SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ~~September~~June 30, ~~2017~~2018

OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-33166

Allegiant Travel Company

(Exact Name of Registrant as Specified in Its Charter)



Nevada	20-4745737
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

1201 North Town Center Drive
Las Vegas, Nevada	89144
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (702) 851-7300

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer x	Accelerated filer o

Non-accelerated filer o	Smaller reporting company o

(Do not check if a smaller reporting company)	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

The number of shares of the registrant’s common stock outstanding as of the close of business on ~~October 16, 2017~~August 1, 2018 was ~~16,077,909.~~16,163,533.

Allegiant Travel Company

Form 10-Q

Table of Contents



PART I.	FINANCIAL INFORMATION

ITEM 1.	Consolidated Financial Statements	3

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1117

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	2028

ITEM 4.	Controls and Procedures	2129

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	2129

ITEM 1A.	Risk Factors	2129

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2230

ITEM 3.	Defaults Upon Senior Securities	2230

ITEM 4.	Mine Safety Disclosures	2230

ITEM 5.	Other Information	2230

ITEM 6.	Exhibits	2331

	Signatures	2432

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands)


	September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
	(unaudited)						(unaudited)
CURRENT ASSETS:
CURRENT ASSETS
Cash and cash equivalents	$	74,023		$	64,711		$	28,981		$	59,449
Restricted cash	17,335			11,647			13,253			11,190
Short-term investments	351,519			269,269			343,180			352,681
Accounts receivable	22,780			40,667			24,184			71,057
Expendable parts, supplies and fuel, net	20,444			16,797			20,419			17,647
Prepaid expenses	25,102			16,277			34,447			23,931
Other current assets	6,771			2,686			829			5,320
TOTAL CURRENT ASSETS	517,974			422,054			465,293			541,275
Property and equipment, net	1,331,798			1,095,314			1,746,707			1,512,415
Long-term investments	76,913			124,834			56,358			78,570
Deferred major maintenance, net	27,551			17,347			36,957			31,326
Deposits and other assets	11,736			12,027			20,190			16,571
TOTAL ASSETS	$	1,965,972		$	1,671,576
CURRENT LIABILITIES:
TOTAL ASSETS:							$	2,325,505		$	2,180,157
CURRENT LIABILITIES
Accounts payable	$	19,247		$	16,010		$	27,473		$	20,108
Accrued liabilities	84,210			96,661			124,326			105,127
Air traffic liability	224,554			194,001			236,932			204,299
Current maturities of notes payable, net of related costs	165,837			86,226
Current maturities of long-term debt and capital lease obligations, net of related costs							144,392			214,761
TOTAL CURRENT LIABILITIES	493,848			392,898			533,123			544,295
Long-term debt, net of current maturities and related costs	845,727			722,048
Long-term debt and capital lease obligations, net of current maturities and related costs							992,322			950,131
Deferred income taxes	140,050			75,338			144,254			119,013
Other noncurrent liabilities	12,521			7,670			11,138			13,407
TOTAL LIABILITIES:	1,492,146			1,197,954			1,680,837			1,626,846
SHAREHOLDERS' EQUITY:
SHAREHOLDERS' EQUITY
Common stock, par value $.001	23			22			23			23
Treasury stock	(606,918		)	(517,803		)	(607,025		)	(605,655		)
Additional paid in capital	251,032			238,236			263,034			253,840
Accumulated other comprehensive loss, net	(1,645		)	(230		)	(2,473		)	(2,840		)
Retained earnings	831,334			753,397			991,109			907,943
TOTAL EQUITY	473,826			473,622
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,965,972		$	1,671,576
TOTAL EQUITY:							644,668			553,311
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY:							$	2,325,505		$	2,180,157

The accompanying notes are an integral part of these consolidated financial statements.

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
OPERATING REVENUE:
Scheduled service revenue	$	183,064		$	177,361		$	615,777		$	568,089
Ancillary revenue:
Air-related charges	130,818			127,301			407,789			376,944
Passenger revenue													$	405,572		$	367,250		$	802,343		$	715,086
Third party products	12,348			11,259			39,394			34,482			17,799			14,304			28,124			27,046
Total ancillary revenue	143,166			138,560			447,183			411,426
Fixed fee contract revenue	11,831			9,183			34,120			22,690			7,653			11,029			18,209			22,289
Other revenue	10,708			8,377			28,140			24,743			5,756			9,261			13,548			17,434
Total operating revenue	348,769			333,481			1,125,220			1,026,948			436,780			401,844			862,224			781,855
OPERATING EXPENSES:
Aircraft fuel	80,421			69,305			250,470			182,969			122,454			85,387			228,481			170,049
Salary and benefits	88,788			73,424			277,307			211,185			101,645			92,221			214,608			188,519
Station operations	37,148			32,252			107,979			96,313			41,553			38,998			79,137			70,830
Maintenance and repairs	28,870			26,263			87,611			82,016			24,611			28,645			43,881			58,740
Depreciation and amortization	31,894			25,881			92,571			75,962			29,833			30,129			57,983			60,678
Sales and marketing	13,884			5,650			36,744			16,774			18,348			13,492			37,426			26,822
Aircraft lease rentals	533			472			3,098			924			75			2,400			96			2,564
Other	24,315			23,394			68,440			58,363			24,039			24,777			46,422			44,129
Total operating expenses	305,853			256,641			924,220			724,506			362,558			316,049			708,034			622,331
OPERATING INCOME	42,916			76,840			201,000			302,442			74,222			85,795			154,190			159,524
OTHER (INCOME) EXPENSE:
Interest expense	10,041			6,938			27,332			21,567			13,156			8,889			25,880			17,291
Interest income	(1,454		)	(781		)	(4,193		)	(2,102		)	(1,927		)	(1,475		)	(3,834		)	(2,739		)
Other, net	(400		)	(308		)	(1,254		)	(972		)	(50		)	(493		)	(290		)	(854		)
Total other expense	8,187			5,849			21,885			18,493			11,179			6,921			21,756			13,698
INCOME BEFORE INCOME TAXES	34,729			70,991			179,115			283,949			63,043			78,874			132,434			145,826
PROVISION FOR INCOME TAXES	12,436			25,538			66,715			105,669			13,027			29,836			27,225			54,437
NET INCOME	$	22,293		$	45,453		$	112,400		$	178,280		$	50,016		$	49,038		$	105,209		$	91,389
Earnings per share to common stockholders:
Earnings per share to common shareholders:
Basic	$	1.39		$	2.76		$	6.85		$	10.74		$	3.10		$	2.98		$	6.53		$	5.52
Diluted	$	1.39		$	2.75		$	6.85		$	10.73		$	3.10		$	2.97		$	6.52		$	5.51
Shares used for computation:
Basic	15,852			16,389			16,142			16,493			15,939			16,198			15,898			16,290
Diluted	15,862			16,406			16,160			16,514			15,945			16,220			15,914			16,317

Cash dividends declared per share:	$	0.70		$	0.70		$	2.10		$	1.70		$	0.70		$	0.70		$	1.40		$	1.40

The accompanying notes are an integral part of these consolidated financial statements.

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,					Six Months Ended June 30,
	2017			2016			2017			2016			2018		2017			2018			2017
Net income	$	22,293		$	45,453		$	112,400		$	178,280		$	50,016	$	49,038		$	105,209		$	91,389
Other comprehensive (loss) income:
Other comprehensive income (loss):
Change in available for sale securities, net of tax	230			(101		)	453			336			113		(2		)	(843		)	222
Foreign currency translation adjustments	(117		)	238			(416		)	176			113		(215		)	214			(298		)
Change in derivatives, net of tax	(193		)	(208		)	(749		)	(533		)	1,260		(581		)	996			(1,085		)
Reclassification of derivative gains into Other revenue	(175		)	(247		)	(703		)	(756		)
Total other comprehensive loss	(255		)	(318		)	(1,415		)	(777		)
Total other comprehensive income (loss)													1,486		(798		)	367			(1,161		)
TOTAL COMPREHENSIVE INCOME	$	22,038		$	45,135		$	110,985		$	177,503		$	51,502	$	48,240		$	105,576		$	90,228

The accompanying notes are an integral part of these consolidated financial statements.

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2017			2016			2018			2017
OPERATING ACTIVITIES:
Net income	$	112,400		$	178,280		$	105,209		$	91,389
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	92,571			75,962			57,983			60,678
Loss on aircraft and other equipment disposals	6,619			3,510
(Gain) loss on aircraft and other equipment disposals							(1,491		)	4,901
Provision for obsolescence of expendable parts, supplies and fuel	2,900			1,803			493			1,753
Amortization of deferred financing costs	1,059			1,154			744			775
Share-based compensation expense	10,847			4,342			6,106			7,249
Deferred income taxes	64,296			2,336			25,241			52,153
Changes in certain assets and liabilities:
(Increase) decrease in accounts receivable	17,709			(9,957		)
(Increase) decrease in prepaid expenses	(8,825		)	3,147
Increase (decrease) in accounts payable	3,671			4,220
Increase (decrease) in accrued liabilities	(11,183		)	23,083
Increase (decrease) in air traffic liability	30,553			22,391
(Increase) in deferred major maintenance	(14,779		)	(4,365		)
Decrease in accounts receivable							46,873			16,572
Increase in prepaid expenses							(10,516		)	(9,476		)
Increase in accounts payable							7,631			2,263
Increase in accrued liabilities							20,859			10,382
Increase in air traffic liability							32,633			42,394
Change in deferred major maintenance							(7,841		)	(14,331		)
Other, net	(11,444		)	2,187			(689		)	(3,782		)
Net cash provided by operating activities	296,394			308,093			283,235			262,920
INVESTING ACTIVITIES:
Purchase of investment securities	(273,796		)	(291,954		)	(168,923		)	(242,895		)
Proceeds from maturities of investment securities	239,920			268,037			199,294			154,334
Aircraft pre-delivery deposits							—			(63,468		)
Purchase of property and equipment, including capitalized interest	(333,746		)	(264,085		)	(187,456		)	(118,846		)
Other investing activities	1,338			3,999			(1,468		)	1,352
Net cash used in investing activities	(366,284		)	(284,003		)	(158,553		)	(269,523		)
FINANCING ACTIVITIES:
Cash dividends paid to shareholders	(34,462		)	(55,895		)	(22,605		)	(23,204		)
Proceeds from the issuance of debt	292,540			120,410			10,797			134,540
Repurchase of common stock	(90,445		)	(63,363		)	(2,994		)	(84,940		)
Principal payments on debt	(88,026		)	(63,478		)
Principal payments on debt and capital lease obligations							(142,399		)	(64,876		)
Other financing activities	(405		)	(158		)	4,114			188
Net cash provided by (used in) financing activities	79,202			(62,484		)
Net change in cash and cash equivalents	9,312			(38,394		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	64,711			87,112
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	74,023		$	48,718
Net cash used in financing activities							(153,087		)	(38,292		)
Net change in cash, cash equivalents, and restricted cash							(28,405		)	(44,895		)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD							70,639			76,358
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD							$	42,234		$	31,463

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAYMENTS FOR:
Interest paid, net of amount capitalized	$	31,733		$	17,070		$	24,370		$	16,001
Income taxes paid, net of refunds	$	(18,757	)	$	79,818
Income taxes paid, net of (refunds)							$	(41,284	)	$	(13,967	)

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets:



	As of June 30,
	2018		2017
CURRENT ASSETS:
Cash and cash equivalents	$	28,981	$	20,040
Restricted cash	13,253		11,423
TOTAL CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	$	42,234	$	31,463

The accompanying notes are an integral part of these consolidated financial statements.

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Allegiant Travel Company (the “Company”) and its majority-owned operating subsidiaries. The Company has no independent ~~assets or~~ operations, and all guarantees of the Company's publicly held debt are full and unconditional and joint and several. Any subsidiaries of the parent company other than the subsidiary guarantors are minor. All intercompany balances and transactions have been eliminated.

These unaudited consolidated financial statements reflect all normal recurring adjustments which management believes are necessary to present fairly the financial position, results of operations, and cash flows of the Company for the respective periods presented. Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto included in the annual report of the Company on Form 10-K for the year ended December 31, ~~2016,~~2017 and filed with the Securities and Exchange Commission.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.

Recent Accounting Pronouncements

Standards Effective in Future Years

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" intended to create a unified model to determine when and how revenue is recognized. Under this ASU and subsequently issued amendments, the core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company will adopt this standard using the full-retrospective approach on January 1, 2018.

Under the new standard, revenue for certain air-related ancillary fees that are directly related to ticket revenue, such as seat fees and baggage fees, will no longer be considered distinct performance obligations separate from passenger travel and will be reclassified into scheduled service revenue. Although finalization is in process, for 2016, the amount expected to be reclassified from air-related charges into scheduled service revenue will be approximately $500 million. In addition, certain fees previously recognized when incurred by the customer, will be deferred and recognized as revenue when air travel is provided and reclassified into scheduled service revenue. The Company believes that adoption will not have a material effect on earnings, although the classification of certain operating revenue and operating expense items will change.

~~In February 2016, the FASB~~ issued ASU 2016-02 related to leases. This standard will require leases with durations greater than twelve months to be recognized on the balance sheet as a lease liability and a corresponding right-of-use asset, and is effective for interim and annual reporting periods beginning after December 15, 2018 with early adoption permitted. The Company will adopt this standard effective January 1, 2019. The Company has not completed the assessment of this new ~~standard. The Company~~standard and believes adoption will have a significant impact on its consolidated balance sheets but is not expected to significantly change the recognition, measurement or presentation of associated ~~expense~~expenses within the consolidated statements of income or cash flows.

Recently Adopted Standards

In August 2016, the FASB issued ASU 2016-15, which amends the guidance in Accounting Standards Codification ("ASC") 230 on the classification of certain cash receipts and payments in the statement of cash flows. The ~~primary purpose of the ASU is to reduce the diversity in practice that has resulted from the lack of consistency on~~Company adopted this ~~topic. The~~ standard ~~is effective for annual and interim periods beginning after December 15, 2017, and the Company will adopt it~~ effective January 1, 2018. ~~Significant classification modifications are not expected~~

In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220)." This standard provides an option to reclassify stranded tax effects within accumulated other comprehensive income (loss) ("AOCI") to retained earnings. The Company adopted this standard effective January 1, 2018 and a one-time effect of $0.6 million was reclassified from AOCI to retained earnings as of June 30, 2018 as a result of this adoption.

In 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), (the "New Revenue Standard"). Under this ASU and subsequently issued amendments, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption. The Company adopted this standard using the full retrospective transition method effective January 1, 2018 and recast prior year results. See Note 2, "Revenue Recognition" for more information on the financial impact of this adoption.

Under the New Revenue Standard, revenue for all air-related ancillary fees that are directly related to ticket revenue, such as seat fees and baggage fees, are no longer considered distinct performance obligations separate from passenger travel and are reclassified into passenger revenue. These are deemed part of the single performance obligation of providing passenger transportation. While the adoption of the New Revenue Standard did not have a significant effect on earnings, $167.6 million and $322.3 million of air-related ancillary fees for the three and six months ended June 30, 2018, respectively, are now classified as passenger revenue.

The adoption of the New Revenue Standard resulted in a net reduction to air traffic liability at December 31, 2017 of $5.9 million. This change resulted from the recognition of breakage revenue on issuance of credit vouchers that are expected to expire unused. In addition, recognition of revenues for fees associated with flight changes or cancellations are now deferred rather than being recognized at the time the fee is incurred. The Company recognizes revenue from the co-brand credit card program on the deferral method.

Bank of America has issued The Allegiant World Mastercard® in which points are earned and awarded to cardholders in exchange for consideration received under an agreement with a seven year scheduled duration expiring in 2023. Under this arrangement, the Company identified the following deliverables: travel points to be awarded (the travel component), use of the Company’s brand and access to its member lists, and certain other advertising and marketing elements (collectively the marketing component). Consideration received from the Company’s co-brand agreement is allocated between the two components based on the relative selling price of each deliverable. The Company applies a level of management judgment and estimation in determining the best estimate of selling price for each deliverable by considering multiple inputs and methods including, but not limited to, the redemption value of points awarded, discounted cash flows, brand value, volume discounts, published selling prices, number of points to be awarded and number of points to be redeemed.

Note 2 — Revenue Recognition

Certain prior period amounts have been recast to conform to the adoption of the New Revenue Standard as shown in the tables below.



	Three Months Ended June 30, 2017							Six Months Ended June 30, 2017
(in thousands, except per share	As Previously Reported					Current Presentation		As Previously Reported					Current Presentation
data)	As Previously Reported		Adjustments			Current Presentation		As Previously Reported		Adjustments			Current Presentation
Income Statement:
Passenger revenue (1)	$	220,615	$	146,635		$	367,250	$	432,713	$	282,373		$	715,086
Air-related charges	145,405		(145,405		)	—		276,970		(276,970		)	—
Sales and marketing	12,861		631			13,492		22,859		3,963			26,822
Income tax provision	29,800		36			29,836		54,279		158			54,437
Net income	48,475		563			49,038		90,107		1,282			91,389
Diluted earnings per share	$	2.94	$	0.03		$	2.97	$	5.43	$	0.08		$	5.51

(1) Passenger revenue previously reported as Scheduled service revenue.



	December 31, 2017
	As Previously					Current
(in thousands)	Reported		Adjustments			Presentation
Balance Sheet:
Air traffic liability	$	210,184	$	(5,885	)	$	204,299
Deferred income taxes	118,492		521			119,013
Retained earnings	902,579		5,364			907,943

Passenger Revenue

Passenger revenue is primarily composed of passenger ticket sales, credit voucher breakage, seat fees, baggage fees, and other travel-related services performed in conjunction with a passenger’s flight, as well as co-brand point redemptions as outlined below:



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2018		2017		2018		2017
Scheduled service	$	235,746	$	220,811	$	474,267	$	435,075
Air-related ancillary charges	167,630		145,887		322,347		279,111
Co-brand redemptions	2,196		552		5,729		900
Total passenger revenue	$	405,572	$	367,250	$	802,343	$	715,086

Scheduled service

Passenger tickets. The Company provides scheduled air transportation on limited-frequency, nonstop flights predominantly between under-served cities and popular leisure destinations. Sales of passenger tickets not yet flown are recorded in air traffic liability. Passenger revenue is recognized when transportation is provided or when ticket voucher breakage occurs.

The contract term of passenger tickets is 12 months and revenue associated with future travel will principally be recognized within this time frame. $187.8 million was recognized into passenger revenue during the six months ended June 30, 2018 that was recorded in the air traffic liability balance of $204.3 million at December 31, 2017.

Credit voucher breakage. The Company estimates the value of vouchers that will expire unused and recognizes revenue at the time the credit voucher is issued.

Air-related

Air-related revenue is primarily composed of services performed in conjunction with a passenger's flight and include baggage fees, the use of the Company’s website to purchase scheduled service transportation, advance seat assignments, and other services. Revenue for these services is recognized when the related transportation service is provided. Prior to the adoption of the New Revenue Standard, the majority of these fees were classified separately as Air-related ancillary charges.

Co-brand redemption

In relation to the travel component of the contract with Bank of America, the Company has a performance obligation to provide cardholders with points to be used for future travel award redemptions. Therefore, consideration received from Bank of America related to the travel component is deferred based on its relative selling price and is recognized into passenger revenue when the points are redeemed and the transportation is provided.

The following table presents the activity of the current and non-current point liabilities (in thousands):



	2018
Balance at January 1	$	8,903
Points awarded	6,898
Points redeemed	(5,730		)
Balance at June 30	$	10,071

As of June 30, 2018, $6.9 million of the current points liability is reflected in Accrued liabilities and represents our current estimate of revenue to be recognized in the next twelve months based on historical trends, with the remaining balance reflected in Other noncurrent liabilities expected to be recognized into revenue in periods thereafter. See below, Third Party Products revenue, for discussion of the marketing component.

Third Party Products

Third party products revenue is generated from the sale of hotel rooms, rental cars, ticket attractions and co-brand marketing revenue.

Revenue from the sale of hotel rooms, rental cars, and ticket attractions is recognized at the time the product is utilized, such as the time a purchased hotel room is occupied. The Company follows the accounting standards for principal versus agent revenue arrangements to determine the amount of revenue to be recognized for each element of a bundled sale involving air-related charges and third party products, in addition to airfare. Revenue from the sale of third party products is recorded net (treatment as an agent) of amounts paid to wholesale providers, travel agent commissions, and transaction costs.

Pursuant to the co-brand agreement with Bank of America, the Company has various performance obligations collectively referred to as the marketing component. These obligations consist of use of the Company’s brand and access to its member lists, and certain other advertising and marketing elements. The marketing component is recorded as third party products revenue in the period in which points are awarded to the credit card holders.

Fixed Fee Contract Revenue

Fixed fee contract revenue consists of agreements to provide charter service on a year-round and ad hoc basis. Fixed fee contract revenue is recognized when the transportation is provided.

Other Revenue

Other revenue is generated from leased aircraft, engines, and other miscellaneous sources. Lease revenue is recognized ratably over the lease term.

Accounts Receivable

Accounts receivable, reflected on the accompanying consolidated balance Sheets, primarily consist of amounts due from credit card companies associated with passenger revenue. These receivables are short-term, generally settled within a few days of sale. Bad debt expense, which occurs in the form of credit card chargebacks, was not material in any period presented.

Taxes and Fees

Various taxes and fees, assessed on the sale of tickets to customers, are collected by the Company serving as an agent, and remitted to taxing authorities. These taxes and fees are not included as revenue in the Company’s consolidated statements of income and are recorded as a liability until remitted to the appropriate taxing authority.

Note 3 — Property and Equipment

Property and equipment (in thousands):


	As of September 30, 2017			As of December 31, 2016			As of June 30, 2018			As of December 31, 2017
Flight equipment, including pre-delivery deposits	$	1,634,835		$	1,377,829		$	1,785,184		$	1,539,433
Computer hardware and software	119,658			101,850			131,661			123,675
Other property and equipment	101,121			81,786			151,802			125,855
Total property and equipment	1,855,614			1,561,465			2,068,647			1,788,963
Less accumulated depreciation and amortization	(523,816		)	(466,151		)	(321,940		)	(276,548		)
Property and equipment, net	$	1,331,798		$	1,095,314		$	1,746,707		$	1,512,415

Note 34 — Long-Term Debt

Long-term debt and capital lease obligations (in thousands):

As of September 30, 2017 As of December 31, 2016
Fixed-rate notes payable due through 2020 $ 465,527
$ 465,748
Variable-rate notes payable due through 2027 546,037
342,526
Total long-term debt, net of related costs 1,011,564
808,274
Less current maturities, net of related costs 165,837
86,226
Long-term debt, net of current maturities and related costs $ 845,727
$ 722,048

Weighted average fixed-interest rate 5.41 % 5.41 %
Weighted average variable-interest rate 3.25 % 3.16 %



	As of June 30, 2018			As of December 31, 2017
Fixed-rate debt and capital lease obligations due through 2030	$	577,452		$	465,462
Variable-rate debt due through 2027	559,262			699,430
Total long-term debt and capital lease obligations, net of related costs	1,136,714			1,164,892
Less current maturities, net of related costs	144,392			214,761
Long-term debt and capital lease obligations, net of current maturities and related costs	$	992,322		$	950,131

Weighted average fixed-interest rate on debt	5.4		%	5.4		%
Weighted average variable-interest rate on debt	4.0		%	3.3		%

Maturities of long-term debt and capital lease obligations for the remainder of ~~2017~~2018 and for the next five years and thereafter, in the aggregate, are: remaining in ~~2017 - $25.0 million;~~ 2018 - ~~$218.3~~$92.5 million; 2019 - ~~$540.0~~$555.4 million; 2020 - ~~$73.4~~$103.5 million; 2021 - ~~$46.1~~$76.6 million; 2022 - $49.2 million; and ~~$108.9~~$259.5 million thereafter.

Secured Debt

InDuring the ~~first nine~~six months ~~of 2017,~~ended June 30, 2018, the Company borrowed ~~$236.5~~$10.8 million under a loan ~~agreements~~agreement secured by ~~12 Airbus A320 series aircraft.~~various ground equipment. The notes bear interest at a ~~floating~~fixed rate ~~based on LIBOR plus a weighted average margin~~ of ~~1.62~~4.2 percent ~~and are~~per year, payable in monthly ~~or quarterly~~ installments over five ~~or ten~~ years.

Senior Secured Revolving Credit Facility

In ~~the third quarter of 2017, the Company drew down $56.0 million under its senior secured revolving credit facility, with six Airbus A320 series aircraft in the collateral pool. In~~ 2015, the Company, through a wholly owned subsidiary, entered into ~~this~~a senior secured revolving credit facility under which it ~~is able~~was entitled to borrow up to $56.0 million. In March 2018, the Company paid off the balance of the facility and amended it to increase the borrowing limit to $81.0 million. The amended facility ~~had an original~~has a term of 24 months and is based on the value of Airbus A320 Series aircraft which the Company may choose to place in the collateral pool. There was ~~extended~~no balance under this facility as of June 30, 2018.

See Note 10, "Subsequent Events," for more information on the revolving credit facility.

General Unsecured Senior Notes

In June 2014, the Company completed an offering of $300.0 million aggregate principal amount of senior unsecured obligations (the "Notes") which will mature in July 2019. In December 2016, the Company completed an offering of an additional ~~one-year term in 2016, and may be extended for an additional one-year period,~~$150.0 million principal amount of these notes, which were issued at a price of 101.5 percent of the ~~lender’s option. Any notes under the facility~~principal amount, plus accrued interest from July 15, 2016. The Notes bear interest at a ~~floating~~ rate of 5.5 percent per year, payable in cash semi-annually, on January 15th and July 15th of each year.

The indenture pursuant to which the Notes were issued includes operating and financial restrictions on the Company. These restrictions limit or restrict, among other things, the Company’s ability and the ability of its restricted subsidiaries to (i) incur additional indebtedness; (ii) incur liens; (iii) make restricted payments (including paying dividends on, redeeming, repurchasing or retiring capital stock); (iv) make investments; and (v) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to various exceptions and qualifications under the terms of the indenture. As of December 31, 2017 and June 30, 2018, the Company exceeded the consolidated total leverage ratio limit, which could affect the ability to make restricted payments in future periods after exhaustion of various exceptions. However, it is not expected that this will have any impact on the restricted payments routinely made in the ordinary course of business. The calculation is made on a quarterly basis based on ~~LIBOR plus 1.85 percent. An individual~~the trailing 12 months.

Capital Leases

The Company has capital lease obligations related to aircraft, ~~may remain~~which significantly impacted our recognized assets and liabilities as of June 30, 2018, but did not result in any significant cash receipts or cash payments during the ~~collateral pool for up to two years.~~quarter.

Note 45 — Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received by selling an asset or paid to transfer a liability in an orderly transaction between market participants.

Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active

markets for identical assets or liabilities; Level 2, defined as inputs other than Level 1 inputs that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company uses the market approach valuation technique to determine fair value for investment securities. The assets classified as Level 1 consist of money market funds for which original cost approximates fair value. The assets classified as Level 2 consist of commercial paper, municipal debt securities, federal agency debt securities, US Treasury Bonds, and corporate debt securities, which are valued using quoted market prices or alternative pricing sources including transactions involving identical or comparable assets and models utilizing market observable inputs. The Company has no investment securities classified as Level 3.

For those assets classified as Level 2 that are not in active markets, the Company obtains fair value from pricing sources using quoted market prices for identical or comparable instruments, and uses pricing models which include all significant observable inputs: maturity dates, issue dates, settlement dates, benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers and other market related data. These inputs are observable or can be derived from, or corroborated by, observable market data for substantially the full term of the asset.

The fair value of the Company's derivative instrument is determined using standard valuation models. The significant inputs used in these models are readily available in public markets or can be derived from observable market transactions and therefore have been classified as Level 2. Inputs used in these standard valuation models for derivative instruments include the applicable exchange and interest rates.

Financial instruments measured at fair value on a recurring basis (in thousands):


	As of September 30, 2017						As of December 31, 2016						As of June 30, 2018						As of December 31, 2017
	Total		Level 1		Level 2		Total		Level 1		Level 2		Total		Level 1		Level 2		Total		Level 1		Level 2
Cash equivalents
Commercial paper													$	9,952	$	—	$	9,952	$	27,910	$	—	$	27,910
Municipal debt securities													5,325		—		5,325		2,782		—		2,782
Money market funds	$	21,112	$	21,112	$	—	$	123	$	123	$	—	115		115		—		1,297		1,297		—
US Treasury Bonds	4,550		—		4,550		—		—		—
Commercial paper	3,594		—		3,594		—		—		—
Federal agency debt securities	—		—		—		19,399		—		19,399
Municipal debt securities	—		—		—		1,843		—		1,843
Total cash equivalents	29,256		21,112		8,144		21,365		123		21,242		15,392		115		15,277		31,989		1,297		30,692
Short-term
Commercial paper													141,091		—		141,091		108,678		—		108,678
Corporate debt securities													116,804		—		116,804		107,878		—		107,878
Municipal debt securities	152,369		—		152,369		78,826		—		78,826		53,143		—		53,143		101,290		—		101,290
Corporate debt securities	84,667		—		84,667		76,570		—		76,570
Commercial paper	83,051		—		83,051		108,372		—		108,372
Federal agency debt securities	28,432		—		28,432		3,895		—		3,895		30,718		—		30,718		31,428		—		31,428
US Treasury Bonds	3,000		—		3,000		1,606		—		1,606		1,424		—		1,424		3,407		—		3,407
Total short-term	351,519		—		351,519		269,269		—		269,269		343,180		—		343,180		352,681		—		352,681
Long-term
Corporate debt securities	71,142		—		71,142		25,048		—		25,048		43,363		—		43,363		60,396		—		60,396
Federal agency debt securities	5,771		—		5,771		24,160		—		24,160		10,022		—		10,022		5,775		—		5,775
US Treasury Bonds													2,973		—		2,973		2,994		—		2,994
Derivative instruments	475		—		475		1,660		—		1,660		21		—		21		282		—		282
Municipal debt securities	—		—		—		72,623		—		72,623		—		—		—		9,405		—		9,405
US Treasury Bonds	—		—		—		3,003		—		3,003
Total long-term	77,388		—		77,388		126,494		—		126,494		56,379		—		56,379		78,852		—		78,852
Total financial instruments	$	458,163	$	21,112	$	437,051	$	417,128	$	123	$	417,005	$	414,951	$	115	$	414,836	$	463,522	$	1,297	$	462,225

The fair value of the Company’s publicly held long-term debt is determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets; therefore, the Company has categorized its publicly held debt as Level 2. ~~The remaining~~Remaining debt ~~agreements are~~is not publicly ~~held. The~~held, and the Company has determined the estimated fair value of these notes to be Level 3, as certain inputs used to determine the fair value ~~of these agreements~~ are

unobservable and, therefore, could be sensitive to changes in inputs. The Company utilizes the discounted cash flow method to estimate the fair value of Level 3 debt.

Carrying value and estimated fair value of long-term debt, including current maturities and without reduction for related costs (in thousands):


	As of September 30, 2017				As of December 31, 2016					As of June 30, 2018				As of December 31, 2017
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Hierarchy Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Hierarchy Level
Publicly held debt	$	451,536	$	467,340	$	452,179	$	468,005	2	$	450,893	$	453,147	$	451,321	$	462,604	2
Non-publicly held debt	565,512		526,955		360,999		340,866		3	589,357		526,887		719,681		660,065		3
Total long-term debt	$	1,017,048	$	994,295	$	813,178	$	808,871		$	1,040,250	$	980,034	$	1,171,002	$	1,122,669

Due to the short-term nature, carrying amounts of cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value.

Note ~~5 — Derivative Instruments~~

The Company entered into a foreign currency swap (expiring in 2018) in order to mitigate the foreign currency exchange rate risk associated with the forecasted lease revenue from 12 Airbus A320 series aircraft leased to a European carrier until 2018. The Company uses a cash flow hedge to minimize the variability in cash flows of assets, liabilities and forecasted transactions caused by fluctuations in foreign currency exchange rates. For the nine months ended September 30, 2017, the net change in fair value recorded in accumulated other comprehensive income related to an unrealized loss on the hedge was $0.7 million compared to $0.5 million for the nine months ended September 30, 2016.

At inception, the Company formally designated and documented this financial instrument as a hedge of a specific underlying exposure, the risk management objective, and the strategy for undertaking the hedge transaction. The Company also assessed whether the financial instrument used in the hedging transactions was effective at offsetting changes in either the fair values or cash flows of the related underlying exposures. This assessment is monitored on at least a quarterly basis, and the change in fair market value of any ineffective portion of a financial instrument would be immediately recognized into earnings. For the nine months ended September 30, 2017, the Company realized $0.7 million in gains from its cash flow hedge into Other revenue, compared to $0.8 million for the nine months ended September 30, 2016. As of September 30, 2017, the Company expects $0.3 million to be reclassified from Other comprehensive income into Other revenue within the next 12 months.

At September 30, 2017, the fair value of the Company's derivative instrument was $0.5 million compared to $1.7 million at December 31, 2016, and is reported in the Company's consolidated balance sheet within deposits and other assets. Refer to Note 4 - Fair Value Measurements for additional information related to the estimated fair value.

~~Note~~ 6 — Shareholders’ Equity

The Company is authorized by the Board of Directors to acquire up to $100.0 million of its stock through open market purchases under its share repurchase program. As repurchase authority is used, the Board of Directors has, to date, authorized additional expenditures for share repurchases.

~~For the three months ended September 30, 2017 and 2016, the Company had no open market share repurchases. For the nine months ended September 30, 2017 and 2016, share~~

Share repurchases consisted of the following:


	Nine Months Ended September 30,				Three Months Ended June 30,			Six Months Ended June 30,
	2017		2016		2018	2017		2018	2017
Shares repurchased (not in thousands)(1)	604,497		369,997		None	589,057		None	604,497
Average price per share	$	142.66	$	166.70	NA	$	142.16	NA	$	142.66
Total (in thousands)	$	86,240	$	61,679	None	$	83,740	None	$	86,240

(1) Share amounts shown above include only open market repurchases and do not include shares withheld from employees for tax withholding obligations related to restricted stock vestings.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, the Company declared and paid recurring cash dividends of ~~$2.10~~$1.40 per share, or ~~$34.5~~$22.6 million.

Note 7 — Earnings per Share

Basic and diluted earnings per share are computed pursuant to the two-class method. Under this method, the Company attributes net income to two classes: common stock and unvested restricted stock. Unvested restricted stock awards granted to employees under the Company’s Long-Term Incentive Plan are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock.

Diluted net income per share is calculated using the more dilutive of the two methods. Under both methods, the exercise of employee stock options is assumed using the treasury stock method. The assumption of vesting of restricted stock, however, differs:


1.	Assume vesting of restricted stock using the treasury stock method.


2.	Assume unvested restricted stock awards are not vested, and allocate earnings to common shares and unvested restricted stock awards using the two-class method.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, the second method, which assumes unvested awards are not vested, was used in the computation because it was more dilutive than the first method.

The following table sets forth the computation of net income per share, on a basic and diluted basis, for the periods indicated (share count and dollar amounts other than per-share amounts in table are in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Basic:
Net income	$	22,293		$	45,453		$	112,400		$	178,280		$	50,016		$	49,038		$	105,209		$	91,389
Less net income allocated to participating securities	(315		)	(298		)	(1,747		)	(1,074		)	(659		)	(789		)	(1,427		)	(1,482		)
Net income attributable to common stock	$	21,978		$	45,155		$	110,653		$	177,206		$	49,357		$	48,249		$	103,782		$	89,907
Net income per share, basic	$	1.39		$	2.76		$	6.85		$	10.74
Earnings per share, basic													$	3.10		$	2.98		$	6.53		$	5.52
Weighted-average shares outstanding	15,852			16,389			16,142			16,493			15,939			16,198			15,898			16,290
Diluted:
Net income	$	22,293		$	45,453		$	112,400		$	178,280		$	50,016		$	49,038		$	105,209		$	91,389
Less net income allocated to participating securities	(315		)	(297		)	(1,745		)	(1,073		)	(658		)	(789		)	(1,425		)	(1,480		)
Net income attributable to common stock	$	21,978		$	45,156		$	110,655		$	177,207		$	49,358		$	48,249		$	103,784		$	89,909
Net income per share, diluted	$	1.39		$	2.75		$	6.85		$	10.73
Earnings per share, diluted													$	3.10		$	2.97		$	6.52		$	5.51
Weighted-average shares outstanding	15,852			16,389			16,142			16,493			15,939			16,198			15,898			16,290
Dilutive effect of stock options and restricted stock	18			26			60			34			44			71			63			92
Adjusted weighted-average shares outstanding under treasury stock method	15,870			16,415			16,202			16,527			15,983			16,269			15,961			16,382
Participating securities excluded under two-class method	(8		)	(9		)	(42		)	(13		)	(38		)	(49		)	(47		)	(65		)
Adjusted weighted-average shares outstanding under two-class method	15,862			16,406			16,160			16,514			15,945			16,220			15,914			16,317

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, anti-dilutive shares excluded from the calculation of earnings per share were ~~129,989~~1,379 and ~~51,439 (shares not~~607 shares (not in thousands), respectively.

Note 8 — Commitments and Contingencies

As of ~~September~~June 30, ~~2017,~~2018, the Company had firm commitments to purchase ~~the following aircraft:~~



~~Aircraft Type~~		~~Number of Aircraft Under Contract~~
~~Airbus A319~~		3
~~Airbus A320~~		17

11 Airbus A320 aircraft. In addition, the Company has entered into lease agreements for an additional 13 Airbus A320 aircraft, ~~expected~~three of which have been delivered and are in service, and one of which has been delivered but was not in service as of June 30, 2018. The remaining nine aircraft are currently scheduled to be delivered ~~between fourth~~in the second half of 2018 and first quarter ~~2017 and the end~~ of ~~2018.~~2019.

Future minimum fixed payments for the Company's commitments related to the acquisition of aircraft (including aircraft lease obligations), airport fees under use and lease agreements, and other operating lease obligations are as follows as of ~~September~~June 30, ~~2017~~2018 (in thousands):


	As of September 30, 2017		As of June 30, 2018
Remaining in 2017	$	141,093
2018	140,702
Remaining in 2018			$	79,148
2019	113,873		123,164
2020	76,016		67,422
2021	34,723		26,288
2022			23,569
Thereafter	231,358		150,598
Total commitments	$	737,765	$	470,189

Contingencies

The Company is subject to certain legal and administrative actions it considers routine to its business activities. The Company believes the ultimate outcome of any pending legal or administrative matters will not have a material adverse impact on its financial position, liquidity or results of operations.

Note 9 — Related Party Transactions

~~The~~During the three and six months ended June 30, 2018, the Company previously entered into a lease agreement for approximately 70,000 square feet of office space in a building in which the Company’s Chairman and Chief Executive Officer ("CEO") and the Company's President owned minority interests as limited partners. The Company exercised its optionmade no payments to ~~terminate the lease effective in May 2015 and paid $1.3 million in January 2016 in settlement of~~ related ~~litigation.~~parties.

Entities owned or controlled by the Company's Chairman and CEO have been paid for the building of corporate training content. This approach to training focuses on concept mastery, recognizing that individuals learn at varying paces, through different styles, and is designed to ensure the trainee fully understands each module before moving on to more advanced training. During the ~~nine~~three and six months ended ~~September~~June 30, 2017, ~~and 2016,~~ the Company made payments to these entities of $0.2 ~~million and $1.4 million, respectively, and no~~million. No further payments are expected.

Note 10 — Subsequent Events

In ~~October 2017,~~July 2018, the Company ~~received funding~~drew down $46.9 million under ~~loan agreements~~its senior secured ~~by two Airbus A320 aircraft~~revolving credit facility. The notes for ~~$68.0 million, executed in September 2017. The notes~~the amounts borrowed under the facility bear interest at a floating rate based on LIBOR ~~plus~~and are due on March 31, 2020.

Also in July 2018, the Company also borrowed $34.5 million under a ~~margin of 1.45 percent~~loan agreement secured by one Airbus A320 series aircraft. The note bears interest at a floating rate based on LIBOR and ~~are~~will be payable in quarterly installments through ~~2027.~~

~~Also in October 2017, the Company executed purchase agreements for four Airbus A320 series aircraft for which delivery is expected in the fourth quarter 2017.~~

The Company's board of directors approved a fleet plan at the October 2017 meeting which further accelerates the retirement of the MD-80 fleet to fourth quarter 2018. As a result of this operational update, the Company is evaluating the MD-80 fleet and its related assets for impairment. The carrying value of these assets was $40.2 million at September 30, 2017.July 2028.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis presents factors that had a material effect on our results of operations during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017. Also discussed is our financial position as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. You should read this discussion in conjunction with our unaudited consolidated financial statements, including the notes thereto, appearing elsewhere in this Form 10-Q and our consolidated financial statements appearing in our annual report on Form 10-K for the year ended December 31, ~~2016.~~2017. This discussion and analysis contains forward-looking statements. Please refer to the section below entitled “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

~~THIRD~~SECOND QUARTER REVIEW

Highlights:

Added ~~six~~10 Airbus A320 series aircraft into service and retired five MD-80 ~~aircraft;~~aircraft during the quarter. We are on track to retire the remaining MD-80 aircraft by the end of November 2018;

realized a 10.4 percent increase in passenger revenue which offset higher fuel costs;

achieved a 5.0 percent decrease in CASM excluding fuel costs despite higher operational costs associated with the fleet transition; and

paid recurring cash dividends of $11.3 million during the quarter, ~~and $34.5~~$22.6 million year to ~~date;~~

~~raised $158.0 million in debt;~~

~~achieved significant operational improvements resulting in a 61 percent reduction of controllable canceled flights period over period;~~

~~operating 373 routes as of quarter-end versus 337 at the same point in 2016; and~~

~~announced plans to develop Sunseeker Resorts, a hotel/condo resort in Charlotte County, Florida.~~date.

AIRCRAFT

The following table sets forth the aircraft in service and operated by us as of the dates indicated:


	September 30, 2017	December 31, 2016	September 30, 2016	June 30, 2018	December 31, 2017	June 30, 2017
MD-80	40	47	48	27	37	45
B757-200	2	4	4	—	—	2
A319 (1)	21	17	15	31	22	20
A320(2)	26	16	16	35	30	21
Total	89	84	83	93	89	88

(1) ~~Excludes 12~~Does not include six A319 aircraft on lease to a European carrier ~~until~~as of June 30, 2018.

(2) Does not include seven A320 aircraft for which we have taken delivery but were not yet in service as of June 30, 2018.

As of ~~September~~June 30, ~~2017,~~2018, we had firm commitments to purchase 2011 Airbus A320 series aircraft and had executed lease agreements for 13nine Airbus A320 series aircraft ~~for~~ which we have ~~not taken delivery.~~yet to be delivered. We expect delivery of ~~eight~~10 of these aircraft in ~~the last quarter of 2017~~2018 and the remaining aircraft in ~~2018 through~~2019 and 2020. We continually consider aircraft acquisitions on an opportunistic basis.

Fleet Plan

The below table indicates the number of aircraft expected to be in service byas of the ~~end of 2017 and 2018,~~dates indicated, based on currently scheduled additions to, and retirements from, our operating fleet.


	As of December 31, 2017	As of December 31, 2018	As of September 30, 2018	As of December 31, 2018
MD-80	37	—	19	—
B757-200	—	—
A319	22	32	31	32
A320	29	50	44	45
Total	88	82	94	77

NETWORK

~~Our~~As of June 30, 2018, we were operating ~~network~~413 routes verses 382 as of ~~September 30, 2017~~the same date last year, which represents ~~a 10.7~~an 8.1 percent ~~increase in the number of routes flown compared to September 30, 2016.~~increase. Our total ~~number~~numbers of ~~under-served~~origination cities and leisure destinations were 9997 and 2021 as of ~~September~~June 30, ~~2017, compared~~2018.

We also announced Knoxville, Tennessee as our 16th base, with ~~95 and 18 as of September 30, 2016. As of October 16, 2017, we were selling 405 routes.~~base operations planned to begin in November 2018.

TRENDS

~~In continuing with~~As our fleet transition ~~to an all-Airbus fleet,~~continues, we added ~~six~~10 Airbus A320 series aircraft to our operating fleet during the ~~third~~second quarter ~~2017.~~of 2018. Airbus aircraft flew ~~62.6~~76.8 percent of our ~~system~~scheduled service ASMs for the quarter, ~~and we~~compared to 55.4 percent for the same time period in 2017, which drove a 5.8 percent increase in fuel efficiency (measured as ASMs per gallon). We expect ~~four~~11 more Airbus A320 series aircraft to be placed in service by the end of ~~2017.~~

We2018 and to have fully retired ~~five~~the remaining 19 MD-80 ~~aircraft during the quarter and expect to retire three more MD-80 aircraft and our two remaining Boeing 757-200~~ aircraft by the end of ~~2017. Our board~~2018.

Although the number of ~~directors approved a~~aircraft in our fleet plan at the October 2017 meeting which further accelerates the retirement of the entire MD-80 fleet to fourth quarter 2018. We expect to retire our remaining 40 MD-80 aircraft and take delivery of 35 additional Airbus aircraftwill decline by the end of the year with the retirement of all of our MD-80 aircraft, we intend to continue increasing capacity through higher utilization rates on our Airbus fleet than we have on our MD-80 aircraft. Additionally, our Airbus fleet has more available seats, on average, than our MD-80 fleet. However, our capacity growth through the end of the 2018 ~~to implement the~~year will be lower than in prior years as a result of our fleet transition. ~~Our growth will be limited until the fleet transition is complete.~~

AsUnexpected delays in the scheduled delivery timing of ~~September 30, 2017,~~used Airbus A320 series aircraft caused operational disruptions during the summer of 2018, as the lack of available aircraft resulted in the reschedule or cancellation of many scheduled service flights. We believe we have been conservative in adding aircraft to our schedule when anticipating future deliveries of aircraft, but delays on certain aircraft deliveries and inductions during second quarter 2018 were ~~offering service on 122 medium-sized city routes compared~~unusual and beyond our ability to ~~90 as~~effectively fully recover our published schedule. In anticipation of known aircraft delivery and induction delays, we removed three lines of flying in late June and July to shore up the ~~same date~~integrity of our operations. This will result in ~~2016.~~a reduced number of flights and reduced revenues during the periods impacted, but our completion percentage has improved.

In April 2018, CBS aired a 60 Minutes segment critical of our safety and the FAA oversight of our operations. We believe the report was misleading, misrepresented our safety culture at that time and now, and mostly ignored the substantial improvement in the reliability of our operations since the events reported. Our customers' reaction to this story appears to have ~~31 new routes~~been short-lived and cancellations and bookings returned to normal levels weeks later.

Planning and development for Sunseeker Resorts is ongoing. Construction is expected to begin in the ~~fourth quarter~~second half of ~~2017, including service into two new cities: Milwaukee, Wisconsin and Norfolk, Virginia.~~

We have announced plans to develop Sunseeker Resorts which will be a hotel and condo resort in Charlotte County, Florida. This project is intended to further establish our brand as a leisure company. Construction is currently expected to begin in mid-2018,2018, with the opening of the resort ~~in late 2019 or early~~planned for 2020.

~~Incremental expense related to the collective bargaining agreement reached with~~Our flight dispatchers voted for union representation by the International Brotherhood of Teamsters ~~for our pilots was~~("IBT") and negotiations began in February 2017. The dispatchers failed to ratify a tentative agreement reached in May 2018 and negotiations continue. There are approximately ~~$41 million (including head count increases) for the nine months ended September 30, 2017. This agreement remains~~40 employees in ~~effect until 2021.~~this operating group.

~~We have two employee groups which have voted for union representation and with which we have yet to reach agreement - flight attendants and flight dispatchers. These employees make up~~

In March 2018, our maintenance technicians who represent approximately 30nine percent of our total employee ~~base.~~ base (approximately 340 employees), voted for union representation by the IBT. Negotiations for an agreement with this group are expected to begin in the near future.

In July 2018, the IBT announced that our pilots were supportive of a strike as a result of delays in our implementation of a new preferential bidding system for pilot flight assignments. We do not believe we are in violation of the collective bargaining agreement with our pilots in this regard, nor do we believe the pilots have a legal right to strike because of this issue. As a result, we have filed suit against the IBT seeking to foreclose the possibility of a strike at this time.

Our flight attendant group approved their collective bargaining agreement effective in December 2017.

Any labor actions whether following an inability to reach a collective bargaining ~~agreements~~agreement with ~~these~~any employee ~~groups~~group or otherwise could ~~materially~~ impact our operations during the continuance of any such activity. Any labor agreement reached following negotiations would also likely increase our operating costs.

RESULTS OF OPERATIONS

Comparison of three months ended ~~September~~June 30, ~~2017~~2018 to three months ended ~~September~~June 30, ~~2016~~2017

Operating Revenue

~~Scheduled service~~Passenger revenue. ~~Scheduled~~Passenger revenue now includes both scheduled service revenue ~~for~~and air-related ancillary revenue, due to the ~~third~~implementation of the New Revenue Standard. For the second quarter ~~2017~~2018, passenger revenue increased ~~3.2~~10.4 percent compared to ~~2016.~~2017. The increase was driven primarily by a ~~3.2~~10.1 percent increase in scheduled service departures and a 1.0 percentage point increase in load factor, which resulted in 12.7 percent more scheduled service passengers ~~while average base fare was flat.~~traveling. Additional passengers resulted in quarter-over-quarter increases in ancillary revenue products such as convenience, baggage and seat fees.

~~Ancillary air-related charges~~.Third party products revenue. ~~Ancillary air-related charges~~Third party product revenue for the ~~third~~second quarter ~~2017~~2018 increased ~~2.8~~24.4 percent overall compared to ~~2016,~~2017, due ~~mostly~~primarily to ~~the~~an increase in scheduled service passengers. The increase was slightly diluted by a 0.5 percent decrease in average ancillary air-related fare per passenger which correlates with a 2.3 percent reduction in stage length, as shorter trips tend to produce lower ancillary charges.

~~Ancillary third party revenue.~~ Ancillary third party revenue increased 9.7 percent for the third quarter 2017 compared to 2016 due to revenue generated from our co-branded credit card program. This increase from co-branded credit card revenue was partially offset by a decrease in net revenue from ~~third party products (hotel rooms,~~ rental cars, attraction and show tickets) resulting from a 20.3 percent and 15.4 percent decrease in hotel room nights and rental car days, respectively. Hurricane Irma had a significant impact on rental car sales in our Florida markets as over 200 flights entering these markets were canceled. Overall, there was a 6.2 percent increase in ancillary third party revenue per passenger year over year.cars.

Fixed fee contract revenue. Fixed fee contract revenue for the ~~third~~second quarter 2018 decreased 30.6 percent from 2017. This was planned and expected due to less availability of aircraft for charter flying during our fleet transition.

Other revenue. Other revenue decreased $3.5 million for the second quarter 2018 from 2017 primarily as six aircraft which generated lease revenue from a European carrier during the second quarter 2017, ~~increased $2.6 million from 2016 due mostly~~had been delivered to ~~increased flying under our Apple Vacations charter.~~us prior to the second quarter 2018.

Operating Expenses

We primarily evaluate our expense management by comparing our costs per passenger and per ASM across different periods, which enables us to assess trends in each expense category. The following table presents operating expense per passenger for the indicated periods. The table also presents operating expense per passenger, excluding fuel, a statistic which gives

management and investors the ability to measure and monitor our cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors beyond our control.


	Three Months Ended September 30,				Percent		Three Months Ended June 30,				Percent
	2017		2016		Change		2018		2017		Change
Aircraft fuel	$	26.41	$	23.58	12.0	%	$	33.06	$	25.83	28.0	%
Salary and benefits	29.15		24.98		16.7		27.44		27.89		(1.6	)
Station operations	12.20		10.97		11.2		11.22		11.80		(4.9	)
Maintenance and repairs	9.48		8.94		6.0		6.64		8.66		(23.3	)
Depreciation and amortization	10.47		8.81		18.8		8.05		9.11		(11.6	)
Sales and marketing	4.56		1.92		137.5		4.95		4.08		21.3
Aircraft lease rentals	0.18		0.16		12.5		0.02		0.73		(97.3	)
Other	7.97		7.96		0.1		6.49		7.49		(13.4	)
Operating expense per passenger	$	100.42	$	87.32	15.0	%	$	97.87	$	95.59	2.4	%
Operating expense per passenger, excluding fuel	$	74.01	$	63.74	16.1	%	$	64.81	$	69.76	(7.1	)%

The following table presents unit costs on a per ASM basis, or CASM, for the indicated periods. As on a per-passenger basis, excluding fuel on a per ASM basis provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility.

Three Months Ended September 30, Percent
2017 2016 Change
Aircraft fuel
2.50 ¢
2.22 ¢ 12.6 %
Salary and benefits 2.76
2.35
17.4
Station operations 1.15
1.03
11.7
Maintenance and repairs 0.90
0.84
7.1
Depreciation and amortization 0.99
0.83
19.3
Sales and marketing 0.43
0.18
138.9
Aircraft lease rentals 0.02
0.02
—
Other 0.75
0.75
—
CASM
9.50 ¢
8.22 ¢ 15.6 %
Operating CASM, excluding fuel
7.00 ¢
6.00 ¢ 16.7 %

~~During third quarter 2017, cost per passenger and per ASM were negatively impacted by the cancellation of approximately two percent of our ASMs due to Hurricane Irma.~~



	Three Months Ended June 30,						Percent
	2018			2017			Change
Aircraft fuel		3.12	¢		2.38	¢	31.1	%
Salary and benefits	2.59			2.57			0.8
Station operations	1.06			1.09			(2.8	)
Maintenance and repairs	0.63			0.80			(21.3	)
Depreciation and amortization	0.76			0.84			(9.5	)
Sales and marketing	0.47			0.38			23.7
Aircraft lease rentals	—			0.07			(100.0	)
Other	0.61			0.69			(11.6	)
CASM		9.24	¢		8.82	¢	4.8	%
Operating CASM, excluding fuel		6.12	¢		6.44	¢	(5.0	)%

Aircraft fuel expense. Aircraft fuel expense increased ~~16.0~~$37.1 million, or 43.4 percent, for the ~~third~~second quarter ~~2017~~2018 compared to ~~2016~~2017 as the system average fuel cost per gallon increased by ~~15.3 percent. Fuel consumption remained relatively flat on~~39.2 percent, coupled with a ~~3.2~~3.3 percent increase in system ~~ASMs~~fuel gallons consumed on a 9.4 percent increase in system ASMs. ASM growth outpaced fuel consumption as fuel efficiency (measured as ASMs per gallon) increased ~~2.8 percent~~5.8 percent year over ~~year.~~year due to increased flying on our Airbus aircraft which are more fuel efficient than our MD-80 aircraft.

Salary and benefits expense. Salary and benefits expense increased ~~$15.4~~$9.4 million, or ~~20.9~~10.2 percent, for the ~~third~~second quarter ~~2017~~2018 when compared to the same period last year. The increase is largely attributable to ~~$9.8 million~~a 5.8 percent increase in ~~incremental expense related to~~full-time equivalent employees. Additionally, in conjunction with the collective bargaining agreement with our ~~pilots, which~~flight attendants that went into effect in ~~August 2016, as well as costs associated with a 12.7~~December 2017, flight attendant total salaries expense increased an average of 25 percent ~~increase in the number of full-time equivalent employees needed~~compared to ~~support additional operating aircraft and the transition to a single fleet type.~~2017.

Station operations expense. Station operations expense for the ~~third~~second quarter ~~2017~~2018 increased ~~15.2~~6.6 percent on a ~~5.4~~10.1 percent increase in scheduled service departures compared to the same period in 2016. The increase in expense outpaced the increase in departures due to servicing more mid-size cities at higher frequencies, as well as increased interrupted travel costs related to irregular operations, and various supplementary station expenses.2017.

Maintenance and repairs expense. Maintenance and repairs expense for the ~~third~~second quarter ~~2017 increased 9.9~~2018 decreased $4.0 million, or 14.1 percent, compared to the same period in ~~2016 which~~2017. The year-over-year decrease is ~~partially~~largely due to ~~a 6.8 percent increase in~~fewer heavy maintenance events performed on our MD-80 aircraft, as they are being systematically retired from our operating fleet. Additionally, the ~~average number~~cost of ~~aircraft in service. There was also an increase in expenses related to routine~~major maintenance ~~in the current quarter, mostly~~events for our ~~MD-80 aircraft.~~Airbus aircraft is deferred in accordance with the deferral method of accounting and the amortization of these expenses is included in depreciation and amortization expense.

Depreciation and amortization expense. Depreciation and amortization expense for the third quarter 2017 increased 23.2 percent compared to 2016, partially related to a 6.8 percent increase in average number of aircraft in service. Additionally, depreciation expense related to MD-80 aircraft was approximately $5.0 million for the third quarter 2017 and 2016. With the recent decision to accelerate the retirement of the MD-80 fleet to fourthsecond quarter 2018 ~~we are evaluating this fleet and related assets for possible~~remained relatively flat, with a 1.0 percent decrease year over year. The decrease is due to the impairment charge taken on our MD-80 aircraft in the fourth quarter ~~2017. As a result,~~2017 as no depreciation expense for ~~our MD-80 fleet for future periods will likely be impacted by the decision to accelerate the retirement of~~ this fleet ~~and any impairment charge taken.~~remains in the current quarter. Depreciation expense

~~We also~~related to the MD-80 aircraft and Boeing 757-200 aircraft (retired in late 2017) for the three months ended June 30, 2017 was $4.9 million and $1.4 million, respectively.

The decrease in total depreciation and amortization expense was offset by higher monthly depreciation expense associated with our Airbus aircraft, as we continue to add Airbus aircraft into ~~service which results in higher incremental monthly depreciation expense than our MD-80s.~~service. Depreciation expense ~~related to Airbus A320 series aircraft~~for this fleet was ~~$15.7~~$19.8 million for the ~~third~~second quarter ~~2017~~2018 compared to ~~$11.3~~$13.7 million for the same period in ~~2016.~~2017. Amortization of major maintenance costs under the deferral method of accounting for the Airbus aircraft was ~~$1.7~~$2.6 million for the ~~third~~second quarter ~~2017~~2018 compared to ~~$0.4~~$1.6 million for the ~~third quarter 2016, as our first major maintenance event on our Airbus aircraft did not occur until~~ second quarter ~~2016.~~2017.

Sales and marketing expense. Sales and marketing expense for the ~~third~~second quarter ~~2017~~2018 increased ~~$8.2~~$4.9 million compared to the same period in ~~2016, mostly~~2017, partly due to an increase in net credit card fees paid ~~by us. We previously charged for credit card fee reimbursement (a fee charged to customers for using a credit card) at zero margin, which was applied~~ as a ~~reduction to sales and marketing expense, and~~result of the ~~net amount paid by us for credit card fees was reduced. We discontinued the charge for credit card fee reimbursement~~10.4 percent increase in ~~January 2017, and as such, credit card fee reimbursements for the third quarter were minimal compared to $6.2 million in the third quarter 2016.~~passenger revenue year over year. There were also ~~year-over-year~~ increased expenses related to various marketing initiatives, including our national ad campaign, for our growing network.

Aircraft lease rentals expense. Aircraft lease rentals expense for the second quarter 2018 decreased $2.3 million compared to 2017 due to fewer sub-service flights in the current quarter. We do not currently have aircraft under operating leases.

Income Tax Expense

Our effective tax rate ~~remained relatively flat quarter over quarter, at 35.8~~was 20.7 percent for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~36.0~~37.8 percent for the three months ended ~~September~~June 30, ~~2016.~~2017. The effective tax rate for the three months ended June 30, 2018 differed from the statutory federal income tax rate of 21.0 percent primarily due to the tax benefit from dissolution of foreign subsidiaries, offset by state taxes. While we expect our tax rate to be fairly consistent in the near term, it will vary depending on recurring items such as the amount of income we earn in each state and the state tax rate applicable to such income. Discrete items during interim periods may also affect our tax rates.

Comparison of ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 to ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017

Operating Revenue

~~Scheduled service~~Passenger revenue. ~~Scheduled~~Passenger revenue now includes both scheduled service revenue ~~for~~and air-related ancillary revenue, due to the ~~nine~~implementation of the New Revenue Standard. For the six months ended ~~September~~June 30, ~~2017~~2018, passenger revenue increased ~~8.4~~12.2 percent compared with ~~2016.~~2017. The increase was mostly ~~the result of~~attributable to a ~~9.5~~9.8 percent increase in scheduled service ~~passengers offset by~~departures and a ~~1.0~~1.9 percentage point increase in load factor, which resulted in 13.9 percent ~~decrease in~~more scheduled service ~~average base fare.~~passengers traveling. Additional passengers resulted in year-to-date increases in ancillary revenue products such as convenience, baggage and seat fees.

~~Ancillary air-related charges~~. ~~Ancillary air-related charges for the nine months ended September 30, 2017 increased 8.2 percent compared with 2016 due mostly to the increase in scheduled service passengers.~~

~~Ancillary third~~Third party products revenue. ~~Ancillary third~~Third party products revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 increased ~~$4.9 million~~4.0 percent over the same period in ~~2016~~2017 primarily due to ~~revenue generated from our co-branded credit card program. This~~an increase ~~from co-branded credit card revenue was offset by a decrease~~ in net revenue from ~~third party products (hotel rooms,~~ rental cars, attraction and show tickets) resulting from a 10.4 percent and 5.4 percent decrease in hotel room nights and rental car days, respectively. Hurricane Irma had a significant impact on rental car sales incars. This was offset by revenue reclassifications related to our ~~Florida markets during~~Allegiant World Mastercard® co-brand credit card, whereby $3.6 million of the ~~third quarter 2017. Overall, there~~revenue related to the travel component was ~~a 4.3 percent increase in ancillary third party revenue per~~reclassified into passenger ~~year over year.~~revenue.

Fixed fee contract revenue. Fixed fee contract revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2017 increased 50.4~~2018 decreased 18.3 percent compared with ~~2016,~~2017. This was planned and expected due to ~~increased~~less availability of aircraft for charter flying during our fleet transition.

Other revenue. Other revenue decreased $3.9 million for ~~both~~ the ~~Department~~six months ended June 30, 2018 compared to 2017 primarily as six aircraft which generated lease revenue from a European carrier during the six months ended June 30, 2017 were delivered to us during the six months ended June 30, 2018. The effects of ~~Defense and under~~this decrease were slightly offset by increases in revenue from our ~~Apple Vacations charter.~~golf course management solution.

Operating Expenses

The following table presents operating expense per passenger for the indicated periods:


	Nine Months Ended September 30,				Percent		Six Months Ended June 30,				Percent
	2017		2016		Change		2018		2017		Change
Aircraft fuel*	$	27.13	$	21.76	24.7	%
Aircraft fuel							$	32.61	$	27.48	18.7	%
Salary and benefits	30.03		25.11		19.6		30.63		30.47		0.5
Station operations	11.69		11.45		2.1		11.29		11.45		(1.4	)
Maintenance and repairs	9.49		9.75		(2.7	)	6.26		9.49		(34.0	)
Depreciation and amortization	10.03		9.03		11.1		8.27		9.81		(15.7	)
Sales and marketing	3.98		1.99		100.0		5.34		4.33		23.3
Aircraft lease rentals	0.34		0.11		209.1		0.01		0.41		(97.6	)
Other	7.41		6.94		6.8		6.63		7.13		(7.0	)
Operating expense per passenger*	$	100.10	$	86.14	16.2	%
Operating expense per passenger							$	101.04	$	100.57	0.5	%
Operating expense per passenger, excluding fuel	$	72.97	$	64.38	13.3	%	$	68.43	$	73.09	(6.4	)%

*Includes effect of $8.3 million fuel tax refunds in the second quarter of 2016.

The following table presents unit costs on a per ASM basis, defined as Operating CASM, for the indicated periods:

Nine Months Ended September 30, Percent
2017 2016 Change
Aircraft fuel*
2.46 ¢
1.97 ¢ 24.9 %
Salary and benefits 2.72
2.27
19.8
Station operations 1.06
1.04
1.9
Maintenance and repairs 0.86
0.88
(2.3 )
Depreciation and amortization 0.91
0.82
11.0
Sales and marketing 0.36
0.18
100.0
Aircraft lease rentals 0.03
0.01
200.0
Other 0.68
0.62
9.7
CASM*
9.08 ¢
7.79 ¢ 16.6 %
Operating CASM, excluding fuel
6.62 ¢
5.82 ¢ 13.7 %

*Includes effect of $8.3 million fuel tax refunds in the second quarter of 2016.



	Six Months Ended June 30,						Percent
	2018			2017			Change
Aircraft fuel		2.99	¢		2.44	¢	22.5	%
Salary and benefits	2.81			2.71			3.7
Station operations	1.03			1.02			1.0
Maintenance and repairs	0.57			0.84			(32.1	)
Depreciation and amortization	0.76			0.87			(12.6	)
Sales and marketing	0.49			0.39			25.6
Aircraft lease rentals	—			0.04			(100.0	)
Other	0.60			0.63			(4.8	)
CASM		9.25	¢		8.94	¢	3.5	%
Operating CASM, excluding fuel		6.26	¢		6.50	¢	(3.7	)%

Aircraft fuel expense. Aircraft fuel expense increased ~~36.9~~$58.4 million, or 34.4 percent, for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to the same period in ~~2016. Excluding the effect of one-time $8.3 million in fuel tax refunds in the second quarter 2016, fuel expense would have increased 31.0 percent and~~2017 as the system average fuel cost per gallon ~~would have~~ increased by ~~21.1 percent. Additionally, there was an 8.6~~29.5 percent, coupled with a 3.6 percent increase in system fuel gallons consumed ~~due to an~~on a 9.9 percent increase in ~~total~~ system ~~capacity of 9.5 percent.~~ASMs. ASM growth outpaced fuel consumption as ~~average~~fuel efficiency (measured as ASMs per ~~gallon~~gallon) increased ~~0.8~~6.1 percent year over ~~year.~~year, due to increased flying on our Airbus aircraft which are more fuel efficient than our MD-80 aircraft.

Salary and benefits expense. Salary and benefits expense increased ~~31.3~~$26.1 million, or 13.8 percent, for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to the same period in ~~2016.~~2017. The increase is largely attributable to ~~$40.8 million in incremental expense related to the collective bargaining agreement with our pilots, which went into effect in August 2016, as well as costs associated with~~ a ~~12.7~~5.8 percent increase in the number of full-time equivalent ~~employees needed to support additional operating aircraft and~~employees. Additionally, in conjunction with the ~~transition to a single fleet type. Additionally, stock compensation~~collective bargaining agreement with our flight attendants that went into effect in December 2017, flight attendant total salaries expense increased ~~incrementally by $5.9 million related to management equity grants which were not in place until late third quarter and fourth quarter 2016.~~an average of 21 percent year over year.

Station operations expense. Station operations expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 increased ~~12.1~~11.7 percent on a ~~13.0~~9.8 percent increase in scheduled service departures compared to the same period in ~~2016.~~2017. The increase in expense outpaced the increase in departures due primarily to certain station incentives which expired during the first quarter of 2018.

Maintenance and repairs expense. Maintenance and repairs expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017 increased 6.8~~2018 decreased $14.9 million, or 25.3 percent, compared with the same period in ~~2016,~~2017. The year-over-year decrease is largely due ~~primarily~~ to ~~a 3.8 percent increase~~fewer heavy maintenance events performed on our MD-80 series aircraft, as they are being systematically retired from our operating fleet. Additionally, the cost of major maintenance events for our Airbus aircraft is deferred in ~~average number~~accordance with the deferral method of ~~aircraft in service as well as incremental~~accounting and the amortization of these expenses ~~related to parts repairs~~is included under depreciation and ~~routine maintenance.~~amortization expense.

Depreciation and amortization expense. Depreciation and amortization expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017 increased~~2018 decreased by ~~21.9~~4.4 percent compared to the same period in ~~2016,~~2017, partially ~~related~~due to ~~a 3.8 percent increase in average number of~~the impairment charge taken on our MD-80 aircraft in ~~service.~~the fourth quarter 2017 as no depreciation expense for this fleet remains in the current year. Depreciation expense related to the MD-80 aircraft ~~declined~~and Boeing 757-200 aircraft (retired in late-2017) for the six months ended June 30, 2017 was $11.3 million and $2.9 million, respectively.

The decrease in depreciation and amortization expense was partially offset by higher monthly depreciation expense associated with our Airbus aircraft, as we continue to ~~$16.4~~add Airbus aircraft into service. Depreciation expense for this fleet was $38.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to ~~$17.4~~$26.5 million for the same period in ~~2016 as we have fewer MD-80 aircraft in service and all are nearing retirement.~~

We also continue to add Airbus aircraft into service which results in higher incremental monthly depreciation expense than our MD-80s. Depreciation expense related to Airbus A320 series aircraft was $42.2 million for the nine months ended September 30, 2017 compared to $33.0 million for the same period in 2016.2017. Amortization of major maintenance costs under the deferral method of accounting for the Airbus aircraft was ~~$4.6~~$5.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to ~~$0.7~~$2.9 million for ~~the same period in 2016, as our first major maintenance event on our Airbus aircraft did not occur until June 2016.~~2017.

Sales and marketing expense. Sales and marketing expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 increased ~~$20.0~~$10.6 million compared to the same period in ~~2016, mostly~~2017, partly due to an increase in net credit card fees paid ~~by us. We previously charged for credit card fee reimbursement (a fee charged to customers for using a credit card) at zero margin, which was applied~~ as a ~~reduction to sales and marketing expense, and the net amount paid by us for credit card fees was reduced. We discontinued the charge for credit card fee reimbursement~~result of a 12.2 percent increase in ~~January 2017, although this charge still applies to travel booked up to the discontinuation date. Consequently, credit card fee reimbursements for the nine months ended September 30, 2017~~

~~declined to $4.0 million from $19.4 million in the first nine months of 2016.~~passenger revenue year over year. There were also ~~year-over-year~~ increased expenses related to various marketing initiatives, including our national ad campaign, for our growing network.

Aircraft lease rentals expense. Aircraft lease rentals expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017 increased $2.2~~2018 decreased $2.5 million compared to the same period in ~~2016~~2017 due to ~~additional subservice~~fewer sub-service flights ~~needed for irregular operations~~ in the ~~second quarter 2017.~~current year. We do not currently have ~~operating~~ aircraft under ~~lease.~~operating leases.

Other expense. Other operating expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 increased ~~$10.1~~$2.3 million compared to ~~2016.~~2017. The increase is ~~partially~~primarily due to ~~losses recorded on disposed aircraft parts in 2017 compared to a gain of over $2.0 million recorded on an engine sale in 2016. Expenses related to crew training in 2017~~information technology expenses, as well as other administrative expenses incurred to support our ~~fleet transition~~airline operations and ~~network growth also increased year over year.~~golf course management business.

Income Tax Expense

Our effective tax rate ~~remained flat at 37.2~~was 20.6 percent for ~~each of~~ the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016.~~2018, compared to 37.3 percent for the six months ended June 30, 2017. The effective tax rate for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 differed from the statutory federal income tax rate of ~~35.0~~21.0 percent primarily due to ~~executive compensation deduction limitations as well as~~the tax benefit from dissolution of foreign subsidiaries, offset by state ~~and foreign~~ taxes. While we expect our tax rate to be fairly consistent in the near term, it will vary depending on recurring items such as the amount of income we earn in each state and the state tax rate applicable to such income. Discrete items during interim periods may also affect our tax rates.

Comparative Consolidated Operating Statistics

The following tables set forth our operating statistics for the periods indicated:


	Three Months Ended September 30,						Percent		Three Months Ended June 30,						Percent
	2017			2016			Change*		2018			2017			Change (1)
Operating statistics (unaudited):
Total system statistics:
Passengers	3,045,642			2,939,055			3.6		3,704,113			3,306,193			12.0
Revenue passenger miles (RPMs) (thousands)	2,672,963			2,645,533			1.0		3,276,599			2,958,808			10.7
Available seat miles (ASMs) (thousands)	3,220,246			3,121,762			3.2		3,922,294			3,584,209			9.4
Load factor	83.0		%	84.7		%	(1.7	)	83.5		%	82.6		%	0.9
Operating expense per ASM (CASM) (cents)	9.50			8.22			15.6		9.24			8.82			4.8
Fuel expense per ASM (cents)	2.50			2.22			12.6		3.12			2.38			31.1
Operating CASM, excluding fuel (cents)	7.00			6.00			16.7		6.12			6.44			(5.0	)
ASMs per gallon of fuel	72.6			70.6			2.8		76.1			71.9			5.8
Departures	22,723			21,384			6.3		27,063			24,721			9.5
Block hours	49,932			47,739			4.6		60,707			56,056			8.3
Average stage length (miles)	842			864			(2.5	)	858			866			(0.9	)
Average number of operating aircraft during period	89.7			84.0			6.8		92.0			85.3			7.9
Average block hours per aircraft per day	6.1			6.2			(1.6	)	7.3			7.2			1.4
Full-time equivalent employees at end of period	3,704			3,287			12.7		3,840			3,628			5.8
Fuel gallons consumed (thousands)	44,346			44,187			0.4		51,516			49,858			3.3
Average fuel cost per gallon	$	1.81		$	1.57		15.3		$	2.38		$	1.71		39.2


Scheduled service statistics:
Passengers	2,998,476			2,904,295			3.2		3,681,944			3,266,789			12.7
Revenue passenger miles (RPMs) (thousands)	2,618,446			2,603,849			0.6		3,245,774			2,903,257			11.8
Available seat miles (ASMs) (thousands)	3,073,360			2,997,529			2.5		3,795,815			3,436,872			10.4
Load factor	85.2		%	86.9		%	(1.7	)	85.5		%	84.5		%	1.0
Departures	21,498			20,398			5.4		25,992			23,609			10.1
Block hours	47,481			45,740			3.8		58,536			53,632			9.1
Total scheduled service revenue per ASM (TRASM) (cents)**	10.61			10.54			0.7
Total passenger revenue per ASM (TRASM) (cents) (2)									11.15			11.10			0.5
Average fare - scheduled service(3)	$	61.05		$	61.07		—		$	64.62		$	67.76		(4.6	)
Average fare - ancillary air-related charges	$	43.63		$	43.83		(0.5	)
Average fare - ancillary third party products	$	4.12		$	3.88		6.2
Average fare - air-related charges (3)									$	45.53		$	44.66		1.9
Average fare - third party products									$	4.84		$	4.38		10.5
Average fare - total	$	108.80		$	108.78		—		$	114.99		$	116.80		(1.5	)
Average stage length (miles)	849			869			(2.3	)	864			869			(0.6	)
Fuel gallons consumed (thousands)	42,193			42,439			(0.6	)	49,671			47,821			3.9
Average fuel cost per gallon	$	1.80		$	1.59		13.2		$	2.37		$	1.70		39.4
Rental car days sold									404,355			391,010			3.4
Hotel room nights sold									93,484			107,910			(13.4	)
Percent of sales through website during period	93.3		%	94.6		%	(1.3	)	93.9		%	95.1		%	(1.2	)

*(1) Except load factor and percent of sales through website during period, which are presented as a percentage point change.

**(2) Various components of this measure do not have a direct correlation to ASMs. This measure is provided on a per ASM basis so as to facilitate comparison with airlines reporting revenues on a per ASM basis.

(3) Reflects division of passenger revenue between scheduled service and air-related charges in the Company's booking path.


	Nine Months Ended September 30,						Percent		Six Months Ended June 30,						Percent
	2017			2016			Change*		2018			2017			Change (1)
Operating statistics (unaudited):
Total system statistics:
Passengers	9,233,083			8,410,422			9.8		7,007,064			6,187,441			13.2
Revenue passenger miles (RPMs) (thousands)	8,340,269			7,831,436			6.5		6,371,403			5,667,306			12.4
Available seat miles (ASMs) (thousands)	10,181,292			9,302,051			9.5		7,650,857			6,961,046			9.9
Load factor	81.9		%	84.2		%	(2.3	)	83.3		%	81.4		%	1.9
Operating expense per ASM (CASM) (cents)***	9.08			7.79			16.6
Fuel expense per ASM (cents)***	2.46			1.97			24.9
Operating expense per ASM (CASM) (cents)									9.25			8.94			3.5
Fuel expense per ASM (cents)									2.99			2.44			22.5
Operating CASM, excluding fuel (cents)	6.62			5.82			13.7		6.26			6.50			(3.7	)
ASMs per gallon of fuel	72.2			71.6			0.8		76.4			72.0			6.1
Departures	69,739			61,271			13.8		51,311			47,016			9.1
Block hours	159,181			142,515			11.7		118,510			109,249			8.5
Average stage length (miles)	870			896			(2.9	)	883			883			—
Average number of operating aircraft during period	86.6			83.4			3.8		90.8			85.0			6.8
Average block hours per aircraft per day	6.7			6.2			8.1		7.2			7.1			1.4
Full-time equivalent employees at end of period	3,704			3,287			12.7		3,840			3,628			5.8
Fuel gallons consumed (thousands)	141,054			129,862			8.6		100,156			96,708			3.6
Average fuel cost per gallon***	$	1.78		$	1.41		26.2
Average fuel cost per gallon									$	2.28		$	1.76		29.5


Scheduled service statistics:
Passengers	9,110,745			8,321,716			9.5		6,961,312			6,112,269			13.9
Revenue passenger miles (RPMs) (thousands)	8,183,636			7,714,172			6.1		6,310,393			5,565,191			13.4
Available seat miles (ASMs) (thousands)	9,747,395			8,967,614			8.7		7,397,830			6,674,035			10.8
Load factor	84.0		%	86.0		%	(2.0	)	85.3		%	83.4		%	1.9
Departures	66,355			58,744			13.0		49,256			44,857			9.8
Block hours	151,988			137,066			10.9		114,224			104,507			9.3
Total scheduled service revenue per ASM (TRASM) (cents)**	10.91			10.92			(0.1	)
Total passenger revenue per ASM (TRASM) (cents) (2)									11.23			11.12			1.0
Average fare - scheduled service(3)	$	67.59		$	68.27		(1.0	)	$	68.95		$	71.33		(3.3	)
Average fare - ancillary air-related charges	$	44.76		$	45.30		(1.2	)
Average fare - ancillary third party products	$	4.32		$	4.14		4.3
Average fare - air-related charges (3)									$	46.31		$	45.67		1.4
Average fare - third party products									$	4.04		$	4.42		(8.6	)
Average fare - total	$	116.67		$	117.71		(0.9	)	$	119.30		$	121.42		(1.7	)
Average stage length (miles)	875			901			(2.9	)	889			887			0.2
Fuel gallons consumed (thousands)	134,906			125,291			7.7		96,542			92,713			4.1
Average fuel cost per gallon***	$	1.76		$	1.41		24.8
Average fuel cost per gallon									$	2.27		$	1.75		29.7
Rental car days sold									802,942			766,721			4.7
Hotel room nights sold									202,468			213,238			(5.1	)
Percent of sales through website during period	94.1		%	94.3		%	(0.2	)	93.9		%	94.2		%	(0.3	)

*(1) Except load factor and percent of sales through website during period, which are presented as a percentage point change.

*** Includes effect(3) Reflects division of ~~$8.3 million fuel tax refunds~~passenger revenue between scheduled service and air-related charges in the ~~second quarter of 2016.~~Company's booking path.

LIQUIDITY AND CAPITAL RESOURCES

Current liquidity

Cash, restricted cash and investment securities (short-term and long-term) ~~increased~~decreased from ~~$470.5~~$501.9 million at December 31, ~~2016~~2017 to ~~$519.8~~$441.8 million at ~~September~~June 30, ~~2017.~~2018. Restricted cash represents escrowed funds under fixed fee contracts and cash collateral against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties. Under our fixed fee flying contracts, we require our customers to prepay for flights to be provided by us. The prepayments are escrowed until the flight is completed and are recorded as restricted cash with a corresponding amount as air traffic liability. Investment securities represent highly liquid marketable securities which are available-for-sale.

During the first ~~nine~~six months of ~~2017,~~2018, our primary source of funds was ~~$296.4~~$283.2 million generated by ~~operations as well as $292.5 million in proceeds from debt issuance.~~operations. Our operating cash flows and previous borrowings have allowed us to invest in our fleet transition and return capital to shareholders. Our future capital needs are primarily for the acquisition of additional aircraft, including our existing Airbus A320 series aircraft commitments, as well as planned capital outlay related to Sunseeker Resorts and other travel and leisure initiatives. Of the 11 aircraft expected to be placed into service during the remainder of 2018, three are structured as capital leases and will not require separate financing, and one has already been paid for (the aircraft being returned from lease to a European carrier).

We believe we have more than adequate liquidity resources through our operating cash flows, borrowings, and cash balances, to meet our future contractual ~~obligations, and expect to finance a significant portion of the purchase price of our remaining newly manufactured Airbus aircraft order on acceptable terms. We~~obligations. In addition, we continue to consider raising funds through debt financing on an opportunistic basis.

In addition to our recurring quarterly cash dividend, ~~we plan to continue repurchasing~~ our ~~stock in the open market subject to availability of cash resources and compliance with our debt covenants. Our~~ current share repurchase authority is $100 million. There is no expiration to this program.

Debt

Our long-term debt and capital lease obligations balance, without reduction for related issuance costs, ~~increased~~decreased from ~~$813.2 million~~$1.2 billion as of December 31, ~~2016~~2017 to ~~$1,017.0 million~~$1.1 billion as of ~~September~~June 30, ~~2017~~2018 as we ~~borrowed additional funds~~paid off our senior secured ~~by aircraft, while~~revolving credit facility and continued making scheduled repayments on our existing ~~debt.~~debt, including the prepayment of certain debt secured by Airbus A320 series aircraft. During the ~~third~~second quarter ~~2017~~of 2018, we borrowed ~~$102.0~~$10.8 million secured by ~~three aircraft as well as $56.0 million against our senior secured revolving credit facility.~~various ground equipment.

Sources and Uses of Cash

Operating Activities. During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, our operating activities provided ~~$296.4~~$283.2 million of cash compared to ~~$308.1~~$262.9 million during the same period of ~~2016.~~2017. The year-over-year ~~decrease~~increase in cash inflows is ~~principally~~ the result of a ~~$65.9~~$13.8 million increase in net income, as well as changes in various asset and liability accounts, including a $46.9 million decrease in ~~net income,~~accounts receivable. This was offset by ~~the effect of an increase in~~adjustments made for non-cash items such as deferred income ~~taxes.~~taxes ($26.9 million lower in 2018).

Operating cash inflows are primarily derived from providing air transportation and related ancillary products and services to customers, and we expect to use that cash flow to purchase aircraft and equipment, make scheduled debt payments, invest in Sunseeker and other travel and leisure initiatives, and return capital to shareholders through share repurchases and dividends.

Investing Activities. Cash used in investing activities was ~~$366.3~~$158.6 million during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to ~~$284.0~~$269.5 million for the same period in ~~2016.~~2017. The year-over-year ~~increase~~decrease is mostly due ~~primarily~~ to ~~$333.7 million in property and equipment purchases during the first nine months~~investment security activity, as cash proceeds from maturities of ~~2017 compared to $264.1~~investment securities (net of purchases) were $30.4 million in the ~~same period~~first half of ~~2016. Additionally, our net~~2018 compared to cash used to purchase investment securities (net of ~~proceeds from maturities) was $33.9 million during the first nine months~~proceeds) of ~~2017 compared to $23.9~~$88.6 million for the same period in ~~2016.~~2017. Cash used to purchase property and equipment (including pre-delivery deposits) was $187.5 million for the first six months of 2018 compared to $182.3 million in the same period of 2017.

Financing Activities. Cash ~~proceeds from~~used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017 exceeded cash used by $79.2~~2018 was $153.1 million ~~while cash used exceeded cash proceeds by $62.5~~compared to $38.3 million for the same period in ~~2016. Proceeds from the issuance of debt net of~~2017. The year-over-year increase is primarily due to an increase in principal payments ~~were $204.5~~on long-term debt and capital lease obligations, as we paid $142.4 million in ~~2017~~debt and ~~$56.9~~capital lease payments in the first half of 2018 compared to $64.9 million infor the same period ~~of 2016. During~~in 2017. Our debt payments in the first ~~nine~~half of 2018 included various scheduled balloon payments, as well as the payoff of our senior secured revolving credit facility, which had $41.6 million in outstanding principal as of December 31, 2017. Additionally, we received $10.8 million in loan proceeds during the second quarter 2018, compared to $134.5 million in loan proceeds during the same period in 2017. For the six months ~~of 2017,~~ended June 30,

2018, we ~~repurchased common stock for $90.4 million and~~ paid cash dividends of ~~$34.5~~$22.6 million, compared to the ~~repurchase of common stock for $63.4 million and~~ payment of cash dividends of ~~$55.9~~$23.2 million ~~($27.7~~and $86.2 million ~~of which was a special dividend declared~~ in ~~December 2015) in~~open market common stock repurchases for the same period ~~of 2016.~~in 2017.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this quarterly report on Form 10-Q, and in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” that are based on our management’s beliefs and assumptions, and on information currently available to our management. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, fleet plan, financing plans, competitive position, industry environment, potential growth opportunities, future service to be provided, the effects of future regulation

and competition, and the development of a ~~hotel-condo resort.~~resort in Southwest Florida. 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,” “anticipate,” “intend,” “plan,” “estimate,” “project” 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 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, public perception of our safety, our reliance on automation systems, limitation on growth as we transition to a single fleet type, our reliance on third parties to deliver aircraft under contract to us on a timely basis, 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, the 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, the ability to successfully develop a ~~hotel-condo~~ resort in Southwest Florida, governmental regulation, increases in maintenance costs and cyclical and seasonal fluctuations to our operating results.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

~~A description~~Except as discussed below relating to the New Revenue Standard, in the second quarter of 2018, there were no changes to our critical accounting policies and estimates from those disclosed in the Consolidated Financial Statements and accompanying notes contained in our 2017 Form 10-K.

Effective January 1, 2018, we adopted the New Revenue Standard using the full retrospective method, which resulted in the recast of the 2017 prior period data presented. Under this ASU and subsequently issued amendments, revenue is ~~included in Item 7 of our Annual Report on Form 10-K~~recognized at the time a good or service is transferred to a customer for the ~~year ended December 31, 2016. There has been no material change to these policies during the nine months ended September 30, 2017.~~amount of consideration received.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to certain market risks, including commodity prices (specifically aircraft fuel). The adverse effects of changes in these markets could pose potential losses as discussed below. The sensitivity analysis provided does not consider the effects that such adverse changes may have on overall economic activity, nor does it consider additional actions we may take to mitigate our exposure to such changes. Actual results may differ.

Aircraft Fuel

Our results of operations can be significantly impacted by changes in the price and availability of aircraft fuel, as aircraft fuel expense represented ~~27.1~~32.3 percent of our operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Increases in fuel prices, or a shortage of supply, could have a material impact on our operations and operating results. Based on our fuel consumption for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, a hypothetical ten percent increase in the average price per gallon of fuel would have increased fuel expense by approximately ~~$7.8~~$12.0 million and ~~$26.0~~$22.9 million, respectively. We have not hedged fuel price risk for many years.

Interest Rates

We have market risk associated with changing interest rates due to the short-term nature of our cash and investment securities and variable-rate debt. We invest available cash in government and corporate debt securities, investment grade commercial paper, and other highly rated financial instruments. Because of the short-term nature of these investments, the returns earned closely parallel short-term floating interest rates. A hypothetical 100 basis point change in interest rates for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 would have ~~affected~~impacted interest income from cash and investment securities by approximately ~~$2.6~~$2.3 million.

As of ~~September~~June 30, ~~2017,~~2018, we had a total of ~~$549.7~~$563.1 million in variable-rate debt, including current maturities and without reduction for related costs. A hypothetical 100 basis point change in market interest rates for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, would have affected interest expense by approximately ~~$3.4~~$3.2 million.

As of ~~September~~June 30, ~~2017,~~2018, we had ~~$467.4~~$477.1 million of fixed-rate debt, including current maturities and without reduction for related ~~costs, which had a fair value of $482.4 million.~~costs. A hypothetical 100 basis point change in market interest rates would not impact interest expense ~~or have a material effect~~ on ~~the fair value of~~ our ~~fixed-rate~~fixed rate debt ~~instruments~~ as of such date.

See Item 7A "Quantitative and Qualitative Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, for further information about market risk.

Item 4. Controls and Procedures

As of ~~September~~June 30, ~~2017,~~2018, under the supervision and with the participation of our management, including our chief executive officer ~~(“CEO”~~("CEO") and chief financial officer (“CFO”), we evaluated the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the “Exchange ~~Act.”~~Act”) as of the end of the period covered by this report. Based on ~~this~~that evaluation, management, including our ~~management~~CEO and CFO, has concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information we are required to disclose is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and ~~forms. Based upon this evaluation, management concluded that our disclosure controls~~forms and ~~procedures are effective in providing reasonable assurance that information required to be disclosed in our reports filed with the SEC under the Exchange Act~~ is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the quarter ending ~~September~~June 30, ~~2017,~~2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Effective January 1, 2018, we adopted Accounting Standards Codification 606, “Revenue from Contracts with Customers.” Although the New Revenue Standard is not expected to have a material impact on our ongoing net income, changes were made to relevant business processes and the related control activities, including information systems, in order to monitor and maintain appropriate controls over financial reporting. The operating effectiveness of these changes will be evaluated as part of our annual assessment on the effectiveness of internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to certain legal and administrative actions we consider routine to our business activities. We believe the ultimate outcome of any pending legal or administrative matters will not have a material adverse impact on our financial position, liquidity or results of operations.

Item 1A. Risk Factors

We have evaluated our risk factors and determined ~~the following~~there are no changes to ~~those~~the risk factors set forth in Part I, Item 1A ~~in the Form 10-K since we filed~~of our Annual Report on Form 10-K.

~~The acceleration of the retirement of our MD-80 fleet will put pressure on our fleet induction team to complete the fleet transition on a timely basis.~~

Although we have been able to successfully add 23 Airbus aircraft to our operating fleet since the beginning of 2016, the accelerated retirement of our MD-80 fleet per our fleet transition plan contemplates placing into service an additional 35 Airbus aircraft through November 2018. Most of these aircraft are used and they will come from different sources. This is a significant undertaking which will require operational efficiency to accomplish on a timely basis. If we are unable to complete these inductions as contemplated, the fleet replacement plan could be delayed which could increase costs or impact revenues.

~~The successful development of a hotel-condo resort is dependent on commercial and economic factors, many of which are beyond our control.~~

We have announced the development of a hotel-condo resort in Southwest Florida with construction expected to begin in mid-2018 and completion of the hotel expected in late 2019 or early 2020. The successful development of the project will be subject to various risks inherent in construction projects (such as financing, cost overruns and construction delays) as well as risks of gaining sufficient interest from purchasers of the condo units at the prices we envision, the desirability of the project’s location, competition and the ability to profitably operate the hotel and related offerings once open.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Our Repurchases of Equity Securities

The following table reflects the repurchases of our common stock during the ~~third~~second quarter ~~2017:~~2018:

Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of
Shares Purchased as Part of our Publicly
Announced Plan Approximate Dollar Value of Shares that
May Yet be Purchased
Under the Plans or
Programs (in thousands) (2)
July 508
$ 139.78
None
August None
None
None
September 4,278
115.71
None
Total 4,786
$ 118.27
$ 100,000



Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of our Publicly Announced Plan	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) (2)
April	452	$	148.70	None
May	4,349	159.60		None
June	—	—		None
Total	4,801	$	—		$	100,000

(1) Includes shares repurchased from employees who vested a portion of their restricted stock grants. These share repurchases were made at the election of each employee pursuant to an offer to repurchase by us. In each case, the shares repurchased constituted the portion of vested shares necessary to satisfy income tax withholding requirements.



~~(1)~~	Includes shares repurchased from employees who vested a portion of their restricted stock grants. These share repurchases were made at the election of each employee pursuant to an offer to repurchase by us. In each case, the shares repurchased constituted the portion of vested shares necessary to satisfy income tax withholding requirements.
~~(2)~~	(2) Represents the remaining dollar amount of open market purchases of our common stock which has been authorized by the Board under a share repurchase program.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. Exhibits



3.1	Articles of Incorporation (1)
3.2	Bylaws of the Company as amended on ~~February 17, 2015~~April 24, 2018 (2)
12	Calculation of Ratio of Earnings to Fixed Charges of Allegiant Travel Company
31.1	Rule 13a - 14(a) / 15d - 14(a) Certification of Principal Executive Officer
31.2	Rule 13a - 14(a) / 15d - 14(a) Certification of Principal Financial Officer
32	Section 1350 Certifications
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to Exhibit filed with Registration Statement #333-134145 filed by the Company with the Commission and amendments thereto.



~~(1)~~	~~Incorporated by reference to Exhibit filed with Registration Statement #333-134145 filed by the Company with the Commission and amendments thereto.~~
~~(2)~~	~~Incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, filed with the Commission on November 1, 2016.~~

(2) Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Commission on April 25, 2018.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		ALLEGIANT TRAVEL COMPANY


Date:	~~October 30, 2017~~August 3, 2018	By:	/s/ Scott Sheldon
		Scott Sheldon, as duly authorized officer of the Company (Chief Financial Officer) and as Principal Financial Officer

2432



	As of September 30, 2017			As of December 31, 2016
Fixed-rate notes payable due through 2020	$	465,527		$	465,748
Variable-rate notes payable due through 2027	546,037			342,526
Total long-term debt, net of related costs	1,011,564			808,274
Less current maturities, net of related costs	165,837			86,226
Long-term debt, net of current maturities and related costs	$	845,727		$	722,048

Weighted average fixed-interest rate	5.41		%	5.41		%
Weighted average variable-interest rate	3.25		%	3.16		%