RASM Inflection and Fare Increases
Q: How confident are you that RASM will turn positive in Q4?
A: Management is confident that RASM will turn positive starting in September, as fares have already inflected positively year-over-year. This trend is expected to continue into the fourth quarter, driven by current trends and anticipated capacity cuts in the industry.

Cost Savings and Sustainability
Q: What drove the better-than-expected cost performance this quarter?
A: The company achieved over $100 million in annual run rate savings from its cost savings plan, contributing to outperformance versus guidance. Lease extensions provided additional benefits. Simplifying the network and operations is yielding significant, sustainable cost reductions, which will continue to accelerate through the year.

Capacity Adjustments to Focus on Peak Demand
Q: How does reducing off-peak capacity impact utilization and margins?
A: By cutting oversupply during midweek, the airline expects a slight impact to CASM but anticipates several points improvement in RASM, directly boosting margins. Utilization may decrease by about an hour, affecting costs by around $60 million in aircraft rent, but the net effect is margin accretive.

Confidence in Meeting Pretax Margin Targets
Q: Can you still achieve your 10-14% pretax margin target by 2025?
A: Management remains confident in meeting the pretax margin target, noting that the cost advantage is widening and sustainable. While capacity oversupply may shift the timeline by one or two quarters, industry capacity cuts are expected to support margin improvements.

Bundled Fares and Pricing Strategy
Q: What is the rationale behind introducing bundled fares now?
A: The introduction of bundled fares through "The New Frontier" in May allows customers to make decisions upfront, enhancing transparency. This strategy has led to a higher ancillary attachment rate and is considered accretive. It positions the airline favorably as the industry moves away from promotional fares.

Performance of New Routes
Q: How are your new routes performing, and what's your approach to underperformers?
A: Of the new routes launched, about two-thirds are operating positively. The company promptly addresses underperforming routes, removing them as they move into off-peak seasons. Investments continue in routes expected to mature to system-level performance over the next 12 months.

Aircraft Deferrals and Capacity Growth
Q: How do aircraft deferrals impact future capacity growth and sale-leaseback gains?
A: Deferring aircraft deliveries has smoothed capacity growth, with expectations of mid- to upper-single-digit capacity increases in 2025. Sale-leaseback gains are not significantly impacted, as a similar number of aircraft are expected next year compared to this year.

Impact of Technology Outages and Cost Recovery
Q: What was the financial impact of recent technology outages, and will you recover costs?
A: Technology outages due to Microsoft Azure and CrowdStrike incidents resulted in over $20 million in costs and roughly 2 points in margin degradation. The company intends to recover these costs but did not provide specific details.

Load Factors and Off-Peak Demand
Q: Why aren't lower fares stimulating demand during off-peak times?
A: Despite offering fares as low as $0.01, demand during off-peak days remains limited due to changes in travel patterns, including flexible work arrangements and reduced business travel. The airline recognizes this as a semi-permanent change and is adjusting its schedule accordingly.

Sustaining Cost Advantage Over Competitors
Q: How does your cost advantage compare to competitors, and is it sustainable?
A: The airline's cost advantage has widened to 45% and is expected to sustain and leverage further through cost-saving initiatives. The narrative of cost convergence has been debunked, and management sees the cost advantage as durable and expanding into 2025.