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	1720

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	2829

ITEM 4.	Controls and Procedures	2930

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	2930

ITEM 1A.	Risk Factors	2930

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

ITEM 3.	Defaults Upon Senior Securities	30

ITEM 4.	Mine Safety Disclosures	30

ITEM 5.	Other Information	30

ITEM 6.	Exhibits	31

	Signatures	32

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands)


	June 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
	(unaudited)						(unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	28,981		$	59,449		$	453,852		$	81,520
Restricted cash	13,253			11,190			14,318			14,391
Short-term investments	343,180			352,681			216,746			314,464
Accounts receivable	24,184			71,057			36,100			36,014
Expendable parts, supplies and fuel, net	20,419			17,647			25,131			19,516
Prepaid expenses	34,447			23,931
Other current assets	829			5,320
Prepaid expenses and other current assets							34,100			29,343
TOTAL CURRENT ASSETS	465,293			541,275			780,247			495,248
Property and equipment, net	1,746,707			1,512,415			2,019,774			1,847,268
Long-term investments	56,358			78,570			24,704			51,526
Deferred major maintenance, net	36,957			31,326			89,868			67,873
Operating lease right-of-use assets, net							22,233			—
Deposits and other assets	20,190			16,571			45,374			36,753
TOTAL ASSETS:	$	2,325,505		$	2,180,157		$	2,982,200		$	2,498,668
CURRENT LIABILITIES
Accounts payable	$	27,473		$	20,108		$	32,097		$	27,452
Accrued liabilities	124,326			105,127			147,483			122,027
Air traffic liability	236,932			204,299			267,050			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							160,523			152,287
TOTAL CURRENT LIABILITIES	533,123			544,295			607,153			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							1,338,734			1,119,446
Deferred income taxes	144,254			119,013			199,689			164,027
Other noncurrent liabilities	11,138			13,407			32,115			10,878
TOTAL LIABILITIES:	1,680,837			1,626,846			2,177,691			1,808,347
SHAREHOLDERS' EQUITY
Common stock, par value $.001	23			23			23			23
Treasury stock	(607,025		)	(605,655		)
Treasury shares							(605,115		)	(605,037		)
Additional paid in capital	263,034			253,840			280,783			270,935
Accumulated other comprehensive loss, net	(2,473		)	(2,840		)	(4		)	(661		)
Retained earnings	991,109			907,943			1,128,822			1,025,061
TOTAL EQUITY:	644,668			553,311			804,509			690,321
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY:	$	2,325,505		$	2,180,157		$	2,982,200		$	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 June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
OPERATING REVENUE:
Passenger revenue	$	405,572		$	367,250		$	802,343		$	715,086
OPERATING REVENUES:
Passenger													$	454,779		$	405,572		$	874,755		$	802,343
Third party products	17,799			14,304			28,124			27,046			18,208			17,799			35,350			28,124
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													12,487			7,653			23,061			18,209
Other													6,285			5,756			10,215			13,548
Total operating revenues													491,759			436,780			943,381			862,224
OPERATING EXPENSES:
Salary and benefits													113,592			101,645			233,003			214,608
Aircraft fuel	122,454			85,387			228,481			170,049			119,987			122,454			219,670			228,481
Salary and benefits	101,645			92,221			214,608			188,519
Station operations	41,553			38,998			79,137			70,830			45,870			41,553			84,835			79,137
Maintenance and repairs	24,611			28,645			43,881			58,740			20,877			24,611			43,701			43,881
Depreciation and amortization	29,833			30,129			57,983			60,678			38,494			29,833			74,676			57,983
Sales and marketing	18,348			13,492			37,426			26,822			20,540			18,348			41,466			37,426
Aircraft lease rentals	75			2,400			96			2,564
Aircraft lease rental													—			75			—			96
Other	24,039			24,777			46,422			44,129			24,294			24,039			46,849			46,422
Total operating expenses	362,558			316,049			708,034			622,331			383,654			362,558			744,200			708,034
OPERATING INCOME	74,222			85,795			154,190			159,524			108,105			74,222			199,181			154,190
OTHER (INCOME) EXPENSE:
OTHER (INCOME) EXPENSES:
Interest expense	13,156			8,889			25,880			17,291			20,942			13,251			39,025			26,158
Capitalized interest													(1,038		)	(95		)	(2,541		)	(278		)
Interest income	(1,927		)	(1,475		)	(3,834		)	(2,739		)	(3,502		)	(1,927		)	(6,703		)	(3,834		)
Loss on debt extinguishment													—			—			3,677			—
Other, net	(50		)	(493		)	(290		)	(854		)	(86		)	(50		)	15			(290		)
Total other expense	11,179			6,921			21,756			13,698
Total other expenses													16,316			11,179			33,473			21,756
INCOME BEFORE INCOME TAXES	63,043			78,874			132,434			145,826			91,789			63,043			165,708			132,434
PROVISION FOR INCOME TAXES	13,027			29,836			27,225			54,437			21,246			13,027			38,041			27,225
NET INCOME	$	50,016		$	49,038		$	105,209		$	91,389		$	70,543		$	50,016		$	127,667		$	105,209
Earnings per share to common shareholders:
Basic	$	3.10		$	2.98		$	6.53		$	5.52		$	4.33		$	3.10		$	7.85		$	6.53
Diluted	$	3.10		$	2.97		$	6.52		$	5.51		$	4.33		$	3.10		$	7.84		$	6.52
Shares used for computation:
Basic	15,939			16,198			15,898			16,290			16,063			15,939			16,037			15,898
Diluted	15,945			16,220			15,914			16,317			16,069			15,945			16,050			15,914

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

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

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017			2018			2017			2019		2018		2019			2018
Net income	$	50,016	$	49,038		$	105,209		$	91,389
Other comprehensive income (loss):
NET INCOME												$	70,543	$	50,016	$	127,667		$	105,209
Other comprehensive income:
Change in available for sale securities, net of tax	113		(2		)	(843		)	222			177		113		654			(843		)
Foreign currency translation adjustments	113		(215		)	214			(298		)	9		113		3			214
Change in derivatives, net of tax	1,260		(581		)	996			(1,085		)	—		1,260		—		��	996
Total other comprehensive income (loss)	1,486		(798		)	367			(1,161		)
Total other comprehensive income												186		1,486		657			367
TOTAL COMPREHENSIVE INCOME	$	51,502	$	48,240		$	105,576		$	90,228		$	70,729	$	51,502	$	128,324		$	105,576

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

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)



	Three Months Ended June 30, 2019
							Accumulated
	Common				Additional		other									Total
	stock		Par		paid-in		comprehensive			Retained			Treasury			shareholders'
	outstanding		value		capital		income (loss)			earnings			shares			equity
Balance at March 31, 2019	16,284		$	23	$	276,247	$	(190	)	$	1,069,690		$	(607,316	)	$	738,454
Share-based compensation	6		—		4,536		—			—			—			4,536
Shares repurchased by the Company and held as treasury shares	(5	)	—		—		—			—			(730		)	(730		)
Stock issued under employee stock purchase plan	20		—		—		—			—			2,931			2,931
Cash dividends, $0.70 per share	—		—		—		—			(11,411		)	—			(11,411		)
Other comprehensive income	—		—		—		186			—			—			186
Net income	—		—		—		—			70,543			—			70,543
Balance at June 30, 2019	16,305		$	23	$	280,783	$	(4	)	$	1,128,822		$	(605,115	)	$	804,509



	Six Months Ended June 30, 2019
							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	124		—		9,848		—			—			—			9,848
Shares repurchased by the Company and held as treasury shares	(22	)	—		—		—			—			(3,009		)	(3,009		)
Stock issued under employee stock purchase plan	20		—		—		—			—			2,931			2,931
Cash dividends, $1.40 per share	—		—		—		—			(22,805		)	—			(22,805		)
Other comprehensive income	—		—		—		657			(551		)	—			106
Net income	—		—		—		—			127,667			—			127,667
Cumulative effect of the New Lease Standard (see Note 5)	—		—		—		—			(550		)	—			(550		)
Balance at June 30, 2019	16,305		$	23	$	280,783	$	(4	)	$	1,128,822		$	(605,115	)	$	804,509



	Three Months Ended June 30, 2018
							Accumulated
	Common				Additional		other									Total
	stock		Par		paid-in		comprehensive			Retained			Treasury			shareholders'
	outstanding		value		capital		income (loss)			earnings			shares			equity
Balance at March 31, 2018	16,151		$	23	$	259,225	$	(3,959	)	$	952,403		$	(607,888	)	$	599,804
Share-based compensation	—		—		3,809		—			—			—			3,809
Issuance of common stock, net of forfeitures	5		—		—		—			—			—			—
Shares repurchased by the Company and held as treasury shares	(5	)	—		—		—			—			(761		)	(761		)
Stock issued under employee stock purchase plan	10		—		—		—			—			1,624			1,624
Cash dividends, $0.70 per share	—		—		—		—			(11,310		)	—			(11,310		)
Other comprehensive income	—		—		—		1,486			—			—			1,486
Net income	—		—		—		—			50,016			—			50,016
Balance at June 30, 2018	16,161		$	23	$	263,034	$	(2,473	)	$	991,109		$	(607,025	)	$	644,668



	Six Months Ended June 30, 2018
							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		—		9,194		—			—			—			9,194
Issuance of common stock, net of forfeitures	5		—		—		—			—			—			—
Shares repurchased by the Company and held as treasury shares	(18	)	—		—		—			—			(2,994		)	(2,994		)
Stock issued under employee stock purchase plan	10		—		—		—			—			1,624			1,624
Cash dividends, $1.40 per share	—		—		—		—			(22,605		)	—			(22,605		)
Other comprehensive income	—		—		—		367			562			—			929
Net income	—		—		—		—			105,209			—			105,209
Balance at June 30, 2018	16,161		$	23	$	263,034	$	(2,473	)	$	991,109		$	(607,025	)	$	644,668

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,						Six Months Ended June 30,
	2018			2017			2019			2018
OPERATING ACTIVITIES:
Net income	$	105,209		$	91,389		$	127,667		$	105,209
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	57,983			60,678			74,676			57,983
(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							(8,294		)	(1,491		)
Share-based compensation expense	6,106			7,249			9,128			6,106
Deferred income taxes	25,241			52,153			35,634			25,241
Other adjustments							5,199			1,237
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							(86		)	46,873
Prepaid expenses							(4,257		)	(10,516		)
Accounts payable							4,449			7,631
Accrued liabilities							14,681			20,859
Air traffic liability							54,820			32,633
Deferred major maintenance							(31,591		)	(7,841		)
Other assets/liabilities							(4,514		)	(689		)
Net cash provided by operating activities	283,235			262,920			277,512			283,235
INVESTING ACTIVITIES:
Purchase of investment securities	(168,923		)	(242,895		)	(130,627		)	(168,923		)
Proceeds from maturities of investment securities	199,294			154,334			258,076			199,294
Aircraft pre-delivery deposits	—			(63,468		)
Purchase of property and equipment, including capitalized interest	(187,456		)	(118,846		)	(234,469		)	(187,456		)
Other investing activities	(1,468		)	1,352			10,201			(1,468		)
Net cash used in investing activities	(158,553		)	(269,523		)	(96,819		)	(158,553		)
FINANCING ACTIVITIES:
Cash dividends paid to shareholders	(22,605		)	(23,204		)	(22,805		)	(22,605		)
Proceeds from the issuance of debt	10,797			134,540			770,435			10,797
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							(522,616		)	(142,399		)
Debt issuance costs							(30,759		)	(409		)
Other financing activities	4,114			188			(2,689		)	1,529
Net cash used in financing activities	(153,087		)	(38,292		)
Net cash provided by (used in) financing activities							191,566			(153,087		)
Net change in cash, cash equivalents, and restricted cash	(28,405		)	(44,895		)	372,259			(28,405		)
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		$	468,170		$	42,234

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAYMENTS FOR:
CASH PAYMENTS (RECEIPTS) FOR:
Interest paid, net of amount capitalized	$	24,370		$	16,001		$	36,886		$	24,370
Income taxes paid, net of (refunds)	$	(41,284	)	$	(13,967	)
Income tax refunds							(3,340		)	(41,284		)
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Property capitalized under operating leases							23,320			—
Flight equipment acquired under finance leases							—			102,609

~~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 operations, and all guarantees of~~Company's investments in unconsolidated affiliates, which are 50 percent or less owned, are accounted for under 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.~~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.~~ adoption on January 1, 2019.

The ~~Company adopted~~Company's consolidated balance sheet was affected by this standard, ~~using~~but the ~~full retrospective transition method effective~~consolidated statement of income and liquidity were not significantly impacted. The most significant change to the consolidated balance sheet upon 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~~2019 relates to ticket revenue, such as seat fees and baggage fees, are no longer considered distinct performance obligations separate from passenger travel and are reclassified into passenger revenue. These are deemed part of the single performance obligation of providing passenger transportation. While the adoption of the New Revenue Standard did not have a significant effect on earnings, $167.6 million and $322.3 million of air-related ancillary fees for the three and six months ended June 30, 2018, respectively, are now classified as passenger revenue.

~~The adoption of the New Revenue Standard resulted in a net reduction to air traffic liability at December 31, 2017 of $5.9 million. This change resulted from~~ the recognition of ~~breakage revenue on issuance~~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 (including passenger ticket sales and credit voucher ~~breakage,~~breakage), revenue from ancillary air-related charges (including seat fees, baggage fees, and other travel-related services performed in conjunction with a passenger’s ~~flight,~~flight), as well as co-brand credit card point redemptions, as outlined below:



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Scheduled service	$	237,685	$	235,746	$	472,456	$	474,267
Ancillary air-related charges	213,527		167,630		395,227		322,347
Co-brand redemptions	3,567		2,196		7,072		5,729
Total passenger revenue	$	454,779	$	405,572	$	874,755	$	802,343

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

~~Scheduled service~~

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

The contract term of passenger tickets is 12twelve months and revenue associated with future travel will principally be recognized within this time frame. ~~$187.8~~During the six months ended June 30, 2019, $204.8 million was recognized into passenger revenue ~~during the six months ended June 30, 2018~~ that was recorded in the air traffic liability balance of ~~$204.3~~$212.2 million at December 31, ~~2017.~~2018.

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

~~Air-related~~

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

Co-brand ~~redemption~~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:



	Six Months Ended June 30,
(in thousands)	2019			2018
Balance at January 1	$	10,708		$	8,903
Points awarded (deferral of revenue)	8,827			6,898
Points redeemed (recognition of revenue)	(7,072		)	(5,730		)
Balance at June 30	$	12,463		$	10,071

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

As of June 30, 2019 and 2018, $9.8 million and $6.9 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):~~equipment:



(in thousands)	As of June 30, 2019			As of December 31, 2018
Flight equipment, including pre-delivery deposits	$	2,089,440		$	1,905,157
Computer hardware and software	149,354			140,385
Land and buildings/leasehold improvements	85,939			85,925
Other property and equipment	121,285			89,778
Total property and equipment	2,446,018			2,221,245
Less accumulated depreciation and amortization	(426,244		)	(373,977		)
Property and equipment, net	$	2,019,774		$	1,847,268

As of June 30, 2018 As of December 31, 2017
Flight equipment, including pre-delivery deposits $ 1,785,184
$ 1,539,433
Computer hardware and software 131,661
123,675
Other property and equipment 151,802
125,855
Total property and equipment 2,068,647
1,788,963
Less accumulated depreciation and amortization (321,940 ) (276,548 )
Property and equipment, net $ 1,746,707
$ 1,512,415

Note 4 — Long-Term Debt

Long-term debt and ~~capital~~finance lease obligations:



(in thousands)	As of June 30, 2019			As of December 31, 2018
Fixed-rate debt and finance lease obligations due through 2029^{(1) (2)}	$	321,646		$	640,806
Variable-rate debt due through 2029	1,177,611			630,927
Total long-term debt and finance lease obligations, net of related costs	1,499,257			1,271,733
Less current maturities, net of related costs⁽¹⁾	160,523			152,287
Long-term debt and finance lease obligations, net of current maturities and related costs	$	1,338,734		$	1,119,446

Weighted average fixed-interest rate on debt	4.7		%	5.3		%
Weighted average variable-interest rate on debt	5.1		%	4.2		%

(1) As of June 30, 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 ~~(in thousands):~~secured by five aircraft.

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

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

Maturities of long-term debt and ~~capital~~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~~$168.1 million; 2020 - ~~$103.5~~$138.9 million; 2021 - ~~$76.6~~$133.4 million; 2022 - ~~$49.2~~$113.9 million; 2023 - $100.9 million; and ~~$259.5~~$844.1 million thereafter.

~~Secured Debt~~Consolidated Variable Interest Entity

During the six months ended June 30, 2018, the Company borrowed $10.8 million under a loan agreement secured by various ground equipment. The notes bear interest at a fixed rate of 4.2 percent per year, payable in monthly installments over five years.

~~Senior Secured Revolving Credit Facility~~

In ~~2015,~~March 2019, the Company, through a wholly owned subsidiary, entered into agreements with a trust to borrow $44.0 million secured by one aircraft. The trust was funded on inception. These borrowings bear interest at a blended rate of 3.8 percent, payable in quarterly installments through April 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

The Company has a senior secured revolving credit facility under which it ~~was entitled~~is able to borrow up to ~~$56.0 million. In March 2018, the Company paid off the balance of the facility and amended it to increase the borrowing limit to~~ $81.0 million. There was no balance under this facility as of June 30, 2019. The ~~amended~~ facility has a term of 24 months and is based on the value of ~~Airbus A320 Series~~ aircraft ~~which the Company may choose to place~~placed in the collateral pool. ~~There was no balance under this facility~~Aircraft remain in the collateral pool for up to two years, and, as of June 30, ~~2018.~~2019, there were four aircraft in the collateral pool.

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

Secured Debt

In June 2019, the Company entered into an agreement to borrow $213.0 million secured by 23 aircraft. The borrowing bears interest at a floating rate based on LIBOR, and is payable in quarterly installments over five years. A portion of the proceeds was used for ~~more information~~the prepayment of six existing debt agreements and the repayment of the outstanding balance on the senior secured revolving credit facility.

During the second quarter 2019, the Company borrowed a total of $63.4 million under multiple loan agreements secured by spare engines. The borrowings bear interest at a floating rate based on LIBOR, and are payable in quarterly installments, with terms ranging from seven to ten years.

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 quarterly interest payments along with quarterly principal payments of $1.1 million through February 2024, at which time the 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,~~Since December 2016 and until February 2019, the Company ~~completed an offering of $300.0~~had outstanding $450.0 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 bearbore interest at ~~a rate of~~ 5.5 percent per year ~~payable~~and matured in ~~cash semi-annually, on January 15th~~July 2019.

In connection with the Term Loan discussed above, the Company completed a tender offer in February 2019, whereby it purchased $347.9 million of the Notes, and ~~July 15th~~incurred related debt extinguishment costs of ~~each year.~~

$3.7 million. The indenture ~~pursuant~~governing the Notes was amended to eliminate most of the restrictive covenants and certain events of default and amend certain other provisions applicable to the Notes. The $428.0 million net proceeds from the Term Loan were used to purchase the Notes, of which the Notes were issued includes operating and financial restrictions on the Company. These restrictions limit or restrict, among other things, the Company’s ability and the ability of its restricted subsidiaries to (i) incur additional indebtedness; (ii) incur liens; (iii) make restricted payments (including paying dividends on, redeeming, repurchasing or retiring capital stock); (iv) make investments; and (v) consolidate, merge or sell all or substantially all of its assets. These covenants are subject to various exceptions and qualifications under the termsremaining $102.1 million outstanding at June 30, 2019 was paid at maturity in July 2019.

Construction Loan Agreement

In March 2019, Sunseeker Florida, Inc. (“SFI”), a wholly-owned subsidiary of the ~~indenture. As~~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 ~~December 31, 2017 and June 30, 2018, the Company exceeded the consolidated total leverage ratio limit, which could affect the ability to make restricted payments in future periods after exhaustion~~Phase 1 of ~~various exceptions. However, it is not expected that~~Sunseeker Resort -Charlotte Harbor (the “Project”). No amount has been drawn under 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.~~

~~Capital Leases~~

~~The Company has capital lease obligations related to aircraft, which significantly impacted our recognized assets and liabilities~~agreement as of June 30, ~~2018, but did not result~~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 guaranteed one-third of the debt, has agreed to bear responsibility under a Non-Recourse Carve-Out Guaranty, and has agreed to guarantee completion of 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. Accounting for finance leases is substantially unchanged.

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 twelve 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 June 30, 2019, had five aircraft under finance leases with remaining terms to 2029.

Lease Costs

The components of lease expense were as follows:



		Three Months Ended		Six Months Ended
(in thousands)	Classification on the Statements of Income	June 30, 2019		June 30, 2019
Finance lease costs:
Amortization of assets	Depreciation and amortization	$	1,629	$	3,259
Interest on lease liabilities	Interest expense	1,326		2,672
Operating lease cost	Station operations; Maintenance and repairs; Other operating expense	805		1,581
Variable lease cost	Station operations; Maintenance and repairs; Other operating expense	2,703		5,797
Total lease cost		$	6,463	$	13,309

Lease position as of June 30, 2019

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



		As of
(in thousands)	Classification on the Balance Sheet	June 30, 2019
Assets
Operating lease assets	Operating lease right-of-use assets, net	$	22,233
Finance lease assets	Property and equipment, net	114,924
Total lease assets		$	137,157

Liabilities
Current
Operating	Accrued liabilities	$	2,240
Finance	Current maturities of long-term debt and finance lease obligations	7,499
Noncurrent
Operating	Other noncurrent liabilities	21,476
Finance	Long-term debt and finance lease obligations	111,805
Total lease liabilities		$	143,020

Weighted-average remaining lease term
Operating leases		9.3 years
Finance leases		10.4 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 and six months ended June 30, 2019.



	Three Months Ended		Six Months Ended
(in thousands)	June 30, 2019		June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	643	1,272
Operating cash flows for finance leases	1,326		2,672
Financing cash flows for finance leases	1,824		3,628

Maturities of Lease Liabilities

The table below indicates the future minimum payments of lease liabilities as of June 30, 2019.



(in thousands)	Operating Leases			Finance Leases
Remaining in 2019	$	1,586		$	6,300
2020	3,206			12,600
2021	3,249			12,600
2022	3,294			11,095
2023	3,147			10,500
Thereafter	14,325			103,459
Total lease payments	28,807			156,554
Less imputed interest	(5,091		)	(37,250		)
Total lease obligations	23,716			119,304
Less current obligations	(2,240		)	(7,499		)
Long-term lease obligations	$	21,476		$	111,805

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):~~basis:


	As of June 30, 2018						As of December 31, 2017						As of June 30, 2019						As of December 31, 2018
	Total		Level 1		Level 2		Total		Level 1		Level 2
(in thousands)													Total		Level 1		Level 2		Total		Level 1		Level 2
Cash equivalents
Money market funds													$	310,550	$	310,550	$	—	$	43,281	$	43,281	$	—
Commercial paper	$	9,952	$	—	$	9,952	$	27,910	$	—	$	27,910	110,429		—		110,429		29,138		—		29,138
Municipal debt securities	5,325		—		5,325		2,782		—		2,782		2,408		—		2,408		—		—		—
Money market funds	115		115		—		1,297		1,297		—
Federal agency debt securities													950		—		950		—		—		—
US Treasury bonds													—		—		—		1,415		—		1,415
Total cash equivalents	15,392		115		15,277		31,989		1,297		30,692		424,337		310,550		113,787		73,834		43,281		30,553
Short-term
Commercial paper	141,091		—		141,091		108,678		—		108,678		138,332		—		138,332		180,846		—		180,846
Corporate debt securities	116,804		—		116,804		107,878		—		107,878		55,729		—		55,729		101,489		—		101,489
Federal agency debt securities													10,504		—		10,504		11,887		—		11,887
Municipal debt securities	53,143		—		53,143		101,290		—		101,290		7,450		—		7,450		14,252		—		14,252
Federal agency debt securities	30,718		—		30,718		31,428		—		31,428
US Treasury Bonds	1,424		—		1,424		3,407		—		3,407
US Treasury bonds													4,731		—		4,731		5,990		—		5,990
Total short-term	343,180		—		343,180		352,681		—		352,681		216,746		—		216,746		314,464		—		314,464
Long-term
Corporate debt securities	43,363		—		43,363		60,396		—		60,396		20,367		—		20,367		37,334		—		37,334
US Treasury bonds													3,068		—		3,068		2,901		—		2,901
Federal agency debt securities	10,022		—		10,022		5,775		—		5,775		1,269		—		1,269		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		24,704		—		24,704		51,526		—		51,526
Total financial instruments	$	414,951	$	115	$	414,836	$	463,522	$	1,297	$	462,225	$	665,787	$	310,550	$	355,237	$	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 ~~(in thousands):~~are as follows:



	As of June 30, 2019				As of December 31, 2018
(in thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Hierarchy Level
Publicly held debt	$	102,090	$	102,154	$	450,463	$	451,026	2
Non-publicly held debt	1,303,593		1,098,068		703,372		619,379		3
Total long-term debt	$	1,405,683	$	1,200,222	$	1,153,835	$	1,070,405

As of June 30, 2018 As of December 31, 2017
Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Hierarchy Level
Publicly held debt $ 450,893
$ 453,147
$ 451,321
$ 462,604
2
Non-publicly held debt 589,357
526,887
719,681
660,065
3
Total long-term debt $ 1,040,250
$ 980,034
$ 1,171,002
$ 1,122,669

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

~~Note 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, 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,
	2019			2018			2019			2018
Basic:
Net income	$	70,543		$	50,016		$	127,667		$	105,209
Less net income allocated to participating securities	(997		)	(659		)	(1,791		)	(1,427		)
Net income attributable to common stock	$	69,546		$	49,357		$	125,876		$	103,782
Earnings per share, basic	$	4.33		$	3.10		$	7.85		$	6.53
Weighted-average shares outstanding	16,063			15,939			16,037			15,898
Diluted:
Net income	$	70,543		$	50,016		$	127,667		$	105,209
Less net income allocated to participating securities	(996		)	(658		)	(1,790		)	(1,425		)
Net income attributable to common stock	$	69,547		$	49,358		$	125,877		$	103,784
Earnings per share, diluted	$	4.33		$	3.10		$	7.84		$	6.52
Weighted-average shares outstanding	16,063			15,939			16,037			15,898
Dilutive effect of stock options and restricted stock	39			44			39			63
Adjusted weighted-average shares outstanding under treasury stock method	16,102			15,983			16,076			15,961
Participating securities excluded under two-class method	(33		)	(38		)	(26		)	(47		)
Adjusted weighted-average shares outstanding under two-class method	16,069			15,945			16,050			15,914

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Basic:
Net income $ 50,016
$ 49,038
$ 105,209
$ 91,389
Less net income allocated to participating securities (659 ) (789 ) (1,427 ) (1,482 )
Net income attributable to common stock $ 49,357
$ 48,249
$ 103,782
$ 89,907
Earnings per share, basic $ 3.10
$ 2.98
$ 6.53
$ 5.52
Weighted-average shares outstanding 15,939
16,198
15,898
16,290
Diluted:

Net income $ 50,016
$ 49,038
$ 105,209
$ 91,389
Less net income allocated to participating securities (658 ) (789 ) (1,425 ) (1,480 )
Net income attributable to common stock $ 49,358
$ 48,249
$ 103,784
$ 89,909
Earnings per share, diluted $ 3.10
$ 2.97
$ 6.52
$ 5.51
Weighted-average shares outstanding 15,939
16,198
15,898
16,290
Dilutive effect of stock options and restricted stock 44
71
63
92
Adjusted weighted-average shares outstanding under treasury stock method 15,983
16,269
15,961
16,382
Participating securities excluded under two-class method (38 ) (49 ) (47 ) (65 )
Adjusted weighted-average shares outstanding under two-class method 15,945
16,220
15,914
16,317

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

Note 8 — Commitments and Contingencies

As of June 30, ~~2018,~~2019, the Company had firm commitments to purchase 11nine 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.~~ CFM engine.

The ~~remaining nine aircraft are currently scheduled to be delivered in the second half of 2018 and first quarter of 2019.~~

~~Future minimum fixed payments for 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):~~follows:



(in thousands)	As of June 30, 2019
Remaining in 2019	$	120,927
2020	33,800
2021	500
2022	18,000
Total commitments	$	173,227

As of June 30, 2018
Remaining in 2018 $ 79,148
2019 123,164
2020 67,422
2021 26,288
2022 23,569
Thereafter 150,598
Total commitments $ 470,189

Contingencies

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

Note 9 — ~~Related Party Transactions~~Segments

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

~~Entities owned or controlled by~~executive leadership team, which reviews information about the Company's ~~Chairman~~three operating segments: the Airline, Sunseeker Resort, and ~~CEO have been paid~~Other non-airline.

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 ~~building~~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 ~~corporate training content. During~~Sunseeker Resort is an extension of the ~~three~~Company's leisure travel focus and ~~six months ended June 30, 2017,~~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 ~~Company made payments~~Teesnap golf course management solution and Allegiant Nonstop family entertainment centers. Allegiant Nonstop family entertainment centers are comprised of games, attractions, and food facilities.

Selected information for the Company's segments and the reconciliation to ~~these entities~~the consolidated financial statement amounts are as follows:



(in thousands)	Airline		Sunseeker Resort			Other non- airline			Consolidated
Three Months Ended June 30, 2019
Operating revenue:
Passenger	$	454,779	$	—		$	—		$	454,779
Third party products	18,208		—			—			18,208
Fixed fee contract	12,487		—			—			12,487
Other	1,299		373			4,613			6,285
Operating income (loss)	115,546		(1,695		)	(5,746		)	108,105
Interest expense, net	15,924		478			—			16,402
Depreciation and amortization	36,890		326			1,278			38,494
Capital expenditures	98,128		11,296			2,494			111,918
Three Months Ended June 30, 2018
Operating revenue:
Passenger	$	405,572	$	—		$	—		$	405,572
Third party products	17,799		—			—			17,799
Fixed fee contract	7,653		—			—			7,653
Other	3,531		—			2,225			5,756
Operating income (loss)	76,054		(301		)	(1,531		)	74,222
Interest expense, net	11,229		—			—			11,229
Depreciation and amortization	29,405		10			418			29,833
Capital expenditures	106,360		9,204			2,725			118,289

(in thousands)	Airline		Sunseeker Resort			Other non- airline			Consolidated
Six Months Ended June 30, 2019
Operating revenue:
Passenger	$	874,755	$	—		$	—		$	874,755
Third party products	35,350		—			—			35,350
Fixed fee contract	23,061		—			—			23,061
Other	1,930		1,275			7,010			10,215
Operating income (loss)	214,035		(2,917		)	(11,937		)	199,181
Interest expense, net	29,145		636			—			29,781
Depreciation and amortization	72,119		482			2,075			74,676
Capital expenditures	207,048		16,571			10,850			234,469
Six Months Ended June 30, 2018
Operating revenue:
Passenger	$	802,343	$	—		$	—		$	802,343
Third party products	28,124		—			—			28,124
Fixed fee contract	18,209		—			—			18,209
Other	10,197		—			3,351			13,548
Operating income (loss)	158,004		(446		)	(3,368		)	154,190
Interest expense, net	22,046		—			—			22,046
Depreciation and amortization	57,172		17			794			57,983
Capital expenditures	165,934		17,344			4,178			187,456

Total assets were as follows as of ~~$0.2 million. No further payments are expected.~~the date indicated:



(in thousands)	June 30, 2019		December 31, 2018
Airline	$	2,859,309	$	2,422,523
Sunseeker Resort	80,895		56,047
Other non-airline	41,996		20,098
Consolidated	$	2,982,200	$	2,498,668

~~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~~2019 and ~~2017.~~2018. Also discussed is our financial position as of June 30, ~~2018~~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~~

Second Quarter 2019 Review

Highlights:


–	Achieved 23.7 percent airline operating margin, which represents a 6.2 percentage point increase year over year;


–	produced a 6.1 percent decrease in airline operating CASM excluding fuel;


–	recognized our second consecutive quarter of ancillary air-related revenue per passenger exceeding $50, with a total of $51.68 this quarter;


–	achieved industry leading controllable completion of more than 99.9% during the quarter;


–	improved A14 performance (flight arrival within 14 minutes of scheduled arrival) by 2.8 percentage points compared to 2018;


–	added two aircraft into service and expect an additional six to be added in the back half of 2019; and


–	announced 10 new routes, and began service on 35 routes previously announced.

~~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.~~

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



	June 30, 2019	December 31, 2018	June 30, 2018
A319	37	32	31
A320 ⁽¹⁾	49	44	35
MD-80	—	—	27
Total	86	76	93

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

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

As of June 30, ~~2018,~~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.~~aircraft. We expect delivery of 10six 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 September 30, 2019	As of December 31, 2019
MD-80	19	—
A319	31	32	37	38
A320	44	45	53	55
Total	94	77	90	93



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~~2019

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



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)



Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $.001	ALGT	NASDAQ Stock Market



Large accelerated filerx	☒		Accelerated filero	☐

Non-accelerated filero	☐		Smaller reporting companyo	☐

~~(Do not check if a smaller reporting company)~~	Emerging growth companyo	☐


	Three Months Ended June 30,				Percent		Three Months Ended June 30,				Percent
	2018		2017		Change		2019		2018		Change
Aircraft fuel	$	33.06	$	25.83	28.0	%
Airline unitized costs
Salary and benefits	27.44		27.89		(1.6	)	$	2.46	$	2.55	(3.5	)%
Station operations	11.22		11.80		(4.9	)	1.03		1.06		(2.8	)
Depreciation and amortization							0.83		0.75		10.7
Maintenance and repairs	6.64		8.66		(23.3	)	0.47		0.63		(25.4	)
Depreciation and amortization	8.05		9.11		(11.6	)
Sales and marketing	4.95		4.08		21.3		0.45		0.47		(4.3	)
Aircraft lease rentals	0.02		0.73		(97.3	)
Other	6.49		7.49		(13.4	)	0.41		0.56		(26.8	)
Operating expense per passenger	$	97.87	$	95.59	2.4	%
Operating expense per passenger, excluding fuel	$	64.81	$	69.76	(7.1	)%
Airline CASM, excluding fuel							5.65		6.02		(6.1	)
Aircraft fuel							2.70		3.12		(13.5	)
Airline CASM							8.35		9.14		(8.6	)

Airline CASM							8.35		9.14		(8.6	)
Non-airline operating CASM*							0.28		0.10		180.0
Operating CASM (consolidated)							8.63		9.24		(6.6	)



	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		%



	As of June 30, 2018
Remaining in 2018	$	79,148
2019	123,164
2020	67,422
2021	26,288
2022	23,569
Thereafter	150,598
Total commitments	$	470,189



	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		4,131,855			3,681,944			12.2
Revenue passenger miles (RPMs) (thousands)	3,245,774			2,903,257			11.8		3,603,076			3,245,774			11.0
Available seat miles (ASMs) (thousands)	3,795,815			3,436,872			10.4		4,311,182			3,795,815			13.6
Load factor	85.5		%	84.5		%	1.0		83.6		%	85.5		%	(1.9	)
Departures	25,992			23,609			10.1		29,567			25,992			13.8
Block hours	58,536			53,632			9.1		66,135			58,536			13.0
Total passenger revenue per ASM (TRASM) (cents) (2)	11.15			11.10			0.5		10.97			11.15			(1.6	)
Average fare - scheduled service (3)	$	64.62		$	67.76		(4.6	)	$	58.39		$	64.62		(9.6	)
Average fare - air-related charges (3)	$	45.53		$	44.66		1.9		$	51.68		$	45.53		13.5
Average fare - third party products	$	4.84		$	4.38		10.5		$	4.40		$	4.84		(9.1	)
Average fare - total	$	114.99		$	116.80		(1.5	)	$	114.47		$	114.99		(0.5	)
Average stage length (miles)	864			869			(0.6	)	853			864			(1.3	)
Fuel gallons consumed (thousands)	49,671			47,821			3.9		52,327			49,671			5.3
Average fuel cost per gallon	$	2.37		$	1.70		39.4		$	2.22		$	2.37		(6.3	)
Rental car days sold	404,355			391,010			3.4		540,960			404,355			33.8
Hotel room nights sold	93,484			107,910			(13.4	)	114,191			93,484			22.2
Percent of sales through website during period	93.9		%	95.1		%	(1.2	)	93.5		%	93.9		%	(0.4	)


Scheduled service statistics:
Passengers	6,961,312			6,112,269			13.9		7,553,393			6,961,312			8.5
Revenue passenger miles (RPMs) (thousands)	6,310,393			5,565,191			13.4		6,794,122			6,310,393			7.7
Available seat miles (ASMs) (thousands)	7,397,830			6,674,035			10.8		8,113,315			7,397,830			9.7
Load factor	85.3		%	83.4		%	1.9		83.7		%	85.3		%	(1.6	)
Departures	49,256			44,857			9.8		53,911			49,256			9.5
Block hours	114,224			104,507			9.3		124,098			114,224			8.6
Total passenger revenue per ASM (TRASM) (cents) (2)	11.23			11.12			1.0		11.22			11.23			(0.1	)
Average fare - scheduled service (3)	$	68.95		$	71.33		(3.3	)	$	63.49		$	68.95		(7.9	)
Average fare - air-related charges (3)	$	46.31		$	45.67		1.4		$	52.32		$	46.31		13.0
Average fare - third party products	$	4.04		$	4.42		(8.6	)	$	4.68		$	4.04		15.8
Average fare - total	$	119.30		$	121.42		(1.7	)	$	120.49		$	119.30		1.0
Average stage length (miles)	889			887			0.2		878			889			(1.2	)
Fuel gallons consumed (thousands)	96,542			92,713			4.1		97,395			96,542			0.9
Average fuel cost per gallon	$	2.27		$	1.75		29.7		$	2.18		$	2.27		(4.0	)
Rental car days sold	802,942			766,721			4.7		1,012,558			802,942			26.1
Hotel room nights sold	202,468			213,238			(5.1	)	219,206			202,468			8.3
Percent of sales through website during period	93.9		%	94.2		%	(0.3	)	93.5		%	93.9		%	(0.4	)


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)		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			388	$	131.74	None
May	4,349	159.60		None			4,703	$	144.31	None
June	—	—		None			—	$	—	None
Total	4,801	$	—		$	100,000	5,091	$	143.35		$	100,000



3.1	Articles of Incorporation (1)
3.2	Bylaws of the Company as amended on April 24, 2018 (2)
1210.1	Credit Agreement dated as of June 24, 2019 among Sunrise Asset Management, Bank of America Leasing and Capital, LLC, Sumitomo Mitsui Banking Corporation and Bank of Utah, as agent (3)
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



		ALLEGIANT TRAVEL COMPANY


Date:	~~August 3, 2018~~July 31, 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