Welcome to the Spirit Airlines' First Quarter 2012 Results Conference Call. My name is Monica, and I'll be the moderator for today's call. [Operator Instructions] I'll now turn the call over to Deanne Gabel. Gabel, you may begin.

Thank you, Monica, and thanks to all of you for joining us this afternoon. Welcome to Spirit Airlines' First Quarter 2012 Earnings Conference Call. Presenting today will be Ben Baldanza, Spirit's President and Chief Executive Officer; and Ted Christie, our Chief Financial Officer. Also joining us are Chief Marketing Officer, Barry Biffle; Chief Operating Officer, Tony Laffe; General Counsel, Thomas Canfield; and Senior VP of Human Resources, Jim Lynde. And then Ted will discuss our first quarter results and current business trends. We will then open the call for questions. Our remarks during this conference call will contain forward-looking statements, which represent the company's current expectations or beliefs concerning future events and financial performance. Forward-looking statements are not a guarantee of future performance or results. Forward-looking statements with respect to future events are based on information available at the time those statements are made, and/or management's beliefs as of today, May 1, 2012, and are subject to significant risks and uncertainties that could cause actual results or performance to differ materially from those reflected in the forward-looking statements, including the information under the caption Risk Factors, included in our 10-K for this year ending December 31, 2011. We undertake no duty to update any forward-looking statements. In our remarks today, we will be comparing first quarter 2012 to first quarter 2011 results, adjusting all periods for pro forma items and excluding unrealized head gains and losses in special items. Please refer to our first quarter 2012 earnings press release for further details regarding our assumptions for pro forma results and for the reconciliation to the most directly comparable GAAP measure for non-GAAP measures discussed. Unless otherwise noted, when we discuss our results for the first quarter, we will be excluding special items such as restructuring and termination fees, loss and disposal of assets and unrealized mark-to-market losses on fuel hedges. Again, these special items, as well as our pro forma adjustments, are included [ph] in our earnings release. I'll now turn it over to Ben. B. Baldanza: Thank you, Deanne, and thanks to everyone for joining us on the call today. We're very pleased to report a first quarter profit of $23.8 million or $0.33 per diluted share. Compared to the first quarter last year, we increased our operating margin by 1.3 points to 12.6%, despite a 14.5% increase in fuel prices. My thanks to the Spirit team for this great achievement. Total operating revenue increased 29.6% year-over-year to $301.5 million, driven by increased capacity and our network reorientation last summer, whereby we added capacity to Dallas/Fort Worth, Chicago and Las Vegas. Robust demand during the quarter resulted in load factor increase of -- 0.8 points to 84.8%, which also contributed to our revenue growth continuing to outpace our capacity growth. I'm pleased at how well our team continues to execute on our growth plan. During the quarter, we inaugurated service between 6 new city pairs. Later this week, we will launch service between Denver and our 4 largest bases, Fort Lauderdale, Las Vegas, Dallas/Fort Worth and Chicago. We continue to see a growing number of consumers responding favorably to our introduction of low fares to even more places. Our ancillary revenue for passenger segment in the first quarter was $51.68, up 21.3% year-over-year. As we have expanded into new markets, we've broadened the base for ancillary offerings such as our $9 Fare Club and our FREE SPIRIT affinity card program, which is contributing to this growth. In addition, we continue to look for innovative ways to increase ancillary revenues, which will allow us the opportunity to further reduce base fares, which in turn stimulates even more growth. Breaking the $50 per passenger mark is something we believe that no other airline has accomplished, and we are proud of the fact that by doing this, we've been able to lower our base fares even further, giving customers the power to save by choosing only the options they value is a key piece of our customer strategy. And we believe there's still room to grow. Ancillary revenue has many favorable characteristics compared with passenger revenue such as less elasticity to price changes and it's less subject to price wars and when coupled with low base fares, it helps stimulate demand. Ancillary revenue represented 40.3% of total revenue in the first quarter of 2012 compared to 34.1% in the first quarter of 2011. We believe there are still opportunities ahead to expand our ancillary revenue. A couple of the ideas we are currently exploring include applying revenue management philosophies to ancillary revenue items, which have historically been tied to static pricing points, as well as from new innovative ways to increase our portion of the consumers' total travel budget. We'll have more details to share with you as these initiatives mature but are confident that over time we can continue to grow our ancillary revenue base. Moving on to a few housekeeping items regarding the second quarter of 2012. We expect capacity to be up 18.8% year-over-year in the second quarter, with our average stage length down about 3.3% to 902 miles. For the full year, we expect capacity to be up 23.7% year-over-year, with stage length down about 3%. Our network continues to grow, and many times, the changes can be very dynamic as we seek to optimize the network for maximum profitability. We are constantly shifting our capacity deployment from less accretive flying to where we can have higher potential margins. Interestingly, another airline has commented that by our doing this, increased growth opportunity for them. And we're okay if they think backfilling our capacity works for them. Our focus on investor return remains our priority. We realized that these proactive changes to the network can make it somewhat difficult to estimate our revenue growth. We think the best way to think about modeling our revenue is to model our total RASM rather than separately modeling passenger RASM and non-ticket revenue for flight segment, which can lead to double counting the positive or negative movements. Remember, all things being equal, we will happily trade $1 of passenger revenue for $1 of non-ticket revenue when we can. Thus, from a trend perspective, you should apply whatever correlation you think Spirit has to the industry to our total RASM, much like you would our competitors passenger RASM. We continue to believe that we can grow capacity 15% to 20% per year for the next several years and not compress our margins. We are proud to have among the highest margins in the industry with the lowest fares. Spirit's year-over-year total RASM comp gets much tougher in the second quarter, as we lap the network reorientation last summer, where we added capacity to Dallas/Fort Worth, Chicago and Las Vegas. As a reminder, our RASM during the second quarter last year was up 22%. During the quarter, we announced the change in our CFO position, and I'm delighted to welcome to Ted Christie to the Spirit team. I will now turn the call over to Ted to discuss our cost performance for the first quarter and what we expect for the second quarter.

Thanks, Ben. In the first quarter, our total operating expense increased 27.8% to $263.6 million, primarily due to increased flight volumes and higher fuel expense. Capacity increased 17.7%, and economic fuel costs per gallon in the first quarter increased 14.5% year-over-year. Excluding fuel, our CASM increased 5.6% year-over-year to $0.0599. Stage length decreased 5.1% year-over-year, which contributed 2.7 points to the year-over-year increase. As we've changed the scope of our network, including adding service in some higher cost airports, we've experienced increase in the average ground handling rates, as well as higher crew hotel rates and volumes. We selected these markets for growth specifically because we believe their high-margin potential more than offsets the associated higher costs. In addition, we absorbed additional training costs in the first quarter as we ramped up our crew and airport personnel in anticipation of our planned growth. Looking ahead, we expect continued cost pressure from higher depreciation and amortization expense related to heavy maintenance, as well as increased routine and unscheduled maintenance expense as a result of an aging fleet. We have 28 aircraft in our fleet that were delivered within a 3-year period, and they all begin to approach their heavy maintenance check cycle in the fall of last year. As a result, we expect to see continued sequential increase on a depreciation and amortization line through year-end 2014. We estimate that for the second quarter, D&A will be approximately $4 million and for the year, about $20 million. As a reminder, we used the deferral method of accounting for heavy maintenance, which means we book heavy maintenance expense to the balance sheet and then amortize these events over the life cycle of the event. In April, the Dallas/Fort Worth Airport was hit with a hailstorm. At a system level, we experienced no material operational impact, but we did have one aircraft that suffered some damage. The cost of those repairs, including the cost of temporary leasing parts until the repairs can be made is estimated to be about $1 million. And our initial review indicates these expenses will not be covered by insurance. In addition, we have recently introduced an enhanced preventative seat maintenance program. This program is designed to meet certain maintenance standards for seats on all our aircraft. We think this program will help us to better control long-term seat maintenance cost. We are still in the early stages of determining the full scope of the program, but currently estimate the onetime start-up cost will be in the range $4 million to $6 million, which will be spread over the second and third quarters. We are currently reviewing the accounting treatment for the program start-up cost, and will update our CASM guidance accordingly, once we make that determination. For the second quarter, we estimate our CASM, excluding fuel and the onetime start-up cost related to the seat maintenance program, will be up 6% to 7% year-over-year as compared to the second quarter of 2011. A decrease in stage length year-over-year accounts for 40% to 45% of the increase. The balance of the increase is driven by the same cost pressures we faced in the first quarter, including increased depreciation related to heavy maintenance events and higher rents and landing fees. As we consider new markets, we will target those that we believe can meet or beat our current margin level after applying fully allocated costs. This strategy has helped us to outperform our competition on a margin basis. That said, our cost advantage is one of our powerful tools for growth, and we will remain vigilant in finding incremental efficiencies and cost reduction strategies that, along with our growth, will help us offset cost headwinds created by the fuel and circumstances of maturing business. Turning now to fuel. For the second quarter, we estimate our economic fuel price will be $3.41 per gallon. The density of seats on our aircraft versus our competition functions as a built-in fuel hedge. We have the lowest fuel burn per seat than our competitors, so our fares have to go up less than theirs to cover increases in fuel costs. In addition, we do, from time to time, enter into financial hedges to cover our exposure during the booking window. We have approximately 19% of our second quarter 2012 projected fuel volume hedged using jet fuel collars. We also have hurricane protection hedges in place for the 2012 hurricane season, designed to shield refining exposure. Additional details are included in the investor update we plan to file this afternoon. Our cash position remains strong, and we ended the quarter with $420.8 million in unrestricted cash. In the first quarter of 2012, we generated $79.7 million of free cash flow from operations, largely driven by a $43 million increase in our air traffic liability, related to forward-booking volumes as we head into the busy summer travel season. Additional cash flow and balance sheet details can be found in our 10-Q, which we filed this morning. CapEx for the first quarter was $9.8 million, which includes the purchase of a spare engine that was financed as a sale leaseback upon delivery. Our prepaid maintenance reserves net of refunds were $4.7 million, and aircraft predelivery deposits returned net of predelivery deposits paid, were $1.4 million. For the second quarter, we anticipate CapEx and working capital requirements, including net aircraft predelivery deposits and maintenance reserves, will be approximately $15 million. In addition, during the second quarter, we expect to make payments of approximately $27 million to our pre-IPO shareholders under our tax receivable agreement. In closing, I'm excited to be joining the Spirit team. Spirit is uniquely positioned to take advantage of being the only Ultra Low Cost carrier in the Americas, and I look forward to contributing to its continued success. With that, I'll turn it back to Ben. B. Baldanza: Thanks, Ted. I want to again thank our employees for delivering these strong first quarter results. Together, we were able to grow our network, expand our operating margins despite a large increase in fuel prices and achieve a return on invested capital before taxes and excluding special items of 36.4%. All in, a great start to the year for us to build upon. There's always more to do and as we grow our business, we remain dedicated to improve upon our success. Now back to Deanne.

All right. Thank you, Ben and Ted. Monica, we are ready to begin with our question-and-answer session.

[Operator Instructions] Our first question comes from Hunter Keay of Wolfe Trahan.

So the increase in ancillary per passenger, up to north of $50, how much of that do you think was shorter stage length driven versus actual just sort of more adoption of sort of opting into the optional services? Is there -- is it possible to sort of break that down into sort of volume adjusting it or utilization adjusting it somehow?

Hunter, this is Barry Biffle. Actually, the move downward in stage actually pressures non-ticket on a dollars per segment basis because on a shorter flight, you tend to not buy as many drinks, you tend to go on a shorter trips, you wouldn't have as many bags. So in fact, while it's not huge a deal, I mean, it was only a couple of percent change, as Ted outlined earlier. It actually pressured it the other way, that didn't actually help to increase it.

Okay. And I guess, Ben, I'd like to -- you touched on -- or Barry, you touched on some of the other initiatives you had in the hopper in terms of ancillary. Are there any policies or fees that are out there that you've seen in other airlines in the world or even other industries in the world that you think are exciting, interesting to you but you think just wouldn't work here because of cultural barriers?

We look around the world both at other airlines and at other businesses for inspiration on how we can both lower fares for people and provide better service through having more options for people. And we recently, in January, implemented the boarding pass charge fee at the airport, which is something that Ryanair and some others in Europe do. And they do it a little differently there, they charge a much higher rate than we charge here and it's affected the way they operate at the airports. We're not sure whether there's a model that matches kind of what Ryanair does here for that. Beyond that, I can't say specific anything that we've heard people talk about charging for bathrooms elsewhere in the world. That's not something we're interested in doing since, as we said a couple of times, we believe that's not an optional thing. So beyond that, there's nothing in particular I can point to that says, we'd like to do this because we see somebody else also in the world doing it, but we don't think it would work here.

Our next question comes from Bill Greene of Morgan Stanley.

I know that you don't tend to offer sort of guidance or anything on RASM. But how about sort of how April shaped up? Can you offer any color there?

Basically, we don't do that, Bill, I'm sorry. We put out traffic releases following the month and talk about our traffic and then that's basically the way we give a good talk about the business.

Okay, fair enough. Can we also talk a little bit then about competitive response to some of these new markets you're announcing. Obviously, these are some important markets to some peers of yours, and I'm just curious if you see -- you mentioned you don't care so much if they want to backfill you, and I certainly understand your cost advantage there. But if they do backfill, maybe it takes longer to see some of these markets ramp up in profitability. How does that sort of play out for you, regardless of whether it's a good thing for them to do or not in the long run?

Well, as we've said before, Bill, when we enter a new market, we expect to sort of grow our own demand through stimulative new low fares. And we estimate -- our entry to a market is based on what the current pricing dynamics and demand in that market are. We look at if we lower the fares, how many more people are likely to come out and fly, given those lower fares. And then we size our capacity in that market to carry the growth and not carry the base traffic that was flying. So generally, what that means, although you certainly -- not every market works exactly the same. We don't even -- generally, we're not really -- we're not attempting to, nor in actuality, are we stealing traffic from existing carriers. So in most cases, our growth in what would maybe considered their market isn't really threatening in the sense that it's not going after their business. And secondly, they tend to ramp up fairly quickly because again, it's the low fare that creates the demand -- it's the low fare that creates the demand and the stimulation, and so that allows it to ramp up really quite quickly.

Okay. Some of the markets that you sort of put in, in the press release here today, if we look at kind of where they're targeting, it certainly appears that there's more than a fair share in Dallas/Fort Worth. When American exits, is that something that you need to kind of consider in the plans here because they'll presumably come out either as a bigger carrier through a potential merger or certainly a lower cost carrier than they might have been in the past. How would that affect your plans?

We don't believe it would affect the plans in any meaningful way. Again, American is going through their process. And at the end of the day, if they're very successful on that process, we don't believe that they are even attempting to achieve a cost structure anything close to ours. And we've not heard anything from American that it should suggest that they're changing their business strategy to attract the corporate business traveler as their core base, which of course, is not what we're trying to do. So at the end of the day, assuming American is going to exit their bankruptcy at some point, which we assume they will, we see that no differently as in terms of how we might think about Dallas versus other growth as with American and the way they are today. There's nothing about American being in bankruptcy that has driven our Dallas expansion. It's been about the size of the Dallas market, the ability to stimulate that market with lower fares and create a new flying basis for travel in and out of Dallas at a lower rate that we can uniquely serve with our price points. B. Baldanza: And Bill, this is Ben. Let me just add too, we're up to 15 routes from DFW. And while that looks really big, which you have to think about from a reaction perspective, we're only in these routes 1x to 2x a day. So compared to what a Southwest or even a Jet Blue has done when they've entered markets and kind of gotten into friction with competitors, we're not after their customer and I think our actions have shown that American recognizes that. And I think American recognizes it's much better to have us as the low-price option, which is not after their business customers than to have someone like Jet Blue that absolutely, if they went to Dallas, they'd be in all of these markets 7x a day. And they would be after the business, and we see that American is rationally focused on us in that light.

Our next question comes from Jim Parker of Raymond James.

Maybe one for Ted since he's new. Ted, you stepped into a nice cash position for a size of this company. And you don't own any aircrafts, so you're probably not getting much of a return on your cash. What's the -- what are the pros and cons of perhaps owning some aircraft and spending a bit of that cash on aircraft?

Well, the pros and cons are pretty obvious. Obviously, you can gain some decent advantages from a cost perspective, as well as from a tax perspective. We're going to evaluate that the way this company has evaluated all its decisions, which is, are we going to drive the kind of return we would expect on that investment? And those evaluations will go through now that I'm here. So I can't comment on what they've looked up before, but certainly, that's the way we're going to approach it going forward.

Okay. One for Barry. Barry, you -- in these markets, you're adding -- in most of your markets, you have 2 or 3 flights per day and you do very well. Any inclination to increase frequency to some of these markets?

Generally, no. And usually, it's just 1 to 2. We don't have really any, we're doing 3 so much. And the reasons for that, as we've outlined in our most recent investor presentation, is the way that we look at our network growth as we take a market and we go in, we lower the prices, that stimulates traffic. And we're only looking to grow into the stimulated portion. And that's what we believe makes us less threatening to incumbent carriers. And if we were to deviate from that, we think it would be a strategic error in our part in how we relate with our competitors.

Our next question comes from Duane Pfennigwerth of Evercore Partners.

Just a follow-up on Jim's question. With respect to your fleet this year and next, are there any -- I think you had 2 this year unfinanced, is that still the case? And can you talk about your preferences on those 2 and deliveries into next year?

Yes, we still -- that's correct, Duane, we still have 2 that are unfinanced calendar year, but we're working in a pretty exhaustive RFP process, and we're looking at our options on those, and the responses have been very good. So we're excited about what we're seeing from a response perspective, as well as a cost perspective.

I guess, that implies at least in the near term, more operating leases?

Like I said, when Jim sprung one on me, we're taking a look at how we finance airplanes. I've been in both positions in the past where owning airplanes has been seen as favorable and also cuts your [indiscernible]. So it's not the panacea but we're looking at all our options and in the near term, including in the near term and the long term.

Okay. Just on your ex-fuel cost growth guidance, I wonder if you could talk about the second quarter of last year where you were down 10%. Optically, it looks like a tougher comp and it looks like the comps get easier in the back half and I guess your capacity growth is actually accelerating as well. So any comments you could offer about ex-fuel comps in the back half?

So you're saying -- okay, so just for the second half of the year, we don't really look that far out from a CASM perspective, but I guess we did give guidance for you at in Q2, right, so you have a good feel for what we're thinking about there. B. Baldanza: Yes, Duane, we'll talk to you more about the second half CASM as we get closer to the second half. But obviously, as the airline gets a little bigger, and as we're growing against sort of the headwind of the maintenance and depreciation that we talked about and the onetime cost of the seat maintenance program, we expect that we'll be able to hold the line item cost through the year. But in terms of how that's going to look year-over-year, we're not quite ready to talk about that yet.

Okay, fair enough. I mean, it looks like you go from a down 10 in the 2Q of last year to a plus 6. So to me, it looks like they're easier. Lastly, just on the boarding pass fee or online check-in, are you seeing any change in customer behavior, any metrics you can offer around that fee? B. Baldanza: We don't have any metrics yet. It's a new program. It didn't start until the end of January. Anecdotally, certainly, people are -- more people are checking in online and coming to the airport with boarding passes. And that program was much more about changing consumer behavior to take advantage of the online check-in, come to the airport ready to fly, all ready, just check your bag and fly, rather than have to be checked in. So over time, we expect that to be sort of more of a cost-saving kind of initiative through consumer behavior that supports that cost improvement, rather than a pure revenue initiative. But again, it's still very early so we don't have any data to share yet on the specific passenger change or anything.

Our next question comes from Mike Linenberg of Deutsche Bank.

Just a couple of questions here. You've had a pretty decent ramp of new markets over the last 12 months. I could even see just in this last quarter the number of markets, the number that are coming on. When I think about your RASM up 10% year-over-year, how will that look on if we sort of broke it out on a same-store basis and then markets that have matured over the last -- or markets that have been added over the last 12 months? I mean, are they similar or is there a meaningful gap between the mature and the new markets?

This is Barry. If you look at any new route performance and within about 6 to 9 months, depending upon if it's international or domestic, you'll be able to see it for yourself in public data. But what you'll find is that through the course of the first year with our market, the market begins to mature. It's usually mature within a year. If you go look at the last 5 years, you'll find that most of our markets are mature. Within, like I said, within a year, within 6 months, you'll find that we're making money and if you back up to, call it, 69 days, they're making cash. As we've announced, actually, I think last year, we've seen a lot of our new routes in the last 12 to 18 months have done much better than our last 5-year average. And we believe that's due to a couple of things: Number one, the popularity of our model is much stronger, and our ability to compete in the marketplace is much stronger than it was years ago. And so that is why we've seen much more stellar performance of new routes. But again, there's still a ramp-up even in the best of markets, and that may be measured in weeks and months where it was measured closer to a year in the past, but there's still a ramp-up. If that helps your thinking on it.

And then my second question is, when you look at -- you mentioned sort of some of the reasons why the ramp-up is faster. You talked about the popularity of the model and the ability to compete. Are you starting to get a benefit, call it, tailwind from the fact that as you fill in the map, for example, Denver, you start up new service, it's a new station for you but the first states, those first 4 markets are cities where you already have a presence. Are you getting a bit of a tailwind from that? Is that helping on the profitability or is that just -- is it still not all that meaningful since your frequency is still low?

That's really hard to prove but we think about it a lot. And there's anecdotal evidence that suggests that growing from places we already have critical mass is much easier because you kind of have an organic base to build from. And I think one of the other things that we're doing, as you see, and it's a little different than maybe our past is that when we go in to a city, we tend to serve 2, 3, 4, up to 5 markets at least from that city. So we have more options. So where before, if you're in a city, maybe you could fly us to Lauderdale or you could fly us to Myrtle Beach or you could fly on to the Caribbean and Latin America, but that's really what we offered to you. Now, if you go to Chicago, I'm in many of the top markets, you go to DFW, I'm in 15 of the top 30 markets. So they kind of build on themselves. So of course, there's -- our execution is getting a little better. I mean kind of like the last question, I mean we're getting better at delivering our mousetrap.

Our next question comes from Ray Neidl of Maxim Group.

Yes, just as a macro type of question. You're growing your route system going west now with new opportunities. So it's going to be increasing. I think, as you said, your length of haul and so forth and that's going to affect your PRASM and your TRASM and CASM and so forth. It might give you a chance to sell up some extra drinks and so forth on board, but basically, is that going to have long-term effects on your model, do you think? Be a different type airline, you'll have greater aircraft utilization, maybe higher maintenance, have you thought about that? B. Baldanza: Ray, I don't really think that's the case. In fact, as we're growing out west, our stage length is actually shrinking a bit because it's not that we're necessarily -- it may go up in the future again but again, it's not like we're connecting the East Coast to the West Coast by flying to the West Coast. We're flying to Portland and Oakland and San Diego, for example, all from Las Vegas, which are not long-haul flights. Dallas and Chicago are in the center of the country, so there's not sort of transcon kind of operations from there. So our model sort of has a sweet spot in the 2- to 4-hour kind of time range, and that's where we'll continue to move it. Basically, bouncing in and around 900 miles is where this airline works well, and that's how the network has been growing even as we've been moving west. And as we look at growth going forward, we think we can keep it in that kind of range. One of the things we like about our growth is that we think we can grow without having to change what we do. As we've said a couple of times, we don't need to join a worldwide alliance. We don't need a merger. We don't need to change our distribution. We don't need to think about the business differently than the way we think about it now to successfully execute on the growth that we have planned.

Okay. And you said that there's still more opportunities to generate ancillary type of revenues but you're not going to charge for the bathroom. Have you ever thought about charging for vacant seats? Your base fee is so cheap, so one person, 2 seats -- I don't know if it's legal or not, but if they wanted the seat next to them vacant, get the extra fare there, though you wouldn't be able to generate additional revenues off of that. B. Baldanza: A reasonable idea. They can do that now as fares are so low, they can just buy 2 seats.

Do people do it? B. Baldanza: No.

Ray, this is Barry. We've actually spent time on that concept. The challenge we're coming into that we think we're actually customers will want to just pay for the seat. But the truth is, then I still got this opportunity cost of all the other things that, that seat should've bought. And so the truth is, is what we should do is to sell all the seats.

Yes, that's what I was thinking. One last thing, though. You've had some negative publicity about not refunding a passenger his fare. What's the reason for that? Is it bad publicity, or you're afraid if you do that, you'll open up the floodgate for anybody with an excuse? B. Baldanza: No. Ray, the reason is pretty simple. We offer the lowest fares in the industry right now. And sort of a core principle of our model is that we can offer very low base fares and customers only pay for what they actually use and they don't pay for what other people use. So to refund a nonrefundable fare, and we get literally hundreds of requests a week to refund nonrefundable fares, the recent media case, the media is talking about, but there are many, many, many others of people who are asking for refunds on nonrefundable fares, we have an insurance product that many people buy to offer refunds to those who don't purchase that product cheapens that product a bit and cheats those people. There's an accountability aspect there of if you're going to change your mind, there are products you can buy to protect yourself. And so we just think it's fairer to be -- to treat everyone consistently, only pay for what you use, don't pay for what your neighbor's decisions are. And at the end of the day, we believe that policy will allow us to continue to offer the lowest fares in the United States. And while in once in a while, it may disenfranchise a certain customer because we didn't bend the rules for them, at the same time, we think that overall, having the lowest fare product is going to be what most customers in the United States appreciate.

That's a good point with the insurance.

Our next question comes from David Fintzen of Barclays Capital.

Just wanted to follow up on Bill's question on the competitive response. You talked a little bit about American preferring you, say, over JetBlue. I'm a little -- I'm curious how as you move into more into Chicago and particularly Denver, obviously, curious how up here in United and maybe doesn't know you as well, how they react? But I'm also curious how Southwest or Frontier where arguably, you're after a little bit more of their customer, at least a portion of their customer base. Do you see a different reaction out of them? B. Baldanza: Not materially, no.

And on the United side, and do you see, does United's response differ from American? Or is it pretty consistent as you're harvesting these opportunities? B. Baldanza: Well, yes. I mean, I don't know that -- I mean, we're pretty small. So I'm not sure -- I can't speak for the Head of Marketing for each one of these airlines and what they think about us. But I think in some cases, the decisions are made at much lower levels and they don't give as much thought as we're having the conversation about. But I think specifically, in the case of last summer, when we entered Chicago's markets in late August, we did see an initial reaction from United that was possibly different than what we've seen from American in the past, but not so dissimilar from what we saw from American in, say, circa 2007. So since then, they behaved very similarly to American. And I think again, they probably concluded the same thing as American has that we're not threatening their business. I think in Southwest's case, it's a very similar thing. I mean, they're all about frequency and the business customer and so forth. So why would they chase us? I mean, we're clearly not after their customer base. And in Frontier's case, it's just really early. I mean, that service actually doesn't start until Thursday. But we haven't seen any changes, and we would expect there to be a whole lot of changes. I mean, they're after a different customer than we are.

Our next question comes from Stephen O'Hara of Sidoti & Company. Stephen O'Hara: Could you -- in terms of the Allegiant adopting the carry-on bag fees, I mean, do you see a competitor or the industry adopting higher levels of ancillary revenue as a good thing, giving you maybe a little room to push the envelope? Or do you see maybe a possible risk in that it could possibly draw unfavorable action from the government? B. Baldanza: Well, as you know, imitation is the sincerest form of flattery, right? So we thank Allegiant for that. In general, the industry has adopted a number of ancillary things starting in 2008 when the industry more broadly adopted bag fees. But you see things like bag fees and seat fees and a lot of things that creates a bulk of our ancillary that rest of the industry are doing to various degrees. We think that's actually a very good thing. What it does is, number one, it's good for consumers, we think, as it gives more consumers choice in terms of only paying for what they use. But also, the more people understand that they're going to be charged for bags wherever they go. For example, they can just look at our fare versus other carrier and see that our fare is lower and be okay. So in general, when we see other carriers adopting ancillary things that have maybe uniquely been working for us at Spirit, we see that as generally a good thing and as you said, maybe gives us more leeway to think about even newer things. Stephen O'Hara: Okay. And then I guess, just kind of a follow-up to the previous question. But in general, I mean, has there been a change in the response from competitors, from maybe when you're first starting the ULCC model to something more recent now? B. Baldanza: I think the answer to that is yes. I mean, if you go back to the 2007 timeframe, the first full year of this model and when we first started flying the Airbus, it was unproven model, we were an unproven airline, liquidity was very constrained and on a lag basis, that was reported through the DOD and so on. So I think that I think they clearly, early on, it was unclear what we were doing, whether we're trying to -- what kind of traffic base we're trying to attract, were we really threatening to other carriers or not. Over the last few years, I think what's been clearly established is that we do have a discernible cost advantage that we believe will increase over time. We're clearly not going after a sort of the core demographic that most of the industry is chasing. And we've been very disciplined about our capacity deployment to keep it thin and spread out. So as a result of that, I think you've seen people who -- competitors who understand us better react more rationally to us.

This is Barry. I would just add one other thing. I mean, I think it's been clear probably in the last 2 years at least that we're not after most of these other carriers' business. And in addition to that, going back now just a year, but when you look at our cash balance, you're left kind of with 2 choices: One, you either get it and you get the rational response, which is you should ignore us; or two, you're forced to ignore us because our cash position is kind of futile to fight us. So not to be arrogant about it, but that's really having been on the other side of this before, I've come to that rationale conclusion.

Our next question comes from Stephen Trent of Citi.

I was just curious, just one sort of broad strategic question with respect to your growth. I noticed fairly recently that you're doing some flying into Toluca, and it seems 20% to 25% just about of your capacity is Latin America and the Caribbean. As you think about future growth capacity, I am with you with respect to your choosing routes based primarily on profitability, but do you think maybe 4 to 5 years down the road that 20% to 25% Lat Am/Caribbean balance on the capacity basis will be intact? Or could it be a little bit higher?

That could depend, if you say 5 years, it depends upon other market forces and competitors and so forth and what they do. The truth is if you go back 5 years, the opportunities were very much U.S. to the Caribbean and Latin America in terms of the yield performance differences versus domestic. That dynamic due to consolidation and what's happened, a lot of carrier brands moving away, as well as aircraft themselves leaving the market in the U.S., those dynamics have flipped. And in the near term, the domestic opportunities have been our primary focus. In addition to that, we haven't had platforms beyond really Fort Lauderdale so we didn't really have the ability to fly a lot of transborder to Mexico like we do now with our growth out west. But I think the thing is, is that we will be where we can maximize the most return on our assets and what's nice about Spirit on the way we view it is the flexibility that our model has and that we can exploit it if that's where the best place that we can get the most return is. But I wouldn't -- I'm not going to draw a line in the sand and say it's got to be 20% or it's got to be 40%. B. Baldanza: Steve, this is Ben. As we look out at our growth, just as Barry said, and we look at all the opportunities where we believe we can deploy our model today given the fare environment and the capacity environment. Those include both international and domestic growth. But as Barry said, the domestic environment is a little more appealing in the very near term.

Understood. And just one super quick follow-up to that, I'm going to guess that in the very, in my view, unlikely event that we see Mexicana Airlines resuscitated, I'm guessing that, that's probably irrelevant for you guys given their very different business model. B. Baldanza: We think that's probably right. Steve, let me also say that we're very happy that you picked up coverage on us after Citi dropped coverage, when Will Randall's coverage dropped, we're happy to see you come on board.

Our last question comes from Hunter Keay of Wolfe Trahan.

Barry, what can you tell us about the typical profile of your average customer? And how do you track if they come back, if they're repeat buyers?

The typical customer would have $80,000 to $100,000 a year in household income, not a whole lot different than you would find at other leisure customers. They do tend to skew. We've seen data that suggest that they tend to skew more value oriented. For example, we have seen evidence that our customers are much more likely than your average $100,000 household income to shop at Sam's Club, BJ's, Costco. So again, they have money, but they're more frugal and they're making rational decisions about value-oriented purchases. And so in terms of repeat, that's really difficult to gauge at this point just because of our growth profile. So what you have to do is look at isolated cases, talking about like in Atlantic City, Orlando, a route maybe we've flown for 10 plus years. And the repeat is very, very high. I mean, I know that there's this rumor that someone percolated recently that, yes, the repeats aren't that great and they will eventually run out of customers. Well, I think over 10 years, we would've already run out of the Atlantic City, Orlando customers because it's just not that big of a marketplace. And so the reality, is again, we're very preferred there. We see very strong relationship with our $9 Fare Club. We see very strong relationship with our FREE SPIRIT MasterCard, which shows that they're tied to the brand. And so we feel really good about our repeat business. Again, people don't go to Costco and just shop once. Same thing, they don't search out a value-oriented best value for money airline and just do it once.

I guess, Ted, a quick one for you. Can you give me a little color on what's driving the fuel price so much higher than competitors? Is this a timing issue when you priced that out? Are you paying more for any particular reason, because hedges are working against you? What's going on there?

No. We've -- we look at the curve on or about the 19th and the 20th of April, and I don't think we have a hedge issue working against us. In fact, I think our hedges kind of gently sit in the money. So I'm not sure if it's different locations, different competitors have different hedging activity, who knows.

Hunter, I also don't know if that's the differential for -- like our differential, you take the jet fuel and add $0.20. I don't know what my competitors on that. I know one competitor is only at $0.10, I'm not sure where everyone else is at.

We have no further questions in queue. We'll now conclude the call.

Thank you all. B. Baldanza: Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.