SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended | SeptemberJune 30, 20202021 |
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OR |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-33166
Allegiant Travel Company
(Exact Name of Registrant as Specified in Its Charter)
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Nevada | 20-4745737 |
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(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
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1201 North Town Center Drive | |
Las Vegas, | Nevada | 89144 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (702) 851-7300
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Common stock, par value $.001$0.001 | | 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):
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Large accelerated filer | ☒ | | Accelerated filer | ☐ |
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Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
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Emerging growth company | ☐ | | | |
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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 30, 2020,July 16, 2021, the registrant had 16,389,48117,986,507 shares of common stock, $.001$0.001 par value per share, outstanding.
ALLEGIANT TRAVEL COMPANY
FORM 10-Q
TABLE OF CONTENTS
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PART I. | FINANCIAL INFORMATION | |
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ITEM 1. | | |
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ITEM 2. | | |
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ITEM 3. | | |
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ITEM 4. | | |
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PART II. | OTHER INFORMATION | |
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ITEM 1. | | |
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ITEM 1A. | | |
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ITEM 2. | | |
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ITEM 3. | | |
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ITEM 4. | | |
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ITEM 5. | | |
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ITEM 6. | | |
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)
| | | September 30, 2020 | | December 31, 2019 | | June 30, 2021 | | December 31, 2020 |
| | (unaudited) | | | | (unaudited) | | |
CURRENT ASSETS | CURRENT ASSETS | | | CURRENT ASSETS | | |
Cash and cash equivalents | Cash and cash equivalents | $ | 268,042 | | | $ | 121,888 | | Cash and cash equivalents | $ | 418,448 | | | $ | 152,764 | |
Restricted cash | Restricted cash | 17,426 | | | 14,897 | | Restricted cash | 32,942 | | | 17,555 | |
Short-term investments | Short-term investments | 441,764 | | | 335,928 | | Short-term investments | 767,410 | | | 532,477 | |
Accounts receivable | Accounts receivable | 166,924 | | | 25,516 | | Accounts receivable | 175,388 | | | 192,215 | |
Expendable parts, supplies and fuel, net | Expendable parts, supplies and fuel, net | 26,305 | | | 28,375 | | Expendable parts, supplies and fuel, net | 30,194 | | | 24,006 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | 30,742 | | | 35,617 | | Prepaid expenses and other current assets | 32,537 | | | 24,616 | |
| TOTAL CURRENT ASSETS | TOTAL CURRENT ASSETS | 951,203 | | | 562,221 | | TOTAL CURRENT ASSETS | 1,456,919 | | | 943,633 | |
Property and equipment, net | Property and equipment, net | 2,004,829 | | | 2,236,808 | | Property and equipment, net | 2,116,618 | | | 2,050,311 | |
Long-term investments | 0 | | | 15,542 | | |
| Deferred major maintenance, net | Deferred major maintenance, net | 127,457 | | | 129,654 | | Deferred major maintenance, net | 145,296 | | | 127,463 | |
Operating lease right-of-use assets, net | Operating lease right-of-use assets, net | 114,573 | | | 22,081 | | Operating lease right-of-use assets, net | 128,537 | | | 115,911 | |
Deposits and other assets | Deposits and other assets | 25,031 | | | 44,497 | | Deposits and other assets | 27,336 | | | 21,607 | |
TOTAL ASSETS: | TOTAL ASSETS: | $ | 3,223,093 | | | $ | 3,010,803 | | TOTAL ASSETS: | $ | 3,874,706 | | | $ | 3,258,925 | |
CURRENT LIABILITIES | CURRENT LIABILITIES | | | | CURRENT LIABILITIES | | | |
Accounts payable | Accounts payable | $ | 64,674 | | | $ | 27,667 | | Accounts payable | $ | 57,143 | | | $ | 34,197 | |
Accrued liabilities | Accrued liabilities | 130,665 | | | 159,031 | | Accrued liabilities | 182,914 | | | 116,093 | |
Current operating lease liabilities | Current operating lease liabilities | 13,814 | | | 2,662 | | Current operating lease liabilities | 16,940 | | | 14,313 | |
Air traffic liability | Air traffic liability | 334,061 | | | 249,950 | | Air traffic liability | 436,728 | | | 307,508 | |
Current maturities of long-term debt and finance lease obligations, net of related costs | Current maturities of long-term debt and finance lease obligations, net of related costs | 233,680 | | | 173,274 | | Current maturities of long-term debt and finance lease obligations, net of related costs | 144,382 | | | 217,234 | |
| TOTAL CURRENT LIABILITIES | TOTAL CURRENT LIABILITIES | 776,894 | | | 612,584 | | TOTAL CURRENT LIABILITIES | 838,107 | | | 689,345 | |
Long-term debt and finance lease obligations, net of current maturities and related costs | Long-term debt and finance lease obligations, net of current maturities and related costs | 1,316,171 | | | 1,248,579 | | Long-term debt and finance lease obligations, net of current maturities and related costs | 1,441,083 | | | 1,441,777 | |
Deferred income taxes | Deferred income taxes | 292,661 | | | 232,520 | | Deferred income taxes | 310,700 | | | 301,763 | |
| Noncurrent operating lease liabilities | Noncurrent operating lease liabilities | 101,864 | | | 21,290 | | Noncurrent operating lease liabilities | 114,761 | | | 102,289 | |
Other noncurrent liabilities | Other noncurrent liabilities | 23,805 | | | 12,279 | | Other noncurrent liabilities | 22,921 | | | 24,388 | |
TOTAL LIABILITIES: | TOTAL LIABILITIES: | 2,511,395 | | | 2,127,252 | | TOTAL LIABILITIES: | 2,727,572 | | | 2,559,562 | |
SHAREHOLDERS' EQUITY | SHAREHOLDERS' EQUITY | | | | SHAREHOLDERS' EQUITY | | | |
Common stock, par value $.001 | 23 | | | 23 | | |
Common stock, par value $0.001 | | Common stock, par value $0.001 | 25 | | | 23 | |
Treasury shares | Treasury shares | (648,118) | | | (617,579) | | Treasury shares | (642,177) | | | (646,008) | |
Additional paid in capital | Additional paid in capital | 315,150 | | | 289,933 | | Additional paid in capital | 671,893 | | | 329,753 | |
Accumulated other comprehensive income, net | 183 | | | 98 | | |
Accumulated other comprehensive loss, net | | Accumulated other comprehensive loss, net | (125) | | | (27) | |
Retained earnings | Retained earnings | 1,044,460 | | | 1,211,076 | | Retained earnings | 1,117,518 | | | 1,015,622 | |
TOTAL EQUITY: | TOTAL EQUITY: | 711,698 | | | 883,551 | | TOTAL EQUITY: | 1,147,134 | | | 699,363 | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: | $ | 3,223,093 | | | $ | 3,010,803 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: | $ | 3,874,706 | | | $ | 3,258,925 | |
The accompanying notes are an integral part of these consolidated financial statements.
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
OPERATING REVENUES: | OPERATING REVENUES: | | | | | | | | OPERATING REVENUES: | | | | | | | |
Passenger | Passenger | $ | 181,916 | | | $ | 391,222 | | | $ | 677,347 | | | $ | 1,265,978 | | Passenger | $ | 443,747 | | | $ | 116,520 | | | $ | 700,441 | | | $ | 495,431 | |
Third party products | Third party products | 11,337 | | | 18,207 | | | 35,756 | | | 53,557 | | Third party products | 23,001 | | | 8,443 | | | 36,622 | | | 24,419 | |
Fixed fee contracts | Fixed fee contracts | 5,284 | | | 19,797 | | | 17,440 | | | 42,859 | | Fixed fee contracts | 5,134 | | | 3,237 | | | 12,827 | | | 12,156 | |
Other | Other | 2,447 | | | 7,283 | | | 12,969 | | | 17,498 | | Other | 551 | | | 5,147 | | | 1,667 | | | 10,522 | |
Total operating revenues | Total operating revenues | 200,984 | | | 436,509 | | | 743,512 | | | 1,379,892 | | Total operating revenues | 472,433 | | | 133,347 | | | 751,557 | | | 542,528 | |
OPERATING EXPENSES: | OPERATING EXPENSES: | | | | | | | | OPERATING EXPENSES: | | | | | | | |
Salary and benefits | Salary and benefits | 95,829 | | | 107,586 | | | 303,264 | | | 340,589 | | Salary and benefits | 121,906 | | | 94,790 | | | 239,856 | | | 207,436 | |
Aircraft fuel | Aircraft fuel | 52,540 | | | 104,583 | | | 168,711 | | | 324,253 | | Aircraft fuel | 109,456 | | | 27,358 | | | 192,305 | | | 116,171 | |
Station operations | | Station operations | 57,210 | | | 27,405 | | | 100,303 | | | 68,405 | |
Depreciation and amortization | Depreciation and amortization | 45,291 | | | 39,436 | | | 132,285 | | | 114,112 | | Depreciation and amortization | 44,522 | | | 43,296 | | | 87,696 | | | 86,995 | |
Station operations | 39,954 | | | 43,522 | | | 108,359 | | | 128,357 | | |
Maintenance and repairs | Maintenance and repairs | 14,038 | | | 24,768 | | | 48,866 | | | 68,470 | | Maintenance and repairs | 22,597 | | | 13,032 | | | 45,968 | | | 34,827 | |
Sales and marketing | Sales and marketing | 7,967 | | | 17,591 | | | 35,331 | | | 59,057 | | Sales and marketing | 17,632 | | | 8,909 | | | 29,241 | | | 27,364 | |
Aircraft lease rental | Aircraft lease rental | 3,015 | | | 0 | | | 5,404 | | | 0 | | Aircraft lease rental | 5,117 | | | 1,427 | | | 9,837 | | | 2,389 | |
Other | Other | 19,755 | | | 26,907 | | | 70,225 | | | 73,756 | | Other | 15,501 | | | 23,752 | | | 33,276 | | | 50,468 | |
CARES Act grant recognition | (77,909) | | | 0 | | | (152,448) | | | 0 | | |
Payroll Support Programs grant recognition | | Payroll Support Programs grant recognition | (61,213) | | | (74,539) | | | (152,971) | | | (74,539) | |
Special charges | Special charges | 33,585 | | | 0 | | | 280,852 | | | 0 | | Special charges | 854 | | | 81,169 | | | 2,592 | | | 247,267 | |
Total operating expenses | Total operating expenses | 234,065 | | | 364,393 | | | 1,000,849 | | | 1,108,594 | | Total operating expenses | 333,582 | | | 246,599 | | | 588,103 | | | 766,783 | |
OPERATING INCOME (LOSS) | OPERATING INCOME (LOSS) | (33,081) | | | 72,116 | | | (257,337) | | | 271,298 | | OPERATING INCOME (LOSS) | 138,851 | | | (113,252) | | | 163,454 | | | (224,255) | |
OTHER (INCOME) EXPENSES: | OTHER (INCOME) EXPENSES: | | | | | | | | OTHER (INCOME) EXPENSES: | | | | | | | |
Interest expense | Interest expense | 11,943 | | | 19,506 | | | 44,149 | | | 58,531 | | Interest expense | 16,720 | | | 14,053 | | | 33,508 | | | 32,206 | |
Capitalized interest | Capitalized interest | 0 | | | (903) | | | (4,067) | | | (3,444) | | Capitalized interest | 0 | | | 0 | | | 0 | | | (4,067) | |
Interest income | Interest income | (868) | | | (3,335) | | | (4,596) | | | (10,038) | | Interest income | (500) | | | (1,417) | | | (963) | | | (3,728) | |
Loss on debt extinguishment | Loss on debt extinguishment | 0 | | | 0 | | | 1,222 | | | 3,677 | | Loss on debt extinguishment | 71 | | | 0 | | | 71 | | | 1,222 | |
Special charges | Special charges | 0 | | | 0 | | | 26,632 | | | 0 | | Special charges | 0 | | | 19,830 | | | 0 | | | 26,632 | |
Other, net | Other, net | 552 | | | (57) | | | 1,173 | | | (41) | | Other, net | (11) | | | 698 | | | (404) | | | 623 | |
Total other expenses | Total other expenses | 11,627 | | | 15,211 | | | 64,513 | | | 48,685 | | Total other expenses | 16,280 | | | 33,164 | | | 32,212 | | | 52,888 | |
INCOME (LOSS) BEFORE INCOME TAXES | INCOME (LOSS) BEFORE INCOME TAXES | (44,708) | | | 56,905 | | | (321,850) | | | 222,613 | | INCOME (LOSS) BEFORE INCOME TAXES | 122,571 | | | (146,416) | | | 131,242 | | | (277,143) | |
INCOME TAX PROVISION (BENEFIT) | INCOME TAX PROVISION (BENEFIT) | (15,565) | | | 12,976 | | | (166,595) | | | 51,017 | | INCOME TAX PROVISION (BENEFIT) | 27,544 | | | (53,313) | | | 29,346 | | | (151,030) | |
NET INCOME (LOSS) | NET INCOME (LOSS) | $ | (29,143) | | | $ | 43,929 | | | $ | (155,255) | | | $ | 171,596 | | NET INCOME (LOSS) | $ | 95,027 | | | $ | (93,103) | | | $ | 101,896 | | | $ | (126,113) | |
Earnings (loss) per share to common shareholders: | Earnings (loss) per share to common shareholders: | | | | | | | | Earnings (loss) per share to common shareholders: | | | | | | | |
Basic | Basic | $ | (1.82) | | | $ | 2.70 | | | $ | (9.75) | | | $ | 10.55 | | Basic | $ | 5.49 | | | $ | (5.85) | | | $ | 6.04 | | | $ | (7.93) | |
Diluted | Diluted | $ | (1.82) | | | $ | 2.70 | | | $ | (9.75) | | | $ | 10.54 | | Diluted | $ | 5.49 | | | $ | (5.85) | | | $ | 6.04 | | | $ | (7.93) | |
Shares used for computation: | Shares used for computation: | | Shares used for computation: | |
Basic | Basic | 16,006 | | | 16,037 | | | 15,953 | | | 16,037 | | Basic | 17,064 | | | 15,902 | | | 16,618 | | | 15,927 | |
Diluted | Diluted | 16,006 | | | 16,039 | | | 15,953 | | | 16,045 | | Diluted | 17,073 | | | 15,902 | | | 16,632 | | | 15,927 | |
| Cash dividends declared per share: | Cash dividends declared per share: | $ | 0 | | | $ | 0.70 | | | $ | 0.70 | | | $ | 2.10 | | Cash dividends declared per share: | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0.70 | |
The accompanying notes are an integral part of these consolidated financial statements.
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
NET INCOME (LOSS) | NET INCOME (LOSS) | $ | (29,143) | | | $ | 43,929 | | | $ | (155,255) | | | $ | 171,596 | | NET INCOME (LOSS) | $ | 95,027 | | | $ | (93,103) | | | $ | 101,896 | | | $ | (126,113) | |
Other comprehensive income (loss): | Other comprehensive income (loss): | | | | | Other comprehensive income (loss): | | | | |
Change in available for sale securities, net of tax | Change in available for sale securities, net of tax | (292) | | | 16 | | | 32 | | | 669 | | Change in available for sale securities, net of tax | (126) | | | 1,057 | | | (98) | | | 324 | |
Foreign currency translation adjustments | Foreign currency translation adjustments | 51 | | | 17 | | | 53 | | | 21 | | Foreign currency translation adjustments | 0 | | | (8) | | | 0 | | | 3 | |
| Total other comprehensive income | (241) | | | 33 | | | 85 | | | 690 | | |
Total other comprehensive income (loss) | | Total other comprehensive income (loss) | (126) | | | 1,049 | | | (98) | | | 327 | |
TOTAL COMPREHENSIVE INCOME (LOSS) | TOTAL COMPREHENSIVE INCOME (LOSS) | $ | (29,384) | | | $ | 43,962 | | | $ | (155,170) | | | $ | 172,286 | | TOTAL COMPREHENSIVE INCOME (LOSS) | $ | 94,901 | | | $ | (92,054) | | | $ | 101,798 | | | $ | (125,786) | |
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The accompanying notes are an integral part of these consolidated financial statements.
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)
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| 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 | |
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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 | |
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| Three Months Ended June 30, 2021 |
| Common stock outstanding | | Par value | | Additional paid-in capital | | Accumulated other comprehensive income (loss) | | Retained earnings | | Treasury shares | | Total shareholders' equity |
Balance at March 31, 2021 | 16,416 | | | $ | 23 | | | $ | 333,147 | | | $ | 1 | | | $ | 1,022,491 | | | $ | (646,008) | | | $ | 709,654 | |
Share-based compensation | 1 | | | — | | | 3,504 | | | — | | | — | | | — | | | 3,504 | |
Issuance of common stock, net of forfeitures | 1,553 | | | 2 | | | 335,137 | | | — | | | — | | | — | | | 335,139 | |
Stock issued under employee stock purchase plan | 16 | | | — | | | — | | | — | | | — | | | 3,831 | | | 3,831 | |
Other comprehensive income | — | | | — | | | — | | | (126) | | | — | | | — | | | (126) | |
Payroll Support Programs warrant issuance | — | | | — | | | 105 | | | — | | | — | | | — | | | 105 | |
Net income | — | | | — | | | — | | | — | | | 95,027 | | | — | | | 95,027 | |
Balance at June 30, 2021 | 17,986 | | | $ | 25 | | | $ | 671,893 | | | $ | (125) | | | $ | 1,117,518 | | | $ | (642,177) | | | $ | 1,147,134 | |
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| 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 | |
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| Six Months Ended June 30, 2021 |
| 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, 2020 | 16,405 | | | $ | 23 | | | $ | 329,753 | | | $ | (27) | | 0 | $ | 1,015,622 | | | $ | (646,008) | | | $ | 699,363 | |
Share-based compensation | 12 | | | — | | | 6,898 | | | — | | | — | | | — | | | 6,898 | |
Issuance of common stock, net of forfeitures | 1,553 | | | 2 | | | 335,137 | | | — | | | — | | | — | | | 335,139 | |
Stock issued under employee stock purchase plan | 16 | | | — | | | — | | | — | | | — | | | 3,831 | | | 3,831 | |
Other comprehensive loss | — | | | — | | | — | | | (98) | | | — | | | — | | | (98) | |
Payroll Support Programs warrant issuance | — | | | — | | | 105 | | | — | | | — | | | — | | | 105 | |
Net income | — | | | — | | | — | | | — | | | 101,896 | | | — | | | 101,896 | |
Balance at June 30, 2021 | 17,986 | | | $ | 25 | | | $ | 671,893 | | | $ | (125) | | | $ | 1,117,518 | | | $ | (642,177) | | | $ | 1,147,134 | |
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| Three Months Ended September 30, 2019 |
| Common stock outstanding | | Par value | | Additional paid-in capital | | Accumulated other comprehensive income (loss) | | Retained earnings | | Treasury shares | | Total shareholders' equity |
Balance at June 30, 2019 | 16,305 | | | $ | 23 | | | $ | 280,783 | | | $ | (4) | | | $ | 1,128,822 | | | $ | (605,115) | | | $ | 804,509 | |
Share-based compensation | — | | | — | | | 4,535 | | | — | | | — | | | — | | | 4,535 | |
Shares repurchased by the Company and held as treasury shares | (110) | | | — | | | — | | | — | | | — | | | (15,540) | | | (15,540) | |
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Cash dividends declared, $0.70 per share | — | | | — | | | — | | | — | | | (11,409) | | | — | | | (11,409) | |
Other comprehensive income (loss) | — | | | — | | | — | | | 33 | | | 551 | | | — | | | 584 | |
Net income | — | | | — | | | — | | | — | | | 43,929 | | | — | | | 43,929 | |
Balance at September 30, 2019 | 16,195 | | | $ | 23 | | | $ | 285,318 | | | $ | 29 | | | $ | 1,161,893 | | | $ | (620,655) | | | $ | 826,608 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 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 March 31, 2020 | 16,199 | | | $ | 23 | | | $ | 295,267 | | | $ | (624) | | | $ | 1,166,588 | | | $ | (651,352) | | | $ | 809,902 | |
Share-based compensation | — | | | — | | | 14,409 | | | — | | | — | | | — | | | 14,409 | |
Shares issued under employee stock purchase plan | 41 | | | — | | | — | | | — | | | — | | | 3,234 | | | 3,234 | |
Cash dividends, $0.70 per share | — | | | — | | | — | | | — | | | 117 | | | — | | | 117 | |
Other comprehensive income | — | | | — | | | — | | | 1,049 | | | — | | | — | | | 1,049 | |
Payroll Support Programs warrant issuance | — | | | — | | | 952 | | | — | | | — | | | — | | | 952 | |
Net loss | — | | | — | | | — | | | — | | | (93,103) | | | — | | | $ | (93,103) | |
Balance at June 30, 2020 | 16,240 | | | $ | 23 | | | $ | 310,628 | | | $ | 425 | | | $ | 1,073,602 | | | $ | (648,118) | | | $ | 736,560 | |
The accompanying notes are an integral part of these consolidated financial statements. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 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 | 113 | | | — | | | 19,743 | | | — | | | — | | | — | | | 19,743 | |
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, $0.70 per share | — | | | — | | | — | | | — | | | (11,361) | | | — | | | (11,361) | |
Other comprehensive income | — | | | — | | | — | | | 327 | | | — | | | — | | | 327 | |
Payroll Support Programs warrant issuance | — | | | — | | | 952 | | | — | | | — | | | — | | | 952 | |
Net loss | — | | | — | | | — | | | — | | | (126,113) | | | — | | | (126,113) | |
Balance at June 30, 2020 | 16,240 | | | $ | 23 | | | $ | 310,628 | | | $ | 425 | | | $ | 1,073,602 | | | $ | (648,118) | | | $ | 736,560 | |
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2021 | | 2020 |
Cash flows from operating activities: | Cash flows from operating activities: | | | | Cash flows from operating activities: | | | |
Net income (loss) | Net income (loss) | $ | (155,255) | | | $ | 171,596 | | Net income (loss) | $ | 101,896 | | | $ | (126,113) | |
Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation and amortization | Depreciation and amortization | 132,285 | | | 114,112 | | Depreciation and amortization | 87,696 | | | 86,995 | |
Special charges | Special charges | 279,114 | | | 0 | | Special charges | 2,592 | | | 263,497 | |
Other adjustments | Other adjustments | 89,342 | | | 60,135 | | Other adjustments | 18,184 | | | 81,630 | |
Changes in certain assets and liabilities: | Changes in certain assets and liabilities: | | Changes in certain assets and liabilities: | |
Air traffic liability | Air traffic liability | 84,111 | | | 55,446 | | Air traffic liability | 129,220 | | | 104,785 | |
| Deferred Payroll Support Programs grant recognition | | Deferred Payroll Support Programs grant recognition | 49,210 | | | 62,814 | |
Other - net | Other - net | (152,872) | | | (79,862) | | Other - net | 16,175 | | | (196,942) | |
Net cash provided by operating activities | Net cash provided by operating activities | 276,725 | | | 321,427 | | Net cash provided by operating activities | 404,973 | | | 276,666 | |
Cash flows from investing activities: | Cash flows from investing activities: | | | | Cash flows from investing activities: | | | |
Purchase of investment securities | Purchase of investment securities | (511,667) | | | (397,504) | | Purchase of investment securities | (673,722) | | | (296,979) | |
Proceeds from maturities of investment securities | Proceeds from maturities of investment securities | 421,658 | | | 413,038 | | Proceeds from maturities of investment securities | 436,364 | | | 258,751 | |
| Purchase of property and equipment | Purchase of property and equipment | (198,567) | | | (350,187) | | Purchase of property and equipment | (134,484) | | | (170,673) | |
Proceeds from sale-leaseback transactions | Proceeds from sale-leaseback transactions | 78,185 | | | 0 | | Proceeds from sale-leaseback transactions | 0 | | | 48,000 | |
Other investing activities | Other investing activities | 1,247 | | | 10,647 | | Other investing activities | 2,443 | | | 2,303 | |
Net cash used in investing activities | Net cash used in investing activities | (209,144) | | | (324,006) | | Net cash used in investing activities | (369,399) | | | (158,598) | |
Cash flows from financing activities: | Cash flows from financing activities: | | | | Cash flows from financing activities: | | | |
Cash dividends paid to shareholders | Cash dividends paid to shareholders | (11,361) | | | (34,214) | | Cash dividends paid to shareholders | 0 | | | (11,361) | |
Proceeds from the issuance of debt | 272,548 | | | 770,435 | | |
Proceeds from the issuance of debt and finance lease obligations | | Proceeds from the issuance of debt and finance lease obligations | 106,657 | | | 175,712 | |
Repurchase of common stock | Repurchase of common stock | (33,773) | | | (18,549) | | Repurchase of common stock | 0 | | | (33,773) | |
Principal payments on debt and finance lease obligations | Principal payments on debt and finance lease obligations | (146,416) | | | (670,148) | | Principal payments on debt and finance lease obligations | (199,627) | | | (98,171) | |
Debt issuance costs | Debt issuance costs | (4,505) | | | (32,592) | | Debt issuance costs | (606) | | | (2,852) | |
Proceeds from issuance of common stock | | Proceeds from issuance of common stock | 335,137 | | | 0 | |
Other financing activities | Other financing activities | 4,609 | | | 325 | | Other financing activities | 3,936 | | | 3,234 | |
Net cash provided by financing activities | Net cash provided by financing activities | 81,102 | | | 15,257 | | Net cash provided by financing activities | 245,497 | | | 32,789 | |
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 148,683 | | | 12,678 | | NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 281,071 | | | 150,857 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | 136,785 | | | 95,911 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | 170,319 | | | 136,785 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 285,468 | | | $ | 108,589 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 451,390 | | | $ | 287,642 | |
| | CASH PAYMENTS (RECEIPTS) FOR: | CASH PAYMENTS (RECEIPTS) FOR: | | CASH PAYMENTS (RECEIPTS) FOR: | |
Interest paid, net of amount capitalized | Interest paid, net of amount capitalized | $ | 36,801 | | | $ | 53,089 | | Interest paid, net of amount capitalized | $ | 26,379 | | | $ | 26,065 | |
Income tax refunds | (95,258) | | | (2,227) | | |
Income tax payments (refunds) | | Income tax payments (refunds) | 4,873 | | | (45,321) | |
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: | SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: | | SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: | |
Right-of-use (ROU) assets acquired | Right-of-use (ROU) assets acquired | $ | 103,499 | | | $ | 2,213 | | Right-of-use (ROU) assets acquired | $ | 23,157 | | | $ | 86,012 | |
Flight equipment acquired under finance leases | | Flight equipment acquired under finance leases | 13,833 | | | 0 | |
Purchases of property and equipment in accrued liabilities | Purchases of property and equipment in accrued liabilities | 19,294 | | | 6,091 | | Purchases of property and equipment in accrued liabilities | 5,088 | | | 22,106 | |
|
The accompanying notes are an integral part of these consolidated financial statements.
ALLEGIANT TRAVEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of Allegiant Travel Company (the “Company”) and its majority-owned operating subsidiaries. The Company's investments in unconsolidated affiliates, which are 50 percent or less owned, are accounted for under the equity or cost method, and are insignificant to the consolidated financial statements. All intercompany balances and transactions have been eliminated.
These unaudited consolidated financial statements reflect all normal recurring adjustments which management believes are necessary to present fairly the financial position, results of operations, and cash flows of the Company for the respective periods presented. Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto included in the annual report of the Company on Form 10-K for the year ended December 31, 20192020 and filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.
Recent Accounting Pronouncements
On June 16, 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The standard requires 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 recorded as allowances instead of reductions to amortized cost of the 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.
On December 18, 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The standard simplifies the accounting and disclosure requirements for income taxes by clarifying existing guidance to improve consistency in application of ASCAccounting Standards Codification ("ASC") 740. The standard also removes the requirement to calculate income tax expense for the stand-alone financial statements of wholly-owned subsidiaries. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted in any interim period within that year. The Company plans to adoptadopted this accounting standard effectiveprospectively as of January 1, 2021.2021, and it did not have a significant impact on the Company's consolidated financial statements.
Note 2 — Impact of the COVID-19 Pandemic
The rapid spread of COVID-19 and the related government restrictions, social distancing measures, and consumer fears have impacted flight loads, resulted in unprecedented cancellations of bookings and substantially reduced demand for new bookings throughout the airline industry. Starting in March 2020, the Company experienced a severe reduction in air travel, which has continued.continued through the first quarter of 2021. Demand in the foreseeable future will continue to be affected by fluctuations in COVID-19 cases, variants, hospitalizations, deaths, treatment efficacy and the availability of a vaccine.vaccines. The Company is continuously reevaluating flight schedules and adjusting capacity based on demand trends.
The Coronavirus Aid, Relief and Economic SecurityOn December 27, 2020, the Consolidated Appropriations Act, 2021 (the "CARES Act""Payroll Support Program Extension") was enactedsigned into law. This Payroll Support Program Extension provides an additional $15.0 billion in March 2020, providing support forto the airline industry and other businesses and individuals.
industry. On April 20, 2020,January 15, 2021, the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program Extension Agreement (the “PSPA”“PSP2”) 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 wasand 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$91.8 million under the PSPA.Payroll Support Program Extension. The proceeds of the awardfunds were used exclusively for wages, salaries and benefits during the second and third quarters 2020, in accordance with the agreement.benefits.
The $176.9In April 2021, the Company received $13.8 million received underin additional funds related to the PSPA duringPSP2 which included a loan of $1.7 million. In consideration for these additional funds, the second and third quartersCompany issued additional warrants ( the "PSP2 Warrants") to the Treasury to acquire 924 shares of 2020 includes direct grants,common stock at a $23.1 million loan, and warrants to purchase 27,681 sharesprice of $179.23 per share (based on the price of the Company's common stock as further discussed below.
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,December 24, 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 connectionApril 2021, the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program 3 Agreement (the "PSP3") with the PSPA, the Company is required to comply with the relevant provisionsTreasury under section 7301 of the CARESAmerican Rescue Plan Act including those prohibiting the repurchase of common stock2021. The Company received a total of $98.4 million in second quarter 2021. The funds must be used exclusively for wages, salaries and the payment of common stock dividends until September 30, 2021, as well as those restricting the payment of certain executive compensation for periods through March 24, 2022.benefits.
Given the Company's efforts to conserve and raise liquidity andBased on the Company's assumptions about the future impact of COVID-19 on travel demand, which could be materially different due to the inherent uncertainties of the current operating environment, the Company expects to meet its cash obligations as well as remain in compliance with the debt covenants in its existing financing agreements for the next 12 months based on its current level of unrestricted cash and short-term investments, its anticipated access to liquidity and tax refunds, and projected cash flows from operations.
Special Charges
The effects of COVID-19 triggered an impairment review, and a non-cash impairment charge was recognized during the nine months ended September 30, 2020 (see Note 12 - Impairment for additional detail). The Company also identified expenses that were unique and specific to COVID-19. The impairment charges and other expenses that resulted from the effects of COVID-19 are recorded astable below summarizes special charges within both operating and non-operating expenses during the nine months ended September 30, 2020. See the table below for a summary of operating and non-operating special charges recorded by segment during the three and ninesix months ended SeptemberJune 30, 2021, and 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | (in thousands) | | Airline | | Sunseeker Resort | | Other non-airline | | Total | (in thousands) | | 2021 | | 2020 | | 2021 | | 2020 |
Three Months Ended September 30, 2020 | | | | | | | | |
| Operating | Operating | | $ | 32,617 | | | $ | 0 | | | $ | 968 | | | $ | 33,585 | | Operating | | $ | 854 | | | $ | 81,169 | | | $ | 2,592 | | | $ | 247,267 | |
Non-operating | Non-operating | | 0 | | | 0 | | | 0 | | | 0 | | Non-operating | | 0 | | | 19,830 | | | 0 | | | 26,632 | |
Total special charges | Total special charges | | $ | 32,617 | | | $ | 0 | | | $ | 968 | | | $ | 33,585 | | Total special charges | | $ | 854 | | | $ | 100,999 | | | $ | 2,592 | | | $ | 273,899 | |
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 | | |
Additional detail for the $307.5$2.6 million of total special charges for the six months ended June 30, 2021 appears below:
•$2.1 million resulting from the accelerated retirements of 4 airframes and 6 engines
•$0.5 million impairment loss on a building in Chesterfield, Missouri associated with the Allegiant Nonstop family entertainment line of business.
Additional detail for the $273.9 million of total special charges (operating and non-operating) for the ninesix months ended SeptemberJune 30, 2020 appears below:
•$168.4 million in impairment charges
◦Includes Airline - $5.0 million; Sunseeker Resort - $136.8 million; Other primarily in our non-airline - $26.6 millionsubsidiaries
•$89.358.6 million adjustment resulting from the accelerated retirementsretirement of 7 airframes and 5 engines, loss on sale leaseback transactionstransaction of 74 aircraft, and write-offs of other aircraft related assets
•$21.519.7 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 theaccrual on 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 which was paid in October 2020)the second half of 2020
•$5.0 million related to suspension of construction at Sunseeker
•$3.52.4 million write-down on various non-aircraft assets and other various expenses
Note 3 — Revenue Recognition
Passenger Revenue
Passenger revenue is the most significant category in the Company's reported operating revenues. Passenger revenue is primarily composed of scheduled service revenue (including passenger ticket sales and credit voucher breakage), revenue from ancillary air-related charges (including seat fees, baggage fees, and other travel-related services performed in conjunction with a passenger’s flight), as well as co-brand credit card point redemptions,revenues, as outlined below:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | (in thousands) | 2020 | | 2019 | | 2020 | | 2019 | (in thousands) | 2021 | | 2020 | | 2021 | | 2020 |
Scheduled service | Scheduled service | $ | 79,464 | | | $ | 200,233 | | | $ | 325,404 | | | $ | 672,690 | | Scheduled service | $ | 225,613 | | | $ | 48,680 | | | $ | 357,540 | | | $ | 245,941 | |
Ancillary air-related charges | Ancillary air-related charges | 100,262 | | | 187,776 | | | 342,520 | | | 583,003 | | Ancillary air-related charges | 213,445 | | | 65,294 | | | 334,518 | | | 242,258 | |
Co-brand redemptions | Co-brand redemptions | 2,190 | | | 3,213 | | | 9,423 | | | 10,285 | | Co-brand redemptions | 4,689 | | | 2,546 | | | 8,383 | | | 7,232 | |
Total passenger revenue | Total passenger revenue | $ | 181,916 | | | $ | 391,222 | | | $ | 677,347 | | | $ | 1,265,978 | | Total passenger revenue | $ | 443,747 | | | $ | 116,520 | | | $ | 700,441 | | | $ | 495,431 | |
Sales of passenger tickets not yet flown are recorded in air traffic liability. Passenger revenue is recognized when transportation is provided or when ticket voucher breakage occurs, to the extent different from estimated breakage. As of SeptemberJune 30, 2020,2021, approximately 34.769.8 percent of the air traffic liability balance was related to forward bookings, with the remaining 65.330.2 percent related to credit vouchers for future travel.
The normal contract term of passenger tickets is twelve12 months and revenue associated with future travel will principally be recognized within this time frame. During$150.4 million of the nine months ended September 30, 2020, $204.1$307.5 million was recognized into passenger revenue that was recorded in the air traffic liability balance as of $250.0 million at December 31, 2019.2020 was recognized into passenger revenue during the six months ended June 30, 2021.
In April 2020, the Company announced that credits issued for canceled travel beginning in April through the end of the COVID-19 pandemic willJanuary 2020 would have an extended expiration date of two years from the original booking date. This policy continued for bookings through June 30, 2021. This change has been considered in estimating the future breakage rate, which represents the value of credit vouchers that are not expected to be redeemed prior to their contractual expiration date. Estimates of revenue to be recognized from air traffic liability for credit vouchers may be subject to variability and differ from historical experience due to the change in contract duration and uncertainty regarding demand for future air travel. Effective July 1, 2021, vouchers issued have an expiration date of one year from the original booking date.
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.
The following table presents the activity of the co-brand point liability as offor the datesperiods indicated:
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
(in thousands) | (in thousands) | 2020 | | 2019 | (in thousands) | 2021 | | 2020 |
Balance at January 1 | Balance at January 1 | $ | 15,613 | | | $ | 10,708 | | Balance at January 1 | $ | 21,841 | | | $ | 15,613 | |
Points awarded (deferral of revenue) | Points awarded (deferral of revenue) | 15,018 | | | 14,308 | | Points awarded (deferral of revenue) | 10,696 | | | 10,962 | |
Points redeemed (recognition of revenue) | Points redeemed (recognition of revenue) | (9,510) | | | (10,285) | | Points redeemed (recognition of revenue) | (8,383) | | | (7,232) | |
Balance at September 30 | $ | 21,121 | | | $ | 14,731 | | |
Balance at June 30 | | Balance at June 30 | $ | 24,154 | | | $ | 19,343 | |
As of SeptemberJune 30, 2021 and 2020, and 2019, $11.8$11.7 million and $10.6$12.4 million, respectively, of the current points liability is reflected in Accruedaccrued liabilities and represents the Company's current estimate of revenue to be recognized in the next twelve12 months based on historical trends, with the remaining balance reflected in other noncurrent liabilities expected to be recognized into revenue in periods thereafter. Given the inherent uncertainty of the current operating environment due to COVID-19, the Company will continue to monitor redemption patterns and may adjust its estimates in the future.
Note 4 — Property and Equipment
The following table summarizes the Company's property and equipment as of the dates indicated:
| (in thousands) | (in thousands) | September 30, 2020 | | December 31, 2019 | (in thousands) | June 30, 2021 | | December 31, 2020 |
Flight equipment, including pre-delivery deposits | Flight equipment, including pre-delivery deposits | $ | 2,259,358 | | | $ | 2,289,157 | | Flight equipment, including pre-delivery deposits | $ | 2,429,482 | | | $ | 2,331,499 | |
Computer hardware and software | Computer hardware and software | 151,602 | | | 171,516 | | Computer hardware and software | 154,248 | | | 149,727 | |
Land and buildings/leasehold improvements(1) | Land and buildings/leasehold improvements(1) | 86,825 | | | 98,885 | | Land and buildings/leasehold improvements(1) | 87,116 | | | 87,030 | |
Other property and equipment | Other property and equipment | 80,156 | | | 161,760 | | Other property and equipment | 82,613 | | | 80,601 | |
Total property and equipment | Total property and equipment | 2,577,941 | | | 2,721,318 | | Total property and equipment | 2,753,459 | | | 2,648,857 | |
Less accumulated depreciation and amortization | Less accumulated depreciation and amortization | (573,112) | | | (484,510) | | Less accumulated depreciation and amortization | (636,841) | | | (598,546) | |
Property and equipment, net | Property and equipment, net | $ | 2,004,829 | | | $ | 2,236,808 | | Property and equipment, net | $ | 2,116,618 | | | $ | 2,050,311 | |
(1) Balance includes a building currently held for sale in Chesterfield, Missouri with a carrying value of $4.3 million
Accrued capital expenditures as of SeptemberJune 30, 20202021 and December 31, 20192020 were $19.3$5.1 million and $16.5$16.9 million, respectively.
Note 5 — Long-Term Debt
The following table summarizes the Company's Long-term debt and finance lease obligations as of the dates indicated:
| (in thousands) | (in thousands) | September 30, 2020 | | December 31, 2019 | (in thousands) | June 30, 2021 | | December 31, 2020 |
Fixed-rate debt and finance lease obligations due through 2029 | $ | 363,080 | | | $ | 235,071 | | |
Fixed-rate debt and finance lease obligations due through 2030 | | Fixed-rate debt and finance lease obligations due through 2030 | $ | 621,750 | | | $ | 525,240 | |
Variable-rate debt due through 2029 | Variable-rate debt due through 2029 | 1,186,771 | | | 1,186,782 | | Variable-rate debt due through 2029 | 963,715 | | | 1,133,771 | |
Total long-term debt and finance lease obligations, net of related costs | Total long-term debt and finance lease obligations, net of related costs | 1,549,851 | | | 1,421,853 | | Total long-term debt and finance lease obligations, net of related costs | 1,585,465 | | | 1,659,011 | |
Less current maturities, net of related costs | Less current maturities, net of related costs | 233,680 | | | 173,274 | | Less current maturities, net of related costs | 144,382 | | | 217,234 | |
Long-term debt and finance lease obligations, net of current maturities and related costs | Long-term debt and finance lease obligations, net of current maturities and related costs | $ | 1,316,171 | | | $ | 1,248,579 | | Long-term debt and finance lease obligations, net of current maturities and related costs | $ | 1,441,083 | | | $ | 1,441,777 | |
| Weighted average fixed-interest rate on debt | Weighted average fixed-interest rate on debt | 3.9 | % | | 3.7 | % | Weighted average fixed-interest rate on debt | 5.7% | | 5.7% |
Weighted average variable-interest rate on debt | Weighted average variable-interest rate on debt | 2.4 | % | | 4.5 | % | Weighted average variable-interest rate on debt | 2.5% | | 2.4% |
Maturities of long-term debt and finance lease obligations for the remainder of 20202021 and for the next four years and thereafter, in the aggregate, are: remaining in 2020 - $44.7 million; 2021 - $229.3$75.8 million; 2022 - $135.5$131.9 million; 2023 - $122.1$132.5 million; 2024 - $656.3$802.3 million; 2025 - $85.4 million; and $362.0$357.6 million thereafter.
CARES Act Payroll Support Program Loan
In April 2020 the Company entered into a low-interest rate, senior unsecured term promissory note (the "PSP" Note) with the Treasury under the CARES Act payroll support program. The PSP Note will mature 10 years after issuance and bears interest at a rate of 1.0 percent for the first five years, with interest at the secured overnight financing rate (SOFR) plus 2.0 percent thereafter. The PSP Note is prepayable at any time at par, without penalty.
During the second and third quarters 2020, the Company received $23.1 million in funds under the PSP Note, which is recorded within noncurrent debt on the balance sheet.
In connection with the PSP Note, the Company is required to comply with the relevant provisions of the CARES Act, including those prohibiting the repurchase of common stock and the payment of common stock dividends until September 30, 2021, as well as those restricting the payment of certain executive compensation for periods through March 24, 2022.
Senior Secured Revolving Credit Facility
TheIn March 2021, the Company hasentered into a senior securednew revolving credit facility under which it is ableentitled to borrow up to $81.0$50.0 million. The facility has a term of 24 months and the borrowing ability is based on the value of the Airbus A320 series aircraft placed in the collateral pool. In 2019 the Company drew down the entire $81.0 million under this facility. A principal payment of $11.7 million was made in September 2020, and the remaining balance as of September 30, 2020 is $69.3 million. Aircraft remain in the collateral pool for up to two years, and, as of September 30, 2020, there were 6 aircraft ininto the collateral pool. The notes for the amounts borrowed under the facility bear interest at a floating rate based on LIBOR and are due in March 2021.
2023. As of June 30, 2021, 0 aircraft collateral had been added to the collateral pool and the facility was undrawn.
Other Secured Debt
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 monthly installments with maturity after five and six years for the spare engines and aircraft, respectively.
Term Loan
In February 2019, the Company entered into a Credit and Guaranty Agreement (the “Term Loan”) to borrow $450.0 million, guaranteed by all of the Company's subsidiaries, excluding Sunseeker Resorts Inc. and its subsidiaries, and other insignificant subsidiaries (the "Term Loan Guarantors"). In February 2020 the Company entered into an amendment to the Term Loan under which the interest rate was reduced by 150 basis points, and the principal amount of the debt was increased by a net amount of $100.0 million to $545.5 million. Quarterly principal payments increased under the amendment, but the remaining provisions were substantially unchanged, including the maturity date. The Term Loan is secured by substantially all property and assets of the Company and the Term Loan Guarantors, excluding aircraft and aircraft engines, and excluding certain other assets. The Term Loan bears interest based on LIBOR and provides for quarterly interest payments along with quarterly principal payments of $1.4 million through February 2024, at which time the Term Loan is due. The Term Loan may be prepaid at any time without penalty.
Construction Loan Agreement
In March 2019, Sunseeker Florida, Inc. (“SFI”), a wholly-owned subsidiary of the Company, entered into a Construction Loan Agreement with certain lenders affiliated with TPG Sixth Street Partners, LLC (the “Lender”). Under the Construction Loan Agreement, SFI would have been able to borrow up to $175.0 million (the “Loan”) to fund the construction of Phase 1 of Sunseeker Resort -Charlotte Harbor. NaN amount was ever drawn under this agreement.
Due to the various impacts of COVID-19, the Company suspended construction of Sunseeker Resort, and it is uncertain when construction will resume. In light of these conditions, the Company reached a $19.8 million settlement agreement with the Lender to terminate the Loan. During the third quarter 2020, the Company paid $14.9 million of the settlement, and the remaining $4.9 million was paid in October 2020. The expense is reflected within non-operating special charges on the statement of income for the nine months ended September 30, 2020.
Note 6 — Income Taxes
The Company recorded a $15.6 million tax benefit (34.8 percentan effective tax rate) compared to a $13.0 million tax provision (22.8rate of 22.5 percent effective tax rate)and 36.4 percent for the three months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. The effective tax rate for the three months ended SeptemberJune 30, 2021 differed from the statutory Federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of ASU 2016-09 related to share-based payments. The effective tax rate for the three months ended June 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 allowsallowed the Company to carryback the 2020 net operating loss at the 35.0 percent tax rate applicable in earlier years. While the Company expects its effective tax rate to be fairly consistent in the near term, it will vary depending on recurring items such as the amount of income earned in each state and the state tax rate applicable to such income. Discrete items during interim periods may also affect the Company's tax rates.
The Company recorded a $166.6 million tax benefit (51.8 percentan effective tax rate) compared to a $51.0 million tax provision (22.9rate of 22.4 percent and 54.5 percent for the six months ended June 30, 2021 and 2020, respectively. The effective tax rate)rate for the ninesix months ended SeptemberJune 30, 20202021 differed from the statutory Federal income tax rate of 21.0 percent primarily due to state income taxes and 2019, respectively.the impact of ASU 2016-09 related to share-based payments. The 51.854.5 percent effective tax rate for the ninesix months ended SeptemberJune 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 includesincluded a $40.9$39.6 million discrete federal income tax benefit related to the full utilization of 2018 and 2019 net operating losses as well as the ability to carryback the 2020 net operating loss at a 35.0 percent rate applicable in earlier years. The effective tax rate was also impacted by the remeasurement of deferred taxes and state taxes.
Note 7 — Leases
The Company evaluates all operating leases and they are measured on the balance sheet with a lease liability and right-of-use asset (“ROU”) at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. Airport terminal leases mostly include variable lease payments outside of those based on a fixed index, and are therefore not recorded as ROU assets.
The following table summarizes the Company's total assets and liabilities related to leases as of the dates indicated:
| (in thousands) | (in thousands) | Classification on the Balance Sheet | September 30, 2020 | | December 31, 2019 | (in thousands) | Classification on the Balance Sheet | June 30, 2021 | | December 31, 2020 |
Assets | Assets | | | | Assets | | | |
Operating lease assets(1) | Operating lease assets(1) | Operating lease right-of-use assets | $ | 114,573 | | | $ | 22,081 | | Operating lease assets(1) | Operating lease right-of-use assets | $ | 128,537 | | | $ | 115,911 | |
Finance lease assets(2) | Finance lease assets(2) | Property and equipment, net | 106,777 | | | 111,665 | | Finance lease assets(2) | Property and equipment, net | 239,019 | | | 133,175 | |
Total lease assets | Total lease assets | | $ | 221,350 | | | $ | 133,746 | | Total lease assets | | $ | 367,556 | | | $ | 249,086 | |
| Liabilities | Liabilities | | Liabilities | |
Current | Current | | Current | |
Operating(1) | Operating(1) | Current operating lease liabilities | $ | 13,814 | | | $ | 2,662 | | Operating(1) | Current operating lease liabilities | $ | 16,940 | | | $ | 14,313 | |
Finance(2) | Finance(2) | Current maturities of long-term debt and finance lease obligations | 7,922 | | | 7,666 | | Finance(2) | Current maturities of long-term debt and finance lease obligations | 13,835 | | | 9,767 | |
Noncurrent | Noncurrent | | Noncurrent | |
Operating(1) | Operating(1) | Noncurrent operating lease liabilities | 101,864 | | | 21,290 | | Operating(1) | Noncurrent operating lease liabilities | 114,761 | | | 102,289 | |
Finance(2) | Finance(2) | Long-term debt and finance lease obligations | 101,955 | | | 107,930 | | Finance(2) | Long-term debt and finance lease obligations | 225,039 | | | 117,060 | |
Total lease liabilities | Total lease liabilities | | $ | 225,555 | | | $ | 139,548 | | Total lease liabilities | | $ | 370,575 | | | $ | 243,429 | |
(1) Represents assets and liabilities of 1016 aircraft, office equipment, certain airport and terminal facilities, and other assets under operating leases
(2) RepresentsThe June 30, 2021 number represents assets and liabilities of 510 aircraft under finance leases
Sale-Leaseback Transaction
During the ninesix months ended SeptemberJune 30, 2020,2021, the Company entered into two separatea sale-leaseback transactionstransaction involving 7 total aircraft. The transactions qualified as sales,3 aircraft and generated $78.2generating $105.0 million of proceeds. AsThe lease was classified as a finance lease and as a result, of the sales, thetransaction did not qualify as a sale. The aircraft were not 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 sinceand the Company would not likely have completedrecorded a financial liability in the transactions absent cash conservation efforts as a resultamount 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.$105.0 million. The proceeds from the sales of aircraft in these transactionsthis transaction are treated as cash inflows from investingfinance lease obligations and reported in financing activities on the statement of cash flows.
Note 8 — Fair Value Measurements
The Company utilizes the market approach to measure the fair value of its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The assets classified as Level 2 primarily utilize quoted market prices or alternative pricing sources including transactions involving identical or comparable assets and models utilizing market observable inputs for valuation of these securities. No changes in valuation techniques or inputs occurred during the ninesix months ended SeptemberJune 30, 2020.2021.
Financial instruments measured at fair value on a recurring basis:
| | | September 30, 2020 | | December 31, 2019 | | June 30, 2021 | | December 31, 2020 |
(in thousands) | (in thousands) | Total | | Level 1 | | Level 2 | | Total | | Level 1 | | Level 2 | (in thousands) | Total | | Level 1 | | Level 2 | | Total | | Level 1 | | Level 2 |
Cash equivalents | Cash equivalents | | | | | | | | | | | | Cash equivalents | | | | | | | | | | | |
Money market funds | Money market funds | $ | 80,121 | | | $ | 80,121 | | | $ | 0 | | | $ | 42,653 | | | $ | 42,653 | | | $ | 0 | | Money market funds | $ | 157,320 | | | $ | 157,320 | | | $ | 0 | | | $ | 5,340 | | | $ | 5,340 | | | $ | 0 | |
Commercial paper | 22,783 | | | 0 | | | 22,783 | | | 5,807 | | | 0 | | | 5,807 | | |
Municipal debt securities | Municipal debt securities | 10,205 | | | 0 | | | 10,205 | | | 1,202 | | | 0 | | | 1,202 | | Municipal debt securities | 78,996 | | | 0 | | | 78,996 | | | 34,338 | | | 0 | | | 34,338 | |
Commercial Paper | | Commercial Paper | 66,292 | | | 0 | | | 66,292 | | | 48,908 | | | 0 | | | 48,908 | |
| Federal agency debt securities | Federal agency debt securities | 1,340 | | | 0 | | | 1,340 | | | 0 | | | 0 | | | 0 | | Federal agency debt securities | 0 | | | 0 | | | 0 | | | 51,400 | | | 0 | | | 51,400 | |
| Total cash equivalents | Total cash equivalents | 114,449 | | | 80,121 | | | 34,328 | | | 49,662 | | | 42,653 | | | 7,009 | | Total cash equivalents | 302,608 | | | 157,320 | | | 145,288 | | | 139,986 | | | 5,340 | | | 134,646 | |
Short-term | Short-term | | | | | | | | | | | | Short-term | | | | | | | | | | | |
Commercial paper | Commercial paper | 212,992 | | | 0 | | | 212,992 | | | 161,286 | | | 0 | | | 161,286 | | Commercial paper | 345,809 | | | 0 | | | 345,809 | | | 229,821 | | | 0 | | | 229,821 | |
| Corporate debt securities | Corporate debt securities | 139,659 | | | 0 | | | 139,659 | | | 145,975 | | | 0 | | | 145,975 | | Corporate debt securities | 217,631 | | | 0 | | | 217,631 | | | 166,768 | | | 0 | | | 166,768 | |
Municipal debt securities | Municipal debt securities | 52,437 | | | 0 | | | 52,437 | | | 12,237 | | | 0 | | | 12,237 | | Municipal debt securities | 178,870 | | | 0 | | | 178,870 | | | 87,290 | | | 0 | | | 87,290 | |
Federal agency debt securities | Federal agency debt securities | 35,389 | | | 0 | | | 35,389 | | | 13,515 | | | 0 | | | 13,515 | | Federal agency debt securities | 25,100 | | | 0 | | | 25,100 | | | 48,598 | | | 0 | | | 48,598 | |
US Treasury bonds | 1,287 | | | 0 | | | 1,287 | | | 2,915 | | | 0 | | | 2,915 | | |
Total short-term | Total short-term | 441,764 | | | 0 | | | 441,764 | | | 335,928 | | | 0 | | | 335,928 | | Total short-term | 767,410 | | | 0 | | | 767,410 | | | 532,477 | | | 0 | | | 532,477 | |
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 | Total financial instruments | $ | 556,213 | | | $ | 80,121 | | | $ | 476,092 | | | $ | 401,132 | | | $ | 42,653 | | | $ | 358,479 | | Total financial instruments | $ | 1,070,018 | | | $ | 157,320 | | | $ | 912,698 | | | $ | 672,463 | | | $ | 5,340 | | | $ | 667,123 | |
None of the Company's debt is publicly held and as a result, the Company has determined the estimated fair value of these notes to be Level 3. Certain inputs used to determine fair value are unobservable and, therefore, could be sensitive to changes in inputs. The Company utilizes the discounted cash flow method to estimate the fair value of Level 3 debt.
Carrying value and estimated fair value of long-term debt, including current maturities and without reduction for related costs, are as follows:
| | | September 30, 2020 | | December 31, 2019 | | | June 30, 2021 | | December 31, 2020 | |
(in thousands) | (in thousands) | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value | | Hierarchy Level | (in thousands) | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value | | Hierarchy Level |
Non-publicly held debt | Non-publicly held debt | $ | 1,461,705 | | | $ | 1,349,111 | | | $ | 1,329,882 | | | $ | 1,140,232 | | | 3 | Non-publicly held debt | $ | 1,366,042 | | | $ | 1,170,576 | | | $ | 1,555,637 | | | $ | 1,191,008 | | | 3 |
Due to their short-term nature, the carrying amounts of cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value.
Note 9 — Earnings (Loss) per Share
Basic and diluted earnings (loss) per share are computed pursuant to the two-class method. Under this method, the Company attributes net income (loss) to two classes: common stock and unvested restricted stock. Unvested restricted stock awards granted to employees under the Company’s Long-Term Incentive Plan are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock.
Diluted net income per share is calculated using the more dilutive of the two methods. Under both methods, the exercise of employee stock options is assumed using the treasury stock method. The assumption of vesting of restricted stock, however, differs:
1.Assume vesting of restricted stock using the treasury stock method.
2.Assume unvested restricted stock awards are not vested, and allocate earnings to common shares and unvested restricted stock awards using the two-class method.
For the three and ninesix months ended SeptemberJune 30, 2019,2021, the second method which assumes unvested awards are not vested, was used in the computation because it was more dilutive than the first method.
The following table sets forth the computation of net income (loss) per share, on a basic and diluted basis, for the periods indicated (share count and dollar amounts other than per-share amounts in the table are in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Basic: | Basic: | | | | | | | | Basic: | | | | | | | |
Net income (loss) | Net income (loss) | $ | (29,143) | | | $ | 43,929 | | | $ | (155,255) | | | $ | 171,596 | | Net income (loss) | $ | 95,027 | | | $ | (93,103) | | | $ | 101,896 | | | $ | (126,113) | |
Less income allocated to participating securities | Less income allocated to participating securities | 0 | | | (578) | | | (236) | | | (2,441) | | Less income allocated to participating securities | (1,285) | | | 0 | | | (1,451) | | | (236) | |
Net income (loss) attributable to common stock | Net income (loss) attributable to common stock | $ | (29,143) | | | $ | 43,351 | | | $ | (155,491) | | | $ | 169,155 | | Net income (loss) attributable to common stock | $ | 93,742 | | | $ | (93,103) | | | $ | 100,445 | | | $ | (126,349) | |
Earnings (loss) per share, basic | Earnings (loss) per share, basic | $ | (1.82) | | | $ | 2.70 | | | $ | (9.75) | | | $ | 10.55 | | Earnings (loss) per share, basic | $ | 5.49 | | | $ | (5.85) | | | $ | 6.04 | | | $ | (7.93) | |
Weighted-average shares outstanding | Weighted-average shares outstanding | 16,006 | | | 16,037 | | | 15,953 | | | 16,037 | | Weighted-average shares outstanding | 17,064 | | | 15,902 | | | 16,618 | | | 15,927 | |
Diluted: | Diluted: | | | | | | | | Diluted: | | | | | | | |
Net income (loss) | Net income (loss) | $ | (29,143) | | | $ | 43,929 | | | $ | (155,255) | | | $ | 171,596 | | Net income (loss) | $ | 95,027 | | | $ | (93,103) | | | $ | 101,896 | | | $ | (126,113) | |
Less income allocated to participating securities | Less income allocated to participating securities | 0 | | | (578) | | | (236) | | | (2,440) | | Less income allocated to participating securities | (1,284) | | | 0 | | | (1,449) | | | (236) | |
Net income (loss) attributable to common stock | Net income (loss) attributable to common stock | $ | (29,143) | | | $ | 43,351 | | | $ | (155,491) | | | $ | 169,156 | | Net income (loss) attributable to common stock | $ | 93,743 | | | $ | (93,103) | | | $ | 100,447 | | | $ | (126,349) | |
Earnings (loss) per share, diluted | Earnings (loss) per share, diluted | $ | (1.82) | | | $ | 2.70 | | | $ | (9.75) | | | $ | 10.54 | | Earnings (loss) per share, diluted | $ | 5.49 | | | $ | (5.85) | | | $ | 6.04 | | | $ | (7.93) | |
Weighted-average shares outstanding(1) | 16,006 | | | 16,037 | | | 15,953 | | | 16,037 | | |
| Weighted-average shares outstanding | | Weighted-average shares outstanding | 17,064 | | | 15,902 | | | 16,618 | | | 15,927 | |
Dilutive effect of stock options and restricted stock | | Dilutive effect of stock options and restricted stock | 123 | | | 0 | | | 128 | | | 0 | |
Adjusted weighted-average shares outstanding under treasury stock method | | Adjusted weighted-average shares outstanding under treasury stock method | 17,187 | | | 15,902 | | | 16,746 | | | 15,927 | |
Participating securities excluded under two-class method | | Participating securities excluded under two-class method | (114) | | | 0 | | | (114) | | | 0 | |
Adjusted weighted-average shares outstanding under two-class method | | Adjusted weighted-average shares outstanding under two-class method | 17,073 | | | 15,902 | | | 16,632 | | | 15,927 | |
(1) Dilutive effect of common stock equivalents excluded from the diluted per share calculation is not material.
Note 10 — Commitments and Contingencies
As of September 30, 2020, the Company had commitments to purchase 8 Airbus A320 aircraft as well as purchase agreements for 2 spare engines.
The Company's contractual purchase commitments consist primarily of aircraft and engine acquisitions. The total future commitments are as follows:
| | | | | |
(in thousands) | September 30, 2020 |
Remaining in 2020 | $ | 110,762 | |
2021 | 37,900 | |
2022 | 21,000 | |
| |
| |
| |
Total commitments | $ | 169,662 | |
Contingencies
The Company is subject to certain legal and administrative actions it considers routine to its business activities. The Company believes the ultimate outcome of any potential and pending legal or administrative matters will not have a material adverse impact on its financial position, liquidity or results of operations.
Note 11 — Segments
Operating segments are components of a company for which separate financial and operating information is regularly evaluated and reported to the Chief Operating Decision Maker ("CODM"), and is used to allocate resources and analyze performance. The Company's CODM is the executive leadership team, which reviews information about the Company's 3 operating segments: the Airline, Sunseeker Resort, and other non-airline.
Airline Segment
The Airline segment operates as a single business unit and includes all scheduled service air transportation, ancillary air-related products and services, third party products and services, fixed fee contract air transportation and other airline-related revenue. The CODM evaluation includes, but is not limited to, route and flight profitability data, ancillary and third party product and service offering statistics, and fixed fee contract information when making resource allocation decisions with the goal of optimizing consolidated financial results.
Sunseeker Resort SegmentNote 11 — Subsequent Events
The Sunseeker Resort segment represents activity relatedThrough a wholly-owned subsidiary, the Company executed Conditional Sale Agreements (CSA’s) on July 26, 2021 through Air Lease Corporation for 10 Airbus A320 series aircraft. These 10 aircraft are expected to be delivered to the developmentCompany between November 2021 and constructionJuly 2022. Each CSA has a term of Sunseeker Resort in Southwest Florida, as well as123 months and provides for monthly payments and a purchase option exercisable at the operation of Kingsway Golf Course. Due to the various impacts of COVID-19, the Company suspended construction of Sunseeker Resort and temporarily closed operation of Kingsway Golf Course. At this time, it is uncertain when construction will resume and when the golf course will re-open.
Other non-Airline Segment
The other non-airline segment includes the Teesnap golf course management solution and Allegiant Nonstop family entertainment centers. Allegiant Nonstop family entertainment centers are comprised of games, attractions, and food facilities.
Due to the impacts of COVID-19, the Company temporarily closed the Allegiant Nonstop location in Warren, MI (which has subsequently opened as of early October 2020). The Company also permanently closed the Allegiant Nonstop location in Clearfield, Utah, and permanently discontinued all activity for the Allegiant Nonstop location in West Jordan, Utah, which was being developed.
In July 2019, management began evaluating strategic alternatives for Teesnap, and its business-to-business software as a service offering.
Selected information for the Company's segments and the reconciliation to the consolidated financial statement amounts are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
(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.
Total assets were as follows asexpiration 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 | |
Note 12 — Impairment
Accounting Standards Codification (ASC) 360 - Property, Plant, and Equipment (ASC 360) requires long-lived assets toterm. Upon delivery, the CSA’s will be assessed for impairment when events and circumstances indicate thatrecorded as finance leases on the assets may be impaired.
As described in Note 2, in the first nine months of 2020, the Company's operations and liquidity were significantly impacted by decreased passenger demand and U.S. government travel restrictions and quarantine requirements due to COVID-19. As a result of these events and circumstances, the Company performed impairment tests on its long-lived assets in connection with the preparation of itsCompany’s financial statements.
In accordance with ASC 360, an impairment of a long-lived asset or group of long-lived assets exists only whenThe Company has announced the sumrecommencement of the estimated undiscounted future cash flows expectedconstruction of its Sunseeker Resort in Southwest Florida. The Company expects to be generated directly byfinance the assets is less than the carrying valuebalance of the assets. Assets were groupedconstruction cost and complete the Resort by operating segment when estimating future cash flows, and further grouped within each segment as applicable. Estimates of future cash flows were generally based on historical results, and management's best estimate of future market and operating conditions.
Airline Segment
Long-lived assets for the Airline segment consist primarily of owned and leased flight and ground equipment. To test the recoverability of the Company's airline operating fleet, undiscounted future cash flows for each aircraft under the Company's current expected operating fleet plan were assessed and it was determined that there was 0 impairment as of September 30, 2020. As the Company obtains greater clarity about the duration and extent of reduced demand and potentially executes further capacity adjustments, the Company will continue to evaluate its current fleet compared to network requirements and may decide to permanently retire additional aircraft.
The Airline has an equity investment in a technology company. A $5.0 million charge was recorded to impair the investment in the second quarter 2020. As a result of the impairment, net book value of the investment is zero. This decision reflects management's best estimate of the fair value of this investment based on recent market trends.
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.
Long-lived assets for Teesnap consist primarily of capitalized software and computer 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. Management does not expect to recover any of the book value of the assets through operations, and an $8.3 million impairment charge was recorded in the first quarter 2020 to write down all long-lived assets to a net book value of 0. This reflects management's best estimate of the fair value of these assets based on recent market trends.
early 2023.
Note 13 — Subsequent Events
In October 2020, the Company closed on the private offering of $150.0 million principal amount of a 8.5 percent Senior Secured Note due 2024. The Notes and related guarantees are secured by first priority security interests in substantially all of the property and assets of the Company and the guarantors of the Notes (excluding aircraft, aircraft engines and certain other assets).The guarantors of the Notes include all significant subsidiaries other than Sunseeker Resorts, Inc. and its subsidiaries.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis presents factors that had a material effect on our results of operations during the three and ninesix months ended SeptemberJune 30, 20202021 and 2019.2020. Also discussed is our financial position as of SeptemberJune 30, 20202021 and December 31, 2019.2020. 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, 2019.2020. This discussion and analysis contains forward-looking statements. Please refer to the section below entitled “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.
Second Quarter 2021 Review
Highlights:
–Earnings per share of $5.49 as the PSP funds augmented our first net profit since the onset of the pandemic
–Restored capacity to pre-pandemic levels with scheduled service capacity up 4.5 percent versus second quarter of 2019
–Continued sequential quarterly improvement in total revenue with second quarter 2021 total revenue up 69.3 percent from the first quarter 2021
–Total cash and investments at June 30, 2021 were $1.2 billion, up from $685 million at December 31, 2020
AIRCRAFT
The following table sets forth the aircraft in service and operated by us as of the dates indicated:
| | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 | | |
A319 | 35 | | | 34 | | | |
A320(1) | 68 | | | 61 | | | |
Total | 103 | | | 95 | | | |
(1) Does not include seven aircraft of which we have taken delivery, but were not yet in service as of June 30, 2021.
NETWORK
As of SeptemberJune 30, 2020,2021, we were selling 520607 routes versus 466519 as of the same date last year and 459 as of June 30, 2019, which represents an 11.6a 17.0 and 32.2 percent increase.increase, respectively. Our total number of origination cities and leisure destinations (for operating routes) were 97 and 29,32, respectively, as of SeptemberJune 30, 2020.2021.
Our unique model is predicated around expanding and contracting capacity to meet seasonal travel demands. We are currently leveraging this core strength, just at a much more significant contracting level than normal seasonal demand changes would dictate. We are maintainingmaintained a broad network and selling presence.presence during the pandemic and have grown our network as air travel is recovering. We consistently monitor flights to assess for cash profitability.
TRENDS
The COVID-19 pandemic and shelter-in-place directives have greatlyhas significantly impacted our operating results for the ninethree and six months ending SeptemberJune 30, 20202021 and willmay continue to do so into the future. Air traffic demand is down substantially and base air faresOur load factors are down significantly as well.a result. 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, variants of the virus, hospitalizations, deaths, treatment efficacy, and the availability of a vaccine.vaccines, CDC recommendations, and government restrictions.
The impactsDespite the pandemic and airline industry challenges, since the beginning 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 bookings2021 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, andthrough June 30, 2021, we have taken immediateannounced service on 95 new routes and extensive measures to reduce daily cash burn. We have reduced managementeight new cities, including seasonal 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 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.
temporary routes. We will continue to focus on conserving cash, along with managingmanage capacity to meet demand, which we believe is a core strength of our business model.
We plan to continue to grow our aircraft fleet and route network and have executed agreements to acquire 21 incremental aircraft year-to-date. Our future profitability will be affected by the success of our growth initiatives.
RESPONSES TO THE COVID-19 PANDEMICNoncontrollable and controllable factors have contributed to a higher than normal level of cancellations during peak periods during and after second quarter 2021 and have resulted in increased irregular operations costs. The noncontrollable factors include weather, TSA delays generally and particularly at smaller airports and airport overcrowding. Controllable issues relate to various aspects of our operations as we had to readjust to providing peak capacity during the summer while also facing a number of external issues as indicated above. We believe many airlines are suffering from these problems at this time. We are working to resolve the controllable issues, but if these problems persist, we may suffer reputational damage and incur higher costs for irregular operations.
BeginningWe have announced the recommencement of the construction of its Sunseeker Resort in MarchSouthwest Florida. We expect to finance the balance of the construction cost and continuing throughout 2020, we have taken many actions to mitigatecomplete the effects of COVID-19 on our business, as outlined below:
Network and Customer Experience
•Reduced third quarter system-wide capacityResort 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
early 2023.
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 an additional 27 furloughs as of November 1, 2020
•Suspended nearly all contractor positions, subscriptions, non-essential training and travel
•Suspended all non-essential capital expenditures including, but not limited to, Sunseeker Resorts, Teesnap and Allegiant Nonstop family entertainment centers
Liquidity Response
•Implemented immediate and meaningful cash spend reductions
•Obtained $84 million in proceeds from financings secured by 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, 2020 (half to be paid by December 31, 2021 and the other half to be paid by December 31, 2022)
Health and Safety
Amid various uncertainties and public concern during the COVID-19 pandemic, we have implemented the below measures to ensure health and safety for all traveling on our flights. Due to our focus on these health and safety measures, we were ranked by Safe Travel Barometer in August 2020 as the #1 airline among North American carriers and among the top five worldwide for best COVID-19 Traveler Safety Measures, with results based on an independent audit of more than 150 airlines.
•Maintain a comprehensive cleaning program for all aircraft that includes a regular schedule of standard and 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 ticket counter, in the gate area and during flight
•Complimentary health and safety kits,which include a single-use face mask, a pair of non-latex disposable gloves and cleaning wipes, provided to all of our customers
•Crew members required to wear face masks on 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 event local testing is not immediately available
RESULTS OF OPERATIONS
Comparison of three months ended SeptemberJune 30, 20202021 to three months ended SeptemberJune 30, 2020
As comparisons of our 2021 results to periods during 2020 reflect disproportionate changes due to the impact of the pandemic on air travel, we have also provided analysis of certain revenue and expense line items to 2019 results where helpful to understand trends in our performance.
Operating Revenue
Passenger revenue. For the thirdsecond quarter 2020,2021, passenger revenue decreased 53.5increased 280.8 percent compared to third quarter 2019. The decreasethe same period in 2020. This increase was due to a 46.6significant decline in passenger demand related to COVID-19 during the second quarter 2020. Revenue in the second quarter 2021 was favorably impacted by estimates of breakage on vouchers whose expiration was extended as a result of the pandemic. Scheduled service passengers were up 190.7 percent and scheduled service average base fare was up 54.7 percent.
Passenger revenue for the second quarter 2021, as compared to second quarter 2019, decreased by 2.4 percent, as load factor decreased by 13 percentage points resulting in a 10.9 percent decline in scheduled service passengers from a 36.3 percentage point decrease in load factor. These declines are largely due to a dramatic decline 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 capacity by 6.5 percent during the third quarter, in response to passenger demand trends. Average total passenger fare (includes scheduled service and air ancillary) decreased 12.9 percent year over year, drivenpassengers. The impact of lower loads was partially offset by a 24.87.2 percent decreaseincrease in scheduled service average base fare as fares were reducedover the same period in an effort2019.
Air ancillary average fare for the second quarter 2021 increased by 12.5 percent when compared to stimulate demand.2020 and 12.2 percent when compared to 2019.
Third party products revenue. Third party products revenue for the thirdsecond quarter 2020 decreased 37.72021 increased 172.4 percent compared to the same period insecond quarter 2020 and 26.3 percent compared to the second quarter 2019. ThisThe increase from 2020 is primarily due to decreased net revenue from boththe result of greater travel demand for rental cars and hotels as a resultthan during the early part of substantially fewer passengers as well as reduced hotel room inventory, particularlythe pandemic. The increase from 2019 is attributable to increased rental car rates and growth in the Las Vegas market.our co-branded credit card revenues.
Fixed fee contract revenue. Fixed fee contract revenue for the thirdsecond quarter 2021 increased 58.6 percent compared to the same period in 2020 decreased 73.3as a result of a 21.8 percent year over yearincrease in related departures due to decreases in demand. Departuresincreased charter activity.
Fixed fee contract revenue for the second quarter 2021, as compared to 2019, decreased 57.9by 58.9 percent due to continuing depressed demand for group charters resulting from a significant drop in ad hoc charter opportunities in the third quarter 2020. The decreases in fixed fee revenue are related to COVID-19.pandemic.
Other revenue. Other revenue decreased 66.489.3 percent for the thirdsecond quarter 20202021 from 2019.the same period in 2020. The decrease was due to decreased activity in the 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 cash conservation efforts.subsidiaries.
Operating Expenses
We primarily evaluate our expense management by comparing our costs per ASMavailable seat mile (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 | | Three Months Ended June 30, | | Percent Change |
Airline only unitized costs (in cents) | 2020 | | 2019 | | Change | |
Unitized costs (in cents) | | Unitized costs (in cents) | 2021 | | 2020 | | 2019 | | YoY | | Yo2Y |
Salary and benefits | Salary and benefits | 2.68 | | | 2.66 | | | 0.8 | % | Salary and benefits | 2.65 | | | 4.27 | | | 2.55 | | | (37.9) | % | | 3.9 | % |
Aircraft fuel | | Aircraft fuel | 2.38 | | | 1.23 | | | 2.70 | | | 93.5 | | | (11.9) | |
Station operations | | Station operations | 1.25 | | | 1.23 | | | 1.03 | | | 1.6 | | | 21.4 | |
Depreciation and amortization | Depreciation and amortization | 1.28 | | | 0.99 | | | 29.3 | | Depreciation and amortization | 0.97 | | | 1.95 | | | 0.87 | | | (50.3) | | | 11.5 | |
Station operations | 1.13 | | | 1.12 | | | 0.9 | | |
Maintenance and repairs | Maintenance and repairs | 0.40 | | | 0.64 | | | (37.5) | | Maintenance and repairs | 0.49 | | | 0.59 | | | 0.47 | | | (16.9) | | | 4.3 | |
Sales and marketing | Sales and marketing | 0.23 | | | 0.45 | | | (48.9) | | Sales and marketing | 0.38 | | | 0.40 | | | 0.46 | | | (5.0) | | | (17.4) | |
Aircraft lease rentals | Aircraft lease rentals | 0.09 | | | — | | | NM | Aircraft lease rentals | 0.11 | | | 0.06 | | | — | | | 83.3 | | | NM |
Other | Other | 0.43 | | | 0.54 | | | (20.4) | | Other | 0.34 | | | 1.07 | | | 0.55 | | | (68.2) | | | (38.2) | |
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) | | |
Payroll Support Programs grant recognition | | Payroll Support Programs grant recognition | (1.33) | | | (3.36) | | | — | | | (60.4) | | | NM |
Operating special charges | | Operating special charges | 0.02 | | | 3.66 | | | — | | | (99.5) | | | NM |
CASM | | CASM | 7.26 | | | 11.10 | | | 8.63 | | | (34.6) | | | (15.9) | |
Operating CASM, excluding fuel | | Operating CASM, excluding fuel | 4.88 | | | 9.87 | | | 5.93 | | | (50.6) | | | (17.7) | |
|
NM - Not meaningful
Salary and benefits expense. Salary and benefits expense decreased $11.8increased $27.1 million, or 10.928.6 percent, for the thirdsecond quarter 20202021 when compared to the same period in 2019.2020. Although the average number of full-timefull time equivalent employees was relatively flatdecreased 5.6 percent year over year, overall expense decreasedincreased due to temporary voluntary leave programs offered to employees, voluntary pay reductions, and suspension of the bonus accrual during the year. We expectsecond quarter 2020.
When compared to the same period in 2019, salaries and benefits expense increased by $8.3 million or 7.3 percent on a relatively flat number of full-timefull time equivalent employees year over two year. On a per ASM basis, salary and benefits expense increased only 3.92 percent. The per ASM cost increase relates to decline by up to 9.0 percent during fourth quarter 2020 due to furloughs and reductionsannual increases in force.crew pay.
Aircraft fuel expense. Aircraft fuel expense decreased $52.0increased $82.1 million, or 49.8300.1 percent, for the thirdsecond quarter 20202021 compared to thirdsecond quarter 2019, largely2020. This is primarily due to the recovery from the COVID-19 pandemic driving increased capacity resulting in a 119.7 percent increase in fuel gallons consumed on a 108.8 percent increase in departures and an 82.0 percent increase in average fuel cost per gallon which was depressed during the pandemic.
When compared to the same period in 2019, aircraft fuel expense decreased by 8.8 percent, which is in line with the decrease in system average fuel cost per gallon of 38.9 percent year over year as fuel prices9.0 percent.
declinedStation operations expense. Station operations expense for the second quarter 2021 increased $29.8 million, or 108.8 percent compared to the same period in 2020 primarily due to lower worldwide demand causedincreased departures of 108.8 percent.
Compared to the same period in 2019, station operations expense increased by the pandemic. System fuel gallons consumed decreased by 17.9$11.3 million or 24.7 percent. This increase is due an increase in departures of 3.1 percent on a 9.4 percent decrease in ASMs as we reduced capacity in light of the pandemic. Fuel efficiency (measured as ASMs per gallon)and increased 10.2 percent year over year due to fuel saving initiatives, as well as less weight on many of our flights, due to a 36.3 percentage point year-over-year decrease in load factor.costs associated with irregular operations.
Depreciation and amortization expense. Depreciation and amortization expense for the thirdsecond quarter 20202021 increased $5.9 million, or 14.8by 2.8 percent year over year,as compared to the second quarter 2020 as the average number of aircraft in service increased 3.512.2 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 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 2020 decreased $3.6 million, or 8.2 percent, on a 9.6 percent decrease in scheduled service departures as we reduced the number of flights offered due to reduced demand.
Maintenance and repairs expense. Maintenance and repairs expense for the thirdsecond quarter 2020 decreased $10.72021 increased $9.6 million, or 43.373.4 percent, compared to the same period in 2019.2020. Routine maintenance costs decreasedincreased as aircraft utilization was down 14.9up 97.4 percent during the quarter.quarter and we incurred incremental costs preparing our fleet to operate at full capacity again.
Compared to the same period in 2019, maintenance and repairs expense increased by $1.7 million or 8.2 percent primarily due to incremental costs preparing our fleet to operate at full capacity, and the maintenance and repairs on additional aircraft purchased over the past two years.
Sales and marketing expense. Sales and marketing expense for the thirdsecond quarter 2020 decreased2021 increased by 54.797.9 percent compared to the same period in 2019. There was2020, due to a decreaseincrease in net credit card fees as a result of a 53.5280.8 percent decreaseincrease in passenger revenue year over year. Additionally,year-over-year as well as reduced advertising spend has been intentionally pulled back this yearin 2020 during the pandemic.
Compared to the same period in 2019, sales and marketing expense decreased by 14.2 percent due to the pandemic.efforts to more adeptly deploy advertising spend.
Other operating expense. Other expense decreased $7.2$8.3 million for the third quarter 2020 compared to thirdthe second quarter 2019,2020, mostly due to decreased activity in our non-airline subsidiaries.
Payroll Support Programs grant recognition. We received a total of $112.2 million in funds during the second quarter 2021 through the payroll support programs. Of the total, $110.4 million of these funds represent direct grants, and will be recognized as a credit to operating expense on our statement of income, over the periods for which the funds were intended to compensate. We recognized $61.2 million as an offset to operating expense on our statement of income during the second quarter of 2021.
During 2020, we received $176.9 million in funds through the payroll support program and recognized a $74.5 million offset to operating expense on our statement of income for the second quarter 2020.
Special charges. Special charges of $0.9 million were recorded within operating expenses for the second quarter 2021 compared to $81.2 million for the same period in 2020. The special charges relate to expenses that were unique and specific to COVID-19. These charges in 2021 include accelerated depreciation on airframes and engines resulting from an accelerated retirement plan, and losses within our non-airline subsidiaries. Special charges recorded in the second quarter 2020 included accelerated depreciation on airframes and engines resulting from an accelerated retirement plan, a loss on a sale-leaseback transaction which we would not likely have transacted absent cash conservation efforts as a result of COVID, salaries and benefits expense, and a non-cash impairment charge for an investment in a third party. See Note 2 of Notes to Consolidated Financial Statements (unaudited) for further information.
Interest Expense
Interest expense for the quarter ended June 30, 2021 increased by $2.7 million, or 19.0 percent over second quarter 2020, due to increased market rates for the fixed rate debt entered into during the pandemic offset by lower interest rates on our variable debt.
Income Tax Expense
Our effective tax rate was 22.5 percent and 36.4 percent for the three months ended June 30, 2021 and 2020, respectively. The effective tax rate for the three months ended June 30, 2021 differed from the statutory federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of ASU 2016-09 related to share-based payments. The effective tax rate for the three months ended June 30, 2020 was primarily due to the tax accounting impact of the CARES Act which allowed the Company to carryback the 2020 net operating loss at the 35.0 percent rate applicable in earlier years.
Comparison of six months ended June 30, 2021 to six months ended June 30, 2020
Operations during the six months ended June 30, 2021 consisted of two months of pre-pandemic activity and the period from March 2020 through June 2020 which was substantially impacted by the pandemic. The comparisons below of the results for the six month periods ended June 30, 2021 and June 30, 2020 should be read with this in mind.
As comparisons of our 2021 results to periods during 2020 reflect disproportionate changes due to the impact of the pandemic on air travel, we have also provided analysis of certain revenue and expense line items to 2019 results where helpful to understand trends in our performance.
Operating Revenue
Passenger revenue. For the six months ended June 30, 2021, passenger revenue increased 41.4 percent compared with the same period in 2020. Revenue in the second quarter 2021 was favorably impacted by estimates of breakage on vouchers whose expiration was extended as a result of the pandemic. The increase is primarily attributable to the effects of COVID-19 in 2020, where a significant decline in passenger demand impacted operations from March to June 2020. Scheduled service passengers and base fares in the current period are up 35.8 percent and 6.4 percent, respectively, over the same period in 2020.
As compared to the same period in 2019, passenger revenue decreased by 19.9 percent, as a 24.1 percent decline in scheduled service load factor was partially offset by a 3.9 percent increase in capacity.
Air ancillary average fare for the six months ended June 30, 2021 increased by 1.7 percent when compared to 2020 and 6.5 percent when compared to 2019.
Third party products revenue. Third party products revenue for the six months ended June 30, 2021 increased 50.0 percent over the same period in 2020 and 3.6 percent when compared to 2019. The increase from 2020 is primarily the result of greater travel demand for rental cars and hotels than the early part of the pandemic. The increase from 2019 is attributable to growth in our co-branded credit card revenues.
Fixed fee contract revenue. Fixed fee contract revenue for the six months ended June 30, 2021 increased 5.5 percent compared with the same period in 2020. This is primarily due to an 11.2 percent increase in related departures due to increased charter activity. During the six months ended June 30, 2021, ad-hoc charters increased by 217.6 percent over 2020 levels and we benefited from March Madness flying which did not occur in the prior year due to the pandemic.
Fixed fee contract revenue for the six months ended June 30, 2021 as compared to the same period in 2019, decreased by 44.4 percent due to continuing depressed demand for group charters since the onset of the pandemic.
Other revenue. Other revenue decreased by 84.2 percent for the six months ended June 30, 2021, when compared to the same period in 2020. The decrease is due to decreased activity in the non-airline subsidiaries, including the closure of the family entertainment centers.
Operating Expenses
The following table presents unit costs on a per ASM basis, defined as Operating CASM, for the indicated periods: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Percent Change |
Unitized costs (in cents) | 2021 | | 2020 | | 2019 | | YoY | | Yo2Y |
Salary and benefits | 2.79 | | | 3.30 | | | 2.79 | | | (15.45) | % | | — | % |
Aircraft fuel | 2.23 | | | 1.85 | | | 2.63 | | | 20.54 | | | (15.21) | |
Station operations | 1.17 | | | 1.09 | | | 1.02 | | | 7.34 | | | 14.71 | |
Depreciation and amortization | 1.02 | | | 1.38 | | | 0.89 | | | (26.09) | | | 14.61 | |
Maintenance and repairs | 0.53 | | | 0.55 | | | 0.52 | | | (3.64) | | | 1.92 | |
Sales and marketing | 0.34 | | | 0.44 | | | 0.50 | | | (22.73) | | | (32.00) | |
Aircraft lease rentals | 0.11 | | | 0.04 | | | — | | | 175.00 | | | NM |
Other | 0.39 | | | 0.80 | | | 0.56 | | | (51.25) | | | (30.36) | |
Payroll Support Programs grant recognition | (1.78) | | | (1.19) | | | — | | | 49.58 | | | NM |
Operating Special charges | 0.03 | | | 3.93 | | | — | | | (99.24) | | | NM |
CASM | 6.83 | | | 12.19 | | | 8.91 | | | (43.97) | | | (23.34) | |
Operating CASM, excluding fuel | 4.60 | | | 10.34 | | | 6.28 | | | (55.51) | | | (26.75) | |
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Salary and benefits expense. Salary and benefits expense increased $32.4 million, or 15.6 percent, for the six months ended June 30, 2021 compared to the same period in 2020. Although the average number of full-time equivalent employees decreased
by 5.6 percent year over year, expense increased due to temporary voluntary leave programs offered to employees, voluntary pay reductions, and suspension of the bonus accrual during the six months ended June 30, 2020.
Salary and benefits expense increased by $6.9 million or 2.9% as compared to the six months ended June 30, 2019. Although the average number of full time equivalent employees decreased by 1.8 percent, overall expense increased due to annual increases in crew pay.
Aircraft fuel expense. Aircraft fuel expense increased $76.1 million, or 65.5 percent, for the six months ended June 30, 2021 compared to the same period in 2020. This is primarily due to the recovery from the COVID-19 pandemic as departures increased by 38.1 percent resulting in an increase of 36.7 percent in fuel gallons consumed. The increase is also partially driven by an increase in fuel expense per ASM of 20.5 percent due to an increase in fuel prices.
Aircraft fuel expense decreased by $27.4 million or 12.5 percent for the six months ended June 30, 2021 compared to the same period in 2019. This is primarily driven by a decrease in average fuel cost per gallon of 10.6 percent.
Station operations expense. Station operations expense for the six months ended June 30, 2021 increased $31.9 million or 46.6 percent primarily due to a 61.8 percent increase in airport and landing fees as a result of an increase in travel demand and
a 38.1 percent increase in departures.
As compared to the six month period ended June 30, 2019, station operations expense increased by $15.5 million or 18.2 percent due to a 2.6 percent increase in departures, increased costs associated with irregular operations and airports fees.
Maintenance and repairs expense. Maintenance and repairs expense for the six months ended June 30, 2021 increased by $11.1 million or 32.0 percent compared to the same period in 2020. This is primarily due to the increase in aircraft utilization and incremental costs preparing our fleet to operate at full capacity again.
As compared to the six months ended June 30, 2019, maintenance and repairs expense increased by $2.3 million or 5.2 percent as the number of aircraft in service increased by 20.9 percent.
Depreciation and amortization expense. Depreciation and amortization expense for the six months ended June 30, 2021 remained relatively flat as compared to the same period in 2020. Although the average number of aircraft in service increased by 8.0 percent, a majority of the increase was due to aircraft on operating lease.
When compared to the six months ended June 30, 2019, depreciation and amortization expense increased 17.4 percent as the average number of aircraft in service during the period increased 20.9 percent.
Sales and marketing expense. Sales and marketing expense for the six months ended June 30, 2021 increased 6.9 percent compared to the same period in 2020. In 2020, advertising spend was intentionally pulled back beginning in March due to the pandemic. There was also an increase in net credit card fees in the current year as a result of a 41.4 percent increase in passenger revenue year over year.
As compared to the six months ended June 30, 2019, sales and marketing expense decreased by 29.5 percent due to our efforts to more adeptly deploy advertising spend.
Other expense. Other expense decreased by $17.2 million or 34.1 percent year over year, due to decreased activity in our non-airline subsidiaries.
Payroll Support Programs grant recognition. We received a total of $176.9$203.9 million in funds during the second and third quarters 2020six months ended June 30, 2021 through the Payroll Support Program Agreement (the “PSPA”) under the CARES Act. Of the total, $152.4 million of these funds relate topayroll support programs. The direct grants and were recognized as a credit to operating expense on our statement of income, over the periods for which the funds were intended to compensate - secondcompensate.
During 2020, we received $176.9 million in funds through the payroll support program and third quarters 2020. Of this total amount, we recognized a $77.9$74.5 million creditoffset to operating expense on our statement of income duringfor the third quarter ofsix months ended June 30, 2020.
Operating Special charges. Special charges of $33.6$2.6 million were recorded within operating expenses for the third quarter 2020. We did not have any special charges for the same period in 2019.six months ended June 30, 2021. The special charges relate to expenses that were unique and specific to COVID-19. These charges includeThis includes accelerated depreciation on four airframes and six engines resulting from an accelerated retirement plan, lossesa loss on the sale-leaseback transactions,transaction we would not likely have transacted absent cash conservation efforts as a portionresult of COVID, salary and benefits expense, and losses within our non-airline subsidiaries. See Note 2 of Notes to Consolidated Financial Statements (unaudited) for further information.other various expenses during the six months ended June 30, 2020.
Non-operating Special charges
Non-operating special charges. Special charges of $26.6 million 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 threesix 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 and Allegiant Nonstop family entertainment centers), and operating expenses attributable to Sunseeker Resort and Kingsway Golf Course (most of the Sunseeker Resort expenses were capitalized during the construction period). As of September 30, 2020, nearly all non-airline spend has been suspended.
Comparison of nine months ended September 30, 2020 to nine months ended September 30, 2019
Operating Revenue
Passenger revenue. For the nine months ended September 30, 2020, passenger revenue decreased 46.5 percent compared with 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 substantial decline in passenger demand and government travel restrictions and quarantine requirements related to COVID-19, since March 2020. Average total fare per passenger decreased by 5.8 percent, during the nine month period as a 3.4 percent increase in average air-related ancillary revenue per passenger partially offset a 13.7 percent decrease in scheduled service average base fare. Increases in our customer baggage fees and convenience fee contributed to the increase in air-related ancillary revenue to $53.32 per passenger.
Third party products revenue. Third party products revenue for the nine months ended September 30, 2020 decreased 33.2 percent over the same period in 2019. This is primarily due to decreased net revenue from both rental cars and hotels, as a result of 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 during the nine months ended September 30, 2020 compared to the same period in 2019.
Fixed fee contract revenue. Fixed fee contract revenue for the nine months ended September 30, 2020 decreased 59.3 percent compared with the same period in 2019, primarily due to decrease in demand resulting in a 45.6 percent decrease in related departures. The decrease in departures is mainly due to a significant drop in ad hoc charter opportunities and the cancellation of events such as the NCAA March Madness basketball tournament during 2020 due to COVID-19.
Other revenue. Other revenue decreased by 25.9 percent for the nine months ended September 30, 2020 compared to the same period in 2019. The decrease is primarily driven by decreases in subsidiary revenue through the third quarter 2020. 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 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.
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| 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) | |
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NM - Not meaningful
Salary and benefits expense. Salary and benefits expense decreased $37.3 million, or 11.0 percent, for the nine months ended September 30, 2020 compared to the same period in 2019. Although the average number of full-time equivalent employees 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 large portion of the $9.5 million special charges specific to COVID-19 during the first quarter of 2020 consisted of salary and benefits expense.
Aircraft fuel expense. Aircraft fuel expense decreased $155.5 million, or 48.0 percent, for the nine months ended September 30, 2020 compared to the same period in 2019 largely due to a decrease in system average fuel cost per gallon of 30.7 percent year over year as fuel prices declined due to lower worldwide demand caused by the pandemic. Additionally, system fuel gallons consumed decreased 24.9 percent on a 19.9 percent decrease in ASMs as we reduced capacity in light of the pandemic. Fuel efficiency (measured as ASMs per gallon) increased 6.6 percent year over year due to fuel saving initiatives as well as less weight on many of our flights, due to 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, 2020 decreased 15.6 percent on a 20.3 percent decrease in scheduled service departures compared to the same period in 2019 as we reduced the number of flights offered due to reduced demand.
Maintenance and repairs expense. Maintenance and repairs expense for the nine months ended September 30, 2020 decreased 28.6 percent compared to the same period in 2019 mostly due to a decrease in both major and routine maintenance costs as aircraft utilization was down 29.3 percent as we flew fewer ASMs and departures during the period.
Sales and marketing expense. Sales and marketing expense for the nine months ended September 30, 2020 decreased $23.7 million compared to the same period in 2019. There was a decrease in net credit card fees as a result of a 46.5 percent decrease in passenger revenue year over year. Additionally advertising spend was intentionally pulled back after the onset of the pandemic in March 2020.
Other operating expense. Other expense decreased $3.5 million year over year, mostly due to a decrease in 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 SeptemberJune 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 2019.2021. Of these special charges in 2020, $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 These charges were reclassified from operating special expense to non-operating special expense for the ninesix months ended SeptemberJune 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.2020.
Income Tax Expense
We recorded a $166.6$29.3 million tax benefit (51.8expense (22.4 percent effective tax rate) compared to a $51.0 million($151.0 million) tax provision (22.9benefit (54.5 percent effective tax rate) for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020 respectively. The 51.822.4 percent effective tax rate for the ninesix months ended SeptemberJune 30, 2021 differed from the statutory federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of ASU 2016-09 related to share-based payments. The 54.5 percent effective tax rate for the six months ended June 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$39.6 million discrete federal income tax benefit related to the full utilization of 2018 and 2019 net operating losses as well as the ability to carryback the 2020 net operating loss at thea 35.0 percent tax rate applicable in earlier years. The effective tax rate was also impacted by the remeasurement of deferred taxes and 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 and Allegiant Nonstop family entertainment centers), and operating expenses attributable to Sunseeker Resort and Kingsway Golf Course (most of the Sunseeker Resort expenses were capitalized during the construction period).
Comparative Consolidated Operating Statistics
The following tables set forth our operating statistics for the periods indicated:
| | | Three Months Ended September 30, | | Percent | | Three Months Ended June 30, | | Percent Change (1) |
| | 2020 | | 2019 | | Change(1) | | 2021 | | 2020 | | 2019 | | YoY | | Yo2Y |
Operating statistics (unaudited): | Operating statistics (unaudited): | | | | | | Operating statistics (unaudited): | | | | | | | | | |
Total system statistics: | Total system statistics: | | | | | | Total system statistics: | | | | | |
Passengers | Passengers | 2,016,241 | | | 3,806,369 | | | (47.0) | | Passengers | 3,699,217 | | | 1,273,258 | | | 4,169,536 | | | 190.5 | | | (11.3) | |
| Available seat miles (ASMs) (thousands) | Available seat miles (ASMs) (thousands) | 3,521,508 | | | 3,888,400 | | | (9.4) | | Available seat miles (ASMs) (thousands) | 4,594,542 | | | 2,220,755 | | | 4,447,066 | | | 106.9 | | | 3.3 | |
| Airline operating expense per ASM (CASM) (cents) | 6.45 | | | 9.09 | | | (29.0) | | |
| Operating expense per ASM (CASM) (cents) | | Operating expense per ASM (CASM) (cents) | 7.26 | | | 11.10 | | | 8.63 | | | (34.6) | | | (15.9) | |
Fuel expense per ASM (cents) | Fuel expense per ASM (cents) | 1.49 | | | 2.69 | | | (44.6) | | Fuel expense per ASM (cents) | 2.38 | | | 1.23 | | | 2.70 | | | 93.5 | | | (11.9) | |
Airline operating CASM, excluding fuel (cents) | 4.96 | | | 6.40 | | | (22.5) | | |
Operating CASM, excluding fuel (cents) | | Operating CASM, excluding fuel (cents) | 4.88 | | | 9.87 | | | 5.93 | | | (50.6) | | | (17.7) | |
| ASMs per gallon of fuel | ASMs per gallon of fuel | 88.5 | | | 80.3 | | | 10.2 | | ASMs per gallon of fuel | 84.8 | | | 90.0 | | | 82.3 | | | (5.8) | | | 3.0 | |
Departures | Departures | 24,365 | | | 27,707 | | | (12.1) | | Departures | 31,507 | | | 15,089 | | | 30,547 | | | 108.8 | | | 3.1 | |
Block hours | Block hours | 52,238 | | | 59,678 | | | (12.5) | | Block hours | 69,809 | | | 32,989 | | | 68,332 | | | 111.6 | | | 2.2 | |
Average stage length (miles) | Average stage length (miles) | 834 | | | 823 | | | 1.3 | | Average stage length (miles) | 838 | | | 850 | | | 853 | | | (1.4) | | | (1.8) | |
Average number of operating aircraft during period | Average number of operating aircraft during period | 90.7 | | | 87.6 | | | 3.5 | | Average number of operating aircraft during period | 101.8 | | | 90.7 | | | 85.0 | | | 12.2 | | | 19.8 | |
Average block hours per aircraft per day | Average block hours per aircraft per day | 6.3 | | | 7.4 | | | (14.9) | | Average block hours per aircraft per day | 7.5 | | | 3.8 | | | 8.8 | | | 97.4 | | | (14.8) | |
Full-time equivalent employees at end of period | Full-time equivalent employees at end of period | 4,275 | | | 4,267 | | | 0.2 | | Full-time equivalent employees at end of period | 4,104 | | | 4,349 | | | 4,179 | | | (5.6) | | | (1.8) | |
Fuel gallons consumed (thousands) | Fuel gallons consumed (thousands) | 39,786 | | | 48,443 | | | (17.9) | | Fuel gallons consumed (thousands) | 54,188 | | | 24,664 | | | 54,064 | | | 119.7 | | | 0.2 | |
Average fuel cost per gallon | Average fuel cost per gallon | $ | 1.32 | | | $ | 2.16 | | | (38.9) | | Average fuel cost per gallon | $ | 2.02 | | | $ | 1.11 | | | $ | 2.22 | | | 82.0 | | | (9.0) | |
| Scheduled service statistics: | Scheduled service statistics: | | | | | Scheduled service statistics: | | | | |
Passengers | Passengers | 2,003,648 | | | 3,753,611 | | | (46.6) | | Passengers | 3,680,254 | | | 1,266,077 | | | 4,131,855 | | | 190.7 | | | (10.9) | |
Revenue passenger miles (RPMs) (thousands) | Revenue passenger miles (RPMs) (thousands) | 1,714,622 | | | 3,170,826 | | | (45.9) | | Revenue passenger miles (RPMs) (thousands) | 3,188,215 | | | 1,107,534 | | | 3,603,076 | | | 187.9 | | | (11.5) | |
Available seat miles (ASMs) (thousands) | Available seat miles (ASMs) (thousands) | 3,449,339 | | | 3,687,473 | | | (6.5) | | Available seat miles (ASMs) (thousands) | 4,505,786 | | | 2,174,683 | | | 4,311,182 | | | 107.2 | | | 4.5 | |
Load factor | Load factor | 49.7 | % | | 86.0 | % | | (36.3) | | Load factor | 70.8 | % | | 50.9 | % | | 83.6 | % | | 19.9 | | | (12.8) | |
Departures | Departures | 23,710 | | | 26,238 | | | (9.6) | | Departures | 30,763 | | | 14,683 | | | 29,567 | | | 109.5 | | | 4.0 | |
Block hours | Block hours | 51,057 | | | 56,576 | | | (9.8) | | Block hours | 68,334 | | | 32,248 | | | 66,135 | | | 111.9 | | | 3.3 | |
Total passenger revenue per ASM (TRASM) (cents)(2) | Total passenger revenue per ASM (TRASM) (cents)(2) | 5.60 | | | 11.10 | | | (49.5) | | Total passenger revenue per ASM (TRASM) (cents)(2) | 10.36 | | | 5.75 | | | 10.97 | | | 80.2 | | | (5.6) | |
Average fare - scheduled service(3) | Average fare - scheduled service(3) | $ | 40.75 | | | $ | 54.20 | | | (24.8) | | Average fare - scheduled service(3) | $ | 62.58 | | | $ | 40.46 | | | $ | 58.39 | | | 54.7 | | | 7.2 | |
Average fare - air-related charges(3) | Average fare - air-related charges(3) | $ | 50.04 | | | $ | 50.03 | | | — | | Average fare - air-related charges(3) | $ | 58.00 | | | $ | 51.57 | | | $ | 51.68 | | | 12.5 | | | 12.2 | |
Average fare - third party products | Average fare - third party products | $ | 5.66 | | | $ | 4.85 | | | 16.7 | | Average fare - third party products | $ | 6.25 | | | $ | 6.67 | | | $ | 4.40 | | | (6.3) | | | 42.0 | |
Average fare - total | Average fare - total | $ | 96.45 | | | $ | 109.08 | | | (11.6) | | Average fare - total | $ | 126.82 | | | $ | 98.70 | | | $ | 114.47 | | | 28.5 | | | 10.8 | |
Average stage length (miles) | Average stage length (miles) | 839 | | | 824 | | | 1.8 | | Average stage length (miles) | 842 | | | 855 | | | 853 | | | (1.5) | | | (1.3) | |
Fuel gallons consumed (thousands) | Fuel gallons consumed (thousands) | 38,853 | | | 46,038 | | | (15.6) | | Fuel gallons consumed (thousands) | 53,022 | | | 24,124 | | | 52,327 | | | 119.8 | | | 1.3 | |
Average fuel cost per gallon | Average fuel cost per gallon | $ | 1.32 | | | $ | 2.17 | | | (39.2) | | Average fuel cost per gallon | $ | 2.01 | | | $ | 1.08 | | | $ | 2.22 | | | 86.1 | | | (9.5) | |
Rental car days sold | Rental car days sold | 255,800 | | | 482,944 | | | (47.0) | | Rental car days sold | 404,760 | | | 135,536 | | | 540,960 | | | 198.6 | | | (25.2) | |
Hotel room nights sold | Hotel room nights sold | 44,655 | | | 99,991 | | | (55.3) | | Hotel room nights sold | 72,701 | | | 12,772 | | | 114,191 | | | 469.2 | | | (36.3) | |
Percent of sales through website during period | Percent of sales through website during period | 92.3 | % | | 93.1 | % | | (0.8) | | Percent of sales through website during period | 94.3 | % | | 93.8 | % | | 93.5 | % | | 0.5 | | | 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 our booking path.
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| 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) | |
Comparative Consolidated Operating Statistics | | | | | | | | | | | | | | | | | |
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) | |
The following tables set forth our operating statistics for the periods indicated:
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| Six Months Ended June 30, | | Percent Change (1) |
| 2021 | | 2020 | | 2019 | | YoY | | Yo2Y |
Operating statistics (unaudited): | | | | | | | | | |
Total system statistics: | | | | | | | | | |
Passengers | 6,033,720 | | | 4,448,708 | | | 7,619,814 | | | 35.6 | | | (20.8) | |
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Available seat miles (ASMs) (thousands) | 8,608,531 | | | 6,288,427 | | | 8,357,304 | | | 36.9 | | | 3.0 | |
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Operating expense per ASM (CASM) (cents) | 6.83 | | | 12.19 | | | 8.90 | | | (44.0) | | | (23.3) | |
Fuel expense per ASM (cents) | 2.23 | | | 1.85 | | | 2.63 | | | 20.5 | | | (15.2) | |
Operating CASM, excluding fuel (cents) | 4.60 | | | 10.35 | | | 6.27 | | | (55.6) | | | (26.6) | |
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ASMs per gallon of fuel | 87.3 | | | 87.2 | | | 83.1 | | | 0.1 | | | 5.0 | |
Departures | 57,191 | | | 41,401 | | | 55,747 | | | 38.1 | | | 2.6 | |
Block hours | 130,183 | | | 95,112 | | | 128,151 | | | 36.9 | | | 1.6 | |
Average stage length (miles) | 865 | | | 879 | | | 876 | | | (1.6) | | | (1.3) | |
Average number of operating aircraft during period | 99.5 | | | 92.1 | | | 82.3 | | | 8.0 | | | 20.9 | |
Average block hours per aircraft per day | 7.2 | | | 5.5 | | | 8.6 | | | 30.9 | | | (16.3) | |
Full-time equivalent employees at end of period | 4,104 | | | 4,349 | | | 4,179 | | | (5.6) | | | (1.8) | |
Fuel gallons consumed (thousands) | 98,614 | | | 72,143 | | | 100,537 | | | 36.7 | | | (1.9) | |
Average fuel cost per gallon | $ | 1.95 | | | $ | 1.61 | | | $ | 2.18 | | | 21.1 | | | (10.6) | |
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Scheduled service statistics: | | | | | | | | | |
Passengers | 6,003,556 | | | 4,420,683 | | | 7,553,393 | | | 35.8 | | | (20.5) | |
Revenue passenger miles (RPMs) (thousands) | 5,354,632 | | | 4,033,017 | | | 6,794,122 | | | 32.8 | | | (21.2) | |
Available seat miles (ASMs) (thousands) | 8,426,876 | | | 6,138,692 | | | 8,113,315 | | | 37.3 | | | 3.9 | |
Load factor | 63.5 | % | | 65.7 | % | | 83.7 | % | | (2.2) | | | (24.1) | |
Departures | 55,710 | | | 40,167 | | | 53,911 | | | 38.7 | | | 3.3 | |
Block hours | 127,185 | | | 92,594 | | | 124,098 | | | 37.4 | | | 2.5 | |
Total passenger revenue per ASM (TRASM) (cents)(2) | 8.75 | | | 8.47 | | | 11.22 | | | — | | | (22.0) | |
Average fare - scheduled service(3) | $ | 60.95 | | | $ | 57.27 | | | $ | 63.49 | | | 6.4 | | | (4.0) | |
Average fare - air-related charges(3) | $ | 55.72 | | | $ | 54.80 | | | $ | 52.32 | | | 1.7 | | | 6.5 | |
Average fare - third party products | $ | 6.10 | | | $ | 5.52 | | | $ | 4.68 | | | 10.5 | | | 30.3 | |
Average fare - total | $ | 122.77 | | | $ | 117.59 | | | $ | 120.49 | | | 4.4 | | | 1.9 | |
Average stage length (miles) | 869 | | | 883 | | | 878 | | | (1.6) | | | (1.0) | |
Fuel gallons consumed (thousands) | 96,329 | | | 70,229 | | | 97,395 | | | 37.2 | | | (1.1) | |
Average fuel cost per gallon | $ | 1.92 | | | $ | 1.60 | | | $ | 2.18 | | | 20.0 | | | (11.9) | |
Rental car days sold | 680,344 | | | 616,582 | | | 1,012,558 | | | 10.3 | | | (32.8) | |
Hotel room nights sold | 128,909 | | | 104,776 | | | 219,206 | | | 23.0 | | | (41.2) | |
Percent of sales through website during period | 93.8 | % | | 93.7 | % | | 93.5 | % | | 0.1 | | | 0.3 | |
(1) Except load factor and percent of sales through website during period, which are presented as a percentage point change.
(2) Various components of this measure do not have a direct correlation to ASMs. This measure is provided on a per ASM basis so as to facilitate comparison with airlines reporting revenues on a per ASM basis.
(3) Reflects division of passenger revenue between scheduled service (base fare) and air-related charges in our booking path.
LIQUIDITY AND CAPITAL RESOURCES
Current liquidity
Cash, cash equivalents and investment securities (short-term and long-term) increased to $709.8 million$1.2 billion at SeptemberJune 30, 2020,2021, from $473.4$685.2 million at December 31, 2019.2020. Investment securities represent highly liquid marketable securities which are available-for-sale.
Restricted cash represents escrowed funds under fixed fee contracts, escrowed project funds 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.
WeDuring the six months ended June 30, 2021, we received a total of $176.9$203.9 million in assistance through the payroll support program under the CARES Act. The funds were paid in installments, and we received $154.7 million during the second quarter 2020 and the remaining $22.2 million in the 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 $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.programs.
We have suspended share repurchases and our quarterly cash dividend, as part of cash preservationconservation efforts in 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 have reduced airline capital expenditures.2022.
We believe we have more than adequate liquidity resources through our cash balances, operating cash flows, borrowings and expected tax refunds, to meet our future contractual obligations. We will continue to consider raising funds through debt financing on an opportunistic basis.
Debt
Our debt and finance lease obligations balance, without reduction for related issuance costs, increaseddecreased from $1.4$1.68 billion as of December 31, 20192020 to $1.5$1.60 billion as of SeptemberJune 30, 2020.2021. During the third quarter of 2020,six months ended June 30, 2021, we borrowed a net amount$122.1 million and we made principal payments of $90.7$199.6 million, including additional$53.9 million on our senior secured revolving credit facility that matured on March 31, 2021 and a $57.0 million prepayment of debt of $84.0 million secured by aircraft, and 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 amended co-branded credit card contract, which is recorded within debt on our balance sheet.aircraft.
Despite net losses and substantially lower revenues caused by the pandemic compared to pre-pandemic periods, our nettotal debt (total debt less cash, cash equivalents and investment securities)finance lease obligations declined by $108.5 million4.6 percent from December 31, 2019 until September2020 to June 30, 2020.
In October 2020, We closed on a 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 other assets).2021.
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 ninesix months ended SeptemberJune 30, 2020,2021, our operating activities provided $276.7$405.0 million of cash compared to $321.4$276.7 million during the same period of 2019. Although2020. This change is mostly attributable to a $228.0 million increase in net income 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 non-cash nature of $279.1 millionchanges in special charges during the nine months ended September 30, 2020.and current assets and liability accounts.
Investing Activities. Cash used in investing activities was $209.1$369.4 million during the ninesix months ended SeptemberJune 30, 20202021 compared to $324.0$158.6 million for the same period in 2019.2020. The decrease in cash usedchange is due to an increase of $199.1 million of purchases of investment securities, net of maturities, and a $151.6decrease of $48.0 million year-over-year decrease in cash outlays forrelated to proceeds from sale-leaseback transactions during the purchasesix months ended June 30, 2020. Purchases of property and equipment and $78.2were $36.2 million in proceeds received from sale-leaseback
transactions. These decreasesless in the use of cash were partially offset by a $105.5 million increase in cash used for investment security activity, as purchases of investment securities (net of maturities) were $90.0 million for the nine months ended September 30, 2020, compared to $15.5 million in proceeds from investment security maturities (net of purchases) for the same period in 2019.current year.
Financing Activities. Cash provided by financing activities for the ninesix months ended SeptemberJune 30, 20202021 was $81.1$245.5 million, compared to $15.3$32.8 million for the same period in 2019.2020. The year-over-year increasechange is mostly due to the equity offering completed on May 10, 2021 which resulted in the receipt of $335.1 million in cash. This was offset by the net effect of debt activity, as debt proceeds net of principal payments and debt issuance cost payments were $121.6costs exceeded debt proceeds by $93.6 million during the ninesix months ended SeptemberJune 30, 2020,2021, compared to $67.7$74.7 million of debt proceeds (net of related costs) in excess of principal payments during the same period in 2019.2020. Additionally, there was an increase inwere no share repurchases which were $33.8 millionor dividends paid in the first quarterhalf of 2020 (before2021, where there was $33.8 million and $11.4 million of such activity, respectively, in the share repurchase program was suspended) compared to $18.5 million during the first nine monthssame period of 2019. Dividends paid decreased by $22.9 million year-over-year as dividend payments were also suspended due to the pandemic.2020.
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 our statements regarding number of contracted aircraft to be placed in service in the future, airline operationsthe development and capacity, the efficacyfinancing of cost saving measures, future expenditures, aircraft financings, the timing of aircraft acquisitions and retirements, expected capital expenditures,our Sunseeker Resort, as well as other information concerning future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and industry environment.the effects of competition. 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,"believe," "expect," "anticipate," "intend," "plan," "estimate," “project,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project”“hope” 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.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,Payroll Support Programs, 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 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 have been no material changes to our critical accounting estimates during the ninesix months ended SeptemberJune 30, 2020.2021. For information regarding our critical accounting policies and estimates, see disclosures in the Consolidated Financial Statements and accompanying notes contained in our 20192020 Form 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 aircraftfuel. Aircraft fuel expense for the six months ended June 30, 2021 represented 16.9 percent32.7% of our total operating expenses for the nine months ended September 30, 2020.expenses. Increases in fuel prices, or a shortage of supply, could have a material impact on our operations and operating results. Based on our fuel consumption for the three and ninesix months ended SeptemberJune 30, 2020,2021, a hypothetical ten percent increase in the average price per gallon of fuel would have increased fuel expense by approximately $5.2$10.8 million and $17.1$19.7 million respectively. We have not hedged fuel price risk for many years.
Interest Rates
As of SeptemberJune 30, 2020,2021, we had $1.2$0.98 billion inof variable-rate debt, including current maturities and without reduction for $15.2 million in related costs. A hypothetical 100 basis point increasechange in market interest rates for the three and nine months ended September 30, 2020 would have affected interest expense on variable rate debt by approximately $3.1$5.3 million and $9.4 million, respectively.for the six months ended June 30, 2021.
As of September 30, 2020, we had $255.2 million of fixed-rate debt, including current maturities and without reduction for related costs.
Item 4. Controls and Procedures
As of SeptemberJune 30, 2020,2021, under the supervision and with the participation of our management, including our chief executive officer ("CEO") and chief financial officer (“CFO”), we evaluated the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, management, including our CEO and CFO, has concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information we are required to disclose is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting that occurred during the quarter ending SeptemberJune 30, 2020,2021, that have materially affected, or are reasonably likely to materially affect, our internal control 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 and those additional Risk Factors disclosed in our Quarterly Report on Form 10-Q for the quarteryear ended June 30,December 31, 2020 and filed with the Commission on August 4, 2020.March 1, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Our Repurchases of Equity Securities
(a) As previously disclosed, in connection with funding that we have received under the 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).Not applicable
(b) Not applicable
(c) We did not repurchase any common stock during the thirdsecond quarter 2020.2021.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
None
Item 6. Exhibits
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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 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.
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| | ALLEGIANT TRAVEL COMPANY |
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Date: | November 5, 2020July 30, 2021 | By: | /s/ Gregory Anderson |
| | Gregory Anderson, as duly authorized officer of the Company (Chief Financial Officer) and as Principal Financial Officer |