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Allegiant cancels its deal with Cebu Pacific Air for 10 Airbus A319s

Allegiant Travel Company (Allegiant Air) (Las Vegas) today announced its proposed transaction to acquire ten Airbus A319 aircraft from Cebu Pacific Air has been terminated as a result of the parties’ failure to satisfy certain conditions to proceeding with the transaction. The potential transaction was made public on July 30, 2012 after the signing of the letter of intent.

“We are disappointed that we were not able to finalize this agreement on which we spent a substantial amount of time and effort,” said Andrew C. Levy, Allegiant President. “Unfortunately we were unable to come to terms on some of the economic provisions of the transaction and as we have demonstrated in the past, we will not purchase aircraft just for the sake of growth. Our disciplined approach in asset purchases is a core competency that we will not compromise.”

“We continue to have fleet flexibility in 2013 even without the Cebu A319s. Seven of the nine A320 aircraft, which we announced the intention to acquire on December 19, 2012, are expected to be delivered in 2013 and we now plan to introduce these aircraft into service at a faster pace so as to offset the capacity that had been planned with the Cebu A319s,” concluded Levy.

Allegiant is now expecting 2013 total CAPEX to be between $170 and $180 million. The company has signed operating leases for nine A319 aircraft with GECAS and purchase agreements for nine A320 aircraft formerly operated by Iberia. Allegiant will remain active in the market for the purchase or lease of additional Airbus aircraft.

Allegiant Air:

Allegiant Air to acquire up to nine former Iberia Airbus A320s

Allegiant Travel Company (Allegiant Air) (Las Vegas) has announced its intention to purchase up to nine used Airbus A320 aircraft. The average age of these aircraft at delivery is expected to be 12 years with a configuration of 177 seats. The aircraft have been most recently operated by Iberia.

“The A320 aircraft type is a perfect complement to the smaller A319 and will enable us to continue cost effective growth for years to come,” said Andrew C. Levy, Allegiant President. “These transactions represent a tremendous opportunity to purchase a sizeable fleet of sister-ships with CFM powered engines, the same engine type as our A319s, at very attractive prices. Finding up to nine aircraft of this pedigree available for purchase is unusual in our experience. Historically it has been difficult to find owners willing to sell quality assets at this point in their life cycle. Our cash reserves and strong balance sheet continue to provide us a unique ability in the used aircraft space to move on these attractive opportunities.”

“We do not expect a material change to our 2013 capacity as we will vary MD-80 utilization appropriately. As with the earlier acquisition of A319s, we are committed to only acquire aircraft at values that support our existing business model of relatively low fleet utilization,” concluded Levy.

Seven aircraft are expected to be purchased in 2013 and two in 2014. With the addition of this transaction, Allegiant is now expecting 2013 total CAPEX to be between $270 and $280 million versus the previous guidance of $150 to $160 million. The company expects to finance the purchase of these aircraft with debt. Allegiant expects to place the first A320 into service late in the third quarter of 2013 and all nine aircraft are expected to be in service by the end of 2014. No additional MD-80 retirements are planned as a result of this transaction.

As long as Allegiant Air can acquire second-hand Airbus aircraft it is unlikely to add any more older McDonnell Douglas MD-80s.

Copyright Photo: Keith Burton. The A320s will complement the smaller Airbus A319s being added to the fleet. Former easyJet Switzerland Airbus A319-111 HB-JZK (msn 2319) became N301NV with Allegiant.

Allegiant Air:

The first Airbus A319 for Allegiant Air is painted, net income of $16.9 million in the 3Q

Allegiant Air‘s (Las Vegas) first Airbus A319 has been painted at Southend awaiting delivery.

In other news, the low-fare airline has cancelled all plans to operate Monterey-Honolulu service according to Airline Route.

On the financial side, the parent company issued the following statement for the third quarter:

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

Unaudited	3Q12	3Q11	Change
Total operating revenue (millions)	$216.9	$191.5	13.2%
Operating income (millions)	$28.7	$16.7	71.8%
Operating margin	13.3%	8.7%	4.5pp
EBITDA (millions)	$44.6	$27.5	62.3%
EBITDA margin	20.6%	14.4%	6.2pp
Net income (millions)	$16.9	$9.5	78.6%
Diluted earnings per share	$0.87	$0.49	77.6%

“We are very proud to report our 39^th 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. The third quarter is typically our weakest quarter of the year, and yet we were able to produce the highest third quarter earnings per share in the company`s history. This is particularly noteworthy to have done this in a quarter with the average oil price at $92 per barrel and in a demand environment that has been slightly weaker than historical norms.”

Notable company highlights

Entered into a lease agreement with GECAS for nine Airbus A319 aircraft on August 27
Announced intention to acquire ten Airbus A319 aircraft from Cebu Pacific Air on July 30
Announced service to Honolulu from Boise, Idaho, Phoenix and Spokane, Wash. to begin in early February 2013
Announced the formation of Allegiant Systems, a joint venture with AvIntel and Lixar IT to develop and market a wide variety of mobile technology services to the commercial aviation industry
As of October 23, we have converted 40 MD-80s to 166 seat aircraft
Announced fifteen routes, in addition to Hawaii, expected to begin in the fourth quarter of 2012

Revenue performance

Average fare – ancillary air-related revenue per passenger has grown to $37.05 in the third quarter 2012, a $4.66 increase since the first quarter 2012
September average fare – ancillary air-related revenue per passenger has grown to $38.08, a $5.48 increase since March 2012
11^th consecutive quarter of year over year increases in total average fare

	3Q12	3Q11	Change
Scheduled Service:
Average fare – scheduled service	$82.30	$84.94	(3.1)%
Average fare – ancillary air-related charges	$37.05	$30.38	22.0%
Average fare – ancillary third party products	$5.59	$5.31	5.3%
Average fare – total	$124.94	$120.63	3.6%
Scheduled service passenger revenue per ASM (PRASM) (cents)	7.89	8.58	(8.0)%
Total scheduled service revenue* per ASM (TRASM) (cents)	11.98	12.19	(1.7)%
Load factor	90.1%	92.2%	(2.1)pp
Passengers (millions)	1.6	1.5	9.4%
Average passengers per departure	143	136	5.1%

* Total scheduled service revenue includes scheduled service, ancillary air-related, and ancillary third party revenue.

Copyright Photo: Keith Burton. Formerly operated by easyJet (Switzerland), Airbus A319-111 HB-JZK (msn 2319) is the first A319 for Allegiant Air. It is pictured after painting at a Southend, near London. The airframe will become N301NV on delivery.

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