Allegiant Travel Company reports net income of $17.1 million in the 3Q, up 1%

Allegiant Travel Company (Allegiant Air) (Las Vegas) reported the following financial results for the third quarter 2013, as well as comparisons to prior year equivalents:

Unaudited 3 months endedSept 30,
2013 2012 Change
Total operating revenue (m) $ 228.9 $ 216.9 5.5 %
Operating income (millions) $ 29.2 $ 28.7 1.7 %
Operating margin   12.8 % 13.3 % (0.5)pp    
EBITDA (millions) $ 46.7 $ 44.6 4.7 %
EBITDA margin   20.4 % 20.6 % (0.2)pp      
Net income (millions) $ 17.1 $ 16.9 1.0 %
Diluted earnings per share $ 0.91 $ 0.87 4.6 %

“We are very proud to report our 43rd consecutive profitable quarter,” stated Maurice J. Gallagher, Jr., Chairman and CEO of Allegiant Travel Company. “We are pleased to produce another profitable quarter and be able to return cash to shareholders through our share repurchase program.  In addition, I am proud to announce that Andrew Levy has been added to our Board of Directors and will also assume the role of Chief Operating Officer.  His proven leadership abilities and extensive operational and financial expertise, as well as a deep understanding of the airline business, will be invaluable in his new role as COO.”

“Finally, we were significantly challenged operationally at the end of September many of our MD-80s were taken out of service due to an evacuation slide issue.  Through the tireless efforts of our Team Members, we were able to minimize the disruption to our customers.  I am very thankful to all of those individuals who worked extremely hard to put the operation back together in such a short amount of time.”

Notable Company Highlights

  • Completed the acquisition of five Airbus A320 aircraft.  The company now owns seven A320s
  • Repurchased 491,000 shares for $47 million during the third quarter, average purchase price of $95.85 per share
  • Announced service from nine existing cities to Punta Gorda (Southwest Florida) to begin in the fourth quarter
  • Announced service to 12 new cities with service beginning in the fourth quarter and first quarter
  • Announced 29 new routes which will begin operation in the fourth quarter
  • Average aircraft in service was flat versus last quarter as we retired three MD-80 aircraft and temporarily grounded two MD-80 aircraft early in the quarter
  • Increasing MD-80 operating fleet from 52 at the end of the year to 53 in the first quarter of 2014

Third Quarter 2013 Revenue Performance

  • 15th consecutive quarter of year over year increases in total average fare, 4.8 percent higher than a year ago
  • Florida TRASM grew by 9.6 percent despite 12.7 percent growth in ASMs
  • Same store markets, those which were operated in both the third quarter 2013 and 2012, generated a 5.0 percent increase in TRASM
  • Grew scheduled load factor to 90.8 percent despite a 4.2 percent increase in seats per departure
  • The September slide interruption resulted in approximately $1 million in refunds given to customers
3Q13 3Q12 Change
Scheduled Service:
Average fare – scheduled service $86.94 $82.30 5.6 %
Average fare – ancillary air-related charges $38.99 $37.05 5.2 %
Average fare – ancillary third party products $5.06 $5.59 (9.5 )%
Average fare – total $130.99 $124.94 4.8 %
Scheduled service passenger revenue per ASM (PRASM) (cents) 8.14 7.89 3.2 %
Total scheduled service revenue per ASM (TRASM) (cents) 12.26 11.98 2.3 %
Load factor 90.8 %   90.1 %   0.7pp
Passengers (millions) 1.7 1.6 6.3 %
Average passengers per departure 150 143 4.9 %
Average scheduled service stage length (miles) 932 910 2.4 %

ASMs = available seat miles
 PRASM = scheduled passenger revenue per scheduled available seat mile
TRASM = (scheduled passenger revenue + ancillary air revenue + ancillary third party revenue) per scheduled available seat mile

Third Quarter 2013 Cost Performance

  • Fuel expense per ASM declined 3.9 percent primarily due to a 5.8 percent increase in ASMs per gallon versus last year, which more than offset a 1.9 percent increase in average cost per gallon
  • Operating expense excluding fuel was negatively impacted by lower aircraft utilization and approximately $2 million in expense attributable to the evacuation slide interruption.  The expense associated with the slide event is isolated to September and resulted in higher aircraft lease rentals expense as we contracted with other carriers for sub-service of aircraft to move some of our customers, higher station operations expense due to customer interrupted trip costs, and increased salary and benefits expense due to additional overtime
  • Salary and benefits expense per passenger increased 15 percent versus last year primarily due to an increase in the number of full time equivalents to support our growth, higher stock-based compensation expense and the continuation of the higher pay band for pilots which began in November 2012.  The current pay band will continue through April 2014 when it will be subject to adjustment based on a trailing 12 month profitability test.  Based on our forecasted profitability, we currently expect the pilot pay band to remain unchanged
  • Depreciation and amortization expense per passenger increased 8 percent primarily due to a change in estimated MD-80 engine residual values and useful life, and operating a larger contingent of 166 seat MD-80 aircraft
  • Other expense per passenger increased 31 percent due to a higher write-down of engine values in our consignment program compared to the prior year, non capitalizable information technology development costs, crew training for our growing Airbus fleet and costs to support a seasonal operating base in Los Angeles
3Q13 3Q12 Change
Total System*:
Operating expense per passenger $114.54 $108.92 5.2 %
Operating expense per passenger, excluding fuel $63.37 $56.85 11.5 %
Operating expense per ASM (CASM) (cents) 10.58 10.29 2.8 %
Operating expense, excluding fuel per ASM (CASM ex fuel) (cents) 5.85 5.37 8.9 %
Average block hours per aircraft per day 5.1 5.2 (1.9 )%

*Total system includes scheduled service, fixed-fee contract and non-revenue flying.

Fourth Quarter 2013 Cost Trends

  • Salary and benefits expense is expected to increase due to additional staff required to support our growth
  • Maintenance and repair expense is expected to be slightly higher than fourth quarter 2012.  For the full year, maintenance expense per aircraft per month is expected to be $100 thousand to $105 thousand as previously guided
  • Aircraft utilization is expected to decline 1.5%, which will pressure ex fuel unit costs when compared to fourth quarter 2012
  • Depreciation and amortization expense is expected to increase as seven A320 aircraft are scheduled to enter service in the fourth quarter.   For the full year, depreciation per aircraft per month is expected to be between $92 thousand and $95 thousand, as previously guided

Third Party Products Performance

  • Rental car days increased 6.5 percent primarily due to a 18 percent increase in Florida passengers
  • Hotel net revenue excluding the effect of an air discount was higher by 39 percent versus last year.  The company has phased out offering an air discount which has historically subsidized hotel sales
Supplemental Ancillary Revenue Information
Unaudited (millions)
3Q13 3Q12 Change
Gross ancillary revenue – third party products $28.7 $28.3 1.4 %
Cost of goods sold ($19.6 ) ($18.5 ) 5.9 %
Transaction costs* ($0.5 ) ($0.8 ) (37.5 )%
Ancillary revenue – third party products $8.6 $9.0 (4.4 )%
As percent of gross   30.1 %   31.9 %   (1.8)pp
   As percent of income before taxes   31.3 %   33.6 %   (2.3)pp
Ancillary revenue – third party products/scheduled passenger $5.06 $5.59 (9.5 )%
Hotel room nights (thousands) 144.4 163.4 (11.6 )%
Rental car days (thousands) 195.3 183.3 6.5 %

*Includes payment expenses and travel agency commissions.

Balance Sheet Highlights

  • Repurchased 491,000 shares for $47 million and have over $43 million in repurchase authority remaining.  Year to date, the company has repurchased 880,991 shares at an average price of $85.64 per share
  • Issued $48.0 million in debt secured by four Airbus aircraft
  • Pre-paid $10.5 million in debt secured by four 757 aircraft
  • Spent $84.5 million in capital expenditures in the third quarter, the majority of which was driven by the purchase of five Airbus A320 aircraft
  • Closed a $10 million debt financing in October, secured by our new headquarters building acquired earlier this year
Unaudited (millions) 9/30/2013 12/31/2012 Change
Unrestricted cash* $303.6 $352.7 (13.9 )%
Total debt $179.7 $150.9 19.1 %
Total Allegiant Travel Company stockholders’ equity $402.4 $400.5 0.5 %
Nine months ended September 30,
Unaudited (millions) 2013 2012
Capital expenditures $161.6 $88.8 82.0 %

*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 October 2013 4Q13
Estimated PRASM year-over-year change 5 to 7% 3 to 5%
Estimated TRASM year-over-year change 1 to 3% 0.5 to 2.5%
Fixed fee and other revenue guidance 4Q13
Fixed fee and other revenue (millions) $3 to $5
Capacity guidance
System 4Q13 1Q14 FY13
Departure year-over-year growth (4) to 0% 8 to 12%
ASM year-over-year growth 4 to 8% 10 to 14% 8 to 10%
Departure year-over-year growth 2 to 6% 8 to 12%
ASM year-over-year growth 8 to 12% 10 to 14% 13 to 15%
Cost guidance 4Q13 FY13
CASM ex fuel – year-over-year change 4.5 to 6.5% 4 to 5%
CAPEX guidance FY13
Capital expenditures (millions) $170 to $180

 CASM ex fuel – cost per available seat mile excluding fuel expense

Aircraft fleet plan by end of period
Aircraft 4Q13 4Q14
MD-80 (166*) 51 53
MD-80 (non 166*) 1
757 6 6
A319 3 4
A320 7 9
Total 68 72

*166 refers to MD-80s that have been converted to 166 seat aircraft, non 166 refers to those aircraft that will not be converted
 Aircraft listed in table above include only in service aircraft

In other news, the company announced new, nonstop jet service from Cincinnati-Northern Kentucky International Airport to Orlando-Sanford International Airport starting on February 12, 2014 and Punta Gorda Airport beginning on February 14, 2014.

This announcement marks the 100th U.S. city served by Allegiant’s low-cost, nonstop service to popular vacation destinations, more than any other low-cost carrier in the U.S.

Copyright Photo: Tony Storck/ Allegiant Air’s McDonnell Douglas DC-9-82 (MD-82) N408NV (msn 53246) in the Blue Man Group special livery lands at the Las Vegas hub and base. Allegiant moved to Concourse A at LAS on October 15.

Allegiant Air: AG Slide Show