Allegiant Travel(US:ALGT)2024-08-06 20:01Financial Performance - Operating income for Q2 2024 was $34.9 million, with an operating margin of 5.2%, while total operating revenue decreased by 2.6% to $666.3 million compared to Q2 2023[70]. - Passenger revenue decreased by 7.5% in Q2 2024, primarily due to an 11.0% drop in average scheduled service base fare and a 3.1% decrease in passengers flown[88]. - Total average ancillary fare increased by 5.0% to $75.34 in Q2 2024, driven by growth in seats, bags, and co-brand credit card revenue[70]. - The company recorded a special charge of $20.1 million in Q2 2024, which included a ratification bonus of $10.8 million for flight attendants and $9.3 million for accelerated depreciation due to early aircraft retirements[70]. - Salaries and benefits expense increased by $32.8 million, or 18.5 percent, in Q2 2024 compared to Q2 2023, driven by a 10.2 percent increase in full-time equivalent employees and a $23.7 million accrual for pilot retention bonuses[92]. - Aircraft fuel expense rose by $7.4 million, or 4.6 percent, in Q2 2024, primarily due to a 5.2 percent increase in average fuel cost per gallon[93]. - Depreciation and amortization expense increased by $11.4 million, or 21.2 percent, in Q2 2024, largely due to $6.0 million related to the Sunseeker Resort[94]. - Passenger revenue decreased by $77.6 million, or 6.2 percent, for the six months ended June 30, 2024, attributed to an 8.0 percent decrease in average scheduled service base fare[101]. - Third-party products revenue increased by $15.6 million, or 28.3 percent, for the six months ended June 30, 2024, driven by a 38.4 percent increase in co-brand credit card revenues[101]. - Operating CASM, excluding fuel, increased by 9.9 percent to 8.54 cents for the six months ended June 30, 2024, primarily due to a $64.4 million increase in salaries and benefits expense[103]. - Special charges recorded in Q2 2024 totaled $18.1 million, including $9.3 million of accelerated depreciation from the early retirement of 21 airframes[96]. - Interest expense for the quarter increased by $1.8 million, primarily due to a $58.5 million increase in outstanding principal[97]. - Income tax expense for Q2 2024 was $4.3 million at an effective tax rate of 24.0 percent, compared to $27.9 million at the same rate in Q2 2023[98]. - Other operating expense increased by $2.5 million, or 7.7 percent, in Q2 2024, driven by an $8.1 million increase in Sunseeker Resort operating expenses[95]. Operational Efficiency - The airline's controllable completion factor was 99.7% in Q2 2024, indicating high operational efficiency[70]. - The airline's operating CASM, excluding fuel and special charges, increased by 5.6% to 8.23 cents in Q2 2024 compared to Q2 2023[91]. - Total passengers decreased by 2.8% year-over-year to 4,621,848 in Q2 2024[1]. - Available seat miles (ASMs) decreased by 0.8% year-over-year to 5,013,209 thousands in Q2 2024[1]. - Airline operating expense per ASM (CASM) increased by 9.2% year-over-year to 12.02 cents in Q2 2024[1]. - Total passenger revenue per ASM (TRASM) decreased by 4.5% year-over-year to 13.03 cents in Q2 2024[1]. Cash Flow and Debt - Cash, cash equivalents, and investment securities decreased to $851.1 million as of June 30, 2024, from $870.7 million at December 31, 2023[19]. - Debt and finance lease obligations decreased by $44.5 million to $2.24 billion as of June 30, 2024[21]. - Operating cash inflows provided $236.7 million during the six months ended June 30, 2024, compared to $346.6 million in the same period of 2023[22]. - Cash used for investing activities was $109.8 million during the six months ended June 30, 2024, compared to $517.8 million in the same period of 2023[23]. - Current share repurchase authority is $75.7 million, with no repurchases made since December 2023[20]. Fuel and Commodity Risks - Aircraft fuel expenses accounted for 26.7% of total operating expenses for the six months ended June 30, 2024[131]. - A hypothetical 10% increase in the average price per gallon of fuel would have increased fuel expenses by approximately $34.6 million[131]. - As of June 30, 2024, the company had $434.9 million of variable-rate debt, with a potential $2.2 million increase in interest expense for a 100 basis point change in interest rates[132]. - The company is subject to market risks, particularly related to commodity prices such as aircraft fuel[130]. - The company does not hedge fuel price risk, exposing it to volatility in fuel costs[131]. Strategic Initiatives - The company has signed agreements with Boeing for 50 new 737 MAX aircraft, with expectations of only four deliveries in 2024 due to ongoing delays[73][74]. - The Sunseeker Resort opened in December 2023, but is expected to incur losses in its first year of operations despite positive customer reviews[83]. - The ability to successfully operate the Sunseeker Resort is a key strategic focus for future growth[126]. - Forward-looking statements include expectations regarding aircraft utilization and revenue management system improvements[125]. - The company has a joint alliance planned with VivaAerobus, which may impact future operations[125]. - Risks include reliance on third parties for aircraft delivery and potential regulatory impacts on operations[126].