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Sun Country Airlines (SNCY -3. 22%) Third Quarter 2023 Earnings Call November 7, 2023, 4:30 p. m. (Eastern Time) ET
Operator
Welcome to Sun Country Airlines’ third quarter 2023 earnings call. My call is Crystal Love and I will be your operator for today’s convention. [Operator’s Instructions] Please note that today’s convention is being taped lately. Now I’m going to Chris Allen, Director of Investor Relations.
Mr. Allen, you can get started.
Chris Allen – Director of Investor Relations
Merci. Je’m joined today through Jude Bricker, President and Chief Executive Officer; Dave Davis, President and Chief Financial Officer; and an organization of others to help answer questions. Before we begin, I would like to remind everyone that on this call, the Company would possibly make statements that constitute forward-looking statements. Our comments today would likely come with forward-looking statements. that are based on management’s existing beliefs, expectations, and assumptions and are subject to risks and insecurities.
The actual effects would possibly differ materially. We inspire you to review the threat points and cautionary statements outlined in our earnings release and in most recent SEC filings. We assume no legal responsibility to update any forward-looking statements. You can find our third-quarter earnings press release under Investor Relations. segment of our ir. suncountry. com.
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That said, I’d like to tell Jude.
Jude Bricker – Executive Director
Thank you, Chris. Thank you all for being with us this afternoon. Our diversified business style is unique to the airline industry. With the predictability of our chartering and shipping activities, we must supply the maximum flexible scheduled service capacity in the industry. .
The combination of our programmed flexibility and our cheap, consistent style allows us to respond to both predictable fluctuations in recreational demand and exogenous industry shocks. We believe that, with our structural advantages, we will be able to reliably generate industry-leading profitability across all cycles. , we are pronouncing third-quarter effects, adding an adjusted operating margin of more than 8% on an 18. 5% year-over-year expansion in outflows. We now know that those effects produced the highest 12-month pretax margin of any of the 11 U. S. primary public networks. U. S.
The same thing happened at the end of the second quarter. Demand remained strong across all segments of our business, highlighted by a 5% drop in scheduled TRASM service in a 15% year-on-year expansion in ASM. Since the beginning of the year, the average monthly TRASM service has been restored to about 35%, a figure higher than pre-COVID rates, and this change sometimes occurs on long-term bookings.
In addition, our charter block hour production, critical to the drop in demand for scheduled services, increased by more than 14% year-on-year. It is worth remembering that the third and fourth quarters sometimes generate margins well below our annual production. We continue to supply a premium quality product. In the third quarter, our controllable final touch was 99. 4%, while providing the highest D0 in the U. S. U. S.
main carriers. I am so grateful to all of our team members who have worked so hard to take care of our consumers every day. Unfortunately, the cause of our functionality hole compared to our potential is still the number of teams. As a result of due to cap and availability, we flew approximately 3,500 fewer flight hours in the third quarter, primarily in July, when ambient demand would have supported our fleet and fuel prices.
We continue to see improvement in staffing levels, albeit at a slower pace than we would like. Looking ahead, we recently extended our schedule through summer 2024 and announced 10 new markets in Minneapolis. This is representative of our expansion for the next few years as we continue to expand our opportunity in Minneapolis during peak periods, supported by a modest off-peak expansion in our charter business. As our expansion moderated in line with the number of pilots, we made the decision to lease two more aircraft that were scheduled to enter our fleet in the fourth quarter.
This will delay the entry into service of two 737-800s planned for the fourth quarter of 2023 until the first quarter of 2025. Aircraft are in high demand, as much of the aviation industry faces delays in the production of new narrow bodies and service disruptions. . of the GTF. So we’ll get smart returns from those planes until we can fully utilize them. That said, I’ll turn it over to you, Dave.
Dave Davis – President & Chief Financial Officer
The third quarter is another successful quarter for Sun Country, with earnings at the high end of our guidance diversity and operating margin in the middle of our guided diversity, despite a fuel price 10% higher than expected. Total profit increased 12. 3% year-over-year to $248. 9 million, while the adjusted pretax profit source was $11. 1 million, compared to $9. 7 million in the third quarter of 2022. Adjusted operating margin of 8. 1% for the quarter and 14. 7% year-to-date.
As Jude mentioned, for 12 consecutive months, Sun Country’s adjusted pretax margin through the third quarter was 10. 2%. This is the highest figure among the top 11 publicly traded U. S. airlines. The strength of our diversified business style continues to be demonstrated through our strong results.
Revenue in our passenger segment continued to grow in the third quarter, with combined scheduled and charter earnings expanding 9. 7% year-over-year to $214. 4 million. Regular service and ancillary sales generated $166. 9 million in profits, up 9. 5% from last year. Normal service MSRT was $0. 1172, down 5% from last year and a 15. 1% increase in normal service ASM. We continue to have a remarkable strength of the TRASM of normal service compared to 2019.
The third quarter of 2023 was almost 39% higher than the third quarter of 2019. This is our sixth consecutive quarter of normal MSRW service, at least 25% more than its comparable quarter in 2019. We don’t expect this streak to improve to end in the fourth quarter. Our overall fare per passenger decreased 8. 7% to $153. 11, while we maintained a loading rate of 86. 6%.
Third-quarter charter earnings rose 10. 6% to $47. 4 million, with a 14. 1% increase in block hours. Part of our profit from charter flights is to reimburse consumers for changes in fuel prices, as we do not take on any fuel risk on our charter flights. Values in the third quarter fell more than 18. 8% year-over-year. And fuel reimbursement earnings for Q3 23 and Q3 22, profit from charter flights grew 14. 6% year-over-year, which is in line with the expansion of block hours. generating solid year-over-year rental earnings consistent with block time.
Cargo earnings in the third quarter increased 10% to $26 million, driven by a 6. 3% increase in bilge hours. Last year, we saw a decrease in flight grades due to scheduled maintenance events, and the annual increases to our contract with Amazon occurred in December 2022. We continue to grow at a successful and measured pace. We expect overall ASGM expansion in the fourth quarter of this year to be between 8% and 10%.
We expect a similar rate of expansion to continue in 2024. Now let’s move on to costs. Total operating expenses increased 11. 4% on a 14. 4% increase in total block hours in the third quarter. Adjusted CASM accumulation increased 2. 6% compared to Q3 22.
This year-over-year replacement is particularly lower than the increases of more than 10% we experienced in the first part of 2023. The timing of maintenance events in the third quarter is a major contributing factor to our year-over-year charge increase, as the volume of airframe controls doubled compared to Q3 22 and increases in the value of curtains were approximately 9%. Looking ahead to the fourth quarter, we expect the high volume of controls to remain strong compared to the fourth quarter of 2022. For a moment in 2024, we expect adjusted CASM to be more or less stable compared to the full year of 2023.
Let’s move on to the balance sheet. Our overall liquidity at the end of the third quarter was $198 million, which is lower than at the end of the second quarter, primarily due to the seasonality of reserves and the timing of our percentage repurchases, which ended toward the end of the quarter. On November 6, our overall liquidity was $230 million. Through the end of September, we have spent $210. 6 million on investments, which has funded a significant portion of our planned aircraft expansion through 2025.
We expect our full-year investments in 2023 to be approximately $225 million and our year-end passenger fleet to consist of 42 aircraft. Fleet expansion in 2024 will be modest and most of our expansion will be funded through increased utilization. Capital expenditures in 2024 are expected to be well below 2023 degrees and loose cash generation is expected to be strong. We continue to maintain a very strong balance sheet.
Our net debt to adjusted EBITDA ratio at the end of the third quarter was 2. 4 times. Because we don’t have a giant debt load, we have some flexibility in how we deploy our liquidity. Since the fourth quarter of 2022, we have spent approximately $80 million on percentage buybacks, the total amount legal through our Board of Directors. Recently, our Board of Directors legalized another $25 million of reimbursement power, which we plan to implement opportunistically.
Let’s move on to orientation. We expect overall Q4 earnings to be in the order of $242 million to $252 million, a 7-11% increase from Q4 22 in a block, and an increase in block hours from 11 to 15. %. We expect fuel costs of $3. 20 per gallon in the fourth quarter, with an adjusted or consistent margin for the quarter that will be between 3% and 5%. The fundamentals of our exclusive diversified business remain strong and our style is highly resilient to adjustments in macroeconomic conditions.
Our priority remains successful growth. And with that, I’m going to open the door to questions.
Operator
[Operator Instructions] The first comes from the lineage of Duane Pfennigwerth of Evercore ISI.
Duane Pfennigwerth – Evercore ISI – Analyst
Just a few for me. As for the aircraft, could you simply remind us what the ideal age of the 800 you’re targeting is?And to what extent do you think the market for those assets has been replaced?I sense that you are in the market. There’s a bit of a pause here. But to the extent that you own them, how much do you think the price of those assets has changed in this context?
Jude Bricker – Executive Director
Duane, we categorize our costs based on age. So there’s no preference because we take that into account in the evaluation. What we’ve had the most luck with is a 12-year-old aircraft, the price of which, traditionally for us, was the sum of the maintenance price transferred and the residual price of the components. Before that, we have to pay a premium for novelty.
And later on, we don’t get paid as much as we do for our age. So that’s the sweet spot of the market. This is also consistent with recent significant maintenance occasions that have occurred on this type of aircraft. If you’re looking for a valuation like that, move the maintenance value.
The maintenance price becomes much more valuable through OEM scaling, mainly and in offerings, and then we add a premium to that. We, the last plane we built about six or seven months ago, and that zero premium. So that’s a little bit, we’re getting a little bit of a reduction thanks to COVID.
And before COVID, it was $1 or $2 million, so I’d say it’s pretty consistent. I think what’s happening is there’s a lot of demand for very short-term rentals, motor rentals. And other people are extending their short-term rentals.
All of this is similar to the demanding business situations of new production.
Duane Pfennigwerth – Evercore ISI – Analyst
IT IS OK. So, are you. . . I guess, are you booked for 2025? And you just said: or I’m sorry, are you booked until 2025?And what’s your expansion figure for next year?I don’t know if you talked about that on the call. I’m sorry if I missed it.
Dave Davis – President & Chief Financial Officer
Yes, so we have bookings largely until 2025. If you recall, we made this deal with the 737-900ERs leased to Oman Air. These begin to come out of the lease and are returned to us on November 24th.
So we’re talking about additional aircraft on the 25th. Jude also discussed some sort of additional lease agreement that’s about to be finalized, for two more planes that we were going to take. These will now arrive in the first quarter of ’25. So it’s seven increments.
And we might or might not be for one or two more. I mean, the good news here is that between the advanced utilization, the aircraft that we already have in the pipeline, the investments for them have already been largely committed. That’s why we think we’re in a wonderful position from a fleet perspective.
Duane Pfennigwerth – Evercore ISI – Analyst
And if I may add one last one, just your opinion on when you think we’re going to be able to fully capture those peak calls during periods. Would spring break be a moderate guest, or a moderate assumption about I thought it was attractive for FedEx to report that they’re overstaffed with about 700 pilots, I think?According to some press reports, you have at least one counterparty canceling donations, top donations, or donations they have made.
So it turns out that this shortage of pilots has passed. Under those conditions, when do you expect to fully capture peak demand?
Dave Davis – President & Chief Financial Officer
So remember, for a year now, at least for us, the challenge has not been the recruitment of pilots or their attrition. So it’s not a concern. The challenge is in the upgrade.
And there are a myriad of reasons for this, which will be discussed in the future. We’re seeing positive trends based on some of the moves we’ve taken over the past six months. We are seeing positive trends in the global realm of captain upgrading. I think we’re all around the table expecting a very strong first quarter and a great ability to capture peak demand in March, which is part of the company’s most productive quarter.
But the trends are going in the right direction. We do not see a shortage of available drivers at this time. For us, this is an internal challenge that we are making progress on and working on.
Operator
The next one comes from Catherine O’Brien’s lineage with Goldman Sachs.
Catherine O’Brien – Goldman Sachs – Analyst
Maybe just a follow-up to the captain’s improvement factor. I know you said in your clever comments that the scenario is improving, albeit a little slower than expected. I guess, how has your capacity and unit load perspective been replaced over the last couple of years?Months, in any case, for 2024? And how delicate are those rules with the option for the captain’s improvement factor to be higher than expected next year?I just want to get a sense of the sensitivities there.
Dave Davis – President & Chief Financial Officer
Yes, I’ll give you my opinion on that. I think we’re making plans: The kind of expansion numbers for 2024 that I’ve given, let’s say, single-digit or double-digit higher numbers are achievable numbers. And then the CASM numbers, pretty flat, are essentially a portion of that. I think if we continue to see positive symptoms in some of those modernization trends, we’ll be able to grow the airline faster than that.
And we don’t want more planes to do that because of the possibilities of use that exist. Any further expansion will have a positive effect on CASM. So I would say that our view probably hasn’t changed much in the last few years. months, but maybe it’s become a little more conservative on the expansion front. But there was nothing radical.
Jude Bricker – Executive Director
What might surprise everyone is that as we increase usage and concentrate that extra capacity on peak periods, we will most likely also see an increase in unit gains, as missed flights are largely in peak call periods. A monthly measure of block hours. So if you think about very volatile demand for environments like the one we’re designed to deal with, and then push back those spikes, the lack of flights tends to be at an above-average point for unit gain. So, we’ll see a lot of traction as we ramp up usage.
It’s going to happen a little bit faster because we’re going to launch some planes. But. . . And it’s linear. It’s probably not like one day we wake up and everything is fixed. I think the scenario will continue like this as we move forward in the coming months.
Catherine O’Brien – Goldman Sachs – Analyst
They gave it to me. And just a little follow-up to that. So, since you have the ability to scale those spikes, is the first priority, as usage increases globally, the first priority for scheduled service?I know you’re also talking about adding ads. Hoc cards or the answer is both, depending on the season. Any color would be helpful.
Jude Bricker – Executive Director
Yes, either is the answer. I mean, keep in mind that the way we integrate charter and scheduled flights is unique to the industry, so we’re going to create aircraft itineraries that integrate those two lines of business depending on the season.
Therefore, the predominance of incremental expansion will be in scheduled services, although we intend to also increase charter flights next year.
Catherine O’Brien – Goldman Sachs – Analyst
They gave it to me. If I can upload one last, I just need to make sure we don’t combine apples and oranges when thinking about the long-term of normal MSAN service. You noticed that, compared to the 2019 trend, which was more than 30% higher in the last two quarters, you didn’t expect a major change. I don’t know what your prognosis is for normal ASM service, so that would be helpful.
But my guess is that if I connect more than 30% of any scheduled RASM service in the fourth quarter, that implies a year-over-year increase in calculations, admittedly very fast. Is this what you expect? Or I find out what. . .
Jude Bricker – Executive Director
I mean, since the beginning of the year, I’ve noticed sort of a return to pre-COVID-19 levels. I use 2019 as my comparison, and it’s very solid between 35% and 40% on a normal service. TRASM Foundation from year to year, from month to month. And what’s vital is that we had a very strong and immediate internal recovery in the summer of ’22.
This recovery then spread to near-international markets, such as Mexico and the Caribbean last winter. And now it’s transatlantic. I’m guessing he’ll probably head to the Pacific. But the thing is, it’s kind of a reset in a more permanent way towards peak and trough trends that are very similar to what we saw before COVID, but only at a higher level.
The only festival I would call is December. December had the most productive schedule in December 2019, and it’s going to be a slightly more difficult festival. It will be much higher in 2023, but possibly not at that 35% level. So, the quarter, the fourth quarter for us is like December.
Dave Davis – President & Chief Financial Officer
Oui. Et I didn’t say this obviously enough, however, the figure I cited is six consecutive quarters of expansion of 25% or more, and we expect that trend to continue.
Operator
The following comes from the lineage of Helane Becker of TD Cowen.
Helane Becker – TD Cowen – Analyst
Just two questions. The first is that scheduled earnings in the third quarter gave the impression of seeing a larger sequential decline than we’ve noticed in previous quarters, despite Dave’s comment that it was up 25%. And we’ve noticed a smaller increase in Ancillary Services. I wonder if there’s something going on there.
Jude Bricker – Executive Director
Helane, Dave looks at some numbers. But I just need to warn you about the series for us, because we’re very seasonal. Therefore, year-over-year replacement in the second quarter compared to the third quarter has stabilized. This was due to two things.
First of all, we are developing much faster. But also, the competitions in 2022 were tough and lasted until the fall season, which is quite rare for us. And the goal was to connect the major cities to Minneapolis, as I call Boston, Seattle, big markets like that that that were strong. in the 3rd quarter.
And they have since stabilized into a more permanent accumulation from pre-COVID-19 levels, albeit solid from last year.
Helane Becker – TD Cowen – Analyst
They gave it to me. That’s helpful. And then my follow-up query has to do with the announcement that you made about classified ads, and it wasn’t today, but the Minneapolis classifieds, I guess, for next winter and next summer. Have you noticed any? I mean, you’re a spill carrier, so you don’t see a lot of resistance from Delta?Or do you see them saying, “Hey, if they’re doing a smart job in this market, maybe we deserve to be there too?
Jude Bricker – Executive Director
Helane, let me share some thoughts and I’ll call Grant to add. First of all, we have a strong logo in the Minneapolis market. We are definitely a spill carrier on some of our scheduled flight opportunities out of Minneapolis. But in Minneapolis we’re investing in the logo.
We market to the community. We have a dynamic loyalty program, so I don’t think of us as spillovers in the Minneapolis metro domain at all, and it’s reflected in the way we plan this timeline, particularly for those calls for trusted models.
We announced 10 new markets. A lot of those markets help our partnership with MLS with scheduled service, and I think that’s going to be a theme for us. We will continue to link Minneapolis to domestic and foreign markets with a focus on VFR traffic during the summer months between Memorial Day and Memorial Day. And then in the winter, there will be some new markets, although the most common is an expansion of same-store sales, as we continue to expand toward peak opportunities with fleet expansion and pilot task force expansion.
And that’s in contrast to what we do, for example, in the Mexican and Caribbean markets of Texas in the summer. In the past, we’ve traveled to Hawaiian markets off the West Coast, which is in fact a vector for spillovers. But we’re just very strategic about when we apply capacity so that we can generate higher unit revenue. Do you have anything else?
Grant Whitney, Executive Vice President and Chief Revenue Officer
The only thing I would add to that, Jude, is that yes, being the recreational carrier selected here, I went up 15 new markets this year. They all work. They all come back. We’ve expanded or raised those new 10.
Delta is a wonderful airline. They have a very solid platform here. We never expect to have undisputed stopovers. But here’s the business: we’re confident we’re going to succeed and we have examples beyond to back it up.
Jude Bricker – Executive Director
We need Delta to succeed in the marketplace because it caters to an enterprise clientele, and we need a colorful business network here in the Twin Cities. So I think we’re catering to other segments of the market. And we’ve introduced those 10 new. . . It announced those 10 new markets and replaced its schedule in some markets to add non-stop opportunities.
Most of it has to do with regional connectivity. I think that’s in line with everything that’s been observed in them since the start of Sun Country’s transition in 2018 or so.
Operator
Next up is Michael Linenberg of Deutsche Bank.
Michael Linenberg – Deutsche Bank – Analyst
Dave, you announced the fourth quarter. I guess you talked about a lot of in-depth controls, I guess, in terms of maintenance. What would be the impact on the margin? And what are the other types of stress points?If I think about margins, year after year, fuel is a smart thing. What is it? Does it work? Is it maintenance?Any color would be fantastic.
Dave Davis – President & Chief Financial Officer
Therefore, the number of checks in the fourth quarter is about 3 times higher than in the fourth quarter of 2022. So, it’s a vital factor, and it’s just the time for the checks. This is probably between $4 million and $5 million challenge for us in the last quarter.
So it’s not small. It’s probably the only one that catches my eye here. But that’s just. . . These are heavy mobile controls. That’s our timeline and there’s not much we can do about it.
Michael Linenberg – Deutsche Bank – Analyst
OK OK. Bien. Et so, just my second question, this was interesting, one of their cheap competitors was talking about refocusing on other markets and maybe allocating more flights to underserved markets than overserved markets. And Minneapolis intervened at least, I think, twice on that call.
And I think you know Minneapolis better than anybody, Jude, you and Grant. Is it your opinion on this underserved market? Are there any doors available?Should we be worried that we will see more cheap festivals in this market?I know I’ve had to deal with cheap competition before. Any thoughts on this comment?
Jude Bricker – Executive Director
I think what’s attractive is how the U. S. market has differentiated. And I’m thinking, to a large extent, of America’s good fortune.
In the last quarter, operators focused on how they manage demand outside of peak hours. And there are three tactics to do this. One is network operators, which concentrate on business customers. They also had to take advantage of a longer Atlantic season this year. .
Or the guys at ULCC, who you’re talking about here, are just adapting to that environment and looking to stimulate some demand. Or there are guys like us and we just got rid of those flights. And I think our approach is clearly the best. And what I would say is, and this makes us able to cater to this one, specifically Minneapolis, but I also think this applies to other markets as we expand a profile call that is volatile. .
And no: we have 98 markets outside of Minneapolis, five of which are open year-round. And so it is: the Minneapolis customer needs to move to other locations at other times depending on the schedule, and we’re designed to do that. So I don’t mind too much.
I think we’re going to continue to have some overlap, which is to say, historically in peak recreational markets like Cancun, Orlando and Las Vegas, for example, and probably Detroit and Denver as well, because the two airlines cater to those markets a lot. I don’t think it will change my view at all. Grant, anything to add?
Grant Whitney, Executive Vice President and Chief Revenue Officer
The other thing I would add is that we’ve brought a lot of installs to a lot of new markets. That’s why we’ve uploaded new markets that allow local customers, especially recreational customers, to pass through non-stop. What I think is very important, Mike, is that Minneapolis has the best outlets on the market. So, everything that’s been done through this team to build the brand, expanding our percentage of seats is really difficult because when other people are looking they go out to pass, they actually come; They’re passing to delta. com and then to Suncountry. . . . com.
So for others to come to market, it’s not as undeniable as saying, “Hey, I’m going to put planes here and they’re going to make it. There’s a lot of work to be done to achieve what we want. “We have built and evolved over the last few years.
Jude Bricker – Executive Director
And I can’t overstate the volatility of our schedule. We will have days with 150 flights and days with 3 in the third quarter. And that’s fair – that’s how we’re going to reliably generate that unit revenue.
Michael Linenberg – Deutsche Bank – Analyst
Super. Et, if you allow me to upload one last quick question, Jude. Si you had enough flight time to be able to take a look at the spikes in the September quarter, how much higher?For example, how much margin do you have left? The table because you’re not at the staffing sweet spot, knowing that cargo flights tend to have a very high margin?I’m just looking at. . .
Jude Bricker – Executive Director
Our variable contribution in July is around 40%. And that’s so, the extra flights at that time would be a little less than that, because when our capacity is limited through monthly hour blocks, we’re going to pack flights on the busiest days. So we would increase our activities to Wednesdays and Saturdays, for example, but it would still be in the 30 to 25% range. And that era of application would have lasted until early August.
Therefore, 3,500 lost block hours would likely produce between $7 million and $10 million in operating revenue for the quarter.
Operator
The next one comes from Wolfe’s Scott Group lineage.
Scott Group – Wolfe Research – Analyst
I know we’ve talked about fourth-quarter RASM assumptions, but maybe they just help us with some of the other elements of fourth-quarter earnings guidance, the capacity of scheduled earnings expectations, and maybe chartering and shipping.
Jude Bricker – Executive Director
I’ll start with the easiest. Freight forwarding is stable, which is what we expect every quarter when we look to the future. Dave, anything else?
Dave Davis – President & Chief Financial Officer
I mean, we’ve talked about our earnings expansion type and our block hour expansion expectations for the fourth quarter. I think we’ll likely see a decline in unit earnings in the fourth quarter, and maintenance prices are largely the main driving force of CASM in the fourth quarter. I think these are some of the big trends.
Scott Group – Wolfe Research – Analyst
IT IS OK. And then, maybe, I sense that there’s a lot of seasonality in his style every quarter, and there’s just not a lot of pre-pandemic history. I’m hoping to get some help here, if you just take a look at operating margins. , the first quarter 20%, the second quarter 15%, the third quarter 8%, now this quarter is 4%. I mean, what’s your. . . What is the existing margin rate, in your opinion, for 2024?Is it a single-digit middle margin, a single-digit upper margin, a double-digit margin?It’s just that it’s hard to tell, is it rarely?There’s so much seasonality.
We just don’t have a lot of history.
Jude Bricker – Executive Director
Our rolling margin for 12 months before tax is 10. 2%. So, you were talking about operating margins, which puts the operating margin probably around 14%. I mean, I think that’s something that we can reflect on continuously.
Dave Davis – President & Chief Financial Officer
I think that 14% figure can be replicated in the near future, and the prospects for the company are greater than that. I mean, Jude talked about the number. Once we take full advantage of the maximum opportunities, especially the summer months, we deserve to be able to achieve a higher operating margin than that rate of around 15%.
Scott Group – Wolfe Research – Analyst
And would you like to have visibility on this low operating margin for teens next year?
Jude Bricker – Executive Director
I mean, we’re promoting through Labor Day, so we have pretty clever visibility into sales. I don’t know if I’m keeping an eye on our schedule, but we’re adding January.
Another comment we hear in the industry is that other people are cutting back on spending in January, which they consider a slow period. We see the need for more capacity and we are also responding to the breakthrough scenario in terms of pilot staffing. yes, I think hunting is pretty smart in the first trimester.
Dave Davis – President & Chief Financial Officer
Oui. Je means, we’re not giving a forecast for the whole of 2024 right now. But given the current situation in terms of putting together our plan for the year ahead, we have very achievable profit and charge targets, and they put our operating margin within the diversity that we just talked about.
Scott Group – Wolfe Research – Analyst
IT IS OK. And then, maybe just to wrap up, some of the loose money buy and sell options for next year. It seems that investments have decreased considerably. But what do you think about the money lost next year?
Dave Davis – President & Chief Financial Officer
Therefore, the free money will be particularly greater. First of all, once again, we shouldn’t make too many forecasts for 2024, but we expect a significant improvement in the effects next year and a drastic relief in investments. So I think we’re going to be a very difficult source of money, which is one of the reasons why we’re comfortable allocating another $25 million to percentage buybacks.
We will continue on this path. We, our planes, are the ones we most commonly buy. The operational effects appear to be strong. Based on what we’ve observed so far, we’ll continue to make the most productive use of our money as we generate it.
Operator
For now, this concludes our answering session. Now I’d like to turn the floor over to Jude Bricker for his final remarks.
Jude Bricker – Executive Director
Thank you all for your time and attention. We will get back to you by the end of the year. Thank you.
Operator
[Operator Approval]
Duration: 0 minutes
Chris Allen – Director of Investor Relations
Jude Bricker – Executive Director
Dave Davis – President & Chief Financial Officer
Duane Pfennigwerth – Evercore ISI – Analyst
Catherine O’Brien – Goldman Sachs – Analyst
Helane Becker – TD Cowen – Analyst
Grant Whitney, Executive Vice President and Chief Revenue Officer
Michael Linenberg – Deutsche Bank – Analyst
Scott Group – Wolfe Research – Analyst
More analysis of SNCY
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