SEC Form 10-Q filed by Allegiant Travel Company
$ALGT
Air Freight/Delivery Services
Consumer Discretionary
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the quarterly period ended September 30, 2024 | ||||||||
| 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
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) | |||||||
| (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:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
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):
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 24, 2024, the registrant had 18,343,946 shares of common stock, $0.001 par value per share, outstanding.
ALLEGIANT TRAVEL COMPANY
FORM 10-Q
TABLE OF CONTENTS
| PART I. | FINANCIAL INFORMATION | |||||||
| ITEM 1. | ||||||||
| ITEM 2. | ||||||||
| ITEM 3. | ||||||||
| ITEM 4. | ||||||||
| PART II. | OTHER INFORMATION | |||||||
| ITEM 1. | ||||||||
| ITEM 1A. | ||||||||
| ITEM 2. | ||||||||
| ITEM 3. | ||||||||
| ITEM 4. | ||||||||
| ITEM 5. | ||||||||
| ITEM 6. | ||||||||
2
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)
| September 30, 2024 | December 31, 2023 | ||||||||||
| (unaudited) | |||||||||||
| CURRENT ASSETS | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Short-term investments | |||||||||||
| Accounts receivable | |||||||||||
| Expendable parts, supplies and fuel, net | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| TOTAL CURRENT ASSETS | |||||||||||
| Property and equipment, net | |||||||||||
| Long-term investments | |||||||||||
| Deferred major maintenance, net | |||||||||||
| Operating lease right-of-use assets, net | |||||||||||
| Deposits and other assets | |||||||||||
| TOTAL ASSETS: | $ | $ | |||||||||
| CURRENT LIABILITIES | |||||||||||
| Accounts payable | |||||||||||
| Accrued liabilities | |||||||||||
| Current operating lease liabilities | |||||||||||
| Air traffic liability | |||||||||||
| Current loyalty program liability | |||||||||||
| Current maturities of long-term debt and finance lease obligations, net of related costs | |||||||||||
| TOTAL CURRENT LIABILITIES | |||||||||||
| Long-term debt and finance lease obligations, net of current maturities and related costs | |||||||||||
| Deferred income taxes | |||||||||||
| Noncurrent operating lease liabilities | |||||||||||
| Noncurrent loyalty program liability | |||||||||||
| Other noncurrent liabilities | |||||||||||
| TOTAL LIABILITIES: | $ | $ | |||||||||
| SHAREHOLDERS' EQUITY | |||||||||||
Common stock, par value $ | |||||||||||
| Treasury shares | ( | ( | |||||||||
| Additional paid in capital | |||||||||||
| Accumulated other comprehensive income, net | |||||||||||
| Retained earnings | |||||||||||
| TOTAL EQUITY: | $ | ||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| OPERATING REVENUES: | |||||||||||||||||||||||
| Passenger | $ | $ | $ | $ | |||||||||||||||||||
| Third party products | |||||||||||||||||||||||
| Fixed fee contracts | |||||||||||||||||||||||
| Resort and other | |||||||||||||||||||||||
| Total operating revenues | |||||||||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||||
| Salaries and benefits | |||||||||||||||||||||||
| Aircraft fuel | |||||||||||||||||||||||
| Station operations | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Maintenance and repairs | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Aircraft lease rentals | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Special charges, net of recoveries | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| OPERATING INCOME (LOSS) | ( | ( | |||||||||||||||||||||
| OTHER (INCOME) EXPENSES: | |||||||||||||||||||||||
| Interest income | ( | ( | ( | ( | |||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Capitalized interest | ( | ( | ( | ( | |||||||||||||||||||
| Other, net | |||||||||||||||||||||||
| Total other expenses | |||||||||||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | ( | ( | ( | ||||||||||||||||||||
| INCOME TAX PROVISION (BENEFIT) | ( | ( | ( | ||||||||||||||||||||
| NET INCOME (LOSS) | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Earnings (loss) per share to common shareholders: | |||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Shares used for computation: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
| Cash dividends declared per share: | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| NET INCOME (LOSS) | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Other comprehensive income: | |||||||||||||||||||||||
| Change in available for sale securities, net of tax | |||||||||||||||||||||||
| TOTAL COMPREHENSIVE INCOME (LOSS) | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)
| Three Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Common stock outstanding | Par value | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings | Treasury shares | Total shareholders' equity | |||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | ( | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Common stock outstanding | Par value | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings | Treasury shares | Total shareholders' equity | |||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | ( | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Stock issued under employee stock purchase plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Cash dividends, $ | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Common stock outstanding | Par value | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings | Treasury shares | Total shareholders' equity | |||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Share-based compensation | ( | — | — | — | |||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | ( | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Cash dividends, $ | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
6
| Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Common stock outstanding | Par value | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings | Treasury shares | Total shareholders' equity | |||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | ( | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Stock issued under employee stock purchase plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Cash dividends, $ | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
7
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | ( | $ | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Special charges, net of recoveries | |||||||||||
| Other adjustments | ( | ||||||||||
| Changes in certain assets and liabilities: | |||||||||||
| Air traffic liability | |||||||||||
| Other - net | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of investment securities | ( | ( | |||||||||
| Proceeds from maturities of investment securities | |||||||||||
| Aircraft pre-delivery deposits | ( | ( | |||||||||
| Purchase of property and equipment | ( | ( | |||||||||
| Other investing activities | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Cash dividends paid to shareholders | ( | ( | |||||||||
| Proceeds from the issuance of debt and finance lease obligations | |||||||||||
| Repurchase of common stock | ( | ( | |||||||||
| Principal payments on debt and finance lease obligations | ( | ( | |||||||||
| Debt issuance costs | ( | ( | |||||||||
| Sunseeker construction financing disbursements | |||||||||||
| Other financing activities | |||||||||||
| Net cash provided by/(used in) financing activities | ( | ||||||||||
| NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | |||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | |||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | $ | |||||||||
| CASH PAYMENTS FOR: | |||||||||||
| Interest paid, net of amount capitalized | $ | $ | |||||||||
| Income tax payments | |||||||||||
| SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: | |||||||||||
| Right-of-use (ROU) assets acquired | $ | $ | |||||||||
| Purchases of property and equipment in accrued liabilities | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
8
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, 2023 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.
The Company has reclassified certain prior period amounts to conform to the current period presentation.
Note 2 — Special Charges
Sunseeker Resort
The Sunseeker Resort at Charlotte Harbor (the "Resort" or "Sunseeker Resort") was impacted by Hurricanes Ian, Idalia, and Helene in the years 2022, 2023, and 2024 respectively. While the Resort was built to withstand hurricanes and flooding, these weather events are unprecedented in their frequency and the amount of destruction caused in Southwest Florida. The Company believes these weather events will be unusual and has included the cost of these events and the related insurance recoveries in special charges. The estimated losses are recorded to special charges in the period of the event and are offset by insurance recoveries in the period they are approved. To date, the Company has recorded $81.5 million in losses and $56.5 million in insurance recoveries. The Company has submitted additional insurance claims, relating to Hurricanes Ian and Idalia, that remain outstanding at the date of this report.
Airline
Due to the heavy maintenance needs on certain aging Airbus airframes and capacity constraints at the maintenance, repair, and overhaul contractors, the Company reevaluated its fleet plan and identified 21 airframes for early retirement to coincide with 737 MAX aircraft deliveries as scheduled under an amendment to the Company's agreement with The Boeing Company signed in September 2023. Two airframes were retired in 2023 and six airframes have been retired during the nine months ended September 30, 2024. The remaining airframes are to be retired between December 2024 and December 2026. The accelerated depreciation on these airframes resulting from a change in the estimated useful life is recorded as a special charge.
In April 2024, the Company's flight attendants, represented by the Transport Workers Union of America, ratified a new five-year collective bargaining agreement. Under the agreement, a ratification bonus was paid in May 2024, which amount is included within special charges.
In third quarter 2024, the Company recorded $3.4 million of special charges related to organizational restructuring.
9
Special Charges
The table below summarizes special charges recorded during the three and nine months ended September 30, 2024, and 2023.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Sunseeker weather and related events, net of insurance recoveries | ( | ||||||||||||||||||||||
| Accelerated depreciation on airframes identified for early retirement | |||||||||||||||||||||||
Flight attendant ratification bonus(1) | |||||||||||||||||||||||
| Organizational restructuring | |||||||||||||||||||||||
| Total special charges | $ | $ | |||||||||||||||||||||
Note 3 — Revenue Recognition
Passenger Revenue
Passenger revenue is the most significant category in the Company's reported operating revenues, as outlined below:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Scheduled service | $ | $ | $ | $ | |||||||||||||||||||
| Ancillary air-related charges | |||||||||||||||||||||||
| Loyalty redemptions | |||||||||||||||||||||||
| Total passenger revenue | $ | $ | $ | $ | |||||||||||||||||||
Sales of passenger tickets not yet flown are recorded in air traffic liability. Passenger revenue is recognized when the underlying service is provided. As of September 30, 2024, the air traffic liability balance was $397.0 million, of which approximately $345.9 million was related to forward bookings, with the remaining $51.1 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 $353.5 million that was recorded in the air traffic liability balance as of December 31, 2023, approximately 87.2 percent was recognized into passenger revenue during the nine months ended September 30, 2024.
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.
Resort Revenue
The Company's resort revenues for the three and nine months ended September 30, 2024 are set forth in the table below:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Food and beverage | $ | $ | $ | $ | |||||||||||||||||||
| Rooms | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total resort revenue | $ | $ | $ | $ | |||||||||||||||||||
Revenue from banquets, golf, retail and spa services are included in other resort revenue. Resort revenue is recognized as the underlying services or goods have been provided. There is typically little to no lag between when the services are performed and when payment is remitted. Large group reservations, conventions, and other event bookings require advance deposits which are recorded as accrued liabilities in the Company's balance sheet until the related services and goods are provided. Guest receivables are recorded in accounts receivable on the Company's balance sheet for room nights stayed prior to payment at checkout. The amounts of advance deposit liabilities and guest ledger receivables were not material as of September 30, 2024 or December 31, 2023.
10
Loyalty redemptions
In relation to the travel component of the Allways Rewards® co-brand credit card contract, the Company has a performance obligation to provide point holders with future travel award redemptions at the airline and resort. Therefore, consideration received related to the travel component is deferred based on its relative selling price and is recognized into passenger revenue or resort revenue when the points are redeemed and the underlying service is provided. Similarly, in relation to the Allways Rewards loyalty program, points earned through the program are deferred based on the stand-alone selling price and recognized into passenger or resort revenue when the points are redeemed and the underlying service is provided.
The following table presents the activity of the point liability for the periods indicated:
| Nine Months Ended September 30, | |||||||||||
| (in thousands) | 2024 | 2023 | |||||||||
| Points balance at January 1 | $ | $ | |||||||||
| Points awarded (deferral of revenue) | |||||||||||
| Points redeemed (recognition of revenue) | ( | ( | |||||||||
| Points balance at September 30 | $ | $ | |||||||||
Note 4 — Property and Equipment
The following table summarizes the Company's property and equipment as of the dates indicated:
| (in thousands) | September 30, 2024 | December 31, 2023 | |||||||||
| Airline | |||||||||||
| Flight equipment | $ | $ | |||||||||
| Computer hardware and software | |||||||||||
| Land and buildings/leasehold improvements | |||||||||||
| Other property and equipment | |||||||||||
| Sunseeker Resort | |||||||||||
| Land and buildings/leasehold improvements | |||||||||||
| Other property and equipment | |||||||||||
| Total property and equipment | |||||||||||
| Less accumulated depreciation and amortization | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
As of September 30, 2024, the Company had firm commitments to purchase 49 aircraft.
Accrued capital expenditures as of September 30, 2024 and December 31, 2023 were $17.9 million and $71.7 million, respectively.
11
Note 5 — Long-Term Debt
The following table summarizes the Company's long-term debt and finance lease obligations, net of related costs, as of the dates indicated:
| (in thousands) | September 30, 2024 | December 31, 2023 | |||||||||
| Fixed-rate debt and finance lease obligations due through 2032 | $ | $ | |||||||||
| Variable-rate debt due through 2036 | |||||||||||
| Total long-term debt and finance lease obligations, net of related costs | |||||||||||
| Less current maturities, net of related costs | |||||||||||
| Long-term debt and finance lease obligations, net of current maturities and related costs | $ | $ | |||||||||
| Weighted average fixed-interest rate on debt | |||||||||||
| Weighted average variable-interest rate on debt | |||||||||||
| Interest Rate(s) Per Annum at | Balance as of | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Maturity Dates | September 30, 2024 | September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||
| Senior secured notes | 2027 | $ | $ | ||||||||||||||||||||||||||||||||
| Consolidated variable interest entities | 2024 | - | 2029 | - | |||||||||||||||||||||||||||||||
| Revolving credit facilities | 2024 | - | 2027 | ||||||||||||||||||||||||||||||||
| Debt secured by aircraft, engines, other equipment and real estate | 2025 | - | 2036 | - | |||||||||||||||||||||||||||||||
| Finance leases | 2028 | - | 2032 | - | |||||||||||||||||||||||||||||||
| Sunseeker construction loan | 2028 | ||||||||||||||||||||||||||||||||||
| Total debt | $ | $ | |||||||||||||||||||||||||||||||||
| Related costs | ( | ( | |||||||||||||||||||||||||||||||||
| Total debt net of related costs | $ | $ | |||||||||||||||||||||||||||||||||
Maturities of long term debt as of September 30, 2024, for the next five years and thereafter, in the aggregate, are:
| (in thousands) | As of September 30, 2024 | ||||
| Remaining in 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total debt and finance lease obligations, net of related costs | $ | ||||
Debt Secured by Aircraft
During the nine months ended September 30, 2024, the Company received $18.8 million in advances and made $75.6 million in repayments on pre-delivery payment (PDP) credit facilities secured by certain aircraft purchase rights. The notes under the facilities bear interest at floating interest rates based on SOFR and are payable at maturity or upon delivery of the collateralized aircraft, whichever comes first.
During the three months ended September 30, 2024, the Company borrowed $75.2 million through two new debt facilities secured by two aircraft. These notes bear interest at floating interest rates based on SOFR, are payable in quarterly installments, and mature in September 2029 and September 2036.
12
Other Secured Debt
Note 6 — Income Taxes
The Company recorded a $6.7 million income tax benefit at a 15.3 percent effective tax rate and a $4.9 million income tax benefit at a 16.3 percent effective tax rate for the three months ended September 30, 2024 and 2023, respectively. The effective tax rate for the three months ended September 30, 2024 differed from the statutory federal income tax rate of 21.0 percent primarily due to state income taxes, permanent tax differences, and discrete items, none of which are individually significant.
Note 7 — 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 nine months ended September 30, 2024.
Financial instruments measured at fair value on a recurring basis:
| As of September 30, 2024 | As of December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (in thousands) | Total | Level 1 | Level 2 | Total | Level 1 | Level 2 | |||||||||||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||||||||||||||
| Municipal debt securities | |||||||||||||||||||||||||||||||||||
| Federal agency debt securities | |||||||||||||||||||||||||||||||||||
| US Treasury bonds | |||||||||||||||||||||||||||||||||||
| Total cash equivalents | |||||||||||||||||||||||||||||||||||
| Short-term | |||||||||||||||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||||||||||||||
| Federal agency debt securities | |||||||||||||||||||||||||||||||||||
| Municipal debt securities | |||||||||||||||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||||||||||||||
| US Treasury Bonds | |||||||||||||||||||||||||||||||||||
| Total short-term | |||||||||||||||||||||||||||||||||||
| Long-term | |||||||||||||||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||||||||||||||
| Federal agency debt securities | |||||||||||||||||||||||||||||||||||
| Municipal debt securities | |||||||||||||||||||||||||||||||||||
| Total long-term | |||||||||||||||||||||||||||||||||||
| Total financial instruments | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
None of the Company's debt is publicly held and as a result, the Company has determined the estimated fair value of these notes as Level 3 liabilities. 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.
13
The 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:
| As of September 30, 2024 | As of December 31, 2023 | ||||||||||||||||||||||||||||
| (in thousands) | Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | Hierarchy Level | ||||||||||||||||||||||||
| Fair Value of Notes Payable | $ | $ | $ | $ | 3 | ||||||||||||||||||||||||
Due to their short-term nature, the carrying amounts of cash, restricted cash, accounts receivable and accounts payable approximate fair value.
Note 8 — Earnings per Share
Basic and diluted earnings per share are computed pursuant to the two-class method. Under this method, the Company attributes net income 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.
The following table sets forth the computation of net income per share, on a basic and diluted basis, for the periods indicated (share count and dollar amounts other than per-share amounts in the table are in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Basic: | |||||||||||||||||||||||
| Net income (loss) | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Less income allocated to participating securities | ( | ( | ( | ||||||||||||||||||||
| Net income (loss) attributable to common stock | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Earnings (loss) per share, basic | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Weighted-average shares outstanding | |||||||||||||||||||||||
| Diluted: | |||||||||||||||||||||||
| Net income (loss) | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Less income allocated to participating securities | ( | ( | ( | ||||||||||||||||||||
| Net income (loss) attributable to common stock | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Earnings (loss) per share, diluted | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Weighted-average shares outstanding | |||||||||||||||||||||||
| Dilutive effect of restricted stock | |||||||||||||||||||||||
| Adjusted weighted-average shares outstanding under treasury stock method | |||||||||||||||||||||||
| Participating securities excluded under two-class method | ( | ||||||||||||||||||||||
| Adjusted weighted-average shares outstanding under two-class method | |||||||||||||||||||||||
14
Note 9 — 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 10 — 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 Gregory Anderson, President and CEO, who reviews information about the Company's two 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 for the Airline segment.
Sunseeker Resort Segment
The Sunseeker Resort segment operates as a single business unit and includes hotel rooms and suites for occupancy, group meeting facilities, food and beverage options, the Aileron Golf Course and other Resort amenities. The CODM evaluation includes, but is not limited to, demand for hospitality offerings, occupancy rates, room pricing, food and beverage offerings, other charge points at the Resort and competitive information when making resource allocation decisions for the Resort.
15
Selected information for the Company's operating segments and the reconciliation to the consolidated financial statement amounts are as follows:
| Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||
| Airline | Sunseeker | Consolidated | Airline | Sunseeker | Consolidated | ||||||||||||||||||||||||||||||
| OPERATING REVENUES: | |||||||||||||||||||||||||||||||||||
| Passenger | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Third party products | |||||||||||||||||||||||||||||||||||
| Fixed fee contracts | |||||||||||||||||||||||||||||||||||
| Resort and other | |||||||||||||||||||||||||||||||||||
| Total operating revenues | |||||||||||||||||||||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||||||||||||||||
| Salaries and benefits | |||||||||||||||||||||||||||||||||||
| Aircraft fuel | |||||||||||||||||||||||||||||||||||
| Station operations | |||||||||||||||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||||||||||||||
| Maintenance and repairs | |||||||||||||||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||||||||||||||
| Aircraft lease rentals | |||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Special charges, net of recoveries | |||||||||||||||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||||||||||||||
| OPERATING INCOME (LOSS) | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Interest income | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||||||||||||||
| Capitalized interest | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Capital expenditures | |||||||||||||||||||||||||||||||||||
16
| Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||
| Airline | Sunseeker | Consolidated | Airline | Sunseeker | Consolidated | ||||||||||||||||||||||||||||||
| OPERATING REVENUES: | |||||||||||||||||||||||||||||||||||
| Passenger | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Third party products | |||||||||||||||||||||||||||||||||||
| Fixed fee contracts | |||||||||||||||||||||||||||||||||||
| Resort and other | |||||||||||||||||||||||||||||||||||
| Total operating revenues | |||||||||||||||||||||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||||||||||||||||
| Salaries and benefits | |||||||||||||||||||||||||||||||||||
| Aircraft fuel | |||||||||||||||||||||||||||||||||||
| Station operations | |||||||||||||||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||||||||||||||
| Maintenance and repairs | |||||||||||||||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||||||||||||||
| Aircraft lease rentals | |||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Special charges, net of recoveries | ( | ||||||||||||||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||||||||||||||
| OPERATING INCOME (LOSS) | ( | ( | |||||||||||||||||||||||||||||||||
| Interest income | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||||||||||||||
| Capitalized interest | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Capital expenditures | |||||||||||||||||||||||||||||||||||
Total assets were as follows as of the dates indicated:
| (in thousands) | As of September 30, 2024 | As of December 31, 2023 | |||||||||
| Airline | $ | $ | |||||||||
| Sunseeker Resort | |||||||||||
| Consolidated | $ | $ | |||||||||
Note 11 — Subsequent Events
17
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 nine months ended September 30, 2024 and 2023. Also discussed is our financial position as of September 30, 2024 and December 31, 2023. 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, 2023. 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.
Third Quarter 2024 Review
Third quarter 2024 highlights include:
•Gregory Anderson assumed the role of chief executive officer on September 1, 2024
•Took delivery of our first 737 MAX aircraft on September 9, 2024
•Total operating revenue of $562.2 million, down 0.6 percent over the prior year
•Total fixed fee contract revenue of $20.6 million, up 15.9 percent year-over-year
•Total average ancillary fare of $74.02, up 3.1 percent year-over-year driven by strength in air ancillary products such as seat and bag charges and cobrand credit card remuneration.
•$36.5 million in total cobrand credit card remuneration, up 18.7 percent from the prior year
•As of September 30, 2024, we had 535 thousand total Allegiant Allways Rewards Visa cardholders
•Enrolled 448 thousand new Allways Rewards members during the third quarter
•Controllable completion rate of 99.5 percent achieved despite the impact of the CrowdStrike outage in July
•Published our 2023 Sustainability Report reaffirming our sustainability goals
•Named the number one Best Airline Credit Card and Best Frequent Flyer program in USA TODAY's 10Best 2024 Readers' Choice Awards for the sixth consecutive year
18
AIRCRAFT
The following table sets forth the aircraft in service and operated by us as of the dates indicated:
September 30, 2024 (4) | December 31, 2023 | ||||||||||
A320(1)(2) | 88 | 92 | |||||||||
A319(3) | 34 | 34 | |||||||||
| Total | 122 | 126 | |||||||||
(1)December 31, 2023 figure does not include one aircraft of which we had taken delivery, but was not in service as of that date.
(2)Includes 23 aircraft under finance lease and 13 aircraft under operating lease as of September 30, 2024, and December 31, 2023.
(3)Includes four aircraft under operating lease as of September 30, 2024 and December 31, 2023.
(4)September 30, 2024 figure does not include one 737 MAX aircraft of which we had taken delivery, but was not in service as of that date.
As of September 30, 2024, we are a party to forward purchase agreements for 49 aircraft with one delivery currently expected in 2024, and the remaining 48 aircraft are expected to be delivered in 2025 and later years. The timing of these deliveries is based on management's best estimates at the current time and differs from the contract in place. The delivery schedule has been and will continue to be impacted by delay notices from Boeing, continuing regulatory reviews of Boeing, supply chain constraints, and labor issues at Boeing. We received delivery of our first 737 MAX aircraft in September 2024 and have since placed it into revenue service in October 2024.
Due to the heavy maintenance needs on certain aging Airbus airframes and capacity constraints at the maintenance, repair, and overhaul contractors, we reevaluated our fleet plan and identified 21 aging airframes for early retirement to coincide with the delivery schedule for our 737 MAX aircraft provided in an amendment to our Boeing purchase agreement signed in September 2023. Two airframes were retired in 2023 and six airframes were retired during the first nine months of 2024. The remaining airframes are to be retired between December 2024 and December 2026. The timing of the retirements was coordinated with the revised delivery schedule for the 737 MAX aircraft to provide us with opportunities for fleet renewal and replacement. The accelerated depreciation on these airframes resulting from a change in the estimated useful life is being recorded as a special charge, of which $4.2 million was recorded during third quarter 2024. We plan to retain the engines associated with these airframes in our spare engine pool and use the substantial remaining life on these engines to offset future overhaul costs.
NETWORK
As of September 30, 2024, we were selling 542 routes versus 549 as of the same date in 2023. Growth of our network in the past two years has been impacted by challenges created by delayed aircraft deliveries, the uncertainty of our pilot staffing levels and other factors. Network growth will continue to be affected by further aircraft delivery delays, aircraft in heavy maintenance and airport construction and disruption. We have identified over 1,400 incremental domestic nonstop routes as opportunities for future network growth, of which over 77 percent currently have no non-stop service. Our total active number of origination cities and leisure destinations were 88 and 34, respectively, as of September 30, 2024.
Our unique model is predicated around expanding and contracting capacity to meet seasonal leisure travel demands.
TRENDS
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. Although the average fuel cost per gallon decreased 12.9 percent in third quarter 2024 compared to the same period in 2023, fuel cost per gallon for the quarter remained 23.4 percent higher than in full year 2019. We expect high fuel costs to continue impacting our total costs and operating results.
Increasing Utilization
We are in the midst of an effort to increase aircraft utilization back to 2019 levels by adding service to our schedule in our most profitable peak periods. By way of example, our aircraft utilization rate was 9.8 hours per aircraft in July 2019 compared to 7.7 hours per aircraft in July 2024. We have made progress toward this goal in 2024 and currently expect to achieve this goal during 2025, but this effort is subject to various risks, some of which may not be under our control.
19
Boeing Agreement
We have signed an agreement and amendments with The Boeing Company to purchase 50 newly manufactured 737 MAX aircraft with options to purchase up to an additional 80 737 MAX aircraft. We took delivery of our first MAX aircraft in September 2024, with the aircraft entering revenue service in October 2024. We believe this new aircraft purchase is complementary with our low-cost strategy based on our intent to retain ownership of the aircraft, the longer useful life for depreciation purposes, and expected fuel savings and operational reliability from the use of these new aircraft.
In the interest of increased quality control at Boeing and its suppliers, the Federal Aviation Administration (FAA) has indicated aircraft production rates will be capped until they are satisfied with Boeing's quality practices. These factors, other delays in Boeing obtaining needed regulatory approvals, and labor actions by Boeing machinists could delay deliveries to us even further than management's current expectations. Although the contract provides for more deliveries, at this time, we do not expect more than one additional aircraft to be delivered in 2024. Continuing delays in aircraft deliveries will impact our ability to schedule additional growth into 2025 and beyond.
New Reservation System
During 2023, we converted to the Navitaire reservation system to replace our legacy home-grown system. While we expect incremental passenger revenue once this system is fully implemented, we suffered some per passenger air ancillary revenue degradation (in the area of bundled ancillary products in particular) as certain functionality was unavailable during the transition. We restored functionality around one of our bundled product offerings in late third quarter 2024 and will continue to devote resources to the transition issues. We currently expect to regain the lost per passenger revenue and begin to achieve some of the incremental per passenger revenue in 2025.
Union Negotiations
The collective bargaining agreement with our pilots is currently amendable. We and the International Brotherhood of Teamsters ("IBT”) jointly requested the mediation services of the National Mediation Board ("NMB") in January 2023 to assist with the negotiations. The mediation process with the NMB is continuing with new union negotiators and leadership.
Separately from the ongoing collective bargaining agreement negotiations, to address retention and pilot pay issues and increase pilot staffing levels, effective in May 2023, we began accruing a retention bonus, with IBT's agreement, for pilots who continue employment with us until a new labor agreement is approved. The amount being accrued is 35 percent of current hourly pay rates, except for our first year first officers for whom the percentage is 82 percent, in each case, calculated at a minimum of 85 pay credit hours per month. Our implementation of the retention bonus has allowed us to effectively increase pay rates for our pilot team members (by way of the accrual of the retention bonus), add pilots through hiring and significantly slow attrition.
For the three months ended September 30, 2024, we recorded estimated pilot retention bonus accruals of $23.7 million bringing the total accrual to $124.3 million at period end, including the related payroll taxes. The bonus will be paid to all pilots remaining employed with us after ratification of a new collective bargaining agreement.
Sunseeker Resort
Sunseeker Resort at Charlotte Harbor opened in December 2023. As with many new hotels or resorts, Sunseeker's booking and occupancy rates are lower than more established properties. In addition, occupancy has been compromised by three major hurricanes impacting the area in summer and fall 2024. Despite strong performance by our food and beverage offerings, Sunseeker will incur significant losses in its first year of operations. Our customer reviews continue to be positive and we hope to build on that favorable customer sentiment to achieve better financial performance of the Resort in the future. We have engaged experienced hospitality advisors to identify areas for improvement in an effort to seek to optimize the value of this asset and evaluate strategic alternatives with potential partners.
Establishment of ESG Goals
We have established ESG goals in the areas of environmental, social and governance. We will report on our progress toward meeting those goals within our annual sustainability reports. Our 2023 Sustainability Report was recently published and can be viewed on our investor relations website.
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 Department of Transportation (DOT) requesting approval of and antitrust immunity for the alliance. Although the DOT process has progressed substantially, their review of our application is currently suspended pending the outcome of diplomatic engagement on broader treaty issues and, as a result, the timing of commencement of this service is uncertain as it will depend on when or if the DOT will ultimately approve the grant of antitrust immunity.
20
RESULTS OF OPERATIONS
Comparison of three months ended September 30, 2024 to three months ended September 30, 2023
Operating Revenue
Passenger revenue. For third quarter 2024, passenger revenue decreased $27.3 million or 5.3 percent compared to the same period in 2023 on relatively flat capacity. The decrease in passenger revenue was primarily driven by a 9.6 percent decrease in average scheduled service base fare, coupled with a 0.9 percent decrease in passengers flown, compared to third quarter 2023. Flight cancellations due to the CrowdStrike globlal outage in July, Hurricane Debby in August and Hurricane Helene in September contributed to the decline in passenger revenue. Air ancillary revenue per passenger remained flat when compared to third quarter 2023, despite certain challenges with the transition to the Navitaire system. Revenue per departure is higher for aircraft converted to the Allegiant Extra configuration. During the quarter we converted 13 aircraft to the Allegiant Extra configuration, ending the period with a total of 39 aircraft in this configuration.
Third party products revenue. Third party products revenue for third quarter 2024 increased $8.5 million or 27.4 percent compared to third quarter 2023. The increase from 2023 is primarily driven by a 29.7 percent increase in the marketing component of co-brand credit card revenues and $2.5 million of revenue from a new travel insurance product implemented during first quarter 2024. In addition, third party hotel revenues declined by 20.0 percent from third quarter 2023 on a 16.2 percent decline in rooms booked. Car rental revenue increased by 6.7 percent over third quarter 2023 despite a 4.0 percent decrease in rental car days sold.
Fixed fee contract revenue. Fixed fee contract revenue for third quarter 2024 increased by $2.8 million or 15.9 percent compared to the same period in 2023. This growth was driven by an 8.2 percent increase in fixed fee departures and a 7.1 percent increase in revenue per departure. Increases in flying were evenly spread across military, ad hoc and vacation charters.
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. 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. Excluding special charges and Sunseeker operating costs also allows management and investors to better compare our airline unit costs with those of other airlines.
| Three Months Ended September 30, | Percent Change | ||||||||||||||||
| Unitized costs (in cents) | 2024 | 2023 | YoY | ||||||||||||||
| Salaries and benefits* | 4.34 | ¢ | 3.68 | ¢ | 17.9 | % | |||||||||||
| Aircraft fuel | 3.29 | 3.79 | (13.2) | ||||||||||||||
| Station operations | 1.57 | 1.46 | 7.5 | ||||||||||||||
| Depreciation and amortization* | 1.42 | 1.26 | 12.7 | ||||||||||||||
| Maintenance and repairs | 0.67 | 0.80 | (16.3) | ||||||||||||||
| Sales and marketing* | 0.55 | 0.64 | (14.1) | ||||||||||||||
| Aircraft lease rentals | 0.13 | 0.13 | — | ||||||||||||||
| Other* | 0.90 | 0.65 | 38.5 | ||||||||||||||
| Special charges, net of insurance recoveries* | 0.20 | 0.74 | NM | ||||||||||||||
| CASM | 13.07 | ¢ | 13.15 | ¢ | (0.6) | ||||||||||||
| Operating CASM, excluding fuel but including Sunseeker Resort | 9.78 | ¢ | 9.36 | ¢ | 4.5 | ||||||||||||
| Airline special charges CASM | 0.17 | 0.34 | NM | ||||||||||||||
| Sunseeker Resort CASM | 0.72 | 0.53 | NM | ||||||||||||||
| Airline operating CASM, excluding fuel, special charges and Sunseeker Resort activity | 8.89 | ¢ | 8.49 | ¢ | 4.7 | ||||||||||||
* These expense line items include Sunseeker Resort activity
Operating CASM, excluding fuel, airline special charges, and Sunseeker Resort activity. Operating CASM, excluding fuel, airline special charges and Sunseeker Resort activity ("CASM-ex"), increased by 4.7 percent to 8.89 ¢ for third quarter 2024 from 8.49 ¢ in third quarter 2023. The CASM-ex increase is primarily attributable to a 15.1 percent, or $24.1 million, increase in airline salaries and benefits expense in third quarter 2024 over third quarter 2023 (for the reasons described in the expense line item discussion below). This increase was on relatively flat capacity as we continue to incur significant labor costs for pilots trained to fly our Boeing 737 MAX aircraft while the aircraft deliveries have been delayed.
Salaries and benefits expense. Salaries and benefits expense increased $32.3 million, or 19.8 percent, in third quarter 2024 compared to third quarter 2023. Higher salaries and benefits expense was primarily driven by a 4.5 percent increase in airline full
21
time equivalent employees (including a 21.9 percent increase in the number of pilots employed since September 30, 2023) and increased crew pay. Increased crew pay reflects the impact of a $23.7 million accrual for pilot retention bonuses during third quarter 2024, which exceeds the third quarter 2023 accrual by $5.0 million due to the higher number of pilots, and a new collective bargaining agreement with our flight attendants that includes wage increases effective April 2024. The accrued pilot retention bonus is payable after ratification of a new collective bargaining agreement with this work group. The opening of Sunseeker Resort in December 2023 further drove the increase by adding nearly 600 Resort team members since September 30, 2023 and an increase of $8.2 million in Sunseeker salaries and benefits expense in third quarter 2024.
Aircraft fuel expense. Aircraft fuel expense decreased $19.6 million, or 11.7 percent, for third quarter 2024 compared to third quarter 2023. This is primarily due to a 12.9 percent decrease in average fuel cost per gallon offset by a 1.6 percent increase in fuel gallons consumed from a 1.5 percent increase in total available seat miles.
Station operations expense. Station operations expense for third quarter 2024 increased $6.0 million, or 9.3 percent compared to third quarter 2023. The increase was driven in part by a $3.2 million increase in passenger compensation partially as the result of the CrowdStrike outage in July. The increase in station operations expense also includes a $1.6 million increase in building rents and increases in airport, landing, and ground handling fees.
Depreciation and amortization expense. Depreciation and amortization expense for third quarter 2024 increased by $8.1 million or 14.5 percent compared to third quarter 2023. The increase is primarily attributed to $7.8 million of depreciation expense related to the Sunseeker Resort, which held its grand opening in December 2023. The remaining change includes an increase in deferred heavy maintenance amortization offset by a decrease in aircraft depreciation as nine airframes were retired since the prior year quarter.
Maintenance and repairs expense. Maintenance and repairs expense for third quarter 2024 decreased $5.2 million, or 14.7 percent, compared to third quarter 2023, due to decreases in rotable repairs and decreased outsourced labor expenses as we have been able to stabilize internal staffing.
Sales and marketing expense. Sales and marketing expense for third quarter 2024 decreased by $3.6 million or 12.6 percent compared to the same period in 2023. Airline sales and marketing expense decreased $4.5 million related to the discontinuation of a marketing agreement and decreases in direct marketing efforts and credit card fees. These decreases were offset by a $0.9 million increase in sales and marketing expense at the Sunseeker Resort.
Other operating expense. Other operating expense increased $11.1 million or 37.8 percent in third quarter 2024 compared to third quarter 2023. The increase was primarily driven by an $8.1 million increase in Sunseeker Resort operating expenses consisting of $1.8 million cost of sales (primarily food and beverage), $2.1 million of insurance expense, $0.9 million of property taxes, and other general and administrative expenses. Other operating expenses related to the airline increased by $5.0 million due primarily to crew travel, software licenses and support, and property taxes. These increases were offset in part by gains on the sale of flight equipment.
Special charges. During third quarter 2024, we recorded $8.8 million of special charges including $4.2 million of accelerated depreciation from the early retirement of 21 airframes through 2026 pursuant to a revised fleet plan, $3.4 million of compensation expense from an organizational restructuring, and $1.1 million of damages from Hurricane Helene, net of insurance recoveries, related to Sunseeker Resort.
Interest Expense and Income
Interest expense, net of interest income and capitalized interest, increased by $5.2 million or 43.4 percent, compared to third quarter 2023. Capitalized interest decreased $3.0 million as the result of a $6.7 million decrease in capitalized interest related to the Sunseeker Resort, offset by an increase in capitalized interest of $3.7 million related to our investment in the Boeing fleet. Interest income decreased by $2.4 million as a result of lower average investment balances, which was offset in part by higher average yields on investments, compared to third quarter 2023.
Income Tax Expense
We recorded a $6.7 million income tax benefit at an effective tax rate of 15.3 percent and a $4.9 million income tax benefit at a 16.3 percent effective tax rate for the three months ended September 30, 2024 and 2023, respectively. The effective tax rate for the three months ended September 30, 2024 differed from the statutory federal income tax rate of 21.0 percent primarily due to state income taxes and permanent tax differences.
22
Comparison of nine months ended September 30, 2024 to nine months ended September 30, 2023
Operating Revenue
Passenger revenue. For the nine months ended September 30, 2024, passenger revenue decreased $104.9 million or 5.9 percent compared with the same period in 2023 on relatively flat capacity. The decrease in passenger revenue was primarily driven by an 8.5 percent decrease in average scheduled service base fare coupled with a 1.8 percent decrease in passengers flown. The lower base fare is attributable to industry overcapacity prevalent during 2024 and weaker demand in off-peak periods. We expect our Allegiant Extra product to increase ancillary air revenue as it is deployed in more of our aircraft. We ended the quarter with 39 aircraft fitted to the Allegiant Extra configuration and anticipate that it will continue to drive fare growth going forward.
Third party products revenue. Third party products revenue for the nine months ended September 30, 2024 increased $24.0 million or 28.0 percent over the same period in 2023. The increase from 2023 is primarily the result of a 35.0 percent increase in the marketing component of co-brand credit card revenues and $7.2 million of revenue from a new travel insurance product implemented during first quarter 2024. In addition, third party hotel revenues increased slightly by 3.3 percent from the prior year period despite a 12.9 percent decrease in room nights booked. Car rental revenue was relatively flat over the prior year period on a 2.8 percent decrease in rental car days sold.
Fixed fee contract revenue. Fixed fee contract revenue for the nine months ended September 30, 2024 increased $13.5 million or 31.0 percent compared to the same period in 2023 on a 30.7 percent increase in fixed fee departures as a result of strong performance during March Madness and growth in corporate and military charters and other sports flying.
Operating Expenses
The following table presents unit costs on a per ASM basis, defined as Operating CASM, for the indicated periods. Excluding fuel on a per ASM basis provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors beyond our control. Excluding special charges and Sunseeker operating costs allows management and investors to better compare our airline unit costs with those of other airlines.
| Nine Months Ended September 30, | Percent Change | ||||||||||||||||
| Unitized costs (in cents) | 2024 | 2023 | YoY | ||||||||||||||
| Salaries and benefits* | 4.33 | ¢ | 3.53 | ¢ | 22.7 | % | |||||||||||
| Aircraft fuel | 3.42 | 3.67 | (6.8) | ||||||||||||||
| Station operations | 1.45 | 1.36 | 6.6 | ||||||||||||||
| Depreciation and amortization* | 1.35 | 1.16 | 16.4 | ||||||||||||||
| Maintenance and repairs | 0.64 | 0.67 | (4.5) | ||||||||||||||
| Sales and marketing* | 0.58 | 0.60 | (3.3) | ||||||||||||||
| Aircraft lease rentals | 0.12 | 0.13 | (7.7) | ||||||||||||||
| Other* | 0.86 | 0.66 | 30.3 | ||||||||||||||
| Special charges, net of insurance recoveries* | 0.28 | 0.14 | NM | ||||||||||||||
| CASM | 13.03 | ¢ | 11.92 | ¢ | 9.3 | ||||||||||||
| Operating CASM, excluding fuel but including Sunseeker Resort | 9.61 | ¢ | 8.25 | ¢ | 16.5 | ||||||||||||
| Airline special charges CASM | 0.30 | 0.11 | NM | ||||||||||||||
| Sunseeker Resort CASM | 0.66 | 0.14 | NM | ||||||||||||||
| Airline operating CASM, excluding fuel, special charges and Sunseeker Resort activity | 8.65 | ¢ | 8.00 | ¢ | 8.1 | ||||||||||||
* These expense line items include Sunseeker Resort activity
Operating CASM, excluding fuel, airline special charges, and Sunseeker Resort activity. Operating CASM, excluding fuel, airline special charges and Sunseeker Resort activity, increased by 8.1 percent to 8.65 ¢ for the nine months ended September 30, 2024 from 8.00 ¢ for the same period in 2023. The CASM-ex increase is primarily attributable to an 18.0 percent or $88.6 million increase in airline salaries and benefits expense (for the reasons described in the expense line item discussion below). This increase was on relatively flat capacity as we continue to incur significant labor costs for pilots trained to fly our Boeing 737 MAX aircraft while the aircraft deliveries have been delayed.
Salaries and benefits expense. Salaries and benefits expense increased $118.8 million, or 23.8 percent, for the nine months ended September 30, 2024 compared to the same period in 2023. Higher salaries and benefits expense was primarily driven by a 4.5 percent increase in airline full-time equivalent employees (including a 21.9 percent increase in the number of pilots
23
employed since September 30, 2023) and increased crew pay. Increased crew pay includes the impact of a $69.6 million accrual for pilot retention bonuses during the nine months ended September 30, 2024, of which $39.2 million is incremental to what was accrued in the same period in 2023 as the accruals did not commence until May 2023, and a new collective bargaining agreement with our flight attendants that includes wage increases effective April 2024. The accrued pilot retention bonus is payable after completion of a new collective bargaining agreement with this work group. The opening of Sunseeker Resort in December 2023 further drove the increase by adding nearly 600 Resort team members since September 30, 2023 and an increase of $30.2 million in Sunseeker salaries and benefits expense during the nine month period.
Aircraft fuel expense. Aircraft fuel expense decreased $31.6 million, or 6.1 percent, for the nine months ended September 30, 2024 compared to the same period in 2023. This is primarily driven by a 6.6 percent decrease in average fuel cost per gallon. The decrease in fuel cost was partially offset by an 0.8 percent increase in fuel gallons consumed on a 0.9 percent increase in total available seat miles.
Station operations expense. Station operations expense for the nine months ended September 30, 2024 increased $14.0 million or 7.3 percent. This is primarily driven by a $5.3 million increase in building rents, a $4.6 million increase in passenger compensation, largely driven by disruption from the CrowdStrike outage in July, and other general increases in airport, landing, and ground handling fees.
Depreciation and amortization expense. Depreciation and amortization expense for the nine months ended September 30, 2024 increased $28.7 million or 17.4 percent compared to the same period in 2023. The increase is primarily attributable to $19.7 million of depreciation expense related to the Sunseeker Resort, which opened in December 2023. The remaining change of $9.0 million is primarily driven by increases in deferred heavy maintenance amortization of $8.2 million, software depreciation of $3.2 million (related to several new systems implemented since July 2023), and rotable depreciation of $2.0 million, offset by a decrease in airframe depreciation of $5.9 million as the result of nine airframes retired since the end of third quarter 2023.
Maintenance and repairs expense. Maintenance and repairs expense for the nine months ended September 30, 2024 decreased $4.3 million or 4.5 percent when compared to the same period in 2023. The decrease was primarily driven by a decrease of $9.6 million in rotable repairs and decreased outsourced labor expenses as we have been able to stabilize internal staffing. This decrease was offset by approximately $5.5 million in increased expendable consumption and engine repair expenses.
Sales and marketing expense. Sales and marketing expense for the nine months ended September 30, 2024 decreased $2.0 million or 2.3 percent compared to the same period in 2023. Airline sales and marketing decreased $5.8 million, primarily driven by the discontinuation of a marketing agreement in 2024, a fee incurred in 2023 for transitioning our co-branded credit card to a new payment network, and a reduction in credit card processing fees, driven by a 5.9 percent decrease in passenger revenue year-over-year. These reductions were offset by a $3.8 million increase in sales and marketing expense at the Sunseeker Resort.
Other operating expense. Other expense for the nine months ended September 30, 2024 increased by $29.9 million, or 32.6 percent year-over-year primarily due to an increase of $26.9 million related to Sunseeker Resort operations, which includes $7.8 million cost of sales (primarily food and beverage cost), $6.4 million of insurance expense, $2.6 million in property taxes, and other general and administrative expenses. Other operating expenses related to the airline increased by $3.0 million due to increases in software licenses, training, and support related to our new IT systems, and crew travel, which were offset in part by gains on the sale of flight equipment.
Special charges. During the nine months ended September 30, 2024, we recorded $40.0 million of special charges including $28.4 million of accelerated depreciation from the early retirement of 21 airframes through 2026 pursuant to a revised fleet plan, $10.8 million related to the ratification bonus on our new flight attendant collective bargaining agreement, as well as $3.4 million of compensation costs related to an organizational restructuring of administrative personnel. These charges were offset by net insurance recoveries related to Sunseeker Resort hurricane damages of $2.6 million.
Interest Expense and Income
Interest expense, net of interest income and capitalized interest, increased by $1.3 million, or 2.6 percent, for the nine months ended September 30, 2024, compared to the same period in 2023. Interest expense increased by $6.1 million, primarily as the result of an increase in the average variable interest rate during the period. Capitalized interest increased $5.8 million as the result of an increase in capitalized interest of $21.2 million driven by increased pre-delivery deposits on aircraft, offset by a $15.5 million decrease in capitalized interest related to the Sunseeker Resort. Interest income decreased by $1.0 million as a result of lower average investment balances, which was offset in part by higher yields on investments compared to the same period in the prior year.
Income Tax Expense
We recorded a $2.7 million income tax benefit at an effective rate of 10.3 percent compared to a $41.3 million tax expense at a 25.7 percent effective tax rate for the nine months ended September 30, 2024 and 2023, respectively. The 10.3 percent effective tax rate for the nine months ended September 30, 2024 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.
24
Comparative Airline-Only Operating Statistics
The following tables set forth our airline operating statistics for the periods indicated:
| Three Months Ended September 30, | Percent Change (1) | ||||||||||||||||
| 2024 | 2023 | YoY | |||||||||||||||
| Airline operating statistics (unaudited): | |||||||||||||||||
| Total system statistics: | |||||||||||||||||
| Passengers | 4,256,249 | 4,292,031 | (0.8) | % | |||||||||||||
| Available seat miles (ASMs) (thousands) | 4,501,532 | 4,433,767 | 1.5 | ||||||||||||||
Airline operating expense per ASM (CASM) (cents) | 12.35 | ¢ | 12.62 | ¢ | (2.1) | ||||||||||||
| Fuel expense per ASM (cents) | 3.29 | ¢ | 3.79 | ¢ | (13.2) | ||||||||||||
| Airline special charges per ASM (cents) | 0.17 | ¢ | 0.34 | ¢ | NM | ||||||||||||
Airline operating CASM, excluding fuel and special charges (cents) | 8.89 | ¢ | 8.49 | ¢ | 4.7 | ||||||||||||
| Departures | 29,884 | 29,251 | 2.2 | ||||||||||||||
| Block hours | 68,453 | 67,312 | 1.7 | ||||||||||||||
| Average stage length (miles) | 856 | 858 | (0.2) | ||||||||||||||
| Average number of operating aircraft during period | 124.1 | 126.8 | (2.1) | ||||||||||||||
| Average block hours per aircraft per day | 6.0 | 5.8 | 3.4 | ||||||||||||||
| Full-time equivalent employees at end of period | 5,827 | 5,578 | 4.5 | ||||||||||||||
| Fuel gallons consumed (thousands) | 55,190 | 54,320 | 1.6 | ||||||||||||||
| ASMs per gallon of fuel | 81.6 | 81.6 | — | ||||||||||||||
| Average fuel cost per gallon | $ | 2.69 | $ | 3.09 | (12.9) | ||||||||||||
| Scheduled service statistics: | |||||||||||||||||
| Passengers | 4,195,572 | 4,234,196 | (0.9) | ||||||||||||||
| Revenue passenger miles (RPMs) (thousands) | 3,701,747 | 3,744,225 | (1.1) | ||||||||||||||
| Available seat miles (ASMs) (thousands) | 4,326,870 | 4,280,034 | 1.1 | ||||||||||||||
| Load factor | 85.6 | % | 87.5 | % | (1.9) | ||||||||||||
| Departures | 28,519 | 28,040 | 1.7 | ||||||||||||||
| Block hours | 65,656 | 64,857 | 1.2 | ||||||||||||||
| Average seats per departure | 175.9 | 176.8 | (0.5) | ||||||||||||||
Yield (cents) (2) | 5.88 | ¢ | 6.49 | ¢ | (9.4) | ||||||||||||
Total passenger revenue per ASM (TRASM) (cents)(3) | 12.21 | ¢ | 12.78 | ¢ | (4.5) | ||||||||||||
Average fare - scheduled service(4) | $ | 51.92 | $ | 57.43 | (9.6) | ||||||||||||
Average fare - air-related charges(4) | $ | 64.63 | $ | 64.50 | 0.2 | ||||||||||||
| Average fare - third party products | $ | 9.40 | $ | 7.31 | 28.6 | ||||||||||||
| Average fare - total | $ | 125.95 | $ | 129.23 | (2.5) | ||||||||||||
| Average stage length (miles) | 863 | 864 | (0.1) | ||||||||||||||
| Fuel gallons consumed (thousands) | 52,993 | 52,491 | 1.0 | ||||||||||||||
| Average fuel cost per gallon | $ | 2.68 | $ | 3.07 | (12.7) | ||||||||||||
| Percent of sales through website during period | 92.4 | % | 95.1 | % | (2.7) | ||||||||||||
| Other data: | |||||||||||||||||
| Rental car days sold | 322,076 | 335,542 | (4.0) | ||||||||||||||
| Hotel room nights sold | 45,620 | 54,447 | (16.2) | ||||||||||||||
(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.
25
Comparative Airline-Only Operating Statistics
The following tables set forth our airline operating statistics for the periods indicated:
| Nine Months Ended September 30, | Percent Change (1) | ||||||||||||||||
| 2024 | 2023 | YoY | |||||||||||||||
| Airline operating statistics (unaudited): | |||||||||||||||||
| Total system statistics: | |||||||||||||||||
| Passengers | 12,982,957 | 13,196,465 | (1.6) | % | |||||||||||||
| Available seat miles (ASMs) (thousands) | 14,286,712 | 14,164,936 | 0.9 | ||||||||||||||
Airline operating expense per ASM (CASM) (cents) | 12.37 | ¢ | 11.78 | ¢ | 5.0 | ||||||||||||
| Fuel expense per ASM (cents) | 3.42 | ¢ | 3.67 | ¢ | (6.8) | ||||||||||||
| Airline special charges per ASM (cents) | 0.30 | ¢ | 0.11 | ¢ | NM | ||||||||||||
Airline operating CASM, excluding fuel and special charges (cents) | 8.65 | ¢ | 8.00 | ¢ | 8.1 | ||||||||||||
| Departures | 91,361 | 90,792 | 0.6 | ||||||||||||||
| Block hours | 216,844 | 215,716 | 0.5 | ||||||||||||||
| Average stage length (miles) | 886 | 883 | 0.3 | ||||||||||||||
| Average number of operating aircraft during period | 125.1 | 124.7 | 0.3 | ||||||||||||||
| Average block hours per aircraft per day | 6.3 | 6.3 | — | ||||||||||||||
| Full-time equivalent employees at end of period | 5,827 | 5,578 | 4.5 | ||||||||||||||
| Fuel gallons consumed (thousands) | 171,556 | 170,271 | 0.8 | ||||||||||||||
| ASMs per gallon of fuel | 83.3 | 83.2 | 0.1 | ||||||||||||||
| Average fuel cost per gallon | $ | 2.85 | $ | 3.05 | (6.6) | ||||||||||||
| Scheduled service statistics: | |||||||||||||||||
| Passengers | 12,837,860 | 13,076,015 | (1.8) | ||||||||||||||
| Revenue passenger miles (RPMs) (thousands) | 11,693,844 | 11,947,986 | (2.1) | ||||||||||||||
| Available seat miles (ASMs) (thousands) | 13,811,809 | 13,778,994 | 0.2 | ||||||||||||||
| Load factor | 84.7 | % | 86.7 | % | (2.0) | ||||||||||||
| Departures | 87,824 | 87,800 | — | ||||||||||||||
| Block hours | 209,219 | 209,468 | (0.1) | ||||||||||||||
| Average seats per departure | 176.4 | 176.1 | 0.2 | ||||||||||||||
Yield (cents) (2) | 6.93 | ¢ | 7.55 | ¢ | (8.2) | ||||||||||||
Total passenger revenue per ASM (TRASM) (cents)(3) | 12.84 | ¢ | 13.46 | ¢ | (4.6) | ||||||||||||
Average fare - scheduled service(4) | $ | 63.10 | $ | 68.95 | (8.5) | ||||||||||||
Average fare - air-related charges(4) | $ | 66.47 | $ | 66.28 | 0.3 | ||||||||||||
| Average fare - third party products | $ | 8.56 | $ | 6.57 | 30.3 | ||||||||||||
| Average fare - total | $ | 138.13 | $ | 141.80 | (2.6) | ||||||||||||
| Average stage length (miles) | 891 | 889 | 0.2 | ||||||||||||||
| Fuel gallons consumed (thousands) | 165,728 | 165,599 | 0.1 | ||||||||||||||
| Average fuel cost per gallon | $ | 2.85 | $ | 3.05 | (6.6) | ||||||||||||
| Percent of sales through website during period | 94.0 | % | 95.3 | % | (1.3) | ||||||||||||
| Other data: | |||||||||||||||||
| Rental car days sold | 1,051,425 | 1,081,483 | (2.8) | ||||||||||||||
| Hotel room nights sold | 168,751 | 193,643 | (12.9) | ||||||||||||||
(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.
26
LIQUIDITY AND CAPITAL RESOURCES
Current liquidity
Cash, cash equivalents and investment securities (short-term and long-term) decreased to $804.6 million as of September 30, 2024, from $870.7 million at December 31, 2023. Investment securities represent highly liquid marketable securities which are available-for-sale.
Restricted cash represents escrowed funds under fixed fee contracts and cash collateral against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties. Under our fixed fee flying contracts, we require our customers to prepay for flights to be provided by us. The prepayments are escrowed until the flight is completed and are recorded as restricted cash with a corresponding amount reflected as air traffic liability.
Our operating cash flows and long-term debt borrowings have allowed us to invest in our fleet renewal. Future capital needs are primarily for the acquisition of additional aircraft, including our existing aircraft commitments.
We believe we have more than adequate liquidity resources through our cash balances, operating cash flows, availability under revolving credit facilities, PDP facilities, and borrowings to meet our future contractual obligations. We have also entered into several financing commitments that will fund upon delivery of our new Boeing aircraft. We will continue to consider raising funds through debt financing as needed to fund capital expenditures.
Our current share repurchase authority is $75.7 million. We have not repurchased shares on the open market since December 2023. We have suspended our quarterly cash dividend in anticipation of upcoming capital needs related to our fleet investments.
Debt
Our debt and finance lease obligations balance, without reduction for related issuance costs, decreased by $76.6 million from $2.28 billion as of December 31, 2023 to $2.21 billion as of September 30, 2024. Net debt (total debt less unrestricted cash, cash equivalents, and investments) as of September 30, 2024 was $1.38 billion, a decrease of $5.4 million from December 31, 2023.
During the nine months ended September 30, 2024, we entered into credit agreements for up to $218.5 million which will be collateralized by new aircraft deliveries. These commitments, along with commitments existing prior to first quarter 2024, are expected to refinance on a long-term basis $106.9 million of our PDP loan balances which are presently classified as current maturities of long term debt. We will draw on these financing commitments at the delivery of the respective aircraft as they will be funded when the aircraft to be pledged are delivered to us.
As of September 30, 2024, approximately 80.6 percent of our debt and finance lease obligations are fixed-rate.
Sources and Uses of Cash
Operating Activities. Operating cash inflows are primarily derived from providing air transportation and related ancillary products and services to customers. During the nine months ended September 30, 2024, our operating activities provided $254.1 million of cash compared to $369.5 million during the same period 2023. This change is primarily attributable to a $143.6 million decrease in net income compared to the 2023 period.
Investing Activities. Cash used for investing activities was $40.8 million during the nine months ended September 30, 2024 compared to $537.4 million during the same period in 2023. The change is primarily attributable to a $387.6 million decrease in cash used for purchase of property and equipment, including aircraft PDPs and a $117.8 million increase in proceeds from maturities of investment securities, net of purchases.
Financing Activities. Cash used in financing activities for the nine months ended September 30, 2024 was $81.9 million, compared to $229.2 million provided by financing activities during the same period in 2023. Proceeds from debt issuances and finance lease obligations exceeded principal repayments by $188.0 million during the nine month period ended September 30, 2023, whereas principal repayments exceeded proceeds from debt issuances and finance lease obligations by $76.6 million during the same period in 2024. The remaining change in financing activity relates to a $52.5 million decrease in financing disbursements related to the Sunseeker construction loan and an additional $10.9 million paid in cash dividends in 2024 compared to the same period in 2023, offset by a decrease of $11.7 million in cash used for common stock repurchases in 2024 compared to 2023.
27
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 the number of contracted aircraft to be placed in service in the future, the timing of aircraft deliveries and retirements, our ability to increase aircraft utilization and also to increase per passenger revenue with our new revenue management system, the implementation of a joint alliance with VivaAerobus, the operations 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 of regulatory reviews of and labor actions at Boeing on its aircraft delivery schedule, an accident involving, or problems with, our aircraft, public perception of our safety, our reliance on our automated systems, our reliance on Boeing and other 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 impact of government regulations on the airline industry, the ability to finance aircraft to be acquired, the ability to obtain necessary 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 impact of management changes and the possible loss of key personnel, economic and other conditions in markets in which we operate, the ability to successfully operate Sunseeker Resort at Charlotte Harbor, increases in maintenance costs and the availability of outside maintenance contractors to perform needed work on our aircraft on a timely basis and at acceptable rates, cyclical and seasonal fluctuations in our operating results and the perceived acceptability of our environmental, social, and governance efforts.
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 nine months ended September 30, 2024. For information regarding our critical accounting policies and estimates, see disclosures in the Consolidated Financial Statements and accompanying notes contained in our 2023 Form 10-K, and in Note 1 of Notes to Consolidated Financial Statements (unaudited).
28
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 nine months ended September 30, 2024 represented 26.2 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 nine months ended September 30, 2024, a hypothetical ten percent increase in the average price per gallon of fuel would have increased fuel expense by approximately $48.6 million. We do not hedge fuel price risk.
Interest Rates
As of September 30, 2024, we had $427.8 million of variable-rate debt, including current maturities, and without reduction for $2.8 million in related costs. A hypothetical 100 basis point change in interest rates would have affected interest expense on variable rate debt by approximately $3.2 million for the nine months ended September 30, 2024.
Item 4. Controls and Procedures
As of September 30, 2024, under the supervision and with the participation of our management, including our chief executive officer ("CEO") and chief financial officer (“CFO”), we evaluated the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, management, including our CEO and CFO, has concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information we are required to disclose is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure.
Except as set forth below, there were no changes in our internal control over financial reporting that occurred during the quarter ending September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The Sunseeker Resort opened on December 15, 2023 and the Resort is currently in its first full year of operations. Management has implemented internal controls over financial reporting related to Resort activities and continues to evaluate those controls and procedures.
29
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, 2023, and filed with the Securities Exchange Commission on February 29, 2024, other than the following risk factor:
Labor actions at Boeing will likely delay its production schedule, which could impact us as delivery delays may result in lower profitability than expected and delayed growth.
We are relying on Boeing to deliver our new 737 MAX aircraft to support airline growth and to replace aircraft we have designated for retirement.
In addition to the regulatory issues Boeing is facing, its machinists began to strike on September 13, 2024, which ended on November 5, 2024. The strike will likely further delay aircraft deliveries to us, and it is not possible to predict for what period our deliveries will be further delayed. Any further delays might disproportionately affect us as we expect to rely on these new aircraft for operating efficiencies and to augment our fleet as well as to replace aircraft to be retired.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Our Repurchases of Equity Securities
The following table reflects the repurchases of our common stock during third quarter 2024:
| Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of our Publicly Announced Plan | Approximate Dollar Value of Shares that May yet be Purchased Under the Plans or Programs (in thousands) (2) | ||||||||||||||||||||||
| July | 20,342 | $ | 49.39 | None | ||||||||||||||||||||||
| August | 9,325 | $ | 45.95 | None | ||||||||||||||||||||||
| September | 5,954 | $ | 50.88 | None | ||||||||||||||||||||||
| Total | 35,621 | $ | 48.74 | — | $ | 75,697 | ||||||||||||||||||||
(1)Represents shares repurchased from employees who vested a portion of their restricted stock grants. These share repurchases were made at the election of each employee pursuant to an offer to repurchase by us. In each case, the shares repurchased constituted a portion of vested shares necessary to satisfy income tax withholding requirements.
(2)Represents the remaining dollar amount of open market purchases of our common stock which has been authorized by our board under a share repurchase program.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
Securities Trading Plans of Directors and Executive Officers
During the three months ended September 30, 2024, none of our directors or executive officers adopted or terminated
30
Item 6. Exhibits
| 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 | ||||
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ALLEGIANT TRAVEL COMPANY | |||||||||||
| Date: | November 5, 2024 | By: | /s/ Robert J. Neal | ||||||||
| Robert J. Neal, as duly authorized officer of the Company (Senior Vice President and Chief Financial Officer) and as Principal Financial Officer | |||||||||||
32