UNITED STATES
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 March 31,June 30, 2022 |
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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 $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 April 25,July 22, 2022, the registrant had 18,117,23118,181,322 shares of common stock, $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)
| | | March 31, 2022 | | December 31, 2021 | | June 30, 2022 | | December 31, 2021 |
| | (unaudited) | | | | (unaudited) | | |
CURRENT ASSETS | CURRENT ASSETS | | | CURRENT ASSETS | | |
Cash and cash equivalents | Cash and cash equivalents | $ | 403,085 | | | $ | 363,378 | | Cash and cash equivalents | $ | 396,091 | | | $ | 363,378 | |
Restricted cash | Restricted cash | 26,220 | | | 37,323 | | Restricted cash | 21,960 | | | 37,323 | |
Short-term investments | Short-term investments | 808,949 | | | 819,478 | | Short-term investments | 813,243 | | | 819,478 | |
Accounts receivable | Accounts receivable | 91,070 | | | 62,659 | | Accounts receivable | 85,315 | | | 62,659 | |
Expendable parts, supplies and fuel, net | Expendable parts, supplies and fuel, net | 36,098 | | | 27,500 | | Expendable parts, supplies and fuel, net | 35,566 | | | 27,500 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | 45,070 | | | 28,073 | | Prepaid expenses and other current assets | 50,270 | | | 28,073 | |
| TOTAL CURRENT ASSETS | TOTAL CURRENT ASSETS | 1,410,492 | | | 1,338,411 | | TOTAL CURRENT ASSETS | 1,402,445 | | | 1,338,411 | |
Property and equipment, net | Property and equipment, net | 2,427,180 | | | 2,259,507 | | Property and equipment, net | 2,555,334 | | | 2,259,507 | |
Long-term investments | Long-term investments | — | | | 2,231 | | Long-term investments | — | | | 2,231 | |
Deferred major maintenance, net | Deferred major maintenance, net | 145,529 | | | 146,850 | | Deferred major maintenance, net | 147,387 | | | 146,850 | |
Operating lease right-of-use assets, net | Operating lease right-of-use assets, net | 125,616 | | | 130,087 | | Operating lease right-of-use assets, net | 121,078 | | | 130,087 | |
Deposits and other assets | Deposits and other assets | 122,450 | | | 113,987 | | Deposits and other assets | 211,629 | | | 113,987 | |
TOTAL ASSETS: | TOTAL ASSETS: | $ | 4,231,267 | | | $ | 3,991,073 | | TOTAL ASSETS: | $ | 4,437,873 | | | $ | 3,991,073 | |
CURRENT LIABILITIES | CURRENT LIABILITIES | | | | CURRENT LIABILITIES | | | |
Accounts payable | Accounts payable | $ | 59,140 | | | $ | 43,566 | | Accounts payable | $ | 63,558 | | | $ | 43,566 | |
Accrued liabilities | Accrued liabilities | 216,690 | | | 162,892 | | Accrued liabilities | 226,083 | | | 162,892 | |
Current operating lease liabilities | Current operating lease liabilities | 19,314 | | | 19,081 | | Current operating lease liabilities | 19,551 | | | 19,081 | |
Air traffic liability | Air traffic liability | 452,622 | | | 307,453 | | Air traffic liability | 451,087 | | | 307,453 | |
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 | 140,450 | | | 130,053 | | Current maturities of long-term debt and finance lease obligations, net of related costs | 157,957 | | | 130,053 | |
TOTAL CURRENT LIABILITIES | TOTAL CURRENT LIABILITIES | 888,216 | | | 663,045 | | TOTAL CURRENT LIABILITIES | 918,236 | | | 663,045 | |
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 | 1,634,539 | | | 1,612,486 | | Long-term debt and finance lease obligations, net of current maturities and related costs | 1,803,533 | | | 1,612,486 | |
Deferred income taxes | Deferred income taxes | 344,454 | | | 346,137 | | Deferred income taxes | 345,118 | | | 346,137 | |
Noncurrent operating lease liabilities | Noncurrent operating lease liabilities | 110,210 | | | 115,067 | | Noncurrent operating lease liabilities | 105,198 | | | 115,067 | |
Other noncurrent liabilities | Other noncurrent liabilities | 31,552 | | | 30,786 | | Other noncurrent liabilities | 33,417 | | | 30,786 | |
TOTAL LIABILITIES: | TOTAL LIABILITIES: | 3,008,971 | | | 2,767,521 | | TOTAL LIABILITIES: | 3,205,502 | | | 2,767,521 | |
SHAREHOLDERS' EQUITY | SHAREHOLDERS' EQUITY | | | | SHAREHOLDERS' EQUITY | | | |
Common stock, par value $0.001 | Common stock, par value $0.001 | 25 | | | 25 | | Common stock, par value $0.001 | 25 | | | 25 | |
Treasury shares | Treasury shares | (638,057) | | | (638,057) | | Treasury shares | (633,332) | | | (638,057) | |
Additional paid in capital | Additional paid in capital | 695,323 | | | 692,053 | | Additional paid in capital | 698,982 | | | 692,053 | |
Accumulated other comprehensive income, net | Accumulated other comprehensive income, net | 5,411 | | | 2,056 | | Accumulated other comprehensive income, net | 2,744 | | | 2,056 | |
Retained earnings | Retained earnings | 1,159,594 | | | 1,167,475 | | Retained earnings | 1,163,952 | | | 1,167,475 | |
TOTAL EQUITY: | TOTAL EQUITY: | 1,222,296 | | | 1,223,552 | | TOTAL EQUITY: | 1,232,371 | | | 1,223,552 | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: | $ | 4,231,267 | | | $ | 3,991,073 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: | $ | 4,437,873 | | | $ | 3,991,073 | |
The accompanying notes are an integral part of these consolidated financial statements.
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
| | | Three Months Ended March 31, | | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | | 2022 | | 2021 | | 2022 | | 2021 |
OPERATING REVENUES: | OPERATING REVENUES: | | | | | OPERATING REVENUES: | | | | | | | |
Passenger | Passenger | $ | 463,961 | | | $ | 256,695 | | | Passenger | $ | 592,604 | | | $ | 443,747 | | | $ | 1,056,566 | | | $ | 700,441 | |
Third party products | Third party products | 22,480 | | | 13,622 | | | Third party products | 27,787 | | | 23,001 | | | 50,267 | | | 36,622 | |
Fixed fee contracts | Fixed fee contracts | 13,386 | | | 7,692 | | | Fixed fee contracts | 8,920 | | | 5,134 | | | 22,305 | | | 12,827 | |
Other | Other | 282 | | | 1,115 | | | Other | 536 | | | 551 | | | 818 | | | 1,667 | |
Total operating revenues | Total operating revenues | 500,109 | | | 279,124 | | | Total operating revenues | 629,847 | | | 472,433 | | | 1,129,956 | | | 751,557 | |
OPERATING EXPENSES: | OPERATING EXPENSES: | | | | | OPERATING EXPENSES: | | | | | | | |
Aircraft fuel | Aircraft fuel | 164,137 | | | 82,848 | | | Aircraft fuel | 257,288 | | | 109,456 | | | 421,425 | | | 192,305 | |
Salaries and benefits | Salaries and benefits | 134,010 | | | 117,950 | | | Salaries and benefits | 139,681 | | | 121,906 | | | 273,691 | | | 239,856 | |
Station operations | Station operations | 65,744 | | | 43,094 | | | Station operations | 66,909 | | | 57,210 | | | 132,652 | | | 100,303 | |
Depreciation and amortization | Depreciation and amortization | 46,343 | | | 43,174 | | | Depreciation and amortization | 49,183 | | | 44,522 | | | 95,526 | | | 87,696 | |
Maintenance and repairs | Maintenance and repairs | 27,820 | | | 23,371 | | | Maintenance and repairs | 31,123 | | | 22,597 | | | 58,943 | | | 45,968 | |
Sales and marketing | Sales and marketing | 22,350 | | | 11,609 | | | Sales and marketing | 27,297 | | | 17,632 | | | 49,647 | | | 29,241 | |
Aircraft lease rental | Aircraft lease rental | 6,132 | | | 4,720 | | | Aircraft lease rental | 5,451 | | | 5,117 | | | 11,584 | | | 9,837 | |
Other | Other | 26,202 | | | 17,776 | | | Other | 26,643 | | | 15,501 | | | 52,845 | | | 33,276 | |
Payroll Support Programs grant recognition | Payroll Support Programs grant recognition | — | | | (91,758) | | | Payroll Support Programs grant recognition | — | | | (61,213) | | | — | | | (152,971) | |
Special charges | Special charges | 142 | | | 1,738 | | | Special charges | 142 | | | 854 | | | 284 | | | 2,592 | |
Total operating expenses | Total operating expenses | 492,880 | | | 254,522 | | | Total operating expenses | 603,717 | | | 333,582 | | | 1,096,597 | | | 588,103 | |
OPERATING INCOME | OPERATING INCOME | 7,229 | | | 24,602 | | | OPERATING INCOME | 26,130 | | | 138,851 | | | 33,359 | | | 163,454 | |
OTHER (INCOME) EXPENSES: | OTHER (INCOME) EXPENSES: | | | | | OTHER (INCOME) EXPENSES: | | | | | | | |
Interest expense | Interest expense | 19,791 | | | 16,788 | | | Interest expense | 24,497 | | | 16,720 | | | 44,288 | | | 33,508 | |
Capitalized interest | Capitalized interest | (1,216) | | | — | | | Capitalized interest | (2,082) | | | — | | | (3,298) | | | — | |
Interest income | Interest income | (773) | | | (463) | | | Interest income | (2,218) | | | (500) | | | (2,991) | | | (963) | |
| Loss on debt extinguishment | | Loss on debt extinguishment | — | | | 71 | | | — | | | 71 | |
| Other, net | Other, net | (6) | | | (393) | | | Other, net | 101 | | | (11) | | | 95 | | | (404) | |
Total other expenses | Total other expenses | 17,796 | | | 15,932 | | | Total other expenses | 20,298 | | | 16,280 | | | 38,094 | | | 32,212 | |
INCOME (LOSS) BEFORE INCOME TAXES | INCOME (LOSS) BEFORE INCOME TAXES | (10,567) | | | 8,670 | | | INCOME (LOSS) BEFORE INCOME TAXES | 5,832 | | | 122,571 | | | (4,735) | | | 131,242 | |
INCOME TAX PROVISION (BENEFIT) | INCOME TAX PROVISION (BENEFIT) | (2,686) | | | 1,801 | | | INCOME TAX PROVISION (BENEFIT) | 1,474 | | | 27,544 | | | (1,212) | | | 29,346 | |
NET INCOME (LOSS) | NET INCOME (LOSS) | $ | (7,881) | | | $ | 6,869 | | | NET INCOME (LOSS) | $ | 4,358 | | | $ | 95,027 | | | $ | (3,523) | | | $ | 101,896 | |
Earnings (loss) per share to common shareholders: | Earnings (loss) per share to common shareholders: | | | | | Earnings (loss) per share to common shareholders: | | | | | | | |
Basic | Basic | $ | (0.44) | | | $ | 0.42 | | | Basic | $ | 0.24 | | | $ | 5.49 | | | $ | (0.20) | | | $ | 6.04 | |
Diluted | Diluted | $ | (0.44) | | | $ | 0.42 | | | Diluted | $ | 0.24 | | | $ | 5.49 | | | $ | (0.20) | | | $ | 6.04 | |
Shares used for computation: | Shares used for computation: | | | Shares used for computation: | |
Basic | Basic | 17,954 | | | 16,167 | | | Basic | 17,987 | | | 17,064 | | | 17,970 | | | 16,618 | |
Diluted | Diluted | 17,954 | | | 16,167 | | | Diluted | 18,006 | | | 17,073 | | | 17,970 | | | 16,632 | |
| Cash dividends declared per share: | Cash dividends declared per share: | $ | — | | | $ | — | | | Cash dividends declared per share: | $ | — | | | $ | — | | | $ | — | | | $ | — | |
The accompanying notes are an integral part of these consolidated financial statements.
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| | | Three Months Ended March 31, | | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | | 2022 | | 2021 | | 2022 | | 2021 |
NET INCOME (LOSS) | NET INCOME (LOSS) | $ | (7,881) | | | $ | 6,869 | | | NET INCOME (LOSS) | $ | 4,358 | | | $ | 95,027 | | | $ | (3,523) | | | $ | 101,896 | |
Other comprehensive income: | Other comprehensive income: | | | | | Other comprehensive income: | | | | |
Change in available for sale securities, net of tax | Change in available for sale securities, net of tax | 3,355 | | | 28 | | | Change in available for sale securities, net of tax | (2,667) | | | (126) | | | 688 | | | (98) | |
| Total other comprehensive income | Total other comprehensive income | 3,355 | | | 28 | | | Total other comprehensive income | (2,667) | | | (126) | | | 688 | | | (98) | |
TOTAL COMPREHENSIVE INCOME (LOSS) | TOTAL COMPREHENSIVE INCOME (LOSS) | $ | (4,526) | | | $ | 6,897 | | | TOTAL COMPREHENSIVE INCOME (LOSS) | $ | 1,691 | | | $ | 94,901 | | | $ | (2,835) | | | $ | 101,798 | |
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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 March 31, 2022 |
| 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, 2021 | 18,111 | | | $ | 25 | | | $ | 692,053 | | | $ | 2,056 | | | $ | 1,167,475 | | | $ | (638,057) | | | $ | 1,223,552 | |
Share-based compensation | 8 | | | — | | | 3,270 | | | — | | | — | | | — | | | 3,270 | |
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Other comprehensive income | — | | | — | | | — | | | 3,355 | | | — | | | — | | | 3,355 | |
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Net (loss) | — | | | — | | | — | | | — | | | (7,881) | | | — | | | (7,881) | |
Balance at March 31, 2022 | 18,119 | | | $ | 25 | | | $ | 695,323 | | | $ | 5,411 | | | $ | 1,159,594 | | | $ | (638,057) | | | $ | 1,222,296 | |
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| Three Months Ended June 30, 2022 |
| 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, 2022 | 18,119 | | | $ | 25 | | | $ | 695,323 | | | $ | 5,411 | | | $ | 1,159,594 | | | $ | (638,057) | | | $ | 1,222,296 | |
Share-based compensation | 31 | | | — | | | 3,659 | | | — | | | — | | | — | | | 3,659 | |
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Stock issued under employee stock purchase plan | 30 | | | — | | | — | | | — | | | — | | | 4,725 | | | 4,725 | |
Other comprehensive (loss) | — | | | — | | | — | | | (2,667) | | | — | | | — | | | (2,667) | |
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Net income | — | | | — | | | — | | | — | | | 4,358 | | | — | | | 4,358 | |
Balance at June 30, 2022 | 18,180 | | | $ | 25 | | | $ | 698,982 | | | $ | 2,744 | | | $ | 1,163,952 | | | $ | (633,332) | | | $ | 1,232,371 | |
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| Three Months Ended March 31, 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) | | | $ | 1,015,622 | | | $ | (646,008) | | | $ | 699,363 | |
Share-based compensation | 11 | | | — | | | 3,394 | | | — | | | — | | | — | | | 3,394 | |
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Other comprehensive income | — | | | — | | | — | | | 28 | | | — | | | — | | | 28 | |
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Net income | — | | | — | | | — | | | — | | | 6,869 | | | — | | | $ | 6,869 | |
Balance at March 31, 2021 | 16,416 | | | $ | 23 | | | $ | 333,147 | | | $ | 1 | | | $ | 1,022,491 | | | $ | (646,008) | | | $ | 709,654 | |
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| Six Months Ended June 30, 2022 |
| 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, 2021 | 18,111 | | | $ | 25 | | | $ | 692,053 | | | $ | 2,056 | | | $ | 1,167,475 | | | $ | (638,057) | | | $ | 1,223,552 | |
Share-based compensation | 39 | | | — | | | 6,929 | | | — | | | — | | | — | | | 6,929 | |
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Stock issued under employee stock purchase plan | 30 | | | — | | | — | | | — | | | — | | | 4,725 | | | 4,725 | |
Other comprehensive income | — | | | — | | | — | | | 688 | | | — | | | — | | | 688 | |
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Net (loss) | — | | | — | | | — | | | — | | | (3,523) | | | — | | | (3,523) | |
Balance at June 30, 2022 | 18,180 | | | $ | 25 | | | $ | 698,982 | | | $ | 2,744 | | | $ | 1,163,952 | | | $ | (633,332) | | | $ | 1,232,371 | |
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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 (loss) | — | | | — | | | — | | | (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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| Six Months Ended June 30, 2021 |
| Common stock outstanding | | Par value | | Additional paid-in capital | | Accumulated other comprehensive income | | Retained earnings | | Treasury shares | | Total shareholders' equity |
Balance at December 31, 2020 | 16,405 | | | $ | 23 | | | $ | 329,753 | | | $ | (27) | | | $ | 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 | |
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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 | |
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | Three Months Ended March 31, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Cash flows from operating activities: | Cash flows from operating activities: | | | | Cash flows from operating activities: | | | |
Net income (loss) | Net income (loss) | $ | (7,881) | | | $ | 6,869 | | Net income (loss) | $ | (3,523) | | | $ | 101,896 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |
Depreciation and amortization | Depreciation and amortization | 46,343 | | | 43,174 | | Depreciation and amortization | 95,526 | | | 87,696 | |
Special charges | Special charges | 142 | | | 1,738 | | Special charges | 284 | | | 2,592 | |
Other adjustments | Other adjustments | 6,155 | | | 8,318 | | Other adjustments | 13,657 | | | 18,184 | |
Changes in certain assets and liabilities: | Changes in certain assets and liabilities: | | Changes in certain assets and liabilities: | |
Air traffic liability | Air traffic liability | 145,169 | | | 95,541 | | Air traffic liability | 143,634 | | | 129,220 | |
| Deferred Payroll Support Programs grant recognition | | Deferred Payroll Support Programs grant recognition | — | | | 49,210 | |
Other - net | Other - net | (13,927) | | | 12,353 | | Other - net | (21,796) | | | 16,175 | |
Net cash provided by operating activities | Net cash provided by operating activities | 176,001 | | | 167,993 | | Net cash provided by operating activities | 227,782 | | | 404,973 | |
Cash flows from investing activities: | Cash flows from investing activities: | | | | Cash flows from investing activities: | | | |
Purchase of investment securities | Purchase of investment securities | (302,161) | | | (89,338) | | Purchase of investment securities | (672,318) | | | (673,722) | |
Proceeds from maturities of investment securities | Proceeds from maturities of investment securities | 311,332 | | | 194,534 | | Proceeds from maturities of investment securities | 675,656 | | | 436,364 | |
Aircraft pre-delivery deposits | Aircraft pre-delivery deposits | (46,694) | | | (3,300) | | Aircraft pre-delivery deposits | (51,111) | | | (3,300) | |
Purchase of property and equipment | Purchase of property and equipment | (71,659) | | | (66,199) | | Purchase of property and equipment | (205,158) | | | (131,184) | |
| Other investing activities | Other investing activities | (572) | | | (16) | | Other investing activities | 645 | | | 2,443 | |
Net cash provided by (used in) investing activities | (109,754) | | | 35,681 | | |
Net cash (used in) investing activities | | Net cash (used in) investing activities | (252,286) | | | (369,399) | |
Cash flows from financing activities: | Cash flows from financing activities: | | | | Cash flows from financing activities: | | | |
| Proceeds from the issuance of debt and finance lease obligations | Proceeds from the issuance of debt and finance lease obligations | — | | | 105,000 | | Proceeds from the issuance of debt and finance lease obligations | 195,800 | | | 106,657 | |
| Principal payments on debt and finance lease obligations | Principal payments on debt and finance lease obligations | (37,335) | | | (151,517) | | Principal payments on debt and finance lease obligations | (70,502) | | | (199,627) | |
Debt issuance costs | Debt issuance costs | (308) | | | (649) | | Debt issuance costs | (669) | | | (606) | |
| Net cash (used in) financing activities | (37,643) | | | (47,166) | | |
Proceeds from issuance of common stock | | Proceeds from issuance of common stock | — | | | 335,137 | |
Other financing activities | | Other financing activities | (82,775) | | | 3,936 | |
Net cash provided by financing activities | | Net cash provided by financing activities | 41,854 | | | 245,497 | |
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 28,604 | | | 156,508 | | NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 17,350 | | | 281,071 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | 400,701 | | | 170,319 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | 400,701 | | | 170,319 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 429,305 | | | $ | 326,827 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 418,051 | | | $ | 451,390 | |
| | CASH PAYMENTS (RECEIPTS) FOR: | CASH PAYMENTS (RECEIPTS) FOR: | | CASH PAYMENTS (RECEIPTS) FOR: | |
Interest paid, net of amount capitalized | Interest paid, net of amount capitalized | $ | 18,007 | | | $ | 15,059 | | Interest paid, net of amount capitalized | $ | 36,828 | | | $ | 26,379 | |
Income tax payments (refunds) | Income tax payments (refunds) | 17 | | | (138) | | Income tax payments (refunds) | (46) | | | 4,873 | |
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 | $ | — | | | $ | 4,733 | | Right-of-use (ROU) assets acquired | $ | — | | | $ | 23,157 | |
Flight equipment acquired under finance leases | Flight equipment acquired under finance leases | 68,211 | | | — | | Flight equipment acquired under finance leases | 90,476 | | | 13,833 | |
Purchases of property and equipment in accrued liabilities | Purchases of property and equipment in accrued liabilities | 37,083 | | | 4,064 | | Purchases of property and equipment in accrued liabilities | 45,887 | | | 5,088 | |
|
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 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, 2021 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.
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 during 2020 and 2021. Demand in the foreseeable future may continueCompany reclassified certain prior period amounts to be affected by fluctuations in COVID-19 cases, variants, hospitalizations, deaths, treatment efficacy and the availability of vaccines. The Company is continuously reevaluating flight schedules and adjusting capacity based on demand trends.
During 2020 and 2021, Congress enacted various legislation which provided support for the airline industry. This included The Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") enacted in March 2020, the Consolidated Appropriations Act, 2021 enacted in December 2020 (the “Payroll Support Program Extension”) and the American Rescue Plan Act enacted in March 2021 (the “ARPA”). On January 15, 2021, the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program Extension Agreement (the “PSP2”) with the Treasury and received $91.8 million under the Payroll Support Program Extension.
In April 2021, the Company received $13.8 million in additional funds relatedconform to the PSP2 which included a loancurrent period presentation. Unless otherwise noted, all amounts disclosed are stated before consideration of $1.7 million. In consideration for these additional funds, the Company issued warrants ( the "PSP2 Warrants") to the Treasury to acquire 924 shares of common stock at a price of $179.23 per share (based on the price of the Company's common stock on the Nasdaq Stock Market on December 24, 2020).
In April 2021, the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program 3 Agreement (the "PSP3") with the Treasury under section 7301 of the American Rescue Plan Act of 2021 and received a total of $98.4 million.
The funds received under PSP2 and PSP3 were used exclusively for wages, salaries and benefits.
Prior to January 1, 2022, all Payroll Support Program funds had been fully utilized.income taxes.
Note 32 — Revenue Recognition
Passenger Revenue
Passenger revenue is the most significant category in the Company's reported operating revenues, as outlined below:
| | | Three Months Ended March 31, | | | Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | (in thousands) | 2022 | | 2021 | | (in thousands) | 2022 | | 2021 | | 2022 | | 2021 |
Scheduled service | Scheduled service | $ | 223,854 | | | $ | 131,929 | | | Scheduled service | $ | 297,343 | | | $ | 225,613 | | | $ | 521,196 | | | $ | 357,540 | |
Ancillary air-related charges | Ancillary air-related charges | 229,464 | | | 121,072 | | | Ancillary air-related charges | 283,551 | | | 213,445 | | | 513,016 | | | 334,518 | |
Allways® Allegiant World Mastercard® redemptions | 10,643 | | | 3,694 | | | |
Loyalty redemptions | | Loyalty redemptions | 11,710 | | | 4,689 | | | 22,354 | | | 8,383 | |
Total passenger revenue | Total passenger revenue | $ | 463,961 | | | $ | 256,695 | | | Total passenger revenue | $ | 592,604 | | | $ | 443,747 | | | $ | 1,056,566 | | | $ | 700,441 | |
Sales of passenger tickets not yet flown are recorded in air traffic liability. Passenger revenue is recognized when transportation is provided. As of March 31,June 30, 2022, the air traffic liability balance was $452.6$451.1 million, of which approximately $394.1$392.5 million was related to forward bookings, with the remaining $58.5$58.6 million related to credit vouchers for future travel.
The normal contract term of passenger tickets is 12 months and passenger revenue associated with future travel will principally be recognized within this time frame. Of the $307.5 million that was recorded in the air traffic liability balance as of December 31, 2021, approximately 56.069.3 percent was recognized into passenger revenue during the threesix months ended March 31,June 30, 2022.
In 2020, the Company announced that credit vouchers issued for canceled travel beginning in January 2020 would have an extended expiration date of two years from the original booking date. This policy continued for vouchers issued through June 30, 2021. Effective July 1, 2021, vouchers issued have an expiration date of one year from the original booking date. Estimates of passenger revenue to be recognized from air traffic liability for credit voucher breakage 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.
The Company periodically evaluates the estimated amount of credit vouchers expected to expire unused and any adjustment is removed from air traffic liability and included in passenger revenue in the period in which the evaluation is complete.
Loyalty redemptions
In relation to the travel component of the Allways® Allegiant World Mastercard® 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 revenue when the points are redeemed and the transportation is provided. Similarly, in relation to the Allways Rewards program, points earned through the program are deferred based on the stand-alone selling price and recognized into revenue when the points are redeemed and the underlying service has been provided.
The following table presents the activity of the point liability for the periods indicated:
| | | Three Months Ended March 31, | | Six Months Ended June 30, |
(in thousands) | (in thousands) | 2022 | | 2021 | (in thousands) | 2022 | | 2021 |
Points balance at January 1 | Points balance at January 1 | $ | 40,490 | | | $ | 21,841 | | Points balance at January 1 | $ | 40,490 | | | $ | 21,841 | |
Points awarded (deferral of revenue) | Points awarded (deferral of revenue) | 16,957 | | | 4,571 | | Points awarded (deferral of revenue) | 35,821 | | | 10,696 | |
Points redeemed (recognition of revenue) | Points redeemed (recognition of revenue) | (10,643) | | | (3,694) | | Points redeemed (recognition of revenue) | (22,354) | | | (8,383) | |
Points balance at March 31 | $ | 46,804 | | | $ | 22,718 | | |
Points balance at June 30 | | Points balance at June 30 | $ | 53,957 | | | $ | 24,154 | |
As of March 31,June 30, 2022 and 2021, $23.2$29.4 million and $10.3$11.7 million, respectively, of the current points liability is reflected in accrued liabilities and represents the current estimate of revenue to be recognized in the next 12 months based on historical trends, with the remaining balance reflected in other noncurrent liabilities expected to be recognized into revenue in periods thereafter.
Note 43 — Property and Equipment
The following table summarizes the Company's property and equipment as of the dates indicated:
| (in thousands) | (in thousands) | March 31, 2022 | | December 31, 2021 | (in thousands) | June 30, 2022 | | December 31, 2021 |
Flight equipment, including pre-delivery deposits | Flight equipment, including pre-delivery deposits | $ | 2,685,856 | | | $ | 2,573,657 | | Flight equipment, including pre-delivery deposits | $ | 2,749,955 | | | $ | 2,573,657 | |
Computer hardware and software | Computer hardware and software | 166,209 | | | 160,237 | | Computer hardware and software | 180,085 | | | 160,237 | |
Land and buildings/leasehold improvements | Land and buildings/leasehold improvements | 59,853 | | | 59,735 | | Land and buildings/leasehold improvements | 59,897 | | | 59,735 | |
Other property and equipment | Other property and equipment | 83,326 | | | 78,192 | | Other property and equipment | 88,137 | | | 78,192 | |
Sunseeker Resort | Sunseeker Resort | 147,645 | | | 83,864 | | Sunseeker Resort | 221,240 | | | 83,864 | |
Total property and equipment | Total property and equipment | 3,142,889 | | | 2,955,685 | | Total property and equipment | 3,299,314 | | | 2,955,685 | |
Less accumulated depreciation and amortization | Less accumulated depreciation and amortization | (715,709) | | | (696,178) | | Less accumulated depreciation and amortization | (743,980) | | | (696,178) | |
Property and equipment, net | Property and equipment, net | $ | 2,427,180 | | | $ | 2,259,507 | | Property and equipment, net | $ | 2,555,334 | | | $ | 2,259,507 | |
Accrued capital expenditures as of March 31,June 30, 2022 and December 31, 2021 were $37.1$45.9 million and $17.7 million, respectively.
Note 54 — 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) | March 31, 2022 | | December 31, 2021 | (in thousands) | June 30, 2022 | | December 31, 2021 |
Fixed-rate debt and finance lease obligations due through 2032 | Fixed-rate debt and finance lease obligations due through 2032 | $ | 885,302 | | | $ | 827,382 | | Fixed-rate debt and finance lease obligations due through 2032 | $ | 1,047,543 | | | $ | 827,382 | |
Variable-rate debt due through 2029 | Variable-rate debt due through 2029 | 889,687 | | | 915,157 | | Variable-rate debt due through 2029 | 913,947 | | | 915,157 | |
Total debt and finance lease obligations, net of related costs | Total debt and finance lease obligations, net of related costs | 1,774,989 | | | 1,742,539 | | Total debt and finance lease obligations, net of related costs | 1,961,490 | | | 1,742,539 | |
Less current maturities, net of related costs | Less current maturities, net of related costs | 140,450 | | | 130,053 | | Less current maturities, net of related costs | 157,957 | | | 130,053 | |
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 | $ | 1,634,539 | | | $ | 1,612,486 | | Long-term debt and finance lease obligations, net of current maturities and related costs | $ | 1,803,533 | | | $ | 1,612,486 | |
| Weighted average fixed-interest rate on debt | Weighted average fixed-interest rate on debt | 5.8% | | 5.8% | Weighted average fixed-interest rate on debt | 5.7% | | 5.8% |
Weighted average variable-interest rate on debt | Weighted average variable-interest rate on debt | 2.9% | | 2.5% | Weighted average variable-interest rate on debt | 3.9% | | 2.5% |
Maturities of long-term debt and finance lease obligations for the remainder of 2022 and for the next four years and thereafter, in the aggregate, are: remaining in 2022 - $95.4$73.4 million; 2023 - $133.9$153.1 million; 2024 - $804.3$823.6 million; 2025 - $111.1$143.6 million; 2026 - $104.7$137.2 million; and $525.5$630.6 million thereafter.
Construction Loan Agreement
In October 2021, Sunseeker Florida, Inc. (“SFI”), a wholly-owned subsidiary of the Company, entered into a Credit Agreement pursuant to which SFI may borrow up to $350.0 million funded by one or more entities directly or indirectly managed by Castlelake, L.P. (“Lender”) to fund the remaining construction of the initial phases of Sunseeker Resort at Charlotte Harbor (the "Resort"). In 2021, the Company made a $30 million deposit into a construction disbursement account and in April 2022, the lender funded $87.5 million into the construction disbursement account for the Resort. As of June 30, 2022, $262.5 million has been advanced under this Credit Agreement.
Other Secured Debt
In April 2022, the Company borrowed $62.3 million under a loan agreement secured by Airbus A320 series aircraft. The notes bear interest at a fixed rate, payable in quarterly installments maturing in April 2027.
In April 2022, the Company borrowed $46.0 million under a loan agreement secured by Airbus A320 series aircraft. The notes bear interest at a variable rate, payable in quarterly installments maturing in April 2028.
Note 65 — Income Taxes
The Company recorded an effective tax rate of 25.425.3 percent and 20.822.5 percent for the three months ended March 31,June 30, 2022 and 2021, respectively. The effective tax rate for the three months ended March 31,June 30, 2022 differed from the statutory Federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of permanent tax differences of which none are individually significant.differences. 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 an effective tax rate of 25.6 percent and 22.4 percent for the six months ended June 30, 2022 and 2021, respectively. The effective tax rate for the six months ended June 30, 2022 differed from the statutory Federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of permanent tax differences of which none are individually significant.
Note 76 — 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 threesix months ended March 31,June 30, 2022.
Financial instruments measured at fair value on a recurring basis:
| | | March 31, 2022 | | December 31, 2021 | | June 30, 2022 | | December 31, 2021 |
(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 | $ | 4,295 | | | $ | 4,295 | | | $ | — | | | $ | 25,019 | | | $ | 25,019 | | | $ | — | | Money market funds | $ | 64,859 | | | $ | 64,859 | | | $ | — | | | $ | 25,019 | | | $ | 25,019 | | | $ | — | |
Commercial Paper | Commercial Paper | 144,882 | | | — | | | 144,882 | | | 179,455 | | | — | | | 179,455 | | Commercial Paper | 193,710 | | | — | | | 193,710 | | | 179,455 | | | — | | | 179,455 | |
Municipal debt securities | Municipal debt securities | 48,066 | | | — | | | 48,066 | | | 63,875 | | | — | | | 63,875 | | Municipal debt securities | 43,267 | | | — | | | 43,267 | | | 63,875 | | | — | | | 63,875 | |
Corporate debt securities | 7,849 | | | — | | | 7,849 | | | — | | | — | | | — | | |
| | Total cash equivalents | Total cash equivalents | 205,092 | | | 4,295 | | | 200,797 | | | 268,349 | | | 25,019 | | | 243,330 | | Total cash equivalents | 301,836 | | | 64,859 | | | 236,977 | | | 268,349 | | | 25,019 | | | 243,330 | |
Short-term | Short-term | | | | | | | | | | | | Short-term | | | | | | | | | | | |
Commercial paper | Commercial paper | 377,695 | | | — | | | 377,695 | | | 419,469 | | | — | | | 419,469 | | Commercial paper | 462,917 | | | — | | | 462,917 | | | 419,469 | | | — | | | 419,469 | |
| Corporate debt securities | Corporate debt securities | 255,848 | | | — | | | 255,848 | | | 234,436 | | | — | | | 234,436 | | Corporate debt securities | 195,698 | | | — | | | 195,698 | | | 234,436 | | | — | | | 234,436 | |
Municipal debt securities | Municipal debt securities | 173,561 | | | — | | | 173,561 | | | 165,573 | | | — | | | 165,573 | | Municipal debt securities | 103,272 | | | — | | | 103,272 | | | 165,573 | | | — | | | 165,573 | |
Federal agency debt securities | Federal agency debt securities | 1,845 | | | — | | | 1,845 | | | — | | | — | | | — | | Federal agency debt securities | 51,356 | | | — | | | 51,356 | | | — | | | — | | | — | |
Total short-term | Total short-term | 808,949 | | | — | | | 808,949 | | | 819,478 | | | — | | | 819,478 | | Total short-term | 813,243 | | | — | | | 813,243 | | | 819,478 | | | — | | | 819,478 | |
Long-term | Long-term | | | | | | | | | | | | Long-term | | | | | | | | | | | |
| Municipal debt securities | Municipal debt securities | — | | | — | | | — | | | 2,231 | | | — | | | 2,231 | | Municipal debt securities | — | | | — | | | — | | | 2,231 | | | — | | | 2,231 | |
| Total long-term | Total long-term | — | | | — | | | — | | | 2,231 | | | — | | | 2,231 | | Total long-term | — | | | — | | | — | | | 2,231 | | | — | | | 2,231 | |
Total financial instruments | Total financial instruments | $ | 1,014,041 | | | $ | 4,295 | | | $ | 1,009,746 | | | $ | 1,090,058 | | | $ | 25,019 | | | $ | 1,065,039 | | Total financial instruments | $ | 1,115,079 | | | $ | 64,859 | | | $ | 1,050,220 | | | $ | 1,090,058 | | | $ | 25,019 | | | $ | 1,065,039 | |
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, excluding finance leases, including current maturities and without reduction for related costs, are as follows:
| | | March 31, 2022 | | December 31, 2021 | | | June 30, 2022 | | December 31, 2021 | |
(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 | $ | 1,413,414 | | | $ | 1,198,418 | | | $ | 1,447,462 | | | $ | 1,261,170 | | | 3 | Non-publicly held debt | $ | 1,580,302 | | | $ | 1,275,697 | | | $ | 1,447,462 | | | $ | 1,261,170 | | | 3 |
Due to their short-term nature, the carrying amounts of cash, restricted cash, accounts receivable and accounts payable approximate fair value.
Note 87 — 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 months ended March 31,June 30, 2022, the second method was used because it was more dilutive than the first method. For the six months ended June 30, 2022, basic and diluted (loss) per share are the same because of the (loss) position. For the three months ended March 31, 2021, the second method was used 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 March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
Basic: | Basic: | | | | | Basic: | | | | | | | |
Net income (loss) | Net income (loss) | | $ | (7,881) | | | $ | 6,869 | | Net income (loss) | $ | 4,358 | | | $ | 95,027 | | | $ | (3,523) | | | $ | 101,896 | |
Less income allocated to participating securities | Less income allocated to participating securities | | — | | | (103) | | Less income allocated to participating securities | (39) | | | (1,285) | | | — | | | (1,451) | |
Net income (loss) attributable to common stock | Net income (loss) attributable to common stock | | $ | (7,881) | | | $ | 6,766 | | Net income (loss) attributable to common stock | $ | 4,319 | | | $ | 93,742 | | | $ | (3,523) | | | $ | 100,445 | |
Earnings (loss) per share, basic | Earnings (loss) per share, basic | | $ | (0.44) | | | $ | 0.42 | | Earnings (loss) per share, basic | $ | 0.24 | | | $ | 5.49 | | | $ | (0.20) | | | $ | 6.04 | |
Weighted-average shares outstanding | Weighted-average shares outstanding | | 17,954 | | | 16,167 | | Weighted-average shares outstanding | 17,987 | | | 17,064 | | | 17,970 | | | 16,618 | |
Diluted: | Diluted: | | | | | Diluted: | | | | | | | |
Net income (loss) | Net income (loss) | | $ | (7,881) | | | $ | 6,869 | | Net income (loss) | $ | 4,358 | | | $ | 95,027 | | | $ | (3,523) | | | $ | 101,896 | |
Less income allocated to participating securities | Less income allocated to participating securities | | — | | | (103) | | Less income allocated to participating securities | (39) | | | (1,284) | | | — | | | (1,449) | |
Net income (loss) attributable to common stock | Net income (loss) attributable to common stock | | $ | (7,881) | | | $ | 6,766 | | Net income (loss) attributable to common stock | $ | 4,319 | | | $ | 93,743 | | | $ | (3,523) | | | $ | 100,447 | |
Earnings (loss) per share, diluted | Earnings (loss) per share, diluted | | $ | (0.44) | | | $ | 0.42 | | Earnings (loss) per share, diluted | $ | 0.24 | | | $ | 5.49 | | | $ | (0.20) | | | $ | 6.04 | |
Weighted-average shares outstanding | Weighted-average shares outstanding | | 17,954 | | | 16,167 | | Weighted-average shares outstanding | 17,987 | | | 17,064 | | | 17,970 | | | 16,618 | |
| Dilutive effect of stock options and restricted stock | | Dilutive effect of stock options and restricted stock | 31 | | | 123 | | | — | | | 128 | |
Adjusted weighted-average shares outstanding under treasury stock method | | Adjusted weighted-average shares outstanding under treasury stock method | 18,018 | | | 17,187 | | | 17,970 | | | 16,746 | |
Participating securities excluded under two-class method | | Participating securities excluded under two-class method | (12) | | | (114) | | | — | | | (114) | |
Adjusted weighted-average shares outstanding under two-class method | | Adjusted weighted-average shares outstanding under two-class method | 18,006 | | | 17,073 | | | 17,970 | | | 16,632 | |
Note 98 — 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 109 — 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 2 operating segments: Airline and Sunseeker Resort.
Airline Segment
The Airline segment operates as a single business unit and includes all scheduled service air transportation, ancillary air-related products and services, third party products and services, fixed fee contract air transportation and other airline-related revenue. The CODM evaluation includes, but is not limited to, route and flight profitability data, ancillary and third party product and service offering statistics, and fixed fee contract information when making resource allocation decisions with the goal of optimizing consolidated financial results.
Sunseeker Resort Segment
The Sunseeker Resort segment represents activity related to the development and construction of Sunseeker Resort in Southwest Florida, as well as the renovation of Aileron Golf Course (formerly known as Kingsway Golf Course). Plans for the resort include a 500-room hotel and 2 towers offering more than 180 one, two and three-bedroom suites, bar and restaurant options, and other amenities. The golf course is a short drive from the resort site and is considered, from a planning and strategic perspective, to be an additional resort amenity. The construction of Sunseeker Resort is an extension of the Company's leisure travel focus and it is expected that many customers flying to Southwest Florida on Allegiant will elect to stay at this resort and enjoy its amenities.
Selected information for the Company's segments and the reconciliation to the consolidated financial statement amounts are as follows:
| (in thousands) | (in thousands) | | Airline | | Sunseeker Resort | | | Consolidated | (in thousands) | | Airline | | Sunseeker Resort | | | Consolidated |
Quarter Ended March 31, 2022 | | | | | | | | |
Three Months Ended June 30, 2022 | | Three Months Ended June 30, 2022 | | | | | | | |
Operating revenue: | Operating revenue: | | | | Operating revenue: | | | |
Passenger | Passenger | | $ | 463,961 | | | $ | — | | | | $ | 463,961 | | Passenger | | $ | 592,604 | | | $ | — | | | | $ | 592,604 | |
Third party products | Third party products | | 22,480 | | | — | | | | 22,480 | | Third party products | | 27,787 | | | — | | | | 27,787 | |
Fixed fee contract | Fixed fee contract | | 13,386 | | | — | | | | 13,386 | | Fixed fee contract | | 8,920 | | | — | | | | 8,920 | |
Other | Other | | 281 | | | 1 | | | | 282 | | Other | | 536 | | | — | | | | 536 | |
Operating income (loss) | Operating income (loss) | | 10,176 | | | (2,947) | | | | 7,229 | | Operating income (loss) | | 27,882 | | | (1,752) | | | | 26,130 | |
Interest expense, net | Interest expense, net | | 15,828 | | | 1,974 | | | | 17,802 | | Interest expense, net | | 17,402 | | | 2,795 | | | | 20,197 | |
Depreciation and amortization | Depreciation and amortization | | 46,341 | | | 2 | | | | 46,343 | | Depreciation and amortization | | 49,170 | | | 13 | | | | 49,183 | |
Capital expenditures | Capital expenditures | | 142,178 | | | 63,781 | | | | 205,959 | | Capital expenditures | | 96,023 | | | 73,595 | | | | 169,618 | |
Quarter Ended March 31, 2021 | | | | |
Three Months Ended June 30, 2021 | | Three Months Ended June 30, 2021 | | | |
Operating revenue: | Operating revenue: | | | | Operating revenue: | | | |
Passenger | Passenger | | $ | 256,695 | | | $ | — | | | | $ | 256,695 | | Passenger | | $ | 443,747 | | | $ | — | | | | $ | 443,747 | |
Third party products | Third party products | | 13,622 | | | — | | | | 13,622 | | Third party products | | 23,001 | | | — | | | | 23,001 | |
Fixed fee contract | Fixed fee contract | | 7,692 | | | — | | | | 7,692 | | Fixed fee contract | | 5,134 | | | — | | | | 5,134 | |
Other | Other | | 1,124 | | | (9) | | | | 1,115 | | Other | | 551 | | | — | | | | 551 | |
Operating income (loss) | Operating income (loss) | | 25,463 | | | (861) | | | | 24,602 | | Operating income (loss) | | 141,233 | | | (2,382) | | | | 138,851 | |
Interest expense, net | Interest expense, net | | 16,325 | | | — | | | | 16,325 | | Interest expense, net | | 16,220 | | | — | | | | 16,220 | |
Depreciation and amortization | Depreciation and amortization | | 43,136 | | | 38 | | | | 43,174 | | Depreciation and amortization | | 44,485 | | | 37 | | | | 44,522 | |
Capital expenditures | Capital expenditures | | 57,674 | | | — | | | | 57,674 | | Capital expenditures | | 81,041 | | | — | | | | 81,041 | |
|
| | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | | Airline | | Sunseeker Resort | | | | Consolidated |
Six Months Ended June 30, 2022 | | | | | | | | |
Operating revenue: | | | | | | | | |
Passenger | | $ | 1,056,566 | | | $ | — | | | | | $ | 1,056,566 | |
Third party products | | 50,267 | | | — | | | | | 50,267 | |
Fixed fee contract | | 22,305 | | | — | | | | | 22,305 | |
Other | | 818 | | | — | | | | | 818 | |
Operating income (loss) | | 38,059 | | | (4,700) | | | | | 33,359 | |
Interest expense, net | | 33,230 | | | 4,769 | | | | | 37,999 | |
Depreciation and amortization | | 95,509 | | | 17 | | | | | 95,526 | |
Capital expenditures | | 238,201 | | | 137,376 | | | | | 375,577 | |
Six Months Ended June 30, 2021 | | | | | | | | |
Operating revenue: | | | | | | | | |
Passenger | | $ | 700,441 | | | $ | — | | | | | $ | 700,441 | |
Third party products | | 36,622 | | | — | | | | | 36,622 | |
Fixed fee contract | | 12,827 | | | — | | | | | 12,827 | |
Other | | 1,667 | | | — | | | | | 1,667 | |
Operating income (loss) | | 166,697 | | | (3,243) | | | | | 163,454 | |
Interest expense, net | | 32,545 | | | — | | | | | 32,545 | |
Depreciation and amortization | | 87,621 | | | 75 | | | | | 87,696 | |
Capital expenditures | | 138,715 | | | — | | | | | 138,715 | |
Total assets were as follows as of the dates indicated:
| (in thousands) | (in thousands) | As of March 31, 2022 | | As of December 31, 2021 | (in thousands) | As of June 30, 2022 | | As of December 31, 2021 |
Airline | Airline | $ | 4,046,505 | | | $ | 3,872,041 | | Airline | $ | 4,086,293 | | | $ | 3,872,041 | |
Sunseeker Resort | Sunseeker Resort | 184,762 | | | 119,032 | | Sunseeker Resort | 351,580 | | | 119,032 | |
| Consolidated | Consolidated | $ | 4,231,267 | | | $ | 3,991,073 | | Consolidated | $ | 4,437,873 | | | $ | 3,991,073 | |
Note 1110 — Subsequent Events
In April 2022, we borrowed $108.3 million under senior bank debt facilities secured by aircraft.
In AprilAugust 2022, the lender funded $87.5 millionCompany entered into a new revolving credit facility under which it is entitled to borrow up to a $100 million. The facility has a term of 24 months and the borrowing ability is based on the value of aircraft and engines placed into the construction disbursement account for the Sunseeker project.collateral pool.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis presents factors that had a material effect on our results of operations during the three and six months ended March 31,June 30, 2022 and 2021. Also discussed is our financial position as of March 31,June 30, 2022 and December 31, 2021. 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, 2021. 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.
FirstSecond Quarter 2022 Review
Highlights:
–LossEarnings per share of $(0.44) as a result$0.24
–In June 2022, John Redmond transitioned into the chief executive officer role replacing founder Maurice Gallagher who assumed the role of significantly higher fuel costs as fuel prices surged during the quarter and higher irregular operations costs.executive Chairman.
–Total operating revenue was $500.1$629.8 million, up 10.728.1 percent when compared with the first quarter of 2019.year over three-year
–Continued sequential improvementThe month of June was the highest revenue-generating month in load factor, which camecompany history in at 78.9 percent, up nearly 2 percentage points from the fourth quarter 2021.both absolute dollars and unitized on a revenue per flight basis
–Total cash and investments at March 31, 2022 were $1.21 billion.
–Average total fare per passenger increased by 2.7 percent year over three-year to $131.15 despite scheduled service capacity increases of 18.7 percent.
–We began work with our ESG partner Schneider Electric in preparation for the publishing of our initial sustainability report later in the year.
–45Acquired 42.7 thousand new Allways®Allways Allegiant World Mastercard® cardholders in firstMastercard holders during the quarter, 2022, the highest number of additions in a quarter in Company history.up 65 percent from 2019
AIRCRAFT
The following table sets forth the aircraft in service and operated by us as of the dates indicated:
| | | March 31, 2022 | | December 31, 2021 | | | June 30, 2022 | | December 31, 2021 | |
A319 | A319 | 35 | | | 35 | | | A319 | 35 | | | 35 | | |
A320(1) | A320(1) | 77 | | | 73 | | | A320(1) | 80 | | | 73 | | |
Total | Total | 112 | | | 108 | | | Total | 115 | | | 108 | | |
(1) Does not include eightseven aircraft of which we have taken delivery as of March 31,June 30, 2022, but were not yet in service as of that date.
As of March 31,June 30, 2022, we are party to a forward purchase agreementsagreement for 5150 aircraft with one Airbus A320eight aircraft scheduled for delivery expected in 2022, ten Boeing 737MAX aircraft in 2023 and the remainder of the Boeing aircraft under contract thereafter. Additionally, we are party to finance leases for six Airbus A320five aircraft expected to deliver later in 2022.
NETWORK
As of March 31,June 30, 2022, we were selling 617610 routes versus 580607 as of the same date in 2021 and 450459 as of March 31,June 30, 2019, which represents a 6.40.5 and 37.132.9 percent increase, respectively. Our total active number of origination cities and leisure destinations were 9996 and 33,32, respectively, as of March 31,June 30, 2022.
Our unique model is predicated around expanding and contracting capacity to meet seasonal travel demands. We maintained a broad network and selling presence during the pandemic and have grown our network over 2019 levels as air travel is recovering.demand has recovered.
TRENDS
COVID-19
The COVID-19 pandemic has significantly impacted our operating results in 2020 and 2021 and we suffered numerous cancellations due to the effect of the Omicron variant on flight crews into first quarter 2022. COVID-19 may continue to impact our operations into the future. We believe that demand in the foreseeable future could fluctuate in response to fluctuations in COVID-19 cases, variants of the virus, hospitalizations, deaths, treatment efficacy, the availability of vaccines, CDC recommendations, and government restrictions.
Strong Demand Momentum
As concerns over COVID-19 have declined, we saw significant increases in load factors and average total fare per passenger beginning in March which areand continuing into second quarter.through the year to date.
Aircraft Fuel
The cost of fuel is volatile, as it is subject to many economic and geopolitical factors we can neither control nor predict. Significant increases in fuel costs could materially affect our operating results and profitability. We have not sought to use financial derivative products to hedge our exposure to fuel price volatility, nor do we have any plans to do so in the future.
The cost per gallon of fuel began to increase significantly in 2021 and the increases were exacerbated by the geopolitical impact of the war in Ukraine. As a result, the average fuel cost per gallon increased by 65.1113.9 percent in firstsecond quarter 2022 over firstsecond quarter 2021 and 43.594.6 percent over firstsecond quarter 2019. We expect high fuel costs will continue to impact our total costs and operating results.
Network Growth
DespiteDuring the pandemic and airline industry challenges, since the beginning of 2021 and through March 31,three months ended June 30, 2022, we have announced service on 123ten new routes 17including three hyper seasonal routes, and to eight new cities, including seasonal and temporary routes. We will continue to manage capacity to meet demand, which we believe is a core strength of our business model. However, we have pulled back some of our growth in 2022 due to staffing challenges as mentioned below.
Boeing Agreement
In December 2021, we signed an agreement with The Boeing Company to purchase 50 newly manufactured 737MAX aircraft scheduled to be delivered in 2023 to 2025 with options to purchase an additional 50 737’s. We believe this new aircraft purchase is complimentary with our low cost strategy based on of our intent to retain ownership of the aircraft, the longer useful life for depreciation purposes, expected fuel savings and operational reliability from the use of these new aircraft.
Operations
Staffing challenges and employee call-outs continue to impact our operations and costs and we have pulled back some of our planned growth for 2022 as a result. We believe these issues are not unique to Allegiant nor do we believe they are systemic. Our irregular operations costs are also impacted by our policy to compensate passengers for their inconvenience in addition to the ticket price, not generally done in the airline industry.
We are investing incrementally in our employee hiring and retention and our operations in an attempt to improve performance and this may put pressure on unit costs in the near term. However, if these problems persist, we may suffer reputational damage and incur higher costs for irregular operations.
Union Negotiations
The collective bargaining agreement with our pilots is currently amendable and the parties have begun to discuss the terms of a new labor agreement for this work group. The terms of any new collective bargaining agreement will impact our costs over the term of the contract.
Pilot Scarcity
The supply of pilots necessary for airline industry growth may be a limiting factor. The pandemic resulted in more than 3,000 early pilot retirements across U.S. mainline and cargo carriers and the pipeline for new pilots does not appear at the present time to be sufficiently robust to replace retired pilots and to allow for projected industry growth. The ability to hire and retain pilots will be critical to our and the industry’s growth.
Engagement of Schneider Electric as ESG Consultant
We have entered into a three-year partnership with Schneider Electric to help us develop an Environmental, Social and Governance (ESG) program including:
–Identifying and prioritizing relevant ESG topics through a materiality assessment
–Establishing ESG goals and environmental goal achievement plans
–Developing an inaugural ESG report referencing the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) frameworks
–Providing ongoing carbon emissions reporting of Scope 1, 2 and 3 greenhouse gas (GHG) emissions
–Supporting the communications efforts around our ESG program
VivaAerobus Alliance
In December 2021, we announced plans for a fully-integrated commercial alliance agreement with VivaAerobus, designed to expand options for nonstop leisure air travel between our markets in the United States and Mexico. We and VivaAerobus have submitted a joint application to the DOT requesting approval of and antitrust immunity for the alliance. The transactions are also subject to clearance by the Mexican Federal Economic Competition Commission.
We and VivaAerobus currently expect to offer new routes under the alliance beginning in the first quarter of 2023, pending governmental approval of the applications.
Sunseeker Resort
We recommenced the construction of our Sunseeker Resort in Southwest Florida in August 2021 and construction is ongoing with the expectation to open the Resort in second quarter 2023.
RESULTS OF OPERATIONS
Comparison of three months ended March 31,June 30, 2022 to three months ended March 31,June 30, 2021
As comparisons of our 2022 results to periods during 2021 reflect disproportionate changes due to the continued impact of the pandemic on air travel and particularly during first quarter 2021, 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 firstsecond quarter 2022, passenger revenue increased 80.733.5 percent compared to the same period in 2021. This increase was largely2021 as scheduled service passengers were up 28.0 percent due to stronger passenger demand in general and when compared to lower passenger demand related to COVID-19 during the firstsecond quarter 2021. Scheduled service passengers were up 59.6In addition, stronger passenger demand resulted in a 4.8 percent andincrease in scheduled service average base fare was up 8.3 percent.fare.
Passenger revenue for the firstsecond quarter 2022, as compared to firstsecond quarter 2019, increased by 10.530.3 percent, as passengers increased by 8.414.0 percent on an 18.7a 13.4 percent increase in capacity resulting in a 5.03.7 percentage point decreaseincrease in load factor. Average total fare per scheduled service revenue per passenger increased by 1.915.0 percent over the same period in 2019 as a result of a 16.5 percent increase in air ancillary air-related revenue per passenger and a 34.1 percent increase in ancillary third party revenue per passenger.
The increase in air ancillary revenue per passenger over the same period in 2019 was primarily driven by increased revenue from the sale of bundled products. as bundled products were not offered during the same period in 2019.
Third party products revenue. Third party products revenue for the firstsecond quarter 2022 increased 65.020.8 percent compared to the firstsecond quarter 2021 and 31.152.6 percent compared to the firstsecond quarter 2019. The increase from 2021 is primarily the result of greater travel demand for rental cars and hotels over the same period in 2021 and increased Allways® Allegiant World Mastercard®Rewards Program revenues. Increased rental car and hotel rates combined with a 33.26.2 percent increase in rental car days sold and 29.18.1 percent increase in room nights sold contributed to generate the substantial increase over 2021.
The increase from 2019 is attributable to increased rental car rates (which more than offset the impact of fewer rental car days) and growth in our Allways® Allegiant World Mastercard®Rewards Program revenues.
Fixed fee contract revenue. Fixed fee contract revenue for the firstsecond quarter 2022 increased 74.073.7 percent compared to the same period in 2021 as a result of a 16.010.1 percent increase in relatedfixed fee departures duewhen compared to lower charter activity during the 2021 quarter impacted by the pandemic. In addition, charter rates were lower infuel per gallon pass throughs (which is accounted for as fixed fee contract revenue) increased 113.9 percent as compared to 2021.
Fixed fee contract revenue for the firstsecond quarter 2022, as compared to 2019, increaseddecreased by 26.628.6 percent as a result of a 4.936.9 percent increasedecrease in related departures driven primarily by March Madness activity, higher charter rates and higher fuel cost passthroughs.fixed fee revenue departures.
Operating Expenses
We primarily evaluate our expense management by comparing our costs per available seat mile (ASM) across different periods, which enables us to assess trends in each expense category. The following table presents unit costs on a per ASM basis, or CASM, for the indicated periods, 2019 being included as a more representative pre-pandemic firstsecond quarter comparison. Excluding fuel on a per ASM basis provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors beyond our control.
| | | Three Months Ended March 31, | | Percent Change | | Three Months Ended June 30, | | Percent Change |
Unitized costs (in cents) | Unitized costs (in cents) | 2022 | | 2021 | | 2019 | | YoY | | Yo3Y | Unitized costs (in cents) | 2022 | | 2021 | | 2019 | | YoY | | Yo3Y |
Aircraft fuel | Aircraft fuel | 3.55 | | | 2.06 | | | 2.55 | | | 72.3 | % | | 39.2 | % | Aircraft fuel | 5.16 | | | 2.38 | | | 2.70 | | | 116.8 | % | | 91.1 | % |
Salaries and benefits | Salaries and benefits | 2.90 | | | 2.94 | | | 3.05 | | | (1.4) | | | (4.9) | | Salaries and benefits | 2.80 | | | 2.65 | | | 2.55 | | | 5.7 | | | 9.8 | |
Station operations | Station operations | 1.42 | | | 1.07 | | | 1.00 | | | 32.7 | | | 42.0 | | Station operations | 1.34 | | | 1.25 | | | 1.03 | | | 7.2 | | | 30.1 | |
Depreciation and amortization | Depreciation and amortization | 1.00 | | | 1.08 | | | 0.93 | | | (7.4) | | | 7.5 | | Depreciation and amortization | 0.99 | | | 0.97 | | | 0.87 | | | 2.1 | | | 13.8 | |
Maintenance and repairs | Maintenance and repairs | 0.60 | | | 0.58 | | | 0.58 | | | 3.4 | | | 3.4 | | Maintenance and repairs | 0.62 | | | 0.49 | | | 0.47 | | | 26.5 | | | 31.9 | |
Sales and marketing | Sales and marketing | 0.48 | | | 0.29 | | | 0.54 | | | 65.5 | | | (11.1) | | Sales and marketing | 0.55 | | | 0.38 | | | 0.46 | | | 44.7 | | | 19.6 | |
Aircraft lease rentals | Aircraft lease rentals | 0.13 | | | 0.12 | | | — | | | 8.3 | | | NM | Aircraft lease rentals | 0.11 | | | 0.11 | | | — | | | — | | | NM |
Other | Other | 0.59 | | | 0.44 | | | 0.57 | | | 34.1 | | | 3.5 | | Other | 0.53 | | | 0.34 | | | 0.55 | | | 55.9 | | | (3.6) | |
Payroll Support Programs grant recognition | Payroll Support Programs grant recognition | — | | | (2.28) | | | — | | | NM | | NM | Payroll Support Programs grant recognition | — | | | (1.33) | | | — | | | NM | | NM |
Special charges | Special charges | 0.00 | | 0.04 | | | — | | | NM | | NM | Special charges | 0.00 | | 0.02 | | | — | | | NM | | NM |
CASM | CASM | 10.67 | | | 6.34 | | | 9.22 | | | 68.3 | | | 15.7 | | CASM | 12.10 | | | 7.26 | | | 8.63 | | | 66.7 | | | 40.2 | |
Operating CASM, excluding fuel | Operating CASM, excluding fuel | 7.12 | | | 4.28 | | | 6.67 | | | 66.4 | | | 6.7 | | Operating CASM, excluding fuel | 6.94 | | | 4.88 | | | 5.93 | | | 42.2 | | | 17.0 | |
Sunseeker Resort CASM | Sunseeker Resort CASM | 0.06 | | | 0.02 | | | 0.05 | | | 200.0 | | | 20.0 | | Sunseeker Resort CASM | 0.04 | | | 0.05 | | | 0.05 | | | (20.0) | | | (20.0) | |
Operating CASM, excluding fuel and Sunseeker Resort activity | Operating CASM, excluding fuel and Sunseeker Resort activity | 7.06 | | | 4.26 | | | 6.62 | | | 65.7 | | | 6.6 | | Operating CASM, excluding fuel and Sunseeker Resort activity | 6.90 | | | 4.83 | | | 5.88 | | | 42.9 | | | 17.3 | |
|
NM - Not meaningful
Salaries and benefits expense. Salaries and benefits expense increased $16.1 million, or 13.6 percent, for the first quarter 2022 when compared to the same period in 2021. The increase is primarily due to an 18.3 percent increase in the number of full time equivalent employees from the first quarter 2021 and higher wages offset by the employee retention tax credit recognized in 2022.
When compared to the same period in 2019, salaries and benefits expense increased by $14.6 million or 12.2 percent on a 16.3 percent increase in the number of full time equivalent employees year over three-year.
Aircraft fuel expense. Aircraft fuel expense increased $81.3$147.8 million, or 98.1135.1 percent, for the firstsecond quarter 2022 compared to firstsecond quarter 2021. This is primarily due to a 65.1113.9 percent increase in average fuel cost per gallon and a 20.310.0 percent increase in fuel gallons consumed on a 15.1an 8.6 percent increase in capacity.
When compared to the same period in 2019, aircraft fuel expense increased by 64.7114.4 percent as average fuel cost per gallon increased 43.5 percent, ASM's increased 18.294.6 percent and fuel gallons consumed increased 15.010.2 percent.
Salaries and benefits expense. Salaries and benefits expense increased $17.8 million, or 14.6 percent, for the second quarter 2022 when compared to the same period in 2021. The increase is primarily due to a 27.3 percent increase in the number of full time equivalent employees from the second quarter 2021.
When compared to the same period in 2019, salaries and benefits expense increased by $26.1 million or 23.0 percent on a 25.1 percent increase in the number of full time equivalent employees year over three-year.
Station operations expense. Station operations expense for the firstsecond quarter 2022 increased $22.7$9.7 million, or 52.617.0 percent compared to the same period in 2021 due to increased departures of 10.92.0 percent and increased costs associated with irregular operations.operations and increased airport fees.
As compared to the same period in 2019, station operations expense increased by $26.8$21.0 million or 68.745.9 percent due to a 13.15.2 percent increase in departures, increased costs associated with irregular operations and increased airport fees.
Irregular operations costs in 2022 were significantly attributable to COVID absences due to the Omicron variant in January and February. These absences resulted in numerous flight cancellations. The amount of irregular operations costs is significantly impacted by our decision to compensate impacted passengers for their inconvenience in addition to the ticket price.
Depreciation and amortization expense. Depreciation and amortization expense for the firstsecond quarter 2022 increased by 7.310.5 percent as compared to the firstsecond quarter 2021 as the average number of aircraft owned andrelated assets in service increased 8.613.2 percent year over year.for the period ended June 30, 2022 as compared to June 30, 2021.
Compared to the same period in 2019, depreciation and amortization expense increased $10.2$10.7 million or 28.127.8 percent as the average number of aircraft owned andrelated assets in service increased 28.830.6 percent year over three-year.for the period ended June 30, 2022 as compared to June 30, 2021.
Maintenance and repairs expense. Maintenance and repairs expense for the firstsecond quarter 2022 increased $4.4$8.5 million, or 19.037.7 percent, compared to the same period in 2021. Routine maintenance costs increased as the average number of aircraft in service increased 12.511.3 percent year over year and there wasas a 15.1 percent increaseresult of increased costs related to outsourced labor in ASMs.2022 (largely attributable to our smaller bases and outstations).
Compared to the same period in 2019, maintenance and repairs expense increased by $5.0$10.2 million or 21.949.1 percent primarily due to a 37.633.3 percent increase in the average number of aircraft in service and an 18.2 percent increaseas a result of increased costs related to outsourced labor in ASM's year over three-year.2022.
Sales and marketing expense. Sales and marketing expense for the firstsecond quarter 2022 increased by 92.554.8 percent compared to the same period in 2021, due to an increase in net credit card fees as a result of an 80.7a 33.5 percent increase in passenger revenue year-over-year as well as reduced advertising spend in earlythe second quarter 2021 during the pandemic.
Compared to the same period in 2019, sales and marketing expense increased by 6.832.9 percent primarily due to an increase in net credit card fees as a result of a 10.530.3 percent increase in passenger revenue compared to the same period in 2019.
Other operating expense. Other expense increased $8.4$11.1 million or 71.9 percent for the firstsecond quarter 2022 compared to the firstsecond quarter 2021 attributable to increased service and incremental increases in our employee training activity.
Payroll Support Programs grant recognition. During 2021, we received $203.9 million in funds through the payroll support programs and recognized $91.8$61.2 million as an offset to operating expense on our statement of income during the firstsecond quarter of 2021. The funds were fully utilized in 2021. There were no such funds received in 2022.
Interest Expense
Interest expense for the quarter ended March 31,June 30, 2022 increased by $3.0$7.8 million, or 17.946.5 percent over firstsecond quarter 2021, due to new fixed rate debt and finance lease transactions entered into since firstsecond quarter 2021.2021 as well as a 1.4 percent increase in the weighted average variable interest rate year over year.
Income Tax Expense
Our effective tax rate was 25.425.3 percent and 20.822.5 percent for the three months ended March 31,June 30, 2022 and 2021, respectively. The effective tax rate for the three months ended March 31,June 30, 2022 differed from the statutory Federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of permanent tax differences of which none are individually significant.differences.
Comparison of six months ended June 30, 2022 to six months ended June 30, 2021
As comparisons of our 2022 results to periods during 2021 reflect disproportionate changes due to the continued impact of the pandemic on air travel during 2021, 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, 2022, passenger revenue increased 50.8 percent compared with the same period in 2021 as scheduled service passengers were up 40.3 percent due to stronger passenger demand in general and when compared to lower passenger demand related to COVID-19 during the first six months of 2021. In addition, stronger passenger demand resulted in a 5.9 percent increase in scheduled service average base fare.
Passenger revenue for the first six months of 2022, as compared to the first six months of 2019 increased by 20.8 percent, as passengers increased by 11.2 percent on a 15.0 percent increase in capacity, resulting in a 0.3 percentage point decrease in load factor. Average total fare per scheduled service passenger increased by 9.1 percent over the same period in 2019 as a result of a 16.5 percent increase in ancillary air related revenue per passenger.
The increase in ancillary air related revenue per passenger over the same period in 2019 was primarily driven by increased revenue from the sale of bundled products as bundled products were not offered in the 2019 period.
Third party products revenue. Third party products revenue for the six months ended June 30, 2022 increased 37.3 percent over the same period in 2021 and 42.2 percent when compared to 2019. The increase from 2021 is primarily the result of greater travel demand for rental cars and hotels and increased Allways® Rewards Program revenues. Increased rental car and hotel rates combined with a 17.2 percent increase in rental car days sold and a 17.2 percent increase in room nights sold contributed to the substantial increase over 2021.
The increase from 2019 is attributable to increased rental car rates (which more than offset the impact of fewer rental car days) and substantial growth in our Allways® Rewards Program revenues.
Fixed fee contract revenue. Fixed fee contract revenue for the six months ended June 30, 2022 increased 73.9 percent compared to the same period in 2021 as a result of a 13.5 percent increase in fixed fee departures largely due to lower charter activity during the pandemic in the same period of 2021. In addition, charter rates were lower in 2021.
Fixed fee contract revenue for the six months ended June 30, 2022, as compared to 2019, decreased by 3.3 percent points as a result of a 17.4 percent decrease in fixed fee departures, partially offset by higher charter rates and higher fuel cost passthroughs.
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) | 2022 | | 2021 | | 2019 | | YoY | | Yo3Y |
Aircraft fuel | 4.39 | | | 2.23 | | | 2.63 | | | 96.9 | % | | 66.9 | % |
Salaries and benefits | 2.85 | | | 2.79 | | | 2.79 | | | 2.2 | | | 2.2 | |
Station operations | 1.38 | | | 1.17 | | | 1.02 | | | 17.9 | | | 35.3 | |
Depreciation and amortization | 0.99 | | | 1.02 | | | 0.89 | | | (2.9) | | | 11.2 | |
Maintenance and repairs | 0.61 | | | 0.53 | | | 0.52 | | | 15.1 | | | 17.3 | |
Sales and marketing | 0.52 | | | 0.34 | | | 0.50 | | | 52.9 | | | 4.0 | |
Aircraft lease rentals | 0.12 | | | 0.11 | | | — | | | 9.1 | | | NM |
Other | 0.55 | | | 0.39 | | | 0.56 | | | 41.0 | | | (1.8) | |
Payroll Support Programs grant recognition | — | | | (1.78) | | | — | | | (100.0) | | | NM |
Special charges | — | | | 0.03 | | | — | | | (100.0) | | | NM |
CASM | 11.41 | | | 6.83 | | | 8.91 | | | 67.1 | | | 28.1 | |
Operating CASM, excluding fuel (2) | 7.02 | | | 4.60 | | | 6.28 | | | 52.6 | | | 11.8 | |
Sunseeker Resort CASM | 0.05 | | | 0.04 | | | 0.05 | | | 25.0 | | | — | |
Operating CASM, excluding fuel and Sunseeker Resort activity | 6.97 | | | 4.56 | | | 6.23 | | | 52.9 | | | 11.9 | |
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Aircraft fuel expense. Aircraft fuel expense increased $229.1 million, or 119.1 percent, for the six months ended June 30, 2022 compared to the same period in 2021. This is primarily driven by a 91.3 percent increase in average fuel cost per gallon. In addition, ASMs increased by 11.6 percent contributing to a 14.6 percent increase in fuel gallons consumed.
Aircraft fuel expense increased by $201.8 million or 91.8 percent for the six months ended June 30, 2022 compared to the same period in 2019. This is primarily driven by an increase in average fuel cost per gallon of 71.1 percent in addition to a 15.0 percent increase in ASMs resulting in a 12.4 percent increase in fuel gallons consumed.
Salaries and benefits expense. Salaries and benefits expense increased $33.8 million, or 14.1 percent, for the six months ended June 30, 2022 compared to the same period in 2021. The increase is primarily due to a 27.3 percent increase in the number of full time equivalent employees from the same period in 2021, offset by the employee retention tax credit recognized in the first quarter of 2022.
Salaries and benefits expense for the six months ended June 30, 2022 increased by $40.7 million or 17.5 percent as compared to the same period in 2019. The increase is primarily due to a 25.1 percent increase in the number of full time equivalent employees from same period in 2019 offset by the employee retention tax credit recognized in the first quarter of 2022.
Station operations expense. Station operations expense for the six months ended June 30, 2022 increased $32.3 million or 32.3 percent due to a 6.0 percent increase in departures, increased costs associated with irregular operations, and increased airport and landing fees.
As compared to the six month period ended June 30, 2019, station operations expense increased by $47.8 million or 56.4 percent due to an 8.8 percent increase in departures, increased costs associated with irregular operations and increased airport fees.
Irregular operations costs in 2022 were significantly attributable to COVID absences due to the Omicron variant in January and February. These absences resulted in numerous flight cancellations. Higher than usual cancellations continued into the second quarter as a result of staffing challenges and other factors. The amount of irregular operations costs is significantly impacted by our decision to compensate impacted passengers for their inconvenience in addition to the ticket price.
Depreciation and amortization expense. Depreciation and amortization expense for the six months ended June 30, 2022 increased $7.8 million or 8.9 percent as compared to the same period in 2021 due to a 13.0 percent increase in the average depreciable aircraft related assets in service.
When compared to the six months ended June 30, 2019, depreciation and amortization expense increased 27.9 percent as the average depreciable aircraft related assets in service during the period increased 32.2 percent.
Maintenance and repairs expense. Maintenance and repairs expense for the six months ended June 30, 2022 increased by $13.0 million or 28.2 percent compared to the same period in 2021. Routine maintenance costs increased as the average number of aircraft in service increased 12.0 percent year-over-year and as a result of increased costs related to outsourced labor in 2022.
As compared to the six months ended June 30, 2019, maintenance and repairs expense increased by $15.2 million or 34.9 percent as the number of aircraft in service increased by 35.4 percent and increased costs related to outsourced labor in 2022 (largely attributable to our smaller bases and outstations).
Sales and marketing expense. Sales and marketing expense for the six months ended June 30, 2022 increased 69.8 percent compared to the same period in 2021, due to an increase in net credit card fees as a result of a 50.8 percent increase in passenger revenue year-over-year as well as reduced advertising spend in the first six months of 2021 during the pandemic.
Compared to the six months ended June 30, 2019, sales and marketing expense increased 19.7 percent due to an increase in net credit card fees as a result of a 20.8 percent increase in passenger revenue.
Other expense. Other expense for the six months ended June 30, 2022 increased by $19.6 million or 58.8 percent year over year, due to increased service, incremental increases in our employee training activity and offset by decreased activity in our non-airline subsidiaries due to the sale of Teesnap in the second quarter of 2021.
Payroll Support Programs grant recognition. During 2021, we received $203.9 million in funds through the payroll support programs and recognized $153.0 million as an offset to operating expense on our income statement for the six month period ending June 30, 2021. The funds were fully utilized in 2021. There were no such funds received in 2022.
Income Tax Expense
We recorded a $1.2 million income tax benefit (25.6 percent effective tax rate) compared to a $29.3 million tax expense (22.4 percent effective tax rate) for the six months ended June 30, 2022 and 2021, respectively. The 25.6 percent effective tax rate for the six months ended June 30, 2022 differed from the statutory federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of permanent tax differences. The 22.4 percent effective tax rate for the six months ended June 30, 2021 differed from the statutory federal income tax rate of 21.0 percent primarily due to the state income taxes and the impact of ASU 2016-09 related to share-based payments.
Comparative Consolidated Operating Statistics
The following tables set forth our operating statistics for the periods indicated:
| | | Three Months Ended March 31, | | Percent Change (1) | | Three Months Ended June 30, | | Percent Change (1) |
| | 2022 | | 2021 | | 2019 | | YoY | | Yo3Y | | 2022 | | 2021 | | 2019 | | YoY | | Yo3Y |
Operating statistics (unaudited): | Operating statistics (unaudited): | | | | | | | | | | Operating statistics (unaudited): | | | | | | | | | |
Total system statistics: | Total system statistics: | | | | | | Total system statistics: | | | | | |
Passengers | Passengers | 3,734,262 | | | 2,334,503 | | | 3,450,278 | | | 60.0 | % | | 8.2 | % | Passengers | 4,740,399 | | 3,699,217 | | | 4,169,536 | | 28.1 | % | | 13.7 | % |
Available seat miles (ASMs) (thousands) | Available seat miles (ASMs) (thousands) | 4,620,144 | | | 4,013,989 | | | 3,910,239 | | | 15.1 | | | 18.2 | | Available seat miles (ASMs) (thousands) | 4,990,086 | | 4,594,542 | | | 4,447,066 | | 8.6 | | | 12.2 | |
| Operating expense per ASM (CASM) (cents) | Operating expense per ASM (CASM) (cents) | 10.67 | | | 6.34 | | | 9.22 | | | 68.3 | | | 15.7 | | Operating expense per ASM (CASM) (cents) | 12.10 | | 7.26 | | | 8.63 | | 66.7 | | | 40.2 | |
Fuel expense per ASM (cents) | Fuel expense per ASM (cents) | 3.55 | | | 2.06 | | | 2.55 | | | 72.3 | | | 39.2 | | Fuel expense per ASM (cents) | 5.16 | | 2.38 | | | 2.70 | | 116.8 | | | 91.1 | |
| Operating CASM, excluding fuel (cents) | Operating CASM, excluding fuel (cents) | 7.12 | | | 4.28 | | | 6.67 | | | 66.4 | | | 6.7 | | Operating CASM, excluding fuel (cents) | 6.94 | | 4.88 | | | 5.93 | | 42.2 | | | 17.0 | |
ASMs per gallon of fuel | ASMs per gallon of fuel | 86.5 | | | 90.4 | | | 84.1 | | | (4.3) | | | 2.9 | | ASMs per gallon of fuel | 83.7 | | 84.8 | | | 82.3 | | (1.3) | | | 1.7 | |
Departures | Departures | 28,494 | | | 25,684 | | | 25,200 | | | 10.9 | | | 13.1 | | Departures | 32,138 | | 31,507 | | | 30,547 | | 2.0 | | | 5.2 | |
Block hours | Block hours | 69,655 | | | 60,373 | | | 59,819 | | | 15.4 | | | 16.4 | | Block hours | 75,472 | | 69,809 | | | 68,332 | | 8.1 | | | 10.4 | |
Average stage length (miles) | Average stage length (miles) | 920 | | | 898 | | | 904 | | | 2.4 | | | 1.8 | | Average stage length (miles) | 881 | | 838 | | | 853 | | 5.1 | | | 3.3 | |
Average number of operating aircraft during period | Average number of operating aircraft during period | 109.5 | | | 97.3 | | | 79.6 | | | 12.5 | | | 37.6 | | Average number of operating aircraft during period | 113.3 | | 101.8 | | | 85.0 | | 11.3 | | | 33.3 | |
Average block hours per aircraft per day | Average block hours per aircraft per day | 7.1 | | | 7.4 | | | 8.3 | | | (4.1) | | | (14.5) | | Average block hours per aircraft per day | 7.3 | | 7.5 | | | 8.8 | | (2.7) | | | (17.0) | |
Full-time equivalent employees at end of period | Full-time equivalent employees at end of period | 4,728 | | | 3,998 | | | 4,067 | | | 18.3 | | | 16.3 | | Full-time equivalent employees at end of period | 5,226 | | 4,104 | | | 4,179 | | 27.3 | | | 25.1 | |
Fuel gallons consumed (thousands) | Fuel gallons consumed (thousands) | 53,438 | | | 44,426 | | | 46,474 | | | 20.3 | | | 15.0 | | Fuel gallons consumed (thousands) | 59,588 | | 54,188 | | | 54,064 | | 10.0 | | | 10.2 | |
Average fuel cost per gallon | Average fuel cost per gallon | $ | 3.07 | | | $ | 1.86 | | | $ | 2.14 | | | 65.1 | | | 43.5 | | Average fuel cost per gallon | $ | 4.32 | | $ | 2.02 | | | $ | 2.22 | | 113.9 | | | 94.6 | |
| Scheduled service statistics: | Scheduled service statistics: | | | | | Scheduled service statistics: | | | | |
Passengers | Passengers | 3,709,104 | | | 2,323,302 | | | 3,421,538 | | | 59.6 | | 8.4 | Passengers | 4,711,001 | | | 3,680,254 | | | 4,131,855 | | | 28.0 | | 14.0 |
Revenue passenger miles (RPMs) (thousands) | Revenue passenger miles (RPMs) (thousands) | 3,558,045 | | | 2,166,417 | | | 3,191,045 | | | 64.2 | | 11.5 | Revenue passenger miles (RPMs) (thousands) | 4,267,828 | | 3,188,215 | | | 3,603,076 | | | 33.9 | | 18.4 |
Available seat miles (ASMs) (thousands) | Available seat miles (ASMs) (thousands) | 4,512,315 | | | 3,921,090 | | | 3,802,132 | | | 15.1 | | 18.7 | Available seat miles (ASMs) (thousands) | 4,888,539 | | | 4,505,786 | | | 4,311,182 | | | 8.5 | | 13.4 |
Load factor | Load factor | 78.9 | % | | 55.3 | % | | 83.9 | % | | 23.6 | | (5.0) | Load factor | 87.3 | % | | 70.8 | % | | 83.6 | % | | 16.5 | | 3.7 |
Departures | Departures | 27,637 | | | 24,947 | | | 24,344 | | | 10.8 | | 13.5 | Departures | 31,402 | | | 30,763 | | | 29,567 | | | 2.1 | | 6.2 |
Block hours | Block hours | 67,829 | | | 58,851 | | | 57,963 | | | 15.3 | | 17.0 | Block hours | 73,857 | | | 68,334 | | | 66,135 | | | 8.1 | | 11.7 |
Average seats per departure | Average seats per departure | 175.6 | | | 173.6 | | | 171.4 | | | 1.2 | | 2.5 | Average seats per departure | 175.6 | | | 173.6 | | | 170.9 | | | 1.2 | | 2.8 |
Yield (cents) (2) | Yield (cents) (2) | 6.59 | | | 6.26 | | | 7.47 | | | 5.3 | | (11.8) | Yield (cents) (2) | 7.24 | | | 7.22 | | | 6.70 | | | 0.3 | | 8.1 |
Total passenger revenue per ASM (TRASM) (cents)(3) | Total passenger revenue per ASM (TRASM) (cents)(3) | 10.78 | | | 6.89 | | | 11.50 | | | 56.5 | | (6.3) | Total passenger revenue per ASM (TRASM) (cents)(3) | 12.69 | | | 10.36 | | | 10.97 | | | 22.5 | | 15.7 |
Average fare - scheduled service(4) | Average fare - scheduled service(4) | $ | 63.22 | | | $ | 58.38 | | | $ | 69.64 | | | 8.3 | | (9.2) | Average fare - scheduled service(4) | $ | 65.60 | | | $ | 62.58 | | | $ | 58.39 | | | 4.8 | | 12.3 |
Average fare - air-related charges(4) | Average fare - air-related charges(4) | $ | 61.87 | | | $ | 52.11 | | | $ | 53.10 | | | 18.7 | | 16.5 | Average fare - air-related charges(4) | $ | 60.19 | | | $ | 58.00 | | | $ | 51.68 | | | 3.8 | | 16.5 |
Average fare - third party products | Average fare - third party products | $ | 6.06 | | | $ | 5.86 | | | $ | 5.01 | | | 3.4 | | 21.0 | Average fare - third party products | $ | 5.90 | | | $ | 6.25 | | | $ | 4.40 | | | (5.6) | | 34.1 |
Average fare - total | Average fare - total | $ | 131.15 | | | $ | 116.35 | | | $ | 127.75 | | | 12.7 | | 2.7 | Average fare - total | $ | 131.69 | | | $ | 126.82 | | | $ | 114.47 | | | 3.8 | | 15.0 |
Average stage length (miles) | Average stage length (miles) | 926 | | | 902 | | | 908 | | | 2.7 | | 2.0 | Average stage length (miles) | 883 | | | 842 | | | 853 | | | 4.9 | | 3.5 |
Fuel gallons consumed (thousands) | Fuel gallons consumed (thousands) | 52,110 | | | 43,306 | | | 45,068 | | | 20.3 | | 15.6 | Fuel gallons consumed (thousands) | 58,332 | | | 53,022 | | | 52,327 | | | 10.0 | | 11.5 |
Average fuel cost per gallon | Average fuel cost per gallon | $ | 3.01 | | | $ | 1.82 | | | $ | 2.13 | | | 65.4 | | 41.3 | Average fuel cost per gallon | $ | 4.33 | | | $ | 2.01 | | | $ | 2.22 | | | 115.4 | | 95.0 |
Rental car days sold | Rental car days sold | 367,094 | | | 275,584 | | | 471,598 | | | 33.2 | | (22.2) | Rental car days sold | 430,004 | | | 404,760 | | | 540,960 | | | 6.2 | | (20.5) |
Hotel room nights sold | Hotel room nights sold | 72,539 | | | 56,208 | | | 105,015 | | | 29.1 | | (30.9) | Hotel room nights sold | 78,590 | | | 72,701 | | | 114,191 | | | 8.1 | | (31.2) |
Percent of sales through website during period | Percent of sales through website during period | 96.0 | % | | 93.3 | % | | 93.6 | % | | 2.7 | | 2.4 | Percent of sales through website during period | 96.3 | % | | 94.3 | % | | 93.5 | % | | 2.0 | | 2.8 |
(1) Except load factor and percent of sales through website during period, which are presented as a percentage point change.
(2) Defined as scheduled service revenue divided by revenue passenger miles.
(3) 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.
(4) Reflects division of passenger revenue between scheduled service (base fare) and air-related charges in our booking path.
Comparative Consolidated Operating Statistics
The following tables set forth our operating statistics for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Percent Change (1) |
| 2022 | | 2021 | | 2019 | | YoY | | Yo3Y |
Operating statistics (unaudited): | | | | | | | | | |
Total system statistics: | | | | | | | | | |
Passengers | 8,474,661 | | 6,033,720 | | 7,619,814 | | 40.5 | % | | 11.2 | % |
Available seat miles (ASMs) (thousands) | 9,610,230 | | 8,608,531 | | 8,357,304 | | 11.6 | | | 15.0 | |
Operating expense per ASM (CASM) (cents) | 11.41 | | 6.83 | | 8.90 | | 67.1 | | | 28.2 | |
Fuel expense per ASM (cents) | 4.39 | | 2.23 | | 2.63 | | 96.9 | | | 66.9 | |
Operating CASM, excluding fuel (cents) | 7.03 | | 4.60 | | 6.27 | | 52.8 | | | 12.1 | |
ASMs per gallon of fuel | 85.0 | | 87.3 | | 83.1 | | (2.6) | | | 2.3 | |
Departures | 60,632 | | 57,191 | | 55,747 | | 6.0 | | | 8.8 | |
Block hours | 145,127 | | 130,183 | | 128,151 | | 11.5 | | | 13.2 | |
Average stage length (miles) | 899 | | 865 | | 876 | | 3.9 | | | 2.6 | |
Average number of operating aircraft during period | 111.4 | | 99.5 | | 82.3 | | 12.0 | | | 35.4 | |
Average block hours per aircraft per day | 7.2 | | 7.2 | | 8.6 | | — | | | (16.3) | |
Full-time equivalent employees at end of period | 5,226 | | 4,104 | | 4,179 | | 27.3 | | | 25.1 | |
Fuel gallons consumed (thousands) | 113,026 | | 98,614 | | 100,537 | | 14.6 | | | 12.4 | |
Average fuel cost per gallon | $ | 3.73 | | $ | 1.95 | | $ | 2.18 | | 91.3 | | | 71.1 | |
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Scheduled service statistics: | | | | | | | | | |
Passengers | 8,420,105 | | | 6,003,556 | | | 7,553,393 | | | 40.3 | | 11.5 |
Revenue passenger miles (RPMs) (thousands) | 7,825,873 | | | 5,354,632 | | | 6,794,122 | | | 46.2 | | 15.2 |
Available seat miles (ASMs) (thousands) | 9,400,853 | | | 8,426,876 | | | 8,113,315 | | | 11.6 | | 15.9 |
Load factor | 83.2 | % | | 63.5 | % | | 83.7 | % | | 19.7 | | (0.5) |
Departures | 59,039 | | | 55,710 | | | 53,911 | | | 6.0 | | 9.5 |
Block hours | 141,686 | | | 127,185 | | | 124,098 | | | 11.4 | | 14.2 |
Average seats per departure | 175.6 | | | 173.6 | | | 171.2 | | | 1.2 | | 2.6 |
Yield (cents) (2) | 6.95 | | | 6.83 | | | 7.06 | | | 1.8 | | (1.6) |
Total passenger revenue per ASM (TRASM) (cents)(3) | 11.77 | | | 8.75 | | | 11.22 | | | 34.5 | | 4.9 |
Average fare - scheduled service(4) | $ | 64.55 | | | $ | 60.95 | | | $ | 63.49 | | | 5.9 | | 1.7 |
Average fare - air-related charges(4) | $ | 60.93 | | | $ | 55.72 | | | $ | 52.32 | | | 9.4 | | 16.5 |
Average fare - third party products | $ | 5.97 | | | $ | 6.10 | | | $ | 4.68 | | | (2.1) | | 27.6 |
Average fare - total | $ | 131.45 | | | $ | 122.77 | | | $ | 120.49 | | | 7.1 | | 9.1 |
Average stage length (miles) | 903 | | | 869 | | | 878 | | | 3.9 | | 2.8 |
Fuel gallons consumed (thousands) | 110,442 | | | 96,329 | | | 97,395 | | | 14.7 | | 13.4 |
Average fuel cost per gallon | $ | 3.67 | | | $ | 1.92 | | | $ | 2.18 | | | 91.1 | | 68.3 |
Rental car days sold | 797,098 | | | 680,344 | | | 1,012,558 | | | 17.2 | | (21.3) |
Hotel room nights sold | 151,129 | | | 128,909 | | | 219,206 | | | 17.2 | | (31.1) |
Percent of sales through website during period | 96.2 | % | | 93.8 | % | | 93.5 | % | | 2.4 | | 2.7 |
(1) Except load factor and percent of sales through website during period, which are presented as a percentage point change.
(2) Defined as scheduled service revenue divided by revenue passenger miles.
(3) 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.
(4) 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 $1.21 billion at March 31,June 30, 2022, from $1.19 billion at December 31, 2021. Investment securities represent highly liquid marketable securities which are available-for-sale.
Restricted cash represents escrowed funds under fixed fee contracts, escrowed airport 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.
We suspended share repurchases and our quarterly cash dividend in 2020 as part of cash conservation 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, 2022.
We believe we have more than adequate liquidity resources through our cash balances, operating cash flows and borrowings 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, increased from $1.77 billion as of December 31, 2021 to $1.80$1.98 billion as of March 31,June 30, 2022. During the threesix months ended March 31,June 30, 2022, we entered into debt and finance leases for $68.2$286.3 million and we made principal payments of $37.3$70.5 million.
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 threesix months ended March 31,June 30, 2022, our operating activities provided $176.0$227.8 million of cash compared to $168.0$405.0 million during the same period 2021. This change is mostly attributable to a $49.6 million larger increase in air traffic liability which more than offset a $14.8$105.4 million decrease in net income.income and due to payroll support funds having been received in 2021, but not in 2022.
Investing Activities. Cash used infor investing activities was $109.8$252.3 million during the threesix months ended March 31,June 30, 2022 compared to $35.7$369.4 million provided fromused for investing activities forduring the same period in 2021. The change is due to a $96.0$239.3 million decreaseincrease in proceeds from maturities of investment securities netin the first six months of 2022 offset by a $121.8 increase in purchases of property and $46.7equipment, including $51.1 million related to aircraft pre-delivery deposits in first quarterduring the six months ended June 30, 2022. Purchases of property and equipment were relatively flat year over year.
Financing Activities. Cash usedprovided by financing activities for the threesix months ended March 31,June 30, 2022 was $37.6$41.9 million, compared to $47.2$245.5 million for the same period in 2021. The change resulted from principal payments$335.1 million of $37.3proceeds from the issuance of common stock in the first six months of 2021 offset by $129.1 million during the three months ended March 31, 2022, compared to $46.5 million of higher principal payments in excess of debt proceeds duringthe 2021 period compared to the same period in 2021.2022. The increased activity in other financing activities is a direct offset to the increase in proceeds from the issuance of debt obligations relating to funds advanced to the construction disbursement account for Sunseeker Resort.
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, the timing of aircraft deliveries and retirements, the implementation of a joint alliance with VivaAerobus, the development of 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 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," "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. 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 government 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, the ability to obtain necessary U.S. and Mexican government approvals to implement the announced alliance with VivaAerobus and to otherwise prepare to offer international service, 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 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 threesix months ended March 31,June 30, 2022. For information regarding our critical accounting policies and estimates, see disclosures in the Consolidated Financial Statements and accompanying notes contained in our 2021 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. Aircraft fuel expense for the threesix months ended March 31,June 30, 2022 represented 33.338.4 percent of our total operating 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 threesix months ended March 31,June 30, 2022, a hypothetical ten percent increase in the average price per gallon of fuel would have increased fuel expense by approximately $16.5$42.0 million. We have not hedged fuel price risk for many years.
Interest Rates
As of March 31,June 30, 2022, we had $0.90$0.99 billion of variable-rate debt, including current maturities and without reduction for $11.0$10.2 million in related costs. A hypothetical 100 basis point change in interest rates would have affected interest expense on variable rate debt by approximately $2.2$4.8 million for the threesix months ended March 31,June 30, 2022.
Item 4. Controls and Procedures
As of March 31,June 30, 2022, 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 March 31,June 30, 2022, 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 for the year ended December 31, 2021 and filed with the Commission on March 1, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Our Repurchases of Equity Securities
(a) Not applicableOn June 22, 2022, we granted shares of restricted stock under the Company’s 2022 Long-term Incentive Plan to each of our six non-employee directors, totaling 6,000 shares of restricted stock. These shares of restricted stock represent the equity portion of each director’s annual compensation for serving on our board and vest on June 22, 2023. In addition, on August 1, 2022, we issued 17,876 shares of restricted stock to Scott Sheldon, our president and chief operating Officer, and 16,812 shares of restricted stock to Gregory Anderson, our president and chief financial officer, under their respective employment agreements. These shares of restricted stock represent the base equity grant for the period under their employment agreements and vest over three years. All of these shares were issued in reliance upon an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, on the basis that the issuance did not involve a public offering.
(b) Not applicable
(c) We did not repurchase any common stock during the firstsecond quarter 2022.
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 |
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: | May 5,August 4, 2022 | By: | /s/ Gregory Anderson |
| | Gregory Anderson, as duly authorized officer of the Company (Chief(President and Chief Financial Officer) and as Principal Financial Officer |