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Allegiant’s second quarter net income rises by 110% to $25.2 million

Allegiant Travel Company (Allegiant Air) (Las Vegas) is steady profit machine finding profits in its underserved small markets. It really has no competition in these markets.

The travel group reported its second quarter net profit increased over 110 percent to $25.2 million.

Here is the full company statement:

“Allegiant Travel Company reported the following financial results for the second quarter 2012 as well as comparisons to prior year equivalents:

Unaudited 2Q12 2Q11 Change
Total operating revenue (millions) $231.2 $200.4 15.3%
Operating income (millions) $41.9 $20.7 102.1%
Operating margin 18.1% 10.3% 7.8pp
EBITDA (millions) $54.9 $30.9 77.9%
EBITDA margin 23.8% 15.4% 8.4pp
Net income (millions) $25.2 $11.9 110.8%
Diluted earnings per share $1.30 $0.62 109.7%

“We are very proud to report our 38th consecutive profitable quarter,” stated Maurice J. Gallagher, Jr., Chairman and CEO of Allegiant Travel Company. “I’d like to thank our Team Members for their great efforts and contributions to another successful quarter.”

Notable company highlights

  • CASM ex-fuel declined 13.9 percent to 5.1 cents, cost per passenger ex-fuel decreased 11.4 percent to $52.98
  • Announced acquisition of 19 A319 aircraft
  • Announced retirement of two MD-87s by the second quarter of 2013
  • Currently testing new website. Only a limited portion of web traffic is pointed to the new site. We expect to have 100 percent of traffic on it by the fourth quarter
  • Instituted new boarding process to support carry-on bag policy
  • Initiated service to Honolulu from Las Vegas and Fresno, Calif
  • Announced service to Honolulu from Bellingham, Wash, Eugene, Ore, Santa Maria, Monterey, and Stockton, Calif to begin in mid November
  • Announced service to Maui from Bellingham, Wash to begin in mid-November
  • As of Aug 1, we have 30 MD-80s with 166 seats. Expect all west coast scheduled MD-80s to have 166 seats by end of the third quarter of 2012.
  • Received ETOPS certification and Flag Carrier Status – permits international scheduled flying
  • Since July 2, operating four 757s
  • Started Oakland and Punta Gorda bases, currently serving eight markets and seven markets, respectively

Revenue performance

  • Average fare — ancillary air-related revenue per passenger grew 7.8 percent
  • Ancillary revenues per passenger were $39.67 in the second quarter, highest in the company’s history

2Q12 2Q11 Change
Scheduled Service:
Average fare – scheduled service $89.43 $91.17 (1.9)%
Average fare – ancillary air-related charges $33.90 $31.45 7.8%
Average fare – ancillary third party products $5.77 $5.68 1.6%
Average fare – total $129.10 $128.30 0.6%
Scheduled service passenger revenue per ASM (PRASM) (cents) 8.75 9.27 (5.6)%
Total scheduled service revenue* per ASM (TRASM) (cents) 12.63 13.04 (3.1)%
Load factor 90.1% 92.0% (1.9)pp
Passengers (millions) 1.7 1.5 16.0%
Average passengers per departure 140 136 2.9%
* Total scheduled service revenue includes scheduled service, ancillary air-related, and ancillary third party revenue.

Cost performance

  • Cost per ASM excluding fuel decreased 13.9 percent to 5.1 cents, total cost per ASM decreased 10.9 percent to 10.16 cents
  • Aircraft fuel expense per gallon declined 2.5 percent or $.08 per gallon
  • Fuel cost per passenger was $52.50, a $2.93 decrease or a 5.3 percent drop from the second quarter 2011
  • Salary and benefit expense per passenger declined 3.4 percent primarily due to outsourcing of station personnel in Las Vegas in the second quarter of 2011 and continued productivity gains
  • Sales and marketing expense per passenger decreased 11.7 percent primarily due to an 8 percent decline in payment processing cost per passenger resulting from increased debit card usage
  • Maintenance and repairs expense per passenger decreased 34.9 percent due primarily to a 64 percent decline in engine overhaul expenses
  • Station operations expense per passenger increased 2.8 percent primarily due to outsourcing Las Vegas station personnel

2Q12 2Q11 Change
Total System*:
Operating expense per passenger $105.48 $115.24 (8.5)%
Operating expense per passenger, excluding fuel $52.98 $59.81 (11.4)%
Operating expense per ASM (CASM) (cents) 10.16 11.40 (10.9)%
Operating expense, excluding fuel per ASM (CASM ex fuel) (cents) 5.10 5.92 (13.9)%
* Total system includes scheduled service, fixed-fee contract and non-revenue flying.

Third party products performance

  • Ancillary revenue — third party products per passenger increased 1.6 percent, our ninth consecutive quarter of year over year increases
  • Third party ancillary gross margin improved to 29.7 percent versus 28.1 percent last year
  • 41 percent of hotel room night growth occurred outside of Las Vegas
  • Rental car days grew 28.4 percent year over year

Supplemental Ancillary Revenue Information 
Unaudited (millions)
2Q12 2Q11 Change
Gross ancillary revenue – third party products $32,909 $29,547 11.4%
Cost of goods sold ($21,909) ($20,046) 9.3%
Transaction costs* ($1,218) ($1,210) 0.7%
Ancillary revenue – third party products $9,782 $8,291 18.0%
As percent of gross 29.7% 28.1% 1.6pp
As percent of income before taxes 24.5% 43.9% (19.4)pp
Ancillary revenue – third party products/scheduled passenger $5.77 $5.68 1.6%
Hotel room nights (thousands) 204.3 186.2 9.8%
Rental car days (thousands) 201.6 157.0 28.4%
* Includes payment expenses and travel agency commissions.

Balance sheet highlights

  • Financed two 757s in the quarter for $14 million
  • $33 million of total debt secured by six 757 aircraft
  • Currently have $45 million in share repurchase authority

Unaudited (millions) 6/30/12 12/31/11 Change
Unrestricted cash* $390.1 $319.5 22.1%
Unrestricted cash net of air traffic liability $232.4 $200.8 15.8%
Total debt $156.2 $146.1 6.9%
Total stockholders’ equity $403.0 $351.5 14.6%
Six months ended June 30,
Unaudited (millions) 2012 2011 Change
Capital expenditures $61.1 $51.2 19.2%
* Unrestricted cash includes investments in marketable securities.

At this time, Allegiant Travel Company provides the following guidance to investors, subject to revision.

Guidance, subject to revision
Revenue guidance July 2012 3Q12
Estimated PRASM year-over-year change (3) to (1)% (9) to (7)%
Fixed fee and other revenue guidance 3Q12
Fixed fee and other revenue (millions) $10 to $12
Aircraft guidance 3Q12
Number of MD-80s to be converted to 166 seats* 37 to 39
Capacity guidance
System 3Q12 4Q12
Departure year-over-year growth +2 to 6% +5 to 9%
ASM year-over-year growth +14 to 18% +19 to 23%
Departure year-over-year growth +3 to 7% +6 to 10%
ASM year-over-year growth +15 to 19% +22 to 26%
Cost guidance 3Q12 FY12
CASM ex fuel — year-over-year change (2) to 0% (10) to (5)%
CAPEX guidance FY12
Capital expenditures (millions) $105 to $115
Full year capacity guidance FY12 FY13
Scheduled ASM year-over-year growth +20 to 25% +20 to 25%
CASM ex fuel — cost per available seat mile excluding fuel expense
* Number of aircraft expected to be completed by end of the quarter

Copyright Photo: Stephen Tornblom.McDonnell Douglas DC-9-83 (MD-83) N865GA at Long Beacg shows off the updated 2010 livery.


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