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Allegiant Travel(ALGT) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an adjusted consolidated net income of 2.4millionandanadjustedearningspershare(EPS)of2.4 million and an adjusted earnings per share (EPS) of 0.11 for Q4 2023, including approximately 12.8millioninpreopeningexpensesforSunseekerResort[30]Forthefullyear2023,adjustedconsolidatednetincomewasroughly12.8 million in preopening expenses for Sunseeker Resort [30] - For the full year 2023, adjusted consolidated net income was roughly 137 million, yielding an adjusted EPS of 7.31,whichincludedapproximately7.31, which included approximately 33 million in expenses related to Sunseeker [31] - EBITDA for the full year was 472million,a45472 million, a 45% increase over 2022, with the airline generating over 500 million in EBITDA excluding special items [31][32] - The airline recorded an adjusted net income of 165millionfortheyear,yieldinganadjustedairlinefullyearEPSof165 million for the year, yielding an adjusted airline full year EPS of 8.82, slightly ahead of initial expectations [31] Business Line Data and Key Metrics Changes - The airline's controllable completion factor was reported at 99.8%, an industry-leading performance [13][12] - The airline's TRASM (Total Revenue per Available Seat Mile) for Q4 was 0.1316,down6.20.1316, down 6.2% year-over-year, but still more than 4% better than any previous fourth quarter [24] - Full year TRASM was 0.338, nearly 6% better than any prior year, with record ancillary performance exceeding 5yearoveryear[24]MarketDataandKeyMetricsChangesThecompanyretainednearlyonethirdofcustomerswhoflewintheprioryear,accountingfornearlyhalfoftotalrevenuefor2023,withayearoveryearcustomerretentionratethatwas165 year-over-year [24] Market Data and Key Metrics Changes - The company retained nearly one-third of customers who flew in the prior year, accounting for nearly half of total revenue for 2023, with a year-over-year customer retention rate that was 16% higher than in 2022 [21] - The number of unique nonstop domestic routes served by Allegiant exceeded that of competitors, with 450 of the 555 routes being noncompetitive [10][16] Company Strategy and Development Direction - The company aims to grow its model, focusing on non-competitive nonstop routes, which currently make up 75% of its routes [10] - Allegiant is enhancing its operational capabilities and plans to increase peak utilization by as much as 20% compared to 2023 [15] - The company is also focused on international expansion, particularly with its joint venture partner, Viva Aerobus [16] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding labor agreements and operational performance, highlighting the importance of maintaining a reliable service in a competitive environment [6][12] - The company anticipates continued strong demand for leisure travel, particularly during peak periods, and expects to capitalize on brand awareness from events like the Super Bowl [20][19] Other Important Information - The Sunseeker Resort opened in December 2023 and is expected to contribute as much as 15 million in EBITDA in 2024 [17] - The company ended 2023 with over 1.1billionintotalliquidity,including1.1 billion in total liquidity, including 870 million in cash and investments [33] Q&A Session Summary Question: Can you provide more color on historical Q-over-Q unit revenue and expected unit costs for the first quarter? - The historical Q-over-Q unit revenue has been around 2.5% from 2011 to 2019 [39] - The first quarter is expected to have elevated unit costs year-over-year, primarily driven by wage increases for frontline labor groups [40] Question: Is there any improvement in off-peak pricing? - The spread between peak and off-peak pricing appears to be returning to pre-pandemic levels, indicating normal leisure seasonality [42] Question: How do you view margin seasonality going into Q2? - The second quarter is expected to have the best operating margin, with a clear path to increase peak capacity in the summer [45] Question: What are the financing plans for capital spending this year? - The company is exploring various financing options, including bank markets and finance leases, to support capital expenditures [49] Question: Can you provide an update on labor discussions? - The company is in federal mediation for pilot agreements and is working to address flight attendant contract issues [52] Question: What is the expected contribution from Sunseeker Resort? - The resort is still in its early stages, but management is optimistic about its performance and expects it to improve as awareness grows [56]