Allegiant Air reports financial results for the first quarter 2009
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Allegiant Air
Allegiant Travel Company, parent company of Allegiant Air and Allegiant Vacations, reported (19-Apr-09) the following financial results for the first quarter 2009 and comparisons to prior year.
Allegiant Travel Company, compañía matriz de Allegiant Air y Allegiant Vacations, publicó (19 Abr 09) los siguientes resultados financieros correspondientes al primer trimestre de 2009 comparado con los obtenidos el año precedente.
CEO and President of Allegiant Travel Company, Maurice J Gallagher, Jr, said, “The first quarter was superb, with an all-time high 31.3% operating margin. This quarter marked a return to capacity growth after last year’s pullback, with modest growth in departures amplified by increases in passengers per departure and load factor. At over USD108 per passenger, we slightly exceeded the range of total scheduled fare per passenger we guided for the quarter. Also consistent with guidance, we increased year-over-year total scheduled RASM by 2.1%. Costs were down substantially, driven by a nearly 50% drop in the per-gallon cost of fuel. The result was a near-tripling of operating margins and record EPS for the company.
“Looking forward, we expect second quarter costs to be substantially lower than the prior year, both because of significantly lower fuel costs and increased utilization. Fuel cost per passenger for the first half of April was slightly more than USD26, substantially below the USD62.48 we paid in the second quarter of 2008. Increased utilization should drive non-fuel cost per passenger below the prior year’s USD47.52 per passenger. On the revenue side, travelers continue to book much closer to the time of travel, making projections difficult. For this reason, we will not give revenue guidance at this time. Given current soft fare conditions, total scheduled RASM will decline year-over-year. It will be difficult to improve materially over our 90.5% scheduled load factor in the second quarter of 2008. However, we are confident unit cost savings will thoroughly overwhelm any unit revenue softness, resulting in another strong quarter.
“In some respects, the most important event of the first quarter was our acquisition of key assets from our long-time IT provider, CMS Solutions, as previously disclosed in a SEC filing. CMS has provided the software that runs much of Allegiant, including our reservation system, and the flexibility of our reservation system has been critical to our successful ancillary revenue strategy. We now have a permanent exclusive license for all CMS airline applications and have brought in-house all related development and programming, under the leadership of our new Vice President of Information Systems, Rob Wilson, formerly of CMS. Our CMS relationship has been a cornerstone of our success and we are very pleased this function is now part of the Company.”
CFO & Managing Director - Planning, Andrew C Levy, stated, “We are very pleased with our first quarter financial performance. We held our own in a challenging revenue environment, more than offsetting fare weakness with increased load factors. At the right price we continue to find strong demand for our product. Should fuel prices remain at current levels, earnings and free cash flow will once again be exceptional.
“Our balance sheet metrics continue to lead the industry. We ended the quarter with unrestricted cash and short-term investments of USD236.4 million, up from USD174.8 million at the end of the prior quarter. Excluding air traffic liability, cash increased from USD105.8 million to USD132.9 million sequentially. Either measure is substantially in excess of quarter-end total debt of USD59.3 million, down from USD64.7 million at year end 2008.
“During the quarter, we had USD11.5 million in capital expenditures for three aircraft (one already in service with the other two to enter service this quarter), three aircraft for part-out, and miscellaneous other purchases. We expect to continue to be opportunistic in purchasing aircraft for future service growth and part-outs to support our spare engine and rotable parts inventory.
“Lastly, since our previous earnings announcement, we spent USD7.1 million in open market transactions to acquire 210,175 shares of the Company’s common stock at an average of USD33.59 per share under the share re-purchase program our Board of Directors approved in Jan-2009. Including open market transactions in both 2008 and 2009, the Company has repurchased a total of 763,875 shares at an average price of USD29.94 returning a total of USD22.9 million to our shareholders.”
During the first quarter of 2009, we placed three owned aircraft in service, two of which were previously leased to a third party. During the first quarter we also entered into operating leases for two MD-80 aircraft which will be placed into service by the end of the second quarter. By the end of the year, we expect to place into service two additional owned aircraft, currently on lease to a third party. In addition, we also own one other aircraft on lease to a third party which we expect to place in service early in 2010. The MD-80 market continues to favor us, allowing us, if we so desire, to easily purchase MD-80s without the need for financing.
Allegiant Air initiated service on four new scheduled routes during the first quarter and announced service to another 18 routes to start during the second quarter, including 13 routes to our new major leisure destination of Los Angeles, with first flights to start 01-May. In other highlights, during the quarter we began service to Punta Gorda, FL (just north of Ft. Myers) and announced seasonal service starting at the end of this month to Myrtle Beach, SC. Subsequent to the end of the quarter, we also announced new service from Eugene, OR to the San Francisco Bay Area to start in June.
In addition, Allegiant Air recently entered into fixed fee flying contracts with several different parties to provide charter service between Miami and four Cuban cities in support of the Cuban family charter program, with service to start in June. Allegiant Air will initially commit one aircraft to this program, though we believe expansion is possible. As with all fixed fee flying, Allegiant Air is not exposed to fuel risk under this program.
Lastly, we flew our first ad-hoc charters for the US Department of Defense earlier this month. To date, available DOD opportunities have exceeded our expectations.
At this time, Allegiant Travel Company provides the following guidance to investors. All items are subject to revision:
Allegiant Air expects second quarter 2009 year-over-year departure growth of approximately 20% and ASM growth of approximately 22%.
Allegiant Air expects third quarter 2009 year-over-year departure growth of approximately 35% and ASM growth of approximately 40%.
Allegiant Air expects to operate 43 aircraft by the end of the second quarter of 2009 and at least 45 aircraft by the end of 2009, which is two more than prior guidance given during our fourth quarter 2008 earnings call in January.
We expect full-year 2009 capital expenditure of approximately USD25–30 million (up from USD20–25 million previously), for improvements to aircraft owned but not yet operated, purchase of additional spare engines and rotable parts and other miscellaneous capital expenditure.
At this time we have no fuel hedges in place.
Allegiant Travel Company will host a conference call with analysts at 1 pm East Coast time 20-Apr-09, to discuss its first quarter 2009 financial results.
(c) Centre for Asia Pacific Aviation. Date posted: 20-Apr-09
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Allegiant Air reports financial results for the first quarter 2009 
