SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended		September 30, ~~2019~~2020

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

Allegiant Travel Co~~mpany~~Company



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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

~~Large accelerated filer~~

☒

~~Accelerated filer~~

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of October ~~28, 2019,~~30, 2020, the registrant had ~~16,288,448~~16,389,481 shares of common stock, $.001 par value per share, outstanding.

PART I. FINANCIAL INFORMATION

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
OPERATING REVENUES:
Passenger	$	181,916	$	391,222	$	677,347	$	1,265,978
Third party products	11,337		18,207		35,756		53,557
Fixed fee contracts	5,284		19,797		17,440		42,859
Other	2,447		7,283		12,969		17,498
Total operating revenues	200,984		436,509		743,512		1,379,892
OPERATING EXPENSES:
Salary and benefits	95,829		107,586		303,264		340,589
Aircraft fuel	52,540		104,583		168,711		324,253
Depreciation and amortization	45,291		39,436		132,285		114,112
Station operations	39,954		43,522		108,359		128,357
Maintenance and repairs	14,038		24,768		48,866		68,470
Sales and marketing	7,967		17,591		35,331		59,057
Aircraft lease rental	3,015		0		5,404		0
Other	19,755		26,907		70,225		73,756
CARES Act grant recognition	(77,909)		0		(152,448)		0
Special charges	33,585		0		280,852		0
Total operating expenses	234,065		364,393		1,000,849		1,108,594
OPERATING INCOME (LOSS)	(33,081)		72,116		(257,337)		271,298
OTHER (INCOME) EXPENSES:
Interest expense	11,943		19,506		44,149		58,531
Capitalized interest	0		(903)		(4,067)		(3,444)
Interest income	(868)		(3,335)		(4,596)		(10,038)
Loss on debt extinguishment	0		0		1,222		3,677
Special charges	0		0		26,632		0
Other, net	552		(57)		1,173		(41)
Total other expenses	11,627		15,211		64,513		48,685
INCOME (LOSS) BEFORE INCOME TAXES	(44,708)		56,905		(321,850)		222,613
INCOME TAX PROVISION (BENEFIT)	(15,565)		12,976		(166,595)		51,017
NET INCOME (LOSS)	$	(29,143)	$	43,929	$	(155,255)	$	171,596
Earnings (loss) per share to common shareholders:
Basic	$	(1.82)	$	2.70	$	(9.75)	$	10.55
Diluted	$	(1.82)	$	2.70	$	(9.75)	$	10.54
Shares used for computation:
Basic	16,006		16,037		15,953		16,037
Diluted	16,006		16,039		15,953		16,045

Cash dividends declared per share:	$	0	$	0.70	$	0.70	$	2.10

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
OPERATING REVENUES:
Passenger $ 391,222
$ 355,100
$ 1,265,978
$ 1,157,443
Third party products 18,207

15,921
53,557
44,045
Fixed fee contracts 19,797
14,791
42,859
33,000
Other 7,283
7,297
17,498
20,845
   Total operating revenues 436,509
393,109
1,379,892
1,255,333
OPERATING EXPENSES:
Salary and benefits 107,586
97,706
340,589
312,314
Aircraft fuel 104,583
113,525
324,253
342,006
Station operations 43,522
43,128
128,357
122,265
Depreciation and amortization 39,436
34,658
114,112
92,641
Maintenance and repairs 24,768
31,983
68,470
75,864
Sales and marketing 17,591
16,798
59,057
54,224
Aircraft lease rental —
671
—
767
Other 26,907
28,459
73,756
74,881
   Total operating expenses 364,393
366,928
1,108,594
1,074,962
OPERATING INCOME 72,116
26,181
271,298
180,371
OTHER (INCOME) EXPENSES:
Interest expense 19,506
14,309
58,531
40,467
Capitalized interest (903 ) —
(3,444 ) (279 )
Interest income (3,335 ) (2,425 ) (10,038 ) (6,259 )
Loss on debt extinguishment —
—
3,677
—
Other, net (57 ) (118 ) (41 ) (408 )
   Total other expenses 15,211
11,766
48,685
33,521
INCOME BEFORE INCOME TAXES 56,905
14,415
222,613
146,850
PROVISION FOR INCOME TAXES 12,976
(732 ) 51,017
26,494
NET INCOME $ 43,929
$ 15,147
$ 171,596
$ 120,356
Earnings per share to common shareholders:
Basic $ 2.70
$ 0.94
$ 10.55
$ 7.46
Diluted $ 2.70
$ 0.94
$ 10.54
$ 7.45
Shares used for computation:
Basic 16,037
15,957
16,037
15,929
Diluted 16,039
15,962
16,045
15,938

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

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
NET INCOME (LOSS)	$	(29,143)	$	43,929	$	(155,255)	$	171,596
Other comprehensive income (loss):
Change in available for sale securities, net of tax	(292)		16		32		669
Foreign currency translation adjustments	51		17		53		21

Total other comprehensive income	(241)		33		85		690
TOTAL COMPREHENSIVE INCOME (LOSS)	$	(29,384)	$	43,962	$	(155,170)	$	172,286

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
NET INCOME $ 43,929
$ 15,147
$ 171,596
$ 120,356
Other comprehensive income:

Change in available for sale securities, net of tax 16
(83 ) 669
(926 )
Foreign currency translation adjustments 17
4
21
218
Change in derivatives, net of tax —
1,325
—
2,321
Total other comprehensive income 33
1,246
690
1,613
TOTAL COMPREHENSIVE INCOME $ 43,962
$ 16,393
$ 172,286
$ 121,969


	Three Months Ended September 30, 2020
	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, 2020	16,240	$	23	$	310,628	$	424	$	1,073,603	$	(648,118)	$	736,560
Share-based compensation	58	—		4,099		—		—		—		4,099



Other comprehensive income (loss)	—	—		—		(241)		—		—		(241)
CARES Act warrant issuance	—	—		423		—		—		—		423
Net loss	—	—		—		—		(29,143)		—		(29,143)
Balance at September 30, 2020	16,298	$	23	$	315,150	$	183	$	1,044,460	$	(648,118)	$	711,698


	Nine Months Ended September 30, 2020
	Common stock outstanding	Par value		Additional paid-in capital		Accumulated other comprehensive income		Retained earnings		Treasury shares		Total shareholders' equity
Balance at December 31, 2019	16,303	$	23	$	289,933	$	98	$	1,211,076	$	(617,579)	$	883,551
Share-based compensation	171	—		23,842		—		—		—		23,842
Shares repurchased by the Company and held as treasury shares	(217)	—		—		—		—		(33,773)		(33,773)
Stock issued under employee stock purchase plan	41	—		—		—		—		3,234		3,234
Cash dividends declared, $0.70 per share	—	—		—		—		(11,361)		—		(11,361)
Other comprehensive income (loss)	—	—		—		85		—		—		85
CARES Act warrant issuance	—	—		1,375		—		—		—		1,375
Net loss	—	—		—		—		(155,255)		—		(155,255)
Balance at September 30, 2020	16,298	$	23	$	315,150	$	183	$	1,044,460	$	(648,118)	$	711,698


	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 (loss)	—	—		—		690		0		—		690
Net income	—	—		—		—		171,596		—		171,596
Cumulative effect of the New Lease Standard	—	—		—		—		(550)		—		(550)
Balance at September 30, 2019	16,195	$	23	$	285,318	$	29	$	1,161,893	$	(620,655)	$	826,608

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


	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net income (loss)	$	(155,255)	$	171,596
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	132,285		114,112
Special charges	279,114		0
Other adjustments	89,342		60,135
Changes in certain assets and liabilities:
Air traffic liability	84,111		55,446

Other - net	(152,872)		(79,862)
Net cash provided by operating activities	276,725		321,427
Cash flows from investing activities:
Purchase of investment securities	(511,667)		(397,504)
Proceeds from maturities of investment securities	421,658		413,038

Purchase of property and equipment	(198,567)		(350,187)
Proceeds from sale-leaseback transactions	78,185		0
Other investing activities	1,247		10,647
Net cash used in investing activities	(209,144)		(324,006)
Cash flows from financing activities:
Cash dividends paid to shareholders	(11,361)		(34,214)
Proceeds from the issuance of debt	272,548		770,435
Repurchase of common stock	(33,773)		(18,549)
Principal payments on debt and finance lease obligations	(146,416)		(670,148)
Debt issuance costs	(4,505)		(32,592)
Other financing activities	4,609		325
Net cash provided by financing activities	81,102		15,257
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	148,683		12,678
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD	136,785		95,911
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	285,468	$	108,589



CASH PAYMENTS (RECEIPTS) FOR:
Interest paid, net of amount capitalized	$	36,801	$	53,089
Income tax refunds	(95,258)		(2,227)
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Right-of-use (ROU) assets acquired	$	103,499	$	2,213
Purchases of property and equipment in accrued liabilities	19,294		6,091

Nine Months Ended September 30,
2019 2018
OPERATING ACTIVITIES:
Net income $ 171,596
$ 120,356
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 114,112
92,641
(Gain)/loss on aircraft and other equipment disposals (8,553 ) 2,274
Share-based compensation expense 13,563
11,043
Deferred income taxes 47,795
21,760
Other adjustments 7,330
1,833
Changes in certain assets and liabilities:
Accounts receivable 4,564
38,005
Prepaid expenses (13,493 ) (6,709 )
Accounts payable (3,655 ) (2,437 )
Accrued liabilities (8,158 ) 5,960
Air traffic liability 55,446
27,432
Deferred major maintenance (48,081 ) (21,699 )
Other assets/liabilities (11,039 ) (336 )
Net cash provided by operating activities 321,427
290,123
INVESTING ACTIVITIES:
Purchase of investment securities (397,504 ) (263,057 )
Proceeds from maturities of investment securities 413,038
355,325
Purchase of property and equipment, including capitalized interest (350,187 ) (273,999 )
Other investing activities 10,647
(5,399 )
Net cash used in investing activities (324,006 ) (187,130 )
FINANCING ACTIVITIES:
Cash dividends paid to shareholders (34,214 ) (33,919 )
Proceeds from the issuance of debt 770,435
191,724
Repurchase of common stock (18,549 ) (3,617 )
Principal payments on debt and finance lease obligations (670,148 ) (171,438 )
Debt issuance costs (32,592 ) (1,147 )
Other financing activities 325
5,834
Net cash provided by (used in) financing activities 15,257
(12,563 )
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
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD $ 108,589
$ 161,069

CASH PAYMENTS (RECEIPTS) FOR:
Interest paid, net of amount capitalized $ 53,089
$ 43,751
Income tax refunds (2,227 ) (41,145 )
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Property capitalized under operating leases $ 25,533
$ —
Flight equipment acquired under finance leases —
127,625

Basis of Presentation

Recent Accounting Pronouncements

~~In February~~On June 16, 2016, the ~~Financial Accounting Standards Board ("FASB")~~FASB issued ASU ~~2016-02, Leases (Topic 842), (the "New Lease Standard"). This~~No. 2016-13, Measurement of Credit Losses on Financial Instruments. The standard requires ~~leases, other than short-term,~~the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be ~~recognized on the balance sheet~~recorded 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 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 lesseeallowances instead of reductions to amortized cost of the ~~lessor’s debt, or any amount allocated~~securities. The Company adopted this accounting standard prospectively as of January 1, 2020, and it did not have a significant impact on its consolidated financial statements.

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.

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

The Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted in March 2020, providing support for the airline industry and other businesses and individuals.

On April 20, 2020, the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program Agreement (the “PSPA”) with the U.S. Department of the Treasury ("Treasury") for an award Allegiant Air would receive under the CARES Act. The total amount initially allocated to Allegiant Air under the PSP was $171.9 million, all of which was received by the end of July 2020. On September 30, 2020, the Company received an additional installment of $5.0 million for a total aggregate of $176.9 million under the PSPA. The proceeds of the award were used exclusively for wages, salaries and benefits during the second and third quarters 2020, in accordance with the agreement.

In consideration for the grant, Allegiant Air issued to Treasury a low-interest rate, senior unsecured term promissory note (the “PSP Note”) which will mature 10 years after issuance. The principal amount of the PSP Note is $23.1 million. The PSP Note is guaranteed by the Company and is prepayable at any time at par (see Note 5).

Also in consideration for the grant, the Company issued warrants (the “PSP Warrants”) to Treasury to purchase 27,681 shares of common stock of the Company at a price of $83.33 per share (based on the closing price of the Company’s common stock on The Nasdaq Global Select Market on April 9, 2020). Warrants to purchase 19,700 shares (valued at $1.0 million) were issued in May and June 2020, and warrants for the remaining 7,981 shares (valued at $0.4 million) were issued in July and September 2020. The PSP Warrants expire five years after issuance, and will be exercisable either through net share settlement or cash, at the Company’s option. The PSP Warrants include customary anti-dilution provisions, do not have any voting rights and are freely transferable, with registration rights.


(in thousands)	Airline		Sunseeker Resort		Other non-airline		Total
Three Months Ended September 30, 2020


Operating	$	32,617	$	0	$	968	$	33,585
Non-operating	0		0		0		0
Total special charges	$	32,617	$	0	$	968	$	33,585
Nine Months Ended September 30, 2020


Operating	$	118,059	$	135,443	$	27,350	$	280,852
Non-operating	0		26,632		0		26,632
Total special charges	$	118,059	$	162,075	$	27,350	$	307,484

•$168.4 million in impairment charges

◦Includes Airline - $5.0 million; Sunseeker Resort - $136.8 million; Other non-airline - $26.6 million

•$89.3 million adjustment resulting from the accelerated retirements of 7 airframes and 5 engines, loss on sale leaseback transactions of 7 aircraft, and write-offs of other aircraft related assets

•$21.5 million adjustment for additional salary and benefits expense in relation to the elimination of positions as well as other non-recurring compensation expense associated with the acceleration of certain existing stock awards

◦Includes Airline - $21.1 million; Sunseeker Resort - $0.4 million

•$19.8 million related to the termination of the loan agreement with Sixth Street Partners (formerly TSSP) intended to finance the development of Sunseeker Resorts Charlotte Harbor

◦$14.9 million paid during the third quarter 2020 and remaining $4.9 million recorded in accrued liabilities (subsequently paid in October 2020)

•$5.0 million related to suspension of construction at Sunseeker

•$3.5 million write-down on various non-aircraft assets and other various expenses


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2019		2020		2019
Scheduled service	$	79,464	$	200,233	$	325,404	$	672,690
Ancillary air-related charges	100,262		187,776		342,520		583,003
Co-brand redemptions	2,190		3,213		9,423		10,285
Total passenger revenue	$	181,916	$	391,222	$	677,347	$	1,265,978

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

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. In September 2020, the Company amended its existing co-brand agreement, which among other things extended the term of the agreement through August 2029 and provided for the pre-purchase of credit card points. This transaction was treated as a financing transaction for accounting purposes using an effective interest rate consistent with the Company’s credit rating.


	Nine Months Ended September 30,
(in thousands)	2020		2019
Balance at January 1	$	15,613	$	10,708
Points awarded (deferral of revenue)	15,018		14,308
Points redeemed (recognition of revenue)	(9,510)		(10,285)
Balance at September 30	$	21,121	$	14,731

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

~~Property and 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


(in thousands)	September 30, 2020		December 31, 2019
Flight equipment, including pre-delivery deposits	$	2,259,358	$	2,289,157
Computer hardware and software	151,602		171,516
Land and buildings/leasehold improvements	86,825		98,885
Other property and equipment	80,156		161,760
Total property and equipment	2,577,941		2,721,318
Less accumulated depreciation and amortization	(573,112)		(484,510)
Property and equipment, net	$	2,004,829	$	2,236,808

(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 %

~~(1) As of December 31, 2018, $428.0 million~~obligations as 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.~~ dates indicated:


(in thousands)	September 30, 2020			December 31, 2019
Fixed-rate debt and finance lease obligations due through 2029	$	363,080		$	235,071
Variable-rate debt due through 2029	1,186,771			1,186,782
Total long-term debt and finance lease obligations, net of related costs	1,549,851			1,421,853
Less current maturities, net of related costs	233,680			173,274
Long-term debt and finance lease obligations, net of current maturities and related costs	$	1,316,171		$	1,248,579

Weighted average fixed-interest rate on debt	3.9		%	3.7		%
Weighted average variable-interest rate on debt	2.4		%	4.5		%

~~Consolidated Variable Interest Entity~~CARES Act Payroll Support Program Loan

Senior Secured Revolving Credit Facility

~~In June 2019, the Company entered into an agreement to borrow $213.0 million secured by 23 aircraft.~~ The ~~borrowing bears interest at a floating rate based on LIBOR, and is payable in quarterly installments over five years. A portion of the proceeds was~~

~~used~~notes for the ~~prepayment of~~amounts borrowed under 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 loan agreements secured by spare engines. The borrowings~~facility bear interest at a floating rate based on LIBOR and are due in March 2021.

In September 2020, the Company borrowed $84.0 million under a loan agreement secured by 2 aircraft and 8 spare engines. The note bears interest at a fixed rate, payable in ~~quarterly~~monthly installments with ~~terms ranging from seven to ten years.~~maturity after five and six years for the spare engines and aircraft, respectively.

~~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 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 remaining $102.1 million of the Notes were paid at their maturity in July 2019.

Construction Loan Agreement

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.

~~As a result~~the tax accounting impact of the ~~New Lease Standard, certain real estate~~CARES Act which allows the Company to carryback the 2020 net operating loss at the 35.0 percent tax rate applicable in earlier years.

at inception. ROU assets represent the ~~Company's~~Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. Airport terminal leases mostly include variable lease payments outside of those based on a fixed index, and are therefore not recorded as ROU assets.


(in thousands)	Classification on the Balance Sheet	September 30, 2020		December 31, 2019
Assets
Operating lease assets(1)	Operating lease right-of-use assets	$	114,573	$	22,081
Finance lease assets(2)	Property and equipment, net	106,777		111,665
Total lease assets		$	221,350	$	133,746

Liabilities
Current
Operating(1)	Current operating lease liabilities	$	13,814	$	2,662
Finance(2)	Current maturities of long-term debt and finance lease obligations	7,922		7,666
Noncurrent
Operating(1)	Noncurrent operating lease liabilities	101,864		21,290
Finance(2)	Long-term debt and finance lease obligations	101,955		107,930
Total lease liabilities		$	225,555	$	139,548

(1) Represents assets and liabilities 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 as10 aircraft, office equipment, certain airport and terminal facilities, and other ~~applicable market data available.~~

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

~~In addition to~~assets under operating leases ~~the Company had~~

(2) Represents assets and liabilities of 5 aircraft under finance leases ~~as of September 30, 2019, with remaining terms to 2029.~~

~~The components of lease 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

Sale-Leaseback Transaction

~~Lease position as of 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 %

~~Other Information~~

~~The table below presents supplemental cash flow information related to leases during~~During the ~~three and~~ nine months ended September 30, ~~2019.~~2020, the Company entered into two separate sale-leaseback transactions involving 7 total aircraft. The transactions qualified as sales, and generated $78.2 million of proceeds. As a result of the sales, the aircraft were removed from property and equipment in the Company's balance sheet, resulting in a $49.8 million loss on the sales. The loss is reflected within operating special charges on the statement of income since the Company would not likely have completed the transactions absent cash conservation efforts as a result of COVID. The leased aircraft were subsequently recorded within operating lease right-of-use assets, with the related lease liabilities recorded within current and noncurrent operating lease liabilities on the balance sheet. The proceeds from the sales of aircraft in these transactions are treated as cash inflows from investing activities on the statement of cash flows.

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

~~Maturities of Lease Liabilities~~

~~The table below indicates the future minimum payments of lease liabilities as of 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

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

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.


	September 30, 2020						December 31, 2019
(in thousands)	Total		Level 1		Level 2		Total		Level 1		Level 2
Cash equivalents
Money market funds	$	80,121	$	80,121	$	0	$	42,653	$	42,653	$	0
Commercial paper	22,783		0		22,783		5,807		0		5,807
Municipal debt securities	10,205		0		10,205		1,202		0		1,202
Federal agency debt securities	1,340		0		1,340		0		0		0


Total cash equivalents	114,449		80,121		34,328		49,662		42,653		7,009
Short-term
Commercial paper	212,992		0		212,992		161,286		0		161,286
Corporate debt securities	139,659		0		139,659		145,975		0		145,975
Municipal debt securities	52,437		0		52,437		12,237		0		12,237
Federal agency debt securities	35,389		0		35,389		13,515		0		13,515
US Treasury bonds	1,287		0		1,287		2,915		0		2,915
Total short-term	441,764		0		441,764		335,928		0		335,928
Long-term

Corporate debt securities	0		0		0		15,396		0		15,396
US Treasury bonds	0		0		0		146		0		146


Total long-term	0		0		0		15,542		0		15,542
Total financial instruments	$	556,213	$	80,121	$	476,092	$	401,132	$	42,653	$	358,479

As of September 30, 2019 As of December 31, 2018
(in thousands) Total Level 1 Level 2 Total Level 1 Level 2
Cash equivalents
Money market funds $ 65,014
$ 65,014
$ —
$ 43,281
$ 43,281
$ —
Commercial paper 5,731
—
5,731
29,138
—
29,138
Municipal debt securities 4,087
—
4,087
—
—
—
Federal agency debt securities 124
—
124
—
—
—
US Treasury bonds —
—
—
1,415
—
1,415
Total cash equivalents 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 142,656
—
142,656
180,846
—
180,846
Federal agency debt securities 11,510
—
11,510
11,887
—
11,887
Municipal debt securities 7,785
—
7,785
14,252
—
14,252
US Treasury bonds 3,017
—
3,017
5,990
—
5,990
Total short-term 314,822
—
314,822
314,464
—
314,464
Long-term

Corporate debt securities 35,996
—
35,996
37,334
—
37,334
US Treasury bonds 3,061
—
3,061
2,901
—
2,901
Federal agency debt securities —
—
—
11,291
—
11,291
Total long-term 39,057
—
39,057
51,526
—
51,526
Total financial instruments $ 428,835
$ 65,014
$ 363,821
$ 439,824
$ 43,281
$ 396,543


	September 30, 2020				December 31, 2019
(in thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Hierarchy Level
Non-publicly held debt	$	1,461,705	$	1,349,111	$	1,329,882	$	1,140,232	3

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

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.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Basic:
Net income (loss)	$	(29,143)	$	43,929	$	(155,255)	$	171,596
Less income allocated to participating securities	0		(578)		(236)		(2,441)
Net income (loss) attributable to common stock	$	(29,143)	$	43,351	$	(155,491)	$	169,155
Earnings (loss) per share, basic	$	(1.82)	$	2.70	$	(9.75)	$	10.55
Weighted-average shares outstanding	16,006		16,037		15,953		16,037
Diluted:
Net income (loss)	$	(29,143)	$	43,929	$	(155,255)	$	171,596
Less income allocated to participating securities	0		(578)		(236)		(2,440)
Net income (loss) attributable to common stock	$	(29,143)	$	43,351	$	(155,491)	$	169,156
Earnings (loss) per share, diluted	$	(1.82)	$	2.70	$	(9.75)	$	10.54
Weighted-average shares outstanding(1)	16,006		16,037		15,953		16,037

(1) Dilutive effect of common stock equivalents excluded from the diluted per share calculation is not material.

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


(in thousands)	September 30, 2020
Remaining in 2020	$	110,762
2021	37,900
2022	21,000



Total commitments	$	169,662

(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

Sunseeker Resort Segment

Other non-Airline Segment


(in thousands)	Airline		Sunseeker Resort		Other non- airline		Consolidated
Three Months Ended September 30, 2020
Operating revenue:
Passenger	$	181,916	$	—	$	—	$	181,916
Third party products	11,337		—		—		11,337
Fixed fee contract	5,284		—		—		5,284
Other	(224)		0		2,671		2,447
Operating income (loss) (1)	(28,836)		(2,619)		(1,626)		(33,081)
Interest expense, net	11,075		0		0		11,075
Depreciation and amortization	45,247		44		0		45,291
Capital expenditures	25,066		0		0		25,066
Three Months Ended September 30, 2019
Operating revenue:
Passenger	$	391,222	$	—	$	—	$	391,222
Third party products	18,207		—		—		18,207
Fixed fee contract	19,797		—		—		19,797
Other	1,648		251		5,384		7,283
Operating income (loss)	77,335		(1,281)		(3,938)		72,116
Interest expense, net	14,761		507		0		15,268
Depreciation and amortization	38,409		329		698		39,436
Capital expenditures	98,308		16,931		479		115,718

(in thousands)	Airline		Sunseeker Resort		Other non- airline		Consolidated
Nine Months Ended September 30, 2020
Operating revenue:
Passenger	$	677,347	$	—	$	—	$	677,347
Third party products	35,756		—		—		35,756
Fixed fee contract	17,440		—		—		17,440
Other	1,460		653		10,856		12,969
Operating income (loss) (2)	(83,106)		(142,741)		(31,490)		(257,337)
Interest expense, net	34,925		561		0		35,486
Depreciation and amortization	130,938		577		770		132,285
Capital expenditures	155,810		45,160		442		201,412
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		0		45,049
Depreciation and amortization	110,528		811		2,773		114,112
Capital expenditures	305,356		33,502		11,329		350,187

(1) For the three months ended September 30, 2020, Operating loss was impacted by special charges of: $32.6 million for the Airline and $1.0 million for Other non-airline.

(2) For the nine months ended September 30, 2020, Operating loss was impacted by special charges of: $118.1 million for the Airline; $135.4 million for Sunseeker Resort; and $27.4 million for Other non-airline.

(in thousands) Airline Sunseeker Resort Other non- airline Consolidated
Three Months Ended September 30, 2019
Operating revenue:
    Passenger $ 391,222
$ —
$ —
$ 391,222
    Third party products 18,207
—
—
18,207
    Fixed fee contract 19,797
—
—
19,797
    Other 1,648
251
5,384
7,283
Operating income (loss) 77,335
(1,281 ) (3,938 ) 72,116
Interest expense, net 14,761
507
—
15,268
Depreciation and amortization 38,409
329
698
39,436
Capital expenditures 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, 2020		December 31, 2019
Airline	$	3,170,834	$	2,830,236
Sunseeker Resort	37,264		133,362
Other non-airline	14,995		47,205
Consolidated	$	3,223,093	$	3,010,803

(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

Sunseeker Resort Segment

Long-lived assets for Sunseeker Resort and related Kingsway Golf Course consist primarily of the land, construction in process, building, and other various equipment. As a result of the impairment tests performed, the Company determined the sum of the undiscounted cash flows was less than the long-lived assets' carrying value. A $136.8 million impairment charge was recorded in the first quarter 2020 to reflect the difference between the carrying values of these assets and their fair values. Fair value reflects management's best estimate,including valuation inputs from third parties and recent market transactions. Based on an evaluation of impairment indicators in the second and third quarters 2020, 0 additional impairment was recognized.

Other non-Airline Segment

Long-lived assets for Allegiant Nonstop family entertainment centers consist primarily of leasehold improvements, arcade games, various equipment, and ROU assets. As a result of the impairment tests performed, the Company determined the sum of the undiscounted cash flows were less than the long-lived assets' carrying value. An $18.3 million impairment charge was recorded in the first quarter 2020 to reflect the difference between the carrying values of these assets and their fair values. Fair value reflects management's best estimate,including valuation inputs from third parties and recent market trends. Based on an evaluation of impairment indicators in the second and third quarters 2020, 0 additional impairment was recognized.

The following discussion and analysis presents factors that had a material effect on our results of operations during the three and nine months ended September 30, ~~2019~~2020 and ~~2018.~~2019. Also discussed is our financial position as of September 30, ~~2019~~2020 and December 31, ~~2018.~~2019. 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.~~2019. 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.

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

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

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

~~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 December 31, 2019~~
~~A319~~	38
~~A320~~	55
~~Total~~	93

~~As of September 30, 2019,~~ we were selling ~~466~~520 routes versus ~~421~~466 as of the same date last year, which represents ~~a 10.7~~an 11.6 percent increase. Our total number of origination cities and leisure destinations (for operating routes) were 9497 and ~~26,~~29, respectively, as of September 30, ~~2019. Based~~2020.

The COVID-19 pandemic and shelter-in-place directives have greatly impacted our operating results for the nine months ending September 30, 2020 and will continue to do so into the future. Air traffic demand is down substantially and base air fares are down as well. We cannot predict when air travel will return to customary levels or at what pace. In the meantime, our revenues will be adversely affected. We believe that demand in the foreseeable future will continue to fluctuate in response to fluctuations in COVID-19 cases, hospitalizations, deaths, treatment efficacy and the availability of a vaccine.

The impacts of the pandemic have resulted in a reduction in our flight schedule. It is likely that reduced schedules will continue into the future. We are closely monitoring bookings and making decisions on schedule changes as necessary based on demand.

Though we cannot control the current demand environment, our primary focus at the current time has been to conserve cash, and we have taken immediate and extensive measures to reduce daily cash burn. We have reduced management and support teams by roughly 300 positions. We have suspended payment of cash dividends and stock buybacks. We have suspended construction of the Sunseeker Resort in Southwest Florida as well as spend on our ~~currently published schedule through May~~other non-airline subsidiaries. We have reduced airline capital expenditures for this year and into the future. We have eliminated other nonessential expenditures and have renegotiated arrangements with outside vendors, all in an effort to conserve cash until revenues recover.

We will continue to focus on conserving cash, along with managing capacity to meet demand, which we believe is a core strength of our business model.

Network and Customer Experience

•Reduced third quarter system-wide capacity by 9.4 percent

•Continually evaluating forward schedules to adjust capacity according to demand trends

•Waived change and cancellation fees for all customers

•Extended expiry on credit vouchers to two years

•Offered opt-in option in the booking path for customers to receive notification that their flight has reached 65.0 percent capacity with option to re-book on another flight with no fee or receive a refund

Cash Outlay Reduction

•Suspended all stock buybacks and dividends

•Enacted a hiring freeze and offered voluntary leaves

•Reduced management and support teams by approximately 300 positions (includes 220 positions previously disclosed in the prior quarter), a 25 percent reduction in these work groups

•Furloughed 100 pilots as of October 1, 2020, and ~~service announcements~~an additional 27 furloughs as of November 1, 2020

•Suspended nearly all contractor positions, subscriptions, non-essential training and ~~cancellations~~travel

•Suspended all non-essential capital expenditures including, but not limited to, Sunseeker Resorts, Teesnap and Allegiant Nonstop family entertainment centers

•Implemented immediate and meaningful cash spend reductions

•Obtained $84 million in proceeds from financings secured by ~~other airlines~~A320 aircraft and CFM engines in September

•Received proceeds of $30.0 million in September through a sale-leaseback transaction on three aircraft

•As of September 30, 2020, we had 21 unencumbered aircraft and two unencumbered spare engines

•During the second and third quarters, received $176.9 million under the payroll support program agreement ("PSPA") with the Treasury, comprised of direct grants, a $23.1 million low-interest 10-year loan, and warrants to purchase 27,681 shares of our common stock.

•Received $94.3 million of tax refunds during the second and third quarters related to the 2018 and 2019 net operating loss carrybacks due to the change in loss carryback period under the CARES Act

–Under current law, we expect a sizable federal income tax refund to be received in the first half of 2021 related to 2020 net operating losses

•Deferring payment of the employer portion of Social Security taxes, as permitted under the CARES Act, to provide additional liquidity - $7.8 million in Social Security taxes deferred as of September 30, ~~2019, we will have direct competition (which we consider~~2020 (half to be ~~similar non-stop service between markets) on approximately 101 routes as of that date.~~paid by December 31, 2021 and the other half to be paid by December 31, 2022)

~~As of the date of this filing, service is scheduled on 22 new routes beginning in fourth quarter 2019, including service into West Palm Beach, FL, which we are welcoming back to the Allegiant network.~~Health and Safety

•Maintain a comprehensive cleaning program for all aircraft that includes a regular schedule of standard and ~~scheduled service passengers increased 8.4 percent. We accomplished~~deep-clean procedures that exceed both CDC and Airbus guidance

•Aircraft receive regular treatment with an advanced antimicrobial protectant that kills viruses, germs and bacteria on contact for 14 days

•Utilize VOC (volatile organic compound) filters on board every aircraft, which remove additional organic compounds and ensure that cabin air is changed, on average, every three minutes, exceeding HEPA standards

•Effective July 2, 2020, require customers to wear face coverings through all phases of travel, including at the increased capacity by increasing aircraft utilization (block hours per aircraft) by 15.6 percent compared to the 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 1.8 percent increase in average total fare year over year.

•Complimentary health and safety kits,which include a single-use face mask, a pair of non-latex disposable gloves and cleaning wipes, provided to a 3.6 percent increase in fuel efficiency (ASMs per gallon of fuel), coupled with a 10.4 percent decrease in average per gallon fuel cost. The margin improvement was also attributable to 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.

•Crew members required to wear face masks on ~~off-peak days~~board and during any interaction with customers

•Social distancing principles at check-in, boarding and on-board, including limiting adjacent row seating and allowing only customers on the same itinerary to utilize middle seats as practicable

•Treat hard surfaces in all office areas, including airport station offices, maintenance facilities, headquarters/administrative offices, withantimicrobial disinfectant/protectant, and utilize wall-mounted and handheld thermometers for employee and crew member temperature checks

•Partner with Quest Diagnostics to provide at home COVID-19 test kits to employees in the third quarter 2019 (generally Tuesdays, Wednesdays and Saturdays) compared to 26.7 percent in the same quarter last year, 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 strategy remains unchanged and we reduce flying when demandevent local testing is ~~low. We were able to profitably decrease flight hours this September by over 48 percent when compared to our busiest months in 2019.~~not immediately available

~~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 99.97 controllable completion percentage.~~

RESULTS OF OPERATIONS

Comparison of three months ended September 30, ~~2019~~2020 to three months ended September 30, ~~2018~~2019

Operating Revenue

Passenger revenue. For the third quarter ~~2019,~~2020, passenger revenue ~~increased 10.2~~decreased 53.5 percent compared to third quarter ~~2018.~~2019. The ~~increase~~decrease was ~~driven primarily by an 8.1~~due to a 46.6 percent ~~increase~~decline in scheduled service ~~departures, which, along with~~passengers from a ~~slight increase~~36.3 percentage point decrease in load ~~factor, resulted~~factor. These declines are largely due to a dramatic decline in ~~an 8.4 percent increase in~~passenger demand and government travel restrictions and quarantine requirements related to COVID-19, which continued during the third quarter 2020. Additionally, we reduced our scheduled service ~~passengers. A 15.4~~capacity by 6.5 percent ~~increase~~during the third quarter, in ~~air-related ancillary average~~response to passenger demand trends. Average total passenger fare ~~more than offset an 8.5~~(includes scheduled service and air ancillary) decreased 12.9 percent year over year, driven by a 24.8 percent decrease in scheduled service average ~~fare. Increases~~base fare as fares were reduced in ~~the customer convenience fee and baggage fees contributed~~an effort to ~~the increase in air-related ancillary unit revenue to $50.03 per passenger.~~stimulate demand.

Third party products revenue. Third party products revenue for the third quarter ~~2019 increased 14.4~~2020 decreased 37.7 percent, compared to the same period in ~~2018.~~2019. This is primarily ~~the result of increased revenue from our co-branded credit card program, as well as an increase in~~due to decreased net revenue from both rental cars and ~~hotels.~~hotels, as a result of substantially fewer passengers as well as reduced hotel room inventory, particularly in the Las Vegas market.

Fixed fee contract revenue. Fixed fee contract revenue for the third quarter ~~2019 increased 33.8~~2020 decreased 73.3 percent ~~when compared to 2018, mostly~~year over year due to ~~increased flying for~~decreases in demand. Departures decreased 57.9 percent resulting from a significant drop in ad hoc charter opportunities in the ~~Department of Defense. This increase was the result of greater availability of spare aircraft due to improved operations and an all-Airbus fleet.~~third quarter 2020. The ~~grounding of the Boeing 737 Max of other airlines likely also contributed to our increased~~decreases in fixed fee ~~flying opportunities during the quarter.~~revenue are related to COVID-19.

Other revenue. Other revenue ~~remained relatively flat year over year, with a decrease of less than one~~decreased 66.4 percent for the third quarter ~~2019~~2020 from ~~2018.~~2019. The ~~slight decline is~~decrease was due to decreased activity in the ~~conclusion~~non-airline segments, especially for Kingsway Golf Course and our family entertainment centers. As a result of the COVID-19 pandemic, we temporarily closed our family entertainment center in Warren, Michigan and permanently discontinued all activity for our locations in Utah. We also temporarily closed Kingsway Golf Course, initially for renovation but now the renovation has been delayed as a result of our aircraft lease revenue arrangement with a European carrier, as we had six aircraft on lease during the third quarter of 2018 and none during 2019. This was mostly offset by an increase in revenue from our non-airline activities.cash conservation efforts.

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 September 30,		Percent
Airline only unitized costs (in cents)	2020	2019	Change
Salary and benefits	2.68	2.66	0.8	%
Depreciation and amortization	1.28	0.99	29.3
Station operations	1.13	1.12	0.9
Maintenance and repairs	0.40	0.64	(37.5)
Sales and marketing	0.23	0.45	(48.9)
Aircraft lease rentals	0.09	—	NM
Other	0.43	0.54	(20.4)
CARES Act grant recognition	(2.21)	—	NM
Operating Special charges	0.93	—	NM
Airline CASM, excluding fuel	4.96	6.40	(22.5)
Aircraft fuel	1.49	2.69	(44.6)
Airline CASM	6.45	9.09	(29.0)

NM - Not meaningful

Three Months Ended September 30, Percent
2019 2018 Change
Airline unitized costs (in cents)
Salary and benefits 2.66
2.64
0.8 %
Station operations 1.12
1.18
(5.1 )
Depreciation and amortization 0.99
0.94
5.3
Maintenance and repairs 0.64
0.88
(27.3 )
Sales and marketing 0.45
0.46
(2.2 )
Other 0.54
0.68
(20.6 )
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* 0.28
0.17
64.7
Operating CASM (consolidated)* 9.37
10.07
(7.0 )

Salary and benefits expense. Salary and benefits expense ~~increased $9.9~~decreased $11.8 million, or ~~10.1~~10.9 percent, for the third quarter ~~2019~~2020 when compared to the same period in ~~2018. The increase is largely due to an 11.3 percent increase in~~2019. Although the average number of full-time equivalent employees ~~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~~was relatively flat year over year, overall expense decreased ~~for the quarter,~~ due to ~~improved productivity efficiencies gained from our transition~~temporary voluntary leave programs offered to ~~an all-Airbus fleet.~~employees, voluntary pay reductions, and suspension of the bonus accrual during the year. We expect the number of full-time equivalent employees to decline by up to 9.0 percent during fourth quarter 2020 due to furloughs and reductions in force.

Aircraft fuel expense. Aircraft fuel expense decreased ~~$8.9~~$52.0 million, or ~~7.9~~49.8 percent, for the third quarter ~~2019~~2020 compared to third quarter ~~2018, as~~2019, largely due to a decrease in system average fuel cost per gallon ~~decreased 10.4~~of 38.9 percent year over ~~year.~~year as fuel prices

declined due to lower worldwide demand caused by the pandemic. System fuel gallons consumed ~~increased~~decreased by ~~3.0~~17.9 percent on a ~~6.7~~9.4 percent ~~increase~~decrease in ~~ASMs. ASM growth outpaced fuel consumption~~ASMs as ~~fuel~~we reduced capacity in light of the pandemic. Fuel efficiency (measured as ASMs per gallon) increased ~~3.6~~10.2 percent ~~quarter~~year over ~~quarter,~~year due to fuel saving initiatives, as well as less weight on many of our ~~transition~~flights, due to a 36.3 percentage point year-over-year decrease in load factor.

Depreciation and amortization expense. Depreciation and amortization expense for the third quarter 2020 increased $5.9 million, or 14.8 percent, year over year, as the average number of aircraft in service increased 3.5 percent year over year.

Accounting for a large portion of this increase, amortization of major maintenance costs was $9.5 million for the third quarter 2020 compared to $6.8 million for the third quarter 2019, due to an ~~all-Airbus fleet.~~increase in the number of aircraft and related deferred maintenance costs associated with them. We expect these costs will continue to increase as our fleet ages.

Station operations expense. Station operations expense for the third quarter ~~2019 increased $0.4~~2020 decreased $3.6 million, or ~~0.9~~8.2 percent, on ~~an 8.1~~a 9.6 percent ~~increase~~decrease in scheduled service ~~departures. Stations expense per departure decreased by 6.6 percent~~departures as we reduced the number of flights offered due ~~primarily~~ to ~~a significant decrease in irregular operations experienced quarter over quarter as a result of Airbus aircraft reliability.~~reduced demand.

Maintenance and repairs expense. Maintenance and repairs expense for the third quarter ~~2019~~2020 decreased ~~$7.2~~$10.7 million, or ~~22.6~~43.3 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 depreciation and amortization expense.

~~Depreciation and amortization expense~~. Depreciation and amortization expense for the third quarter 2019 increased $4.8 million, or 13.8 percent, year over year as the average number of Airbus aircraft in service increased 21.7 percent year over year.

~~Amortization of major~~2019. Routine maintenance costs decreased as aircraft utilization was ~~$6.8 million for~~down 14.9 percent during the third quarter 2019 compared to $2.9 million for the 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.quarter.

Sales and marketing expense. Sales and marketing expense for the third quarter ~~2019 increased slightly~~2020 decreased by 54.7 percent compared to the same period in ~~2018, mostly due to an increase~~2019. There was a decrease in net credit card fees ~~paid~~ as a result of ~~the 10.2~~a 53.5 percent ~~increase~~decrease in passenger revenue year over year. ~~We have improved our utilization of customer data~~Additionally, advertising spend has been intentionally pulled back this year due to ~~optimize marketing efforts, allowing us to decrease marketing spend per passenger by 3.4 percent year over year.~~the pandemic.

Other operating expense. Other expense decreased ~~$1.6~~$7.2 million for the third quarter ~~2019~~2020 compared to third quarter ~~2018,~~2019, mostly due to decreased activity in our non-airline subsidiaries.

CARES Act grant recognition. We received a total of $176.9 million in funds during the second and third quarters 2020 through the Payroll Support Program Agreement (the “PSPA”) under the CARES Act. Of the total, $152.4 million of these funds relate to direct grants, and were recognized as ~~there~~a credit to operating expense on our statement of income, over the periods for which the funds were ~~decreases~~intended to compensate - second and third quarters 2020. Of this total amount, we recognized a $77.9 million credit to operating expense on our statement of income during the third quarter of 2020.

Operating Special charges. Special charges of $33.6 million were recorded within operating expenses for the third quarter 2020. We did not have any special charges for the same period in ~~flight operations related~~2019. The special charges relate to expenses ~~as well as various general administrative expenses.~~that were unique and specific to COVID-19. These charges include accelerated depreciation on airframes and engines resulting from an accelerated retirement plan, losses on the sale-leaseback transactions, a portion of salary and benefits expense, and losses within our non-airline subsidiaries. See Note 2 of Notes to Consolidated Financial Statements (unaudited) for further information.

Non-operating Special charges

There were no special charges recorded within non-operating expenses for the third quarter 2020. We did not have any special charges for the same period in 2019.

Interest Expense

Interest expense for the quarter ended September 30, 2020 declined by $7.6 million, or 38.8 percent, as we were able to reduce the interest rate on our Term Loan with a principal balance of approximately $542.7 million after we amended the Term Loan in February 2020 and as a result of declines in LIBOR impacting our variable rate debt.

Income Tax Expense

We recorded a $15.6 million tax benefit (34.8 percent effective tax rate) compared to a $13.0 million tax provision (22.8 percent effective tax rate) for the three months ended September 30, 2020 and 2019, respectively. The effective tax rate for the three months ended September 30, 2020 differed from the statutory federal income tax rate of 21.0 percent primarily due to the tax accounting impact of the CARES Act which allows us to carryback the 2020 net operating loss at the 35.0 percent tax rate applicable in earlier years.

Sunseeker and Other 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 Other non-Airline Segment (our Teesnap golf management business ~~Kingsway golf course,~~and Allegiant Nonstop family entertainment ~~centers,~~centers), and operating expenses attributable to Sunseeker Resort and Kingsway Golf Course (most of the Sunseeker Resort expenses ~~are being~~were capitalized ~~at this time)~~during the construction period). ~~We expect these expenses to increase as the opening~~As 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 22.8 percent for the three months ended~~ September 30, 2019, compared to negative 5.1 percent for the three months ended September 30, 2018. The effective tax rate for the three 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 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 taxpayer for federal income tax purposes for 2019.2020, nearly all non-airline spend has been suspended.

Comparison of nine months ended September 30, ~~2019~~2020 to nine months ended September 30, ~~2018~~2019

Operating Revenue

Passenger revenue. For the nine months ended September 30, ~~2019,~~2020, passenger revenue ~~increased 9.4~~decreased 46.5 percent compared with ~~2018. The increase was mostly~~the same period in 2019 due to a 43.2 percent decline in scheduled service passengers from a 24.5 percent decrease in load factor. These declines are attributable to a ~~9.0 percent increase~~substantial decline in ~~scheduled service departures, which resulted in an 8.5 percent increase in scheduled service passengers.~~passenger demand and government travel restrictions and quarantine requirements related to COVID-19, since March 2020. Average total fare per passenger ~~increased slightly~~decreased by 5.8 percent, during the nine month period as a ~~13.7~~3.4 percent increase in average air-related ancillary revenue per passenger ~~more than~~partially offset ~~the 8.1~~a 13.7 percent decrease in scheduled service average base fare. Increases in our customer baggage fees and convenience fee ~~and baggage fees~~ contributed to the increase in air-related ancillary revenue to ~~$51.56~~$53.32 per passenger.

Third party products revenue. Third party products revenue for the nine months ended September 30, ~~2019 increased 21.6~~2020 decreased 33.2 percent over the same period in ~~2018.~~2019. This is primarily ~~the~~due to decreased net revenue from both rental cars and hotels, as a result of ~~increased~~substantially fewer passengers as well as reduced hotel room inventory, particularly in the Las Vegas market. The decline in revenue from rental cars and hotels was slightly offset by a 1.3 percent increase in third-party revenue from our co-branded credit card program ~~as well as an increase~~during the nine months ended September 30, 2020 compared to the same period in ~~net revenue from rental cars.~~2019.

Fixed fee contract revenue. Fixed fee contract revenue for the nine months ended September 30, ~~2019 increased 29.9~~2020 decreased 59.3 percent compared with ~~2018,~~the same period in 2019, primarily due to decrease in demand resulting in a ~~26.8~~45.6 percent ~~increase~~decrease in related departures. ~~This was the result of greater availability of spare aircraft~~The decrease in departures is mainly due to ~~improved operations~~a significant drop in ad hoc charter opportunities and ~~an all-Airbus fleet. The grounding~~the cancellation of events such as the ~~Boeing 737 Max of other airlines likely also contributed~~NCAA March Madness basketball tournament during 2020 due to ~~our increased fixed fee flying opportunities during 2019.~~COVID-19.

Other revenue. Other revenue decreased ~~$3.3 million~~by 25.9 percent for the nine months ended September 30, ~~2019~~2020 compared to ~~2018 primarily due to a decrease~~the same period 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~~decrease is primarily driven by decreases in subsidiary revenue through the third quarter 2020. As a result of ~~this decrease were slightly offset by increases~~the COVID-19 pandemic, we temporarily closed our family entertainment center in ~~revenue from~~Warren, Michigan and permanently discontinued all activity for our ~~non-airline activities.~~locations in Utah. We also temporarily closed Kingsway Golf Course, initially for renovation but now the renovation has been delayed as a result of our cash conservation efforts.

Operating Expenses

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 )

*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 costsperiods. Excluding fuel on a per ASM ~~basis.~~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.


	Nine Months Ended September 30,		Percent
Airline only unitized costs (in cents)	2020	2019	Change
Salary and benefits	3.01	2.68	12.3	%
Depreciation and amortization	1.33	0.90	47.8
Station operations	1.10	1.05	4.8
Maintenance and repairs	0.50	0.56	(10.7)
Sales and marketing	0.36	0.47	(23.4)
Aircraft lease rentals	0.06	—	NM
Other	0.58	0.47	23.4
CARES Act grant recognition	(1.55)	—	NM
Operating Special charges	1.20	—	NM
Airline CASM, excluding fuel	6.59	6.13	7.5
Aircraft fuel	1.72	2.65	(35.1)
Airline CASM	8.31	8.78	(5.4)

NM - Not meaningful

Salary and benefits expense. Salary and benefits expense ~~increased $28.3~~decreased $37.3 million, or ~~9.1~~11.0 percent, for the nine months ended September 30, ~~2019~~2020 compared to the same period in ~~2018. The increase is largely attributable to an 11.3 percent increase in~~2019. Although the average number of full-time equivalent employees ~~supporting~~was relatively flat year over year, temporary voluntary leave programs offered to employees, voluntary pay reductions, and suspension of the bonus accrual during the year resulted in decreased expenses. Additionally, a ~~7.4 percent increase in system block hours, as well as increased activity in our non-airline subsidiary activity. Flight crew salaries~~large portion of the $9.5 million special charges specific to COVID-19 during the first quarter of 2020 consisted of salary 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.~~benefits expense.

Aircraft fuel expense. Aircraft fuel expense decreased ~~$17.8~~$155.5 million, or ~~5.2~~48.0 percent, for the nine months ended September 30, ~~2019~~2020 compared to the same period in ~~2018 as~~2019 largely due to a decrease in system average fuel cost per gallon ~~decreased 6.0~~of 30.7 percent year over ~~year. System~~year as fuel prices declined due to lower worldwide demand caused by the pandemic. Additionally, system fuel gallons consumed ~~increased 1.2~~decreased 24.9 percent on ~~an 8.4~~a 19.9 percent ~~increase~~decrease in ~~ASMs. ASM growth outpaced fuel consumption~~ASMs as ~~fuel~~we reduced capacity in light of the pandemic. Fuel efficiency (measured as ASMs per gallon) increased ~~7.1~~6.6 percent year over year due to fuel saving initiatives as well as less weight on many of our ~~transition~~flights, due to ~~an all-Airbus fleet.~~a 24.5 percentage point year-over-year decrease in load factor.

Depreciation and amortization expense. Depreciation and amortization expense for the nine months ended September 30, 2020 increased $18.2 million, or 15.9 percent, compared to the same period in 2019. The average number of aircraft in service increased 9.5 percent year over year.

Amortization of major maintenance costs was $28.3 million for the nine months ended September 30, 2020 compared to $17.7 million for the same period in 2019. We expect these costs will continue to increase as our fleet ages.

Station operations expense. Station operations expense for the nine months ended September 30, ~~2019 increased 5.0~~2020 decreased 15.6 percent on a ~~9.0~~20.3 percent ~~increase~~decrease in scheduled service departures compared to the same period in ~~2018. Stations expense per departure decreased by 3.7 percent due mostly~~2019 as we reduced the number of flights offered 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.~~reduced demand.

Maintenance and repairs expense. Maintenance and repairs expense for the nine months ended September 30, ~~2019~~2020 decreased ~~9.7~~28.6 percent compared to ~~2018~~the same period in 2019 mostly due to a decrease in both major and routine maintenance ~~costs. Additionally,~~costs as aircraft utilization was down 29.3 percent as we flew fewer ASMs and departures during 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.period.

~~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~~2020 decreased $23.7 million compared to the same period in ~~2018, partially due to an increase~~2019. There was a decrease in net credit card fees ~~paid~~ as a result of a ~~9.4~~46.5 percent ~~increase~~decrease in passenger revenue year over year. ~~There were also increased expenses related to various marketing initiatives, including our multi-year partnerships with~~Additionally advertising spend was intentionally pulled back after the ~~Vegas Golden Knights and Minor League Baseball. However, we have improved our utilization~~onset of ~~customer data to optimize marketing efforts, allowing us to decrease marketing spend per passenger.~~the pandemic in March 2020.

Other operating expense. Other expense decreased ~~$1.1~~$3.5 million year over year, ~~as there were decreases~~mostly due to a decrease in ~~flight operations~~non-airline related expenses and other various expenses.

CARES Act grant recognition. We received a total of $176.9 million in funds during the second and third quarters 2020 through the Payroll Support Program Agreement under the CARES Act. We recognized $152.4 million, the amount relating to direct grants, as a credit to operating expense on our statement of income during the nine months ended September 30, 2020.

Operating Special charges. Special charges of $280.9 million were recorded within operating expenses for the nine months ended September 30, 2020. We did not have any special charges for the same period in 2019. The special charges relate to expenses that were unique and specific to COVID-19, and include impairment charges, accelerated depreciation on seven airframes and five engines resulting from an accelerated retirement plan, losses on sale-leaseback transactions, a portion of salary and benefits expense, and other various expenses. See Note 2 of Notes to Consolidated Financial Statements (unaudited) for further information.

Non-operating Special charges

Special charges of $26.6 million were recorded within non-operating expenses for the nine months ended September 30, 2020. We did not have any special charges for the same period in 2019. Of these special charges, $19.8 million relates to the termination of the loan agreement with Sixth Street Partners (formerly TSSP) intended to finance the development of Sunseeker Resorts Charlotte Harbor. The remaining $6.8 million relates to impairment charges for Sunseeker Resort during the first quarter 2020.

Interest Expense

Interest expense for the nine months ended September 30, 2020 declined by $14.4 million, or 24.6 percent, as we were able to reduce the interest rate on our Term Loan with a principal balance of approximately $542.7 million after we amended the Term Loan in February 2020 and as a result of declines in LIBOR impacting our variable rate debt.

Income Tax Expense

We recorded a $166.6 million tax benefit (51.8 percent effective tax rate) compared to a $51.0 million tax provision (22.9 percent effective tax rate) for the nine months ended September 30, 2020 and 2019, respectively. The 51.8 percent effective tax rate for the nine months ended September 30, 2020 differed from the statutory federal income tax rate of 21.0 percent primarily due to the tax accounting impact of the CARES Act which includes a $40.9 million discrete federal income tax benefit related to the full utilization of 2018 and 2019 net operating losses as well as ~~over $12.0 million~~the ability to carryback the 2020 net operating loss at the 35.0 percent tax rate applicable in ~~gains from MD-80~~earlier years. The effective tax rate was also impacted by the remeasurement of deferred taxes 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.~~state taxes.

Sunseeker and Other 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 Other non-Airline Segment (our Teesnap golf management business ~~Kingsway golf course,~~and Allegiant Nonstop family entertainment ~~centers,~~centers), and operating expenses attributable to Sunseeker Resort and Kingsway Golf Course (most of the Sunseeker Resort expenses ~~are being~~were capitalized ~~at this time). We expect these expenses to increase as~~during 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.~~construction period).

~~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 September 30,				Percent
	2020		2019		Change(1)
Operating statistics (unaudited):
Total system statistics:
Passengers	2,016,241		3,806,369		(47.0)

Available seat miles (ASMs) (thousands)	3,521,508		3,888,400		(9.4)

Airline operating expense per ASM (CASM) (cents)	6.45		9.09		(29.0)
Fuel expense per ASM (cents)	1.49		2.69		(44.6)
Airline operating CASM, excluding fuel (cents)	4.96		6.40		(22.5)

ASMs per gallon of fuel	88.5		80.3		10.2
Departures	24,365		27,707		(12.1)
Block hours	52,238		59,678		(12.5)
Average stage length (miles)	834		823		1.3
Average number of operating aircraft during period	90.7		87.6		3.5
Average block hours per aircraft per day	6.3		7.4		(14.9)
Full-time equivalent employees at end of period	4,275		4,267		0.2
Fuel gallons consumed (thousands)	39,786		48,443		(17.9)
Average fuel cost per gallon	$	1.32	$	2.16	(38.9)

Three Months Ended September 30, Percent
2019 2018
Change⁽¹⁾
Operating statistics (unaudited):
Total system statistics:
Passengers 3,806,369
3,503,849
8.6
Available seat miles (ASMs) (thousands) 3,888,400
3,643,948
6.7
Operating expense per ASM (CASM) (cents) 9.37
10.07
(7.0 )
Fuel expense per ASM (cents) 2.69
3.12
(13.8 )
Operating CASM, excluding fuel (cents) 6.68
6.95
(3.9 )
ASMs per gallon of fuel 80.3
77.5
3.6
Departures 27,707
25,601
8.2
Block hours 59,678
56,329
5.9
Average stage length (miles) 823
838
(1.8 )
Average number of operating aircraft during period 87.6
95.6
(8.4 )
Average block hours per aircraft per day 7.4
6.4
15.6
Full-time equivalent employees at end of period 4,267
3,835
11.3
Fuel gallons consumed (thousands) 48,443
47,016
3.0
Average fuel cost per gallon $ 2.16
$ 2.41
(10.4 )


Scheduled service statistics:									Scheduled service statistics:
Passengers	3,753,611			3,461,267			8.4		Passengers	2,003,648			3,753,611			(46.6)
Revenue passenger miles (RPMs) (thousands)	3,170,826			2,988,962			6.1		Revenue passenger miles (RPMs) (thousands)	1,714,622			3,170,826			(45.9)
Available seat miles (ASMs) (thousands)	3,687,473			3,485,800			5.8		Available seat miles (ASMs) (thousands)	3,449,339			3,687,473			(6.5)
Load factor	86.0		%	85.7		%	0.3		Load factor	49.7		%	86.0		%	(36.3)
Departures	26,238			24,281			8.1		Departures	23,710			26,238			(9.6)
Block hours	56,576			53,723			5.3		Block hours	51,057			56,576			(9.8)
Total passenger revenue per ASM (TRASM) (cents)⁽²⁾	11.10			10.64			4.3		Total passenger revenue per ASM (TRASM) (cents)(2)	5.60			11.10			(49.5)
Average fare - scheduled service⁽³⁾	$	54.20		$	59.23		(8.5	)	Average fare - scheduled service(3)	$	40.75		$	54.20		(24.8)
Average fare - air-related charges⁽³⁾	$	50.03		$	43.36		15.4		Average fare - air-related charges(3)	$	50.04		$	50.03		—
Average fare - third party products	$	4.85		$	4.60		5.4		Average fare - third party products	$	5.66		$	4.85		16.7
Average fare - total	$	109.08		$	107.19		1.8		Average fare - total	$	96.45		$	109.08		(11.6)
Average stage length (miles)	824			845			(2.5	)	Average stage length (miles)	839			824			1.8
Fuel gallons consumed (thousands)	46,038			44,910			2.5		Fuel gallons consumed (thousands)	38,853			46,038			(15.6)
Average fuel cost per gallon	$	2.17		$	2.41		(10.0	)	Average fuel cost per gallon	$	1.32		$	2.17		(39.2)
Rental car days sold	482,944			472,301			2.3		Rental car days sold	255,800			482,944			(47.0)
Hotel room nights sold	99,991			95,690			4.5		Hotel room nights sold	44,655			99,991			(55.3)
Percent of sales through website during period	93.1		%	93.7		%	(0.6	)	Percent of sales through website during period	92.3		%	93.1		%	(0.8)

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

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

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

Nine Months Ended September 30, Percent
2019 2018
Change⁽¹⁾
Operating statistics (unaudited):
Total system statistics:
Passengers 11,426,183
10,510,913
8.7
Available seat miles (ASMs) (thousands) 12,245,704
11,294,805
8.4
Operating expense per ASM (CASM) (cents) 9.05
9.52
(4.9 )
Fuel expense per ASM (cents) 2.65
3.03
(12.5 )
Operating CASM, excluding fuel (cents) 6.41
6.49
(1.2 )
ASMs per gallon of fuel 82.2
76.8
7.1
Departures 83,454
76,912
8.5
Block hours 187,829
174,838
7.4
Average stage length (miles) 858
868
(1.2 )
Average number of operating aircraft during period 84.1
92.4
(9.0 )
Average block hours per aircraft per day 8.2
6.9
18.8
Full-time equivalent employees at end of period 4,267
3,835
11.3
Fuel gallons consumed (thousands) 148,980
147,172
1.2
Average fuel cost per gallon $ 2.18
$ 2.32
(6.0 )

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 )


	Nine Months Ended September 30,				Percent
	2020		2019		Change(1)
Operating statistics (unaudited):
Total system statistics:
Passengers	6,464,949		11,426,183		(43.4)

Available seat miles (ASMs) (thousands)	9,809,934		12,245,704		(19.9)

Airline operating expense per ASM (CASM) (cents)	8.31		8.78		(5.4)
Fuel expense per ASM (cents)	1.72		2.65		(35.1)
Airline operating CASM, excluding fuel (cents)	6.59		6.13		7.5
ASMs per gallon of fuel	87.6		82.2		6.6
Departures	65,766		83,454		(21.2)
Block hours	147,350		187,829		(21.6)
Average stage length (miles)	862		858		0.5
Average number of operating aircraft during period	92.1		84.1		9.5
Average block hours per aircraft per day	5.8		8.2		(29.3)
Full-time equivalent employees at end of period	4,275		4,267		0.2
Fuel gallons consumed (thousands)	111,929		148,980		(24.9)
Average fuel cost per gallon	$	1.51	$	2.18	(30.7)


Scheduled service statistics:
Passengers	6,424,331			11,307,004			(43.2)
Revenue passenger miles (RPMs) (thousands)	5,747,639			9,964,948			(42.3)
Available seat miles (ASMs) (thousands)	9,588,031			11,800,788			(18.8)
Load factor	59.9		%	84.4		%	(24.5)
Departures	63,877			80,149			(20.3)
Block hours	143,651			180,674			(20.5)
Total passenger revenue per ASM (TRASM) (cents)(2)	7.44			11.18			(33.5)
Average fare - scheduled service(3)	$	52.12		$	60.40		(13.7)
Average fare - air-related charges(3)	$	53.32		$	51.56		3.4
Average fare - third party products	$	5.57		$	4.74		17.5
Average fare - total	$	111.00		$	116.70		(4.9)
Average stage length (miles)	867			861			0.7
Fuel gallons consumed (thousands)	109,082			143,433			(23.9)
Average fuel cost per gallon	$	1.50		$	2.17		(30.9)
Rental car days sold	872,382			1,495,502			(41.7)
Hotel room nights sold	149,431			319,197			(53.2)
Percent of sales through website during period	93.2		%	93.4		%	(0.2)

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

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

LIQUIDITY AND CAPITAL RESOURCES

Current liquidity

Cash, cash equivalents and investment securities (short-term and long-term) ~~decreased~~increased to $709.8 million at September 30, ~~2019 to $442.0 million,~~2020, from ~~$447.5~~$473.4 million at December 31, ~~2018.~~2019. Investment securities represent highly liquid marketable securities which are available-for-sale.

Restricted cash represents escrowed funds under fixed fee contracts and cash collateral against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties. Under our fixed fee flying contracts, we require our customers to prepay for flights to be provided by us. The prepayments are escrowed until the flight is completed and are recorded as restricted cash with a corresponding amount reflected as air traffic liability.

~~Our operating cash flows~~We received a total of $176.9 million in assistance through the payroll support program under the CARES Act. The funds were paid in installments, and ~~long-term debt borrowings have allowed us to invest in our fleet transition, return capital to shareholders~~we received $154.7 million during the second quarter 2020 and the remaining $22.2 million in the ~~form~~third quarter 2020.

Due to changes in the net operating loss carryback period under the CARES Act, we received a federal income tax refund of ~~recurring regular quarterly dividends~~$45.6 million in May 2020 and an additional refund of $48.7 million in July 2020, both of which related to 2018 and 2019 net operating loss carrybacks. In the first half of 2021, we expect to receive under current law a federal income tax refund in excess of $125 million related to a 2020 net operating loss carryback. We received a $13 million federal excise tax refund related to net customer refunds issued for the first quarter 2020. We are also anticipating an additional $16 million in federal excise tax refunds in the first half of 2021.

In September 2020, we received proceeds of $84.0 million from a financing secured by two aircraft and eight spare engines. As of September 30, 2020, we had 21 unencumbered aircraft and two unencumbered spare engines.

In September 2020, we received $30.0 million of proceeds through a sale-leaseback transaction on three aircraft and a fourth closed in October for an additional $10.0 million.

We have suspended share repurchases and ~~invest~~our quarterly cash dividend, as part of cash preservation efforts in ~~Sunseeker Resort~~response to the effects of COVID-19 on our business. In connection with our receipt of financial support under the payroll support program, we agreed not to repurchase shares or pay cash dividends through September 30, 2021. We have also suspended all non-airline capital expenditures and ~~our Allegiant Nonstop family entertainment centers. Future~~have reduced airline capital needs are primarily for the acquisition of additional aircraft, including our existing aircraft commitments, as well as planned capital outlay related to Sunseeker Resort and other travel and leisure initiatives.expenditures.

We believe we have more than adequate liquidity resources through our cash balances, operating cash flows, borrowings ~~debt commitments~~ and ~~cash balances,~~expected tax refunds, to meet our future contractual obligations. We will continue to consider raising funds through debt financing on an opportunistic basis.

~~In addition to our recurring quarterly cash dividend, our current share repurchase authority is $85.3 million. There is no expiration to this program.~~

Debt

Our ~~long-term~~ debt and finance lease obligations balance, without reduction for related issuance costs, increased from ~~$1.3~~$1.4 billion as of December 31, ~~2018~~2019 to ~~$1.4~~$1.5 billion as of September 30, ~~2019.~~2020. During the ~~first three quarters~~third quarter of ~~2019,~~2020, we borrowed ~~$450.0~~a net amount of $90.7 million, ~~under the Term Loan, and $320.4~~including additional debt of $84.0 million secured by aircraft, and ~~engines. Additionally, we retired~~an additional $6.7 million of debt related to the PSP Note under the CARES Act Payroll Support Program. We also received an advance of $6.2 million from the pre-purchase of credit card points related to our ~~unsecured notes of $450.0 million and paid off six loans, plus the outstanding balance~~amended co-branded credit card contract, which is recorded within debt on our ~~revolving credit facility for combined secured~~balance sheet.

Despite net losses and substantially lower revenues caused by the pandemic, our net debt ~~payoffs of $112.2 million.~~(total debt less cash, cash equivalents and investment securities) declined by $108.5 million from December 31, 2019 until September 30, 2020.

In ~~March 2019, we entered into~~October 2020, We closed on a ~~Construction Loan Agreement with~~private offering of $150.0 million principal amount of 8.5 percent Senior Secured Notes due 2024. The Notes and related guarantees are secured by first priority security interests in substantially all of our property and assets (excluding aircraft, aircraft engines, the Sunseeker development, and certain lenders affiliated with TPG Sixth Street Partners, LLC under which we may borrow up to $175.0 million to fund the construction of Phase 1 of Sunseeker Resort - Charlotte Harbor. No amount under this loan agreement has been drawn to date.other assets).

Sources and Uses of Cash

Operating Activities. Operating cash inflows are primarily derived from providing air transportation and related ancillary products and services to customers. During the nine months ended September 30, ~~2019,~~2020, our operating activities provided ~~$321.4~~$276.7 million of cash compared to ~~$290.1~~$321.4 million during the same period of ~~2018. The increase is mainly due to a $51.2 million increase in~~2019. Although net income ~~in 2019. This is partially~~for the nine months ended September 30, 2020 decreased by $326.9 million compared to 2019, the cash effect of this fluctuation was largely offset by the ~~net effect~~non-cash nature of ~~changes~~$279.1 million in ~~certain asset and liability accounts~~special charges during the ~~period, including the effect of a one time income tax refund of over $41 million received in 2018.~~nine months ended September 30, 2020.

Investing Activities. Cash used in investing activities was ~~$324.0~~$209.1 million during the nine months ended September 30, ~~2019~~2020 compared to ~~$187.1~~$324.0 million for the same period in ~~2018.~~2019. The ~~increase~~decrease in cash used is ~~mostly~~ due to a ~~$76.2~~$151.6 million year-over-year ~~increase~~decrease in cash outlays for the purchase of property and equipment and $78.2 million in proceeds received from sale-leaseback

transactions. These decreases in the use of cash were partially offset by a ~~lower amount of~~$105.5 million increase in cash ~~proceeds from maturities~~used for investment security activity, as purchases of investment securities (net of ~~purchases). The use of cash~~maturities) were $90.0 million for ~~investing activities in~~ the ~~first~~ nine months ~~of 2019 was reduced by a $16.0 million difference in cash provided by other investing activities~~ended September 30, 2020, compared to $15.5 million in proceeds from investment security maturities (net of purchases) for the same period ~~last year, mostly related to proceeds received from the sales of MD-80 parts.~~in 2019.

Financing Activities. Cash provided by financing activities for the nine months ended September 30, ~~2019~~2020 was ~~$15.3~~$81.1 million, compared to ~~$12.6~~$15.3 million ~~cash used in financing activities during~~for the same period in ~~2018. This~~2019. The year-over-year ~~fluctuation~~increase is ~~primarily~~mostly due to the net effect of debt activity, as debt proceeds ~~as we entered into~~net of principal payments and debt ~~agreements totaling $770.4~~issuance cost payments were $121.6 million during the nine months ended September 30, ~~2019,~~2020, compared to ~~$191.7~~$67.7 million induring the same period in ~~2018. The~~2019. Additionally, there was an increase in ~~debt proceeds was partially offset by a $498.7~~share repurchases, which were $33.8 million ~~increase in principal payments on, and early payoffs of, long-term debt and finance lease obligations~~ in the ~~current year~~first quarter of 2020 (before the share repurchase program was suspended) compared to ~~2018.~~$18.5 million during the first nine months of 2019. Dividends paid decreased by $22.9 million year-over-year as dividend payments were also suspended due to the pandemic.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this quarterly report on Form 10-Q, and in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” that are based on our management’s beliefs and assumptions, and on information currently available to our management. Forward-looking statements include ~~information~~

~~concerning~~ our ~~possible or assumed~~statements regarding future airline operations and capacity, the efficacy of cost saving measures, future expenditures, aircraft financings, the timing of aircraft acquisitions and retirements, expected capital expenditures, as well as other information concerning future results of operations, business strategies, ~~fleet plan,~~ financing plans ~~competitive position,~~and industry ~~environment, potential growth opportunities, future service to be provided, the effects of future regulation and competition, and the development of a resort in Southwest Florida.~~environment. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project” or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements may be found in our periodic reports filed with the Securities and Exchange Commission at www.sec.gov. These risk factors include, without limitation, the impact and duration of the COVID-19 pandemic on airline travel and the economy, liquidity issues resulting from the effect of the COVID-19 pandemic on our business, restrictions imposed on us a result of accepting government grants under the CARES Act, an accident involving, or problems with, our aircraft, public perception of our safety, our reliance on our automated systems, our reliance on third parties to deliver aircraft under contract to us on a timely basis, risk of breach of security of personal data, volatility of fuel costs, labor issues and costs, the ability to obtain regulatory approvals as needed, , the effect of economic conditions on leisure travel, debt covenants and balances, the ability to finance aircraft ~~under contract,~~to be acquired, terrorist attacks, risks inherent to airlines, our competitive environment, our reliance on third parties who provide facilities or services to us, the possible loss of key personnel, economic and other conditions in markets in which we operate, the ability to successfully develop and finance a resort in Southwest Florida, governmental regulation, increases in maintenance costs and cyclical and seasonal fluctuations in our operating results.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There ~~were~~have been no material changes to our critical accounting estimates during the nine months ended September 30, 2020. For information regarding our critical accounting policies and estimates, ~~as of September 30, 2019, from those disclosed~~see disclosures in the Consolidated Financial Statements and accompanying notes contained in our ~~2018~~2019 Form ~~10-K.~~10-K, and in Note 1 of Notes to Consolidated Financial Statements (unaudited).

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Aircraft Fuel

Our results of operations can be significantly impacted by changes in the price and availability of aircraft fuel, as aircraft fuel expense represented ~~29.2~~16.9 percent of our operating expenses for the nine months ended September 30, ~~2019.~~2020. Increases in fuel prices, or a shortage of supply, could have a material impact on our operations and operating results. Based on our fuel consumption for the three and nine months ended September 30, ~~2019,~~2020, a hypothetical ten percent increase in the average price per gallon of fuel would have increased fuel expense by approximately ~~$10.7~~$5.2 million and ~~$33.3~~$17.1 million, respectively. We have not hedged fuel price risk for many years.

Interest Rates

As of September 30, ~~2019,~~2020, we had $1.2 billion in variable-rate debt, including current maturities and without reduction for related costs. A hypothetical 100 basis point increase in market interest rates for the three and nine months ended September 30, ~~2019~~2020 would have affected interest expense by approximately ~~$2.2~~$3.1 million and ~~$6.7~~$9.4 million, respectively.

As of September 30, ~~2019,~~2020, we had ~~$98.9~~$255.2 million of fixed-rate debt, including current maturities and without reduction for related costs. ~~A hypothetical 100 basis point change in market interest rates would not impact interest expense on our fixed rate debt as of such date.~~

Item 4. Controls and Procedures

As of September 30, ~~2019,~~2020, under the supervision and with the participation of our management, including our chief executive officer ("CEO") and chief financial officer (“CFO”), we evaluated the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, management, including our CEO and CFO, has concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information we are required to disclose is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure.

~~Except as noted below, there~~There were no changes in our internal control over financial reporting that occurred during the quarter ending September 30, ~~2019,~~2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Effective January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842). Although the New Lease Standard did not have a material impact on our ongoing net income, changes were made to relevant business processes and the related control activities in order to monitor and maintain appropriate controls over financial reporting. The operating effectiveness of these changes will be evaluated as part of our annual assessment on the effectiveness of internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

We have evaluated our risk factors and determined there are no changes to those set forth in Part I, Item 1A of our Annual Report on Form ~~10-K.~~10-K and those additional Risk Factors disclosed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and filed with the Commission on August 4, 2020.

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

Our Repurchases of Equity Securities

~~The following table reflects~~(a) As previously disclosed, in connection with funding that we have received under the ~~repurchases~~CARES Act, we have issued to the Treasury warrants to purchase up to 27,681 shares of our common stock since April 2020 under an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. Of these warrants, warrants to purchase 19,700 shares were issued on or prior to June 30, 2020 and warrants for an additional 7,981 shares were issued in third quarter 2020. For additional information regarding the Warrants, see Note 2 of the Notes to Consolidated Financial Statements (unaudited).

(b) Not applicable

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

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

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

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. Exhibits



3.1			Articles of Incorporation (1)
3.2			Bylaws of the Company as amended on ~~October 23, 2019~~May 6, 2020 (2)
124.1			Indenture, dated as of October 7, 2020, by and among Allegiant Travel Company, the guarantors party thereto and Wilmington Trust, National Association, as trustee and collateral agent, governing the 8.500% Senior Secured Notes due 2024. (3)
4.2			Form of 8.500% Senior Secured Notes due 2024 (incorporated by reference to Exhibit A to Exhibit 4.1 above).
4.3			First Lien Intercreditor Agreement, dated as of October 7, 2020, between Barclays Bank PLC, as Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust, National Association, as First Lien Notes Collateral Agent and Authorized Representative for the First Lien Notes Secured Parties. (3)
10.1			Employment Agreement effective as of August 1, 2020, between the Company and D. Scott Sheldon.
10.2			Employment Agreement effective as of August 1, 2020, between the Company and Gregory C. Anderson.
10.3			Employment Agreement dated as of September 1, 2020, between the Company and Robert P. Wilson, III.
10.4			Employment Agreement dated as of September 1, 2020, between the Company and Scott DeAngelo.
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.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			XBRL Taxonomy Extension Labels Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document

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

(2) Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Commission on May 12, 2020.

(3) Incorporated by reference to respective Exhibit to the Current Report on Form 8-K filed with the Commission on October ~~25, 2019.~~7, 2020.

SIGNATURES

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



		ALLEGIANT TRAVEL COMPANY


Date:	~~October 31, 2019~~November 5, 2020	By:	/s/ Gregory Anderson
		Gregory Anderson, as duly authorized officer of the Company (Chief Financial Officer) and as Principal Financial Officer

3233



PART I.	FINANCIAL INFORMATION

ITEM 1.	Consolidated Financial Statements	34

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2021

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	2931

ITEM 4.	Controls and Procedures	2932

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	3032

ITEM 1A.	Risk Factors	3032

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3032

ITEM 3.	Defaults Upon Senior Securities	3032

ITEM 4.	Mine Safety Disclosures	3032

ITEM 5.	Other Information	3032

ITEM 6.	Exhibits	3133

	Signatures	3234


	September 30, 2019			December 31, 2018				September 30, 2020		December 31, 2019
	(unaudited)							(unaudited)
CURRENT ASSETS							CURRENT ASSETS
Cash and cash equivalents	$	88,114		$	81,520		Cash and cash equivalents	$	268,042	$	121,888
Restricted cash	20,475			14,391			Restricted cash	17,426		14,897
Short-term investments	314,822			314,464			Short-term investments	441,764		335,928
Accounts receivable	31,450			36,014			Accounts receivable	166,924		25,516
Expendable parts, supplies and fuel, net	27,210			19,516			Expendable parts, supplies and fuel, net	26,305		28,375
Prepaid expenses and other current assets	43,356			29,343			Prepaid expenses and other current assets	30,742		35,617

TOTAL CURRENT ASSETS	525,427			495,248			TOTAL CURRENT ASSETS	951,203		562,221
Property and equipment, net	2,102,815			1,847,268			Property and equipment, net	2,004,829		2,236,808
Long-term investments	39,057			51,526			Long-term investments	0		15,542
Deferred major maintenance, net	99,564			67,873			Deferred major maintenance, net	127,457		129,654
Operating lease right-of-use assets, net	22,433			—			Operating lease right-of-use assets, net	114,573		22,081
Deposits and other assets	45,184			36,753			Deposits and other assets	25,031		44,497
TOTAL ASSETS:	$	2,834,480		$	2,498,668		TOTAL ASSETS:	$	3,223,093	$	3,010,803
CURRENT LIABILITIES							CURRENT LIABILITIES
Accounts payable	$	21,493		$	27,452		Accounts payable	$	64,674	$	27,667
Accrued liabilities	121,399			122,027			Accrued liabilities	130,665		159,031
Current operating lease liabilities							Current operating lease liabilities	13,814		2,662
Air traffic liability	267,676			212,230			Air traffic liability	334,061		249,950
Current maturities of long-term debt and finance lease obligations, net of related costs	138,685			152,287			Current maturities of long-term debt and finance lease obligations, net of related costs	233,680		173,274

TOTAL CURRENT LIABILITIES	549,253			513,996			TOTAL CURRENT LIABILITIES	776,894		612,584
Long-term debt and finance lease obligations, net of current maturities and related costs	1,213,299			1,119,446			Long-term debt and finance lease obligations, net of current maturities and related costs	1,316,171		1,248,579
Deferred income taxes	211,801			164,027			Deferred income taxes	292,661		232,520

Noncurrent operating lease liabilities							Noncurrent operating lease liabilities	101,864		21,290
Other noncurrent liabilities	33,519			10,878			Other noncurrent liabilities	23,805		12,279
TOTAL LIABILITIES:	2,007,872			1,808,347			TOTAL LIABILITIES:	2,511,395		2,127,252
SHAREHOLDERS' EQUITY							SHAREHOLDERS' EQUITY
Common stock, par value $.001	23			23			Common stock, par value $.001	23		23
Treasury shares	(620,655		)	(605,037		)	Treasury shares	(648,118)		(617,579)
Additional paid in capital	285,318			270,935			Additional paid in capital	315,150		289,933
Accumulated other comprehensive income (loss), net	29			(661		)
Accumulated other comprehensive income, net							Accumulated other comprehensive income, net	183		98
Retained earnings	1,161,893			1,025,061			Retained earnings	1,044,460		1,211,076
TOTAL EQUITY:	826,608			690,321			TOTAL EQUITY:	711,698		883,551
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY:	$	2,834,480		$	2,498,668		TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY:	$	3,223,093	$	3,010,803



	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



	Nine Months Ended September 30,
	2019			2018
OPERATING ACTIVITIES:
Net income	$	171,596		$	120,356
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	114,112			92,641
(Gain)/loss on aircraft and other equipment disposals	(8,553		)	2,274
Share-based compensation expense	13,563			11,043
Deferred income taxes	47,795			21,760
Other adjustments	7,330			1,833
Changes in certain assets and liabilities:
Accounts receivable	4,564			38,005
Prepaid expenses	(13,493		)	(6,709		)
Accounts payable	(3,655		)	(2,437		)
Accrued liabilities	(8,158		)	5,960
Air traffic liability	55,446			27,432
Deferred major maintenance	(48,081		)	(21,699		)
Other assets/liabilities	(11,039		)	(336		)
Net cash provided by operating activities	321,427			290,123
INVESTING ACTIVITIES:
Purchase of investment securities	(397,504		)	(263,057		)
Proceeds from maturities of investment securities	413,038			355,325
Purchase of property and equipment, including capitalized interest	(350,187		)	(273,999		)
Other investing activities	10,647			(5,399		)
Net cash used in investing activities	(324,006		)	(187,130		)
FINANCING ACTIVITIES:
Cash dividends paid to shareholders	(34,214		)	(33,919		)
Proceeds from the issuance of debt	770,435			191,724
Repurchase of common stock	(18,549		)	(3,617		)
Principal payments on debt and finance lease obligations	(670,148		)	(171,438		)
Debt issuance costs	(32,592		)	(1,147		)
Other financing activities	325			5,834
Net cash provided by (used in) financing activities	15,257			(12,563		)
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
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	108,589		$	161,069

CASH PAYMENTS (RECEIPTS) FOR:
Interest paid, net of amount capitalized	$	53,089		$	43,751
Income tax refunds	(2,227		)	(41,145		)
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Property capitalized under operating leases	$	25,533		$	—
Flight equipment acquired under finance leases	—			127,625



(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



		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



		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		%


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.~~



(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


–	~~Achieved 17.9 percent airline operating margin, which represents a 10.3 percentage point increase year over year;~~


–	~~recognized our third consecutive quarter of ancillary air-related revenue per passenger exceeding $50, with a total of $50.03 this quarter;~~


–	~~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;~~


–	~~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 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~~


–	~~scheduled 22 new routes which are planned to begin service in November 2019.~~



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



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