SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ~~June 30, 2018~~March 31, 2019

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

For the transition period from to

Commission File Number 001-33166

Allegiant Travel Company

(Exact Name of Registrant as Specified in Its Charter)



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

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

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

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

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

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



Large accelerated filer x	Accelerated filer o

Non-accelerated filer o	Smaller reporting company o

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

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

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

The number of shares of the registrant’s common stock outstanding as of the close of business on ~~August 1, 2018~~April 30, 2019 was ~~16,163,533.~~16,286,963.

Allegiant Travel Company

Form 10-Q

Table of Contents



PART I.	FINANCIAL INFORMATION

ITEM 1.	Consolidated Financial Statements	3

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1718

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	2825

ITEM 4.	Controls and Procedures	2926

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	2926

ITEM 1A.	Risk Factors	2926

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3027

ITEM 3.	Defaults Upon Senior Securities	3027

ITEM 4.	Mine Safety Disclosures	3027

ITEM 5.	Other Information	3027

ITEM 6.	Exhibits	3128

	Signatures	3229

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands)


	June 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(unaudited)						(unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	28,981		$	59,449		$	243,282		$	81,520
Restricted cash	13,253			11,190			14,496			14,391
Short-term investments	343,180			352,681			286,955			314,464
Accounts receivable	24,184			71,057			34,209			36,014
Expendable parts, supplies and fuel, net	20,419			17,647			19,527			19,516
Prepaid expenses	34,447			23,931
Other current assets	829			5,320
Prepaid expenses and other current assets							35,477			29,343
TOTAL CURRENT ASSETS	465,293			541,275			633,946			495,248
Property and equipment, net	1,746,707			1,512,415			1,940,480			1,847,268
Long-term investments	56,358			78,570			24,605			51,526
Deferred major maintenance, net	36,957			31,326			83,869			67,873
Operating lease right-of-use assets, net							22,788			—
Deposits and other assets	20,190			16,571			44,789			36,753
TOTAL ASSETS:	$	2,325,505		$	2,180,157		$	2,750,477		$	2,498,668
CURRENT LIABILITIES
Accounts payable	$	27,473		$	20,108		$	28,690		$	27,452
Accrued liabilities	124,326			105,127			136,075			122,027
Air traffic liability	236,932			204,299			276,241			212,230
Current maturities of long-term debt and capital lease obligations, net of related costs	144,392			214,761
Current maturities of long-term debt and finance lease obligations, net of related costs							154,027			152,287
TOTAL CURRENT LIABILITIES	533,123			544,295			595,033			513,996
Long-term debt and capital lease obligations, net of current maturities and related costs	992,322			950,131
Long-term debt and finance lease obligations, net of current maturities and related costs							1,203,709			1,119,446
Deferred income taxes	144,254			119,013			180,136			164,027
Other noncurrent liabilities	11,138			13,407			33,145			10,878
TOTAL LIABILITIES:	1,680,837			1,626,846			2,012,023			1,808,347
SHAREHOLDERS' EQUITY
Common stock, par value $.001	23			23			23			23
Treasury stock	(607,025		)	(605,655		)	(607,316		)	(605,037		)
Additional paid in capital	263,034			253,840			276,247			270,935
Accumulated other comprehensive loss, net	(2,473		)	(2,840		)	(190		)	(661		)
Retained earnings	991,109			907,943			1,069,690			1,025,061
TOTAL EQUITY:	644,668			553,311			738,454			690,321
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY:	$	2,325,505		$	2,180,157		$	2,750,477		$	2,498,668

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 June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
OPERATING REVENUE:
Passenger revenue	$	405,572		$	367,250		$	802,343		$	715,086
OPERATING REVENUES:
Passenger													$	419,977		$	396,771
Third party products	17,799			14,304			28,124			27,046			17,141			10,325
Fixed fee contract revenue	7,653			11,029			18,209			22,289
Other revenue	5,756			9,261			13,548			17,434
Total operating revenue	436,780			401,844			862,224			781,855
Fixed fee contracts													10,575			10,556
Other													3,929			7,792
Total operating revenues													451,622			425,444
OPERATING EXPENSES:
Salary and benefits													119,411			112,963
Aircraft fuel	122,454			85,387			228,481			170,049			99,682			106,027
Salary and benefits	101,645			92,221			214,608			188,519
Station operations	41,553			38,998			79,137			70,830			38,965			37,584
Maintenance and repairs	24,611			28,645			43,881			58,740			22,824			19,270
Depreciation and amortization	29,833			30,129			57,983			60,678			36,182			28,149
Sales and marketing	18,348			13,492			37,426			26,822			20,926			19,078
Aircraft lease rentals	75			2,400			96			2,564
Other	24,039			24,777			46,422			44,129			22,554			22,405
Total operating expenses	362,558			316,049			708,034			622,331			360,544			345,476
OPERATING INCOME	74,222			85,795			154,190			159,524			91,078			79,968
OTHER (INCOME) EXPENSE:
OTHER (INCOME) EXPENSES:
Interest expense	13,156			8,889			25,880			17,291			18,083			12,908
Capitalized interest													(1,503		)	(184		)
Interest income	(1,927		)	(1,475		)	(3,834		)	(2,739		)	(3,201		)	(1,907		)
Loss on debt extinguishment													3,677			—
Other, net	(50		)	(493		)	(290		)	(854		)	103			(240		)
Total other expense	11,179			6,921			21,756			13,698
Total other expenses													17,159			10,577
INCOME BEFORE INCOME TAXES	63,043			78,874			132,434			145,826			73,919			69,391
PROVISION FOR INCOME TAXES	13,027			29,836			27,225			54,437			16,795			14,198
NET INCOME	$	50,016		$	49,038		$	105,209		$	91,389		$	57,124		$	55,193
Earnings per share to common shareholders:
Basic	$	3.10		$	2.98		$	6.53		$	5.52		$	3.52		$	3.43
Diluted	$	3.10		$	2.97		$	6.52		$	5.51		$	3.52		$	3.42
Shares used for computation:
Basic	15,939			16,198			15,898			16,290			16,011			15,889
Diluted	15,945			16,220			15,914			16,317			16,013			15,898

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

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 June 30,					Six Months Ended June 30,						Three Months Ended March 31,
	2018		2017			2018			2017			2019			2018
Net income	$	50,016	$	49,038		$	105,209		$	91,389
NET INCOME												$	57,124		$	55,193
Other comprehensive income (loss):
Change in available for sale securities, net of tax	113		(2		)	(843		)	222			477			(956		)
Foreign currency translation adjustments	113		(215		)	214			(298		)	(6		)	101
Change in derivatives, net of tax	1,260		(581		)	996			(1,085		)	—			(264		)
Total other comprehensive income (loss)	1,486		(798		)	367			(1,161		)	471			(1,119		)
TOTAL COMPREHENSIVE INCOME	$	51,502	$	48,240		$	105,576		$	90,228		$	57,595		$	54,074

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

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)



							Accumulated
	Common				Additional		other									Total
	stock		Par		paid-in		comprehensive			Retained			Treasury			shareholders'
	outstanding		value		capital		income (loss)			earnings			shares			equity
Balance at December 31, 2018	16,183		$	23	$	270,935	$	(661	)	$	1,025,061		$	(605,037	)	$	690,321
Share-based compensation	118		—		5,312		—			—			—			5,312
Shares repurchased by the Company and held as treasury shares	(17	)	—		—		—			—			(2,279		)	(2,279		)
Cash dividends declared, $0.70 per share	—		—		—		—			(11,394		)	—			(11,394		)
Other comprehensive income (loss)	—		—		—		471			(551		)	—			(80		)
Net income	—		—		—		—			57,124			—			57,124
Cumulative effect of the New Lease Standard (see Note 5)	—		—		—		—			(550		)	—			(550		)
Balance at March 31, 2019	16,284		$	23	$	276,247	$	(190	)	$	1,069,690		$	(607,316	)	$	738,454



							Accumulated
	Common				Additional		other									Total
	stock		Par		paid-in		comprehensive			Retained			Treasury			shareholders'
	outstanding		value		capital		income (loss)			earnings			shares			equity
Balance at December 31, 2017	16,066		$	23	$	253,840	$	(2,840	)	$	907,943		$	(605,655	)	$	553,311
Share-based compensation	98		—		5,385		—			—			—			5,385
Shares repurchased by the Company and held as treasury shares	(13	)	—		—		—			—			(2,233		)	(2,233		)
Cash dividends declared, $0.70 per share	—		—		—		—			(11,295		)	—			(11,295		)
Other comprehensive income (loss)	—		—		—		(1,119		)	562			—			(557		)
Net income	—		—		—		—			55,193			—			55,193
Balance at March 31, 2018	16,151		$	23	$	259,225	$	(3,959	)	$	952,403		$	(607,888	)	$	599,804

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

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2019			2018
OPERATING ACTIVITIES:
Net income	$	105,209		$	91,389		$	57,124		$	55,193
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	57,983			60,678			36,182			28,149
(Gain) loss on aircraft and other equipment disposals	(1,491		)	4,901
Provision for obsolescence of expendable parts, supplies and fuel	493			1,753
Amortization of deferred financing costs	744			775
Gain on aircraft and other equipment disposals							(6,696		)	(132		)
Share-based compensation expense	6,106			7,249			4,538			3,796
Deferred income taxes	25,241			52,153			16,103			12,735
Other adjustments							4,971			1,080
Changes in certain assets and liabilities:
Decrease in accounts receivable	46,873			16,572
Increase in prepaid expenses	(10,516		)	(9,476		)
Increase in accounts payable	7,631			2,263
Increase in accrued liabilities	20,859			10,382
Increase in air traffic liability	32,633			42,394
Change in deferred major maintenance	(7,841		)	(14,331		)
Other, net	(689		)	(3,782		)
Accounts receivable							1,805			6,713
Prepaid expenses							(5,988		)	(4,439		)
Accounts payable							(368		)	9,959
Accrued liabilities							7,877			14,267
Air traffic liability							64,011			52,474
Deferred major maintenance							(18,376		)	(4,476		)
Other assets/liabilities							(1,086		)	(2,392		)
Net cash provided by operating activities	283,235			262,920			160,097			172,927
INVESTING ACTIVITIES:
Purchase of investment securities	(168,923		)	(242,895		)	(68,447		)	(93,933		)
Proceeds from maturities of investment securities	199,294			154,334			124,472			97,224
Aircraft pre-delivery deposits	—			(63,468		)
Purchase of property and equipment, including capitalized interest	(187,456		)	(118,846		)	(122,551		)	(69,167		)
Other investing activities	(1,468		)	1,352			6,973			521
Net cash used in investing activities	(158,553		)	(269,523		)	(59,553		)	(65,355		)
FINANCING ACTIVITIES:
Cash dividends paid to shareholders	(22,605		)	(23,204		)	(11,394		)	(11,295		)
Proceeds from the issuance of debt	10,797			134,540			494,000			—
Repurchase of common stock	(2,994		)	(84,940		)
Principal payments on debt and capital lease obligations	(142,399		)	(64,876		)
Principal payments on debt and finance lease obligations							(386,329		)	(102,914		)
Debt issuance costs							(30,060		)	(176		)
Other financing activities	4,114			188			(4,894		)	(679		)
Net cash used in financing activities	(153,087		)	(38,292		)
Net cash provided by (used in) financing activities							61,323			(115,064		)
Net change in cash, cash equivalents, and restricted cash	(28,405		)	(44,895		)	161,867			(7,492		)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD	70,639			76,358			95,911			70,639
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	42,234		$	31,463		$	257,778		$	63,147

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAYMENTS FOR:
CASH PAYMENTS (RECEIPTS) FOR:
Interest paid, net of amount capitalized	$	24,370		$	16,001		$	20,924		$	17,902
Income taxes paid, net of (refunds)	$	(41,284	)	$	(13,967	)
Income tax (refunds)/payments							$	(4,490	)	$	37
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Property capitalized under operating leases							$	23,320		$	—
Flight equipment acquired under finance leases							$	—		$	77,162

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

As of June 30,
2018 2017
CURRENT ASSETS:

Cash and cash equivalents $ 28,981
$ 20,040
Restricted cash 13,253
11,423
TOTAL CASH, CASH EQUIVALENTS, AND RESTRICTED CASH $ 42,234
$ 31,463

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

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Allegiant Travel Company (the “Company”) and its majority-owned operating subsidiaries. The Company has no independent assets or operations, and all guarantees of the Company's publicly held debt are full and unconditional and joint and several. Any subsidiaries of the parent company other than the subsidiary guarantors are minor. The Company's investments in unconsolidated affiliates, which are 50 percent or less owned, are accounted for under the equity or cost method. 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, ~~2017~~2018 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

Recently Adopted Standards ~~Effective in Future Years~~

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, ~~related to leases.~~Leases (Topic 842), (the "New Lease Standard"). This standard ~~will require~~requires leases, ~~with durations greater~~other than ~~twelve months~~short-term, to be recognized on the balance sheet as a lease liability and a corresponding right-of-use ~~asset,~~asset.

Lease payments include fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties, and others as required by the standard. Lease payments do not include variable lease payments other than those that depend on an index or rate, any guarantee by the lessee of the lessor’s debt, or any amount allocated to non-lease components. This standard is effective for interim and annual reporting periods beginning after December 15, 2018 ~~with early adoption permitted. The~~and the Company ~~will adopt this standard effective~~adopted the New Lease Standard as of January 1, 2019. The Company ~~has~~also elected the package of practical expedients, which among other things, does not ~~completed the assessment~~require reassessment of this new standard and believes adoption will have a significant impact on its consolidated balance sheets but is not expected to significantly change the recognition, measurement or presentation of associated expenses within the consolidated statements of income or cash flows.lease classification.

~~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 Company adopted ~~this standard effective January 1, 2018.~~

~~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 earningsNew Lease Standard using the modified retrospective transition approach as of ~~June 30, 2018~~the effective date as ~~a result of this adoption.~~

~~In 2014,~~permitted by the ~~FASB issued~~amendments in ASU ~~No. 2014-09, Revenue from Contracts with Customers~~2018-11, "Targeted Improvements - Leases (Topic ~~606), (the "New Revenue Standard")~~842)." Under this ~~ASU and subsequently issued amendments, revenue~~method, the cumulative effect adjustment to the opening balance of retained earnings is recognized at the ~~time~~adoption date. As a ~~good~~result, the Company was not required to adjust its comparative period financial information for effects of the standard or ~~service is transferred to a customer~~make the new required lease disclosures for ~~the amount of consideration received. Entities may use a full retrospective approach or report the cumulative effect as of~~periods before the date of ~~adoption. The Company adopted this standard using the full retrospective transition method effective~~adoption on 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.2019.

The Company's consolidated balance sheet was affected by this standard, but the consolidated statement of income and liquidity were not significantly impacted. The most significant change to the consolidated balance sheet upon adoption ~~of the New Revenue Standard resulted in a net reduction~~on January 1, 2019 relates to ~~air traffic liability at December 31, 2017 of $5.9 million. This change resulted from~~ the recognition of ~~breakage revenue on issuance~~new right-of-use (ROU) assets of ~~credit vouchers that are expected to expire unused. In addition, recognition~~$18.0 million and operating liabilities of ~~revenues~~$19.1 million. The Company's accounting 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.finance leases remains substantially unchanged.

~~Bank of America has issued The Allegiant World Mastercard® in which points are earned and awarded to cardholders in exchange~~See Note 5, "Leases," 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.more information.

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

Passenger Revenue

Passenger revenue is the most significant category in our reported operating revenues. Passenger revenue is primarily composed of scheduled service revenue (includes passenger ticket sales and credit voucher ~~breakage,~~breakage), revenue from ancillary air-related charges (includes seat fees, baggage fees, and other travel-related services performed in conjunction with a passenger’s ~~flight,~~flight), as well as co-brand point redemptions, as outlined below:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March,
(in thousands)	2018		2017		2018		2017		2019		2018
Scheduled service	$	235,746	$	220,811	$	474,267	$	435,075	$	234,772	$	238,520
Air-related ancillary charges	167,630		145,887		322,347		279,111
Ancillary air-related charges									181,700		154,717
Co-brand redemptions	2,196		552		5,729		900		3,505		3,534
Total passenger revenue	$	405,572	$	367,250	$	802,343	$	715,086	$	419,977	$	396,771

~~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.~~occurs, to the extent different from estimated breakage.

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~~$175.7 million was recognized into passenger revenue during the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 that was recorded in the air traffic liability balance of ~~$204.3~~$212.2 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.2018.

Co-brand ~~redemption~~redemptions

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~~co-brand point ~~liabilities (in thousands):~~liability as of the dates indicated:

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



	Three Months Ended March,
(in thousands)	2019			2018
Balance at January 1	$	10,708		$	8,903
Points awarded (deferral of revenue)	4,164			3,233
Points redeemed (recognition of revenue)	(3,505		)	(3,534		)
Balance at March 31	$	11,367		$	8,602

As of ~~June 30,~~March 31, 2019 and March 31, 2018, ~~$6.9~~$8.9 million and $5.7 million, respectively, 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 June 30, 2018			As of December 31, 2017			As of March 31, 2019			As of December 31, 2018
Flight equipment, including pre-delivery deposits	$	1,785,184		$	1,539,433		$	2,002,777		$	1,905,157
Computer hardware and software	131,661			123,675			143,369			140,385
Land and buildings/leasehold improvements							85,925			85,925
Other property and equipment	151,802			125,855			106,159			89,778
Total property and equipment	2,068,647			1,788,963			2,338,230			2,221,245
Less accumulated depreciation and amortization	(321,940		)	(276,548		)	(397,750		)	(373,977		)
Property and equipment, net	$	1,746,707		$	1,512,415		$	1,940,480		$	1,847,268

Note 4 — Long-Term Debt

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

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

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



	As of March 31, 2019			As of December 31, 2018
Fixed-rate debt and finance lease obligations due through 2030 (1) (2)	$	325,353		$	640,806
Variable-rate debt due through 2028	1,032,383			630,927
Total long-term debt and finance lease obligations, net of related costs	1,357,736			1,271,733
Less current maturities, net of related costs (1)	154,027			152,287
Long-term debt and finance lease obligations, net of current maturities and related costs	$	1,203,709		$	1,119,446

Weighted average fixed-interest rate on debt	3.9		%	5.3		%
Weighted average variable-interest rate on debt	5.5		%	4.2		%

(1) As of March 31, 2019, and December 31, 2018, respectively, $80.1 million and $428.0 million of the Company's Unsecured Senior Notes were classified as long-term as management refinanced the borrowings on a long-term basis in February 2019, as discussed below.

(2) Includes finance lease obligations secured by five A320 series aircraft.

Maturities of long-term debt and ~~capital~~finance lease obligations for the remainder of ~~2018~~2019 and for the next ~~five~~four years and thereafter, in the aggregate, are: remaining in ~~2018 - $92.5 million;~~ 2019 - ~~$555.4~~$196.2 million; 2020 - ~~$103.5~~$124.0 million; 2021 - ~~$76.6~~$144.4 million; 2022 - ~~$49.2~~$70.1 million; 2023 - $57.2 million; and ~~$259.5~~$765.8 million thereafter.

~~Secured Debt~~Consolidated Variable Interest Entity

~~During~~The Company evaluates ownership, contractual lease arrangements and other interests in entities to determine if they are variable interest entities ("VIEs") based on the ~~six months ended June 30, 2018,~~nature and extent of those interests. These evaluations can be complex and involve judgment and the use of estimates and assumptions based on available historical information and management’s judgment, among other factors. The Company consolidates a VIE when, among other criteria, it has the power to direct the activities that most significantly impact the VIE’s economic performance as well as the obligation to absorb losses or the right to receive benefits of the VIE, thus making the Company ~~borrowed $10.8~~the primary beneficiary of the VIE.

In March 2019, the Company, through a wholly owned subsidiary, entered into agreements with a trust to borrow $44.0 million ~~under a loan agreement~~ secured by ~~various ground equipment.~~one Airbus A320 series aircraft. The ~~notes~~trust was funded on inception. These borrowings bear interest at a ~~fixed~~blended rate of ~~4.2~~3.8 percent, ~~per year,~~ payable in ~~monthly~~quarterly installments ~~over five years.~~through March 2029, at which time the Company will have a purchase option at a fixed amount. As this transaction is a common control transaction, the Company, as the primary beneficiary, has measured and recorded the assets and liabilities at their carrying values, which were $39.1 million and $44.0 million, respectively, at the time of borrowing.

Senior Secured Revolving Credit Facility

~~In 2015, the~~The Company ~~through a wholly owned subsidiary, entered into~~has a senior secured revolving credit facility under which it ~~was entitled~~is able to borrow up to ~~$56.0 million. In~~$81.0 million, and $46.9 million is outstanding as of March ~~2018, the Company paid off the balance of the facility and amended it to increase the borrowing limit to $81.0 million.~~31, 2019. The ~~amended~~ facility has a current term of 24 months and is based on the value of Airbus A320 ~~Series~~series aircraft ~~which the Company may choose to place~~placed in the collateral pool. ~~There was no balance under this facility~~Aircraft may remain in the collateral pool for up to two years, and, as of ~~June 30, 2018.~~March 31, 2019, there were nine aircraft in the collateral pool. The notes for the amounts borrowed under the facility bear interest at a floating rate based on LIBOR and are due on March 31, 2021.

~~See Note 10, "Subsequent Events,"~~Term Loan

In February 2019, the Company entered into a Credit and Guaranty Agreement (the “Term Loan”) to borrow $450.0 million, guaranteed by all of the Company's subsidiaries, excluding Sunseeker Resorts Inc. and its subsidiaries, and other insignificant subsidiaries (the "Term Loan Guarantors"). The Term Loan is secured by substantially all property and assets of the Company and the Term Loan Guarantors, excluding aircraft and aircraft engines, and excluding certain other assets. The Term Loan has a five-year term, bears interest based on LIBOR and provides for ~~more information on~~quarterly interest payments along with quarterly principal payments of $1.1 million through February 2024, at which time the ~~revolving credit facility.~~Term Loan is due. The Term Loan may be prepaid at any time without penalty.

In connection with the Term Loan, the Company conducted a tender offer for its 5.5 percent senior unsecured obligation, as outlined below.

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 $150.0 million principal amount of these notes, which were issued at a price of 101.5 percent of the principal amount, plus accrued interest from July 15, 2016. The Notes bear interest at a rate of 5.5 percent per year, payable in cash semi-annually, on January 15th and July 15th of each year.

In connection with the Term Loan discussed above, the Company completed a tender offer, whereby it purchased $347.9 million of the Notes, and incurred related debt extinguishment costs of $3.7 million. The indenture ~~pursuant to which~~governing 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 subsidiarieswas amended 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 termseliminate most of the ~~indenture. As~~restrictive covenants and certain events of ~~December 31, 2017~~default, reduce the minimum notice period required for redemptions of the Notes from 30 days as previously required by the indenture to three business days, and ~~June 30, 2018,~~amend certain other provisions applicable to the Notes. The $428.0 million net proceeds from the Term Loan have been, or will be, used to purchase the Notes. The Company ~~exceeded~~expects to call the ~~consolidated total leverage ratio limit, which could affect~~remaining balance of the ~~ability to make restricted payments~~Notes in ~~future periods after exhaustion~~advance 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 the trailing 12 months.their July 2019 maturity.

Construction Loan Agreement

~~Capital Leases~~In March 2019, Sunseeker Florida, Inc. (“SFI”), a wholly-owned subsidiary of the Company, entered into a Construction Loan Agreement with certain lenders affiliated with TPG Sixth Street Partners, LLC (the “Lender”). Under the Construction Loan Agreement, SFI may borrow up to $175.0 million (the “Loan”) to fund the construction of Phase 1 of Sunseeker Resort -Charlotte Harbor (the “Project”). No amount has been drawn under this agreement as of March 31, 2019.

Under the Construction Loan Agreement, the Lender is to provide the final $175.0 million of funding for the Project, with initial funding to come from the Company. The loan is secured by the Project and, for a period of time, the surrounding land owned by SFI. The Company has ~~capital lease obligations related~~guaranteed one-third of the debt, has agreed to ~~aircraft, which significantly impacted our recognized assets~~bear responsibility under a Non-Recourse Carve-Out Guaranty, and ~~liabilities as~~has agreed to guarantee completion of ~~June 30, 2018, but did not result~~the Project in ~~any significant cash receipts or cash payments during~~accordance with approved plans and specifications. All of the ~~quarter.~~shares in SFI are also pledged to secure the loan. The Loan bears interest based on LIBOR and matures in March 2023.

Note 5 — Leases

The Company determines if an arrangement is a lease at inception and has lease agreements for office facilities, office equipment, certain airport and terminal facilities, and other space and assets. These commitments have remaining non-cancelable lease terms, with lease expirations which range from 2019 to 2036.

As a result of the New Lease Standard, certain real estate and property leases, and various other operating leases have been measured on the balance sheet with a lease liability and right-of-use asset ("ROU"). Airport terminal leases mostly include variable lease payments outside of those based on a fixed index, and are therefore excluded from consideration.

Application of this standard resulted in the recognition of $23.3 million in ROU assets and a corresponding lease liability of $24.2 million (with $22.0 million classified as long-term within Other non-current liabilities and the remainder classified as short-term within Accrued liabilities) as of March 31, 2019. Accounting for finance leases is substantially unchanged.

Operating leases are included in operating lease ROU assets, accrued liabilities, and other noncurrent liabilities on the consolidated balance sheets. Finance leases are included in property and equipment, current maturities of long-term debt and finance leases, and long-term debt and finance leases, net of current maturities, on the consolidated balance sheets. ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. ROU assets and liabilities are recognized on the lease commencement date based on the present value of lease payments over the lease term. The present value of lease payments is calculated using the incremental borrowing rate at lease commencement, which takes into consideration recent debt issuances as well as other applicable market data available.

Lease terms include options to extend when it is reasonably certain that the option will be exercised. Leases with a term of 12 months or less are not recorded on the balance sheet. Additionally, lease and non-lease components are accounted for as a single lease component for real estate agreements.

In addition to operating leases the Company leases certain aircraft and, as of March 31, 2019, had five aircraft under finance leases with remaining terms to 2029.

See Note 8, Commitments and Contingencies, for further detail.

Lease Costs

The components of lease expense were as follows:



		Three Months Ended
(in thousands)	Classification on the Statements of Income	March 31, 2019
Finance lease costs:
Amortization of assets	Depreciation and amortization	$	1,629
Interest on lease liabilities	Interest expense	1,346
Operating lease cost	Station operations; Maintenance and repairs; Other operating expense	775
Variable lease cost	Station operations; Maintenance and repairs; Other operating expense	3,092
Total lease cost		$	6,842

Lease position as of March 31, 2019

The table below presents the lease-related assets and liabilities recorded on the balance sheet.



(in thousands)	Classification on the Balance Sheet	As of March 31, 2019
Assets
Operating lease assets	Operating lease right-of-use assets, net	$	22,788
Finance lease assets	Property and equipment, net	116,553
Total lease assets		$	139,341

Liabilities
Current
Operating	Accrued liabilities	$	2,101
Finance	Current maturities of long-term debt and finance lease obligations	7,417
Noncurrent
Operating	Other noncurrent liabilities	22,049
Finance	Long-term debt and finance lease obligations	113,710
Total lease liabilities		$	145,277

Weighted-average remaining lease term
Operating leases		9.5 years
Finance leases		10.6 years
Weighted-average discount rate
Operating leases		4.2		%
Finance leases		4.4		%

Other Information

The table below presents supplemental cash flow information related to leases during the three months ended March 31, 2019.



	Three Months Ended
(in thousands)	March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	629
Operating cash flows for finance leases	1,346
Financing cash flows for finance leases	1,804

Maturities of Lease Liabilities

The table below indicates the future minimum payments of lease liabilities as of March 31, 2019.



(in thousands)	Operating Leases			Finance Leases
Remaining in 2019	$	2,269		$	9,450
2020	3,206			12,600
2021	3,249			12,600
2022	3,295			11,095
2023	3,147			10,500
Thereafter	14,325			103,458
Total lease payments	29,491			159,703
Less imputed interest	(5,341		)	(38,576		)
Total lease obligations	24,150			121,127
Less current obligations	(2,101		)	(7,417		)
Long-term lease obligations	$	22,049		$	113,710

The Company adopted the New Lease Standard on January 1, 2019 as noted above, and as required, the following disclosure is provided for periods prior to adoption. Future annual minimum lease payments as of December 31, 2018 were as follows:



(in thousands)	Operating Leases		Capital Leases
2019	$	8,102	$	12,600
2020	6,031		12,600
2021	3,643		12,600
2022	1,630		11,095
2023	1,626		10,500
Thereafter	8,297		103,458
Total lease payments	$	29,329	162,853
Less imputed interest			(39,922		)
Total lease obligations			122,931
Less current obligations			(7,336		)
Long-term lease obligations			$	115,595

Note 6 — 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 June 30, 2018						As of December 31, 2017						As of March 31, 2019						As of December 31, 2018
	Total		Level 1		Level 2		Total		Level 1		Level 2		Total		Level 1		Level 2		Total		Level 1		Level 2
Cash equivalents
Money market funds													$	125,394	$	125,394	$	—	$	43,281	$	43,281	$	—
Commercial paper	$	9,952	$	—	$	9,952	$	27,910	$	—	$	27,910	80,760		—		80,760		29,138		—		29,138
Municipal debt securities	5,325		—		5,325		2,782		—		2,782		3,792		—		3,792		—		—
Money market funds	115		115		—		1,297		1,297		—
US Treasury Bonds													880		—		880		1,415		—		1,415
Total cash equivalents	15,392		115		15,277		31,989		1,297		30,692		210,826		125,394		85,432		73,834		43,281		30,553
Short-term
Commercial paper	141,091		—		141,091		108,678		—		108,678		182,608		—		182,608		180,846		—		180,846
Corporate debt securities	116,804		—		116,804		107,878		—		107,878		74,331		—		74,331		101,489		—		101,489
Municipal debt securities	53,143		—		53,143		101,290		—		101,290		13,927		—		13,927		14,252		—		14,252
Federal agency debt securities	30,718		—		30,718		31,428		—		31,428		11,367		—		11,367		11,887		—		11,887
US Treasury Bonds	1,424		—		1,424		3,407		—		3,407		4,722		—		4,722		5,990		—		5,990
Total short-term	343,180		—		343,180		352,681		—		352,681		286,955		—		286,955		314,464		—		314,464
Long-term
Corporate debt securities	43,363		—		43,363		60,396		—		60,396		20,300		—		20,300		37,334		—		37,334
US Treasury Bonds													3,050		—		3,050		2,901		—		2,901
Federal agency debt securities	10,022		—		10,022		5,775		—		5,775		1,255		—		1,255		11,291		—		11,291
US Treasury Bonds	2,973		—		2,973		2,994		—		2,994
Derivative instruments	21		—		21		282		—		282
Municipal debt securities	—		—		—		9,405		—		9,405
Total long-term	56,379		—		56,379		78,852		—		78,852		24,605		—		24,605		51,526		—		51,526
Total financial instruments	$	414,951	$	115	$	414,836	$	463,522	$	1,297	$	462,225	$	522,386	$	125,394	$	396,992	$	439,824	$	43,281	$	396,543

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. ~~Remaining~~The Company's remaining debt is not publicly held, and the Company has determined the estimated fair value of these notes to be Level 3, as certain inputs used to determine the fair value 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 are as follows (in thousands):


	As of June 30, 2018				As of December 31, 2017					As of March 31, 2019				As of December 31, 2018
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Hierarchy Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Hierarchy Level
Publicly held debt	$	450,893	$	453,147	$	451,321	$	462,604	2	$	102,133	$	102,389	$	450,463	$	451,026	2
Non-publicly held debt	589,357		526,887		719,681		660,065		3	1,160,772		937,134		703,372		619,379		3
Total long-term debt	$	1,040,250	$	980,034	$	1,171,002	$	1,122,669		$	1,262,905	$	1,039,523	$	1,153,835	$	1,070,405

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

~~Share repurchases consisted of the following:~~

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Shares repurchased (not in thousands) (1) None
589,057
None
604,497
Average price per share NA
$ 142.16
NA
$ 142.66
Total (in thousands) 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 six months ended June 30, 2018, the Company declared and paid recurring cash dividends of $1.40 per share, or $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 six~~ months ended ~~June 30,~~March 31, 2019 and 2018, respectively, 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 June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
Basic:
Net income	$	50,016		$	49,038		$	105,209		$	91,389		$	57,124		$	55,193
Less net income allocated to participating securities	(659		)	(789		)	(1,427		)	(1,482		)	(799		)	(768		)
Net income attributable to common stock	$	49,357		$	48,249		$	103,782		$	89,907		$	56,325		$	54,425
Earnings per share, basic	$	3.10		$	2.98		$	6.53		$	5.52		$	3.52		$	3.43
Weighted-average shares outstanding	15,939			16,198			15,898			16,290			16,011			15,889
Diluted:
Net income	$	50,016		$	49,038		$	105,209		$	91,389		$	57,124		$	55,193
Less net income allocated to participating securities	(658		)	(789		)	(1,425		)	(1,480		)	(798		)	(768		)
Net income attributable to common stock	$	49,358		$	48,249		$	103,784		$	89,909		$	56,326		$	54,425
Earnings per share, diluted	$	3.10		$	2.97		$	6.52		$	5.51		$	3.52		$	3.42
Weighted-average shares outstanding	15,939			16,198			15,898			16,290			16,011			15,889
Dilutive effect of stock options and restricted stock	44			71			63			92			31			46
Adjusted weighted-average shares outstanding under treasury stock method	15,983			16,269			15,961			16,382			16,042			15,935
Participating securities excluded under two-class method	(38		)	(49		)	(47		)	(65		)	(29		)	(37		)
Adjusted weighted-average shares outstanding under two-class method	15,945			16,220			15,914			16,317			16,013			15,898

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, respectively, anti-dilutive shares excluded from the calculation of earnings per share were ~~1,379~~4,046 shares and ~~607~~1,463 shares (not in thousands)~~, respectively.~~.

Note 8 — Commitments and Contingencies

As of ~~June 30, 2018,~~March 31, 2019, the Company had firm commitments to purchase 11twelve Airbus A320 ~~aircraft. In addition, the Company has entered into lease agreements for an additional 13 Airbus A320~~series aircraft ~~three of which have been delivered~~ and are in service, and one of which has been delivered but was not in service as of June 30, 2018. The remaining nine aircraft are currently scheduled to be delivered in the second half of 2018 and first quarter of 2019.four CFM engines.

~~Future minimum fixed payments for the~~

The Company's contractual purchase commitments ~~related to the acquisition~~consist primarily of aircraft ~~(including aircraft lease obligations), airport fees under use~~ and ~~lease agreements, and other operating lease obligations~~engine acquisitions. The total future commitments are as follows ~~as of June 30, 2018~~ (in thousands):


	As of June 30, 2018		As of March 31, 2019
Remaining in 2018	$	79,148
2019	123,164
Remaining in 2019			$	198,110
2020	67,422		33,800
2021	26,288		500
2022	23,569		18,000
Thereafter	150,598
Total commitments	$	470,189	$	250,410

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~~Segments

~~During~~Operating segments are components of a company for which separate financial and operating information is regularly evaluated and reported to the Chief Operating Decision Maker ("CODM"), and is used to allocate resources and analyze performance. The Company's CODM is the executive leadership team, which reviews information about the Company's three operating segments: the Airline, Sunseeker Resort, and ~~six months ended June 30, 2018, the Company made no payments to related parties.~~Other non-airline.

~~Entities owned or controlled by~~Airline Segment

The Airline segment operates as a single business unit and includes all scheduled service air transportation, ancillary air-related products and services, third party products and services, fixed fee contract air transportation and other airline-related revenue. The CODM evaluation includes, but is not limited to, route and flight profitability data, ancillary and third party product and service offering statistics, and fixed fee contract information when making resource allocation decisions with the goal of optimizing consolidated financial results.

Sunseeker Resort Segment

The Sunseeker Resort segment represents activity related to the development and construction of Sunseeker Resort in Southwest Florida, as well as the operation of Kingsway golf course. Plans for the resort include a 500-room hotel and two towers offering an estimated 180 one, two and three bedroom suites, bar and restaurant options, and other amenities. The golf course is a short drive from the resort site and is considered, from a planning and strategic perspective, to be an additional resort amenity. The construction of Sunseeker Resort is an extension of the Company's ~~Chairman~~leisure travel focus and ~~CEO have been paid~~it is expected that many customers flying to Southwest Florida on Allegiant will elect to stay at this resort and enjoy its amenities.

Other non-Airline Segment

The other non-airline segment includes the Teesnap golf course management solution and Allegiant Nonstop family entertainment centers, both of which fit with the Company's leisure focus. Allegiant Nonstop family entertainment centers are comprised of games, attractions, and food facilities.

Selected information for the ~~building of corporate training content. During~~Company's segments and the ~~three and six months ended June 30, 2017,~~reconciliation to the ~~Company made payments to these entities of $0.2 million. No further payments~~consolidated financial statement amounts are ~~expected.~~as follows (in thousands):



	Airline		Sunseeker Resort			Other non- airline			Consolidated
Three Months Ended March 31, 2019
Operating revenue:
Passenger	$	419,977	$	—		$	—		$	419,977
Third party products	17,141		—			—			17,141
Fixed fee contract	10,575		—			—			10,575
Other	631		902			2,396			3,929
Operating income (loss)	98,490		(1,222		)	(6,190		)	91,078
Interest expense, net of capitalized interest and interest income	13,221		158			—			13,379
Depreciation and amortization	35,229		156			797			36,182
Total assets, end of period	2,640,003		68,742			41,732			2,750,477
Capital expenditures	108,920		5,275			8,356			122,551
Three Months Ended March 31, 2018
Operating revenue:
Passenger	$	396,771	$	—		$	—		$	396,771
Third party products	10,325		—			—			10,325
Fixed fee contract	10,556		—			—			10,556
Other	6,666		—			1,126			7,792
Operating income (loss)	81,950		(145		)	(1,837		)	79,968
Interest expense, net	10,817		—			—			10,817
Depreciation and amortization	27,766		7			376			28,149
Total assets, end of period	2,248,340		33,910			6,715			2,288,965
Capital expenditures	59,574		8,140			1,453			69,167

~~Note 10 — Subsequent Events~~

In July 2018, the Company drew down $46.9 million under its senior secured revolving credit facility. The notes for the amounts borrowed under the facility bear interest at a floating rate based on LIBOR and are due on March 31, 2020.

Also in July 2018, the Company also borrowed $34.5 million under a loan agreement secured by one Airbus A320 series aircraft. The note bears interest at a floating rate based on LIBOR and will be payable in quarterly installments through 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 six~~ months ended ~~June 30, 2018~~March 31, 2019 and ~~2017.~~2018. Also discussed is our financial position as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. 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, ~~2017.~~2018. 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.

~~SECOND QUARTER REVIEW~~

First Quarter 2019 Review

Highlights:

~~Added 10 Airbus A320 series aircraft into service and retired five MD-80 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, $22.6 million year to date.~~


–	Achieved 22 percent airline operating margin;


–	recognized record ancillary air-related revenue per passenger of $53.10, which represents an increase of 12.5 percent compared to 2018;


–	added eight aircraft into service and expect an additional nine to be added throughout 2019;


–	announced 35 new routes, including inaugural service into Anchorage, AK; and


–	broke ground on Sunseeker Resort - Charlotte Harbor.

AIRCRAFT

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

June 30, 2018 December 31, 2017 June 30, 2017
MD-80 27
37
45
B757-200 —
—
2
A319 (1) 31
22
20
A320 (2) 35
30
21
Total 93
89
88



	March 31, 2019	December 31, 2018	March 31, 2018
MD-80	—	—	32
A319	37	32	26
A320 (1)	47	44	30
Total	84	76	88

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

~~(2) Does not include seven A320~~three aircraft for which we have taken delivery, but were not yet in service as of ~~June 30, 2018.~~March 31, 2019.

As of ~~June 30, 2018,~~March 31, 2019, we had firm commitments to purchase ~~11 Airbus A320 series aircraft and had executed lease agreements for nine Airbus A320 series aircraft which have yet to be delivered.~~twelve aircraft. We expect delivery of 10nine of these aircraft in ~~2018~~2019 and the remaining aircraft in ~~2019~~2020 and ~~2020.~~2022. We continually consider aircraft acquisitions on an opportunistic basis.

Fleet Plan

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


	As of September 30, 2018	As of December 31, 2018	As of June 30, 2019	As of September 30, 2019	As of December 31, 2019
MD-80	19	—
A319	31	32	37	38	38
A320	44	45	51	53	55
Total	94	77	88	91	93

NETWORK

As of ~~June 30, 2018,~~March 31, 2019, we ~~were operating 413~~are currently selling 450 routes ~~verses 382~~versus 419 as of the same date last year, which represents ~~an 8.1~~a 7.4 percent increase. Our total ~~numbers~~number of origination cities and leisure destinations (for operating routes) were 9798 and 2123, respectively, as of ~~June 30, 2018.~~March 31, 2019. Based on our currently published schedule through early-February 2020, and service announcements and cancellations by other airlines to date, we will have direct competition (which we consider to be similar non-stop service between markets) on 114 of our routes as of that date.

~~We also~~During the first quarter of 2019, we announced ~~Knoxville, Tennessee as~~35 new routes including our ~~16th base, with base operations~~inaugural scheduled flights to Anchorage, AK and additional service to Destin, FL, Nashville, TN, and Savannah, GA, among other route announcements. The new routes are all planned to begin service in ~~November 2018.~~the second quarter 2019.

In April 2019, we filed an application with the U.S. Department of Transportation to offer scheduled service to Mexico. This is the first step in beginning to offer international service to our leisure travelers, with non-stop flights between the United States and Mexico.

TRENDS

As we have completed our fleet transition, ~~continues, we added 10 Airbus A320 series aircraft to our operating fleet during the second quarter of 2018.~~ Airbus aircraft flew ~~76.8~~100 percent of our scheduled service ASMs for the quarter, compared to ~~55.4~~72.4 percent for the same time period in ~~2017,~~2018, which drove a ~~5.8~~9.6 percent increase in fuel efficiency (measured as ASMs per gallon). Despite having an average of 11 fewer operating aircraft in the fleet compared to 2018, scheduled service ASMs increased 5.6 percent and scheduled service passengers increased 4.3 percent. Higher utilization of the Airbus fleet (with a 16.9 percent year-over-year increase in average block hours per aircraft per day) enabled system growth with fewer aircraft. We expect 11to return to lower aircraft utilization during the year, as more ~~Airbus A320 series~~ aircraft are added to ~~be placed in service by the end of 2018~~our operating fleet. Airline operating income increased more than $16 million quarter-over-quarter, and ~~to have fully retired the remaining 19 MD-80 aircraft by the end of 2018.~~produced a 22 percent operating margin.

~~Although~~We continue to improve our operation, as evidenced by a 100 percent controllable completion rate for the ~~number~~first quarter 2019, and a total completion factor of aircraft in our fleet will 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 year will be lower than in prior years as99.2 percent. We also achieved a ~~result of our fleet transition.~~record 123 consecutive days without a maintenance cancellation.

Unexpected delays in the scheduled delivery timing of 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 unusual and beyond our ability to effectively fully recover our published schedule. In anticipation of known aircraft delivery and induction delays, we removed three lines of flying in late June and July to shore up the integrity of our operations. This will result in 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~~2019, 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 been short-lived and cancellations and bookings returned to normal levels weeks later.

~~Planning and development for Sunseeker Resorts is ongoing. Construction is expected to begin in the second half of 2018, with the opening of the resort planned for 2020.~~

~~Our flight~~ dispatchers, ~~voted for union representation~~represented by the International Brotherhood of Teamsters, ~~("IBT") and negotiations began in February 2017. The dispatchers failed~~(IBT) voted to ratify their first collective bargaining agreement. The agreement has a ~~tentative agreement reached in~~five year term beginning May ~~2018~~1, 2019 and ~~negotiations continue. There are approximately 40 employees in this~~is not expected to have a significant effect on our operating ~~group.~~

results.

In March ~~2018,~~2019, we began construction for Sunseeker Resort - Charlotte Harbor in Southwest Florida, and entered into a Construction Loan Agreement with affiliates of TPG Sixth Street Partners to provide $175 million in construction financing for the project. We also opened our ~~maintenance technicians who represent approximately nine percent of~~first Allegiant Nonstop family entertainment center in Clearfield, UT, in January 2019 and our ~~total employee base (approximately 340 employees), voted for union representation by the IBT. Negotiations for an agreement with this group are expected to begin~~second location in ~~the near future.~~

~~In July 2018, the IBT announced that our pilots were supportive of a strike as a result of delays~~Warren, MI, 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 agreement with any employee group or otherwise could impact our operations during the continuance of any such activity. Any labor agreement reached following negotiations would also likely increase our operating costs.April 2019.

RESULTS OF OPERATIONS

Comparison of three months ended ~~June 30, 2018~~March 31, 2019 to three months ended ~~June 30, 2017~~March 31, 2018

Operating Revenue

Passenger revenue. ~~Passenger revenue now includes both scheduled service revenue and air-related ancillary revenue, due to the implementation of the New Revenue Standard.~~ For the ~~second~~first quarter ~~2018,~~2019, passenger revenue increased ~~10.4~~5.8 percent compared to ~~2017.~~first quarter 2018. The increase was driven primarily by a ~~10.1~~4.6 percent increase in scheduled service departures, ~~and a 1.0 percentage point increase in load factor,~~ which resulted in ~~12.7~~a 4.3 percent ~~more~~increase in scheduled service passengers ~~traveling. Additional~~(slightly diluted by a 1.2 percentage point drop in load factor). The higher number of passengers resulted in ~~quarter-over-quarter~~year-over-year increases in ancillary revenues, the most significant of which were increases in the customer convenience fee and carry on and checked baggage fees throughout the network. These increases contributed to a 12.5 percent increase in unit ancillary revenue ~~products such as convenience, baggage and seat fees.~~to $53.10 per passenger, the highest quarterly performance in our history.

Third party products revenue. Third party ~~product~~products revenue for the ~~second~~first quarter ~~2018~~2019 increased ~~24.4~~66.0 percent, ~~overall~~or $6.8 million, compared to ~~2017, due~~the same period in 2018. This is primarily ~~to an~~the result of a 26.5 percent increase in net revenue from rental ~~cars.~~cars resulting from the increase in scheduled service passengers coupled with a higher take rate, as well as an increase in revenue generated from our co-branded credit card program.

Fixed fee contract revenue. Fixed fee contract revenue for the ~~second~~first quarter 2019 remained relatively flat when compared to 2018, ~~decreased 30.6~~despite a 6.5 percent decrease in fixed fee departures quarter-over-quarter. The decrease in departures resulted from ~~2017. This~~the government shutdown early in the quarter, as the FAA was ~~planned~~not available to provide certification for aircraft that we had available and ~~expected due to less availability of~~ready for service; thus, we were operating fewer aircraft ~~for charter flying during our fleet transition.~~than planned.

Other revenue. Other revenue decreased ~~$3.5~~by $3.9 million for the ~~second~~first quarter 2019 from 2018, ~~from 2017~~ primarily ~~as six~~due to a decrease in aircraft ~~which generated~~ lease ~~revenue from~~revenue. We took redelivery of the final aircraft previously on lease to a European carrier in December 2018, whereas 10 aircraft were on lease during the ~~second~~first quarter ~~2017, had been delivered to us prior to the second quarter~~ 2018. The decline in lease revenue was partially offset by increased revenue from Teesnap, our golf course management solution.

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~~unit costs on a per ~~passenger~~ASM basis, or CASM, for the indicated periods. ~~The table also presents operating expense~~Excluding fuel on a per ~~passenger, excluding fuel, a statistic which gives~~ASM basis provides 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 June 30,				Percent		Three Months Ended March 31,						Percent
	2018		2017		Change		2019			2018			Change
Salary and benefits								3.05	¢		3.03	¢	0.7	%
Aircraft fuel	$	33.06	$	25.83	28.0	%	2.55			2.84			(10.2	)
Salary and benefits	27.44		27.89		(1.6	)
Station operations	11.22		11.80		(4.9	)	1.00			1.01			(1.0	)
Maintenance and repairs	6.64		8.66		(23.3	)	0.58			0.52			11.5
Depreciation and amortization	8.05		9.11		(11.6	)	0.93			0.75			24.0
Sales and marketing	4.95		4.08		21.3		0.54			0.51			5.9
Aircraft lease rentals	0.02		0.73		(97.3	)
Other	6.49		7.49		(13.4	)	0.57			0.61			(6.6	)
Operating expense per passenger	$	97.87	$	95.59	2.4	%
Operating expense per passenger, excluding fuel	$	64.81	$	69.76	(7.1	)%
CASM								9.22	¢		9.27	¢	(0.5	)%
Operating CASM, excluding fuel							6.67			6.43			3.7
Non-airline operating CASM*							0.27			0.08			NM
Operating CASM, excluding fuel and non-airline activity								6.40	¢		6.35	¢	0.8	%

~~The following table presents unit~~*Includes operating 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~~associated with Sunseeker Resort and ~~investors the ability to measure and monitor our cost performance absent fuel price volatility.~~

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

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

Salary and benefits expense. Salary and benefits expense increased ~~$9.4~~$6.4 million, or ~~10.2~~5.7 percent, for the ~~second~~first quarter ~~2018~~2019 when compared to the same period ~~last year.~~in 2018. The increase is largely ~~attributable~~due to a ~~5.8~~7.7 percent increase in full-time equivalent ~~employees. Additionally, in conjunction with~~employees, as well as labor inefficiencies as we continue to grow into the ~~collective bargaining agreement with our~~increased number of flight ~~attendants that went into effect in December 2017, flight attendant total salaries~~personnel we maintained during the fleet transition.

Aircraft fuel expense. Aircraft fuel expense ~~increased an average of 25~~decreased $6.3 million, or 6.0 percent, for the first quarter 2019 compared to ~~2017.~~first quarter 2018. The decrease is largely due to a 4.5 percent decrease in system fuel gallons consumed, coupled with a 1.8 percent decrease in the system average fuel cost per gallon. Fuel efficiency (measured as ASMs per gallon) increased 9.6 percent year over year, allowing us to increase system ASMs by 4.9 percent, while reducing total fuel consumption. The Airbus aircraft are more fuel efficient than the MD-80 aircraft, which we still had in operation during the first quarter 2018.

Station operations expense. Station operations expense for the ~~second~~first quarter ~~2018~~2019 increased ~~6.6~~$1.4 million, or 3.7 percent ~~on a 10.1 percent increase in scheduled service departures~~ compared to the same period in ~~2017.~~2018, and is in line with a 4.6 percent increase in scheduled service departures.

Maintenance and repairs expense. Maintenance and repairs expense for the ~~second~~first quarter ~~2018 decreased $4.0~~2019 increased $3.6 million, or ~~14.1~~18.4 percent, compared to the same period in ~~2017. The year-over-year decrease is largely due to fewer heavy maintenance events performed on our MD-80 aircraft,~~2018, as ~~they are being systematically retired from our operating fleet. Additionally,~~ the ~~cost~~average number of ~~major maintenance events for our~~ Airbus aircraft ~~is deferred~~ in ~~accordance with~~service increased by 49.2 percent. Although repairs for the ~~deferral method of accounting and~~Airbus fleet type tend to be less frequent, associated costs are also generally higher than for the ~~amortization of these expenses is included in depreciation and amortization expense.~~MD-80 fleet.

Depreciation and amortization expense. Depreciation and amortization expense for the ~~second~~first quarter ~~2018 remained relatively flat, with a 1.0~~2019 increased 28.5 percent ~~decrease~~ year over year. The ~~decrease is due to the impairment charge taken on our MD-80~~average number of Airbus aircraft in ~~the fourth quarter 2017 as no depreciation expense for this fleet remains in the current quarter. Depreciation expense~~

~~related to the MD-80~~service increased 49.2 percent year over year and our Airbus 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~~have a higher monthly depreciation expense ~~associated with~~than our ~~Airbus~~MD-80 aircraft ~~as we continue to add Airbus aircraft into~~previously in service. ~~Depreciation expense for this~~In comparison, during the first quarter 2018, the MD-80 fleet was ~~$19.8 million for~~fully depreciated, yet produced 27.6 percent of ASMs during the ~~second quarter 2018 compared to $13.7 million for the same period in 2017.~~quarter. Amortization of major maintenance costs ~~under the deferral method of accounting for the Airbus aircraft~~ was ~~$2.6~~$4.8 million for the ~~second~~first quarter ~~2018~~2019 compared to ~~$1.6~~$2.5 million for the ~~second~~first quarter ~~2017.~~2018.

Sales and marketing expense. Sales and marketing expense for the ~~second~~first quarter ~~2018~~2019 increased ~~$4.9~~$1.8 million compared to the same period in ~~2017, partly~~2018 due to ~~an increase in net credit card fees paid as a result of the 10.4 percent increase in passenger revenue year over year. There were also~~ increased expenses related to various marketing initiatives, including our ~~national ad campaign, for our growing network.~~multi-year partnerships with the Vegas Golden Knights and Minor League Baseball.

~~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~~Non-airline expenses

Non-airline expenses are included in the ~~current quarter. We do not currently have aircraft under~~various line items discussed above, as appropriate. The non-airline expenses include those from our Teesnap golf management business, expenses incurred to operate the Kingsway golf course, pre-opening expenses incurred in connection with Allegiant Nonstop family entertainment centers (locations opened in January 2019 and April 2019), and operating ~~leases.~~expenses attributable to Sunseeker Resort (most Sunseeker Resort expenses are being capitalized at this time).

Income Tax Expense

Our effective tax rate was ~~20.7~~22.7 percent for the three months ended ~~June 30, 2018,~~March 31, 2019, compared to ~~37.8~~20.5 percent for the three months ended ~~June 30, 2017.~~March 31, 2018. The effective tax rate for the three months ended ~~June 30, 2018~~March 31, 2019 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 six months ended June 30, 2018~~ We expect to ~~six months ended June 30, 2017~~

~~Operating Revenue~~

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

~~Third party products revenue.~~ ~~Third party products revenue~~be non-cash taxpayers for the six months ended June 30, 2018 increased 4.0 percent over the same period in 2017 primarily due to an increase in net revenue from rental cars. This was offset by revenue reclassifications related to our Allegiant World Mastercard® co-brand credit card, whereby $3.6 million of the revenue related to the travel component was reclassified into passenger revenue.

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

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

~~Operating Expenses~~

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

Six Months Ended June 30, Percent
2018 2017 Change
Aircraft fuel $ 32.61
$ 27.48
18.7 %
Salary and benefits 30.63
30.47
0.5
Station operations 11.29
11.45
(1.4 )
Maintenance and repairs 6.26
9.49
(34.0 )
Depreciation and amortization 8.27
9.81
(15.7 )
Sales and marketing 5.34
4.33
23.3
Aircraft lease rentals 0.01
0.41
(97.6 )
Other 6.63
7.13
(7.0 )
Operating expense per passenger $ 101.04
$ 100.57
0.5 %
Operating expense per passenger, excluding fuel $ 68.43
$ 73.09
(6.4 )%

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

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

~~Aircraft fuel expense.~~ Aircraft fuel expense increased $58.4 million, or 34.4 percent, for the six months ended June 30, 2018 compared to the same period in 2017 as the system average fuel cost per gallon increased by 29.5 percent, coupled with a 3.6 percent increase in system fuel gallons consumed on a 9.9 percent increase in system ASMs. ASM growth outpaced fuel consumption as fuel efficiency (measured as ASMs per gallon) increased 6.1 percent year over 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 $26.1 million, or 13.8 percent, for the six months ended June 30, 2018 compared to the same period in 2017. The increase is largely attributable to a 5.8 percent increase in the number of full-time equivalent employees. Additionally, in conjunction with the collective bargaining agreement with our flight attendants that went into effect in December 2017, flight attendant total salaries expense increased an average of 21 percent year over year.

~~Station operations expense.~~ Station operations expense for the six months ended June 30, 2018 increased 11.7 percent on a 9.8 percent increase in scheduled service departures compared to the same period in 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 six months ended June 30, 2018 decreased $14.9 million, or 25.3 percent, compared with the same period in 2017. The year-over-year decrease is largely due to fewer heavy maintenance events performed on our MD-80 series aircraft, as they are being systematically retired from our operating fleet. Additionally, the cost of major maintenance events for our Airbus aircraft is deferred in accordance with the deferral method of accounting and the amortization of these expenses is included under depreciation and amortization expense.

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

The decrease in depreciation and amortization expense was partially offset by higher monthly depreciation expense associated with our Airbus aircraft, as we continue to add Airbus aircraft into service. Depreciation expense for this fleet was $38.0 million for the six months ended June 30, 2018 compared to $26.5 million for the same period in 2017. Amortization of major maintenance costs under the deferral method of accounting for the Airbus aircraft was $5.1 million for the six months ended June 30, 2018 compared to $2.9 million for 2017.

~~Sales and marketing expense.~~ Sales and marketing expense for the six months ended June 30, 2018 increased $10.6 million compared to the same period in 2017, partly due to an increase in net credit card fees paid as a result of a 12.2 percent increase in passenger revenue year over year. There were also 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 six months ended June 30, 2018 decreased $2.5 million compared to the same period in 2017 due to fewer sub-service flights in the current year. We do not currently have aircraft under operating leases.

~~Other expense.~~ Other operating expense for the six months ended June 30, 2018 increased $2.3 million compared to 2017. The increase is primarily due to information technology expenses, as well as other administrative expenses incurred to support our airline operations and golf course management business.

~~Income Tax Expense~~

Our effective tax rate was 20.6 percent for the six months ended June 30, 2018, compared to 37.3 percent for the six months ended June 30, 2017. The effective tax rate for the six 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.

purposes for 2019.

Comparative Consolidated Operating Statistics

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


	Three Months Ended June 30,						Percent		Three Months Ended March 31,						Percent
	2018			2017			Change (1)		2019			2018			Change (1)
Operating statistics (unaudited):
Total system statistics:
Passengers	3,704,113			3,306,193			12.0		3,450,278			3,302,951			4.5
Revenue passenger miles (RPMs) (thousands)	3,276,599			2,958,808			10.7		3,228,594			3,094,805			4.3
Available seat miles (ASMs) (thousands)	3,922,294			3,584,209			9.4		3,910,239			3,728,563			4.9
Load factor	83.5		%	82.6		%	0.9		82.6		%	83.0		%	(0.4	)
Operating expense per ASM (CASM) (cents)	9.24			8.82			4.8
Airline operating expense per ASM (CASM) (cents)									8.95			9.19			(2.6	)
Fuel expense per ASM (cents)	3.12			2.38			31.1		2.55			2.84			(10.2	)
Operating CASM, excluding fuel (cents)	6.12			6.44			(5.0	)
Airline operating CASM, excluding fuel (cents)									6.40			6.35			0.8
ASMs per gallon of fuel	76.1			71.9			5.8		84.1			76.7			9.6
Departures	27,063			24,721			9.5		25,200			24,248			3.9
Block hours	60,707			56,056			8.3		59,819			57,803			3.5
Average stage length (miles)	858			866			(0.9	)	904			910			(0.7	)
Average number of operating aircraft during period	92.0			85.3			7.9		79.6			90.7			(12.2	)
Average block hours per aircraft per day	7.3			7.2			1.4		8.3			7.1			16.9
Full-time equivalent employees at end of period	3,840			3,628			5.8		4,067			3,776			7.7
Fuel gallons consumed (thousands)	51,516			49,858			3.3		46,474			48,640			(4.5	)
Average fuel cost per gallon	$	2.38		$	1.71		39.2		$	2.14		$	2.18		(1.8	)

Scheduled service statistics:
Passengers 3,681,944
3,266,789
12.7
Revenue passenger miles (RPMs) (thousands) 3,245,774
2,903,257
11.8
Available seat miles (ASMs) (thousands) 3,795,815
3,436,872
10.4
Load factor 85.5 % 84.5 % 1.0
Departures 25,992
23,609
10.1
Block hours 58,536
53,632
9.1
Total passenger revenue per ASM (TRASM) (cents) (2) 11.15
11.10
0.5
Average fare - scheduled service (3) $ 64.62
$ 67.76
(4.6 )
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 $ 114.99
$ 116.80
(1.5 )
Average stage length (miles) 864
869
(0.6 )
Fuel gallons consumed (thousands) 49,671
47,821
3.9
Average fuel cost per gallon $ 2.37
$ 1.70
39.4
Rental car days sold 404,355
391,010
3.4
Hotel room nights sold 93,484
107,910
(13.4 )
Percent of sales through website during period 93.9 % 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.~~

Six Months Ended June 30, Percent
2018 2017 Change (1)
Operating statistics (unaudited):
Total system statistics:
Passengers 7,007,064
6,187,441
13.2
Revenue passenger miles (RPMs) (thousands) 6,371,403
5,667,306
12.4
Available seat miles (ASMs) (thousands) 7,650,857
6,961,046
9.9
Load factor 83.3 % 81.4 % 1.9
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) 6.26
6.50
(3.7 )
ASMs per gallon of fuel 76.4
72.0
6.1
Departures 51,311
47,016
9.1
Block hours 118,510
109,249
8.5
Average stage length (miles) 883
883
—
Average number of operating aircraft during period 90.8
85.0
6.8
Average block hours per aircraft per day 7.2
7.1
1.4
Full-time equivalent employees at end of period 3,840
3,628
5.8
Fuel gallons consumed (thousands) 100,156
96,708
3.6
Average fuel cost per gallon $ 2.28
$ 1.76
29.5


Scheduled service statistics:
Passengers	6,961,312			6,112,269			13.9		3,421,538			3,279,368			4.3
Revenue passenger miles (RPMs) (thousands)	6,310,393			5,565,191			13.4		3,191,045			3,064,619			4.1
Available seat miles (ASMs) (thousands)	7,397,830			6,674,035			10.8		3,802,132			3,602,015			5.6
Load factor	85.3		%	83.4		%	1.9		83.9		%	85.1		%	(1.2	)
Departures	49,256			44,857			9.8		24,344			23,264			4.6
Block hours	114,224			104,507			9.3		57,963			55,689			4.1
Total passenger revenue per ASM (TRASM) (cents) (2)	11.23			11.12			1.0		11.50			11.30			1.8
Average fare - scheduled service (3)	$	68.95		$	71.33		(3.3	)	$	69.64		$	73.81		(5.6	)
Average fare - air-related charges (3)	$	46.31		$	45.67		1.4		$	53.10		$	47.18		12.5
Average fare - third party products	$	4.04		$	4.42		(8.6	)	$	5.01		$	3.15		59.0
Average fare - total	$	119.30		$	121.42		(1.7	)	$	127.75		$	124.14		2.9
Average stage length (miles)	889			887			0.2		908			916			(0.9	)
Fuel gallons consumed (thousands)	96,542			92,713			4.1		45,068			46,872			(3.8	)
Average fuel cost per gallon	$	2.27		$	1.75		29.7		$	2.13		$	2.17		(1.8	)
Rental car days sold	802,942			766,721			4.7		471,598			398,587			18.3
Hotel room nights sold	202,468			213,238			(5.1	)	105,015			108,984			(3.6	)
Percent of sales through website during period	93.9		%	94.2		%	(0.3	)	93.6		%	93.8		%	(0.2	)

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

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

LIQUIDITY AND CAPITAL RESOURCES

Current liquidity

Cash, ~~restricted~~ cash equivalents and investment securities (short-term and long-term) ~~decreased~~increased at March 31, 2019 to $554.8 million, from ~~$501.9~~$447.5 million at December 31, ~~2017~~2018. Investment securities represent highly liquid marketable securities which are available-for-sale.

The increase in cash is due primarily to ~~$441.8~~$178.5 million ~~at June 30, 2018.~~ in cash from operating activities (excluding capital expenditures related to heavy maintenance), as well as $428.0 million in net Term Loan proceeds received in February 2019.

As of March 31, 2019, $347.9 million of the Term Loan proceeds were used to purchase our unsecured senior notes. The remaining proceeds of approximately $80.1 million will be used when we retire the remaining $102.1 million balance of these notes. We expect to call the remainder of the notes prior to their maturity in July 2019.

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 reflected as air traffic liability. ~~Investment securities represent highly liquid marketable securities which are available-for-sale.~~

~~During the first six months of 2018, our primary source of funds was $283.2 million generated by operations.~~ Our operating cash flows and ~~previous~~long-term debt borrowings have allowed us to invest in our fleet transition and return capital to ~~shareholders.~~shareholders in the form of recurring regular quarterly dividends. 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~~Resort 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. In addition, we continue to consider raising funds through debt financing on an opportunistic basis.

In addition to our recurring quarterly cash dividend, our current share repurchase authority is $100 million. There is no expiration to this program.

Debt

Our long-term debt and ~~capital~~finance lease obligations balance, without reduction for related issuance costs, ~~decreased~~increased from ~~$1.2~~$1.3 billion as of December 31, ~~2017~~2018 to ~~$1.1~~$1.4 billion as of ~~June 30, 2018~~March 31, 2019 as we ~~paid off our senior secured revolving credit facility and continued making scheduled repayments on our existing debt, including~~borrowed $450.0 million under the ~~prepayment of certain debt secured by Airbus A320 series aircraft. During the second quarter of 2018, we borrowed $10.8~~Term Loan plus an additional $44.0 million secured by ~~various ground equipment.~~aircraft, while repurchasing $347.9 million of our unsecured notes and making principal payments on our other existing debt.

In March 2019, we entered into a Construction Loan Agreement with certain lenders affiliated with TPG Sixth Street Partners, LLC under which we may borrow up to $175.0 million to fund the construction of Phase 1 of Sunseeker Resort - Charlotte Harbor. No amounts under this loan agreement have been drawn to date.

Sources and Uses of Cash

Operating Activities. During the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, our operating activities provided ~~$283.2~~$160.1 million of cash compared to ~~$262.9~~$172.9 million during the same period of ~~2017.~~2018. The year-over-year ~~increase~~decrease in cash inflows is mostly the result of ~~a $13.8 million increase in~~the net ~~income, as well as~~effect of changes in ~~various~~certain asset and liability accounts, including ~~a $46.9 million decrease~~an increase in ~~accounts receivable. This was offset by adjustments made for non-cash items such as~~ deferred ~~income taxes ($26.9 million lower in 2018).~~major maintenance.

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 Resort - Charlotte Harbor and other travel and leisure initiatives, and return capital to shareholders through share repurchases and dividends.

Investing Activities. Cash used in investing activities was ~~$158.6~~$59.6 million during the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 compared to ~~$269.5~~$65.4 million for the same period in ~~2017. The~~2018. A $53.4 million year-over-year ~~decrease is mostly due to investment security activity,~~increase in cash outlay for the purchase of property and equipment was offset as cash proceeds from maturities of investment securities (net of purchases) were ~~$30.4~~$56.0 million induring the ~~first half of 2018~~three months ended March 31, 2019, compared to ~~cash used to purchase investment securities (net of proceeds) of $88.6~~$3.3 million for the same period in ~~2017. Cash used to purchase property and equipment (including pre-delivery deposits) was $187.5 million for~~ 2018. Additionally, in

the first ~~six months~~quarter of ~~2018~~2019 we had a $6.5 million increase in other investing activities compared to ~~$182.3 million in~~ the same period last year, mostly related to proceeds received from the sales of ~~2017.~~MD-80 parts.

Financing Activities. Cash provided by financing activities for the three months ended March 31, 2019 was $61.3 million, compared to $115.1 million cash used in financing activities ~~for the six months ended June 30, 2018 was $153.1 million compared to $38.3 million for~~during the same period in ~~2017. The~~2018. This year-over-year ~~increase~~fluctuation is primarily due to debt proceeds, as we entered into debt agreements totaling $494.0 million during the three months ended March 31, 2019, but did not enter any debt agreements in the first quarter 2018. The increase in debt proceeds was partially offset by an increase in principal payments on long-term debt and ~~capital~~finance lease obligations, as we ~~paid $142.4~~repurchased $347.9 million of our unsecured notes due July 2019 in a tender offer, made $38.4 million of other debt and ~~capital~~finance lease payments inand incurred $30.1 million of debt issuance costs during the ~~first half of 2018~~quarter. This compared to ~~$64.9~~$102.9 million of principal payments on debt for the same period in 2017. Our debt payments in the first half of 2018 included various scheduled balloon payments, as well as the payoff of our senior secured revolving credit facility, which had $41.6 million in outstanding principal as of December 31, 2017. Additionally, we received $10.8 million in loan proceeds during the second quarter 2018, compared to $134.5 million in loan proceeds during the same period in 2017. For the six months ended June 30,2018.

~~2018, we paid cash dividends of $22.6 million, compared to the payment of cash dividends of $23.2 million and $86.2 million in open market common stock repurchases for the same period 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 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~~our automated systems, limitation on growth ~~as we~~after our 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~~our competitive environment, our reliance on third parties who provide facilities or services to us, the possible loss of key personnel, economic and other conditions in markets in which we operate, the ability to successfully develop and finance a resort in Southwest Florida, governmental regulation, increases in maintenance costs and cyclical and seasonal fluctuations toin 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

~~Except as discussed below relating to the New Revenue Standard, in the second quarter of 2018, there~~There were no changes to our critical accounting policies and estimates, as of March 31, 2019, from those disclosed in the Consolidated Financial Statements and accompanying notes contained in our ~~2017~~2018 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 recognized at the time a good or service is transferred to a customer for the 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 ~~32.3~~27.6 percent of our operating expenses for the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. 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 six~~ months ended ~~June 30, 2018,~~March 31, 2019, a hypothetical ten percent increase in the average price per gallon of fuel would have increased fuel expense by approximately ~~$12.0 million and $22.9 million, respectively.~~$9.5 million. 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 six months ended June 30, 2018 would have impacted interest income from cash and investment securities by approximately $2.3 million.

As of ~~June 30, 2018,~~March 31, 2019, we had ~~a total of $563.1 million~~$1.1 billion 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 ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, would have affected interest expense by approximately ~~$3.2~~$2.1 million.

As of ~~June 30, 2018,~~March 31, 2019, we had ~~$477.1~~$204.8 million of fixed-rate debt, including current maturities and without reduction for related costs. A hypothetical 100 basis point change in market interest rates would not impact interest expense on our fixed rate debt 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, 2017, for further information about market risk.~~

Item 4. Controls and Procedures

As of ~~June 30, 2018,~~March 31, 2019, under the supervision and with the participation of our management, including our chief executive officer ("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”) as of the end of the period covered by this report. Based on that evaluation, management, including our CEO and CFO, has concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information we are required to disclose is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and 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~~Except as noted below, there were no changes in our internal control over financial reporting that occurred during the quarter ending ~~June 30, 2018,~~March 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Effective January 1, ~~2018,~~2019, we adopted ~~Accounting Standards Codification 606, “Revenue from Contracts with Customers.”~~ASU 2016-02, Leases (Topic 842). Although the New ~~Revenue~~Lease Standard iswill 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 there are no changes to ~~the risk factors~~those set forth in Part I, Item 1A of our Annual Report on Form 10-K.

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 ~~second~~first quarter ~~2018:~~2019:

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



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)
January	459	$	123.09	None
February	12,921	136.87		None
March	3,565	126.82		None
Total	16,945	$	134.38		$	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.

(2) Represents the remaining dollar amount of open market purchases of our common stock which has been authorized by the Board under a share repurchase program.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. Exhibits



3.1	Articles of Incorporation (1)
3.2	Bylaws of the Company as amended on April 24, 2018 (2)
4.1	Third Supplemental Indenture, dated as of February 5, 2019, among the Company, the subsidiary guarantors party thereto and Wells Fargo Bank, National Association, as trustee. (3)
10.1	Credit and Guaranty Agreement, dated as of February 5, 2019, among the Company, as borrower, certain subsidiaries of the Company party thereto, as guarantors, the lenders party thereto and Barclays PLC, as administrative agent, syndication agent and lead arranger. (4)
10.2	Construction Loan Agreement dated as of March 18, 2019 between TPG Specialty Lending, Inc., SSPC 1, LLC, and SSPC 2, LLC (as “Lenders”), TPG Specialty Lending, Inc. (as “Agent”) and Sunseeker Florida, Inc. (5)
10.3	Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as of March 18, 2019 between TPG Specialty Lending, Inc. (“Agent”) and Sunseeker Florida, Inc.
10.4	Guaranty of Completion dated as of March 18, 2019 among Allegiant Travel Company and Sunrise Asset Management, LLC for the benefit of TPG Specialty Lending, Inc., SSPC 1, LLC and SSPC 2, LLC.
10.5	Non-Recourse Carve-out Guaranty Agreement dated as of March 18, 2019 from Allegiant Travel Company for the benefit of TPG Specialty Lending, Inc., SSPC 1, LLC and SSPC 2, LLC.
10.6	Guaranty of Payment dated as of March 18, 2019 from Allegiant Travel Company for the benefit of TPG Specialty Lending, Inc., SSPC 1, LLC and SSPC 2, LLC.
10.7	Pledge and Security Agreement dated as of March 18, 2019 by Sunseeker Resorts, Inc. for the benefit of TPG Specialty Lending, Inc., SSPC 1, LLC and SSPC 2, LLC.
12	Calculation of Ratio of Earnings to Fixed Charges of Allegiant Travel Company
31.1	Rule 13a - 14(a) / 15d - 14(a) Certification of Principal Executive Officer
31.2	Rule 13a - 14(a) / 15d - 14(a) Certification of Principal Financial Officer
32	Section 1350 Certifications
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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

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

(3) Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed with the Commission on February 5, 2019

(4) Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Commission on February 5, 2019.

(5) Portions of the indicated document have been omitted pursuant to a request for confidential treatment and the document indicated has been filed separately with the Commission as required by Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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:	~~August 3, 2018~~May 7, 2019	By:	/s/ ~~Scott Sheldon~~Gregory Anderson
		~~Scott Sheldon,~~Gregory Anderson, as duly authorized officer of the Company (Chief Financial Officer) and as Principal Financial Officer

3229



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



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



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



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

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



	June 30, 2018	December 31, 2017	June 30, 2017
MD-80	27	37	45
B757-200	—	—	2
A319 (1)	31	22	20
A320 (2)	35	30	21
Total	93	89	88



Scheduled service statistics:
Passengers	3,681,944			3,266,789			12.7
Revenue passenger miles (RPMs) (thousands)	3,245,774			2,903,257			11.8
Available seat miles (ASMs) (thousands)	3,795,815			3,436,872			10.4
Load factor	85.5		%	84.5		%	1.0
Departures	25,992			23,609			10.1
Block hours	58,536			53,632			9.1
Total passenger revenue per ASM (TRASM) (cents) (2)	11.15			11.10			0.5
Average fare - scheduled service (3)	$	64.62		$	67.76		(4.6	)
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	$	114.99		$	116.80		(1.5	)
Average stage length (miles)	864			869			(0.6	)
Fuel gallons consumed (thousands)	49,671			47,821			3.9
Average fuel cost per gallon	$	2.37		$	1.70		39.4
Rental car days sold	404,355			391,010			3.4
Hotel room nights sold	93,484			107,910			(13.4	)
Percent of sales through website during period	93.9		%	95.1		%	(1.2	)