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Allegiant Travel Company Second Quarter 2017 Financial Results

LAS VEGAS, July 26, 2017 (GLOBE NEWSWIRE) -- Allegiant Travel Company (NASDAQ:ALGT) today reported the following financial results for the second quarter 2017, as well as comparisons to the prior year:

Three Months Ended
June 30,
Six Months Ended
June 30,
Unaudited 2017 2016Change 2017 2016Change
Total operating revenue (millions)$400.6 $344.9 16.2% $776.5 $693.5 12.0%
Operating income (millions)$85.2 $104.5 (18.5)% $158.1 $225.6 (29.9)%
Net income (millions)$48.5 $60.8 (20.3)% $90.1 $132.8 (32.2)%
Diluted earnings per share$2.94 $3.68 (20.1)% $5.43 $7.97 (31.9)%
Return on capital employed* 18.2% 25.2%

* - see appendix for calculation, represents twelve months ended June 30

“I am pleased to announce we had our 58th consecutive profitable quarter," stated Maurice J. Gallagher Jr., chairman and CEO of Allegiant Travel Company. "I am also pleased with our 21.3 percent operating margin during this transition time for the company. We are well into the wind down of our MD-80 fleet. We have taken delivery of our first four new 186 seat A320 aircraft from Airbus as of July 26th. We expect to place into service another ten Airbus aircraft including six more new A320s throughout the remainder of 2017. We also signed an agreement to acquire an additional 13 used A320s which we announced in June 2017. This was the last transaction needed to solidify the plan to retire all the MD-80s by the end of 2019. Thank you to all of our team members for another successful quarter."

Notable highlights

  • Airbus growth - In June, announced the lease arrangement of 13 used A320 aircraft to be delivered in 2017 and 2018. Will take the company to 92 committed Airbus either in service or for future delivery
  • Network growth - As of June 30, 2017 the company is operating 382 routes versus 342 at the same time last year
  • New routes - Announced 28 new routes expected to begin in the third and fourth quarters of 2017
    • Includes new cities of Milwaukee, Wisconsin; Norfolk, Virginia; and Gulfport, Mississippi
  • Shareholder returns - $92 million was returned through a combination of the recurring dividend paid in June 2017 and share repurchases during the quarter. The company:
    • Will pay a dividend of $0.70 per share on September 5, 2017 to shareholders of record as of August 18, 2017
    • Returned $84 million to shareholders through the repurchase of 589,000 open market shares in the quarter. This was the highest dollar amount spent in share repurchases for one quarter in the history of the company
    • The Board of Directors increased the share repurchase authorization to $100 million

Second quarter 2017 revenue

  • TRASM results - Second quarter TRASM increased 3.1 percent
    • Impact of Easter shift into April this year benefited the quarter contributing approximately 1.5 percentage points of TRASM
  • New markets (markets operating less than one year) were approximately thirteen percent of ASMs for the second quarter which is similar to last year

Third quarter 2017 revenue trends

  • TRASM guidance - Third quarter TRASM is expected to be between negative .5 and positive 1.5 percent versus the third quarter last year
    Increased MD-80 spares, which limits the ability to grow peak period flying, is expected to cost the third quarter one percentage point of TRASM
    Off peak flying is expected to be almost 26 percent of ASMs for the third quarter, versus approximately 22 percent last year

Second quarter cost trends

  • Second quarter CASM ex fuel increased 13.2 percent versus the same period last year driven by:
    New pilot agreement - Added six percentage points
    Elimination of the credit card surcharge - Added four percentage points
    • In January 2017, we discontinued our credit card surcharge, which had previously been applied as a reduction to sales and marketing expense
    Irregular operations - Added two percentage points

Third quarter 2017 cost trends

  • Third quarter 2017 CASM ex fuel is expected to increase between sixteen and eighteen percent versus the same period last year, driven by:
    New pilot agreement - Expected to add three percentage points
    Incremental depreciation on Airbus aircraft - Expected to add three percentage points
    Elimination of credit card surcharge - Expected to add three percentage points
    Transition costs - Cost related to the fleet transition such as reduced ASMs through less utilization of MD-80s and other operational inefficiencies driven by the move to an all Airbus fleet is expected to add five percentage points

Full year 2017 cost trends

  • Full year 2017 CASM ex fuel is expected to remain up between ten and twelve percent, consistent with prior guidance
  • Maintenance and repairs expense is expected to remain between $100 and $110 thousand per in-service aircraft per month for full year 2017, consistent with prior guidance
  • Total ownership expense per aircraft per month - Full year 2017 ownership expense per in-service aircraft per month is expected to remain between $125 and $135 thousand, consistent with prior guidance

Balance sheet activity and full year 2017 trends

  • Full year CAPEX guidance (Excluding Airbus deferred heavy maintenance) is expected to be $525 million, consistent with prior guidance
  • Raised $113 million in debt proceeds during the second quarter
    • Currently have five unencumbered Airbus aircraft

Guidance, subject to revision
3Q17
Estimated TRASM year-over-year change (0.5) to 1.5%
Fixed fee and other revenue guidance 3Q17
Fixed fee and other revenue (millions) $17 to $19
Capacity guidance
System3Q174Q17FY17
Departure year-over-year growth4 to 8%7 to 11%
ASM year-over-year growth3 to 7%9 to 13%9 to 11%
Scheduled
Departure year-over-year growth4 to 8%7 to 11%
ASM year-over-year growth3 to 7%9 to 13%9 to 11%
Cost guidance3Q17 FY17
CASM ex fuel* – year-over-year change16 to 18% 10 to 12%
CAPEX guidance FY17
Capital expenditures (millions) $525
Capitalized Airbus deferred heavy maintenance (millions) ** $30
Aircraft leasing arrangement (millions) *** $150

* - CASM ex fuel – cost per available seat mile excluding fuel expense
** - Not included in capital expenditure total
*** - Not included in capital expenditure total, present value of leases over lease term

Aircraft fleet plan by end of period
Aircraft - (seats per AC) 1Q172Q173Q17YE17
MD-80 (166 seats) 47 45 40 37
757 (215 seats) 2 2 2
A319 (156 seats) 19 20 21 22
A320 (177/186 seats) 17 21 25 29
Total 85 88 88 88

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

Allegiant Travel Company will host a conference call with analysts at 4:30 p.m. ET Wednesday, July 26, 2017 to discuss its second quarter 2017 financial results. A live broadcast of the conference call will be available via the Company’s Investor Relations website homepage at http://ir.allegiantair.com. The webcast will also be archived in the “Events & Presentations” section of the website.

Allegiant®

Las Vegas-based Allegiant (NASDAQ:ALGT) is focused on linking travelers in small cities to world-class leisure destinations. The airline offers industry-low fares on an all-jet fleet while also offering other travel-related products such as hotel rooms and rental cars. All can be purchased only through the company website, Allegiant.com. Beginning with one aircraft and one route in 1999, the company has grown to more than 85 aircraft and 350 routes across the country with base airfares less than half the cost of the average domestic roundtrip ticket. For downloadable press kit, including photos, visit: http://gofly.us/iiFa303wrtF.

Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, statements in this press release that are not historical facts are forward-looking statements. These forward-looking statements are only estimates or predictions based on our management's beliefs and assumptions and on information currently available to our management. Forward-looking statements include our statements regarding future unit revenue, future operating expense, ASM growth, departure growth, fixed-fee and other revenues, expected capital expenditures, number of contracted aircraft to be placed in service in the future, timing of aircraft retirements, as well as other information concerning future results of operations, business strategies, financing plans, industry environment and potential growth opportunities. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe," "expect," “guidance,” "anticipate," "intend," "plan," "estimate", “project”, “hope” or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements generally may be found in our periodic reports filed with the Securities and Exchange Commission at www.sec.gov . These risk factors include, without limitation, an accident involving, or problems with, our aircraft, our reliance on our automated systems, limitation on growth as we transition to a single fleet type, risk of breach of security of personal data, volatility of fuel costs, labor issues and costs, the ability to obtain regulatory approvals as needed , the effect of economic conditions on leisure travel, debt covenants and balances, the ability to finance aircraft under contract, terrorist attacks, risks inherent to airlines, our competitive environment, our reliance on third parties who provide facilities or services to us, the possible loss of key personnel, economic and other conditions in markets in which we operate, governmental regulation, increases in maintenance costs and cyclical and seasonal fluctuations in our operating results.

Any forward-looking statements are based on information available to us today and we undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.

Detailed financial information follows:


Allegiant Travel Company
Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30, Percent
2017 2016 change
OPERATING REVENUE:
Scheduled service revenue$220,615 $189,122 16.7
Ancillary revenue:
Air-related charges 145,405 128,713 13.0
Third party products 14,304 11,965 19.5
Total ancillary revenue 159,709 140,678 13.5
Fixed fee contract revenue 11,029 6,706 64.5
Other revenue 9,261 8,345 11.0
Total operating revenue 400,614 344,851 16.2
OPERATING EXPENSES:
Aircraft fuel 85,387 60,005 42.3
Salary and benefits 92,221 68,553 34.5
Station operations 38,998 33,328 17.0
Maintenance and repairs 28,645 29,261 (2.1)
Depreciation and amortization 30,129 25,396 18.6
Sales and marketing 12,861 5,317 141.9
Aircraft lease rentals 2,400 219 NM
Other 24,777 18,296 35.4
Total operating expense 315,418 240,375 31.2
OPERATING INCOME 85,196 104,476 (18.5)
OTHER (INCOME) EXPENSE:
Interest income (1,475) (710) 107.7
Interest expense 8,889 7,390 20.3
Other, net (493) (300) 64.3
Total other (income) expense 6,921 6,380 8.5
INCOME BEFORE INCOME TAXES 78,275 98,096 (20.2)
PROVISION FOR INCOME TAXES 29,800 37,249 (20.0)
NET INCOME$48,475 $60,847 (20.3)
Earnings per share to common shareholders (1):
Basic$2.94 $3.69 (20.3)
Diluted$2.94 $3.68 (20.1)
Weighted average shares outstanding used in computing earnings per share to common shareholders (1):
Basic 16,198 16,420 (1.4)
Diluted 16,220 16,442 (1.4)

NM - Not meaningful
(1) The Company's unvested restricted stock awards are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock. The Basic and Diluted earnings per share for the periods presented reflect the two-class method mandated by accounting guidance for the calculation of earnings per share. The two-class method adjusts both the net income and the shares used in the calculation. Application of the two-class method did not have a significant impact on the Basic and Diluted earnings per share for the periods presented.


Allegiant Travel Company
Operating Statistics
(Unaudited)
Three Months Ended June 30, Percent
2017 2016 change*
OPERATING STATISTICS
Total system statistics:
Passengers3,306,193 2,878,460 14.9
Revenue passenger miles (RPMs) (thousands)2,958,808 2,665,753 11.0
Available seat miles (ASMs) (thousands)3,584,209 3,178,904 12.7
Load factor82.6% 83.9% (1.3)
Operating expense per ASM (CASM) (cents)***
8.80 7.56 16.4
Fuel expense per ASM (cents)***2.38 1.89 25.9
Operating CASM, excluding fuel (cents)6.42 5.67 13.2
ASMs per gallon of fuel71.9 72.0 (0.1)
Departures24,721 20,969 17.9
Block hours56,056 48,506 15.6
Average stage length (miles)866 893 (3.0)
Average number of operating aircraft during period85.3 83.8 1.8
Average block hours per aircraft per day7.2 6.4 12.5
Full-time equivalent employees at end of period3,628 3,228 12.4
Fuel gallons consumed (thousands)49,858 44,153 12.9
Average fuel cost per gallon***$1.71 $1.36 25.7
Scheduled service statistics:
Passengers3,266,789 2,850,112 14.6
Revenue passenger miles (RPMs) (thousands)2,903,257 2,626,770 10.5
Available seat miles (ASMs) (thousands)3,436,872 3,072,135 11.9
Load factor84.5% 85.5% (1.0)
Departures23,609 20,171 17.0
Block hours53,632 46,763 14.7
Total scheduled service revenue per ASM (TRASM) (cents)**11.07 10.74 3.1
Average fare - scheduled service$67.54 $66.36 1.8
Average fare - ancillary air-related charges$44.51 $45.16 (1.4)
Average fare - ancillary third party products$4.38 $4.20 4.3
Average fare - total$116.43 $115.72 0.6
Average stage length (miles)869 897 (3.1)
Fuel gallons consumed (thousands)47,821 42,698 12.0
Average fuel cost per gallon***$1.70 $1.36 25.0
Percent of sales through website during period95.1% 93.9% 1.2

* Except load factor and percent of sales through website, which is percentage point change.
** Various components of this measurement do not have a direct correlation to ASMs. These figures are provided on a per ASM basis to facilitate comparison with airlines reporting revenues on a per ASM basis.
*** Includes effect of $8.3 million fuel tax refunds in the second quarter of 2016.


Allegiant Travel Company
Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)

Six Months Ended June 30, Percent
2017 2016 change
OPERATING REVENUE:
Scheduled service revenue$432,713 $390,728 10.7
Ancillary revenue:
Air-related charges 276,970 249,643 10.9
Third party products 27,046 23,223 16.5
Total ancillary revenue 304,016 272,866 11.4
Fixed fee contract revenue 22,289 13,507 65.0
Other revenue 17,434 16,366 6.5
Total operating revenue 776,452 693,467 12.0
OPERATING EXPENSES:
Aircraft fuel 170,049 113,663 49.6
Salary and benefits 188,519 137,761 36.8
Station operations 70,830 64,061 10.6
Maintenance and repairs 58,740 55,753 5.4
Depreciation and amortization 60,678 50,081 21.2
Sales and marketing 22,859 11,125 105.5
Aircraft lease rentals 2,564 452 NM
Other 44,129 34,968 26.2
Total operating expense 618,368 467,864 32.2
OPERATING INCOME 158,084 225,603 (29.9)
OTHER (INCOME) EXPENSE:
Interest income (2,739) (1,321) 107.3
Interest expense 17,291 14,629 18.2
Other, net (854) (663) 28.8
Total other (income) expense 13,698 12,645 8.3
INCOME BEFORE INCOME TAXES 144,386 212,958 (32.2)
PROVISION FOR INCOME TAXES 54,279 80,131 (32.3)
NET INCOME 90,107 132,827 (32.2)
Earnings per share to common shareholders (1):
Basic$5.44 $7.98 (31.8)
Diluted$5.43 $7.97 (31.9)
Weighted average shares outstanding used in computing earnings per share to common shareholders (1):
Basic 16,290 16,549 (1.6)
Diluted 16,317 16,574 (1.6)

NM - Not meaningful
(1) The Company's unvested restricted stock awards are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock. The Basic and Diluted earnings per share for the periods presented reflect the two-class method mandated by accounting guidance for the calculation of earnings per share. The two-class method adjusts both the net income and shares used in the calculation. Application of the two-class method did not have a significant impact on the Basic and Diluted earnings per share for the periods presented.


Allegiant Travel Company
Operating Statistics
(Unaudited)
Six Months Ended June 30, Percent
2017 2016 change*
OPERATING STATISTICS
Total system statistics:
Passengers6,187,441 5,471,367 13.1
Revenue passenger miles (RPMs) (thousands)5,667,306 5,185,903 9.3
Available seat miles (ASMs) (thousands)6,961,046 6,180,289 12.6
Load factor81.4% 83.9% (2.5)
Operating expense per ASM (CASM) (cents)***8.88 7.57 17.3
Fuel expense per ASM (cents)***2.44 1.84 32.6
Operating CASM, excluding fuel (cents)6.44 5.73 12.4
ASMs per gallon of fuel72.0 72.1 (0.1)
Departures47,016 39,887 17.9
Block hours109,249 94,776 15.3
Average stage length (miles)883 913 (3.3)
Average number of operating aircraft during period85.0 83.0 2.4
Average block hours per aircraft per day7.1 6.3 12.7
Full-time equivalent employees at end of period3,628 3,228 12.4
Fuel gallons consumed (thousands)96,708 85,676 12.9
Average fuel cost per gallon***$1.76 $1.33 32.3
Scheduled service statistics:
Passengers6,112,269 5,417,421 12.8
Revenue passenger miles (RPMs) (thousands)5,565,191 5,110,323 8.9
Available seat miles (ASMs) (thousands)6,674,035 5,970,086 11.8
Load factor83.4% 85.6% (2.2)
Departures44,857 38,346 17.0
Block hours104,507 91,326 14.4
Total scheduled service revenue per ASM (TRASM) (cents)**11.04 11.11 (0.6)
Average fare - scheduled service$70.80 $72.12 (1.8)
Average fare - ancillary air-related charges$45.31 $46.08 (1.7)
Average fare - ancillary third party products$4.42 $4.29 3.0
Average fare - total$120.53 $122.49 (1.6)
Average stage length (miles)887 917 (3.3)
Fuel gallons consumed (thousands)92,713 82,852 11.9
Average fuel cost per gallon***$1.75 $1.33 31.6
Percent of sales through website during period94.2% 94.1% 0.1


* Except load factor and percent of sales through website, which is percentage point change.
** Various components of this measurement do not have a direct correlation to ASMs. These figures are provided on a per ASM basis to facilitate comparison with airlines reporting revenues on a per ASM basis.
*** Includes effect of $8.3 million fuel tax refunds in the second quarter of 2016.


Summary Balance Sheet

(millions)6/30/2017 12/31/2016 Change
(unaudited)
Unrestricted cash
Cash and cash equivalents$20.0 $64.7 (69.1)%
Short-term investments323.1 269.3 20.0
Long-term investments159.8 124.8 28.0
Total unrestricted cash502.9 458.8 9.6
Debt
Current maturities of long-term debt, net of related costs101.3 86.2 17.5
Long-term debt, net of current maturities and related costs776.2 722.0 7.5
Total debt877.5 808.2 8.6
Total Allegiant Travel Company shareholders’ equity$459.5 $473.6 (3.0)%


Summary Cash Flow

Six Months Ended June 30,
Unaudited (millions)2017 2016 Change
Cash provided by operating activities$263.1 $256.1 2.7%
Purchase of property and equipment, including capitalized interest*(182.3) (105.2) 73.3
Repurchase of common stock(84.9) (63.3) 34.1
Cash dividends paid to shareholders(23.2) (44.4) (47.7)
Proceeds from the issuance of long-term debt134.5 28.0 380.4
Principal payments on long-term debt(64.9) (39.2) 65.6

* Includes aircraft pre-delivery deposits.


Appendix A
Additional Financial Information
(Unaudited)
Twelve Months Ended June 30,
Return on capital calculation (millions)2017 2016
Net income attributable to Allegiant Travel Company$176.9 $234.0
Income tax100.5 138.0
Interest expense31.5 27.3
Less interest income(4.4) (2.2)
304.5 397.1
Interest income4.4 2.2
Tax rate36.2% 37.1%
Numerator197.1 251.2
Total assets as of prior June 301,449.0 1,319.5
Less current liabilities as of prior June 30443.2 386.3
Plus short term debt as of prior June 3080.1 65.2
Denominator1,085.9 998.4
Return on capital employed18.2% 25.2%


Media Inquiries: mediarelations@allegiantair.com Investor Inquiries: ir@allegiantair.com

Source:Allegiant Travel Company