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Republic Airways Holdings Inc. (NASDAQ:RJET)

Q2 2010 Earnings Call

August 04, 2010 10:30 a.m. ET

Executive

Hal Cooper - EVP & CFO

Bryan Bedford - President & CEO

Greg Aretakis - VP, Revenue Production

Daniel Shurz - VP, Planning and Strategy

Joe Allman - VP, Controller

Analyst

Dwayne Pfennigwerth - Raymond James

Michael Linenberg - Deutsche Bank

Travis Devitt - Teton Capital Advisers

Stephan Mera - Maddison

Operator

Good day ladies and gentlemen and welcome to the Second Quarter 2010 Republic Airways Holdings Incorporated Earnings Conference Call. My name is Shenal and I'll be your coordinator for today. At this time all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call Mr. Hal Cooper, Chief Financial Officer. Please proceed.

Hal Cooper

And thank you, Shenal and thanks every one and good morning everyone, welcome to our second quarter conference call. I am here in Indianapolis and I am joined by Bryan Bedford, our Chairman and CEO; Wayne Heller, our COO; Joe Allman, is our VP Controller; Tim Dooley, our VP of FP&A. We're also joined remotely by Greg Aretakis, our Vice President of Revenue Production and Daniel Shurz, our Vice President of Planning and Strategy. And they'll both have some comments to make on their varius pieces of the business. But let's by covering our Safe Harbor disclosure.

Please note that the information contained in our earnings release and this call contains forward-looking information as defined by United States securities laws. Forward-looking information is subject to risk and uncertainties, and we refer you to a summary of risk factors contained in our most recent filing with the SEC.

As I mentioned Bryan and others will go through some prepared remarks' and then we'll be prepared to take your questions. So Bryan?

Bryan Bedford

Hey thanks Hal and good morning, we welcome to all of our listeners. Have to tell you we're very pleased to report a return to profitability which includes an X item profit for our Frontier. And in other course of the call you'll hear me refer to the brand business and Frontier those terms are interchangeable right now that we've made our brand decision. And it's not the Frontiers the surviving brand for our commercial operation.

Our results for the quarter exceeded our internal expectations and the guidance which we provided on our last call. I got to tell you this was the direct result of the hard work of my 11,000 co-workers. Our employees are working incredibly hard every day to ensure that our guest are receiving exceptional service on aircraft that are extremely full. As you saw from last night we reported another record load factor in excess of 91% for July. So boards very grateful for the hard work that our employees have given us and the fact that it's showing true in our financial performance. So again thanks to all of you, for you dedication and professionalism.

I'm going to quickly update our results from the press release last night and give me a from some of my coworkers here round the table let me start with a fixed he business free tax income was $18.2 million for the quarter we did have one unusual item better than that number which related to a out of period excise tax payment and if we exclude that item our prescription tax income was 20.8 million and not to prescription tax margin of 8% on revenue which would get in guy provided in the last call. We expect similar performance for a sixty business over the balance of 2010.

Excluding fuel of its service revenue wee down $42 million that’s a 15% reduction year on year on a 16% decrease and dark hours the effect of the decrease is Cisco action some of the that we will be doing in our sixty segment and also and the most of method that play the fact that when our recording the regional operation that will be doing for mid west for last year is no longer better than our fixed key results its not being moved every two out branded foreign segment the cost excluding the quarter drop 2% to $7.86 from $8.03 in the second quarter last year.

But that’s really dehydrated someone time in 2009 for our aircraft return cost that pushed our cost out so I sense it so cost performance by year over year on the bright side on the frontier business segment I am very pleased to say much difference to show in last quarter total revenue were up 480 million for the quarter that’s an increase of 9.3% from the combined results of the business of 2009.

The revenues in the second quarter came in $10.76 which is a 2% increase over 2009 and quite a bit better than the guidance we gave of 10.3 to 10.5 our last call regular topics are DPF and management are going to give lot more color on regular performance so also got we did it chief factors of reach of 3 milestone during the quarter we produced an 85.9% factor for entire quarter which compares quite fair with the ATB 81.8% road factor we care and Q2 of 2009 flow cost for that quarter came in $2.34 a gallon that excludes a 3.8 million charge we took for our fuel hedge mark-to-market adjustment. And that's $0.68 higher than the price per gallon we paid in the brand business over the second quarter 2009. And it is focused on the cost difference -- it's about a $40 million head wind in our results this quarter.

Operating inner cost for the quarter excluding fuel was $7.23, I do make sure that we're clear, we're now reporting inner cost for the Frontier business consistent with the rest of the industry which excludes interest. Now, excluding the $18.5 million integration charge that we took for aircraft return cost and other integration expenses during the quarter, excluding that our inner cost, we're actually $6.89. And again that's accomplished with an average C density, we ride at 100 seats per departure. So we're pretty pleased with the progress we're making on Frontier's unit cost structure.

We reported a GAAP pre-tax loss on the brand business of 14.2 million, that when you exclude the items I mentioned. We are reporting a pre-tax profit of 2.8 million. We had a consolidated pre-tax X item profit of 24.5 million when tax affected that would result in net income of about 15 million or earnings per share in excess of $0.40 for the quarter. And again this is substantially better than the guidance of $0.20 to $0.30 X items that we gave in the call last quarter. So the team is quite happy with the results for the quarter.

Finally, we revise raising guidance for Q3 introducing X item EPS guidance of $0.65 to $0.70 for the third quarter on a consolidated basis. And that's based on a average cost per fuel gallon of $2.35.

So that's the financial update. Let me turn it over to Hal to give you some color on liquidity. Hal?

Hal Cooper

Sure. As we reported in the press release, we ended the June quarter with about $417 million of total cash, of which 257 million was restricted. So that's about a $160 million of unrestricted cash, which is in line with $13 million increase in unrestricted cash for this quarter.

We're also been taking on the last couple of calls about our credit card processing arrangement. If you recall, each of the carriers we acquire had their own credit card processor. We've been working and finally got the deal done to consolidate that. And in that agreement we're going to receive a modest decrease in our hold back which was 100%. We're going to take that for about a 95% hold back which will equate to a one time pick up in unrestricted cash of around $10 million as we wind down the old relationships.

We had a couple of aircraft announcements during the quarter. We'll be acquiring six A320s in the first half of 2011. All six of those aircraft firm lease financing commitments. So there will no significant cash outline for those aircrafts. We also announced a letter of intend with Embraer to acquire 24 190 or 195 at our choosing aircraft and because that is a letter of intend it's subject to final documentation. And when that's done we'll be prepared to talk about the near term cash requirements, we're not prepared to discuss that at this point.

Finally, I think I mentioned this on the last call, we have seen in the first half of this year an opening of the credit markets. In the first half of the year we financed about $20 million for our spare engines and we've done that through multiple third party sources on terms that are -- we felt like were favorable to us.

So with that brief update I'd like to turn the call over to Greg, who's going to walk you through our capacity and unit revenue results. He'll be offering some guidance for our Frontier operations as well. So Greg?

Greg Aretakis

Thanks Hal. Good morning everyone, I'd like to start this morning by reviewing our Q2 actual results versus the guidance we gave on the last call. And as Bryan mentioned earlier get into a little more granularity about what's going on within the 2% TRASM increase.

The Q2 actual results we guided to a 1% to 2% decline in TRASM versus 2009 combined Q2. And we beat that guidance by about four point. Obviously we're pleased with the loads on the aircrafts but also experience an up-tick in yield from where we expected to be for the quarter.

Q2 capacity was forecast as an increase in the 5% to 7% range, we came in just over 7%. Our employees ran a very good operation for the quarter and we were able to get through a major schedule adjustment in the reduction wing flying and incorporation of additional A320s into the schedule on that without a hitch.

I like to cover briefly how the revenue flowed into the system within the context of a CASM number mentioned earlier. The reason why our CASM improvement didn't track in the double digits like the rest of the industry relates mostly to accounting differences between 2009 and 2010 reported result talking specifically about passenger ticket revenue we saw a 10.6% increase year on year bad fees which are the next higher sorts of revenue also were about 10% on a unit basis specifically for our two major hubs are gambler network turn in a positive passenger revenue comp of 15% year-on-year which results that which was down to a couple of points its worth noting that the network show a positive year-over-year passenger rams for the first time in over a year.

For the month June as we dive deeper into unit revenue for as a network and we look at same store sale that is the market that we were serving last year and also this year second quarter passenger ticket revenue was up 11% and was up over 20% of course knew marks out of this year for the most long hole identity market like Los Angelus, San Francisco, Seattle and San Diego and w have markets that have much lower TRASM that the system average.

So all in all we were very pleased with the revenue production that we saw on the second quarter network one the momentum that we saw to the end of the first quarter defiantly continues and more importantly the back slowing down in Q3 still to early to tell about Q4 we will update to on the next call as we immigrate the two brands we are very focused on increasing sales of our bumble product which have so for five only available we began promotion like the best black guy which full flexibility along with a the benefit such as free check bag free live TV and complimentary stress seating.

We have one believe that classic touch for a business travelers schedule who need and top shopping and one stop shopping. We start with a number ok to increase our local performance and to increase our average fear you think combination is marketing and commercial pricing that quite table increase five times for a tray cater a classic product of the fair includes.

We saw in damper network in June we can attribute more than 25% of that to the increased use of plastic plugs the second quarter result are full reflect able we are capable of attaining we the bundle offering first we launched a promotion of classic plus sp we haven’t seen its impact for fourth quarter. Secondly we started the promotion as we moved into the highly leaser summer travel season and we expect to get more traction as we move into the fall business travel season. And finally we continue to experiment with the pricing and we're working to find the optimal fair formula for our classic and classic plus bundle fair.

Starting in October we began to operate the -- we'll begin to operate airline as in single selling and technical platform and we'll be rolling the branded products up into these network. And while this only represents around 20% of our capacity, Milwaukee is highly contested marketplace and we believe that the bundle products will be similarly effective in the business travel space will improve the average fair there as well.

Looking forward for the September quarter, we're now looking at capacity up 7% to 9% over third quarter of last year, and we expect to see TRASM up 1% to 3% versus 2009. Full year 2010 capacity increases for Frontier is still in the 6% to 7% range and we're increasing our full year TRASM guidance by two points to a range of $10.5 to $10.7 which should be a result of flat to up by 2% for the year.

Finally some advance booking data on the branded operation consolidated basis for the third quarter. July, as Bryan mentioned earlier we had a very-very strong July, load factor was over 91% which was a record for the combined system and up over 1.6 points from the prior year. August we think the load factor number would be 2009 by one to two point and last year we were at 86.9. September based on our current visibility we would expect load factor track ahead of 2009 by one to two points.

Okay. So with that I'm going to hand off to Daniel Shurz, to talk a little bit about our fleet developments and changes in our network. Daniel?

Daniel Shurz

Thank you very much Greg. Good morning everyone. We had a very busy first half for the ultimate network prospect and we've added 18 new routes so far this year. I mean I'd be very pleased with the general performance on these.

We are heading into the second half of the year changes which are generally some offset about getting capacity right for the slower fall winter season. We are going to removing all the remaining Q400s from service in September. And as of October 1st Frontier will be an old Jet Airlines.

During the transition as means in winding down, it looks our employees continue do an outstanding job with the operational change. And without these system, Frontier would not have been able to drop a number of markets or continue to be part of our network in October and beyond.

We also continue to be somewhat opportunistic with our fleet portfolio. Our goal is to increase our average seat density and get the efficiency from that and as an example that's why we're removing four 318s and one A70 from the brand of fleets in September. And these aircrafts will be replaced during the first half of 2011 by six new A320 aircraft as Hal mentioned.

The effect of this change along with the Q400 retirements is that we expect our capacity growth in Q4 to be in the range of 1.5% to 3% in the Frontier business. And in Q1 2011 we actually expect our capacity by the business to full year be 0.5% and 2%. The additional of A320s next year allows us to continue to reduce unit cost in the branded network and the Denver have in particular further wide into our unit cost advantage over both of our hub competitors.

We're going to be making some significant seasonal changes to Milwaukee hub schedule in November that we believe will further improve our competitive position in this market. We're going base additional A319s in the Milwaukee to operate services into the big three northeast business markets of Boston, New York and Washington. And will be reducing banners from -- from four to three which will lower utilization on our highest cost fleet there which is the 135 and 145 aircraft.

And I think a very important seats for partial molecular growth in 64 to somewhat 72 the new schedule is for. We'll start our non-stop service to 35 destinations which is four more than in the fourth quarter of 2009 and it's also 10 more than our largest competitor.

And again also as Hal mentioned, we have a letter of intend with Embraer 24 190 or 195 aircraft to the network to be delivered between mid-2011 and mid-2013. Our intense to use these aircraft throughout the Frontier network. Customers love this aircraft with good reason. Bur from our perspective the most important benefit is that we can achieve a TRASM level that is much more competitive on an airplane that's capable of reaching both coasts from both of our hubs.

With the arrival of these aircraft we expect to re-marketing a substantial portion of 173 which is currently operating for Frontier. And our three replacement program gives us the flexibility to respond to market opportunities and yet as mentioned to take a conservative view of the economy on seasonal demand patterns.

Finally I'd like to turn to our expectation on competitive capacity. The trends are diverging somewhat between the two hubs. And we expect total domestic capacity in Denver which was relatively flat in the first half of the year to be up between 4% and 5% in Q3 and by 6% to 8% in Q4 compared to a year earlier.

Milwaukee level has been moderate we expect growth of 24 to 25% compared to the last year and 12 to 14% in Q4.

And without all turn it back to Bryan.

Bryan Bedford

Thanks Daniel. This finally got want to send out of congratulation to the employees for their positive results in Q2. And again but tremendous efforts to make with high demand that we are seeing in the third quarter and things been working really hard on the immigration process to ensure a smooth transition and the female has more experience and that’s when no small undertaking considering the technology. We have been up against and so we are very much looking for none selling platform the redemption system which is got to deliberate better and different product for gas various I would really like to keep up the good work.

And with that we are ready for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) The first question comes from Dwayne Pfennigwerth of Raymond James

Dwayne Pfennigwerth - Raymond James

Good morning you go forward with you order how should we think about the growth rate of the branded business in 2011 and why is that the white aircraft should go after a welfare offering?

Bryan Bedford

Well ok its going to be difficult to give you the capacity guidance that your looking for I think we will be able to do that into three when we nailed out some of the open points on the letter of intent. But Daniel mentioned in his comments the 190 order was all about flexibility we are the a birdy to grow the economy of strong and recovery is fully under way well have the opportunity to remove smaller 145 170 aircraft which high unit cost aircraft compared to our competitors as we demonstrate the second quarter and risk continues in the third quarter people want the product where we have we need to e able to operate most competitor price power fun the 190 and 195 quite frankly gave cost structure compared to other 100 seater aircraft that we're flying up against. So, it's absolutely the right aircraft for a low fair carrier. And it certainly gives us flexibility to growth based on market conditions or to keep a fleet unit count flat. And replace less efficient small regional Jets with E190, 195.

Dwayne Pfennigwerth - Raymond James

Thanks Bryan. So should be we be thinking about this not only provides new aircraft growth but really an out for some of the smaller E175s?

Bryan Bedford

Well E170s are E145s, yes.

Dwayne Pfennigwerth - Raymond James

Okay. And then just wondering, can you help us at all with sort of your expectations for all in TRASM or TRASM X fuel over the next couple of quarters?

Hal Cooper

At the end of the day we're going to produce a TRASM in our branded business X fuel of below $0.07 X items. And we can't be too specific on what the items would be because we have a few moving parts there. But we produced below $0.07 in current quarter, we think that's going to continue. And part of this fleet transition will continue to help that. Below $0.07 is absolutely where we need to be on the branded business.

Tim Dooley

This is Tim, the only thing I'll add to is that with the Q400s coming out at the end there are -- those are relatively higher TRASM X fuel because of the short hold that they're on. So you might see a bit of a sip in Q4.

Dwayne Pfennigwerth - Raymond James

Okay. And any as far as what you know today sort of any aircraft return expenses Q3, Q4 at this point?

Bryan Bedford

Well a lot of the stuff that you've seen even in Q2 as it relates to the return of the A318s, they are non-cash charges. Of course we've already paid for security deposits in maintains provision. So that cash is out the door. We're surrendering those pre-paid items as part of the lease termination. And there will be some of that again non-cash, but there will be some of that associated with the links wind down. And again Wince is been doing a great job for us and we told everyone early in the process that we didn't see how we could operate a 11 unit Q400 fleet efficiently on independent operating certificate. It's either going to have to get a lot bigger or it's kind of to get a lot smaller. And at the end of day we ended up with a scenario where we simplify the fleet by eliminating the Q400s and we'll bring all the links employees into the other Republic operating Entities.

Dwayne Pfennigwerth - Raymond James

Okay, thanks. And just one quick one for Hal, can you tell us what the sort of net interest expense carry is for the branded business at this point?

Hal Cooper

Just for the branded business, do we have that handy guys?

Greg Aretakis

One second on that . About 10 million a quarter. 40 million bucks a year.

Dwayne Pfennigwerth - Raymond James

Thank you.

Bryan Bedford

Thanks.

Operator

Your next question comes from the line Michael Linenberg with Deutsche Bank.

Bryan Bedford

Hi, Michael.

Operator

Michael, your line is open. I'm not sure if your line is--

Michael Linenberg - Deutsche Bank

Oh, sorry. Good morning, guys. I was muted. A couple questions here, your restricted cash was up a lot from where we were at the beginning of the year. What's behind that?

Tim Dooley

It's a change in the ATL. So there is a much forward bookings at June 30, than they were at December 31.

Michael Linenberg - Deutsche Bank

Okay. That's a good point.

Hal Cooper

Keep in mind we are a 100% and had been for most of the year and like I said in the opening we give a modest relief on that as we implement the new agreement.

Michael Linenberg - Deutsche Bank

Now Hal does that new -- I realize that there's probably confidential elements of that agreement. But you go from 100% to 95%. Are there metrics or milestones in that agreement that will allow you to bring that 95% down further?

Hal Cooper

Good questions and are there are. We can earn our way down to a better hold back position. But we're not planning that in any of our forecast. But it's there, good question.

Michael Linenberg - Deutsche Bank

Okay. And so -- but it sounds like that, it's 95% for now, and it sounds like to get it a bit lower, you'd have to see what extraordinary earnings? I'm trying to see if there's going to be additional cash freed up overtime.

Joe Allman

This is Joe. We defiantly could go over --

Michael Linenberg - Deutsche Bank

Okay.

Joe Allman

We're playing conservatively as we know we have cash expectation for Q4 and Q1 with the aircraft deals. But we defiantly could go lower in Q3 or Q4. But our plan right now is to hold steady at 95.

Michael Linenberg - Deutsche Bank

Okay.

Hal Cooper

Just to be clear the floor is not zero or even 50, it's more like 80.

Michael Linenberg - Deutsche Bank

Yes, I figured I would ask you guys that offline. But it sounded like you weren't going to be able to get down to zero but the 50 is actually -- the 80 is actually eliminating. My last question and this is to Bryan, I know the -- I guess the delta code share, or I guess frequent flier program like that ended what this past spring? Did you see an impact from that, and where -- sort of where are you with respect to potentially teaming up with another carrier? Whether it's a major US carrier? Maybe a non-US carrier? Is that on hold now, or do we see any opportunities there in the near term?

Bryan Bedford

And I did what this did you see an impact from that and should where are you with respect to potentially teaming up with another carrier maybe my assistant maybe Airbus carrier what I am old now or do we see any opportunities where in your term what happened more the conversation although a couple of the player pretty detracted right now the participants is pretty shallow to understand you can imagine who will be talking to I think there is interest out there because somebody going to redo all unique having sub-out specifically. The coach are doing a real well producing a whole lot of revenue for us because there is a directional deal because our team go on delta and which was perfect their code can not be one of us which didn’t help us arrive they did help us the secret fire didn’t help us a lot did help us the frequently fire relationship in a rehab we have very deep frequent fire for in the rocky northwest so there is pretty good synergy on the frequent fire relationship. So that was a bit of a rough but we just have to move forward

Michael Linenberg - Deutsche Bank

Okay. Just one quick last one diagnostic of my daughter she s in the coast and decide not to pass or did you not even look?

Bryan Bedford

Well not sure gala took it out from everybody that displayed person when we got her that what there were also labor guarantees the just pall we couldn’t make those commitments god given a concern to our friend the teen steers in the short process the delta is running the competition we just didn’t see how he get that consent from our team stores that would enable us to actually make the commitment the doctor was telling us they needed to support the sale ill take in the past have nothing to do with alack of interest or the economics of the do and we just couldn’t give the challenges I was there is themes of the process

Michael Linenberg - Deutsche Bank

Okay. Very good thank appreciate it.

Operator

The next question comes from Travis Devitt with Teton Capital.

Travis Devitt - Teton Capital Advisers

Hi, guys. Congratulations on a good quarter. Two questions here. What was the capital expenditures in the quarter?

Hal Cooper

Just about $5 million this quarter, Travis.

Travis Devitt - Teton Capital Advisers

Okay. Were there any plane sales? That were taken out of that?

Hal Cooper

No, none this quarter.

Travis Devitt - Teton Capital Advisers

Okay. And then secondly, I just kind of wanted to get your more high level overview of the capital allocation strategy. May you guys can talk about why you're aiming for fleet growth versus kind of saying very disciplined into letting the business build capital for a while? Is it that you see -- is it that you feel you need to grow? Or you see the four factors, you just see the opportunity and you don't believe other carriers are taking advantage? I mean, because the industry does tend to move pretty quickly into oversupply. I just wanted to get a feel for how you're looking at that?

Bryan Bedford

It's a fair question Travis. And again if we go back to the comments that Daniel made, you actually see a growth rate slowdown quite a bit in Q4, Daniel I think he guided 1.5% to 2.5% or 1.5% to 3% growth in Q2 versus where we are at in -- Q4 Travis. Those where we were at in Q2 and Q3. So you do see us making seasonal reductions in the amount of capacity that we have going into the fall. And in fact it appears that we'll actually be shrinking capacity in Q1 of 2011 versus the current year. And that's a function of retiring for A318s and 170s. So we're actually taking six A320s, but if you look at the our economics to operate in A318 versus in A320 that's a terrific trade for us, same for the 170. And as we look to the 190 agreement you get to the same answer. I mean this is significant flexibility to respond to market demands if there are any. And when I'm telling you there will be we don’t know. But if there aren't I guess gives us the ability to trade out a smaller less efficient less CASM efficient aircraft into more efficient producing aircraft. So we're not forecasting a net increase in the number of units or production in 2011. So I think that's consistent. And again just looking at southwest guidance they are taking new aircraft but they are retiring old aircraft and our strategy is basically the same.

Travis Devitt - Teton Capital Advisers

Okay. Thank you.

Bryan Bedford

You bet.

Operator

Your next question comes from the line Stephan Mera with Maddison.

Stephan Mera - Maddison

Hi, great quarter. I just want to clarify the adjusted profit number. We come to $24.5 million, but then there's also $13.6 and is it correct for me to add that and end up with $38.1 or am I looking at it the wrong way?

Tim Dooley

Yes, Stephan this is Tim. The other 13.6 million we don’t classify that as an item because to some extend that number is going to be there, going forward. That amortization of intangible assets that's going be there for quite a while. But those relate to something that we set-up at the time of acquisition. And so there they wouldn't otherwise have been there had we not done the acquisition. So we're just pointing out that number. You can feel free to add it back or not. That's sort of up to you.

Stephan Mera - Maddison

And then one more question regarding the load factors that you're seeing in June and July, already. Can we consider that as more or less full capacity? Or do you think you can potentially bring that load factor up, if the demands there?

Bryan Bedford

I got to tell you, we're surprised at how full these clients are running. And it's hard to envision that load factor going any higher. But Greg you got any color on that?

Greg Aretakis

No, Bryan. I mean the fact of the matter is as we see demand the revenues management team continues to make the kinds of adjustments that make good common sense for revenue production. And we've been squeezing and squeezing and the demands still there. And so we're going to act accordingly. And again I gave few comments a moment ago back how we're looking out of the third quarter, we don’t see it weakening.

Stephan Mera - Maddison

Okay. And this question here, you guys talked about a cost advantage over two main carriers in Denver. I know the amount is obvious, but can you give us anymore color, as to your cost advantage with Southwest? Or do you not want to talk about this?

Bryan Bedford

Daniel you want?

Daniel Shurz

Well at a simple level, there are some stage adjustments needed, as we mentioned. We reported across the whole branded network the CASM X fuel of 6.89. Our average size of that product in Denver is higher than our network average. So our CASM X fuel in Denver is lower than that, is lower than that figure. Southwest network wide CASM X fuel in the first half of 2010 just under $7.6. So they are running a reasonable network wide CASM X fuel disadvantage to us at the moment. And we believe it when we you just Denver.

Stephan Mera - Maddison

Okay, great. Alright thanks a lot.

Hal Cooper

Thank you.

Operator

And that concludes the Q&A session. I'll now like to turn the call back over to management.

Bryan Bedford

Well, okay guys. Again we're pretty happy with the quarter that we were able to produce today. And well that did a great job for us taking care of our guest. And we're looking forward to a point where we get the technology that all work seamlessly across our different East and West network. So it's been a great summer and hopefully we've got our capacity down correctly going into the small fall winter season. And hopefully we'll continue to produce year-on-year improvements. So thanks for your interest in the call and we'll talk to you in three months.

Operator

Ladies and gentlemen that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.

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