Allegiant Travel (ALGT) Q4 2018 Earnings Conference Call Transcript

Allegiant Travel (ALGT -4.15%)
Q4 2018 Earnings Conference Call
Jan. 30, 2019 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator 

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2018 Allegiant Travel company earnings conference call. [Operator instructions] As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Chris Allen, investor relations.

Sir, you may begin.

Chris Allen -- Investor Relations

Thank you. Welcome to the Allegiant Travel Company's fourth-quarter and full-year 2018 earnings call. On the call with me today are Maury Gallagher, the company's chairman and chief executive officer; John Redmond, the company's president; Scott Sheldon, our chief financial officer and chief operating officer; Drew Wells, our VP of revenue and planning; and a handful of others that will help answer questions. We'll start with some commentary then open it up to questions.

The company's comments today will contain forward-looking statements concerning our future performance and strategic plan. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the SEC. Any forward-looking statements are based on information available to us today.

We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise. The company cautions investors not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize. To view the earnings release as well as the rebroadcast of this call, feel free to visit the company's Investor Relations site at ir.allegiantair.com. With that, I would like to turn it over to John.

John Redmond -- President

Thank you very much, Chris, and good afternoon, everyone. Welcome to the end-of-year conference call, of course, one of the more interesting ones because we get to provide guidance on the following year. But as I read through our earnings release, getting ready for this call, I couldn't help to reflect on the Investor Day we had toward the end of 2016. In that Investor Day, we provided guidance, which was four years out 2020, which seemed crazy at the time to provide guidance so far out.

For those of you who participated who has since seen that information, the guidance we were providing was the initiatives that we were going to be working on, revenue initiatives as well as cost to get us to 2020, which was the year that we expected to come out of this significant fleet transition and operate an all Airbus fleet. Of course, now, when you look back at that today and you ask yourself, well, what's happened over that time frame? Very difficult transition that we completed in two years instead of three, frankly. We got done a year early, and that's why we're so excited about now going into '19. When you look at those initiatives, this amazing team not only has delivered on all the initiatives, but the ones that we haven't delivered on yet, we are pacing to deliver all of those on schedule as we suggested or stated.

So it's been an amazing time frame during a very difficult transition, but one that we're finally coming into an all Airbus fleet that when you look at the '19 guidance, you can only be excited about what's going to happen going forward. But I couldn't be more proud of the amazing job that the entire Allegiant team has done here in getting us to this important point in the history of the company. So when you look at this earnings release that we put out, there's a great deal of transparency to help understand the airline and non-airline business lines as we move forward. We mentioned last call we provide this, and of course, here it is.

Consistent with last year, we will not comment on the 2019 data point guidance, unless there are material changes during the course of the year. And of course, that's what we followed in '18 plan and we're doing that in '19. We did provide CASM-X guidance for 2019 as well. We did that to assist in your understanding of how our costs are trending as we continue to rightsize the operation for a single fleet guide.

We'll continue to grow into our excess pilots as we add 17 aircraft throughout 2019. And I'll let Scott give you a little bit more color on all the aircraft CAPEX when he gives his presentation. One of the data point that's not in the release is the fact that we will be a noncash federal taxpayer in both '19 and '20. We made some comments on this in the past, but I want to reiterate that as well.

So as I talked about the fleet transition, we, of course, completed that in the fourth quarter, as we said we did some time ago. And the entire Allegiant team is looking forward to operating an all Airbus fleet going forward. So as good as the performance has been in '18 as we completed the transition, our best years are ahead of us. As I heard someone say, you ain't seen nothing yet, and that's, of course, the very true statement for what's going to be happening here as we move forward.

So in Q4 and full year of 2018, we outperformed on every operating metric highlighted by controllable completion factor for the year of 99.7%. So the complexity and challenges of the transition did not distract the focus and intention of our incredible Allegiant team here. So as we finish up the year and look forward to next year, I couldn't be more proud to be associated with the management team we have and this wonderful group of employees we should all be standing and taking a bow. It's been amazing, but boy, I can't wait for '19.

And on that note, I'll turn it over to Scott.

Scott Sheldon -- Chief Financial Officer and Chief Operating Officer

Thanks, John, and good afternoon, everyone. First of all, I want to thank all of our team members and partners throughout the network for a really tremendous 2018. I think, the combined efforts and results really should be celebrated given the mission that was outlined at the beginning of the year. Maury tasked us with really finishing the sunsetting of our remaining 37 MD-80s.

We had in the pipeline to acquire and induct as many as 29 Airbus, which were primarily from used operators, multiple operators. During the summer season, we consolidated all of our MD-80 line to our Sanford base. We increased our Airbus operational reliability, which allowed us to minimize reliance on sparing aircraft. Our flight ops training did a great job at condensing the training footprint that's really allowed us to minimize our flight crews being off-line and particularly as we exited in November to get to as many as 75 crew members trained on the Airbus.

So without that, I think we could say we were successful on all those areas. In addition, we targeted some pretty aggressive operating metrics of which we were -- we hope to achieve. If you look at 2018 on a full-year basis, we increased completion percentage, controllable completion percentage by 0.7 points to 99.7%. This resulted in a reduction in controllable irregular ops expense by $10 million.

And really, with the exception of a 6-week period during the summer, these numbers would have been substantially better. We increased our [indiscernible] by 3.5 points to just over 85%; A14 by 3.5 points to 77%. We continue to be pleased with our CASM-X profile, which specifically for the airline, reduced by 1.8%. So once again, just a job well done to everyone throughout the network.

And a little more on guidance. John mentioned and did a nice job laying this out. But now, there's a couple points that I just want to give a little clarity on so we can walk down Page 3 of the earnings release to give you the forward curve, we expect $2.10 on a full-year basis. That's off of $2.33 full-year number.

We're currently paying about $2.10 a gallon. And cents per gallon, we're guiding $0.80 to $0.82 ASMs per gallon, which on the surface appears to be a little light given the $0.815 ASMs per gallon we put up in the fourth quarter. Really, the guiding factor here is the pacing of our A319s coming into the fleet. It's really first half loaded.

Our fleet plan has 17 units coming in with the first half bias of 319s. And so the six and a half percent increase in ASMs per gallon in '18 over '17 will fall off just a little bit into '19. Interest expense, we're guiding $70 million to $80 million on a full-year basis, which is up from about $54 million in 2018. It simply reflects the current leverage profile of the organization.

This includes the economics of the refinancing of our unsecured bond. Tax rate, we're guiding to 24% to 25%, which is up from a full-year effective tax rate of just under 19%. Full-year '18 was impacted primarily by two issues: one was a specific Section 199 deduction. In addition, we have some impact from the dissolution of our special purpose companies related to some aircraft that we had placed in Europe.

But moving on to ASM growth, we'll let Drew touch on that. Depreciation, we're guiding $150 million to $160 million for full-year '19. This was up from about $130 million in '18. On the surface, it's a pretty sizable increase, but I think folks should remember that our MD-80 fleet was impaired in fourth quarter of 2017, which effectively means it was written down to zero book value.

So for all of 2018, we had zero depreciation expense related to our entire MD-80 fleet, which produced about just under 20% of our ASMs. John mentioned our airline CASM-X. We're guiding down 3.5% to down 1.5% on single digit ASM growth. We continue to be pleased that some of the pacing items from the transition, particularly we're getting better efficiency on our flight crews and just efficiencies related to a single fleet type.

So once again, that's a full companywide effort. John mentioned the 2020 plan. We threw out just under $0.63 x fuel so you can see we're reaching those levels by the end of 2019. A little bit on CAPEX.

Full-year CAPEX for the airline is coming in around $530 million. It's really broken into two different buckets: maintenance CAPEX of $95 million to $115 million, which is up from about $48 million in the prior year. In addition, it's a fairly healthy aircraft CAPEX here. As you can see in the release, we terminated some finance leases and backfilled them with some outright purchases.

So some of this growth is really 2020 warranted. And then last but not least, our EPS guidance of $13.25 to $14.75. It's about 30% up if you midpoint it. So very pleased with the health of the organization, the health of the franchise.

And we look forward to what 2019 will bring. Drew?

Drew Wells -- Vice President of Revenue and pPanning

Thanks, Scott, and thanks, everyone, for joining us this afternoon. I'm very pleased to announce the fourth-quarter year-over-year TRASM of up 4.4%, including the impact of revenue recognition rules, which easily ends up as the best year-over-year performance in 2018, as we indicated in October. That number also includes roughly $2 million of benefit due to breakage associated with our credit card loyalty program. While we will be able to take increased breakage going forward, most of that $2 million should be considered a one-time benefit.

The breakage amount also explains the variance between today's release and the TRASM range 8-K-ed on January 10. Without breakage, TRASM was up 3.9%, which was slightly higher than what we expected at the beginning of the quarter. We saw record fixed fee performance with $50.3 million for the year. Note that this was the amount we forecasted to hit in 2020 through the EBIT initiatives laid out in the 2016 and 2017 Investor Days that John mentioned.

I'd like to commend everyone involved in the planning and operation of these flights for their success. As we turn the corner on our successful and unprecedented fleet transition, we expect to reap the benefits of the remaining 2020 EBIT initiatives. With a full-year ASM guidance of 7% to 9%, our utilization will increase in 2019 as our fleet count gets back to previous levels. However, we are set up well to drive efficient and unit revenue-accretive growth through the year.

Our announcement of a crew and plane based in Grand Rapids further strengthens our Mid-Continent-based strategy. This will allow us to continue to better optimize passenger throughput in our busiest destinations and to grow departures during higher demand times of the day, which has historically been good for fares. This is the peak time growth that is not dependent on aircraft growth. We will also reduce the number of spare aircraft, which will improve fleet productivity, adding growth to peak days a week.

This is peak day growth but is also not dependent on aircraft growth. We started to realize the benefit of e-commerce revenue project initiatives in late 2018 through the round-trip discount. The goal of this project is primarily to convert 1-way itineraries into round trips, which helps fill empty seats with ancillary-paying passengers. The project is in the early innings still and should provide more upside to 2019.

The pricing engine continues the good form we talked about in October and was instrumental in 4Q results. As we move into the second year of optimization, gains will likely be more yield driven versus load driven. We continue to be bullish on the revenue environment as forward demand looks strong. We will continue to benefit from the aforementioned initiatives and set up other self-help initiatives such as bundled ancillary products under development and should begin to roll out in the second half of the year.

As a reminder, the later Easter is only a modest negative to Q1, about one to one-and-a-half points; but a greater benefit to Q2, about two and two and a half points. Overall, I am very excited about the greater revenue opportunities in 2019, drive from the transition to an all Airbus fleet and our various self-help revenue initiatives. With that, I'd like to turn it over to the operator for Q&A. 

Questions and Answers:

Operator

[Operator instructions] And our first question will come from the line of Hunter Keay with Wolfe Research. Your line is open.

Hunter Keay -- Wolfe Research -- Analyst

Hi, everybody. Thank you. What's up? Maybe this question is for Sheldon. I'm kind of curious about this $800 million-or-so of CAPEX and the associated -- Australia's is going to push on the balance sheet.

Can you remind us, Scott, of the key covenants, either on minimum liquidity or EBITDA ratios that we need to be mindful of, particularly considering the recent tender offer that may have changed anything?

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

Hunter, this is Greg. I can help tackle that one. On the key covenants, there's a maintenance covenant that will come out on the refi of this -- the high-yield bonds. So we just announced -- or just we'll price and allocate this term loan B that happened yesterday.

And so that will be a $450 million instrument to replace the high-yield bonds. So going forward, all the covenants that we adhere to and really there's a maintenance covenant in there of $300 million minimum liquidity.

Hunter Keay -- Wolfe Research -- Analyst

OK. Actually, the only name was something around like EBITDA ratios or adjusted EBITDA or any of that stuff.

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

Yes. And that's five turns debt-to-EBITDA.

Hunter Keay -- Wolfe Research -- Analyst

Five turns debt to EBITDA. OK. Cool. And then would you care to tell us anything about this well-noted institutional asset manager? I'm kind of curious.

Obviously, you're not going to name them, but is this somebody that you guys had known for a long time to the airline side? Is this somebody that has a lot of maybe residential real estate experience? Just generically, can you help us describe how this came to be and what this institution might bring to the table?

John Redmond -- President

I think, we're better off not creating more of a guessing game. We'll just kind of wait until we release that information as we said before, the end of Q1. So we're comfortable with -- that will be completed by that time frame. And let's just say it's someone that you know.

Hunter Keay -- Wolfe Research -- Analyst

Gotcha. Thank you, John.

Operator

Thank you. Our next question comes from the line of Helane Becker with Cowen. Your line is open.

Helane Becker -- Cowen -- Analyst

Oh my God, I was so excited I choke. I'm so excited [Inaudible] that I choke. Sorry about that. So just a couple of things.

One is you talk about the profitability of all the non-airline stuff. Can you just mention how that progresses during the year so that we would just have a good understanding of if there are losses, they're front-end loaded or back-half loaded? Or how should I be thinking about that? Or shouldn't I be thinking about that?

John Redmond -- President

Well, I mean, at the end of the day, we're not going to provide any detail beyond what we provided, which is consistent with the entire release. It's just based on a full year. So when you look at the, say, Teesnap, a lot of that, of course, relates to a lot of first year courses being added. So the way the model works is they're more profitable in years two and out and less profitable in years being added.

When you look at Kingsway, that course is basically a breakeven. So you can look at it like that. And when you look at Sunseeker and the FEC, a lot of that has to do with preopening-related expenses, right? So as you incur certain types of expenses that you can't capitalize, they end up being losses that you see reflected in the negative income, if you will. So at the end of the day, it's not a significant number.

So if you want to just even straight-line it, I mean, you're not going to be material, however, you want to look at it. But any one particular quarter, it's not significant.

Helane Becker -- Cowen -- Analyst

OK, that's great. And then my other question is just with respect to what you can say about demand. Kind of given all the sentiment and what we saw in the first few weeks of the year with the government shutdown, I'm just kind of wondering if you've seen any changes in the way your customers are booking up and -- for the next couple of months maybe.

John Redmond -- President

Go ahead, Drew.

Drew Wells -- Vice President of Revenue and pPanning

This is Drew. So demand looks good moving forward. As we then mentioned on other calls, the first couple weeks of January tend to be kind of the biggest bellwether for how 1Q is going to perform, and we were booking kind of right as we expected. So I didn't see any sort of material slowdown with relation to government shutdown or anything else.

And I think the leisure space is very healthy right now.

Helane Becker -- Cowen -- Analyst

OK. Great. And thank you very much.

John Redmond -- President

Thanks, Helane.

Operator

Thank you. Our next question comes from the line of Savanthi Syth with Raymond James. Your line is open.

Savanthi Syth -- Raymond James -- Analyst

Hey, good afternoon. Just a little bit of clarity on the CAPEX side. Scott, I think you mentioned related to this kind of terminating of the aircraft and buying some really briefly, is there any kind of early payment for aircraft in future years? Or how should we think about that CAPEX?

John Redmond -- President

You want to take that, Greg?

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

Sure, yes. Savi, this is Greg. On the CAPEX, if you think about the airline CAPEX, excluding heavy maintenance, we're about $430 million in full-year '19. Of that, I would think about two-thirds of that relates to aircraft, and then the remaining one-third relates to spare engines and other CAPEX.

And so we're going to acquire half dozen seven spare engines brand new during '19, so that puts some pressure on the CAPEX as well.

Savanthi Syth -- Raymond James -- Analyst

OK, that makes sense. The engine part is probably what I was missing. And then if I might just follow up on the discussion about the initiatives that were laid out in 2017. Can you talk a little bit more about like just what run rate? I think it was $365 million that was kind of laid out.

And just what's the run rate we're at today? And what's going to yet to come over the next couple of years?

John Redmond -- President

I mean, we've never really provided a breakout study by year of implementation, but most of those have been completed or are well under way. But I don't have any breakout handy.

Savanthi Syth -- Raymond James -- Analyst

Is it just maybe that you comment a portioned of that's really less to execute on? Is that a fair assumption?

Drew Wells -- Vice President of Revenue and pPanning

Savi, this is Drew. I think, e-commerce is the biggest of the buckets that has kind of the least amount completed to date. As you think about fleet productivity, that's going to be a big 2019 effort as we reduce the spare count and we'll collect most of the benefit there. As you think about fuel benefit from ASM production, that's simply going to be a map exercise as we move into all Airbus.

So we'll see kind of a big windfall this year as well. In terms of the others, there's credit card is kind of right on the trajectory for $50 million in this year and next. I think, that pretty much covers it. Is there anything else specific you wanted to go through?

Savanthi Syth -- Raymond James -- Analyst

That's it now. Thanks.

Drew Wells -- Vice President of Revenue and pPanning

I mean, the big takeaway there is most of this is all being achieved by the end of '19 as opposed to by the end of '20, which is what was originally communicated back on Investor Day.

Savanthi Syth -- Raymond James -- Analyst

Got it. All right. Appreciate it. Thank you.

Operator

Thank you. Our next question comes from the line of Catherine O'Brien with the Goldman Sachs. Your line is open.

Catherine O'Brien -- Goldman Sachs -- Analyst

Good afternoon. Thanks for the time in. So a question for Scott or Greg. Can you remind if there are any moving pieces between quarters with respect to CASM as we go through 2019? Or should we just simply assume that lower-capacity quarters should see higher CASM and vice versa?

Scott Sheldon -- Chief Financial Officer and Chief Operating Officer

Yes, I think it's the latter. I think, you're going to see the most pressure in the first quarter just given it's the least ASM growth year over year and that it's pretty consistent through two, three and four -- quarters 2, 3 and 4.

Catherine O'Brien -- Goldman Sachs -- Analyst

OK, great. And then can you maybe give us some color just on underlying cost assumptions to that non-airline operating income guidance just to help us think about the total company cost structure we should think about for this year?

John Redmond -- President

I'm not sure I fully understand your question. I'm sorry, Catherine, but...

Catherine O'Brien -- Goldman Sachs -- Analyst

So you give us some non-airline operating income. But I'm just wondering maybe you have like a margin or some assumption or some sort of guidance we can back into non-airline cost trends this year. Or just maybe year over year, how ever you want us to think about that.

Scott Sheldon -- Chief Financial Officer and Chief Operating Officer

Yes. I think, if you look at the impact on full-year '19 kind of non-airline ex-fuel cost, it's anywhere from kind of $0.002 to $0.003 per ASM, which is probably up $0.002 year over year. So to give you a little color.

Catherine O'Brien -- Goldman Sachs -- Analyst

OK, great. Thanks for that. And then maybe just one quick -- one more quick one, if I could. What kind of benefit, if any, do you have from your improvement of your new management system baked into your 2019 guidance? Or was it really the largest impact we saw from that in 2018? Thank you for the time.

Drew Wells -- Vice President of Revenue and pPanning

This is Drew. The largest impact is still going to be in 2018. Of kind of similar to what we talked about before, the holidays, the spring break, the very well-defined travel periods have excelled as well as kind of the lowest of demand periods. And that kind of constitutes almost half maybe of the flight which we have.

There's still a lot of upside to be had through the summer, which we talked about quite a bit in both July and October. So yes, I believe the biggest chunk is out of the way in '18 with more upside to '19 than we probably initially expected.

Catherine O'Brien -- Goldman Sachs -- Analyst

Thank you so much.

Operator

Thank you. And our next question comes from the line of Matt Fallon with Deutsche Bank. Your line is open.

Mike Linenberg -- Deutsche Bank -- Analyst

Hey, it's Mike Linenberg here actually in lieu of Matt. Just a couple here. The $175 million of financing that you're getting for the $420 million, as we think about the terms of that debt, would that be similar to the terms of where you currently borrow in the marketplace? Is that a fair assumption as we think about modeling in that expense for 2019?

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

Again, all of the level of details will come out in the release when we're completed with that transaction. But I think just the fact that we called out some of it as being nonrecourse, you really can't expect it to be something as full collateral like, say, financing a plane.

John Redmond -- President

Well, the interest cost will be capitalized as well, Michael. This just takes some time.

Mike Linenberg -- Deutsche Bank -- Analyst

OK, you're saying that the interest cost will be capitalized?

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

Yes.

John Redmond -- President

Yes, sir.

Mike Linenberg -- Deutsche Bank -- Analyst

OK. And then of the remaining $420 million, the $420 million less the $175 million, are we to assume that that's going to come out of internally generated funds? Are you also looking to finance a portion of that?

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

That would be internally generated funds.

Mike Linenberg -- Deutsche Bank -- Analyst

OK, great. And then just second question, just to Drew calling out the Easter impact. I think, it was -- you said 1.5 points on March; but 2.5, I think, in the June quarter. Why the spread there? I mean, I realize Easter was April 1 last year and it's the 21st this year.

Is there something else there than just the way the day fell?

Drew Wells -- Vice President of Revenue and pPanning

It's really about kind of what the comp looks like. So late April is very low demand for our leisure customers, so reaping any of the benefit from an Easter shift in some of that peak travel will swing the needle far more out there than it will at the end of March when there's still a lot of really strong traffic, some spring break that are shipping out. So a lot of it is just based on kind of what the non-Easter part of it looks like.

Mike Linenberg -- Deutsche Bank -- Analyst

OK. That makes a lot of sense. OK, great. Thanks, Drew.

Thanks, everyone.

Drew Wells -- Vice President of Revenue and pPanning

Thank you.

Operator

Thank you. Our next question comes from the line of Dan McKenzie with Buckingham Research. Your line is open.

Dan McKenzie -- Buckingham Research -- Analyst

Hi, good afternoon. Thanks, guys. I just wanted to go back to kind of an earlier question on the non-airline cost. I do see that the 2019 non-airline operating income is broken out, which is very helpful.

With respect to the revenue side of the business and as kind of your full-year outlook, EPS outlook, what are you -- what are the key drivers of your revenue outlook? Obviously, I've heard the commentary around demand very strong, but what are the things that we should watch out for that could potentially go wrong here? Or do you feel like you've built in an adequate amount of conservatism?

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

Well, you're talking about the non-airline. So I can't imagine ending and going sideways on this for the most part. I mean, we did provide a projection on the number of golf courses that we expect to add. So to the extent that we did not achieve our revenue target, it would just be missing the number of courses we expect to add.

But again, it wouldn't be material.

Dan McKenzie -- Buckingham Research -- Analyst

Sorry, I meant to clarify on the airline side of the business just with respect to this year.

Drew Wells -- Vice President of Revenue and pPanning

Sure. So yes, the demand does look good, but there was always a risk of falloff there. As you've seen in the past from us, the leisure customer is very resilient. And in the event that we do see economic downturn, we're still confident that we can put together very strong results.

And generally, that will mean either oil comes down and we can adjust capacity appropriately to continue to incentivize leisure customer travel. It generally just comes down to the price point at which you do that. I guess, the second piece of that is we are still relying on some self-help initiatives in 2019, and there's always deployment risk as to when those can rule out and whether or not we can maximize that benefit in the time line that we expect. So there's always that on the back end.

As it pertains to fleet, I'm very confident in all our counterparties in the time lines we have in place. I don't expect to repeat some of the delivery issues we've seen in the past. So I don't believe that that is a material risk at this point, though, it always does exist at some level.

Dan McKenzie -- Buckingham Research -- Analyst

OK, good. And then with respect to the follow-up question here, I'm wondering if we can just focus a little bit more on Sunseeker. It's really an investor concern. And if I could maybe just focus on cost and how this might impact kind of the projections that you gave us back last September.

I think, the $420 million estimate was a hard estimate, but did not include expenses to date. And now, we're seeing some -- expenses to date are close to $51 million, so presumably, higher than last year. So I guess, one, has there been some cost refunds on Sunseeker? Has anything changed about the development? And how might that change sort of how you're thinking about the Sunseeker income statement? Or how that might, I guess, sort of rank as a percent of total EBIT as we look out to 2020?

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

There will be no change at all, Dan. I mean, when we first were talking about it, even we said $420 million was a $420 million going-forward number. So we commented we had spent in the neighborhood of $50 million to date. Now you're seeing as of the end of December, we have spent $51 million.

But that doesn't change the overall $470 million total, which had, of course, been inclusive of everything spent up to the time we were chatting, plus the $420 million going forward. So that overall $470 million doesn't change nor the $420 million going forward.

Dan McKenzie -- Buckingham Research -- Analyst

Got it. Is how are thinking about the contribution of Sunseeker relative to the overall operation? Still in line with that initial forecast that you put together for us back in September last year?

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

We're going to know a lot more here in another couple of months. But it is -- we're still hoping to be -- if you drove by the site, you'd see a lot of work going on. So a lot of times, people say we haven't done anything. There's work going on now.

I think, what we would like to see before we start committing to a more firm time frame is when you to start going vertical. So we're still expecting that going vertical time frame to be at the very back end of Q1 or early Q2. So call it the March, April time frame. And it is still our expectation, but again, we'll know more in another couple of months of that from the time we start going vertical, we would be opening in the neighborhood about 18 months from then.

So call it the back half of 2020 is when we'd be looking to open up this project.

John Redmond -- President

Dan, on the economics we put out, we see those being just fine. The forecast that we put out back in September, nothing's changed there. And just to be clear, none of this is expense. This is all capital outlay.

So the $50 million was not an expense item. It was a capital item. So that number has been pretty firm for many, many months that we've talked about. Nothing's changed there, and we don't expect to exceed budget either.

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

And of course, the biggest component of that, which we announced a long, long time ago, was land acquisition, right, which was just north of $30 million. So that was the biggest piece of the $50 million that had been spent.

Dan McKenzie -- Buckingham Research -- Analyst

Understood. OK. I appreciate the clarificication. Thanks.

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

Thanks, Dan.

John Redmond -- President

Thank you.

Operator

Thank you. And our next question comes from the line of Joseph DeNardi with Stifel. Your line is open.

Bert Subin -- Stifel Financial Corp. -- Analyst

Hey, this is actually Bert on for Joe. I think this question's probably for Drew. I'm just wondering, United's growth strategy has been restoring some of the feed traffic share it lost earlier in the decade. So regional capacity growth for them has been high and will be high again next year or this year.

Seems like American sort of planning a similar strategy. Has that restoration of service a smaller market that's impacted you guys in any noticeable way as it's pushing you to different type of markets? Or do you just not really think about it at all?

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

Thanks. It's not something that's shown up in our results at all. All this traffic still requires connections and can sometimes drive up to two, three hours of extra travel time on to something that should be a 2.5-hour nonstop hub. Additionally, a big part of that feed is high-priced regional into the hub where they can then spoke out.

Largely, they're not fishing in the same customer pond that we are in terms of leisure versus business spread. And from that perspective, I think, we've saved out of that mess altogether. So not something that we felt.

Maury Gallagher -- Chairman and Chief Executive Officer

This is Maury. I want to reemphasize this customer that the United or American might attract is not our customer. Frankly, it's a combination of stealing traffic from the other guy and/or maybe some stimulation because of better schedules, but it's not a person getting on an airplane going to Punta Gorda or something like a place like that. Not to say that it doesn't happen, but we've just seen it over and over.

It's not a zero-sum game. So while they're going about their own business, they're really playing against each other.

Bert Subin -- Stifel Financial Corp. -- Analyst

Great. Thanks so much.

Operator

Thank you. And our next question comes from a line of Steve O'Hara with Sidoti & Company. Your line is open.

Steve O'Hara -- Sidoti & Company -- Analyst

Yes, hi. Thanks for taking my question. Just on the non-airline operating income, that's, I assume, included in the earnings-per-share guidance that it's a GAAP number and the same is adjusted. Is that correct?

Scott Sheldon -- Chief Financial Officer and Chief Operating Officer

That's correct.

Maury Gallagher -- Chairman and Chief Executive Officer

Yes.

Steve O'Hara -- Sidoti & Company -- Analyst

OK. And can you just -- on the 2020 initiatives, there's some comment about them proceeding and how they were -- you were getting most of the benefit here and there. I guess, can you just clarify that? I mean, it seems like the benefit was significantly larger than that that you laid out. But are we talking about kind of where you had expected to be? Is that what you're saying?

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

Well, when we provided that information, the commentary around it was we expected to achieve all of those benefits in 2020, right? A lot of those benefits have been achieved to date. And as Drew was commenting on earlier, a lot of them will be achieved throughout '19. So we're not going to experience the full benefit in '19, but we're going to achieve them as we move through the year. So several of those relate to being done with the fleet transition.

So the fact that we're done at the end of '18, it's not the end of '19, will obviously pull forward all of those benefits. So comfortable with what trails into '20, but most, if not all of that, is done through '19.

Steve O'Hara -- Sidoti & Company -- Analyst

OK, OK. All right. And just on the ASMs per gallon and maybe fuel economy there, I mean, with the 319s coming in, should we expect that to kind of improve throughout the year and then improve again in 2020, assuming more 320s into the fleet?

John Redmond -- President

Yes, I think that's fair.

Steve O'Hara -- Sidoti & Company -- Analyst

OK. OK. And is 85 still the right number to kind of think about -- 83 to 85, something in that range?

Drew Wells -- Vice President of Revenue and pPanning

Yes, I think it's 85, a larger bias of A320s. But in general, that's the general direction.

Steve O'Hara -- Sidoti & Company -- Analyst

OK. All right. Thank you.

Operator

Thank you. And our next question comes from the line of Duane Pfennigwerth with Evercore. Your line is open.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Hey guys, good afternoon. One clarification on the $250 million to $300 million in Sunseeker spend this year with $420 million remaining. Is it $420 million remaining after that $275 million?

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

No. So what you have is $420 million was remaining, and we said that we're looking to finance $175 million. So $420 million less $175 million. We would be spending $245 million, right? So anything that we would spend this year in excess of $245 million would be financing that we would be announcing here by the end of the quarter.

Duane Pfennigwerth -- Evercore ISI -- Analyst

OK. But the $420 million remaining includes anything you would spend, whether financed or paid for yourself in 2019?

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

Yes.

Duane Pfennigwerth -- Evercore ISI -- Analyst

And then secondly, just on the increased reporting transparency, it gets a little bit better each quarter and really applaud you for that, specifically in the context of forward guidance. But of course, it piques our interest a little. Why are you spending any capital and company focus on golf course software and Dave-&-Buster's-like game rooms? I understand these things might be interesting experiments, but why do they need to be funded on balance sheet by Allegiant equity holders?

John Redmond -- President

Well, we look at the synergistic value, right? It's where one plus one is not even three. It's like four. So sometimes, when people think of golf courses, for instance...

Duane Pfennigwerth -- Evercore ISI -- Analyst

John, sorry, I've covered Allegiant for a long time. There is no synergy between golf course management software and Allegiant Travel. So can you just speak to the debate at the board level regarding the next -- sort of how you debate the next dollar of investment into a Dave & Buster's versus an airline versus a hotel? I mean, the ROIC of the airlines should be much higher than anything else you have going on. So what does that debate look like?

Maury Gallagher -- Chairman and Chief Executive Officer

Duane, I'm going to tell you what the debate looks like. The person that sits on an airplane, what else do they do besides sit on an airplane? Do they go to a Dave & Buster's? Yes? Do they play golf? Absolutely. So you gather information. This is an information-centric era, Duane.

We live in information. We want more customers. We want bigger wallet share. And so yes, you can make an argument that maybe the maximum ROI for the next 24 months is putting it into an airplane, but what about out four years from now, five years from now? So this stuff is all part of our trying to articulate this grand scheme of going more customer-centric rather than tube-centric.

Filling up a tube is important, and we will do and focus on that tremendously. But we want to have more relationships with more customers on an individual basis and understand where they spend their money over and above just getting in the tube. So that's the marginal spend. And just like every other investment, the early days we're never going to have a better ROI than a mature business will.

But we are making those investments, and we're trying again to articulate that as best we can. So that's what the is board understanding and the board is fully on board with all of this.

John Redmond -- President

So Duane, let me just give you a deeper data point just to help understand what Maury said because a lot of times, people haven't thought about it or don't care about it. But the golf courses, for instance, right now, are generating emails, brand-new emails, people we don't know at the rate of one-third of what the airline generates on a daily basis, right? So that's a significant number of emails that we're capturing from golf courses about people that currently aren't in Allegiant's database. So when you add another 800 courses as we expect throughout the year, obviously, we'll be generating emails from those courses at the rate of half of the rate that the airline produces, right? So that's an incredible data point that goes well beyond what you thought of given your comments.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Appreciate those thoughts, Maury and John. I would just say x these other adventures, you're guiding to $15 in earnings for the airline. Congratulations on getting the fleet upgrade done more quickly than you initially anticipated. But your multiple, I just wondered to what extent you and the board reflect upon the multiple and how your multiple has changed as you deploy capital to lower-return businesses.

Maury Gallagher -- Chairman and Chief Executive Officer

No problem. We certainly are conscious of that, and it's a short-term hit to the multiple but long-term win, we think. That's as simple as we can say it.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Thank you.

Maury Gallagher -- Chairman and Chief Executive Officer

Welcome.

Operator

Thank you. And our next question comes from of the line of Rajeev Lalwani with Morgan Stanley. Your line is open.

Rajeev Lalwani -- Morgan Stanley -- Analyst

Hi guys. It's going to be a tough act to follow. Just a couple of airline questions for you. One, you guys talked about 600 routes that you've identified over the next whatever years for possible growth.

Are those 600 -- are competition levels in those markets similar to what you're seeing now, meaning can you attack those routes and sort of keep that 75% or so of your markets being without much competition?

Drew Wells -- Vice President of Revenue and pPanning

Yes. Of those markets that we identified, it's actually close to about 10% competition right now. So we will actually drop the percentage of markets that are competitive should we get through all of those.

Rajeev Lalwani -- Morgan Stanley -- Analyst

OK, helpful. And then the other -- as it relates to just oil prices moving around, how does it impact your fleet utilization and your network now given all the work that you've done on the fleet transition versus years ago? I imagine it's very different where you're not really flexing as much based on oil and moving peak and nonpeak travel around. But I'd love to just get an update on how that looks today after the various changes.

Drew Wells -- Vice President of Revenue and pPanning

Sure. So the core of our process is the exact same. As we forecast out, all of the flights we want to put out for sales, six to nine months out. We're ensuring that that incremental round-trip on a market-level basis is exceeding the gross profit threshold that we need in order to have that existing for an MD just as it exists for an Airbus.

In terms of earnings potential, there's a difference of about $1 per gallon between the MD and the Airbus to secure the same earnings and margin. So that's kind of the flexibility we have to go there. As we plan, we're always using higher oil than what we expect to actually receive. So we're already planning to have a little bit of a buffer in there to account for the fuel variations that you're talking about.

Such that that does not arise, we have the ability to add capacity and closer in maybe three, four months out to be able to capitalize on that. But again, everything is subject to hitting the internal gross thresholds that we set up.

Rajeev Lalwani -- Morgan Stanley -- Analyst

If I can sneak a last one in. On the non-airline operating income, that $15 million, when does that start to go away? Is that in the next couple of years? Does that turn into a positive? Just preliminary thoughts there for John.

John Redmond -- President

Well, really, as you get in the back half of '20, it starts to get closer, of course, to a breakeven. When you start to open Sunseeker, you definitely get to that direction. You look at FECs and you look at Teesnap, it's more of a scale game. So you're really -- when you start to look at '21, I mean, the numbers all start to look extremely positive.

So '19, of course, is kind of like, call it a transition. You're just not with the fleet. But that transition year, it allows you to get the scale you need to in order to get out of these -- the negative carry and move into '21, 2021 where it starts to look a lot better.

Rajeev Lalwani -- Morgan Stanley -- Analyst

Thank you.

Operator

[Operator instructions] And our next question is a follow-up question from Dan McKenzie with Buckingham Research. Your line is open. Mr. McKenzie, your line is open.

Dan McKenzie -- Buckingham Research -- Analyst

Well, Thank you. If I can go back to nonfuel cost, now 1.5% to 3.5%. Can you just remind as where the -- kind of lay out maybe the top 3 line items where the greatest inefficiency was in 2018. So I think, obviously, there's a fleet transition.

Is it that you just simply don't need to hire? You've already hired all the pilots and flight attendants that you need for this year? Or if you can just kind of help us understand kind of where those -- the good guys are for '19.

Scott Sheldon -- Chief Financial Officer and Chief Operating Officer

Dan, this is Scott. Yes, 2018, it was just you're carrying a lot of crews, particularly as you're really -- you're flying 37 MD-80s. You're fully staffed for that. And as it draws down and then you put people into a 70-day cycle to transition to an Airbus, you're definitely carrying excess.

I think, our productivity runs around 50%. We'll have to pace. We think we'll drive may be 5, 6 points higher from 2019, so that'll definitely be a good guide. Taking utilization up a little bit from '18 to '19 will definitely help.

Continue to see real positive movement in maintenance and repairs. We'll use the guide for aircraft. We think we said historically, if you're targeting a $75,000 per month type profile, that would be a win for us, and we're continuing to see movement toward that. And maybe the bad guy is just DNA, which we highlighted and tried to give color on the impact on an absolute basis, it's definitely up, and that's partly because of the writedown.

But just more importantly, as we introduced a lot of more expensive aircraft as part of the transition. So I think from a face of the financial statements, it's pretty straightforward on where the good guys are into '19 and '20.

Dan McKenzie -- Buckingham Research -- Analyst

Yes, very good. And then I guess, I'm just wondering if I can follow-up on an earlier question. Maury, you referenced the appeal of the credit card and the information world that we live in today. And so as we just kind of think about credit card spend, just kind of more directly with respect to how it can contribute to Allegiant, what might the credit card spend perhaps look like in three years, five years as you think about the contribution that it has with respect to revenue -- third-party revenue, so to speak.

Maury Gallagher -- Chairman and Chief Executive Officer

Scott DeAngelo will answer that.

Scott DeAngelo -- Chief Marketing Officer -- Analyst

Yes, you bet. Happy to add color on that. So to build on what Drew said earlier, we reiterate again that by end of 2020, I think that the credit card program, as we know it today, will be contributing at least $50 million in EBITDA to the business. A couple other areas and color to think about it.

Above and beyond that, we began to leverage already existing partnerships but with minor-league baseball. We're starting to season. You'll see some 44 of the largest teams exposing to 15.5 million fans the ability to get the Allegiant cards. And to just quickly put that in perspective, that 15.5 million, if you think of a stadium like an airplane, appreciating the difference will be 97,000 flights, just shy of what Allegiant did in 2018.

So that's just one example of how we are scaling the exposure of it. You take the other assets, be them family entertainment centers, golf courses or other existing or sponsorship or partnership deals. They become very asset-light weight to distribute the credit card. So we'll keep posted on the success rate of that, but you can begin to see that at least from an exposure point of view, we'll be doubling, tripling, quadrupling who we're exposing for the card, and we expect to see continued great growth from that.

Dan McKenzie -- Buckingham Research -- Analyst

OK. Thanks for the time you guys.

Scott DeAngelo -- Chief Marketing Officer -- Analyst

Thanks, Dan.

Operator

Thank you. And we have a follow-up question from the line of Savi Syth with Raymond James. Your line is open.

Savi Syth -- Raymond James -- Analyst

Just one question on some of these -- on the FEC and maybe Teesnap, like, what's the size of that where you say you kind of get to a good tale. And maybe kind of the more interesting question is kind of is it in a base case assumptions for these kind of various businesses pan out in like five to maybe a little bit longer, let's say, once those business mature, what's the mix between kind of the airline side versus kind of these non-airline businesses, you think from a profit mix standpoint?

John Redmond -- President

When you look at -- let's start with Teesnap. When you look at adding the potential of that 800 courses in the next year, the -- I think, I mentioned in a response to an earlier questions that the year one of a course life, if you will, is the install year. And the most profitable years are years two and out, right? with really the earnings start to mature in three and out. So we have -- we would have the number of courses at the end of '19 to have a cash flow positive in '21.

You get meaningful cash flow positive stories. The FECs, if you just opened up one, for instance, you would be cash flow positive that day. The challenge you have is as you start to scale up and open more, you're always running into preopening expenses that are masking some of the earnings, right? So that's why I say it takes a little bit of scale, and I'm going to say like three or four of those to be open where you start to get a cash flow positive story. So it's a great story.

It's not like years out. That's why we're pointing for the back end of '20 and into '21 when you start to meaningful, and they're not a cash drag.

Savanthi Syth -- Raymond James -- Analyst

Helpful. And then from a profitability mix standpoint, like how big can these businesses be relative to kind of the airline side?

John Redmond -- President

Well, it's all a guessing game at this stage, as to how big they actually can get. So I...

Maury Gallagher -- Chairman and Chief Executive Officer

The airline is going to dominate the foreseeable future. So that -- don't expect to change, Savi. So at this point, we don't want to go on record. It's just going to be this percentage or that percentage at this juncture.

Savi Syth -- Raymond James -- Analyst

OK. Thank you.

Maury Gallagher -- Chairman and Chief Executive Officer

Yeah.

Operator

And this concludes today's question-and-answer session. I would now like to turn the call back to Maury Gallagher for closing remarks.

Maury Gallagher -- Chairman and Chief Executive Officer

Thank you very much.

Operator

[Operator signoff]

Duration: 56 minutes

Call Participants:

Chris Allen -- Investor Relations

John Redmond -- President

Scott Sheldon -- Chief Financial Officer and Chief Operating Officer

Drew Wells -- Vice President of Revenue and pPanning

Hunter Keay -- Wolfe Research -- Analyst

Greg Anderson -- Senior Vice President, Treasury and Principal Accounting Officer

Helane Becker -- Cowen -- Analyst

Savanthi Syth -- Raymond James -- Analyst

Catherine O'Brien -- Goldman Sachs -- Analyst

Mike Linenberg -- Deutsche Bank -- Analyst

Dan McKenzie -- Buckingham Research -- Analyst

Bert Subin -- Stifel Financial Corp. -- Analyst

Maury Gallagher -- Chairman and Chief Executive Officer

Steve O'Hara -- Sidoti & Company -- Analyst

Duane Pfennigwerth -- Evercore ISI -- Analyst

Rajeev Lalwani -- Morgan Stanley -- Analyst

Scott DeAngelo -- Chief Marketing Officer -- Analyst

Savi Syth -- Raymond James -- Analyst

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