Jamie Baker

Jamie Baker of JPMorgan Chase & Co. asked if the industry is at peak returns given the gap between lease rates and debt costs, and whether AerCap would increase leverage back to its target or aim for a higher credit rating.

Answer

CEO Aengus Kelly affirmed the company's discipline in targeting an 8-10% return over treasury rates and avoiding unprofitable deals. CFO Pete Juhas stated the intention is to run leverage closer to the 2.7x target rather than lowering it for a potential ratings upgrade, prioritizing shareholder returns over credit metrics at this stage.

James Baker from JPMorgan Chase & Co. asked if the industry is at "peak returns," citing concerns about competing capital, and questioned whether AerCap would increase its leverage back to its target or lower the target to achieve a higher credit rating.

Answer

CEO Aengus Kelly asserted that AerCap consistently passes on interest costs and targets an 8-10% return over treasury rates, exercising discipline by walking away from deals that don't meet its criteria. CFO Pete Juhas stated the company intends to run leverage closer to its 2.7x target, likely in the 2.4x-2.5x range, rather than lowering the target. He emphasized that the focus is on maximizing shareholder returns, and while an A- rating would be positive, it's not the primary goal at the expense of returns.

Jamie Baker questioned the potential long-term effects of aircraft tariffs, suggesting they could dampen growth and shift demand toward mid-life aircraft. He also asked if there was any historical precedent for aircraft and parts being carved out from such trade restrictions.

Answer

CEO Aengus Kelly acknowledged that tariffs add costs to the system but noted AerCap's existing OEM contracts have fixed escalation caps, protecting the company. He speculated that widespread tariffs could boost used aircraft values. He expressed hope for a tariff-free environment, suggesting an expansion of the 1979 agreement to include nations like China and India would be a significant victory for the U.S. aerospace industry. He also mentioned that discussions are reportedly underway in China to potentially exempt the aerospace sector.

Jamie Baker inquired about the number of aircraft transitioning to new lessees versus being extended or parted out, and whether these transitions impacted net margins. He also asked for the total recovery amount from Russia as a percentage of the original asset book value.

Answer

CEO Aengus Kelly clarified that very few aircraft transition, and the company manages for EPS and ROE, not net spread, which can be influenced by asset sales. CFO Pete Juhas detailed that against an original book value of approximately $3.2 billion, the company has recovered about $1.3 billion in 2023 and $200 million in 2024.

Jamie Baker from JPMorgan Chase & Co. questioned the incremental cost of debt today and whether JetBlue is leaning towards leasebacks or borrowing against aircraft for future capital raises. He also asked how industry fundamentals for JetBlue's recovery compare to a year ago, given the high routing hurdle to achieve break-even or better operating margin.

Answer

Ursula Hurley, CFO of JetBlue Airways, stated that the company would evaluate all markets for cost-effectiveness and prepayment flexibility, noting that aircraft debt is typically the lowest cost. She indicated that options like bilateral bank loans, capital markets, or leasebacks would be considered. Joanna Geraghty, CEO of JetBlue Airways, asserted that industry fundamentals are now more aligned with JetBlue's strategy. She acknowledged the previous year's industry setback but highlighted the ongoing execution of Jet Forward initiatives, particularly the focus on premium customers, as validated by analysis showing less margin impact for carriers with greater premium exposure.

Jamie Baker of JPMorgan Chase & Co. questioned if JetBlue had modeled for increased competition as part of its 'Blue Sky' partnership, specifically regarding where United might use its new JFK slots. He also asked if new premium products from low-cost competitors were impacting JetBlue's results in overlapping markets.

Answer

CEO Joanna Geraghty stated that while they cannot legally discuss slot usage with United, their financial model for the partnership includes assumptions about the competitive impact. President Marty St. George asserted that competing premium products from ULCCs have had 'no impact whatsoever,' citing JetBlue's established credibility and superior product. He added that JetBlue continues to innovate with a domestic first-class product launching in 2026.

Jamie Baker sought clarification on whether the upcoming domestic partnership is with a domestic airline or for providing domestic feed. He also asked if there are any 'silver linings' to the current downturn that could benefit JetBlue's business or accelerate parts of the JetForward strategy.

Answer

President Martin St. George confirmed the partnership is with a domestic airline with a large network. CEO Joanna Geraghty addressed the second question, stating that while the macro environment is challenging, the JetForward strategy is working and provides a long-term path to profitability. She highlighted early proof points like improved operational reliability (A14) and Net Promoter Scores (NPS), strong performance of new products, and resilient loyalty revenue as indicators that the strategy is sound and will position the company to emerge stronger.

Jamie Baker asked for a breakdown of the drivers behind the expected revenue acceleration from Q1 to the full year 2025, and whether the significant capacity growth in Boston would act as a drag on system RASM.

Answer

President Marty St. George explained that the revenue acceleration is driven by a 1.5-point benefit from the Easter holiday shift and the continued execution of the JetForward strategic plan, without assuming any major changes in the competitive environment. He acknowledged that RASM growth in Boston would be lower than elsewhere due to the added capacity but noted that the airline is redeploying assets back to core Northeast leisure markets.

Jamie Baker questioned the ongoing strategic logic of the transatlantic operation given the domestic network downsizing and asked if JetBlue would consider re-engaging with Spirit Airlines under any circumstances.

Answer

CEO Joanna Geraghty affirmed that the transatlantic operation remains an important and profitable part of the East Coast leisure network, driving loyalty relevance. She noted the company has effectively seasonalized the routes to redeploy aircraft in winter. On the second point, she stated unequivocally, 'we're not interested in revisiting the Spirit's potential acquisition,' emphasizing a laser focus on the organic JetForward plan. However, she allowed that the company would evaluate acquiring assets if it were a capitally prudent opportunity.

Jamie Baker questioned the Q4 RASM guide, suggesting that if tactical improvements like bag fees, loyalty, and credit noise contribute significantly (estimated 8 points), it implies a mid-single-digit deterioration in core RASM. He asked if the core business is indeed deteriorating and how this might impact future anniversarying of initiatives. He also asked for clarification on Southwest's definition of 'hub' as used in a recent lounge survey.

Answer

COO Andrew Watterson disputed the 8-point benefit calculation, clarifying that flight credit breakage benefits are expected in 2026, and bag fees represent about a three-point year-over-year benefit. He also noted a two-point RASM headwind from stage length. He emphasized that core customers are increasingly engaged, evidenced by accelerated credit card applications, Rapid Rewards signups, and improved road warrior travel. CEO Bob Jordan clarified that the use of 'hub' in the lounge survey was a word choice, not a strategic shift, referring to Southwest's 15-17 'mega cities' with intentional connections. He explained the company is exploring lounges to widen offerings and enhance Rapid Rewards and co-brand card economics.

Jamie Baker of JPMorgan Chase & Co. questioned the implied $1.2 billion decline in the core business after accounting for the $1.8 billion in initiatives, asking if the macro environment and Basic Economy rollout fully explain the drop. He also asked about future financing plans.

Answer

President & CEO Bob Jordan confirmed the decline is fully explained by the industry-wide macro impact of 5-6% and higher fuel costs, not an underlying issue in the base business. CFO Tom Doxey addressed financing, stating that as incremental EBIT from initiatives generates free cash flow, the company will have flexibility to use that cash or surplus debt capacity for repurchases, with options for either unsecured bonds or aircraft debt if needed.

Jamie Baker of JPMorgan Chase & Co. asked for clarification on how the company formulates its guidance, questioning whether the new initiatives are being layered on top of a steady-state assumption for the core business, which may itself be under pressure.

Answer

President and CEO Bob Jordan acknowledged that the prior stack of initiatives was insufficient to drive appropriate margins post-COVID. Chief Operating Officer Andrew Watterson added that the company admitted its previous value proposition wasn't generating needed revenue and has pivoted to a new, segmented offering. Jordan emphasized that the new initiatives are unique to Southwest and, combined with strong cost discipline, will drive relative outperformance.

Jamie Baker questioned the framing of the 3%-5% margin guidance relative to fleet initiatives and asked about the potential for a new premium credit card product with Chase.

Answer

CFO Tammy Romo and CEO Bob Jordan reiterated that the margin guidance range was always intended to show performance with and without the fleet strategy, and the clarification was based on shareholder feedback. Regarding loyalty, EVP Ryan Green confirmed that while they cannot act without Chase, discussions are underway to amend the contract and evolve the card products for the new premium seating world.

Jamie Baker questioned the prevalence of premium leisure yields eclipsing corporate yields across American's markets and whether this phenomenon influences the aggressiveness of their corporate share pursuit.

Answer

Robert Isom, CEO, acknowledged the richness of corporate travel yields and stated American needs both premium leisure and corporate demand, hence their continued investment in the sales team. He noted that business travel has not fully recovered to 2019 passenger levels, indicating significant room for growth. Steve Johnson, Vice Chair and Chief Strategy Officer, added that business travelers are frequent, generate 1.5 to 2 times the yields of other sources, and often drive premium leisure demand through loyalty programs. Devon May, CFO, attributed the modest air traffic liability drawdown to seasonal trends and a strengthening fourth quarter, leading to more Q4 bookings in Q3.

Jamie Baker asked about the prevalence of premium leisure yields eclipsing corporate yields across American's markets and whether this trend influences the aggressiveness of pursuing corporate share.

Answer

Robert Isom, CEO, acknowledged the richness of corporate travel yields and stated that American needs both premium leisure and corporate demand, hence the continued investment in the sales team. He noted that business travel has not fully recovered to 2019 passenger levels, indicating significant room for growth, especially with the return to office trends. Steve Johnson, Vice Chair and Chief Strategy Officer, added that business travelers are frequent, high-yield customers who often become AAdvantage members and co-brand cardholders, influencing their leisure travel choices. Devon May, CFO, attributed the modest Q2 to Q3 air traffic liability drawdown to seasonal trends and a strengthening fourth quarter, which led to more bookings for Q4 travel occurring in Q3.

James Baker of JPMorgan Chase & Co. asked for an approximation of the percentage of American's flights that operate at a loss and inquired about the strategy to improve the profitability of its network.

Answer

CEO Robert Isom did not provide a specific percentage, instead emphasizing that American operates a hub-and-spoke network where system-wide results are key. He attributed the current margin gap to peers to paying full market wages and a higher exposure to the temporarily weak domestic market, which he views as a future tailwind. He expressed confidence in the airline's long-term strategy to improve margins and deliver on its revenue potential.

Jamie Baker of JPMorgan Chase & Co. inquired about the company's approach to minimum liquidity and CapEx if cash flow weakens, and how RASM on off-peak flights compares to midday flights in the Chicago hub.

Answer

CFO Devon May expressed confidence in the balance sheet, highlighting $10.8 billion in liquidity and significant unencumbered assets. Vice Chair Steve Johnson explained that adding flights at the edges of the day in Chicago is a cost-effective growth strategy that is vital for serving local traffic.

Jamie Baker of JPMorgan Chase & Co. questioned if the margin gap between American's best and worst performing hubs is narrowing and asked for an update on the progress of reconciling with corporate accounts.

Answer

CEO Robert Isom explained that the full deployment of the regional fleet in 2025 will bolster hubs like DFW, Charlotte, and Miami, while also improving performance at DCA, Philadelphia, and Chicago. Vice Chair Steve Johnson confirmed that the foundational work of signing new agreements with corporate and agency partners is complete, setting the stage for share recovery in Q1 and Q2 2025.

Jamie Baker pointed out that after normalizing for lower fuel prices, core earnings performance appears weaker year-over-year in the Q4 guide than it was in Q3, and asked for an explanation. He also asked about American's greatest network deficiencies and whether management has the appetite to address them.

Answer

CFO Devon May addressed the earnings question by highlighting the relationship between fuel and revenue, noting that capacity is adjusted based on the fuel environment and that results cannot be viewed in isolation. CEO Robert Isom responded on network strategy, stating the current network is 'fantastic' and that the priority is maximizing existing assets, including key partnerships with Alaska Airlines and British Airways, and growing in key markets like New York rather than addressing perceived deficiencies.

Jamie Baker from JPMorgan Chase & Co. asked about the prevalence of premium leisure yields exceeding corporate yields across United's network, questioning if this represents a secular change or if corporate yields remain the long-term gold standard. He also asked if the relationship between revenue and nominal GDP is still a relevant talking point for the industry.

Answer

EVP and Chief Commercial Officer Andrew Nocella confirmed that premium leisure yield quality often exceeds traditional corporate business in the domestic system, a trend he finds exciting and unexpected. However, he noted that corporate yields remain higher in global long-haul. He stated that United no longer relies on the revenue-to-nominal GDP formula, as it doesn't distinguish between high-quality and low-quality airline revenue streams.

Jamie Baker from JPMorgan Chase & Co. questioned what catalysts could enable United to surpass Delta's margins in the future. He also asked for the strategic rationale behind prepaying the MileagePlus debt beyond the immediate financial benefit.

Answer

CEO Scott Kirby responded that his focus is on achieving high absolute margins for United, not relative performance, but asserted that United and Delta are the only two structurally advantaged 'brand loyal' airlines and will generate the bulk of industry profits. He highlighted United's superior hubs as a key advantage. EVP & CFO Mike Leskinen described MileagePlus as a 'crown jewel asset' and stated that unencumbering it provides future optionality, with a current focus on providing segment-level financial disclosure for the program in the next year to highlight its value.

Jamie Baker of JPMorgan Chase & Co. asked about United's 2026 earnings forecast under a recessionary scenario and questioned the strategy behind prioritizing share buybacks over further deleveraging.

Answer

CEO Scott Kirby stated that in a normalized post-recession economy, United's margins would be higher, driven by structural industry changes and their brand-loyal customer base. EVP and CFO Mike Leskinen explained that the buyback strategy is opportunistic, aiming to optimize the cost of capital when the stock is undervalued, while maintaining discipline to continue deleveraging towards an investment-grade rating.

Jamie Baker asked if management's previous comments on the life cycle of discount airlines still hold true and questioned CEO Scott Kirby on the progress in changing the investor perception that 'all capacity is created equal.'

Answer

EVP and CCO Andrew Nocella affirmed his view on the discounter life cycle, citing United's 'generational investments' in product complexity. CEO Scott Kirby asserted that not all capacity is equal, explaining that United's strategy of adding service and frequency has a less negative impact on industry RASM than competitors' strategies of chasing load factor.

Jamie Baker asked if competitors flooding peak seasons with capacity is the 'new normal' and questioned United's intent behind the 21% growth in Basic Economy volumes, asking if they aim to be the largest discount supplier.

Answer

EVP & CCO Andrew Nocella expressed skepticism about the sustainability of competitors' peak-season strategy and noted unprofitable capacity is exiting the market. He clarified that United's goal with Basic Economy is to expand margins, not just volume, calling the strategy a 'solid home run' that is profitable for United and detrimental to competitors.

Jamie Baker highlighted Delta's record premium revenue growth exceeding main cabin by 13 points, asking for deeper insights into consumer behavior changes, such as whether it's driven by affluent members taking more trips or less affluent flyers trading up. He also inquired about the overlap between premium and corporate travel, specifically the percentage of premium revenue that is corporate, and whether premium revenue could overtake main cabin sooner than the previously projected 2027.

Answer

President Glen Hauenstein explained that premium growth is a long-term journey driven by making premium seats more affordable and attainable, high repeat rates (mid-80% retention), and expanding availability. CEO Ed Bastian added that investments in coastal hubs and Delta One lounges, coupled with strong corporate travel, fuel this momentum. Glen Hauenstein estimated that 30-40% of premium revenue is corporate and indicated that premium revenue is now expected to overtake main cabin in a quarter or two next year, sooner than 2027.

Jamie Baker asked about the record 13-point difference in premium revenue growth versus main cabin, seeking deeper insights into consumer behavior changes, such as whether more affluent SkyMiles members are taking more trips or less affluent flyers are trading up. He also inquired about the overlap between premium and corporate travel, and whether premium revenue is now expected to overtake main cabin revenue in Q1 or Q2 of next year, earlier than the previously projected 2027.

Answer

President Glen Hauenstein and CEO Ed Bastian highlighted the transformation of premium products from loss leaders to high-margin offerings, driven by increased affordability, high repeat rates (mid-80s%), and strategic expansion in coastal hubs. Mr. Hauenstein estimated that 30-40% of premium revenue is corporate, noting that high-yield leisure can sometimes exceed corporate yields. He confirmed that premium revenue is indeed expected to overtake main cabin revenue in Q1 or Q2 of next year.

Jamie Baker questioned the 10-point spread between premium revenue growth and Main Cabin contraction, asking if it was driven more by Main Cabin weakness and whether premium trends met expectations. He also asked if return-to-office mandates could temper "bleisure" travel demand.

Answer

President Glen Hauenstein confirmed strong and undiminishing demand for premium products, which supports further expansion of premium seating. On workplace flexibility, Hauenstein believes the workplace remains more flexible post-pandemic, supporting travel demand. CEO Ed Bastian added that business travel is still 15-20% below where it should be relative to the economy's size, suggesting significant upside potential.

Jamie Baker of JPMorgan Chase & Co. asked about the widening revenue gap between premium and Main Cabin, questioning if premium trends met expectations. He also questioned if return-to-office mandates are tempering 'bleisure' travel demand.

Answer

President Glen Hauenstein confirmed that demand for premium cabins remains strong with no signs of diminishing. He suggested the 'bleisure' concern was overstated, noting workplace flexibility remains high. CEO Ed Bastian added that corporate travel still has significant recovery potential, with an estimated 15-20% of travel yet to return relative to the economy's size.

Jamie Baker asked if the booking curve for Premium cabins differs significantly from Main Cabin. He also posed a question to CEO Ed Bastian about managing a workforce with many new hires facing their first industry downturn and the potential implications of lower profit sharing.

Answer

President Glen Hauenstein confirmed the booking curves are not significantly different. CEO Ed Bastian responded that he is not planning involuntary actions and has many voluntary tools available. He noted many new hires are industry veterans who understand turbulence, and he consistently reminds all employees that periods of change are when Delta can differentiate itself.

Jamie Baker questioned whether a strong yield environment alters the industry's ability to recapture higher fuel costs. He also asked if corporate travel behavior is reverting to pre-COVID patterns or remaining distinct.

Answer

President Glen Hauenstein stated his belief that the industry needs to recapture fuel costs faster than in the past due to margin pressures. CFO Dan Janki added that carriers must improve overall margins, not just offset fuel. Regarding corporate travel, Glen noted that behavior is reverting on the margin (e.g., shorter booking curves) but remains different from pre-pandemic norms.

Jamie Baker from JPMorgan Chase & Co. asked if the RASM benefits from competitors' capacity cuts are front-end loaded and questioned how a potential full recovery in corporate demand would influence network strategy.

Answer

President Glen Hauenstein clarified that the benefits are not front-loaded; as competitors cut better-performing routes, the positive impact on remaining capacity actually increases. He also stated a corporate travel recovery would likely be managed by reallocating fare buckets rather than significant network rebalancing, as premium products are already performing well.

James Baker asked for Frontier's perspective on the competitive sale-leaseback market and inquired why the company does not provide monthly RASM disclosures.

Answer

CEO Barry Biffle and President Jimmy Dempsey expressed confidence in the financing market, noting that Frontier's favorable aircraft acquisition costs drive strong sale-leaseback economics and that they have financing committed 12-24 months out. Biffle explained they avoid monthly reporting to prevent market overreactions to short-term volatility, but emphasized that the industry is moving away from unsustainably low fares.

Speaking for Jamie Baker of JPMorgan, an analyst asked if the oversupply in leisure markets like Florida and Vegas is ongoing and inquired about the mechanics of potential tariffs on sale-leaseback transactions.

Answer

CEO Barry Biffle stated that oversupply in markets like Florida has moderated, with some competitors cutting capacity significantly. He attributed recent weakness to a broad 'demand shock' in March that is now subsiding. Regarding tariffs, Biffle stated succinctly, 'We have no plans to pay tariffs.'

James Kirby, on for Jamie Baker, asked if the sale-leaseback premiums in 2025 would differ materially from 2024 and whether the company had modeled the potential capacity increase from successful Air Traffic Control (ATC) reform.

Answer

CFO Mark Mitchell explained that while the premium per aircraft is not an issue, the total gain will differ in 2025 due to a lower number of deliveries (21 vs. 23) and a different mix (8 A320neos in 2025 vs. all A321s in 2024). CEO Barry Biffle stated that while Frontier doesn't model ATC reform internally, industry studies suggest savings of 18-22 minutes per flight, which would improve efficiency, the customer experience, and safety. He expressed support for reforms like raising the controller retirement age.

Jamie Baker of JPMorgan Chase & Co. questioned if lower sale-leaseback gains would create a CASM headwind in 2025 and asked why Q4 margin guidance wasn't stronger given tighter industry capacity and lower fuel prices compared to Q2.

Answer

CFO Mark Mitchell acknowledged that sale-leaseback gains would likely be lower in 2025 but stated that other tailwinds, like the full-year benefit of network simplification, would more than mitigate this. CEO Barry Biffle attributed the Q4 margin outlook to the significant negative impact of two hurricanes on its Florida operations and demand, as well as a drag from a high number of new, immature markets. He noted that without the hurricanes, margins would have been much closer to single digits.

Jamie Baker of JPMorgan Chase & Co. asked for Air Lease's perspective on how rising OEM production rates might impact the sale-leaseback market, current lease extensions, and the company's own order book dynamics, referencing commentary from a peer.

Answer

CEO John Plueger responded that even with projected production increases, a significant aircraft supply shortfall is expected to persist for the next three to four years. He believes the sale-leaseback market will likely remain overly competitive with lower returns compared to their direct order book strategy. However, he affirmed that Air Lease remains open to unique sale-leaseback opportunities, particularly if they are part of a larger transaction with an airline.

Jamie Baker of JPMorgan Chase & Co. questioned if Air Lease considered increasing aircraft sales to enhance equity value and asked for the proportion of the portfolio represented by less profitable, COVID-era leases.

Answer

CEO John Plueger indicated that the 2025 sales plan of ~$1.5 billion is consistent with recent levels, though they remain opportunistic. Executive Chairman Steven Udvar-Hazy added they are exploring managed vehicle structures. In response to the second question, CFO Greg Willis pointed to the previously disclosed figure of $5 billion in COVID-era leases maturing by the end of 2026 as the key metric for investors to gauge the portfolio's transition.

Jamie Baker of JPMorgan Chase & Co. asked about the future of OEM-lessor relationships and the evolution of the sale-leaseback market.

Answer

Executive Chairman Steven Udvar-Hazy stated that OEMs are now focusing on 'quality with lessors rather than quantity,' which benefits Air Lease due to its strong placement capabilities. CEO John Plueger and Mr. Hazy both noted that while the sale-leaseback market remains a key financing tool for airlines, particularly fast-growing LCCs, it does not diminish the strong direct demand for Air Lease's order book.

James Baker requested clarification on when premium and other non-main cabin revenues are expected to surpass 50% of total revenue. He also asked about the company's industry supply forecast for Q4, questioning if capacity would tighten as much as in Q3.

Answer

CCO Andrew Harrison clarified that premium revenue currently constitutes about 35% of total revenue. CFO Shane Tackett added that the goal for revenue outside the main cabin (including loyalty, cargo, etc.) is to reach the mid-50% range. Regarding capacity, Tackett stated the Q4 setup in Alaska's key markets looks constructive and is likely to improve further.

Jamie Baker asked if management would pursue a new strategic opportunity during the current downturn or focus solely on execution given their full plate. He also questioned the FAA timeline for the single operating certificate and whether a delay would impact other integration milestones.

Answer

CEO Benito Minicucci stated the team is "nimble" and "decisive" and would make trade-offs to pursue a high-value opportunity if one arose. On the integration, he expressed high confidence in achieving the single operating certificate by October, noting submissions are on track. He clarified that the key milestones—the certificate, passenger service system integration, and joint bargaining—are not strictly interdependent and can proceed on separate tracks.

Jamie Baker from JPMorgan asked if there have been any downside surprises with the Hawaiian Airlines franchise, similar to issues found during the Virgin America integration. He also asked for the key building blocks required to achieve future Q1 profitability for the Hawaiian assets.

Answer

CFO Shane Tackett and CEO Benito Minicucci both stated there have been no negative surprises, attributing this to a more thorough due diligence process compared to the Virgin deal. In fact, they noted performance has been better than expected. To improve Hawaiian's Q1 results, Minicucci explained the strategy involves applying Alaska's disciplined approach of matching capacity to demand, optimizing aircraft placement, and improving productivity.

Jamie Baker asked for clarification on the status of discussions with the Department of Justice regarding the Hawaiian Airlines acquisition and inquired about the paid yield premium for Premium Class seats versus traditional economy.

Answer

CEO Benito Minicucci stated that discussions with the DOJ have occurred and they are in the "home stretch," awaiting the DOJ's decision around August 5th, feeling strong about their pro-consumer case. CCO Andrew Harrison confirmed that the yield premium for the entire Premium Class cabin is around 40% over the main cabin, with about half of that being paid, suggesting the 15-20% estimate for paid premium is accurate.

Asked about the strategy for communicating the new premium travel experience to consumers and whether the company needs to hire outside talent to successfully execute this shift away from its traditional no-frills model.

Answer

Spirit will use a new ad agency to actively market the new offerings, which they believe will be easier than marketing basic economy since they are adding value. They will also leverage third-party distribution channels to sell premium products. While they are using outside advisors, they believe their internal team is fully aligned and that their low-cost DNA remains a key advantage in delivering value.