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	1820

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	2529

ITEM 4.	Controls and Procedures	2629

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	2630

ITEM 1A.	Risk Factors	2630

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2730

ITEM 3.	Defaults Upon Senior Securities	2730

ITEM 4.	Mine Safety Disclosures	2730

ITEM 5.	Other Information	2730

ITEM 6.	Exhibits	2831

	Signatures	2932

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands)


	March 31, 2019			December 31, 2018			September 30, 2019			December 31, 2018
	(unaudited)						(unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	243,282		$	81,520		$	88,114		$	81,520
Restricted cash	14,496			14,391			20,475			14,391
Short-term investments	286,955			314,464			314,822			314,464
Accounts receivable	34,209			36,014			31,450			36,014
Expendable parts, supplies and fuel, net	19,527			19,516			27,210			19,516
Prepaid expenses and other current assets	35,477			29,343			43,356			29,343
TOTAL CURRENT ASSETS	633,946			495,248			525,427			495,248
Property and equipment, net	1,940,480			1,847,268			2,102,815			1,847,268
Long-term investments	24,605			51,526			39,057			51,526
Deferred major maintenance, net	83,869			67,873			99,564			67,873
Operating lease right-of-use assets, net	22,788			—			22,433			—
Deposits and other assets	44,789			36,753			45,184			36,753
TOTAL ASSETS:	$	2,750,477		$	2,498,668		$	2,834,480		$	2,498,668
CURRENT LIABILITIES
Accounts payable	$	28,690		$	27,452		$	21,493		$	27,452
Accrued liabilities	136,075			122,027			121,399			122,027
Air traffic liability	276,241			212,230			267,676			212,230
Current maturities of long-term debt and finance lease obligations, net of related costs	154,027			152,287			138,685			152,287
TOTAL CURRENT LIABILITIES	595,033			513,996			549,253			513,996
Long-term debt and finance lease obligations, net of current maturities and related costs	1,203,709			1,119,446			1,213,299			1,119,446
Deferred income taxes	180,136			164,027			211,801			164,027
Other noncurrent liabilities	33,145			10,878			33,519			10,878
TOTAL LIABILITIES:	2,012,023			1,808,347			2,007,872			1,808,347
SHAREHOLDERS' EQUITY
Common stock, par value $.001	23			23			23			23
Treasury stock	(607,316		)	(605,037		)
Treasury shares							(620,655		)	(605,037		)
Additional paid in capital	276,247			270,935			285,318			270,935
Accumulated other comprehensive loss, net	(190		)	(661		)
Accumulated other comprehensive income (loss), net							29			(661		)
Retained earnings	1,069,690			1,025,061			1,161,893			1,025,061
TOTAL EQUITY:	738,454			690,321			826,608			690,321
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY:	$	2,750,477		$	2,498,668		$	2,834,480		$	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 March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018
OPERATING REVENUES:
Passenger	$	419,977		$	396,771		$	391,222		$	355,100		$	1,265,978		$	1,157,443
Third party products	17,141			10,325			18,207			15,921			53,557			44,045
Fixed fee contracts	10,575			10,556			19,797			14,791			42,859			33,000
Other	3,929			7,792			7,283			7,297			17,498			20,845
Total operating revenues	451,622			425,444			436,509			393,109			1,379,892			1,255,333
OPERATING EXPENSES:
Salary and benefits	119,411			112,963			107,586			97,706			340,589			312,314
Aircraft fuel	99,682			106,027			104,583			113,525			324,253			342,006
Station operations	38,965			37,584			43,522			43,128			128,357			122,265
Depreciation and amortization							39,436			34,658			114,112			92,641
Maintenance and repairs	22,824			19,270			24,768			31,983			68,470			75,864
Depreciation and amortization	36,182			28,149
Sales and marketing	20,926			19,078			17,591			16,798			59,057			54,224
Aircraft lease rental							—			671			—			767
Other	22,554			22,405			26,907			28,459			73,756			74,881
Total operating expenses	360,544			345,476			364,393			366,928			1,108,594			1,074,962
OPERATING INCOME	91,078			79,968			72,116			26,181			271,298			180,371
OTHER (INCOME) EXPENSES:
Interest expense	18,083			12,908			19,506			14,309			58,531			40,467
Capitalized interest	(1,503		)	(184		)	(903		)	—			(3,444		)	(279		)
Interest income	(3,201		)	(1,907		)	(3,335		)	(2,425		)	(10,038		)	(6,259		)
Loss on debt extinguishment	3,677			—			—			—			3,677			—
Other, net	103			(240		)	(57		)	(118		)	(41		)	(408		)
Total other expenses	17,159			10,577			15,211			11,766			48,685			33,521
INCOME BEFORE INCOME TAXES	73,919			69,391			56,905			14,415			222,613			146,850
PROVISION FOR INCOME TAXES	16,795			14,198			12,976			(732		)	51,017			26,494
NET INCOME	$	57,124		$	55,193		$	43,929		$	15,147		$	171,596		$	120,356
Earnings per share to common shareholders:
Basic	$	3.52		$	3.43		$	2.70		$	0.94		$	10.55		$	7.46
Diluted	$	3.52		$	3.42		$	2.70		$	0.94		$	10.54		$	7.45
Shares used for computation:
Basic	16,011			15,889			16,037			15,957			16,037			15,929
Diluted	16,013			15,898			16,039			15,962			16,045			15,938

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

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 March 31,						Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018			2019		2018			2019		2018
NET INCOME	$	57,124		$	55,193		$	43,929	$	15,147		$	171,596	$	120,356
Other comprehensive income (loss):
Other comprehensive income:
Change in available for sale securities, net of tax	477			(956		)	16		(83		)	669		(926		)
Foreign currency translation adjustments	(6		)	101			17		4			21		218
Change in derivatives, net of tax	—			(264		)	—		1,325			—		2,321
Total other comprehensive income (loss)	471			(1,119		)
Total other comprehensive income							33		1,246			690		1,613
TOTAL COMPREHENSIVE INCOME	$	57,595		$	54,074		$	43,962	$	16,393		$	172,286	$	121,969

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



	Three Months Ended September 30, 2019
	Common stock outstanding		Par value		Additional paid-in capital		Accumulated other comprehensive income (loss)			Retained earnings			Treasury shares			Total shareholders' equity
Balance at June 30, 2019	16,305		$	23	$	280,783	$	(4	)	$	1,128,822		$	(605,115	)	$	804,509
Share-based compensation	—		—		4,535		—			—			—			4,535
Shares repurchased by the Company and held as treasury shares	(110	)	—		—		—			—			(15,540		)	(15,540		)
Cash dividends, $0.70 per share	—		—		—		—			(11,409		)	—			(11,409		)
Other comprehensive income	—		—		—		33			551			—			584
Net income	—		—		—		—			43,929			—			43,929
Balance at September 30, 2019	16,195		$	23	$	285,318	$	29		$	1,161,893		$	(620,655	)	$	826,608

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



	Nine Months Ended September 30, 2019
	Common stock outstanding		Par value		Additional paid-in capital		Accumulated other comprehensive income (loss)			Retained earnings			Treasury shares			Total shareholders' equity
Balance at December 31, 2018	16,183		$	23	$	270,935	$	(661	)	$	1,025,061		$	(605,037	)	$	690,321
Share-based compensation	124		—		14,383		—			—			—			14,383
Shares repurchased by the Company and held as treasury shares	(132	)	—		—		—			—			(18,549		)	(18,549		)
Stock issued under employee stock purchase plan	20		—		—		—			—			2,931			2,931
Cash dividends, $2.10 per share	—		—		—		—			(34,214		)	—			(34,214		)
Other comprehensive income	—		—		—		690			—			—			690
Net income	—		—		—		—			171,596			—			171,596
Cumulative effect of the New Lease Standard (see Note 5)	—		—		—		—			(550		)	—			(550		)
Balance at September 30, 2019	16,195		$	23	$	285,318	$	29		$	1,161,893		$	(620,655	)	$	826,608



	Three Months Ended September 30, 2018
	Common stock outstanding		Par value		Additional paid-in capital		Accumulated other comprehensive income (loss)			Retained earnings			Treasury shares			Total shareholders' equity
Balance at June 30, 2018	16,161		$	23	$	263,034	$	(2,473	)	$	991,109		$	(607,025	)	$	644,668
Share-based compensation	—		—		3,873		—			—			—			3,873
Issuance of common stock, net of forfeitures	3		—		—		—			—			—			—
Shares repurchased by the Company and held as treasury shares	(5	)	—		—		—			—			(624		)	(624		)
Cash dividends, $0.70 per share	—		—		—		—			(11,314		)	—			(11,314		)
Other comprehensive income	—		—		—		1,246			—			—			1,246
Net income	—		—		—		—			15,147			—			15,147
Balance at September 30, 2018	16,159		$	23	$	266,907	$	(1,227	)	$	994,942		$	(607,649	)	$	652,996



	Nine Months Ended September 30, 2018
	Common stock outstanding		Par value		Additional paid-in capital		Accumulated other comprehensive income (loss)			Retained earnings			Treasury shares			Total shareholders' equity
Balance at December 31, 2017	16,066		$	23	$	253,840	$	(2,840	)	$	907,943		$	(605,655	)	$	553,311
Share-based compensation	98		—		13,067		—			—			—			13,067
Issuance of common stock, net of forfeitures	8		—		—		—			—			—			—
Shares repurchased by the Company and held as treasury shares	(23	)	—		—		—			—			(3,617		)	(3,617		)
Stock issued under employee stock purchase plan	10		—		—		—			—			1,623			1,623
Cash dividends, $2.10 per share	—		—		—		—			(33,919		)	—			(33,919		)
Other comprehensive income	—		—		—		1,613			562			—			2,175
Net income	—		—		—		—			120,356			—			120,356
Balance at September 30, 2018	16,159		$	23	$	266,907	$	(1,227	)	$	994,942		$	(607,649	)	$	652,996

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

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,						Nine Months Ended September 30,
	2019			2018			2019			2018
OPERATING ACTIVITIES:
Net income	$	57,124		$	55,193		$	171,596		$	120,356
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	36,182			28,149			114,112			92,641
Gain on aircraft and other equipment disposals	(6,696		)	(132		)
(Gain)/loss on aircraft and other equipment disposals							(8,553		)	2,274
Share-based compensation expense	4,538			3,796			13,563			11,043
Deferred income taxes	16,103			12,735			47,795			21,760
Other adjustments	4,971			1,080			7,330			1,833
Changes in certain assets and liabilities:
Accounts receivable	1,805			6,713			4,564			38,005
Prepaid expenses	(5,988		)	(4,439		)	(13,493		)	(6,709		)
Accounts payable	(368		)	9,959			(3,655		)	(2,437		)
Accrued liabilities	7,877			14,267			(8,158		)	5,960
Air traffic liability	64,011			52,474			55,446			27,432
Deferred major maintenance	(18,376		)	(4,476		)	(48,081		)	(21,699		)
Other assets/liabilities	(1,086		)	(2,392		)	(11,039		)	(336		)
Net cash provided by operating activities	160,097			172,927			321,427			290,123
INVESTING ACTIVITIES:
Purchase of investment securities	(68,447		)	(93,933		)	(397,504		)	(263,057		)
Proceeds from maturities of investment securities	124,472			97,224			413,038			355,325
Purchase of property and equipment, including capitalized interest	(122,551		)	(69,167		)	(350,187		)	(273,999		)
Other investing activities	6,973			521			10,647			(5,399		)
Net cash used in investing activities	(59,553		)	(65,355		)	(324,006		)	(187,130		)
FINANCING ACTIVITIES:
Cash dividends paid to shareholders	(11,394		)	(11,295		)	(34,214		)	(33,919		)
Proceeds from the issuance of debt	494,000			—			770,435			191,724
Repurchase of common stock							(18,549		)	(3,617		)
Principal payments on debt and finance lease obligations	(386,329		)	(102,914		)	(670,148		)	(171,438		)
Debt issuance costs	(30,060		)	(176		)	(32,592		)	(1,147		)
Other financing activities	(4,894		)	(679		)	325			5,834
Net cash provided by (used in) financing activities	61,323			(115,064		)	15,257			(12,563		)
Net change in cash, cash equivalents, and restricted cash	161,867			(7,492		)
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH							12,678			90,430
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD	95,911			70,639			95,911			70,639
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	257,778		$	63,147		$	108,589		$	161,069

CASH PAYMENTS (RECEIPTS) FOR:
Interest paid, net of amount capitalized	$	20,924		$	17,902		$	53,089		$	43,751
Income tax (refunds)/payments	$	(4,490	)	$	37
Income tax refunds							(2,227		)	(41,145		)
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Property capitalized under operating leases	$	23,320		$	—		$	25,533		$	—
Flight equipment acquired under finance leases	$	—		$	77,162		—			127,625

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.~~method, and are insignificant to the consolidated financial statements. 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, 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

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

Lease payments include fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties, and ~~others~~other payments 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 and the Company adopted the New Lease Standard as of January 1, 2019. The Company also elected the package of practical expedients, which among other things, does not require reassessment of lease classification.

The Company adopted the New Lease Standard using the modified retrospective transition approach as of the effective date as permitted by the amendments in ASU 2018-11, "Targeted Improvements - Leases (Topic 842)." Under this method, the cumulative effect adjustment to the opening balance of retained earnings is recognized at the adoption date. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption on January 1, 2019.

The Company's consolidated balance sheet was affected by this standard, but the consolidated ~~statement~~statements of income and the Company's liquidity were not significantly impacted. The most significant change to the consolidated balance sheet upon adoption on January 1, 2019 relates to the recognition of new right-of-use (ROU) assets of $18.0 million and operating liabilities of $19.1 million. The Company's accounting for finance leases remains substantially unchanged.

See Note 5, "Leases," for more information.

Note 2 — Revenue Recognition

Passenger Revenue

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



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2019		2018		2019		2018
Scheduled service	$	200,233	$	202,796	$	672,690	$	677,061
Ancillary air-related charges	187,776		150,095		583,003		472,443
Co-brand redemptions	3,213		2,209		10,285		7,939
Total passenger revenue	$	391,222	$	355,100	$	1,265,978	$	1,157,443

Three Months Ended March,
(in thousands) 2019 2018
Scheduled service $ 234,772
$ 238,520
Ancillary air-related charges 181,700
154,717
Co-brand redemptions 3,505
3,534
Total passenger revenue $ 419,977
$ 396,771

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, 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. ~~$175.7~~During the nine months ended September 30, 2019, $210.1 million was recognized into passenger revenue ~~during the three months ended March 31, 2019~~ that was recorded in the air traffic liability balance of $212.2 million at December 31, 2018.

Co-brand redemptions

In relation to the travel component of the co-branded credit card 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 co-brand point liability as of the dates indicated:



	Nine Months Ended September 30,
(in thousands)	2019			2018
Balance at January 1	$	10,708		$	8,903
Points awarded (deferral of revenue)	14,308			10,872
Points redeemed (recognition of revenue)	(10,285		)	(7,939		)
Balance at September 30	$	14,731		$	11,836

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 ~~March 31,~~September 30, 2019 and ~~March 31,~~ 2018, ~~$8.9~~$10.6 million and ~~$5.7~~$8.1 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~~other noncurrent liabilities expected to be recognized into revenue in periods thereafter.

Note 3 — Property and Equipment

Property and ~~equipment (in thousands):~~equipment:



(in thousands)	As of September 30, 2019			As of December 31, 2018
Flight equipment, including pre-delivery deposits	$	2,168,557		$	1,905,157
Computer hardware and software	158,720			140,385
Land and buildings/leasehold improvements	86,163			85,925
Other property and equipment	142,198			89,778
Total property and equipment	2,555,638			2,221,245
Less accumulated depreciation and amortization	(452,823		)	(373,977		)
Property and equipment, net	$	2,102,815		$	1,847,268

As of March 31, 2019 As of December 31, 2018
Flight equipment, including pre-delivery deposits $ 2,002,777
$ 1,905,157
Computer hardware and software 143,369
140,385
Land and buildings/leasehold improvements 85,925
85,925
Other property and equipment 106,159
89,778
Total property and equipment 2,338,230
2,221,245
Less accumulated depreciation and amortization (397,750 ) (373,977 )
Property and equipment, net $ 1,940,480
$ 1,847,268

Accrued capital expenditures as of September 30, 2019 and September 30, 2018 were $6.1 million and $3.8 million, respectively.

Note 4 — Long-Term Debt

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



(in thousands)	As of September 30, 2019			As of December 31, 2018
Fixed-rate debt and finance lease obligations due through 2029⁽¹⁾	$	215,839		$	640,806
Variable-rate debt due through 2029	1,136,145			630,927
Total long-term debt and finance lease obligations, net of related costs	1,351,984			1,271,733
Less current maturities, net of related costs⁽¹⁾	138,685			152,287
Long-term debt and finance lease obligations, net of current maturities and related costs	$	1,213,299		$	1,119,446

Weighted average fixed-interest rate on debt	3.9		%	5.3		%
Weighted average variable-interest rate on debt	4.8		%	4.2		%

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 finance lease obligations for the remainder of 2019 and for the next four years and thereafter, in the aggregate, are: remaining in 2019 - ~~$196.2~~$33.0 million; 2020 - ~~$124.0~~$138.9 million; 2021 - ~~$144.4~~$133.4 million; 2022 - ~~$70.1~~$113.8 million; 2023 - ~~$57.2~~$100.9 million; and ~~$765.8~~$832.0 million thereafter.

Consolidated Variable Interest Entity

The Company evaluates ownership, contractual lease arrangements and other interests in entities to determine if they are variable interest entities ("VIEs") based on the 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 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 secured by ~~one Airbus A320 series~~1 aircraft. The trust was funded on inception. These borrowings bear interest at a blended rate of 3.8 percent, payable in quarterly installments through ~~March~~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 is able to borrow up to $81.0 ~~million, and $46.9 million is outstanding~~million. There was 0 balance under this facility as of ~~March 31,~~September 30, 2019. The facility has a ~~current~~ term of 24 months and is based on the value of ~~Airbus A320 series~~ aircraft placed in the collateral pool. Aircraft ~~may~~ remain in the collateral pool for up to two years, and, as of ~~March 31,~~September 30, 2019, there were ~~nine~~4 aircraft in the collateral pool.

Secured Debt

In June 2019, the Company entered into an agreement to borrow $213.0 million secured by 23 aircraft. The ~~notes~~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 the ~~amounts~~prepayment of the balance under 6 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 ~~the facility~~loan agreements secured by spare engines. The borrowings bear interest at a floating rate based on LIBOR, and are ~~due on March 31, 2021.~~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,~~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 and~~ July ~~15th of each year.~~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 incurred related debt extinguishment costs of $3.7 million. The ~~indenture governing the Notes was amended to eliminate most of the restrictive covenants and certain events of default, reduce the minimum notice period required for redemptions~~remaining $102.1 million of the Notes from 30 days as previously required by the indenture to three business days, and 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 expects to call the remaining balance of the Noteswere paid at their maturity in ~~advance of their~~ July ~~2019 maturity.~~2019.

Construction Loan Agreement

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”). NoNaN amount has been drawn under this agreement as of ~~March 31,~~September 30, 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 accordance with approved plans and specifications. All of the 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 12twelve 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~~5 aircraft under finance leases as of September 30, 2019, with remaining terms to 2029.

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

Lease Costs

The components of lease ~~expense~~costs recognized on the statements of income were as follows:



		Three Months Ended		Nine Months Ended
(in thousands)	Classification on the Statements of Income	September 30, 2019		September 30, 2019
Finance lease costs:
Amortization of assets	Depreciation and amortization	$	1,629	$	4,888
Interest on lease liabilities	Interest expense	1,306		3,978
Operating lease cost	Station operations; Maintenance and repairs; Other operating expense	897		2,634
Variable lease cost	Station operations; Maintenance and repairs; Other operating expense	663		1,672
Total lease cost		$	4,495	$	13,172

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,~~September 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	September 30, 2019
Assets
Operating lease assets	Operating lease right-of-use assets, net	$	22,433
Finance lease assets	Property and equipment, net	113,294
Total lease assets		$	135,727

Liabilities
Current
Operating	Accrued liabilities	$	2,388
Finance	Current maturities of long-term debt and finance lease obligations	7,582
Noncurrent
Operating	Other noncurrent liabilities	21,744
Finance	Long-term debt and finance lease obligations	109,878
Total lease liabilities		$	141,592

Weighted-average remaining lease term
Operating leases		9.4 years
Finance leases		10.1 years
Weighted-average discount rate
Operating leases		4.3		%
Finance leases		4.4		%

(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 and nine months ended ~~March 31,~~September 30, 2019.



	Three Months Ended		Nine Months Ended
(in thousands)	September 30, 2019		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	725	$	2,190
Operating cash flows for finance leases	1,306		3,978
Financing cash flows for finance leases	1,844		5,472

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,~~September 30, 2019.



(in thousands)	Operating Leases			Finance Leases
Remaining in 2019	$	726		$	3,150
2020	3,566			12,600
2021	3,382			12,600
2022	3,361			11,095
2023	3,213			10,500
Thereafter	15,317			103,459
Total lease payments	29,565			153,404
Less imputed interest	(5,433		)	(35,944		)
Total lease obligations	24,132			117,460
Less current obligations	(2,388		)	(7,582		)
Long-term lease obligations	$	21,744		$	109,878

(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		Finance 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

(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.

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


	As of March 31, 2019						As of December 31, 2018						As of September 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	$	125,394	$	125,394	$	—	$	43,281	$	43,281	$	—	$	65,014	$	65,014	$	—	$	43,281	$	43,281	$	—
Commercial paper	80,760		—		80,760		29,138		—		29,138		5,731		—		5,731		29,138		—		29,138
Municipal debt securities	3,792		—		3,792		—		—				4,087		—		4,087		—		—		—
US Treasury Bonds	880		—		880		1,415		—		1,415
Federal agency debt securities													124		—		124		—		—		—
US Treasury bonds													—		—		—		1,415		—		1,415
Total cash equivalents	210,826		125,394		85,432		73,834		43,281		30,553		74,956		65,014		9,942		73,834		43,281		30,553
Short-term
Corporate debt securities													149,854		—		149,854		101,489		—		101,489
Commercial paper	182,608		—		182,608		180,846		—		180,846		142,656		—		142,656		180,846		—		180,846
Corporate debt securities	74,331		—		74,331		101,489		—		101,489
Federal agency debt securities													11,510		—		11,510		11,887		—		11,887
Municipal debt securities	13,927		—		13,927		14,252		—		14,252		7,785		—		7,785		14,252		—		14,252
Federal agency debt securities	11,367		—		11,367		11,887		—		11,887
US Treasury Bonds	4,722		—		4,722		5,990		—		5,990
US Treasury bonds													3,017		—		3,017		5,990		—		5,990
Total short-term	286,955		—		286,955		314,464		—		314,464		314,822		—		314,822		314,464		—		314,464
Long-term
Corporate debt securities	20,300		—		20,300		37,334		—		37,334		35,996		—		35,996		37,334		—		37,334
US Treasury Bonds	3,050		—		3,050		2,901		—		2,901
US Treasury bonds													3,061		—		3,061		2,901		—		2,901
Federal agency debt securities	1,255		—		1,255		11,291		—		11,291		—		—		—		11,291		—		11,291
Total long-term	24,605		—		24,605		51,526		—		51,526		39,057		—		39,057		51,526		—		51,526
Total financial instruments	$	522,386	$	125,394	$	396,992	$	439,824	$	43,281	$	396,543	$	428,835	$	65,014	$	363,821	$	439,824	$	43,281	$	396,543

The fair value of the Company’s publicly held long-term debt iswas determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets; therefore, the Company ~~has~~ categorized its publicly held debt as Level 2. The 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):~~follows:



	As of September 30, 2019				As of December 31, 2018
(in thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Hierarchy Level
Non-publicly held debt	$	1,259,130	$	1,053,911	$	703,372	$	619,379	3
Publicly held debt	—		—		450,463		451,026		2
Total long-term debt	$	1,259,130	$	1,053,911	$	1,153,835	$	1,070,405

As of March 31, 2019 As of December 31, 2018
Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Hierarchy Level
Publicly held debt $ 102,133
$ 102,389
$ 450,463
$ 451,026
2
Non-publicly held debt 1,160,772
937,134
703,372
619,379
3
Total long-term debt $ 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 7 — Earnings per Share

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

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


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


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

For the three and nine months ended ~~March 31,~~September 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 September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Basic:
Net income	$	43,929		$	15,147		$	171,596		$	120,356
Less net income allocated to participating securities	(578		)	(194		)	(2,441		)	(1,602		)
Net income attributable to common stock	$	43,351		$	14,953		$	169,155		$	118,754
Earnings per share, basic	$	2.70		$	0.94		$	10.55		$	7.46
Weighted-average shares outstanding	16,037			15,957			16,037			15,929
Diluted:
Net income	$	43,929		$	15,147		$	171,596		$	120,356
Less net income allocated to participating securities	(578		)	(194		)	(2,440		)	(1,601		)
Net income attributable to common stock	$	43,351		$	14,953		$	169,156		$	118,755
Earnings per share, diluted	$	2.70		$	0.94		$	10.54		$	7.45
Weighted-average shares outstanding	16,037			15,957			16,037			15,929
Dilutive effect of stock options and restricted stock	56			35			45			42
Adjusted weighted-average shares outstanding under treasury stock method	16,093			15,992			16,082			15,971
Participating securities excluded under two-class method	(54		)	(30		)	(37		)	(33		)
Adjusted weighted-average shares outstanding under two-class method	16,039			15,962			16,045			15,938

Three Months Ended March 31,
2019 2018
Basic:
Net income $ 57,124
$ 55,193
Less net income allocated to participating securities (799 ) (768 )
Net income attributable to common stock $ 56,325
$ 54,425
Earnings per share, basic $ 3.52
$ 3.43
Weighted-average shares outstanding 16,011
15,889
Diluted:

Net income $ 57,124
$ 55,193
Less net income allocated to participating securities (798 ) (768 )
Net income attributable to common stock $ 56,326
$ 54,425
Earnings per share, diluted $ 3.52
$ 3.42
Weighted-average shares outstanding 16,011
15,889
Dilutive effect of stock options and restricted stock 31
46
Adjusted weighted-average shares outstanding under treasury stock method 16,042
15,935
Participating securities excluded under two-class method (29 ) (37 )
Adjusted weighted-average shares outstanding under two-class method 16,013
15,898

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

Note 8 — Commitments and Contingencies

As of ~~March 31,~~September 30, 2019, the Company had firm commitments to purchase ~~twelve~~14 Airbus A320 series ~~aircraft and four CFM engines.~~aircraft.

The Company's contractual purchase commitments consist primarily of aircraft and engine acquisitions. The total future commitments are as ~~follows (in thousands):~~follows:



(in thousands)	As of September 30, 2019
Remaining in 2019	$	53,400
2020	157,900
2021	37,900
2022	21,000
Total commitments	$	270,200

As of March 31, 2019
Remaining in 2019 $ 198,110
2020 33,800
2021 500
2022 18,000
Total commitments $ 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 — Segments

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~~3 operating segments: the Airline, Sunseeker Resort, and ~~Other~~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 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 leisure travel focus and 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.~~centers. Allegiant Nonstop family entertainment centers are comprised of games, attractions, and food facilities.

In July 2019, management began evaluating strategic alternatives for Teesnap, and its business-to-business software as a service offering. As the Company's current strategy has a business to customer focus, rather than business to business, management determined that the best course of action for both entities would be to sell Teesnap. Management expects the sale to be finalized before the end of the second quarter 2020. The carrying value of the disposal group expected to be transferred in the sale is approximately $5.5 million as of September 30, 2019.

Selected information for the Company's segments and the reconciliation to the consolidated financial statement amounts are as ~~follows (in thousands):~~follows:


	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
(in thousands)											Airline		Sunseeker Resort			Other non- airline			Consolidated
Three Months Ended September 30, 2019
Operating revenue:
Passenger	$	396,771	$	—		$	—		$	396,771	$	391,222	$	—		$	—		$	391,222
Third party products	10,325		—			—			10,325		18,207		—			—			18,207
Fixed fee contract	10,556		—			—			10,556		19,797		—			—			19,797
Other	6,666		—			1,126			7,792		1,648		251			5,384			7,283
Operating income (loss)	81,950		(145		)	(1,837		)	79,968		77,335		(1,281		)	(3,938		)	72,116
Interest expense, net	10,817		—			—			10,817		14,761		507			—			15,268
Depreciation and amortization	27,766		7			376			28,149		38,409		329			698			39,436
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		98,308		16,931			479			115,718
Three Months Ended September 30, 2018
Operating revenue:
Passenger											$	355,100	$	—		$	—		$	355,100
Third party products											15,921		—			—			15,921
Fixed fee contract											14,791		—			—			14,791
Other											4,611		94			2,592			7,297
Operating income (loss)											29,727		(1,136		)	(2,410		)	26,181
Interest expense, net											11,884		—			—			11,884
Depreciation and amortization											34,138		47			473			34,658
Capital expenditures											74,799		8,197			3,547			86,543

(in thousands)											Airline		Sunseeker Resort			Other non- airline			Consolidated
Nine Months Ended September 30, 2019
Operating revenue:
Passenger											$	1,265,978	$	—		$	—		$	1,265,978
Third party products											53,557		—			—			53,557
Fixed fee contract											42,859		—			—			42,859
Other											3,578		1,526			12,394			17,498
Operating income (loss)											291,371		(4,199		)	(15,874		)	271,298
Interest expense, net											43,906		1,143			—			45,049
Depreciation and amortization											110,528		811			2,773			114,112
Capital expenditures											305,356		33,502			11,329			350,187
Nine Months Ended September 30, 2018
Operating revenue:
Passenger											$	1,157,443	$	—		$	—		$	1,157,443
Third party products											44,045		—			—			44,045
Fixed fee contract											33,000		—			—			33,000
Other											14,808		94			5,943			20,845
Operating income (loss)											187,731		(1,582		)	(5,778		)	180,371
Interest expense, net											33,929		—			—			33,929
Depreciation and amortization											91,309		64			1,268			92,641
Capital expenditures											240,733		25,541			7,725			273,999

Total assets were as follows as of the dates indicated:



(in thousands)	September 30, 2019		December 31, 2018
Airline	$	2,689,869	$	2,422,523
Sunseeker Resort	104,283		56,047
Other non-airline	40,328		20,098
Consolidated	$	2,834,480	$	2,498,668

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

The following discussion and analysis presents factors that had a material effect on our results of operations during the three and nine months ended ~~March 31,~~September 30, 2019 and 2018. Also discussed is our financial position as of ~~March 31,~~September 30, 2019 and December 31, 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, 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.

~~First~~Third Quarter 2019 Review

Highlights:


–	Achieved 2217.9 percent airline operating ~~margin;~~margin, which represents a 10.3 percentage point increase year over year;


–	recognized ~~record~~our third consecutive quarter of ancillary air-related revenue per passenger exceeding $50, with a total of ~~$53.10, which represents an increase of 12.5 percent compared to 2018;~~ $50.03 this quarter;


–	~~added eight aircraft into service and expect an additional nine to be added throughout 2019;~~recognized a 33.8 percent increase in fixed fee revenue quarter over quarter, which resulted in the highest quarterly fixed fee revenue in company history;


–	~~announced 35 new routes, including inaugural~~achieved third party products revenue per passenger of $4.85, the highest third quarter revenue since 2013;


–	achieved a total fare increase of 1.8 percent year over year despite a 5.8 percent increase in scheduled service ~~into Anchorage, AK;~~capacity;


–	produced a 5.6 percent decrease in airline operating CASM excluding fuel;


–	ranked number two by Forbes in list of best airlines to fly this fall and received recognition from the USA Today Reader's Choice Award for having the best airline co-branded credit card;


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


–	improved controllable A14 performance (flight arrival within 14 minutes of scheduled arrival) by 4.5 percentage points compared to 2018; and


–	~~broke ground on Sunseeker Resort - Charlotte Harbor.~~scheduled 22 new routes which are planned to begin service in November 2019.

AIRCRAFT

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


	March 31, 2019	December 31, 2018	March 31, 2018	September 30, 2019	December 31, 2018	September 30, 2018
MD-80	—	—	32
A319	37	32	26	37	32	31
A320 (1)	47	44	30	52	44	43
MD-80				—	—	19
Total	84	76	88	89	76	93

(1) Does not include ~~three~~four aircraft ~~for~~of which we have taken delivery, but were not yet in service as of ~~March 31,~~September 30, 2019.

As of ~~March 31,~~September 30, 2019, we had firm commitments to purchase ~~twelve aircraft.~~14 aircraft and have signed an agreement to take delivery of four additional aircraft through operating leases. We expect delivery of ~~nine~~seven of these aircraft in 2019 and the remaining aircraft in 2020 ~~and~~through 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 our operating fleet.

As of June 30, 2019 As of September 30, 2019 As of December 31, 2019
A319 37
38
38
A320 51
53
55
Total 88
91
93



	As of December 31, 2019
A319	38
A320	55
Total	93

NETWORK

As of ~~March 31,~~September 30, 2019, we ~~are currently~~were selling ~~450~~466 routes versus ~~419~~421 as of the same date last year, which represents a ~~7.4~~10.7 percent increase. Our total number of origination cities and leisure destinations (for operating routes) were 9894 and ~~23,~~26, respectively, as of ~~March 31,~~September 30, 2019. Based on our currently published schedule through ~~early-February~~May 2020, and service announcements and cancellations by other airlines ~~to date,~~as of September 30, 2019, we will have direct competition (which we consider to be similar non-stop service between markets) on ~~114 of our~~approximately 101 routes as of that date.

~~During~~As of the ~~first quarter~~date of ~~2019, we announced 35~~this filing, service is scheduled on 22 new routes beginning in fourth quarter 2019, including ~~our inaugural scheduled flights~~service into West Palm Beach, FL, which we are welcoming back 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~~ the ~~second quarter 2019.~~Allegiant network.

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~~The transition to an all-Airbus fleet ~~transition, Airbus aircraft flew 100 percent of our scheduled service ASMs for the quarter, compared~~continues to ~~72.4 percent for the same time period in 2018, which drove a 9.6 percent increase in fuel efficiency (measured as ASMs per gallon).~~produce positive operating results. Despite having an average of 11eight fewer ~~operating~~ aircraft in service during the ~~fleet~~third quarter 2019 compared to 2018, scheduled service ASMs increased ~~5.6~~5.8 percent on an 8.1 percent increase in departures, and scheduled service passengers increased ~~4.3~~8.4 percent. ~~Higher~~We accomplished the increased capacity by increasing aircraft utilization of(block hours per aircraft) by 15.6 percent compared to the ~~Airbus fleet (with~~third quarter 2018. The increase in utilization was enabled by the younger and more reliable all-Airbus fleet. Despite the capacity increase, we were able to achieve a ~~16.9~~1.8 percent ~~year-over-year~~ increase in average ~~block hours~~total fare year over year.

We grew airline operating margin by 10.3 percentage points, to 17.9 percent in the third quarter 2019. This was partly due to a 3.6 percent increase in fuel efficiency (ASMs per ~~aircraft~~gallon of fuel), coupled with a 10.4 percent decrease in average per ~~day) enabled system growth with fewer aircraft. We expect~~gallon fuel cost. The margin improvement was also attributable to ~~return~~a 5.6 percent decrease in total airline unit cost excluding fuel, driven by continued improvement in operations, lower maintenance expense, and lower irregular operations costs.

Margin improvement was also bolstered by increases in revenue. 28.2 percent of our scheduled ASMs were on off-peak days in the third quarter 2019 (generally Tuesdays, Wednesdays and Saturdays) compared to ~~lower aircraft utilization during~~26.7 percent in the same quarter last year, ~~as more aircraft are added~~and we still achieved an increase in total unit revenue of 4.3 percent. Although off-peak flying has contributed to our margin improvement, our operating ~~fleet. Airline operating income increased more than $16 million quarter-over-quarter,~~strategy remains unchanged and ~~produced~~we reduce flying when demand is low. We were able to profitably decrease flight hours this September by over 48 percent when compared to our busiest months in 2019.

Additionally, we have led or tied for the U.S. domestic airline industry lead in completion factor for 18 of the past 21 months since the beginning of 2018. During the first three quarters of 2019, we had only eleven days affected by maintenance cancellations, and achieved a ~~22 percent operating margin.~~

~~We continue to improve our operation, as evidenced by a 100 percent~~99.97 controllable completion ~~rate for the first quarter 2019, and a total completion factor of 99.2 percent. We also achieved a record 123 consecutive days without a maintenance cancellation.~~percentage.

In April 2019, our dispatchers, represented by the International Brotherhood of Teamsters, (IBT) voted to ratify their first collective bargaining agreement. The agreement has a five year term beginning May 1, 2019 and is not expected to have a significant effect on our operating results.

In March 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 first Allegiant Nonstop family entertainment center in Clearfield, UT, in January 2019 and our second location in Warren, MI, in April 2019.

RESULTS OF OPERATIONS

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

Operating Revenue

Passenger revenue. For the ~~first~~third quarter 2019, passenger revenue increased ~~5.8~~10.2 percent compared to ~~first~~third quarter 2018. The increase was driven primarily by ~~a 4.6~~an 8.1 percent increase in scheduled service departures, which, along with a slight increase in load factor, resulted in ~~a 4.3~~an 8.4 percent increase in scheduled service ~~passengers (slightly diluted by a 1.2 percentage point drop~~passengers. A 15.4 percent increase in ~~load factor). The higher number of passengers resulted~~air-related ancillary average fare more than offset an 8.5 percent decrease in ~~year-over-year increases in ancillary revenues, the most significant of which were increases~~scheduled service average fare. Increases in the customer convenience fee and ~~carry on and checked~~ baggage fees ~~throughout the network. These increases~~ contributed to ~~a 12.5 percent~~the increase in air-related ancillary unit ~~ancillary~~ revenue to ~~$53.10~~$50.03 per ~~passenger, the highest quarterly performance in our history.~~passenger.

Third party products revenue. Third party products revenue for the ~~first~~third quarter 2019 increased ~~66.0~~14.4 percent, ~~or $6.8 million,~~ compared to the same period in 2018. This is primarily the result of ~~a 26.5 percent increase in net~~increased revenue from ~~rental cars resulting from the increase in scheduled service passengers coupled with a higher take rate,~~our co-branded credit card program, as well as an increase in net revenue ~~generated~~ from ~~our co-branded credit card program.~~both rental cars and hotels.

Fixed fee contract revenue. Fixed fee contract revenue for the ~~first~~third quarter 2019 ~~remained relatively flat~~increased 33.8 percent when compared to 2018, ~~despite a 6.5 percent decrease in~~mostly due to increased flying for the Department of Defense. This increase was the result of greater availability of spare aircraft due to improved operations and an all-Airbus fleet. The grounding of the Boeing 737 Max of other airlines likely also contributed to our increased fixed fee ~~departures quarter-over-quarter. The decrease in departures resulted from~~flying opportunities during the government shutdown early in the quarter, as the FAA was not available to provide certification for aircraft that we had available and ready for service; thus, we were operating fewer aircraft than planned.quarter.

Other revenue. Other revenue ~~decreased by $3.9 million~~remained relatively flat year over year, with a decrease of less than one percent for the ~~first~~third quarter 2019 from ~~2018, primarily~~2018. The slight decline is due to ~~a decrease in~~the conclusion of our aircraft lease ~~revenue. We took redelivery of the final aircraft previously on lease to~~revenue arrangement with a European carrier, ~~in December 2018, whereas 10~~as we had six aircraft ~~were~~ on lease during the ~~first~~third quarter ~~2018. The decline in lease revenue~~of 2018 and none during 2019. This was ~~partially~~mostly offset by ~~increased~~an increase in revenue from ~~Teesnap,~~ our ~~golf course management solution.~~non-airline activities.

Operating Expenses

We primarily evaluate our expense management by comparing our costs per ASM across different periods, which enables us to assess trends in each expense category. The following table presents airline-only unit costs on a per ASM basis, or CASM, for the indicated periods. Excluding fuel on a per 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 March 31,						Percent		Three Months Ended September 30,		Percent
	2019			2018			Change		2019	2018	Change
Airline unitized costs (in cents)
Salary and benefits		3.05	¢		3.03	¢	0.7	%	2.66	2.64	0.8	%
Aircraft fuel	2.55			2.84			(10.2	)
Station operations	1.00			1.01			(1.0	)	1.12	1.18	(5.1	)
Depreciation and amortization									0.99	0.94	5.3
Maintenance and repairs	0.58			0.52			11.5		0.64	0.88	(27.3	)
Depreciation and amortization	0.93			0.75			24.0
Sales and marketing	0.54			0.51			5.9		0.45	0.46	(2.2	)
Other	0.57			0.61			(6.6	)	0.54	0.68	(20.6	)
CASM		9.22	¢		9.27	¢	(0.5	)%
Operating CASM, excluding fuel	6.67			6.43			3.7
Airline CASM, excluding fuel									6.40	6.78	(5.6	)
Aircraft fuel									2.69	3.12	(13.8	)
Airline CASM									9.09	9.90	(8.2	)

Airline CASM									9.09	9.90	(8.2	)
Non-airline operating CASM*	0.27			0.08			NM		0.28	0.17	64.7
Operating CASM, excluding fuel and non-airline activity		6.40	¢		6.35	¢	0.8	%
Operating CASM (consolidated)*									9.37	10.07	(7.0	)

*Includes operating costs associated with Sunseeker Resort and other non-airline related activity. Various components of this measure do not have a direct correlation to ASMs but must be included to calculate total operating CASM. Consolidated operating CASM is reported to facilitate comparison with airlines reporting total costs on a per ASM basis.

Salary and benefits expense. Salary and benefits expense increased ~~$6.4~~$9.9 million, or ~~5.7~~10.1 percent, for the ~~first~~third quarter 2019 when compared to the same period in 2018. The increase is largely due to ~~a 7.7~~an 11.3 percent increase in full-time equivalent employees ~~as well as labor inefficiencies as we continue~~supporting a 5.9 percent increase in system block hours, and increased activity in our non-airline subsidiary activity. Flight crew salaries and wages per ASM decreased for the quarter, due to ~~grow into the increased number of flight personnel we maintained during the fleet transition.~~improved productivity efficiencies gained from our transition to an all-Airbus fleet.

Aircraft fuel expense. Aircraft fuel expense decreased ~~$6.3~~$8.9 million, or ~~6.0~~7.9 percent, for the ~~first~~third quarter 2019 compared to ~~first~~third 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~~2018, as system average fuel cost per ~~gallon. Fuel~~gallon decreased 10.4 percent year over year. System fuel gallons consumed increased by 3.0 percent on a 6.7 percent increase in ASMs. ASM growth outpaced fuel consumption as fuel efficiency (measured as ASMs per gallon) increased ~~9.6~~3.6 percent ~~year~~quarter over ~~year, allowing us~~quarter, due 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.our transition to an all-Airbus fleet.

Station operations expense. Station operations expense for the ~~first~~third quarter 2019 increased ~~$1.4~~$0.4 million, or ~~3.7~~0.9 percent, on an 8.1 percent increase in scheduled service departures. Stations expense per departure decreased by 6.6 percent due primarily to a significant decrease in irregular operations experienced quarter over quarter as a result of Airbus aircraft reliability.

Maintenance and repairs expense. Maintenance and repairs expense for the third quarter 2019 decreased $7.2 million, or 22.6 percent, compared to the same period in 2018, mostly due to a decrease in routine maintenance costs. Furthermore, 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 in ~~line with a 4.6 percent increase in scheduled service departures.~~depreciation and amortization expense.

~~Maintenance~~

Depreciation and ~~repairs~~amortization expense. ~~Maintenance~~ Depreciation and ~~repairs~~amortization expense for the ~~first~~third quarter 2019 increased ~~$3.6~~$4.8 million, or ~~18.4~~13.8 percent, ~~compared to the same period in 2018,~~year over year as the average number of Airbus aircraft in service increased ~~by 49.2 percent. Although repairs for the Airbus fleet type tend to be less frequent, associated costs are also generally higher than for the MD-80 fleet.~~

~~Depreciation and amortization expense~~. ~~Depreciation and amortization expense for the first quarter 2019 increased 28.5~~21.7 percent year over year. The average number of Airbus aircraft in service increased 49.2 percent year over year and our Airbus aircraft have a higher monthly depreciation expense than our MD-80 aircraft previously in service. In comparison, during the first quarter 2018, the MD-80 fleet was fully depreciated, yet produced 27.6 percent of ASMs during the quarter.

Amortization of major maintenance costs was ~~$4.8~~$6.8 million for the ~~first~~third quarter 2019 compared to ~~$2.5~~$2.9 million for the ~~first~~third quarter 2018, with increases expected to continue as our Airbus aircraft count and related deferred maintenance costs grow. Further, the MD-80 fleet operating in 2018 was fully depreciated prior to 2018.

Sales and marketing expense. Sales and marketing expense for the ~~first~~third quarter 2019 increased ~~$1.8 million~~slightly compared to the same period in 2018, mostly due to ~~increased~~an increase in net credit card fees paid as a result of the 10.2 percent increase in passenger revenue year over year. We have improved our utilization of customer data to optimize marketing efforts, allowing us to decrease marketing spend per passenger by 3.4 percent year over year.

Other expense. Other expense decreased $1.6 million for the third quarter 2019 compared to third quarter 2018, as there were decreases in flight operations related expenses, ~~related to~~as well as various ~~marketing initiatives, including our multi-year partnerships with the Vegas Golden Knights and Minor League Baseball.~~general administrative expenses.

Non-airline expenses

Non-airline expenses are included in the 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 expenses attributable to Sunseeker Resort (most of the Sunseeker Resort expenses are being capitalized at this time). We expect these expenses to increase as the opening of Sunseeker Resort approaches and with the growth in the number of family entertainment centers and the continued operation of Teesnap pending the sale of this entity.

Income Tax Expense

Our effective tax rate was ~~22.7~~22.8 percent for the three months ended ~~March 31,~~September 30, 2019, compared to ~~20.5~~negative 5.1 percent for the three months ended ~~March 31,~~September 30, 2018. The effective tax rate for the three months ended ~~March 31,~~September 30, 2019 differed from the statutory federal income tax rate of 21.0 percent primarily due to state taxes. The effective tax rate for the three months ended September 30, 2018 was negative primarily due to a one-time income tax refund for tax deductions not previously claimed. 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. We expect to be a non-cash ~~taxpayers~~taxpayer for federal income tax purposes for 2019.

Comparison of nine months ended September 30, 2019 to nine months ended September 30, 2018

Operating Revenue

Passenger revenue. For the nine months ended September 30, 2019, passenger revenue increased 9.4 percent compared with 2018. The increase was mostly attributable to a 9.0 percent increase in scheduled service departures, which resulted in an 8.5 percent increase in scheduled service passengers. Average total fare per passenger increased slightly during the nine month period as a 13.7 percent increase in air-related ancillary revenue per passenger more than offset the 8.1 percent decrease in scheduled service average fare. Increases in our customer convenience fee and baggage fees contributed to the increase in air-related ancillary revenue to $51.56 per passenger.

Third party products revenue. Third party products revenue for the nine months ended September 30, 2019 increased 21.6 percent over the same period in 2018. This is primarily the result of increased revenue from our co-branded credit card program, as well as an increase in net revenue from rental cars.

Fixed fee contract revenue. Fixed fee contract revenue for the nine months ended September 30, 2019 increased 29.9 percent compared with 2018, primarily due to a 26.8 percent increase in related departures. This was the result of greater availability of spare aircraft due to improved operations and an all-Airbus fleet. The grounding of the Boeing 737 Max of other airlines likely also contributed to our increased fixed fee flying opportunities during 2019.

Other revenue. Other revenue decreased $3.3 million for the nine months ended September 30, 2019 compared to 2018 primarily due to a decrease in aircraft lease revenue. We had six aircraft on lease to a European carrier during the first nine months of 2018 and none during 2019. The effects of this decrease were slightly offset by increases in revenue from our non-airline activities.

Operating Expenses

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



	Nine Months Ended September 30,		Percent
	2019	2018	Change
Airline unitized costs (in cents)
Salary and benefits	2.68	2.73	(1.8	)%
Station operations	1.05	1.08	(2.8	)
Depreciation and amortization	0.90	0.81	11.1
Maintenance and repairs	0.56	0.67	(16.4	)
Sales and marketing	0.47	0.48	(2.1	)
Other	0.47	0.60	(21.7	)
Airline CASM, excluding fuel	6.13	6.37	(3.8	)
Aircraft fuel	2.65	3.03	(12.5	)
Airline CASM	8.78	9.40	(6.6	)

Airline CASM	8.78	9.40	(6.6	)
Non-airline operating CASM*	0.27	0.12	125.0
Operating CASM (consolidated)*	9.05	9.52	(4.9	)

Salary and benefits expense. Salary and benefits expense increased $28.3 million, or 9.1 percent, for the nine months ended September 30, 2019 compared to the same period in 2018. The increase is largely attributable to an 11.3 percent increase in the number of full-time equivalent employees supporting a 7.4 percent increase in system block hours, as well as increased activity in our non-airline subsidiary activity. Flight crew salaries and wages per ASM decreased for the nine months ended September 30, 2019, due to improved productivity efficiencies gained from our transition to an all-Airbus fleet.

Aircraft fuel expense. Aircraft fuel expense decreased $17.8 million, or 5.2 percent, for the nine months ended September 30, 2019 compared to the same period in 2018 as system average fuel cost per gallon decreased 6.0 percent year over year. System fuel gallons consumed increased 1.2 percent on an 8.4 percent increase in ASMs. ASM growth outpaced fuel consumption as fuel efficiency (measured as ASMs per gallon) increased 7.1 percent year over year, due to our transition to an all-Airbus fleet.

Station operations expense. Station operations expense for the nine months ended September 30, 2019 increased 5.0 percent on a 9.0 percent increase in scheduled service departures compared to the same period in 2018. Stations expense per departure decreased by 3.7 percent due mostly due to additional incentives realized, contractor efficiencies gained, as well as a decrease in irregular operations costs resulting from efficiencies realized from the Airbus fleet.

Maintenance and repairs expense. Maintenance and repairs expense for the nine months ended September 30, 2019 decreased 9.7 percent compared to 2018 mostly due to a decrease in both major and routine maintenance costs. Additionally, the cost of major maintenance events for our Airbus aircraft is being 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 nine months ended September 30, 2019 increased $21.5 million, or 23.2 percent, compared to the same period in 2018. The average number of Airbus aircraft in service increased 35.0 percent year over year.

Amortization of major maintenance costs was $17.7 million for the nine months ended September 30, 2019 compared to $8.0 million for 2018, with increases expected to continue as our Airbus aircraft count and related deferred maintenance costs grow.

Sales and marketing expense. Sales and marketing expense for the nine months ended September 30, 2019 increased $4.8 million compared to the same period in 2018, partially due to an increase in net credit card fees paid as a result of a 9.4 percent increase in passenger revenue year over year. There were also increased expenses related to various marketing initiatives, including our multi-year partnerships with the Vegas Golden Knights and Minor League Baseball. However, we have improved our utilization of customer data to optimize marketing efforts, allowing us to decrease marketing spend per passenger.

Other expense. Other expense decreased $1.1 million year over year as there were decreases in flight operations related expenses, as well as over $12.0 million in gains from MD-80 and other aircraft part sales. This was mostly offset by increases in various administrative expenses, as well as expenses related to our non-airline activities.

Non-airline expenses

Non-airline expenses are included in the various line items discussed above, as appropriate. The non-airline expenses include those from our Teesnap golf management business, Kingsway golf course, Allegiant Nonstop family entertainment centers, and operating expenses attributable to Sunseeker Resort (most of the Sunseeker Resort expenses are being capitalized at this time). We expect these expenses to increase as the opening of Sunseeker Resort approaches and with the growth in the number of family entertainment centers and the continued operation of Teesnap pending the sale of this entity.

Income Tax Expense

Our effective tax rate was 22.9 percent for the nine months ended September 30, 2019, compared to 18.0 percent for the nine months ended September 30, 2018. The effective tax rate for the nine months ended September 30, 2019 differed from the statutory federal income tax rate of 21.0 percent primarily due to state taxes. The effective tax rate for the nine months ended September 30, 2018 was lower primarily due to a one-time income tax refund for tax deductions not previously claimed and the tax benefit from dissolution of foreign subsidiaries. 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. We expect to be a non-cash taxpayer for federal income tax purposes for 2019.

Comparative Consolidated Operating Statistics

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


	Three Months Ended March 31,						Percent		Three Months Ended September 30,				Percent
	2019			2018			Change (1)		2019		2018		Change⁽¹⁾
Operating statistics (unaudited):
Total system statistics:
Passengers	3,450,278			3,302,951			4.5		3,806,369		3,503,849		8.6
Revenue passenger miles (RPMs) (thousands)	3,228,594			3,094,805			4.3
Available seat miles (ASMs) (thousands)	3,910,239			3,728,563			4.9		3,888,400		3,643,948		6.7
Load factor	82.6		%	83.0		%	(0.4	)
Airline operating expense per ASM (CASM) (cents)	8.95			9.19			(2.6	)
Operating expense per ASM (CASM) (cents)									9.37		10.07		(7.0	)
Fuel expense per ASM (cents)	2.55			2.84			(10.2	)	2.69		3.12		(13.8	)
Airline operating CASM, excluding fuel (cents)	6.40			6.35			0.8
Operating CASM, excluding fuel (cents)									6.68		6.95		(3.9	)
ASMs per gallon of fuel	84.1			76.7			9.6		80.3		77.5		3.6
Departures	25,200			24,248			3.9		27,707		25,601		8.2
Block hours	59,819			57,803			3.5		59,678		56,329		5.9
Average stage length (miles)	904			910			(0.7	)	823		838		(1.8	)
Average number of operating aircraft during period	79.6			90.7			(12.2	)	87.6		95.6		(8.4	)
Average block hours per aircraft per day	8.3			7.1			16.9		7.4		6.4		15.6
Full-time equivalent employees at end of period	4,067			3,776			7.7		4,267		3,835		11.3
Fuel gallons consumed (thousands)	46,474			48,640			(4.5	)	48,443		47,016		3.0
Average fuel cost per gallon	$	2.14		$	2.18		(1.8	)	$	2.16	$	2.41	(10.4	)



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


Scheduled service statistics:
Passengers	3,421,538			3,279,368			4.3		3,753,611			3,461,267			8.4
Revenue passenger miles (RPMs) (thousands)	3,191,045			3,064,619			4.1		3,170,826			2,988,962			6.1
Available seat miles (ASMs) (thousands)	3,802,132			3,602,015			5.6		3,687,473			3,485,800			5.8
Load factor	83.9		%	85.1		%	(1.2	)	86.0		%	85.7		%	0.3
Departures	24,344			23,264			4.6		26,238			24,281			8.1
Block hours	57,963			55,689			4.1		56,576			53,723			5.3
Total passenger revenue per ASM (TRASM) (cents) (2)	11.50			11.30			1.8		11.10			10.64			4.3
Average fare - scheduled service (3)	$	69.64		$	73.81		(5.6	)	$	54.20		$	59.23		(8.5	)
Average fare - air-related charges (3)	$	53.10		$	47.18		12.5		$	50.03		$	43.36		15.4
Average fare - third party products	$	5.01		$	3.15		59.0		$	4.85		$	4.60		5.4
Average fare - total	$	127.75		$	124.14		2.9		$	109.08		$	107.19		1.8
Average stage length (miles)	908			916			(0.9	)	824			845			(2.5	)
Fuel gallons consumed (thousands)	45,068			46,872			(3.8	)	46,038			44,910			2.5
Average fuel cost per gallon	$	2.13		$	2.17		(1.8	)	$	2.17		$	2.41		(10.0	)
Rental car days sold	471,598			398,587			18.3		482,944			472,301			2.3
Hotel room nights sold	105,015			108,984			(3.6	)	99,991			95,690			4.5
Percent of sales through website during period	93.6		%	93.8		%	(0.2	)	93.1		%	93.7		%	(0.6	)



							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



	Three Months Ended March,
(in thousands)	2019		2018
Scheduled service	$	234,772	$	238,520
Ancillary air-related charges	181,700		154,717
Co-brand redemptions	3,505		3,534
Total passenger revenue	$	419,977	$	396,771



(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



	As of March 31, 2019
Remaining in 2019	$	198,110
2020	33,800
2021	500
2022	18,000
Total commitments	$	250,410



	As of June 30, 2019	As of September 30, 2019	As of December 31, 2019
A319	37	38	38
A320	51	53	55
Total	88	91	93



Scheduled service statistics:
Passengers	11,307,004			10,422,579			8.5
Revenue passenger miles (RPMs) (thousands)	9,964,948			9,299,355			7.2
Available seat miles (ASMs) (thousands)	11,800,788			10,883,630			8.4
Load factor	84.4		%	85.4		%	(1.0	)
Departures	80,149			73,537			9.0
Block hours	180,674			167,947			7.6
Total passenger revenue per ASM (TRASM) (cents)⁽²⁾	11.18			11.04			1.3
Average fare - scheduled service⁽³⁾	$	60.40		$	65.72		(8.1	)
Average fare - air-related charges⁽³⁾	$	51.56		$	45.33		13.7
Average fare - third party products	$	4.74		$	4.23		12.1
Average fare - total	$	116.70		$	115.28		1.2
Average stage length (miles)	861			874			(1.5	)
Fuel gallons consumed (thousands)	143,433			141,452			1.4
Average fuel cost per gallon	$	2.17		$	2.31		(6.1	)
Rental car days sold	1,495,502			1,408,357			6.2
Hotel room nights sold	319,197			313,360			1.9
Percent of sales through website during period	93.4		%	93.8		%	(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)
January	459	$	123.09	None
February	12,921	136.87		None
March	3,565	126.82		None
Total	16,945	$	134.38		$	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⁾
July	994	$	149.14	None
August	104,539	141.64		103,943
September	3,935	148.95		None
Total	109,468	143.35			$	85,277



3.1	Articles of Incorporation (1) ~~(1)~~
3.2	Bylaws of the Company as amended on ~~April 24, 2018~~October 23, 2019 (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~~12	~~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



		ALLEGIANT TRAVEL COMPANY


Date:	~~May 7,~~October 31, 2019	By:	/s/ Gregory Anderson
		Gregory Anderson, as duly authorized officer of the Company (Chief Financial Officer) and as Principal Financial Officer