Allegiant Travel (ALGT) Q3 2021 Earnings Call Transcript

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Allegiant Travel (ALGT 0.87%)
Q3 2021 Earnings Call
Oct 27, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, everyone, and welcome to the Q3 2021 Allegiant Travel Company Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to your host, Ms. Sherry Wilson.

Sherry Wilson -- Director of Investor Relation

Thank you, Kirby. Welcome to the Allegiant Travel Company's Third Quarter 2021 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; Greg Anderson, our EVP and Chief Financial Officer; Scott Sheldon, our EVP and Chief Operating Officer; Scott DeAngelo, our EVP and Chief Marketing Officer; Drew Wells, our SVP of Revenue and Planning; and a handful of others to help answer questions. We will start the call with commentary and then open it up to questions. We ask that you please limit yourself to one question and one follow-up.

The company's comments today will contain forward-looking statements concerning our future performance and strategic plans. Various risk factors could cause the underlying assumptions of these statements in 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 this earnings release as well as the rebroadcast of the call, feel free to visit the company's Investor Relations site at ir.allegiantair.com.

With that, I'll turn it over to Maury.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Thank you, Sherry, and good afternoon, everyone. Thank you for joining us again. We had another very good quarter as we saw loads and yields improved versus earlier this year in Q1 and two. Our scheduled service ASMs increased 17% this year versus the same quarter in 2019. As I mentioned in our release, we are the only carrier this year, that I'm aware of, who has both grown their system compared to 2019 and has been profitable. And subsequently, this was a substantial increase versus the sequential 4.5% growth in Q2 and 3.1% growth in Q1. And while our third quarter's results were profitable, they were impacted by our operational challenges. This spring, many in the industry were revving their motors for the drag race to restart their airlines. Common theme was flag paint and planting and get there before someone else. Majors had to refocus much of their flying to leisure-oriented destinations given the lack of business and international passengers. And we, the low-cost carriers, we're feeling our oats as well and looking to get out and plant some flags. We all were looking to get out of the gates quickly and stake the new turf regardless the focus on leisure traffic in the associated airports by all concerned. As a result, the operational demands on leisure destination airports, particularly in Florida were substantial.

Comparatively, business-focused airports in most of your larger NFL cities were operating at a fraction of their traditional volumes. Some of our destination airports had operational increases of up to 100% compared to 2020 and 2019, respectively. This added leisure flight activity was hampered by a difficult labor environment as well. Airports with these increases in activity did not have the necessary personnel for this substantial growth. An illustrative example of this unprecedented leisure effect was Southwest's comments about their recent operational problems tied to ATC issues in Florida, stating that half of their flights now touch Florida each day. This amazing evolution of the network of one of the major carriers in the U.S. is indicative of the substantial shift in where airplanes were flying this past summer. My label for this phenomena is Leisure Destination Overload. As I said, we were not immune to the challenges the industry was experiencing this past summer. Over the past few years, we have implemented a generous compensation program if and when we interrupt the customer's trip. Our approach in this event is to provide a better-than-average amount of TLC to help make -- take the sting out of this bad situation. If we were to add back these interrupted trip costs and other onetime associated operational expenses, our unit cost would have been on the mark.

Greg will have more comments in a few minutes. You've heard every carrier so far comment on increasing fuel prices. Some carriers are still hedging, but understand this will only provide short-term relief. Capacity reductions are the only remedy long term for fuel price increases. We have first-hand knowledge in this area. In 2008, in the first half of the year, we made substantial capacity cuts to offset the then-skyrocketing energy cost. And while we plan on growing this coming year by at least low double-digit percentages, increasing fuel cost could put a damper on this growth. As we told you repeatedly, our model's flexibility allows us to flex up and down better than others. We have shown a consistent ability to grow over the years, but we have also been able to quickly retreat if needed, as we did in early 2008 and last year's pandemic. I'm excited about where we're at. We're in excellent shape. Our balance sheet has improved substantially during these difficult times. At the quarter end, we had over $1.1 billion of cash and only $500 million of net debt. We've restarted Sunseeker, and we recently completed a $350 million financing line to finish the construction. And John will have some additional comments. Our third-party revenue efforts are paying dividends. They are increasing nicely.

These incremental revenues have been a difference maker through the years, providing us with industry-leading unit revenues and associated profits. This is all part of our Allegiant 2.0 strategy that we've talked about previously. Scott DeAngelo will have further comments as well. We are continuing our climb back from the depths of the pandemic, and this climb out has not been a straight line. It has been complicated by the volatility of the labor markets as well as COVID-related absences that we experienced this past summer. But we've seen demand continue to increase nicely in the past few months in spite of the Delta variant outbreak. We were the first to profitability from COVID. Our model and our noncompetitive route structure continue to be industry leaders. And I believe 2022 will continue this return to normalcy, and we will lead the industry out of this is abyss of the past 1.5 years. Lastly, as usual, I want to thank our team members who have been the difference maker in our success through the years, and now is no different. They have been warriors on the front line this entire time in the past 1.5 years, consistently transporting our passengers day in and day out to their destinations.

Thank you to everyone. John?

John Redmond -- President

Thank you very much, Maury, and good afternoon, everyone. Like Maury, I'd like to take this opportunity to thank all of our incredible team members who go above and beyond every day to help this company move forward out of this pandemic. The challenges brought on by the pandemic's shock wave have led the supply chain upheaval and labor shortages, creating operational challenges throughout the company none of us have ever seen or experienced before. You are all rising to the occasion, and we are getting through it, as painful as it may be. Again, I am thankful for your continued efforts and understanding. Given these unprecedented challenges, we still had a great financial quarter after adjusting for one-off costs associated with irregular ops. As we adjust to and fix these challenges, our results will continue to improve. Our revenue is strengthening, exceeding Q3 2019, and we expect Q4 to exceed 2019 Q4 as well. In regards to Sunseeker, here are a couple of updates. As previously announced, the $350 million financing transaction with Castlelake has been completed. We expect the first $175 million tranche to fund in the next couple of days. Castlelake has been a great partner and Allegiant Travel looks forward to a long-term relationship. Construction has resumed on the resort with approximately 250 people working on the project today. Construction on the golf course has resumed as well.

We expect these projects to be completed in Q1 2023. The hotel tower should be topped off by the end of this year, the two suite towers, as expected, will top off in Q1 of 2022. We expect to begin taking reservations in Q1 of 2022 as well. And also beginning Q1 2022, we will resume segment reporting, showing some secret data separately as we did in the past pre-pandemic. As I've done on past earnings calls, I thought it would be helpful to provide some directional data points to help you understand how we see things for full year 2021. All these data points I'm providing are on an adjusted basis, which exclude COVID-related special charges, the net benefit from the payroll support programs and bonus accruals. Furthermore, all data points provided assume fuel at $2.17 a gallon for the full year. EBITDA, expected to be in excess of $275 million with a margin around 17%. Also, would expect fully diluted EPS in excess of $1.50 a share. Again, these are all on an adjusted basis. In addition to the above, we expect year-end cash balance of around $1.3 billion and net debt of around $300 million. And Greg will provide more detail around these data points in his commentary.

And with that, I'll turn it over to Scott Sheldon.

D. Scott Sheldon -- Chairman and Chief Executive Officer

Thank you, John, and good afternoon, everyone. Perhaps a comment or two on our third quarter operations. Without stating the obvious, our operational results and corresponding headwinds were similar to that of our industry peers who have released during this earnings cycle. From a capacity standpoint, we had perhaps one of the more ambitious summer schedules in the domestic U.S. market. Third quarter of 2021 departures were scheduled to be up nearly 17% year over two years, average aircraft growth up nearly 20%, and destination and route growth were expected to be up 25% and 29%, respectively. Furthermore, the distribution and departure growth among our crew bases has continued to shift to some of our smaller and midsized markets, which puts additional strain on infrastructure and labor staffing challenges. Despite those added complexities, we were seeing enough improvement in the operating environment to stay the course as we exited June. And we felt we had all the necessary complement of flight crews and frontline employees to execute the back half of our summer schedule. Unfortunately, the Delta variant surge in late July and early August was simply too much to recover, and we took an abnormally high number of cancellations.

In addition, our core operating performance metrics were down as compared to historical trends, but we are starting to see those trend up. Over the course of summer, we had as much as 30% of our frontline workforce impacted by COVID and/or other types of leaves with a definitive spike as we turn the calendar from July to August. Greg will have more commentary on IROPs. Looking into the back half of the year and into 2022, our driven team remain optimistic on the demand and revenue environment. That being said, we're trying to build in some safety nets for a number of higher-risk operational areas. Our ops team continues to work with planning to ensure we establish appropriate buffers to execute a more consistent schedule to help mitigate passenger disruptions. Undoubtedly, flying labor and MRO supply chain challenges are the number one and number two focus areas as we look to support our March 2022 flying.

One quick comment on labor before I sign off, I'd like to congratulate all of our maintenance technicians, maintenance control staff, quality and storage personnel represented by the IBT for ratifying their first collective bargaining agreement. This agreement helps make us competitive in the marketplace as we look to fill much needed positions for our -- excuse me, 2022 schedule. I know this is a long time coming and was disrupted by our 2020 COVID pause, but I very much appreciate everyone's effort involved to get this to the finish line. And in closing, I'd like to thank all of our team members across the network for their outstanding service and professionalism in the face of our latest Delta variant spike. Your efforts have been tremendous. Our team members and partners are the backbone and the face of our organization and their unwavering commitment and loyalty to our consumers is why our organization has and will continue to be successful.

And with that, I'll turn it over to Scott DeAngelo.

Scott DeAngelo -- Chief Marketing Officer

Thanks, Scott. From a marketing perspective, despite the headwinds we've called out, the Allegiant brand continued to shine, attracting more visitors to allegiant.com, and more bookings among both first time and repeat customers than in any third quarter in our history. In late August, while the Delta variant drove customer sentiment, as we measure in our weekly tracking survey, to its lowest level since early January, it has since returned to its highest levels since mid-July. And while the Delta variant negatively impacted bookings during August and September, the degree of that negative impact was far more modest than that seen at similar customer sentiment levels during 2020 and the beginning of this year. Simply put, Allegiant customer demand is showing increased resiliency despite continued bumps along the pandemic road to recovery. Despite the Delta variant headwinds during a considerable portion of the quarter, we still managed to increase visitation to allegiant.com by one percent, and more importantly, increased bookings at allegiant.com by five percent versus 2019 levels. The packed transactions increased at five times the rate of web visits, points to Allegiant's heightened brand awareness, increased marketing efficacy at attracting the right visitors to our site, and enhanced web and app experience, which makes it easier for those visitors to find and buy what they want.

All of these enhancements, again, combine to attract and convert more new and more returning customers in the lowest cost ways. Specifically, our lowest cost channels, that is, customers coming to us via our mobile app or by directly entering the allegiant.com URL or by clicking on a link in one of the 50 million targeted emails we send each week, now account for 80% of total visits to allegiant.com. And that drove nearly 20% more website visitors than they did in 2019. And those visitors translated into a healthy balance of both first time and repeat Allegiant customer bookings. Bookings from first-time customers saw a nearly 2.5% increase, and those from repeat customers saw a nearly three percent increase compared to 2019. We also continue to achieve deeper levels of customer engagement across everything we offer at allegiant.com. Overall, third-party revenue, which comprises co-brand credit card, hotel stays and car rentals, was up nearly 35% for the quarter versus 2019 compared to scheduled service passenger growth in the quarter of just over two percent versus 2019. A greater portion of customers are spending more of their leisure wallet at allegiant.com on products beyond just air travel. The continued growth in our asset-light third-party product revenue stream was aided not only by the web and app redesign launched earlier this year, but also by the introduction of our first ever non credit card loyalty program, Allways Rewards, and enhancements to our co-brand credit card acquisition approach that launched during this past quarter.

The Allegiant World Mastercard, which is now being branded under the Allways Rewards umbrella, was once again voted the top airline co-brand credit card in the nation for the third consecutive year in USA Today's Reader's Choice Awards. You may recall that our second quarter saw the number one and the number three best months of new cardholder acquisition in the program's history. In this quarter, despite various headwinds and the traditional decline of leisure travel in early fall, we achieved the number four and the number five best months of new cardholder acquisition in the program's history. In total, new card sign-ups in the quarter were up by more than 12% versus 2019. Contributing to the continued growth in new cardholders was the introduction of instant credit enrollment in our mobile app. Historically, this has been the top-performing way that we acquire new cardholders on our website. So we expanded this functionality to our mobile app, where 20% of our bookings are now made and the results are exceeding our expectations. Building off the success of our co-brand credit card's simple, popular point earning and redemption model, and combining that with inspiration from winning, tech-forward, consumer-friendly programs like Apple Card and Target Circle Rewards, we launched Allways Rewards this past quarter. Already, Allways Rewards members spend 23% more per transaction than nonmembers, lift that is driven primarily by their increased attachment of air ancillary and third-party products to their itineraries.

These loyalty programs, combined with the redesigned website and mobile app and soon to be joined by other technology enhancements in the upcoming year, are all playing meaningful roles in helping us sell beyond the aircraft and weave Allegiant into the most important and highest margin aspects of leisure travel, including third-party distribution of hotel, rental car and even sports and entertainment events. And to that end, Allegiant Stadium, in addition to drawing more than 60 million viewers across live broadcasts during the season's first four games at the stadium as well as driving web visits and bookings up by as much as 39% above 2019 levels on the days of and after these games, has now joined our portfolio of third-party products. As the NFL season kicked off, we launched Allegiant Stadium travel packages that include air travel, hotel stay and game tickets. While these packages don't represent a material revenue driver, they do serve as a high-profile way to showcase our ability to sell beyond the aircraft. And to that point, for 80% of Allegiant Stadium package customers, it's the first time they had ever booked a hotel through allegiant.com. And for nearly 1/3 of these customers, it's the first time they've flown to Las Vegas on Allegiant.

Beyond the wildly positive impact we're seeing directly from this partnership, Allegiant Stadium has become a crown jewel of sorts for broader nationwide Las Vegas advertising that the destination itself is doing. Allegiant Stadium is central to the destination's claim that Las Vegas is now the entertainment and sports capital of the world, thanks in large part to Allegiant Stadium elevating Las Vegas as the destination to what they have dubbed the greatest arena on earth. In summary, the Allegiant brand is thriving. Sure, headwinds exist but they will ultimately subside. And as they do, we believe we are best positioned with the increased demand we continue to see from new and repeat customers for Allegiant's brand of affordable, accessible leisure travel to maximize our share not only of their nonstop leisure air travel, but also of their spending on the increasing array of leisure products we're able to offer at allegiant.com.

And with that, I'll pass it over to Drew.

Drew Wells -- Senior Vice President, Revenue

Thank you, Scott, and thanks to everyone for joining us this afternoon. I'm immensely pleased with the third quarter's revenue results. Total revenue came in 5.3% higher than 3Q 2019 on scheduled service ASM growth of 17%. We are among the first carriers to restore revenues above 2019 levels and likely the first U.S. carrier to do so on the scheduled service side. We hit the ground running with the July load factor over 80% and finished with a pandemic best 76.6% load factor for the quarter. The ancillary performance once again led the charge for us as bundles and the redesigned website impact on take rates continue to generate positive results. The RM team continues to do a remarkable job handling the complex task of balancing loads and yields on a market level even as the environment changes rapidly. As is always the case with the bulk of ASMs in the first half of the quarter, before we dramatically pulled down our schedule for the off-peak fall, 3Q goes as the summer goes. This schedule and flexibility is key to our model, and the upcoming quarters will continue to put that to the test with rising fuel costs, supply chain disruption, potential TSA staffing issues and the potential for additional seasonal COVID spikes. We are and will continue to work in lockstep with the organization to maintain this flexibility and ensure enterprise success.

After inaugurating seven routes in the third quarter and several successful hyperseasonal one- and two-weekend event specific routes, we will launch 52 new markets in the fourth quarter, with 75% of those connecting the dots between existing Allegiant cities. Despite that, we will have a lower percentage of markets in their first 12 months than we previously communicated, down roughly four points in the third quarter and one point in the fourth. Similarly, we expect our fourth quarter growth rate to also come in lower than previously communicated, in part, as we react to rising fuel. We plan capacity with a typical cost per gallon buffer of $0.50, and it's only the third time in the last nearly a decade we've hit or exceeded that buffer. With that, we now expect scheduled service ASMs up 12% to 16% and system ASMs up 10% to 14%. We are positioned similarly today to where we were 12 months ago, though, with Thanksgiving having more revenue on the books today than the same holiday period finished with last year on a considerably higher base. The booking cadence has resurged to be in line seasonally adjusted with the peaks of the summer and holiday demand looks quite strong. The reopening of cross-border travel for vaccinated travelers starting next month has shown a meaningful impact to our near border airports. Normally, I would be quite bullish on the fourth quarter prospects.

However, the seven-day average U.S. new case count of 70,000 is hovering around an eerily similar number to late October 2020, granted on a different trajectory over the past several weeks. As such, I'm a bit wary of running away with the excitement of 4Q potential and have built in some expectation of spike-related headwinds. That said, I believe we will continue to lead the recovery and are forecasting another positive total revenue quarter of plus 0.5% to plus four percent. And with some positive variance, believe we can achieve an 80% book load factor in both November and December. As we look to 2022, we have some fairly low comps in the first half of the year as growth was limited to three percent versus 2019 that will provide a catalyst for headline growth and help set the stage for the rest of the year.

We are still working through June and beyond to ensure we are setting up the company for success in finding the proper balance between growth and operational integrity. We'll have much more detail to provide in three months' time.

And with that, I'd like to pass it over to Greg.

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

Drew, thank you. And good afternoon, everyone. So on the current tone of our business, for the third quarter, we reported adjusted earnings per share of $0.66, our second consecutive quarter of positive adjusted net income. While this quarter's adjusted results fell below initial expectations, we experienced nonrecurring and unusual irregular operations. These incidents are not unique to Allegiant nor do we believe they are systemic. The total cost impact during the third quarter for these elevated IROP events was around $28 million. Roughly half of this $28 million was driven by areas such as incremental contract labor, supply chain constraints and incremental ferry flights. The other half of our 3Q IROP costs, and as Maury teed up, relate to our compensation program for customers in which we aspire to do more to take care of them if we significantly interrupt their trips. This past quarter, we paid $15 million to these impacted passengers. For example, in addition to credit vouchers issued to our customers, we may also compensate them between $100 to $300 per eligible passenger to provide immediate support for reaccommodations. The purpose and intended impact of providing the additional compensation is twofold. First, and of course, to better assist our customers when unusual and difficult circumstances disrupt their plans; but second, and equally important to our bigger picture, it drives greater accountability to the financial as well as the human impact of flight disruptions by really making it steam for Allegiant.

With that backdrop, our third quarter adjusted total costs increased 17.5% year over two year. However, excluding the $28 million in IROP costs, as just outlined, this cost increase would have been under 10% on total system capacity growth of 14.2% year over two year. Turning toward the fourth quarter. Despite expected capacity growth of 12%, we expect unit costs excluding fuel to be slightly down to flat year over two year. This is largely driven by the increased cost pressure at our airports and ground service providers. Our expected 4Q CASM ex implies a full year 2021 adjusted CASM ex at around 2019 levels. As noted earlier, fuel costs continue to rise as we are currently paying $2.55 per gallon of fuel, a sequential quarterly increase of $0.35 per gallon. However, even at these elevated fuel costs, we expect our fourth quarter financial results to remain profitable and exceed third quarter's adjusted EPS. Based on our fuel consumption, an increase of $0.10 per gallon of fuel equates to roughly $5 million per quarter. Moving to the balance sheet. As of today, we have $1.2 billion in total cash, an improvement from the end of 3Q, as earlier this month, we received the remaining $116 million in cash from our NOL refund. Also, and as of today, our net debt is around $400 million, a decrease of 60% since the beginning of the pandemic. For the full year 2021, we expect to reinvest $240 million back into the airline, an increase in our guide by $20 million.

And this increase is just primarily driven by our strategic parts purchasing initiative, along with some other non-aircraft capex. Year-to-date, we have paid down more than $200 million of our debt balances, $50 million of which was in the form of prepayments, and this brings our current total debt to roughly $1.5 billion, a decrease of five percent since the beginning of the year. Looking toward 2022, we are in the mid-innings of finalizing our 2022 capacity plans and expect to provide an update next time we speak. We are actually exploring a possible Investor Day/call in December, and we'll keep you apprised of status in the coming weeks. Given the uncertainties with rising fuel, labor and supply chain constraints, we intend to establish a baseline of capacity growth for 2022 in the low double digits area. And harnessing the unique flexibility of our model, we are confident in our ability to spring up capacity if and when appropriate. In addition, we have action working toward getting a couple of steps ahead of the growth by bringing on 300 frontline team members ahead of when we normally would, namely pilots, flight attendants and mechanics. And this estimates about a $15 million in incremental cost during 2022 when compared to historical staffing levels. Advancing these hires should greatly aid the quality of our performance by getting team members trained and experienced. Then as the choppy environment abates, we expect to naturally grow into these incremental heads.

We are mindful of the looming inflationary pressures. Where we can, we are offsetting such pressures and examples of a few are as follows: Since the onset of the pandemic, we have acquired aircraft and spare engines at prices significantly discounted when compared to pre pandemic levels. To date, we estimate $150 million in direct savings here. Similarly, we strategically purchased $40 million with the spare parts at an average discount of 50%, another $20 million in savings. And finally, for these examples, where most carriers in our industry significantly increased their debt during the pandemic, we did not. As a result, our full year 2021 interest expense should be around 20% down year over two year. In closing with fleet, we expect our full year 2022 airline gross capex, which includes capital leases, to be around $350 million. This is primarily driven by $200 million in aircraft gross capex, with the remaining $150 million roughly split between other and heavy maintenance categories.

As a reminder, our fleet plan includes 19 incremental aircraft to be placed into service throughout 2022, bringing our total expected fleet count by the end of the year to $127. Of these 19 aircraft to be placed in service next year, 11 have or will be acquired in 2021 and are already included in that 2021 capex guide. eight aircraft are slated to close next year, of which six have been structured under a capital lease. As a result of these capital leases, our full year 2022 committed net aircraft cash capex is expected to be only $55 million. By year-end 2022, more than 50% of our fleet will be comprised of 186-seat aircraft, which compares favorably to 2019's composition of roughly 25% 186-seat aircraft. The larger gauge, 186-seat aircraft have additional benefit in a rising fuel environment as they are the most efficient in our fleet on an ASM per gallon basis. We expect full year 2022 ASMs per gallon to increase by five percent year over three-year. And at a $2.55 per gallon, this increased efficiency is worth roughly $30 million in fuel savings compared to 2019 fuel efficiency levels.

And with that, we'll open it up to Q and A.

Questions and Answers:

Operator

[Operator Instructions] And first question comes from the line of Savi Syth from Raymond James. Savi your line is now open.

Savi Syth -- Raymond James -- Analyst

Hey. Good afternoon everyone. Just actually a quick question to start with, Greg, you talked about the liquidity right now being -- or cash being right now $1.2 billion. And I think the guidance is to $1.3 billion by the end of the year. Is there something kind of different the way the cash building -- is building in the fourth quarter this year than past? Or are there other kind of inputs coming in?

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

No, I don't think there's any other inputs, Savi. It's just -- we're a little bit over $1.2 billion right now. And I think just the inference is that we're going to build cash through operational cash flow.

Savi Syth -- Raymond James -- Analyst

Ok. And then just a little bit more clarity on 2022 planning. So it sounds like the hiring is done for kind of the operations levels above the kind of low single digits. Is that how you're thinking about it? And then you'll kind of grow into it if you're comfortable with that operation? Or just looking for a little bit more clarity on how you're thinking about kind of hiring and then operating in 2022?

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Yes. Savi -- yes. We have -- obviously, our pipeline is full. We hired upwards of 270 pilots and these would sort of dovetail into March peak flying in addition to summer. We are seeing a little bit of a spike in attrition, particularly on the FO side. It's not terribly material yet. But I think those sort of numbers would give you low double-digit growth for the summer. Flight attendants, that's -- that attrition is fairly stable right now. Mechanics is the big win. I mean, we were just very, very underwater when it came to being competitive. And so out of any of the areas, that's probably where we have to catch up the most.

Unidentified Speaker

Yes. So maybe just to clarify, the low double digit is what Maury -- in the down low singles, I think I heard you maybe say. I just wanted to clarify on that front.

Savi Syth -- Raymond James -- Analyst

Sorry, I meant that, it would just make sense. Thank you.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Thanks, Savi.

Operator

Next question comes from the line of Conor Cunningham of MKM Partners. Conor, your line is now open.

Conor Cunningham -- MKM Partners -- Analyst

Hi, Everyone. Thank you. Just on the budget for Sunseeker, I don't think that's been finalized yet. So just curious where that may sit today given all the supply chain issues and inflationary cost pressures. I just would think that it's higher than what you had previously kind of soft guided to, which was like, I think, $510 million to $550 million. So just curious on where that may sit right now or maybe why you haven't finalized or in general?

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

I think it's a good point. I think we and the rest of the world is experiencing these supply chain disruptions. And I don't think there's an industry that's immune to it, our product, that is. So -- We know that the costs are going to be higher. We're still working through exactly how much higher, but it could be in the 10% to 15% range on the total project, maybe even slightly higher. But I think a lot of that we will understand as we move more into the end of this year and probably into Q3. So it's not only understanding better the impact of that supply chain disruption on cost, but also on timing. We are, of course -- pre-pandemic, we're paced to open April of 2021.

Now everything has kind of been thrown into a turmoil in that regard. So it's those two issues, both cost and timing that we're working through. But as I mentioned before, we know we're going to be over -- we were at $500 million. The carrying cost, if you will, throughout the pandemic took us to like $510 million and now just working through the order of magnitude above $510 million, but we know it's going to be call it, in the 10%, maybe even 15% range and could be slightly higher. But it's just too early to give any degree of specificity on what that number will eventually be.

Conor Cunningham -- MKM Partners -- Analyst

Okay. Okay. That's helpful. And then, Maury, I know you talked about the potential of slowing growth to maintain that historical fuel to fare ratio that everyone always talks about, but a lot of the other airlines need to bring back capacity just to settle very nonfuel cost pressures that they're dealing with, given no one made any infrastructure changes during the pandemic. So I'm just curious on what gives you the confidence that the industry is going to follow what has historically been a good idea to cut capacity to drive those? I mean, I think the risk you run is like you've got growth and no one else does and -- the reason why I bring up, I just think it's a point that basically everyone is struggling with right now. So if you can just speak to the high-level dynamics that you see playing out in general.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Well, you're spot on, everybody that's sitting here today, if they had the decisions they made last December, January and February for the summer of 2021, we'd probably do it differently. At times, we were facing 10%, 15% of our personnel in maintenance, in our MROs where we're having our airplanes worked on, they weren't in. COVID just rippled all through the summer. So we've got a bit of uncertainty that's in the organization right now as to what can we count on Scott mentioned labor problems with our maintenance personnel, a lot of COVID issues with them in the different bases we have going through it. So we're assessing where the personnel we need to be. We're hiring very actively. The irony of it is, I mean everybody in this business is hiring yet they still haven't gotten back to full capacity. So there's some incongruities as to what you have.

Long term, we've always kind of run to our own -- the beat of our own drum. First and foremost, as you heard Scott DeAngelo talk about, the quality of our brand and the like has really got to be thought out very appropriately. And IROPs are just not long-term acceptable to us. And the irony of it is this industry ran like a Swiss watch in 2019. And now it's almost like we've forgotten how to run on time and deal with interruptions. But in our case, we're definitely focused on getting back to a really solid operation, something we can count on. And that's going to be a short term, the next -- through the first quarter, we'll -- I think we'll have a good handle on what we're doing as we go into January, February and March.

And then we'll reassess growth at that point. Could we grow more than the low double digits? Yes. But do we have to? No. I mean, again, while others may be growing, the beauty of our business model is we're still 75% uncompetitive -- noncompetitive in our route structure. And that's always been the case, and we don't see that changing materially. So I'd like to get there quicker if we can, but we're not going to sacrifice the -- our customers and our own personnel that come with operational problems. But as I said in my comments, I'm very bullish on the business model and where we're at. Scott, these revenues that are coming through this third-party stuff is -- you guys should really take a look at that stuff. That's very meaningful, long-term repetitive revenue that's going to be very, very powerful for us.

Conor Cunningham -- MKM Partners -- Analyst

Appreciate it. Thank you.

Operator

Next question comes from the line of Dan McKenzie of Seaport Global Securities. Dan, your line is now open.

Dan McKenzie -- Seaport Global Securities -- Analyst

Hey, Thanks. Good afternoon guys. Few questions here. Going back to the supply chain challenges being the number one, number two areas of focus, I'm just wondering if you can clarify that a little bit more. What is within your control? What isn't? And what is the level of confidence that the infrastructure is in place to protect the operations over the holidays? So I'm just hoping you can elaborate a little bit more on that.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Let me give an overview, and I'll turn it over to Scott. Where they're certainly supply chain problems for us, the airline isn't as bad, I think, as construction. And I think John would probably say Sunseeker is a little more difficult than ours. At this point, the main thing is to make sure we don't over schedule the airline, and we have the sufficient pilots, flight attendants, maintenance can do their job. So we're very focused on that for the next 60 days. Scott?

Scott DeAngelo -- Chief Marketing Officer

Yes. We'll get through the holidays. We have a couple of tails that might bleed into Thanksgiving. But when you think about -- if you think about 2022, with 19 inductions, we're going to have 24 heavy maintenance events. A lot of the materials that is sourced is coming from outside the country. We operate out of six MROs in a number of different countries. I mean, the list is long when you think about each one sort of has its own little corner case. We're definitely trying to simplify it, given our execution in the first nine months.

If you guys remember, the first quarter hit us as we're trying to wake planes up, MROs are scrambling to get their operations back online. So we're trying to either build in additional buffers that we -- that will just allow us to make sure we have the iron that we need. And then Greg and B.J.'s teams are trying to get ahead as much as they can on the supply chain. We have a bunch of max pax conversions next year, is that correct?

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Everything should be on-site. On-site right now.

Scott DeAngelo -- Chief Marketing Officer

On-site, OK. That was a big piece. It's just getting Airbus kits for our max pax conversions. We're opening some of these plans in a larger structural package that we're finding a little bit of corrosion, like anything can really increase the span. But it's very much a high priority for us to sort of build in buffers.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

And Dan, just to finish that, everybody -- when we came into the first quarter, we thought we were back in 2019. Demand was back. We just turned on the switch, and it all runs like we thought it would. All the variables is death by a thousand cuts. So I think everybody is probably walking a little around on eggshells trying to make sure they don't overpromise and under deliver. So we're going to pull it back accordingly and the variables we can control, we obviously will. But we're learning as we go.

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

And Dan, it's Greg. I may just add one more comment to that on the supply chain, really around parts and the like, and that's we have a mantra. We just -- we want to make sure that the right parts and tools are at the right place at the right time. Just given the constraints that we experienced this past year, that wasn't always the case, but we have been proactively and for some time now trying to get ahead of that. We've talked about the strategic parts initiative where we've gone out and we acquired $20 million -- we spent $20 million for $40 million worth of parts and getting those in. We increased a little bit more on our capex guide this year to continue to try and get ahead so that we can better support the operations and increase like max levels from an inventory variance perspective.

Dan McKenzie -- Seaport Global Securities -- Analyst

Yes. Thanks for that comprehensive answer. That's very helpful. And then, I guess, second question here, Drew, from what I can see, it looks like over 50% of the overall capacity in at least November and December comes from holiday flying, but please correct me on that, I guess. So a couple of questions. In the fourth quarter here, what percent of the flying is peak versus off-peak? And then just with respect to the revenue forecast, what have you factored in for children getting vaccinated? And I guess what I'm getting at is just given the level of capacity that's scheduled over the holidays, it just seems like a small change in holiday command -- demand, pardon me, could really move the revenue dynamic by tens of millions of dollars.

Drew Wells -- Senior Vice President, Revenue

Yes. I mean, you're spot on with the last part there. In fourth quarter, I'm sure my peers would agree, it's one of the hardest to forecast because it is so backloaded. We have so much more time and variability built into that, particularly when there are environmental concerns like we see today. I'm not building in upside for children being vaccinated at this point. I'll take that upside as it comes and as we see it kind of be effective and prevailing. So that's not something I'm currently contemplating. In terms of peak and off peak, if you're just thinking day of week, we're looking about 23% of our ASMs being on off-peak days. What I would caution is that an off peak day in the heart of Christmas is not the same as an off-peak day in October, for example. So there's like a little bit of probably misleading in that as it pertains to holidays in particular.

Dan McKenzie -- Seaport Global Securities -- Analyst

Okay. Break it. Thanks for your time you guys.

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

Thanks, Dan.

Operator

Next question comes from the line of Helane Becker of Cowen. Helane, your line is now open.

Helane Becker -- Cowen -- Analyst

Thanks very much. Hi everybody. Thank you very much for your time. So not sure who this is for, but as you think about inducting aircraft into the network, I think you said 19 aircraft are coming in next year. And I thought it was 24 aircraft going into heavy maintenance. How should we think about the level of aircraft that you're comfortable inducting? I mean you're getting ahead of it on hiring, I guess. But what are you forecasting for total attrition for next year?

D. Scott Sheldon -- Chairman and Chief Executive Officer

Hi. Helane, I should have mentioned this, and B.J. just reminded me of the 19 inductions, all but two are coming from FAA Trace, which makes the induction that much easier. Obviously, labor, yes, it's -- I mean, that's really the -- these are less complex inductions that we would historically otherwise have.

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

And then Scott, maybe I can add, too, that we set up Melbourne, right, an induction facility where we just went out. And this is facility that we have, Helane, that is just 100% focused on induction aircraft, nose to tail too, at all times. So we -- this was unique. We went out and did this earlier this year in anticipation to make sure that for these induction pipelines and these aircraft that we have coming, that we have some buffers built in there.

Helane Becker -- Cowen -- Analyst

Got you. And then on the labor contract that was announced today, I think you said that the cost increase associated with that is included in the guidance, but can -- if it's not, can you just give us some help on that one? And it may not be meaningful. I don't remember how many people that contract covers.

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

Yes. Helane, it's Greg. It is included in the kind of directional guidance that we provided. And the way, I guess, I would frame it is that maintenance makes up roughly 10% to 12% of our salary and wages. And the contract is worth roughly $12 million per year. It's a five-year contract, and then it's a little bit front loaded.

Helane Becker -- Cowen -- Analyst

Okay. Are you having -- actually, are you having to pay signing bonuses to attract people?

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Yes.

Helane Becker -- Cowen -- Analyst

Okay. That's kind of what I thought. But no, that's -- I'm hearing that. Okay team. Thanks for your help.

D. Scott Sheldon -- Chairman and Chief Executive Officer

Thanks, Helane.

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

Thank you.

Operator

Next question comes from the line of Duane Pfennigwerth of Evercore ISI. Duane, your line is now open.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Hey, Thanks. Just with respect to the sequential move in CASM from 3Q to 4Q. Obviously, it was more than just IROP that impacted you in 3Q with the suboptimal operation. So how much of that do you get back? Or are you baking in getting back in the fourth quarter? And then I apologize if you mentioned it, I know you've given us a lot of qualitative guidance here, but on that low double-digit capacity, how are you thinking about CASM ex year-over-year?

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

Duane, it's Greg. I'll knock off the second part of your question first. And I think on that low double digits, we think that our CASM ex could be around 2019 levels, so $0.065. And then sequential costs and perhaps just worth excluding IROPs because we don't anticipate those to be the same level. It's pretty close on a gross basis. Keep in mind, I think fourth quarter ASMs are down a couple of percentage points versus third quarter. So you've got a little bit of pressure there. And then there's some headwinds in a couple of different areas, pilot training, so that other line item, you have some pilot training coming through there. So that put a little bit of pressure on that along with Sunseeker getting ramped up and some op expense there.

I think we've talked about it. On a quarterly basis, we think Sunseeker op expense is roughly $2 million, $2.5 million. And then with the hiring, too, we mentioned those 300 incremental frontline employees starting to bring those in and things like that. So I think that too would add a little bit. But all in all, I think roughly, it will be slightly on a gross basis, fourth quarter higher than third quarter. But then, yes, just take into account the reduction in ASMs.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Okay. I can follow up with you offline maybe. You lost me a little bit.

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

The -- yes, just I guess the punchline...

Duane Pfennigwerth -- Evercore ISI -- Analyst

Ex IROP, you think CASM will be up sequentially because ASMs are lower?

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

Yes, with two pressure points. One, being the labor that we talked about, the 300 incremental crew members coming on board more quickly there. And then the other being the Sunseeker starting to ramp up their op costs on that. So that's about $2.5 million. And then the training pipeline associated with that labor that I just mentioned. So that would put a slight pressure on that as compared to the third quarter.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Okay. Thank you.

Operator

Next question comes from the line of Brandon Oglenski of Barclays. Brandon, your line is now open.

Brandon Oglenski -- Barclays -- Analyst

Hey guys, Thanks for taking my question. Greg, can we just follow up there? I thought I also heard you say that profitability could be better in the fourth quarter. Was that a comment backwards looking? Sorry, I just wanted to clarify that.

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

No. Sequentially, yes, I think profitability, we expect to be higher in the fourth quarter as compared to the third quarter. That's based on the revenue guide and capacity guide that we put out there, and then we just kind of walk through the framework on the cost.

Brandon Oglenski -- Barclays -- Analyst

Okay. And then if I'm hearing you correctly, next year, you're thinking CASM can be close to 2019 levels. It sounds like maybe if you didn't have some of these disruptions, you could be targeting something lower? And is that just gauge driven?

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

Yes. I mean, that's -- we certainly expect getting -- we're not going to have these disruptions next year, so that's not included in that number that I talked about, the 6.5%. I think you'll see some benefit if there is an increase in capacity, but we're not planning on that. We're planning on the low double digits, and that's the number I provided. But -- however, you do increase that and take that up slightly, I think for every two percentage points increase in ASM, that's worth $0.0010 of CASM ex, if you will. But yes, I think the short answer is we do expect, right now where we sit, based on the capacity guidance, the directional guidance we put out there that we could be roughly $0.065 in 2022, CASM ex.

Brandon Oglenski -- Barclays -- Analyst

Okay. I appreciate that. If I can just sneak in one more strategic question. I guess how do you guys look at the third-party travel sales and the ramp-up that you're seeing there? And compare that to the strategy with Sunseeker, are these complementary to one another? And should we be thinking these are both avenues of growth, so you could be looking at other property development opportunities in the future as well? Appreciate it.

Scott DeAngelo -- Chief Marketing Officer

Sure. I've found the start. It's Scott DeAngelo here. They're certainly complementary. The Sunseeker, as it stands today, is in Punta Gorda. And that's one of, right, the 120-some-odd places you can land and we want to sell hotels in the other 119, let's say. So by and large, they steer clear of each other. I think over time, and I'll let John Redmond speak to this, if and as there's an asset-light play that gets a lot of these properties that belong to other major brands to say, "Hey, I want the Sunseeker name on my hotel. And by the way, I want the Sunseeker restaurant brands in there," then one by one, right, we're able to steer or turn on or off, by any given product that we sell. So we can keep the lanes, if you will, nice and clear.

John Redmond -- President

Yes. In addition to what Scott said, when you look at Sunseeker beyond the stand-alone opportunities, which are obvious, the other synergy there is you have a load factor impact on the airline with Sunseeker being open down there, kind of like when you look at Orlando or Las Vegas and what happens with the demand in these markets with the products they have here. So there's an opportunity there as well as credit card opportunity sign-ups, et cetera. I mean, Scott has some amazing sign-up activity we're getting now, but once you open a resort and the additional opportunities you can drive into credit card, so those are two major synergy opportunities you can see off a resort as well. And I don't know if there's another part of your question I may have missed, I'm sorry.

Brandon Oglenski -- Barclays -- Analyst

No, I think you guys addressed it. Thank you.

John Redmond -- President

Okay.

Operator

Next question comes from the line of Andrew Didora of Bank of America. Andrew, your line is now open.

Andrew Didora -- Bank of America -- Analyst

Hi. Good afternoon everyone. Thanks for the questions. I guess, Maury, bigger picture here, right? Like, you've built an airline that generates good returns. You've been focused on buying used aircraft. You get deals on spare parts like you talked about earlier, with Sunseeker and the budget increases and everything that we're seeing in the construction market [Technical Issues] spend here? And at what point does the budget get too much and you decide to either stop or change plans here?

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Broke up a little bit there, Andrew. I think you're asking would we stop building Sunseeker if it got too expensive. Is that your question?

Andrew Didora -- Bank of America -- Analyst

Yes, that's right. Given your return, you've built such an airline generating pretty strong returns. At what point does the budget just get too much that you maybe change direction a little bit?

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Just based on what we know now, it's certainly not even close to that. The opportunity down there, what we saw this spring, just the Florida and everything else, leisure demand -- you heard my comments that everybody is up with leisure. Southwest now has half of their flights touching Florida every day. Florida is the Lake Wobegon. That's where people want to go. And we're -- we couldn't be in a better place.

Andrew Didora -- Bank of America -- Analyst

Okay. I guess, Drew...

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Revenue will conquer any budget increases here.

Andrew Didora -- Bank of America -- Analyst

Okay. I guess, Drew, I think you gave the off peak ASM commentary about, what, 23% or so in 4Q. But I mean, just we've been hearing a lot about the kind of the 4Q peak versus off-peak environment. I've been getting a lot of fare sale emails from a lot of different airlines of late. Can you maybe talk and maybe quantify what that gap is between peak and off peak? Can you maybe give us some sense on sort of where Thanksgiving week is booking up right now versus, say, maybe first half of November? Anything to try to like help triangulate what that difference is between those -- the peak versus off-peak times? Thanks.

Drew Wells -- Senior Vice President, Revenue

Sure. I can maybe take this at a high level. I don't know that you'll necessarily get an answer that you're looking for here, but ballpark, you're probably looking at your Thanksgiving flights running somewhere 33% higher revenue per flight than you would have in earlier November. And I expect that will grow a little bit by the time departures hit. So there's a pretty sizable gap.

Sherry Wilson -- Director of Investor Relation

Operator, are you still there? Or Andrew?

Operator

Yes. Should we proceed on the next question?

Sherry Wilson -- Director of Investor Relation

Yes.

Operator

Alright. Next question comes from the line of Catherine O'Brien from Goldman Sachs. Catherine, your line is now open.

Catherine O'Brien -- Goldman Sachs -- Analyst

Hey, Good afternoon everyone, Thanks for the time. I had kind of a multipart question on the third party. Great to see that strength continuing. I guess -- I don't know if it's for Scott or Drew, but can you just walk us through how third-party per pax is up significantly when rental car days and hotel room nights are down so materially? Is that just pricing? Is over 100% of the increased co-brand driven? If it is pricing, is that driven by a lower supply of these products? Or is there something different about your partnerships now than 2019? Thanks for that.

Scott DeAngelo -- Chief Marketing Officer

You bet. This is Scott. I'll start, and Drew, you can add in. So certainly, a lion's share of it is co-brand and the continued surge that we've mentioned over the last two quarters there. However, rental car revenue is also up materially, and that is average daily rate, I'm looking to see here, is up about 50% versus 2019 levels off of, of course, lower rental days. But that is a supply demand thing. And then those are the main drivers right now. I mentioned last time, we've identified a lot of technical solves for increasing the throughput for hotel.

Right now, you may recall that for every 15 hotels that get put in a shopping cart, only one person checks out with them. But there's a variety of things that OTAs and hotels at their own site can do that we will be able to do that we expect to unlock that. But co-brand and then rental car based not on days but on price per day are the big drivers there.

Drew Wells -- Senior Vice President, Revenue

Yes. Not a lot to add here. We talked about it a little bit in the July call. I mean, as part of the thesis for why we thought fall would actually have a bit of a higher floor because of where daily rates were on both hotels and rental cars kind of pushing some people out of the high-priced summer and into the fall now with the Delta spike that didn't manifest. But the underlying piece of high-margin rental cars still persevered through the entire quarter and probably in the foreseeable future until inventory rightsizes.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Let me just give some background overview. This is a long-term relationship with enterprise that started in 2005. And we're the only carrier I know -- in fact, we sell more than virtually every other airline, if not the most, in this kind of space. And we do that because we're so tightly integrated with the enterprise, is a good chunk of it. And so their pricing engine is able to drive our pricing. There's no manual activities. So I think we're substantially ahead of the industry, on the airline side that is, in offering cars and putting packages together that are very seamless and with the best opportunity to maximize revenues and you're seeing that with unit revenues today. And you're seeing in car -- I'm sure if you're going out to buy a car, you're seeing sticker price plus $10,000, same thing is flowing through on the rental car side.

Catherine O'Brien -- Goldman Sachs -- Analyst

Yes. It's remarkable. Maybe just a quick one on -- a little bit of a follow-up to Conor's question on the Sunseeker budget. Just on that Castlelake financing you closed on, in the case the budget moves around, it sounds like you could maybe draw less than the $350 million, but correct me if I'm wrong, do you also have the ability to upsize that agreement in the case the budget does increase? Thanks.

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

I'll take that one for you. But the -- we don't anticipate having to go back with Castlelake. We haven't had any conversations with them about upsizing nor does the existing agreement provide for being able to upsize it. Having said that, we don't see if a budget went north of what we expected to be a significant dollar amount, which is beyond our capability to finance. We're in a very liquid position, as you know. We're in great shape. It's not like this budget is going to run past us by hundreds of millions. We're not talking or looking at numbers like that. As I mentioned before, it could be 10% or 15%. But we're not hearing or seeing or experiencing anything beyond those types of percentages. So we don't see anything like that ever materializing going forward.

Catherine O'Brien -- Goldman Sachs -- Analyst

Okay. So would that most likely just come out of cash on hand or you look to do another financing deal? Thanks for that. Extra one, Thanks.

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

We would just look at that as being something that comes out of cash on hand.

Catherine O'Brien -- Goldman Sachs -- Analyst

Great. Thanks.

Operator

Next question comes from the line of Shannon Dougherty of Deutsche Bank. Shannon, your line is now open.

Mike Linenberg -- Deutsche Bank -- Analyst

It's Mike Linenberg here, asking a question on behalf of Shannon.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

You got somebody flying ahead of you Michael, is that what you're saying?

Mike Linenberg -- Deutsche Bank -- Analyst

I'm getting ready to retire, Maury, and go work for you. Listen, this is actually -- John, on your point about the Sunseeker opening March, I guess you said first quarter 2023, and you're going to start selling this first quarter of 2022. When I kind of look at Allegiant's schedule, you typically sort of sell out, I don't know, 6, seven months, maybe it's 200, 220 days or so. It's historically been the standard. Are you planning to open and just sell hotel or resort nights and not bundle with the airline piece? Or are you considering maybe extending the schedule for Allegiant and selling out 300, 330, maybe even beyond a year, I think we're seeing that with some tiers in some countries.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

We're not -- Drew and I in the past, this is before obviously this pandemic stuff, we had conversations regarding that, and we know it's an opportunity and it's something that we could explore. It's not a requirement for it's not a requirement for us to go on sale. So if we wanted to go on sell as a land-only product, if you will, without the ability to package the -- with air, we would definitely do that.

Drew Wells -- Senior Vice President, Revenue

Yes. Mike, we're quite as far as we would like to be and where we've historically been. So we're trying to push that back further out to that 10-, 11-month window. I expect we'll be able to get there in the next year or so, I'd say, without [Indecipherable]. But I expect we'll be pushing back out further than we have over the last 18, 24 months.

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

One other thing I would add because we're also exploring tactics like this and major sporting events and music events that may be sold six, nine, 12 months in advance is that at the time of buying that, there's a lot of interest, I can tell you from our partners in those areas of having what in effect would be a credit. Much like you get an F&B credit when you book a hotel room, while in this case, when you book a hotel room 12 months on at Sunseeker, you're getting an Allegiant flight credit, that as you get closer to your stay and that schedules out, drives you back to allegiant.com to book your flight at that time. So there's a variety of ways to make the connection versus needing to have both the hotel inventory and the flight schedule in perfect sync.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

The other thing, Michael, One other thing. We're sending 40 million to 50 million emails a week out to our audience. So the power of the direct-to-consumer is going to come into play big time here. And while the airplanes are good we've just seen it over and over in all the new hotels here in Vegas, they get the love right out of the box. So it's going to be -- I'm not saying we won't use the airline, but I don't know that we have to -- we certainly don't have to have the airline in my opinion, though, to fill this thing up during the first 12 to 24 months and beyond.

Mike Linenberg -- Deutsche Bank -- Analyst

Yes. Look, and I know you guys are probably better than I, but I know John had mentioned an opportunity to build load factor points. And I think that one of the things we do find interesting is that when you go very far out and people want to have everything settled, that in many cases, the way the pricing curve is you'd think fares are a lot -- the further out you are, the lower they are. But when you go out, call it, a year or more, what we'll see is that, for the planners, you'll get a better far, whether it's for the college graduation, the wedding, et cetera. And so you may be able to tap into that. With the exception being that if you're in a situation that's inflationary, and you're concerned about maybe input cost being a lot higher down the road, that's where I think you could get hurt. But I think getting that on the books and allowing people to plan that far out could be a nice builder of revenue and load track.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

We don't disagree with you at all. I think the thing, we always have to take a step back and remember is 2023 won't be the only year we're operating the hotel. So we know it's going to be a transitory year where we're probably going to get more land only transactions than package type transactions. But as you get into 2024 or the back end of 2023, moving into 2024 and out, there's more traction with the brand, with the awareness. I mean, that's when the package activity will accelerate. So it was not something that we ever looked at as being an absolute requirement or necessary to fill a hotel. Because of this lag, we know it's something that is part of a longer-term strategy, but not a requirement for a first year of operations.

Mike Linenberg -- Deutsche Bank -- Analyst

Okay. Great. And just a follow-up. I know this is a strategic one here, and I'm going to make it quick. When the DOT came out with kind of the new ruling with respect to Newark, I thought it was very interesting that you guys were at least on record and maybe I misheard, but very quick to say we're not interested. And I think about even your own trade group talking about carriers like yourself not having opportunities to get into airports that are congested, whether it's New York LaGuardia DCA. And you could argue, make the point that's an expensive airport to operate from, on one hand. On the other hand, you're in the airport, and you've done pretty well, and you've done well in airports like LAX and others. I'm just curious why you went out on records, and it seemed like it was pretty quick to say, we're not interested. And again, maybe I misheard.

Unidentified Speaker

Michael, it's Kristen. So the main reason that we came out really quick on that was just with the size of that slot model. It wasn't something that we'd be able to pick up and then to operate in a timely fashion. So we have worked with our trade group on maybe other options for that. But for such a large swap all at once, it just was not -- it wasn't going to work for us and we wouldn't be able to fulfill the requirements.

Mike Linenberg -- Deutsche Bank -- Analyst

Fair enough. Thanks, Kristen. Thanks, Everyone.

Operator

Next question comes from the line of Hunter Keay of Wolfe Research. Hunter, your line is now open.

Hunter Keay -- Wolfe Research -- Analyst

Thank you. The -- I'm trying to Square, Scott DeAngelo, the commentary around low-cost customer acquisitions with the $22 million you spent on sales and marketing, which is up about 25% from pre-COVID with your passenger count only up about two. I understand the whole ecosystem here, the card acquisitions are up and the rental cars and all that stuff, that's great. But should I -- I guess the real question is, should I think about the sales and marketing line item as being a $100 million annual cost item starting next year or just going forward?

Scott DeAngelo -- Chief Marketing Officer

No, it's definitely not the latter. There are a couple of things you mentioned in there and rightly called out, incentives associated with cardholder -- new cardholder sign-ups are certainly in there. There absolutely are some increased costs as we came out of the pandemic and battled both OTAs and certain competitors in and around paid search. And there's also some one time things just associated with production items and related in advertising and marketing. But as a general rule, no, that should necessarily be just straight lined in there.

Hunter Keay -- Wolfe Research -- Analyst

Got it. All right. And then when you think about the operational challenges, Maury, that you guys just had. How do you think about this once Sunseeker opens? I mean, is there going to be a requirement to be number one, number two in the operations relative to your peers every single month because you're not just asking for someone to give you their business because you have the lowest fare, you're asking for someone to give you their entire vacation, and if they have a bad experience in the flight, they may not book Sunseeker again. So have you thought about the importance of being the best in the industry on ops once Sunseeker opens, and any sort of expense that might have to come with that?

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Yes. No, we've definitely considered it, Hunter. And I think what you're seeing in the industry, if you go back and look at 2019 numbers, the whole industry was so tightly bunched as far as reliability and on-time. I mean, the whole group was like 80% to 89% on time, I think within 14 and you just -- everybody was running at a 99% -- mid-high 99% reliability factor. So the industry can do it. And we were right there. We don't ascribe to perhaps a Delta, wanting to be the best on-time because a lot of our two times a week markets, we don't want to leave people. So we may run a touch late historically there. But you certainly have to have a good product. And in today's social media world, putting aside Sunseeker, you just can't afford to have bad excursions and bad flights and things like that because that's flight. And so irrespective of Sunseeker, we need a good solid operation. And you know what, Hunter, it's cheaper to run a good operation than it is a bad one. At the end of the day, and you make the investments, you do what you have to do. And the beauty of when you're growing is you can always have a few extra people in there because personnel seem to be the problem child these days with all the different aspects of pilots and you hear just the whole world of -- in transportation truck drivers, anything involved with logistics or whatever is just tough to come by.

So you're going to have to make investments to stay ahead of that track. I don't care if you're us, Delta, American and United. Everybody is going to have personnel issues for the next few years, I think. So yes, no, we're going to run a good operation regardless. Will it help Sunseeker? Absolutely. But that's just a good quality product that we think we can get. And once again, when you're running unit revenue, it's 20% better than most of your competitors, that gives you a little bit of cover up room too. And so the revenue side is really where you're hearing us continuously beat the drum to be better and get more unit revenue in on a flight-by-flight person-by-person basis.

Hunter Keay -- Wolfe Research -- Analyst

Thanks, Maury.

Operator

Next question comes from the line of Chris Stathoulopoulos of Susquehanna International Group. Chris, Your line is now open.

Chris Stathoulopoulos -- Susquehanna International Group -- Analyst

Thanks for taking my questions. So I realize you're still setting our plans for next year. But as we think about your routes and what's happening here, the pressures and fuel, labor and the need to stabilize the network, should we expect a sort of -- at this point, is the idea to grow your routes, perhaps, historically, you've done low teens, then it depends on routes with or without competition. But is the idea at this point, given these pressures here, fuel, labor and stabilizing the network, is the idea to grow the network in a similar fashion that we've seen pre-pandemic or is it about filling out the schedule and -- or is it a little bit of both? Thanks.

Drew Wells -- Senior Vice President, Revenue

Sure. Yes. I think it will be a little bit of both as it traditionally is. Our planning process revolves around trying to achieve margin targets that slowed a little bit depending on the strength of the period. I would say that we're probably -- we'll probably tilt a little bit more toward filling out the schedule and rightsizing existing, then we'll build new over the first part of 2022 in the summer. That's just based on decisions we have to make here in the short term. But by the time we get to the back half, we know that could invert. One of the main staples here is flexibility and we'll be making real-time calls on this into -- in the first part of next year. So the answer I give you today could very well change by the end of January based on how the environment is shifting.

Chris Stathoulopoulos -- Susquehanna International Group -- Analyst

Okay. And the second question, so you described, I think, in your prepared remarks as running a well-oiled machine here. But as you're coming out of the pressures here in the network and you're looking to stabilize operations. Relative to what you've done in the past, which has been good, is there -- what have you learned here and what do you think could ultimately carry forward into 2022, 2023, the recovery, where we could see a more efficient airline or perhaps a tailwind ultimately to CASM ex? Thanks.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Well, first and foremost, you have to have the people who run the airplanes and make sure they're maintained, they're at the gate on time. And you also had the, what I call the, operational overload or leisure overload. We faced a lot of station problems, TSA, lack of TSA people. Our destined station had 10 pounds for a five-pound bag, Southwest showed up and put 12 flights in unannounced. So that was -- there was just a lot of dislocation. And we're getting -- we're back. We're getting -- so we can get our handle on this. But our first job in the next 90 days, 120 days is to get the personnel where we need and we know that we can show up every day and fly the airplanes without missing the people to get the job done. Scott, I don't know...

D. Scott Sheldon -- Chairman and Chief Executive Officer

Yes. I think the only thing I'll add is we could have taken a hardline approach in certain -- especially when the Delta variant hit pretty hard, I mean we are losing 20 points of on-time performance, uncontrollable. We get a lot of people at the gate. We could have done a lot of things. I think some of our peers took a harder line than we did considering some of the markets we fly, we took -- we take the delay in order to get more people on the plane, but it's going to push downstream issues such as cruise timing out. But yes, I think in general, you need stable labor, you need to know people can show up. They're not going to be on leave, they're not going to be impacted by more COVID-related issues. It's just going to take a long time. I mean, airlines aren't designed to start and stop like this. And ultimately, that's what you're seeing.

Chris Stathoulopoulos -- Susquehanna International Group -- Analyst

Okay. Thank you for the time.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Thank you.

Operator

And there are no further questions at this time. Maury, you may continue.

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

Thank you all very much. Appreciate your time, and we'll talk to you in the end of this quarter, sometime in January or early February. Thank you again.

Operator

[Operator Closing Remarks]

Duration: 78 minutes

Call participants:

Sherry Wilson -- Director of Investor Relation

Maurice J. Gallagher, Jr. -- Chairman and Chief Executive Officer

John Redmond -- President

D. Scott Sheldon -- Chairman and Chief Executive Officer

Scott DeAngelo -- Chief Marketing Officer

Drew Wells -- Senior Vice President, Revenue

Gregory Anderson -- Executive Vice President, Chief Financial Officer and Principal Accounting Officer

Unidentified Speaker

Savi Syth -- Raymond James -- Analyst

Conor Cunningham -- MKM Partners -- Analyst

Dan McKenzie -- Seaport Global Securities -- Analyst

Helane Becker -- Cowen -- Analyst

Duane Pfennigwerth -- Evercore ISI -- Analyst

Brandon Oglenski -- Barclays -- Analyst

Andrew Didora -- Bank of America -- Analyst

Catherine O'Brien -- Goldman Sachs -- Analyst

Mike Linenberg -- Deutsche Bank -- Analyst

Hunter Keay -- Wolfe Research -- Analyst

Chris Stathoulopoulos -- Susquehanna International Group -- Analyst

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