ALLEGIANT TRAVEL COMPANY REPORTS FIRST QUARTER 2010 FINANCIAL RESULTS
$1.12 earnings per share and 21.4% operating margin despite 72% year-over-year increase in fuel expense
Las Vegas, Nev., April 19, 2010 /PRNewswire/ – Allegiant Travel Company (NASDAQ: ALGT), parent company of Allegiant Air and Allegiant Vacations, today reported the following financial results for first quarter 2010 and comparisons to prior year equivalents:
Unaudited
1Q10
1Q09
Change
Total operating revenue (millions)
$
169.6
$
142.1
19.4
%
Operating income (millions)
$
36.2
$
44.5
(18.5
)%
Operating margin
21.4
%
31.3
%
-9.9pp
Net income (millions)
$
22.6
$
28.2
(19.8
)%
Diluted earnings per share
$
1.12
$
1.37
(18.2
)%
Scheduled Service:
Average fare — scheduled service
$
81.41
$
74.52
9.2
%
Average fare — ancillary total
35.08
34.09
2.9
%
Average fare — total
$
116.49
$
108.61
7.3
%
Total revenue per ASM (cents)
11.08
10.82
2.4
%
Average passengers per departure
135
132
2.3
%
Load factor
91.7
%
90.8
%
0.9pp
Average stage length (miles)
945
887
6.5
%
Total System*:
Operating expense per passenger
$
92.80
$
75.42
23.0
%
Operating expense per passenger, excluding fuel
$
52.89
$
49.62
6.6
%
Average departures per aircraft per day
2.81
3.00
(6.3
)%
Average stage length (miles)
895
843
6.2
%
*Total system includes scheduled service, fixed-fee contract and non-revenue flying
Allegiant Travel Company also reported the following balance sheet information:
“We are pleased to announce our 29th consecutive profitable quarter with the results of the first quarter of 2010,” stated Maurice J. Gallagher, Jr., Chairman and CEO of Allegiant Travel Company. “Our first quarter results continue to reaffirm the stability and strength of our model. This is the fifth year in a row where our first quarter operating profit percentage has been double digit. The 31% operating margin we achieved in the first quarter of 2009 benefited from the lowest quarterly fuel prices in over five years ($1.47 per gallon). This year, in spite of a 48% increase in fuel price to $2.17 per gallon, we nonetheless achieved a 21% operating margin.
“We continued growing during this quarter. Average aircraft in operation increased by seven (46 vs 39) versus the prior year. On a system basis, we generated 17% more ASMs, 10% more departures and 11% more passengers. Southern California flying and other longer routes drove a 6.5% increase in our scheduled service average stage length from 887 in the first quarter of last year to 945 miles this year.
“Improving unit revenues are also part of the story. We generated a $116.49 average fare per scheduled passenger versus $108.61, a nearly $8 increase compared to the first quarter last year. Sequentially, unit revenues were also up 7% from $108.59 in the fourth quarter of 2009, another sign of an improving economy. And TRASM also increased 2.4% year-over-year despite the significant increase in stage length.
“This quarter also marked our eighth consecutive quarter of load factors near or above 90%. Beginning in the second quarter of 2008, we increased our focus on filling aircraft to take advantage of strong ancillary revenues and reduce per-passenger costs by spreading costs, particularly fuel, over more passengers. This strategy has worked well and we plan to continue this approach indefinitely.
“Looking forward, we are excited about our prospects. Our Team Members continue to perform exceptionally well. We were able to reward all eligible employees with profit-sharing checks in the first quarter – our third year running for this company-wide program. We began service to Orlando International Airport on February 1st and most recently announced plans to begin Hawaii service. To that end, we entered into a contract to purchase six Boeing 757-200 series aircraft and closed on the first two aircraft in March. We are targeting operational authority by the end of 2010 and we expect to begin service shortly thereafter,” concluded Gallagher.
Andrew C. Levy, President and Chief Financial Officer stated, “We remain pleased with our cost management. Operating expense per passenger, excluding fuel, was up only 6.6% to $52.89 despite the increase in average stage length and a 6.3% decline in departures per aircraft. The increase in fuel price and the longer stage length resulted in a $14 increase in fuel expense per passenger from $25.80 to $39.91.
“Despite a 72% increase in fuel expense, we generated $44.8 million in EBITDA, down from $51.4 million in the first quarter of 2009. We ended the quarter with unrestricted cash and short-term investments of $249.2 million, up from $231.5 million at the end of the prior quarter. Excluding air traffic liability, cash declined to $127.4 million from $140.9 million at the end of 2009, while over the same timeframe total debt outstanding declined to $39.4 million from $45.8 million.
“Capital expenditures (including deposits made in prior periods) were $40.0 million during the first quarter, almost all of which was related to aircraft. In the first quarter of 2010 we made open-market purchases of 55,602 shares at an average per-share price of $51.29 for total consideration of $2.9 million under the share repurchase program our Board of Directors approved in January 2009 and most recently amended in January 2010. We currently have a total of $22.1 million in unused stock repurchase authority remaining under our current Common Stock repurchase plan.
“Lastly, we are pleased with our performance in the third party ancillary segment. Gross ancillary revenue was up 26.2% to $22.5 million, mostly driven by a year-over-year increase in non-Las Vegas hotels and transportation (rental cars and hotel shuttles). Our margin declined largely due to the diminution in net revenue contribution from a merchant that provides us with a commission based on sales of an online subscription coupon product, combined with lower margins on transportation products. Net revenue increased 3.9% on a year-over-year basis,” concluded Levy.
Supplemental Ancillary Revenue Information (unaudited)
1Q10
1Q09
Change
Gross ancillary revenue — third party products (000)
$
22,489
$
17,817
26.2
%
Cost of goods sold (000)
($16,367
)
($12,067
)
35.6
%
Transaction costs (a) (000)
($1,180
)
($995
)
18.6
%
Ancillary revenue — third party products (000)
$
4,942
$
4,755
3.9
%
As percent of gross
22.0
%
26.7
%
-4.7pp
Ancillary revenue — third party products/scheduled passenger
$
3.64
$
3.93
(7.3
)%
(a) includes credit card fees and travel agency commissions
During the first quarter of 2010 we placed one owned 150-seat MD-80 aircraft into service. We placed a second owned 150-seat MD-80 aircraft into service early in the second quarter, in conjunction with the previously announced planned permanent withdrawal of one MD-87 aircraft on April 1 (our 130-seat MD-87 fleet, now numbering three, operates almost exclusively for our fixed-fee programs). By the end of the second quarter 2010, we expect to have an operating fleet of 50 MD-80 aircraft (including our three remaining MD-87 aircraft).
MD-80 Aircraft in Service
March 31, 2010
March 31, 2009
Owned (including capital leases)
43
39
Leased
4
2
Total
47
41
Allegiant Air did not start any new scheduled routes in the first quarter of 2010. During the first quarter, we announced eight new routes to start in the second quarter, including four to Myrtle Beach, three to our Los Angeles base in Southern California, and one route to Phoenix-Mesa. We expect to make further new route announcements in the near future.
Network Summary*
March 31, 2010
March 31, 2009
Major leisure destinations
6
5
Other leisure destinations
5
6
Small cities served
57
59
Total cities served
68
70
Routes to Las Vegas
39
39
Routes to Orlando
30
30
Routes to Tampa Bay/St. Petersburg
20
20
Routes to Phoenix-Mesa
20
15
Routes to Southern California (Los Angeles)
11
0
Routes to Ft. Lauderdale
5
6
Other routes
9
6
Total routes
134
116
• includes cities served seasonally
At this time, Allegiant Travel Company provides the following guidance to investors. All items are subject to revision. Allegiant Air expects:
Guidance, subject to revision
2010
Second quarter
Third quarter
System
Departure year-over-year growth
2
%
10
%
ASM year-over-year growth
8
%
16
%
Block hours/aircraft/day
6.5
6.1
Departures/aircraft/day
2.8
2.7
Scheduled
Departure year-over-year growth
3
%
17
%
ASM year-over-year growth
9
%
20
%
•
Second quarter fixed fee revenues expected to be flat to slightly down relative to second quarter 2009.
•
Second quarter 2010 operating expense per passenger, excluding fuel, to be approximately $53.
•
An operating fleet of 50 MD-80 aircraft by the end of second quarter 2010 and an operating fleet of at least 52 MD-80 aircraft and two 757 aircraft by the end of 2010.
•
2010 capital expenditures of approximately $120 million, including amounts expended in the first quarter of 2010.
At this time we have no fuel hedges in place.
Allegiant Travel Company will host a conference call with analysts at noon East Coast time tomorrow, April 20, 2010, to discuss its first quarter 2010 financial results. A live broadcast of the conference call will be available via the Company’s Investor Relations website homepage athttp://ir.allegiant.com. The webcast will also be archived in the “Events & Presentations” section of the website.
About the Company Las Vegas-based Allegiant Travel Company (NASDAQ: ALGT) is focused on linking travelers in small cities to major leisure destinations such as Las Vegas, Orlando, Fla., Tampa/St. Petersburg, Fla., Phoenix-Mesa, Los Angeles and Fort Lauderdale, Fla. Through its subsidiary, Allegiant Air, the Company operates a low-cost, high-efficiency, all-jet passenger airline offering air travel both on a stand-alone basis and bundled with hotel rooms, rental cars and other travel related services.ALGT/G
Media Inquiries: Tyri Squyres +1-702-851-7370 mediarelations@allegiantair.com
Investor Inquiries: Robert Ashcroft +1-702-430-3275 ir@allegiantair.com
Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, statements in this press release that are not historical facts are forward-looking statements. These forward-looking statements are only estimates or predictions based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include our statements regarding expected load factors, the air travel price environment, industry prospects, future operating expense, ASM growth, departure growth, fleet growth, fleet utilization, fixed-fee revenues and expected capital expenditures, 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 generally 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 effect of the economic downturn on leisure travel, increases in fuel prices, terrorist attacks, risks inherent to airlines, demand for air services to our leisure destinations from the markets served by us, our ability to implement our growth strategy, possible unionization efforts, our dependence on our leisure destination markets, our ability to add, renew or replace gate leases, our competitive environment, problems with our aircraft, dependence on fixed fee customers, our reliance on our automated systems, economic and other conditions in markets in which we operate, 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 update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.
Detailed financial information follows:
1
Allegiant Travel Company Consolidated Statements of Income Three Months Ended March 31, 2010 and 2009 (in thousands, except per share amounts) (Unaudited)
Three months ended March 31,
Percent
2010
2009
change
OPERATING REVENUE:
Scheduled service revenue
$
110,434
$
90,196
22.4
Ancillary revenue:
Air-related charges
42,650
36,501
16.8
Third party products
4,942
4,755
3.9
Total ancillary revenue
47,592
41,256
15.4
Fixed fee contract revenue
11,267
10,106
11.5
Other revenue
344
561
(38.7
)
Total operating revenue
169,637
142,119
19.4
OPERATING EXPENSES:
Aircraft fuel
57,366
33,398
71.8
Salary and benefits
25,892
23,409
10.6
Station operations
15,682
13,133
19.4
Maintenance and repairs
12,770
11,132
14.7
Sales and marketing
5,083
4,467
13.8
Aircraft lease rentals
507
405
25.2
Depreciation and amortization
8,691
6,882
26.3
Other
7,401
4,815
53.7
Total operating expenses
133,392
97,641
36.6
OPERATING INCOME
36,245
44,478
(18.5
)
As a percent of total operating revenue
21.4
%
31.3
%
OTHER EXPENSE (INCOME):
Loss from unconsolidated affiliates, net
142
7
1,928.6
Interest income
(411
)
(701
)
(41.4
)
Interest expense
749
1,101
(32.0
)
Total other expense (income)
480
407
17.9
INCOME BEFORE INCOME TAXES
35,765
44,071
(18.8
)
As a percent of total operating revenue
21.1
%
31.0
%
PROVISION FOR INCOME TAXES
13,165
15,909
(17.2
)
NET INCOME
$
22,600
$
28,162
(19.8
)
As a percent of total operating revenue
13.3
%
19.8
%
Earnings per share:
Basic
$
1.14
$
1.39
(18.0
)
Diluted
$
1.12
$
1.37
(18.2
)
Weighted average shares outstanding:
Basic
19,805
20,219
(2.0
)
Diluted
20,222
20,512
(1.4
)
2
Allegiant Travel Company Operating Statistics Three Months Ended March 31, 2010 and 2009 (Unaudited)
Three months ended March 31,
Percent
2010
2009
change*
OPERATING STATISTICS
Total system statistics
Passengers
1,437,459
1,294,608
11.0
Revenue passenger miles (RPMs) (thousands)
1,373,756
1,166,981
17.7
Available seat miles (ASMs) (thousands)
1,557,186
1,331,957
16.9
Load factor
88.2
%
87.6
%
0.6
Operating revenue per ASM (cents)
10.89
10.67
2.1
Operating expense per ASM (CASM) (cents)
8.57
7.33
16.9
Fuel expense per ASM (cents)
3.68
2.51
46.6
CASM, excluding fuel (cents)
4.88
4.82
1.2
Operating expense per passenger
$
92.80
$
75.42
23.0
Fuel expense per passenger
$
39.91
$
25.80
54.7
Operating expense per passenger, excluding fuel
$
52.89
$
49.62
6.6
Departures
11,700
10,624
10.1
Block hours
28,244
24,408
15.7
Average stage length (miles)
895
843
6.2
Average number of operating aircraft during period
46.2
39.4
17.3
Total aircraft in service end of period
47
41
14.6
Average departures per aircraft per day
2.81
3.00
(6.3
)
Average block hours per aircraft per day
6.8
6.9
(1.4
)
Full-time equivalent employees at end of period
1,602
1,419
12.9
Fuel gallons consumed (thousands)
26,402
22,783
15.9
Average fuel cost per gallon
$
2.17
$
1.47
47.6
Scheduled service statistics
Passengers
1,356,610
1,210,325
12.1
Revenue passenger miles (RPMs) (thousands)
1,307,966
1,102,470
18.6
Available seat miles (ASMs) (thousands)
1,426,546
1,214,832
17.4
Load factor
91.7
%
90.8
%
0.9
Departures
10,081
9,141
10.3
Average passengers per departure
135
132
2.3
Block hours
25,355
21,867
16.0
Yield (cents)
8.44
8.18
3.2
Scheduled service revenue per ASM (cents)
7.74
7.42
4.3
Total ancillary revenue per ASM (cents)
3.34
3.40
(1.8
)
Total revenue per ASM (TRASM) (cents)
11.08
10.82
2.4
Average fare — scheduled service
$
81.41
$
74.52
9.2
Average fare — ancillary total
35.08
34.09
2.9
Average fare — total
$
116.49
$
108.61
7.3
Average stage length (miles)
945
887
6.5
Fuel gallons consumed (thousands)
23,706
20,395
16.2
Average fuel cost per gallon
$
2.32
$
1.57
47.8
Percent of sales through website during period
88.3
%
87.4
%
0.9
* except load factor and percent of sales through website, which is percentage point change
3
Allegiant Travel Company Non-GAAP Presentations Quarters Ended March 31, 2010 and 2009 (in thousands, except per share and per ASM amounts) (Unaudited)
“EBITDA” represents earnings before interest expense, income taxes, depreciation and amortization. EBITDA is not a calculation based on generally accepted accounting principles and should not be considered as an alternative to net income or operating income as indicators of our financial performance or to cash flow as a measure of liquidity. In addition, our calculation may not be comparable to other similarly titled measures of other companies. EBITDA is included as a supplemental disclosure because we believe it is a useful indicator of our operating performance. Further, EBITDA is a well-recognized performance measurement that is frequently used by securities analysts, investors and other interested parties in comparing the operating performance of companies. We believe EBITDA is useful in evaluating our operating performance compared to our competitors because its calculation generally eliminates the effects of financing and income taxes and the accounting effects of capital spending and acquisitions, which items may vary between periods and for different companies for reasons unrelated to overall operating performance. The following represents the reconciliation of EBITDA to net income for the periods indicated below.
The SEC has adopted rules (Regulation G) regulating the use of non-GAAP financial measures. Because of our use of non-GAAP financial measure EBITDA to supplement our consolidated financial statements presented on a GAAP basis, Regulation G requires us to include in this press release a presentation of the most directly comparable GAAP measure, which is net income, and a reconciliation of the non-GAAP measure to the most comparable GAAP measure. Our utilization of a non-GAAP measurement is not meant to be considered in isolation or as a substitute for net income and other measures of financial performance prepared in accordance with GAAP. EBITDA is not a GAAP measurement and our use of it may not be comparable to similarly titled measures employed by other companies in the airline industry. The reconciliations to GAAP measures follow.
Three months ended March 31,
Percent
(in thousands)
2010
2009
change
Net income
$
22,600
$
28,162
(19.8
)
Plus (minus)
Interest income
(411
)
(701
)
(41.4
)
Interest expense
749
1,101
(32.0
)
Provision for income taxes
13,165
15,909
(17.2
)
Depreciation and amortization
8,691
6,882
26.3
EBITDA
$
44,794
$
51,353
(12.8
)
4
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