Allegiant Travel(ALGT) ZACKS·2025-03-19 17:10Core Viewpoint - Allegiant Travel Company (ALGT) is experiencing improved demand and expansion efforts, but faces challenges with weak liquidity and rising expenses [1]. Group 1: Demand and Capacity - Robust air travel demand is enhancing ALGT's prospects, with scheduled traffic increasing by 4.7% from February 2024 levels [2]. - Capacity for scheduled service rose significantly by 10.7% year over year, although this led to a slight decline in load factor to 79.5%, down from 84% the previous year [2]. Group 2: Expansion Strategy - ALGT is strategically expanding with 44 new nonstop routes, including three new cities, catering to the demand for affordable air travel [3]. - The addition of cities like Gulf Shores, Colorado Springs, and Columbia, along with new airports, positions ALGT to serve popular vacation destinations and underserved markets [3]. Group 3: Capacity Growth Plans - In 2025, ALGT plans to enhance capacity through increased aircraft utilization during peak leisure periods, with the delivery of 9 new MAX aircraft [4]. - The new aircraft are expected to offer significantly higher earnings potential compared to the older A320 aircraft they will replace [4]. - ALGT is also expanding its premium seating offering, currently equipping 56 aircraft with Allegiant Extra, which boosts ancillary revenue per passenger [4]. Group 4: Financial Challenges - ALGT's financial stability is under pressure due to elevated operating expenses, which surged by 17% year over year in 2024, primarily driven by labor costs [5]. - Labor costs, comprising 29.8% of total operating expenses, increased by 19.2% year over year [5]. - The company ended 2024 with a current ratio of 0.74, indicating liquidity challenges, as a ratio above 1 is preferable for meeting short-term obligations [6]. Group 5: Stock Performance - ALGT shares have declined by 22.9% over the past year, contrasting with a 12.9% rise in the Zacks Transportation - Airline industry during the same period [6].