transient, leisure, and group demand segments and how they contribute to the 2-4% RevPAR guidance for 2025.

Answer

CFO Joan Bottarini confirmed a strong outlook, with group pace at 7% for 2025, continued momentum in business transient, and sustained strength in leisure. President and CEO Mark Hoplamazian added that corporate group is outpacing association group, and business transient recovery is broad-based across key sectors like IT, finance, consulting, and pharma.

Duane Pfennigwerth of Evercore ISI inquired about the optimal number of brands for Hyatt's portfolio and whether there is a streamlining opportunity, possibly connected to the newly formed lifestyle and luxury groups.

Answer

President and CEO Mark Hoplamazian explained that Hyatt's strategy is to add distinct, non-overlapping brands and that converting hotels between brands is challenging with third-party owners. He clarified that the new organizational groups for luxury and lifestyle are intended to hyper-focus on specific customer segments and sharpen brand definitions, rather than to consolidate or eliminate brands.

Duane Pfennigwerth asked about the potential tailwinds to growth in 2026 from a clean fall on the Gulf Coast (without major storms), considering the interplay between operational impacts and business interruption proceeds.

Answer

President and CEO Jim Risoleo expressed hope for no more storms this hurricane season. He highlighted The Don CeSar's strong performance (2025 assumption raised from $3M to $6M) and its positive setup for 2026, along with the Ritz Naples and the upcoming transformational renovation at Tiburón (supported by operating profit guarantees). He noted that the Gulf Coast's performance is driven by affluent customers prioritizing premium experiences, citing 1 Hotel South Beach, Ritz-Carlton Amelia Island, and Singer Resort. CFO Sourav Ghosh added that 2026 will benefit from completed HTCP projects (excluding Grand Hyatt Manchester), the Super Bowl in San Francisco, and the World Cup in 10 cities, driving incremental top-line growth from both organic market trends and capital investments.

Duane Pfennigwerth asked about the potential tailwinds to growth in 2026 from a clean fall season on the Gulf Coast without major storms, considering the interplay between operational impacts and business interruption proceeds.

Answer

Jim Risoleo, President and CEO, expressed optimism for the remainder of the hurricane season. He highlighted The Don CeSar's strong performance, exceeding expectations with a raised 2025 EBITDA assumption from $3 million to $6 million, and its positive setup for 2026. He also mentioned the strong performance of the Ritz Naples and the upcoming transformational renovation at Tiburón, which will include operating profit guarantees. Risoleo noted the continued strong performance of properties like 1 Hotel South Beach, Ritz-Carlton Amelia Island, and the ramping Singer Resort, all driven by affluent customers prioritizing premium experiences. Sourav Ghosh, Executive Vice President and Chief Financial Officer, added that 2026 will benefit from the completion of most Hyatt Transformational Capital Program projects, the Super Bowl in San Francisco, and the World Cup in 10 cities, all contributing to incremental top-line growth from capital investments.

Duane Pfennigwerth of Evercore ISI asked for clarification on group booking dynamics, seeking to reconcile the 6% sequential increase in room nights on the books with the cautious commentary regarding Q3 group demand.

Answer

EVP & CFO Sourav Ghosh explained that while the full-year group room night forecast was slightly reduced due to softer short-term pickup for Q3, the long-term group pace for 2026-2028 has actually improved. He noted that despite taking some risk off the table for Q3, the group rate booked for the second half of the year remains extremely strong.

Duane Pfennigwerth of Evercore ISI asked for clarification on the contrast between the 6% sequential increase in group room nights on the books and the cautious commentary for Q3 group performance.

Answer

EVP & CFO Sourav Ghosh explained that while the full-year 2025 forecast for group room nights was slightly reduced due to softer short-term Q3 pickup, the booking pace for 2026-2028 has actually improved. He emphasized that group rates booked in Q2 for the second half of the year remain extremely strong.

Duane Pfennigwerth asked for an updated outlook on Maui for the remainder of the year, specifically regarding RevPAR, profit growth, and comparative periods.

Answer

EVP and CFO Sourav Ghosh provided an updated EBITDA bridge for Maui, noting that the estimated operational improvement for 2025 has been raised from $15-30 million to $30-40 million. This increases the full-year EBITDA projection for Maui to approximately $100 million at the midpoint, a $10 million increase from prior guidance, largely driven by Q1 outperformance. He noted Q1 and Q4 are expected to be the strongest quarters.

Duane Pfennigwerth of Evercore ISI pointed out the strong Q4 2024 and Q1 2025 performance and asked why the full-year guidance implies a significant deceleration, and also inquired about margin flow-through if RevPAR exceeds guidance.

Answer

President and CEO James Risoleo attributed the cautious guidance to uncertainties around the Maui recovery and the international travel imbalance. EVP and CFO Sourav Ghosh added that Q1 benefited from one-time events and the Easter calendar shift, which will create a tough comparison for Q2. Regarding flow-through, Ghosh stated that a 4.3% RevPAR growth would be the breakeven point for margins, given projected expense growth.

Duane Pfennigwerth asked for more detail on the strong 40% citywide room night pacing in San Francisco for 2025. He also inquired about the company's capital allocation priorities among ROI projects, acquisitions, and buybacks.

Answer

EVP and CFO Sourav Ghosh specified that for Host's San Francisco portfolio, they have 220,000 group room nights on the books for 2025, up nearly 30% year-over-year. President and CEO James Risoleo reiterated that capital allocation will remain opportunistic across all levers—internal ROI projects, acquisitions, and share repurchases—supported by the company's low leverage and significant dry powder.

Duane Pfennigwerth asked about observed changes in underlying seasonality, particularly an elongated peak season in Europe, and requested data on the percentage of Marriott's European demand originating from U.S. points of sale.

Answer

President and CEO Tony Capuano shared anecdotal observations of extended peak seasons in Europe and Japan into the fall, attributing some to weather-related rebookings. CFO Leeny Oberg provided specific data, noting the mix of U.S. customers in Europe was 36% in Q3 2025, up slightly from 33% for the full year 2024, and mentioned strong summer results despite a weakening dollar.

Duane Pfennigwerth asked about any observed changes in underlying seasonality, particularly an elongated peak season in Europe and stronger fall trends, and inquired about the proportion of Europe's demand originating from U.S. point of sale.

Answer

Tony Capuano (President and CEO) noted an anecdotal extension of peak season into the fall in Europe and Japan, partly due to weather-related rebookings. Leeny Oberg (CFO and EVP of Development) provided data, stating that the mix of U.S. customers in Europe was 36% in Q3 this year, slightly up from 33% for the full year last year, indicating no major shift despite FX fluctuations.

Duane Pfennigwerth of Evercore ISI asked about the expected RevPAR improvement from Q3 to Q4, questioning if the pickup is primarily domestic and which customer segments are the main drivers.

Answer

CFO Leeny Oberg stated the improvement is global, helped by easier comps in China, in addition to calendar shifts and stronger group pace in the U.S. for Q4. She noted that while the fall is a seasonally stronger period for business transient, the outlook assumes steady economic activity rather than a fundamental pickup. President & CEO Anthony Capuano highlighted that visibility into transient remains very short, with booking windows under 20 days.

Duane Pfennigwerth from Evercore ISI asked which customer segment—group, business transient, or leisure—has the most potential to reaccelerate if macroeconomic uncertainty subsides. He also questioned why a 'trade-down' effect from luxury hotels is not being observed in this cycle.

Answer

CEO Tony Capuano suggested that reduced uncertainty would boost consumer confidence, leading to an uptick in leisure and business transient demand. CFO Leeny Oberg attributed the resilience of high-end demand to demographic shifts, with the 55+ age group holding a significantly larger share of household net worth. Mr. Capuano added that luxury had the strongest occupancy and ADR growth in Q1.

Duane Pfennigwerth of Evercore ISI asked for an update on the recovery of business transient travel by volume and revenue, and for details on the structure and renewal timing of Marriott's co-brand credit card relationships.

Answer

CFO Leeny Oberg confirmed that business transient travel has recovered to 2019 levels overall, driven by small and medium businesses, though large corporate travel still lags. CEO Tony Capuano explained the major co-brand partnerships are multiyear domestic agreements with JPMorgan Chase & Co. and American Express, supplemented by local bank partnerships internationally, and did not signal any imminent renewals.

Duane Pfennigwerth from Evercore ISI asked about the relationship between U.S. room night growth and GDP in 2024 and which segments might better align with GDP in 2025.

Answer

CFO and EVP, Development Leeny Oberg attributed the 2024 trends to a normalization, with flat leisure demand being offset by growth in business transient and group, resulting in a 1% rise in U.S. room nights year-to-date. President and CEO Tony Capuano added that the continued strength of the group segment has been a particularly encouraging sign, driven by strong appetite from corporate and association meeting planners.

Duane Pfennigwerth of Evercore ISI asked for a bridge from the mid-September conference tone to current forward bookings, specifically regarding advanced yields year-over-year and whether optimism about Transatlantic performance is volume or yield-driven. He also requested more specifics on the maintenance expense shift, whether a flight attendant accrual is in the Q4 guide, and if the 2-3% CASM framework applies to 2026.

Answer

EVP and Chief Commercial Officer Andrew Nocella stated that United is booked a couple of points ahead for the next two months, intentionally using some yield to achieve this. For the Atlantic, he expects positive year-over-year RASM in Q4, driven by proper capacity placement and demand trends, noting Q4's higher share of premium cabin revenue. CFO Mike Leskinen clarified that the 1% maintenance shift from Q3 to Q4 was primarily engine-related and is expected to catch up in Q4. He confirmed no flight attendant accrual in Q4 guidance as ratification is expected in early 2026, and the 2-3% CASM framework is a multi-year expectation, with 2026 including added labor expense.

Duane Pfennigwerth from Evercore ISI asked which geographic region is expected to be the largest contributor to United's future margin expansion. He also questioned if the airline had been overstaffed with pilots and if recent delivery increases have created better alignment.

Answer

EVP & CCO Andrew Nocella explained that while international margins are strong, the biggest opportunity for margin expansion lies in closing the gap with domestic margins by improving connectivity and gauge in the domestic network. EVP & COO Torbjorn Enqvist asserted that pilot staffing has been well-balanced for some time, and they are neither overstaffed nor understaffed. CFO Mike Leskinen added that proper staffing levels contribute to better cost performance.

Duane Pfennigwerth of Evercore ISI asked for management's key takeaways from the book 'Capital Returns' and how its principles on supply analysis and capital allocation influence their strategy.

Answer

CEO Scott Kirby highlighted the book's lesson on thinking against consensus and focusing on supply constraints, which informs his bullish long-term view on international markets. EVP and CFO Mike Leskinen emphasized two points: maintaining discipline on CapEx to ensure returns exceed the cost of capital, and using buybacks opportunistically when shares are undervalued. EVP and CCO Andrew Nocella noted the book reinforces the importance of supply constraints at major airports.

Duane Pfennigwerth inquired about the specific network changes that have improved Q1 seasonality and asked whether the path to double-digit margins relies more on international strength or a balanced domestic and international contribution.

Answer

EVP and CCO Andrew Nocella attributed Q1 improvement to a rising brand, disciplined capacity deployment, returning corporate traffic, and Europe's emergence as a year-round destination. He stated that while international margins are currently higher and will lead, he is more optimistic about domestic margin growth closing the gap as mid-continent hubs mature.

Duane Pfennigwerth inquired about regional signs of corporate recovery, particularly on the West Coast, and asked if management's confidence in its 2025 growth plans is higher now compared to previous years, given OEM constraints.

Answer

EVP & CCO Andrew Nocella stated that coastal hubs are currently stronger than interior hubs for corporate recovery, led by tech and financial services. EVP & CFO Mike Leskinen reiterated a downward bias for 2025 CapEx due to OEM delays and noted that 2025 capacity plans will be guided later, with a focus on maximizing profitability.

Duane Pfennigwerth asked about the drivers behind Delta's strong year-over-year improvement in cash flow, specifically inquiring about the impact of working capital benefits from a normalizing booking curve and any dynamics related to Maintenance, Repair, and Overhaul (MRO). He also followed up on the context of the corporate recovery, asking if it was fully back and if any benefits from a CrowdStrike comparison should be excluded.

Answer

CEO Ed Bastian and President Glen Hauenstein explained that working capital improvements were offsetting headwinds from a compressed booking curve, which is expected to normalize further in Q4. They attributed underlying improvements to efficiency gains from rebuilding the airline. Regarding corporate recovery, Mr. Hauenstein stated that corporate revenues are well beyond any CrowdStrike impact and are now slightly above 2019 levels, with passenger numbers still in the high 70s, indicating significant runway for continued expansion as business normalizes. CFO Dan Janki added that the 8% corporate growth in Q3 was actually 9% without CrowdStrike, showing real momentum.

Duane Pfennigwerth inquired about the drivers behind Delta's strong year-over-year improvement in operating cash flow, specifically asking about the impact of working capital normalization, booking curve changes, and MRO dynamics. He also asked for context on the corporate recovery, excluding any CrowdStrike benefit, and whether corporate travel has fully returned to pre-pandemic levels.

Answer

CFO Dan Janki explained that year-to-date cash flow is on track with the previous year despite booking curve headwinds, with underlying improvement from working capital efficiencies as the airline rebuilds. President Glen Hauenstein noted that corporate revenues are now slightly above 2019 levels, with passenger volumes in the high 70s, indicating further runway for growth as business normalizes, and that the strong corporate sales trends are independent of the CrowdStrike impact.

Duane Pfennigwerth from Evercore ISI asked about the potential limitations of third-party credit card spending data. He also inquired about Delta's competitive advantages for its co-brand card program against non-airline premium cards.

Answer

President Glen Hauenstein suggested that broad credit card data often misses the nuances of Delta's higher-end consumer base. He emphasized that the co-brand card's advantage lies in its unique, airline-specific benefits like club access and status, which drive record-high customer satisfaction and cannot be replicated by general premium cards.

Duane Pfennigwerth asked about the potential limitations of third-party credit card spending data and questioned how Delta views its co-brand card's competitive advantages against non-airline premium cards.

Answer

President Glen Hauenstein suggested that aggregate credit card data can be misleading as it combines different consumer segments, noting Delta's higher-end customer base remains strong. Regarding the co-brand card, he emphasized its unique value proposition, including benefits like club access and airline status that non-airline cards cannot replicate, leading to record-high cardholder satisfaction.

Duane Pfennigwerth sought details on the upcoming capacity cuts, specifically asking which regions and fleet types would be most affected. He also asked for a breakdown of loyalty revenue growth between new card acquisitions and existing card member spend.

Answer

President Glen Hauenstein and CFO Dan Janki clarified that cuts will focus on domestic Main Cabin during off-peak times and will involve accelerating retirements of older aircraft like the 757s, 767s, and older A319s/A320s. On loyalty, Hauenstein revealed that the vast majority of growth comes from increased spend by existing cardholders, with new acquisitions contributing only 3-4 percentage points.

Duane Pfennigwerth asked what drove the Q4 revenue surprise and inquired about the status of the LATAM joint venture, specifically when Delta might shift from 'investment mode' to 'harvest mode'.

Answer

President Glen Hauenstein attributed the Q4 revenue beat to a distinct uptick in demand post-election rather than holiday timing. Regarding the LATAM partnership, he explained that while not yet in 'harvest mode,' Delta is reducing its investment as the necessary network connections are now largely in place, moving the venture to a more mature phase.

Duane Pfennigwerth from Evercore ISI inquired about changes in travel seasonality and asked about the progress of Delta's productivity recovery, including key metrics to monitor.

Answer

President Glen Hauenstein noted a shift in long-haul international travel from peak summer months to September and October. CFO Dan Janki and CEO Ed Bastian explained that Delta is in the 'early innings' of productivity recovery, highlighting efficiency gains from growing into its workforce, with further benefits expected from maintenance, crew optimization, and technology.

Duane Pfennigwerth of Evercore ISI asked for a long-term macro view on the key drivers for industry-wide RevPAR acceleration and inquired about the specific flexibility gained from the recent debt refinancing that unencumbered assets.

Answer

CEO Jeff Donnelly expressed his hope that reduced political turmoil post-midterms could boost corporate confidence and private fixed investment, which, combined with low supply growth, should drive RevPAR acceleration. EVP & CFO Briony Quinn added that the refinancing provides both operational flexibility, by removing lender consents, and transactional flexibility, as all debt is now prepayable without penalty.

Duane Pfennigwerth of Evercore ISI asked for a long-term view on the key drivers for industry RevPAR acceleration and the specific flexibility gained from the company's recent debt refinancing.

Answer

CEO Jeffrey Donnelly expressed his belief that reduced political turmoil could boost corporate investment, which, combined with low new supply, should lead to RevPAR acceleration. CFO Briony Quinn explained the refinancing provides both operational flexibility, by removing lender consents, and transactional flexibility, as all debt is now prepayable without penalty.

Duane Pfennigwerth of Evercore ISI asked for details on the profile of DiamondRock's average group business and inquired about specific markets showing strong group pacing.

Answer

CEO Jeff Donnelly described the group business as a mix of associations and corporate, typically for their 200-250 room hotels, leading to smaller, shorter-term bookings. He highlighted Denver and Salt Lake City as markets with significant strength in group pacing and noted a post-renovation uptick in San Diego.

Speaking on behalf of Duane Pfennigwerth, an analyst named Peter asked for the expected shape of RevPAR growth by quarter in 2025 and for details on specific initiatives that have helped control expense growth.

Answer

CEO Jeff Donnelly projected that Q1 RevPAR growth would be the softest quarter due to weakness in the resort-heavy portfolio, with the remaining quarters expected to be in the 2-3% range. President & COO Justin Leonard stated there was 'no magic bullet' for expense control, attributing success to a disciplined focus on productivity, leveraging new data tools to identify and replicate labor management best practices across the portfolio.

Duane Pfennigwerth from Evercore ISI asked for more detail on the group booking curve, specifically why the first half of 2025 is pacing positive while the full year is negative. He also inquired about the process behind the downward revision to CapEx guidance, asking for specifics on projects that were altered or canceled.

Answer

CEO Jeff Donnelly explained the booking curve cadence is due to difficult year-over-year comparisons for major group hotels like Chicago in the back half of 2025, while smaller hotels are booking more group business in the first half. On CapEx, he cited specific examples for the reduction, such as re-scoping F&B and lobby work at the Bourbon Orleans and achieving budget savings on the Westin San Diego rooms renovation, reflecting a broader focus on capital efficiency.

Duane Pfennigwerth from Evercore Inc. asked for a reminder on the impacts of foreign exchange rates on revenue and costs, and requested an update on airport capacity and infrastructure projects at Panama's Tocumen International Airport (PTY).

Answer

CEO Pedro Heilbron noted that stronger Latin American currencies are a positive but not significant driver for revenue. CFO Peter Donkersloot added that costs are largely dollar-based, minimizing FX impact. Heilbron also detailed a 3-4 year expansion plan for PTY airport, including runway work and 10-12 new gates, securing growth capacity for at least another decade.

Duane Pfennigwerth asked about the progress of distribution cost savings and potential for further initiatives. He also inquired about aircraft utilization rates and the growth outlook for 2026 given the fleet delivery schedule.

Answer

CFO Peter Donkersloot Ponce stated that more savings from their distribution strategy are expected, noting 85% of sales are now direct or via NDC. CEO Pedro Heilbron added that utilization remains steady at around 12 hours and that the impact of new aircraft deliveries will be more significant in 2026 due to their back-loaded schedule this year.

Duane Pfennigwerth asked about the sequential trend in Revenue per Available Seat Mile (RASM) and the likelihood of a positive inflection in the second half of 2025.

Answer

CEO Pedro Heilbron explained that the yearly RASM guidance assumes a continuation of trends from H2 2024, which were impacted by currency weakness and increased industry capacity. He acknowledged that while the guidance is for "more of the same," a positive inflection in the second half is possible if factors like currency, demand, or capacity trends improve.

Duane Pfennigwerth sought to quantify the margin impact from the MAX 9 grounding and Venezuela flight suspensions, questioned a specific interest expense item, and asked if Q4 trends were indicative of early 2025.

Answer

CFO Jose Montero quantified the full-year margin impact from the Venezuela situation at approximately 0.5 percentage points and the MAX 9 grounding at around $40 million. He explained the interest expense item was a periodic IFRS adjustment that fluctuates with interest rates. Regarding 2025, Montero noted that while they don't provide multi-quarter guidance, the year-over-year comps for Q1 could be similar to Q4.

Duane Pfennigwerth of Evercore ISI inquired about the recent booking trends in Maui, the factors driving them, and the status of the Wailea Beach Resort's room renovation.

Answer

CEO Bryan Giglia explained that the recovery of the Kaanapali submarket is stabilizing rates and driving an acceleration in leisure bookings for Q4 at the Wailea Beach Resort. He confirmed the resort's renovation was completed early in the year, allowing them to sell a new product into the recovering market.

Duane Pfennigwerth of Evercore ISI asked about performance in two key markets: what held back the Hawaii asset in Q1 compared to peers, and what is the outlook for San Francisco for the remainder of the year.

Answer

CEO Bryan Giglia explained that the Wailea property faced short-term headwinds as the nearby, more value-oriented Kaanapali market reopened, causing some guest trade-down. He noted this is a temporary 'growing pain' and expects a return to growth later in the year, citing strong group pace. For San Francisco, he described it as a continuing success story with strong business transient demand in their submarket, good pace for the rest of the year, and a positive outlook for the coming quarters.

Duane Pfennigwerth inquired about the underlying demand segment assumptions for group, business transient, and leisure travel within the 7% to 10% RevPAR growth guidance for 2025.

Answer

Bryan Giglia, Chief Executive Officer, explained that the guidance assumes continued solid group performance (pacing up 10%), steady business transient demand, and leisure activity similar to the previous year. Giglia noted that the leisure segment represents the most significant area for potential upside or risk to the 2025 forecast, particularly with the recovery in Maui.

Duane Pfennigwerth questioned what specifically changed in Maui to impact the revised guidance, and asked for clarification on whether relief business was in the prior-year comparisons.

Answer

CEO Bryan Giglia clarified that the October guidance update was solely for San Diego. Maui's underperformance in Q3 and Q4 stemmed from a slower-than-expected leisure travel rebound. He confirmed there was no relief business in the current comps, as it has been fully lapped. He noted positive signs including strong 2025 group pace and increased December airline capacity.

Duane Pfennigwerth sought clarification on whether the recent double-digit growth in forward sales was driven by yield, and asked about relative performance characteristics within Frontier's network.

Answer

CEO Barry Biffle confirmed that the strong forward sales are primarily driven by higher yields, with revenue per passenger showing double-digit increases, supplemented by a few points of load factor improvement. Regarding network performance, he noted that Las Vegas has been a challenging market, while VFR (Visiting Friends and Relatives) markets have been performing very strongly.

Duane Pfennigwerth of Evercore ISI asked for the profile of new markets that are working versus those that are not and inquired if Frontier's contracts would permit selling delivery positions from its order book.

Answer

CEO Barry Biffle clarified that recent weakness is less about specific routes and more about off-peak days, particularly Tuesdays and Wednesdays, which have 'dried up.' He noted that during the March/April demand freeze, lowering fares failed to stimulate demand. On the order book, Biffle explained that selling positions would require negotiation, but subleasing existing aircraft is a more straightforward way to moderate capacity.

Duane Pfennigwerth of Evercore ISI asked about the reasons for recent schedule changes in December and inquired whether Frontier's contracts would permit the outright sale of future aircraft delivery positions.

Answer

President Jimmy Dempsey explained that the December schedule adjustments were minor, related to finalizing the network around some shifts in aircraft delivery timing. Regarding delivery positions, CEO Barry Biffle declined to comment on confidential commercial terms but stated that the company has worked with Airbus to smooth out its delivery schedule and is very comfortable with the current profile.

Duane Pfennigwerth of Evercore ISI asked when the corporate versus association group mix is expected to normalize and requested more detail on the evolution of group cancellations since the March-April period.

Answer

EVP & COO Patrick Chaffin explained that the group mix is expected to normalize in 2026, which is already showing a higher corporate mix on the books. He noted that cancellations were elevated in Q1 due to macro concerns but returned to normal levels in Q2. President & CEO Mark Fioravanti added that much of the Q1 cancellation activity was tied to government-related contracts.

Duane Pfennigwerth of Evercore ISI asked for details on the typical composition of 'in the year, for the year' demand and questioned the level of attrition and cancellation revenue embedded in the full-year guidance.

Answer

Executive Patrick Chaffin explained that 'in the year, for the year' demand is composed of leisure bookings (within a 30-90 day window) and corporate group business. Executive Jennifer Hutcheson clarified that attrition and cancellation revenue is recognized only when collected, and the low end of the guidance range incorporates conservatism for potential increases in this activity and associated room night declines.

Duane Pfennigwerth asked whether the softer-than-expected ICE results at Gaylord Texan and Opryland were driven by local market demand changes or programming, and also inquired about which industries are driving the momentum in corporate bookings.

Answer

EVP and CFO Mark Fioravanti explained that while ICE admissions were flat, there was a decrease in overnight stays, suggesting some customers traded down to day visits. Chairman and CEO Colin Reed stressed that overall December leisure revenue remains exceptionally strong compared to pre-pandemic levels. EVP and COO Patrick Chaffin added that consumer research indicated heightened economic sensitivity, and noted that the company is focusing on attracting financial and tech clients, though corporate growth is broad-based.

An analyst on behalf of Duane Pfennigwerth asked for details on the potential Q3 refinancing options and requested an update on the transaction market for assets currently being marketed.

Answer

CFO Sean Dell'Orto explained the company is working with banks on a two-phase process to address 2026 debt maturities, starting with commitments for a revolver or other financing, followed by a potential mortgage on the Bonnet Creek property. Chairman and CEO Thomas Baltimore added this strategy provides optionality. Regarding asset sales, Baltimore acknowledged the challenging market but expressed confidence in meeting the $300M-$400M disposition target for the year, citing active discussions with buyers.

Duane Pfennigwerth requested an updated view on which markets are expected to lead and lag in performance for the year and asked what demand drivers media reports might be missing regarding New York City's resilience despite softer international travel.

Answer

Chairman and CEO Thomas Baltimore identified Hawaii (post-strike ramp-up), Orlando, Key West, New York City, and Puerto Rico as expected leaders. Regarding New York, he noted that while there is some softness in international travel, it represents only 10% of Park's total business, and the impact from any single country is not significant to the overall portfolio.

Duane Pfennigwerth asked for a detailed outlook on Hawaii's performance throughout 2025, including the quarterly growth cadence, and how to translate strong group pacing stats into EBITDA growth for an asset.

Answer

Chairman and CEO Thomas Baltimore outlined that Hawaii will have a soft Q1 but expects a significant ramp-up in Q3 and Q4, driven by domestic travel and recovering Japanese tourism. CFO Sean Dell'Orto explained that strong group pace is positive but displaces some transient business, resulting in high single-digit RevPAR growth for an asset like Waikoloa, which contributes to overall portfolio performance.

Duane Pfennigwerth requested more detail on the 2025 group pace, including which markets might outperform or lag, and asked for a way to frame the Orlando complex's performance against a pre-renovation baseline, such as RevPAR index improvement.

Answer

Chairman and CEO Thomas Baltimore projected a mid-to-high single-digit group revenue pace for 2025, highlighting expected strength in Denver, Orlando (Bonnet Creek), and a significant rebound at Hilton Waikoloa (pace up nearly 77%). For Orlando, he emphasized the market's macro strengths and the complex's expanded meeting space but did not provide a specific pre-renovation RevPAR index comparison.

Duane Pfennigwerth from Evercore ISI asked about the expected trajectory of margin improvement in the intermediate term as the cargo business becomes fully ramped by Q4. He also requested a segment-level breakdown of the guided 5-8% block hour growth for Q3.

Answer

CEO Jude Bricker explained that cost pressures from unproductive assets and fixed overhead will constrain margins as the cargo business grows, with a return to scheduled service growth expected around Q2 2026. CFO Bill Trousdale provided the Q3 block hour breakdown: cargo up 40-50%, scheduled service down high-single digits, and charter up single digits.

Duane Pfennigwerth inquired about the ramp-up of the cargo business, specifically aircraft induction, utilization, and profitability compared to initial expectations. He also asked for a broader industry perspective on how other carriers might address the persistent softness in off-peak leisure demand.

Answer

CEO Jude Bricker explained that the cargo expansion is a multi-year process that temporarily shifts pilot resources, impacting system block hour growth. He noted near-term cost headwinds from staffing up for aircraft inductions that can be variable. Regarding the broader industry, Bricker stated his belief that the U.S. leisure space needs to shrink through reorganizations or M&A to restore pricing power.

Duane Pfennigwerth of Evercore ISI asked for color on fourth-quarter booking patterns, noting a strong sequential build in Air Traffic Liability (ATL), and requested an update on the delivery cadence for the Amazon cargo aircraft and the associated rate improvements.

Answer

CEO Jude Bricker explained that the ATL build was influenced by a larger Q1 schedule, TRASM tailwinds, and a strategic decision to hold capacity further out, resulting in higher fares. President and CFO David Davis confirmed the cargo expansion timeline is unchanged, with the first aircraft entering service in late March and all eight operational by the end of August 2025, with rate escalations proceeding as planned.

Duane Pfennigwerth inquired about the cargo business, asking if the improved rates are at their full run rate and for an update on the timing of new aircraft deliveries in 2025. He also asked about Sun Country's strategy for seasonal scheduled service flying outside of Minneapolis.

Answer

President and CFO David Davis clarified that the new cargo agreement's rate changes are not fully implemented, with two more increases scheduled for 2025 as new aircraft arrive. He confirmed eight new freighters are expected to ramp up between late Q1 and early Q4 2025. CEO Jude Bricker added that to support this cargo growth, scheduled service capacity, particularly non-Minneapolis flying, will likely shrink in summer 2025, and no new markets are planned.

Duane Pfennigwerth of Evercore ISI inquired about the recovery trajectory for Los Angeles and the growth outlook for San Francisco, specifically asking about the expected LA headwind in the second half and the strength of San Francisco's convention calendar.

Answer

Chairman & CEO Jon Bortz stated that LA should improve through the year, aided by easier Q4 comps. For San Francisco, he confirmed sustained progress and a 'blowout' Q4 convention calendar, driven by major events like Dreamforce and Microsoft Ignite. Co-President & CFO Raymond Martz added that while SF occupancy is improving significantly year-over-year, it remains well below 2019 levels, indicating substantial runway for growth.

Duane Pfennigwerth asked about the expected recovery curve for the Los Angeles market and what the key leading indicators would be. He also inquired about the proportion of 'drive-to' demand within the portfolio and any observable changes in that segment.

Answer

CEO Jon Bortz identified leading indicators for L.A.'s recovery as a return of bookings from traditional sources like the entertainment, fashion, and tech industries, noting that the pace of pickup is already returning to normal. On 'drive-to' demand, he explained that while not precisely measured, most of the company's resorts are strategically located in drive-to markets. Executive Raymond Martz added that a 10% year-over-year increase in resort parking revenue in Q1 serves as an encouraging, albeit imperfect, indicator of this demand.

Duane Pfennigwerth of Evercore ISI asked for an in-depth perspective on the Washington, D.C. market, focusing on demand drivers related to the change in administration and the overall business climate.

Answer

Jon Bortz, Chairman and CEO, described the mood among government workers as one of 'high anxiety' but highlighted several positive demand drivers for hotels. These include the presidential inauguration, increased legislative activity from a new Congress, and corporate travel to meet new officials. He also noted that back-to-office mandates are boosting downtown activity. Raymond Martz, Executive, added that direct government business constitutes only a mid-single-digit percentage of their D.C. hotels' demand.

Duane Pfennigwerth of Evercore ISI sought more detail on which demand segments and chain scales offer the most upside in 2025 and asked for a timeline on when political changes in lagging markets like San Francisco might improve public perception and financial results.

Answer

Jon Bortz, Chairman and CEO, highlighted business travel (both group and transient) and the continued normalization of leisure demand as key growth drivers. On the lagging urban markets, he stated that the on-the-ground reality regarding safety and cleanliness has 'dramatically improved' and is now better than the perception. He believes it will take a couple of years for perception to catch up with this reality, not 5-10 years.

Duane Pfennigwerth of Evercore ISI sought details on transborder market stability, asking when the demand pullback began and how trends evolved through Q2. He also asked about the relative capacity growth revisions for international versus domestic markets.

Answer

EVP Holger Blankenstein reported that transborder demand began improving mid-Q2, with VFR travel resuming and balanced demand from both U.S. and Mexico points of sale. For Q3, he guided to 6% total ASM growth, comprising 4-5% domestic growth and mid-teens growth in international markets.

Duane Pfennigwerth from Evercore ISI sought more detail on transborder market stability, asking about the timeline of the demand pullback and recovery and whether it was balanced between Mexico and U.S. points of sale. He also asked for a breakdown of the revised capacity growth between domestic and international markets.

Answer

Holger Blankenstein, EVP of Airline Commercial & Operations, stated that demand improvements began mid-Q2 as VFR travel resumed and confirmed the recovery is balanced between U.S. and Mexican points of sale. For Q3, he guided to ASM growth of approximately 4-5% in the domestic market and mid-teens growth in the international market.

Duane Pfennigwerth requested details on monthly RASM trends to understand the Q2 trajectory, asked about demand stabilization, and inquired how the new Copa Airlines partnership would impact Central American operations.

Answer

Airline Executive Vice President Holger Blankenstein explained that March was weak but April TRASM improved due to the Easter shift. He noted no difference in point-of-sale demand between the U.S. and Mexico. He clarified the Copa codeshare is for Mexico-South/Central America connectivity and will not change Volaris's existing Central America to U.S. VFR-focused operation.

Duane Pfennigwerth requested a quantification of the Easter holiday shift's impact on Q1 RASM, the expected RASM trend into the June quarter, and the full-year outlook for CASM ex-fuel. He also asked about the repair throughput for Pratt & Whitney impacted engines and the year-over-year trend for related compensation.

Answer

Airline Executive Vice President Holger Blankenstein identified the Easter shift to April as a primary driver of the Q1 TRASM decline, alongside FX changes, and projected a mid-single-digit TRASM decline for the full year. CFO Jaime Pous stated full-year CASM ex-fuel should be similar to 2024 levels. CEO Enrique Beltranena detailed engine repair throughput challenges, noting a recent slowdown. Jaime Pous added that P&W compensation in 2025 would be 'substantially similar' to 2024.

Duane Pfennigwerth inquired about the expected shape of capacity growth for the first quarter and first half of 2025, and asked for an early perspective on the new political administration's relationship with the airline industry.

Answer

Chief Financial Officer Jaime Pous confirmed that mid-teens capacity growth is a reasonable assumption for the first half of 2025. CEO Enrique Beltranena added that they expect policy continuity from the new government, having already engaged with new authorities on topics like promoting sector development and consolidating the Mexico City airport system.

Duane Pfennigwerth from Evercore ISI requested a comparison of U.S. versus rest-of-world volumes, a recap of the Q1 cadence and April/May stabilization, and insights into government-adjacent travel sectors like consulting.

Answer

CEO Paul Abbott noted that while Americas growth (3%) was slightly behind EMEA (4%) and APAC (7%), the larger theme was slower domestic travel versus international. He confirmed that after normalizing for Easter, growth rates have been stable through March and April. He added that GBTG has minimal direct government exposure but noted that business and professional services were growing at an average rate for the company.

Duane Pfennigwerth from Evercore ISI asked about the reasons for the spread between TTV growth and revenue growth, the specific drivers of improved free cash flow, and the timing lag between transaction reporting and actual travel.

Answer

CFO Karen Williams attributed the TTV-revenue spread to a higher international mix and premium cabin pricing, noting only 30% of revenue is directly tied to TTV. She clarified that improved free cash flow was primarily due to significant interest expense reduction post-refinancing, with CapEx changes reflecting productivity gains rather than project cuts. CEO Paul Abbott confirmed that the window between transaction booking and travel is very short, making quarterly transaction data a reliable indicator of activity within that same period.

Duane Pfennigwerth of Evercore ISI asked for details on the decision to change the ADS exchange ratio, how it affects foreign ownership restrictions, and if it would help the ADS trade closer to parity with the ordinary shares.

Answer

CEO Michael O'Leary and CFO Neil Sorahan explained the change aims to increase the liquidity of the ADSs by lowering the absolute share price. They do not expect it to close the valuation gap with ordinary shares until EU ownership restrictions are resolved. Executive Juliusz Komorek added that the company is trending towards 50% EU ownership, which would permit the restoration of voting rights for non-EU shareholders.