Allegiant Travel Company has  reported the following financial results for the first quarter 2020, as well as comparisons to the prior year:

“The events that have unfolded over the last eight weeks are truly unprecedented,” stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company. “We began to see the first signs of demand weakness at the end of February, with a steep downward demand trajectory by mid-March. Despite March revenues down nearly 40 percent year over year, we finished the quarter with airline-only EPS of $1.89 per share and an airline-only operating margin of 12.6 percent. These numbers are a true testament to the flexibility of our model and our ability to right-size capacity quickly and seamlessly.

“Since the onset of the pandemic, we have been laser-focused on ensuring the health and safety of our employees and passengers. Enhancing our cleaning procedures, adding health precautions and employing smart principles of social distancing, we recently launched our Going the Distance for Health and Safety initiative as a resource to customers, the details of which can be found in the bullets below. It outlines a set of principles which are as much a part of our DNA as flying from small cities to vacation destinations. These principles are designed to evolve with travel needs, as a permanent part of our operation.

“In addition to health and safety enhancements, we took early and decisive action to preserve liquidity and reduce cash burn. These measures, outlined below, have brought immediate and significant progress over the past few weeks. Most notably, more than 25 percent of our team members have strengthened these efforts by participating in voluntary leave and pay reduction programs. I am humbled by their generosity and personal investment in our company. These investments will help preserve jobs and the company alike. The effect of these combined liquidity preservation measures has reduced daily cash burn to roughly $2.1 million a day, in a matter of a few weeks.

“As previously reported, we will receive $172 million in payroll support under the CARES Act, of which $86 million has been received to date, with the remainder being paid in installments. In addition, we will receive nearly $100 million in federal income tax refunds during the second quarter of 2020 related to favorable net operating loss (NOL) carryback rules as outlined by the CARES Act. We anticipate another projected $100 million or more early next year related to 2020 expected losses and capital expenditures. I look at this very material $200 million plus in federal income tax refunds as our ‘equity’ offering other carriers are currently pursuing in the market. With these refunds and our aggressive cost and capital expenditure savings, we believe we have sufficient liquidity going forward. Should we project a need for additional funds, we have up to $276 million of dry powder available through the end of September from the CARES Act loan program.

“Near term is painful and will continue to be painful. But I believe our model, given the current economic impact, is best-suited to withstand the brutal impact from this pandemic. In the near term, we will most likely shrink our fleet by as many as 25 aircraft. These aircraft, particularly the motors, will ‘seed’ our near and long-term ability to materially reduce planned engine overhauls, beginning in 2020 and for years thereafter. Going forward, the market will favor buyers, not sellers as has been the case the past few years. We will be able to use our expertise, as we did with the MD80s, to purchase aircraft and associated parts at what we believe will be substantial discounts to recent prices. We will ‘manage’ planned overhauls via our balance sheet versus expensive overhaul shop visits. Another substantial advantage is that we do not have meaningful aircraft purchase commitments in 2021 and beyond. The combination of our retirements and the greatly reduced cost of used aircraft and their motors is a key part of both our near-term liquidity benefit and long-term – 2021 and beyond –  reduced capital requirements for our growth. Finally, I am reminded of a saying I used with our MD80s, namely ‘we were a non-capital-intensive business in a capital-intensive industry.’

“Going forward, we are prepared to make tough choices and take any steps necessary to adapt and right-size our cost structure. Since the outset of the COVID-19 crisis, we have taken proactive measures to adjust quickly and aggressively to meet the demands of this challenging and changing environment. With that said, our low-cost business model has proven its resilience during past economic downturns, and we expect it will support our ability to rebound here as well. The Allegiant model, based on simplicity, flexibility and optionality is well-suited for these difficult environments.”

Covid-19 Responses – Going the Distance for Health and Safety

• Enhanced aircraft cleaning, including regular treatment with an advanced antimicrobial protectant that kills viruses, germs and bacteria on contact for 14 days. Our treatment schedule, along with regular cleaning processes, far exceeds manufacturer guidelines
• Social distancing principles at check-in, boarding and on-board, including limiting adjacent row seating and allowing only customers on the same itinerary to utilize middle seats as practicable
• Volatile Organic Compound (VOC) air filters that ensure the air quality on our planes exceeds HEPA standards
• Complimentary health and safety kits, which include a single-use face mask, a pair of non-latex disposable gloves and cleaning wipes, provided to all of our customers
• Crew members wear face masks on board and gloves during in-flight service
  • All in-flight service offerings consist of prepackaged, factory sealed goods
  • In-flight service frequency has been reduced to once per flight

Network and Customer Experience

• Reduced April capacity by 87.4 percent
  • Evaluating May and June and expect significant capacity reductions based on diminished leisure demand trends
• Waived change and cancellation fees for all customers for future travel
• Extended expiry on credit vouchers to two years

Cash Outlay Reduction – as much as $375 million in cash outlay reductions to our initial 2020 plan

• Suspended all stock buybacks and dividends
• Executives reduced salaries by 50 percent and Board members are foregoing cash compensation
  • Neither the chairman and CEO nor the president draw a salary
• Enacted a hiring freeze and offering voluntary leave
  • More than 1,100 team members are currently participating in some form of pay reduction program
• Suspended nearly all contractor positions, subscriptions, non-essential training and travel
• Suspended all non-essential capital expenditures including non-airline subsidiaries
• Extended payment terms and renegotiating contracts with vendors

CARES Act Relief

• Payroll support in the amount of $171.9 million comprised of $150.3 million in direct grants and a $21.6 million low-interest, unsecured 10-year loan.
  • Received first installment of $86 million with remainder expected over the next three months
  • Warrants will be issued to the U.S. Department of the Treasury to purchase 25,898 shares at a strike price of $83.33 per share
• Federal income tax refund of $94 million related to 2018 and 2019 net operating loss carrybacks
• Anticipated federal income tax refund of $100 million expected to be received between March and May 2021 for 2020 net operating loss carryback
• Submitted application under the Loan Program with the option to access up to $276 millionsecured loan through September 2020

Balance Sheet, Cash and Liquidity

• Total cash and investments at March 31^st and April 30^th were $464 million and $517 million⁽¹⁾, respectively
• Repriced Term Loan B facility with a 150 basis points rate reduction and upsized by $100 millionin February
• Obtained financing of $31 millionin April secured by two A320 aircraft
• Current 2Q20 cash burn is expected to be $2.1 million per day⁽²⁾
  • Cash burn assumes gross bookings for 2Q20 average $750 thousand per day
  • 3Q20 cash burn is expected to be $1.5 million per day assuming gross bookings average $750 thousand per day
• Further sources of liquidity expected during the second quarter around $163 million, including:
  • Additional payroll support from CARES Act in the amounts of $68.7 million
  • Federal income tax refund of $94 million related to net operating losses from 2018 and 2019
• Reduced full year capital expenditures by $260 million
  • $100 million reduction in airline capital expenditures
    • Expect all remaining 2020 aircraft and engine acquisitions to be financed
  • $160 million reduction in non-airline capital expenditures
• We currently have 28 unencumbered aircraft and 8 unencumbered spare engines with an appraised value of roughly $431 million
• Air traffic liability at March 31 and April 30 was $304 million and $305 million, respectively
  • March 31 and April 30 balance related to future scheduled flights are $137 million and $95 million
  • March 31 and April 30 balance related to travel vouchers issued for future use are $167 million and $210 million

(1) April 30 ending cash balance of $517 million includes the first installment payment received under the CARES Act Payroll Support Program of $86 million.

(2) Daily cash burn defined as cash from operations less debt and rent obligations and capital expenditure outflows excluding aircraft and engine acquisitions as they are expected to be financed. Excludes impact of CARES Act Payroll Support Program funding.

Non-airline Subsidiaries

• Nearly all non-airline subsidiary spend has been suspended indefinitely
• COVID-19 triggered impairment review and as a result of the uncertainty moving forward, the company recognized a total impairment of $163 million over its non-airline subsidiaries:
  • Sunseeker impairment of $137 million – suspended construction indefinitely
    • No plans for future capital commitments from Allegiant
    • Exploring potential strategic partnerships
  • Nonstop impairment of $18 million – reorganized to be self-sufficient, not requiring future funding from the airline
    • Warren location temporarily closed – produced positive cash flow prior to closing
    • Permanently closed Utah locations
  • Teesnap impairment of $8 million – reorganized to be self-sufficient, not requiring future funding from the airline
    • Remains an asset held for sale

First quarter 2020 results

• TRASM decreased 13.4 percent
  • March capacity cut 23.3 percent and down 12.2 percent year over year
• Airline only CASM, excluding fuel increased 1.7 percent on capacity growth of 4.0 percent
  • CASM, excluding fuel had been on track to be down 2.0 percent on capacity growth of 16.0 percent prior to COVID-19 scheduling changes

Top Copyright Photo (all others by the airline): Allegiant Air Airbus A320-214 WL N252NV (msn 7868) BFI (Nick Dean). Image: 949885.

Allegiant Air aircraft slide show:

Allegiant Travel Company (Allegiant Air) has reported the following financial results for the second quarter 2019, as well as comparisons to the prior year:

(1) Denotes a non-GAAP financial measure. Refer to the Non-GAAP Presentation section within this document for further information.
(2) Percent point change

“I’m happy to report the second quarter of 2019 was Allegiant’s 66^th consecutive profitable quarter,” stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company. “We commented last quarter about the benefits of our all Airbus fleet. These benefits are continuing and increasing. We led the industry in Q1 with a 22 percent airline operating margin; this quarter the airline generated a 24 percent operating margin, a six percentage point increase from the previous year. And we accomplished these results with seven fewer aircraft this year compared to 2018. The fuel efficiencies of the Airbus continue to impress. We consumed 4.9 percent more fuel in Q2 compared to last year but produced 13.4 percent more ASMs. Correspondingly, our CASM ex-fuel declined 6.1 percent year over year. I’m comfortable stating we believe we will be the only carrier this quarter who had lower unit costs this year versus last year.

“On the revenue front, scheduled service revenue was $11 million per aircraft during the first six months of the year, over $2 million more than last year’s per aircraft revenue during the same period. Additionally, we generated approximately $3.5 million of EBITDA per aircraft in the same period or about $1.1 million greater per aircraft than the same period last year.

“Our operations continue to excel. We have solely led or tied for the industry lead in completion factor every month in 2019.  One of our challenges in the past few years has been our ability to scale our operations during our peak periods in the summer months and maintain a high completion rate.  In June 2018, we were number five in completion rate; this year we were number one. I’m happy to report we have had only ten days where we have had a mechanical cancellation since the beginning of the year.

“This combination of superior financial results and industry-leading operational performance, along with the proprietary model we have developed and continue to operate is a tribute to our excellent team members. Looking forward, we are excited about the opportunities in front of us including our ability to operate our leisure model to Mexico and the Caribbean in the coming years.”

New Routes:

Airline operational highlights

•         Departures in the second quarter up 13.8 percent year over year despite seven fewer average aircraft in service
•         Average number of aircraft in service decreased 7.6 percent from 92 to 85 year over year
•         Spare aircraft reduced from twelve down to four spares year over year
•         Block hour utilization increased by 20.5 percent to 8.8 block hours per aircraft per day
•         Led industry in completion every month in 2019
•         Maintenance cancellations down 87.6 percent year over year
•         On time performance (A-14) for the quarter was 77.7 percent up 2.8pts year over year
•         Net promoter score is up an average of 8pts year over year
•         Irregular operation costs – second quarter down $7.2 million or 57.6 percent

Airline only second quarter 2019 results

•         Diluted earnings per share were $4.81, up 49.8 percent year over year
•         23.7 percent operating margin for the quarter and 22.9 percent year to date
•         TRASM decreased 1.6 percent on capacity growth of 13.6 percent
•         May TRASM grew 2.4 percent on 11 percent growth in ASMs
•         June TRASM grew 0.7 percent on 13.5 percent growth in ASMs
•         Total fare is down only 0.5 percent despite increasing aircraft utilization by 20.5 percent
•         Year-to-date average total fare has increased 1.0 percent to $120.49
•         Fixed fee flying revenue increased 63.2 percent
•         Fuel gallons used increased only 4.9 percent on ASM growth of 13.4 percent
•         Increase in ASMs per gallon of 8.1 percent to 82.3
•         Airline unit cost excluding fuel decreased by 6.1 percent
•         Maintenance and operational improvements were the largest drivers

Liquidity and shareholder returns

•         Total cash and investments at June 30 were $695 million
•         Paid off high yield bond balance of $102 million in July
•         Currently, we have 26 unencumbered aircraft
•         $81 million available under the revolving credit facility
•         Returned $11 million in dividends in the second quarter
•         Expect to pay dividend of $0.70 per share on September 27, 2019 to shareholders of record as of September 20, 2019

Non-airline highlights

•         Non-airline businesses resulted in a combined operating loss of $7.4 million during second quarter
•         Evaluating strategic alternatives for Teesnap
•         Triggered the business classification of an entity held for sale in July 2019
•         SunseekerResorts FY19 CAPEX reduced to a range between $150 and $175 million
•         Operated two family entertainment centers (FEC’s) during second quarter
•         Rebranded FEC’s from G4CE to Allegiant Nonstop effective June 1, 2019

Aircraft listed in table above include only in-service aircraft and future aircraft under contract (subject to change)

Top Copyright Photo: Allegiant Air Airbus A320-214 WL N247NV (msn 7704) FLL (Bruce Drum). Image: 104577.

Allegiant Air aircraft slide show:

Route Map:

Allegiant Travel Company today reported the following financial results for the first quarter 2019, as well as comparisons to the prior year:

*Denotes a non-GAAP financial measure. Refer to the Non-GAAP Presentation section within this document for further information.

“I’m happy to report the first quarter of 2019 was Allegiant’s 65^th consecutive profitable quarter,” stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company. “This quarter demonstrated the earnings potential of our all-Airbus fleet. Despite having eleven fewer aircraft compared to the same period last year, our airline’s operating income rose more than $16 million and we had a 22 percent margin.  In addition, our operational performance was exceptional, with a controllable completion rate of 100 percent for the quarter.  Our on-time performance for March – one of the busiest months of the year – was 85 percent.  These results were due to the exceptional work of our team.

“In March we broke ground on Sunseeker Resorts Charlotte Harbor in Southwest Florida, and also partnered with TPG Sixth Street Partners to finance some of the construction costs to build the project,” he continued. “We have an ideal location, a database of 16 million customers, and an infrastructure to feed customers to our property through Punta Gorda Airport (PGD) and St. Pete/Clearwater International Airport (PIE). This is a natural extension of our business model. These next two years will be investment years in our non-airline projects such as Sunseeker Resorts, the Allegiant Nonstop family entertainment centers and our golf offering.  All of these products will enable us to interact with an ever-expanding universe of leisure customers, to offer more options under the Allegiant Travel Company umbrella.

“I want to thank all of our Allegiant team members for their excellent efforts the past quarter.  The improvement in our operations, the reliability and the on-time performance could not have been achieved without their exceptional work. They are the most critical component in our continued financial success.”

2019 highlights and trends

• Maintaining EPS guide of $13.25 to $14.75increasing full year fuel cost to $2.26 from $2.10 per gallon
• EPS in Q2 should exceed Q1 because of Easter and additional available aircraft
  • Only happened twice before in past ten years
• Easter shift expected to benefit TRASM for Q2 2019 between 2.0 and 2.5 percent
• Available seat mile (ASM) growth is expected to be lowest in Q1 and highest in Q2
  • ASM growth in Q2 expected to be between 13 and 14 percent
• Airline CASM ex fuel is expected to be down year over year in each remaining quarter with the largest decrease in Q4
• Submitted US DOT application for international flying into Mexico and expect to begin selling flights by YE19

Airline only first quarter 2019 results

• Diluted earnings per share were $3.98, up $0.44 year over year
• 22 percent operating margin for the airline
  • Highest since the second quarter of 2017 when the fuel price per gallon was $1.71
• Despite an estimated 1.5 percent TRASM headwind due to Easter shift into Q2, (TRASM) increased by 1.8 percent year over year
• Better than expected improvement in salary expense and station operations resulted in unit costs excluding fuel (CASM-ex)increasing by only 0.8 percent year over year

Q1 2019 airline network and revenue highlights

• Ancillary air revenue per passenger highest in company history at $53.10 up 12.5 percent year over year
  • Total fare per passenger was $127.75, up 2.9 percent year over year
• Fixed fee flying revenue was $10.6 million, flat year over year, despite a 6.5 percent decrease in fixed fee departures
  • Government shutdown eliminated some expected Department of Defense charters
  • Airbus charter economics superior to the MD-80
• Announced two new operational bases
  • Grand Rapids, MI
  • Savannah, GA
• 35 routes announced
  • New service to Anchorage, AK
  • Strong growth to Destin, FL, Nashville, TN and Savannah, GA

Q1 2019 airline cost highlights

• Fuel benefits with Airbus continue – total fuel costs down by six percent
• Total gallons down 4.5 percent while block hours up 4.1 percent and ASMs up 4.9 percent
  • Increase in ASMs per gallon of 9.6 percent to 84.1 ASMs per gallon
  • Decrease in the price per gallon of 1.8 percent to $2.14 per gallon
• Total operating costs excluding fuel were $250.2 million, an increase of 5.8 percent year over year
  • Depreciation costs increased 26.9 percent or $7.5 million
  • Q1 2018 MD80s were fully depreciated; were 27.5 percent of ASMs
• Total unit costs excluding fuel and depreciation were 5.5 cents, a decrease of 2.0 percent year over year
• $3.7 million of additional interest expense associated with the tender of our $450 million high yield bond
  • Capitalized interest resulted in a $1.5 million reduction in interest expense primarily driven by the capex associated with Sunseeker Resorts
  • Expect the cadence of capitalized interest to increase in direct correlation with incremental Sunseeker capex

Q1 2019 airline operational highlights

• Departures up five percent despite eleven fewer average aircraft
  • Average aircraft decreased from 91 last year to 80 this year
  • Spare aircraft were reduced from eleven to four year over year
• Controllable completion 100 percent on 24,300 departures
  • Second most quarterly departures in company history
  • Total completion factor 99.2 percent
  • No maintenance cancellations for over 120 days since December 16th, record for the company
  • On time performance (A-14) for the quarter was 79 percent
  • March on time performance was 85 percent
  • Third-highest versus domestic carriers per flightstats.com
  • Company’s busiest flying month of the year

Q1 2019 capital allocation highlights

• Capital expenditures:
  • Airline – $108.9 million
  • Heavy Maintenance – $10.0 million
  • Sunseeker – $5.3 million
  • Other – $8.4 million
• Shareholder returns
  • Returned $11 million in dividends in the first quarter
  • Expect to pay dividends of $0.70 per share on June 27, 2019 to shareholders of record as of June 14, 2019

Q1 2019 balance sheet highlights

• Ended with $555 million in total cash and investments
• Ended with $1,236.6 million in debt and $121.1 million in capital lease obligations
  • Refinanced $450 million unsecured bond with a five year $450 million term loan
  • Secured by company assets excluding aircraft, engines and Sunseeker Resort
• At the end of the quarter, we have 28 unencumbered aircraft

Q1 2019 non-airline highlights

• Non-airline businesses resulted in a combined operating loss of $7.4 million
  • Non-airline operating losses expected to be highest in Q1 due to one-time expenses associated with opening of two Allegiant Nonstop family entertainment centers
  • Allegiant Nonstop revenues are expected to be weakest in Q1
  • Expect improvement in second half of year
• Sunseeker Resorts
  • Broke ground on resort in Punta Gorda
  • Expect to include 500 hotel rooms, 189 long stay suites, restaurants, bars and other amenities
  •TPG Sixth Street Partnersagreed to provide $175 million in two-thirds non-recourse construction financing
  • TPG funds are last funds into the project and drawn monthly with interest paid only on drawn amounts
• Allegiant Nonstop (family entertainment centers)
  • Rebranded to Allegiant Nonstop for better tie-in to airline
  • Opened first location, Clearfield, UT in Jan 2019
  • Opened second location, Warren, MI in Apr 2019

Top Copyright Photo (all others by the airline): Allegiant Air Airbus A320-214 WL N250NV (msn 7743) BWI (Tony Storck). Image: 943561.

Allegiant aircraft slide show: