SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172018
  
OR
oTRANSITION 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
algtheaderq417a02.jpg
Allegiant Travel Company
(Exact Name of Registrant as Specified in Its Charter)
Nevada20-4745737
(State or Other Jurisdiction of Incorporation or Organization)(IRS Employer Identification No.)
  
1201 North Town Center Drive 
Las Vegas, Nevada89144
(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, 2017August 1, 2018 was 16,077,909.16,163,533.


Allegiant Travel Company
Form 10-Q
Table of Contents

PART I.FINANCIAL INFORMATION 
   
ITEM 1.
   
ITEM 2.
   
ITEM 3.
   
ITEM 4.
   
PART II.OTHER INFORMATION 
   
ITEM 1.
   
ITEM 1A.
   
ITEM 2.
   
ITEM 3.
   
ITEM 4.
   
ITEM 5.
   
ITEM 6.
   
 


PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ALLEGIANT TRAVEL COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)

September 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
(unaudited)  (unaudited)  
CURRENT ASSETS:   
CURRENT ASSETS   
Cash and cash equivalents$74,023
 $64,711
$28,981
 $59,449
Restricted cash17,335
 11,647
13,253
 11,190
Short-term investments351,519
 269,269
343,180
 352,681
Accounts receivable22,780
 40,667
24,184
 71,057
Expendable parts, supplies and fuel, net20,444
 16,797
20,419
 17,647
Prepaid expenses25,102
 16,277
34,447
 23,931
Other current assets6,771
 2,686
829
 5,320
TOTAL CURRENT ASSETS517,974
 422,054
465,293
 541,275
Property and equipment, net1,331,798
 1,095,314
1,746,707
 1,512,415
Long-term investments76,913
 124,834
56,358
 78,570
Deferred major maintenance, net27,551
 17,347
36,957
 31,326
Deposits and other assets11,736
 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 liabilities84,210
 96,661
124,326
 105,127
Air traffic liability224,554
 194,001
236,932
 204,299
Current maturities of notes payable, net of related costs165,837
 86,226
Current maturities of long-term debt and capital lease obligations, net of related costs144,392
 214,761
TOTAL CURRENT LIABILITIES493,848
 392,898
533,123
 544,295
Long-term debt, net of current maturities and related costs845,727
 722,048
Long-term debt and capital lease obligations, net of current maturities and related costs992,322
 950,131
Deferred income taxes140,050
 75,338
144,254
 119,013
Other noncurrent liabilities12,521
 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 $.00123
 22
23
 23
Treasury stock(606,918) (517,803)(607,025) (605,655)
Additional paid in capital251,032
 238,236
263,034
 253,840
Accumulated other comprehensive loss, net(1,645) (230)(2,473) (2,840)
Retained earnings831,334
 753,397
991,109
 907,943
TOTAL EQUITY473,826
 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 20162018 2017 2018 2017
OPERATING REVENUE:              
Scheduled service revenue$183,064
 $177,361
 $615,777
 $568,089
Ancillary revenue:       
Air-related charges130,818
 127,301
 407,789
 376,944
Passenger revenue$405,572
 $367,250
 $802,343
 $715,086
Third party products12,348
 11,259
 39,394
 34,482
17,799

14,304
 28,124
 27,046
Total ancillary revenue143,166
 138,560
 447,183
 411,426
Fixed fee contract revenue11,831
 9,183
 34,120
 22,690
7,653
 11,029
 18,209
 22,289
Other revenue10,708
 8,377
 28,140
 24,743
5,756
 9,261
 13,548
 17,434
Total operating revenue348,769
 333,481
 1,125,220
 1,026,948
436,780
 401,844
 862,224
 781,855
OPERATING EXPENSES:              
Aircraft fuel80,421
 69,305
 250,470
 182,969
122,454
 85,387
 228,481
 170,049
Salary and benefits88,788
 73,424
 277,307
 211,185
101,645
 92,221
 214,608
 188,519
Station operations37,148
 32,252
 107,979
 96,313
41,553
 38,998
 79,137
 70,830
Maintenance and repairs28,870
 26,263
 87,611
 82,016
24,611
 28,645
 43,881
 58,740
Depreciation and amortization31,894
 25,881
 92,571
 75,962
29,833
 30,129
 57,983
 60,678
Sales and marketing13,884
 5,650
 36,744
 16,774
18,348
 13,492
 37,426
 26,822
Aircraft lease rentals533
 472
 3,098
 924
75
 2,400
 96
 2,564
Other24,315
 23,394
 68,440
 58,363
24,039
 24,777
 46,422
 44,129
Total operating expenses305,853
 256,641
 924,220
 724,506
362,558
 316,049
 708,034
 622,331
OPERATING INCOME42,916
 76,840
 201,000
 302,442
74,222
 85,795
 154,190
 159,524
OTHER (INCOME) EXPENSE:              
Interest expense10,041
 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 expense8,187
 5,849
 21,885
 18,493
11,179
 6,921
 21,756
 13,698
INCOME BEFORE INCOME TAXES34,729
 70,991
 179,115
 283,949
63,043
 78,874
 132,434
 145,826
PROVISION FOR INCOME TAXES12,436
 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:              
Basic15,852
 16,389
 16,142
 16,493
15,939
 16,198
 15,898
 16,290
Diluted15,862
 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 20162018 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 tax230
 (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 20162018 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 amortization92,571
 75,962
57,983
 60,678
Loss on aircraft and other equipment disposals6,619
 3,510
(Gain) loss on aircraft and other equipment disposals(1,491) 4,901
Provision for obsolescence of expendable parts, supplies and fuel2,900
 1,803
493
 1,753
Amortization of deferred financing costs1,059
 1,154
744
 775
Share-based compensation expense10,847
 4,342
6,106
 7,249
Deferred income taxes64,296
 2,336
25,241
 52,153
Changes in certain assets and liabilities:      
(Increase) decrease in accounts receivable17,709
 (9,957)
(Increase) decrease in prepaid expenses(8,825) 3,147
Increase (decrease) in accounts payable3,671
 4,220
Increase (decrease) in accrued liabilities(11,183) 23,083
Increase (decrease) in air traffic liability30,553
 22,391
(Increase) in deferred major maintenance(14,779) (4,365)
Decrease in accounts receivable46,873
 16,572
Increase in prepaid expenses(10,516) (9,476)
Increase in accounts payable7,631
 2,263
Increase in accrued liabilities20,859
 10,382
Increase in air traffic liability32,633
 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 activities296,394
 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 securities239,920
 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 activities1,338
 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 debt292,540
 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 activities79,202
 (62,484)
Net change in cash and cash equivalents9,312
 (38,394)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD64,711
 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 PERIOD70,639
 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 cash13,253
 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 Companystandard 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 expenseexpenses 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 onCompany 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) Adjustments Adjustments
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)  ReportedAdjustments   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 charges167,630
 145,887
 322,347
 279,111
Co-brand redemptions2,196
 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 awarded6,898
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, 2016As 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 software119,658
 101,850
131,661
 123,675
Other property and equipment101,121
 81,786
151,802
 125,855
Total property and equipment1,855,614
 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 2027546,037
 342,526
Total long-term debt, net of related costs1,011,564
 808,274
Less current maturities, net of related costs165,837
 86,226
Long-term debt, net of current maturities and related costs$845,727
 $722,048
    
Weighted average fixed-interest rate5.41% 5.41%
Weighted average variable-interest rate3.25% 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 2027559,262
 699,430
Total long-term debt and capital lease obligations, net of related costs1,136,714
 1,164,892
Less current maturities, net of related costs144,392
 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 debt5.4% 5.4%
Weighted average variable-interest rate on debt4.0% 3.3%

Maturities of long-term debt and capital lease obligations for the remainder of 20172018 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 ninesix months of 2017,ended June 30, 2018, the Company borrowed $236.5$10.8 million under a loan agreementsagreement secured by 12 Airbus A320 series aircraft.various ground equipment. The notes bear interest at a floatingfixed rate based on LIBOR plus a weighted average margin of 1.624.2 percent and areper 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 thisa senior secured revolving credit facility under which it is ablewas 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 originalhas 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 extendedno 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 facilityprincipal 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 individualthe trailing 12 months.



Capital Leases

The Company has capital lease obligations related to aircraft, may remainwhich 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, 2016As of June 30, 2018 As of December 31, 2017
Total Level 1 Level 2 Total Level 1 Level 2Total Level 1 Level 2 Total Level 1 Level 2
Cash equivalents                      
Commercial paper$9,952
 $
 $9,952
 $27,910
 $
 $27,910
Municipal debt securities5,325
 
 5,325
 2,782
 
 2,782
Money market funds$21,112
 $21,112
 $
 $123
 $123
 $
115
 115
 
 1,297
 1,297
 
US Treasury Bonds4,550
 
 4,550
 
 
 
Commercial paper3,594
 
 3,594
 
 
 
Federal agency debt securities
 
 
 19,399
 
 19,399
Municipal debt securities
 
 
 1,843
 
 1,843
Total cash equivalents29,256
 21,112
 8,144
 21,365
 123
 21,242
15,392
 115
 15,277
 31,989
 1,297
 30,692
Short-term 
  
    
  
  
 
  
    
  
  
Commercial paper141,091
 
 141,091
 108,678
 
 108,678
Corporate debt securities116,804
 
 116,804
 107,878
 
 107,878
Municipal debt securities152,369
 
 152,369
 78,826
 
 78,826
53,143
 
 53,143
 101,290
 
 101,290
Corporate debt securities84,667
 
 84,667
 76,570
 
 76,570
Commercial paper83,051
 
 83,051
 108,372
 
 108,372
Federal agency debt securities28,432
 
 28,432
 3,895
 
 3,895
30,718
 
 30,718
 31,428
 
 31,428
US Treasury Bonds3,000
 
 3,000
 1,606
 
 1,606
1,424
 
 1,424
 3,407
 
 3,407
Total short-term351,519
 
 351,519
 269,269
 
 269,269
343,180
 
 343,180
 352,681
 
 352,681
Long-term 
  
  
  
  
  
 
  
  
  
  
  
Corporate debt securities71,142
 
 71,142
 25,048
 
 25,048
43,363
 
 43,363
 60,396
 
 60,396
Federal agency debt securities5,771
 
 5,771
 24,160
 
 24,160
10,022
 
 10,022
 5,775
 
 5,775
US Treasury Bonds2,973
 
 2,973
 2,994
 
 2,994
Derivative instruments475
 
 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-term77,388
 
 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 remainingRemaining debt agreements areis not publicly held. Theheld, 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 LevelCarrying 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 debt565,512
 526,955
 360,999
 340,866
 3589,357
 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 20162018 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 ninesix months ended SeptemberJune 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 ninesix months ended SeptemberJune 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 20162018 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 outstanding15,852
 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 outstanding15,852
 16,389
 16,142
 16,493
15,939
 16,198
 15,898
 16,290
Dilutive effect of stock options and restricted stock18
 26
 60
 34
44
 71
 63
 92
Adjusted weighted-average shares outstanding under treasury stock method15,870
 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 method15,862
 16,406
 16,160
 16,514
15,945
 16,220
 15,914
 16,317

For the three and ninesix months ended SeptemberJune 30, 2017,2018, anti-dilutive shares excluded from the calculation of earnings per share were 129,9891,379 and 51,439 (shares not607 shares (not in thousands), respectively.


Note 8 — Commitments and Contingencies

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

Aircraft TypeNumber of Aircraft Under Contract
Airbus A3193
Airbus A32017

11 Airbus A320 aircraft. In addition, the Company has entered into lease agreements for an additional 13 Airbus A320 aircraft, expectedthree 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 fourthin 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 SeptemberJune 30, 20172018 (in thousands):

As of September 30, 2017As of June 30, 2018
Remaining in 2017$141,093
2018140,702
Remaining in 2018$79,148
2019113,873
123,164
202076,016
67,422
202134,723
26,288
202223,569
Thereafter231,358
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

TheDuring 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 ninethree and six months ended SeptemberJune 30, 2017, and 2016, the Company made payments to these entities of $0.2 million and $1.4 million, respectively, and nomillion. No further payments are expected.

Note 10 — Subsequent Events

In October 2017,July 2018, the Company received fundingdrew down $46.9 million under loan agreementsits senior secured by two Airbus A320 aircraftrevolving credit facility. The notes for $68.0 million, executed in September 2017. The notesthe amounts borrowed under the facility bear interest at a floating rate based on LIBOR plusand are due on March 31, 2020.

Also in July 2018, the Company also borrowed $34.5 million under a margin of 1.45 percentloan agreement secured by one Airbus A320 series aircraft. The note bears interest at a floating rate based on LIBOR and arewill 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 ninesix months ended SeptemberJune 30, 20172018 and 2016.2017. Also discussed is our financial position as of SeptemberJune 30, 20172018 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.

THIRDSECOND QUARTER REVIEW

Highlights:

Added six10 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, 2016June 30, 2018 December 31, 2017 June 30, 2017
MD-8040
 47
 48
27
 37
 45
B757-2002
 4
 4

 
 2
A319 (1)21
 17
 15
31
 22
 20
A320(2)26
 16
 16
35
 30
 21
Total89
 84
 83
93
 89
 88
(1) Excludes 12Does not include six A319 aircraft on lease to a European carrier untilas 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 SeptemberJune 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 eight10 of these aircraft in the last quarter of 20172018 and the remaining aircraft in 2018 through2019 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, 2018As of September 30, 2018 As of December 31, 2018
MD-8037
 
19
 
B757-200
 
A31922
 32
31
 32
A32029
 50
44
 45
Total88
 82
94
 77

NETWORK

OurAs of June 30, 2018, we were operating network413 routes verses 382 as of September 30, 2017the same date last year, which represents a 10.7an 8.1 percent increase in the number of routes flown compared to September 30, 2016.increase. Our total numbernumbers of under-servedorigination cities and leisure destinations were 9997 and 2021 as of SeptemberJune 30, 2017, compared2018.

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 withAs our fleet transition to an all-Airbus fleet,continues, we added six10 Airbus A320 series aircraft to our operating fleet during the thirdsecond quarter 2017.of 2018. Airbus aircraft flew 62.676.8 percent of our systemscheduled service ASMs for the quarter, and wecompared 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 four11 more Airbus A320 series aircraft to be placed in service by the end of 2017.

We2018 and to have fully retired fivethe 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 board2018.

Although the number of directors approved aaircraft 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 theyear 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 comparedunusual and beyond our ability to 90 aseffectively 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 dateintegrity 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 routesbeen 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 quartersecond 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 earlyplanned for 2020.

Incremental expense related to the collective bargaining agreement reached withOur 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 remains40 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 agreementsagreement with theseany employee groupsgroup 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 SeptemberJune 30, 20172018 to three months ended SeptemberJune 30, 20162017

Operating Revenue

Scheduled servicePassenger revenue. ScheduledPassenger revenue now includes both scheduled service revenue forand air-related ancillary revenue, due to the thirdimplementation of the New Revenue Standard. For the second quarter 20172018, passenger revenue increased 3.210.4 percent compared to 2016.2017. The increase was driven primarily by a 3.210.1 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 chargesThird party product revenue for the thirdsecond quarter 20172018 increased 2.824.4 percent overall compared to 2016,2017, due mostlyprimarily to thean 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 thirdsecond 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 mostlyhad 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, PercentThree Months Ended June 30, Percent
2017 2016 Change2018 2017 Change
Aircraft fuel$26.41
 $23.58
 12.0%$33.06
 $25.83
 28.0 %
Salary and benefits29.15
 24.98
 16.7
27.44
 27.89
 (1.6)
Station operations12.20
 10.97
 11.2
11.22
 11.80
 (4.9)
Maintenance and repairs9.48
 8.94
 6.0
6.64
 8.66
 (23.3)
Depreciation and amortization10.47
 8.81
 18.8
8.05
 9.11
 (11.6)
Sales and marketing4.56
 1.92
 137.5
4.95
 4.08
 21.3
Aircraft lease rentals0.18
 0.16
 12.5
0.02
 0.73
 (97.3)
Other7.97
 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 benefits2.76
 2.35
 17.4
Station operations1.15
 1.03
 11.7
Maintenance and repairs0.90
 0.84
 7.1
Depreciation and amortization0.99
 0.83
 19.3
Sales and marketing0.43
 0.18
 138.9
Aircraft lease rentals0.02
 0.02
 
Other0.75
 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 benefits2.59
 2.57
 0.8
Station operations1.06
 1.09
 (2.8)
Maintenance and repairs0.63
 0.80
 (21.3)
Depreciation and amortization0.76
 0.84
 (9.5)
Sales and marketing0.47
 0.38
 23.7
Aircraft lease rentals
 0.07
 (100.0)
Other0.61
 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 thirdsecond quarter 20172018 compared to 20162017 as the system average fuel cost per gallon increased by 15.3 percent. Fuel consumption remained relatively flat on39.2 percent, coupled with a 3.23.3 percent increase in system ASMsfuel 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 percent5.8 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 20.910.2 percent, for the thirdsecond quarter 20172018 when compared to the same period last year. The increase is largely attributable to $9.8 milliona 5.8 percent increase in incremental expense related tofull-time equivalent employees. Additionally, in conjunction with the collective bargaining agreement with our pilots, whichflight attendants that went into effect in August 2016, as well as costs associated with a 12.7December 2017, flight attendant total salaries expense increased an average of 25 percent increase in the number of full-time equivalent employees neededcompared to support additional operating aircraft and the transition to a single fleet type.2017.

Station operations expense. Station operations expense for the thirdsecond quarter 20172018 increased 15.26.6 percent on a 5.410.1 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 thirdsecond quarter 2017 increased 9.92018 decreased $4.0 million, or 14.1 percent, compared to the same period in 2016 which2017. The year-over-year decrease is partiallylargely due to a 6.8 percent increase infewer heavy maintenance events performed on our MD-80 aircraft, as they are being systematically retired from our operating fleet. Additionally, the average numbercost of aircraft in service. There was also an increase in expenses related to routinemajor maintenance in the current quarter, mostlyevents 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 possibleremained 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 alsorelated 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 aircraftfor this fleet was $15.7$19.8 million for the thirdsecond quarter 20172018 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 thirdsecond quarter 20172018 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 thirdsecond quarter 20172018 increased $8.2$4.9 million compared to the same period in 2016, mostly2017, 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, andresult of the net amount paid by us for credit card fees was reduced. We discontinued the charge for credit card fee reimbursement10.4 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 35.8was 20.7 percent for the three months ended SeptemberJune 30, 2017,2018, compared to 36.037.8 percent for the three months ended SeptemberJune 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 ninesix months ended SeptemberJune 30, 20172018 to ninesix months ended SeptemberJune 30, 20162017
 
Operating Revenue

Scheduled servicePassenger revenue. ScheduledPassenger revenue now includes both scheduled service revenue forand air-related ancillary revenue, due to the nineimplementation of the New Revenue Standard. For the six months ended SeptemberJune 30, 20172018, passenger revenue increased 8.412.2 percent compared with 2016.2017. The increase was mostly the result ofattributable to a 9.59.8 percent increase in scheduled service passengers offset bydepartures and a 1.01.9 percentage point increase in load factor, which resulted in 13.9 percent decrease inmore 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 thirdThird party products revenue. Ancillary thirdThird party products revenue for the ninesix months ended SeptemberJune 30, 20172018 increased $4.9 million4.0 percent over the same period in 20162017 primarily due to revenue generated from our co-branded credit card program. Thisan 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 duringAllegiant World Mastercard® co-brand credit card, whereby $3.6 million of the third quarter 2017. Overall, thererevenue related to the travel component was a 4.3 percent increase in ancillary third party revenue perreclassified into passenger year over year.revenue.

Fixed fee contract revenue. Fixed fee contract revenue for the ninesix months ended SeptemberJune 30, 2017 increased 50.42018 decreased 18.3 percent compared with 2016,2017. This was planned and expected due to increasedless availability of aircraft for charter flying during our fleet transition.

Other revenue. Other revenue decreased $3.9 million for both the Departmentsix 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 underthis 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, PercentSix Months Ended June 30, Percent
2017 2016 Change2018 2017 Change
Aircraft fuel*$27.13
 $21.76
 24.7 %
Aircraft fuel$32.61
 $27.48
 18.7 %
Salary and benefits30.03
 25.11
 19.6
30.63
 30.47
 0.5
Station operations11.69
 11.45
 2.1
11.29
 11.45
 (1.4)
Maintenance and repairs9.49
 9.75
 (2.7)6.26
 9.49
 (34.0)
Depreciation and amortization10.03
 9.03
 11.1
8.27
 9.81
 (15.7)
Sales and marketing3.98
 1.99
 100.0
5.34
 4.33
 23.3
Aircraft lease rentals0.34
 0.11
 209.1
0.01
 0.41
 (97.6)
Other7.41
 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 benefits2.72
 2.27
 19.8
Station operations1.06
 1.04
 1.9
Maintenance and repairs0.86
 0.88
 (2.3)
Depreciation and amortization0.91
 0.82
 11.0
Sales and marketing0.36
 0.18
 100.0
Aircraft lease rentals0.03
 0.01
 200.0
Other0.68
 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 benefits2.81
 2.71
 3.7
Station operations1.03
 1.02
 1.0
Maintenance and repairs0.57
 0.84
 (32.1)
Depreciation and amortization0.76
 0.87
 (12.6)
Sales and marketing0.49
 0.39
 25.6
Aircraft lease rentals
 0.04
 (100.0)
Other0.60
 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 ninesix months ended SeptemberJune 30, 20172018 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 and2017 as the system average fuel cost per gallon would have increased by 21.1 percent. Additionally, there was an 8.629.5 percent, coupled with a 3.6 percent increase in system fuel gallons consumed due to anon a 9.9 percent increase in total system capacity of 9.5 percent.ASMs. ASM growth outpaced fuel consumption as averagefuel efficiency (measured as ASMs per gallongallon) increased 0.86.1 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 ninesix months ended SeptemberJune 30, 20172018 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 12.75.8 percent increase in the number of full-time equivalent employees needed to support additional operating aircraft andemployees. Additionally, in conjunction with the transition to a single fleet type. Additionally, stock compensationcollective 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 ninesix months ended SeptemberJune 30, 20172018 increased 12.111.7 percent on a 13.09.8 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 ninesix months ended SeptemberJune 30, 2017 increased 6.82018 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 increasefewer 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 numberaccordance with the deferral method of aircraft in service as well as incrementalaccounting and the amortization of these expenses related to parts repairsis included under depreciation and routine maintenance.amortization expense.
Depreciation and amortization expense. Depreciation and amortization expense for the ninesix months ended SeptemberJune 30, 2017 increased2018 decreased by 21.94.4 percent compared to the same period in 2016,2017, partially relateddue to a 3.8 percent increase in average number ofthe 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 declinedand 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 $16.4add Airbus aircraft into service. Depreciation expense for this fleet was $38.0 million for the ninesix months ended SeptemberJune 30, 20172018 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 ninesix months ended SeptemberJune 30, 20172018 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 ninesix months ended SeptemberJune 30, 20172018 increased $20.0$10.6 million compared to the same period in 2016, mostly2017, 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 reimbursementresult 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 ninesix months ended SeptemberJune 30, 2017 increased $2.22018 decreased $2.5 million compared to the same period in 20162017 due to additional subservicefewer 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 ninesix months ended SeptemberJune 30, 20172018 increased $10.1$2.3 million compared to 2016.2017. The increase is partiallyprimarily 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 2017information technology expenses, as well as other administrative expenses incurred to support our fleet transitionairline operations and network growth also increased year over year.golf course management business.

Income Tax Expense

Our effective tax rate remained flat at 37.2was 20.6 percent for each of the ninesix months ended SeptemberJune 30, 2017 and 2016.2018, compared to 37.3 percent for the six months ended June 30, 2017. The effective tax rate for the ninesix months ended SeptemberJune 30, 20172018 differed from the statutory federal income tax rate of 35.021.0 percent primarily due to executive compensation deduction limitations as well asthe 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, PercentThree Months Ended June 30, Percent
2017 2016 Change*2018 2017 Change (1)
Operating statistics (unaudited):          
Total system statistics:          
Passengers3,045,642
 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 factor83.0% 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 fuel72.6
 70.6
 2.8
76.1
 71.9
 5.8
Departures22,723
 21,384
 6.3
27,063
 24,721
 9.5
Block hours49,932
 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 period89.7
 84.0
 6.8
92.0
 85.3
 7.9
Average block hours per aircraft per day6.1
 6.2
 (1.6)7.3
 7.2
 1.4
Full-time equivalent employees at end of period3,704
 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:          
Passengers2,998,476
 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 factor85.2% 86.9% (1.7)85.5% 84.5% 1.0
Departures21,498
 20,398
 5.4
25,992
 23,609
 10.1
Block hours47,481
 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 sold404,355
 391,010
 3.4
Hotel room nights sold93,484
 107,910
 (13.4)
Percent of sales through website during period93.3% 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, PercentSix Months Ended June 30, Percent
2017 2016 Change*2018 2017 Change (1)
Operating statistics (unaudited):          
Total system statistics:          
Passengers9,233,083
 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 factor81.9% 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 fuel72.2
 71.6
 0.8
76.4
 72.0
 6.1
Departures69,739
 61,271
 13.8
51,311
 47,016
 9.1
Block hours159,181
 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 period86.6
 83.4
 3.8
90.8
 85.0
 6.8
Average block hours per aircraft per day6.7
 6.2
 8.1
7.2
 7.1
 1.4
Full-time equivalent employees at end of period3,704
 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:          
Passengers9,110,745
 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 factor84.0% 86.0% (2.0)85.3% 83.4% 1.9
Departures66,355
 58,744
 13.0
49,256
 44,857
 9.8
Block hours151,988
 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 sold802,942
 766,721
 4.7
Hotel room nights sold202,468
 213,238
 (5.1)
Percent of sales through website during period94.1% 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.
**(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.
*** Includes effect(3) Reflects division of $8.3 million fuel tax refundspassenger 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) increaseddecreased from $470.5$501.9 million at December 31, 20162017 to $519.8$441.8 million at SeptemberJune 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 ninesix 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. Weobligations. 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, increaseddecreased from $813.2 million$1.2 billion as of December 31, 20162017 to $1,017.0 million$1.1 billion as of SeptemberJune 30, 20172018 as we borrowed additional fundspaid off our senior secured by aircraft, whilerevolving 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 thirdsecond quarter 2017of 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 ninesix months ended SeptemberJune 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 decreaseincrease 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 inadjustments 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 ninesix months ended SeptemberJune 30, 20172018 compared to $284.0$269.5 million for the same period in 2016.2017. The year-over-year increasedecrease is mostly due primarily to $333.7 million in property and equipment purchases during the first nine monthsinvestment security activity, as cash proceeds from maturities of 2017 compared to $264.1investment securities (net of purchases) were $30.4 million in the same periodfirst half of 2016. Additionally, our net2018 compared to cash used to purchase investment securities (net of proceeds from maturities) was $33.9 million during the first nine monthsproceeds) 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 fromused in financing activities for the ninesix months ended SeptemberJune 30, 2017 exceeded cash used by $79.22018 was $153.1 million while cash used exceeded cash proceeds by $62.5compared to $38.3 million for the same period in 2016. Proceeds from the issuance of debt net of2017. The year-over-year increase is primarily due to an increase in principal payments were $204.5on long-term debt and capital lease obligations, as we paid $142.4 million in 2017debt and $56.9capital lease payments in the first half of 2018 compared to $64.9 million infor the same period of 2016. Duringin 2017. Our debt payments in the first ninehalf 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 ($27.7and $86.2 million of which was a special dividend declared in December 2015) inopen 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 descriptionExcept 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-Krecognized 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 27.132.3 percent of our operating expenses for the ninesix months ended SeptemberJune 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 ninesix months ended SeptemberJune 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 ninesix months ended SeptemberJune 30, 20172018 would have affectedimpacted interest income from cash and investment securities by approximately $2.6$2.3 million.

As of SeptemberJune 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 ninesix months ended SeptemberJune 30, 2017,2018, would have affected interest expense by approximately $3.4$3.2 million.

As of SeptemberJune 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-ratefixed 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 SeptemberJune 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 thisthat evaluation, management, including our managementCEO 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 controlsforms 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 SeptemberJune 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 followingthere are no changes to thosethe risk factors set forth in Part I, Item 1A in the Form 10-K since we filedof 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 thirdsecond 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
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Labels Linkbase Document
101.PREXBRL 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, 2017August 3, 2018By:/s/ Scott Sheldon
  Scott Sheldon, as duly authorized officer of the Company (Chief Financial Officer) and as Principal Financial Officer

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