Allegiant Travel reports narrower profits, helped by lower fuel costs

With the threat of a pilot strike looming on the horizon, Las Vegas-based Allegiant Travel, parent company of Allegiant Air, on Wednesday reported fourth-quarter earnings that were spurred by lower fuel costs that have benefited all the nation’s airlines.

It was the 48th straight profitable quarter for Allegiant, which saw its net income narrow as a result of a charge for the write-down of the company’s fleet of six Boeing 757s.

Allegiant reported net income of $4.8 million, 27 cents a share, on revenue of $279 million for the quarter that ended Dec. 31, compared with net income of $17.5 million, 94 cents a share, on revenue of $238.5 million for the same quarter a year ago. The fleet write-down adjusted net income from $32 million, $1.83 a share.

The performance beat analysts’ estimates by 11 cents a share.

The decline in fuel prices has made the flying of Allegiant’s aging MD-80 fleet more profitable. Fourth-quarter fuel expenses decreased 12 percent, driven by a 19.9 percent decline in price per gallon offset by a 9.6 percent increase in gallons consumed.

Allegiant’s board also approved a quarterly cash dividend of 25 cents a share on Tuesday, payable March 17 to shareholders of record on March 4. That follows a special $43.7 million dividend, $2.50 a share, announced earlier in the month. In 2014, the company returned $139.1 million to shareholders through the repurchase of 1.3 million shares of stock.

The market responded late Wednesday with a 3.2 percent drop in the stock price to $176.61 a share.

Allegiant shares fell $5.81, or 3.18 percent, to close on Wednesday at $176.61 amid a late market sell-off. They fell further in after-hours trading.

Allegiant announced service to six new cities — Pittsburgh; Indianapolis; New Orleans; Omaha, Neb.; Richmond, Va.; and Jacksonville, Fla. — and 25 new routes during 2014. Six new cities and 18 new routes are planned in the first quarter of 2015.

While Allegiant continues its upward growth trajectory, analysts are keeping watch on the potential of a pilot strike.

Airline Professionals Association Teamsters Local 1224 conducted a conference call in advance of Allegiant’s earnings call Wednesday afternoon, telling analysts they’re requested a proffer of arbitration from the National Mediation Board and have conducted a strike vote among the nearly 500 pilots the union represents.

Gregory Unterseher of the Teamsters said he’s confident that the board would release the union from negotiations because of the lack of progress in collective bargaining sessions.

But in Allegiant’s earnings call, Chairman, President and CEO Maurice Gallagher said he expects both sides will be directed back to talks.

“It’s posturing by us and by the Teamsters,” said Gallagher, who said he didn’t listen to the union’s call. “They’re trying to promote their issues and are out talking to people. The rhetoric and the histrionics are distracting.”

Union officials say Allegiant management and union representatives have been at the bargaining table for 2½ years, but Gallagher said it’s not unusual for a first contract to take four years or more to complete.

Pilots voted in August 2012 for Teamster representation. Union officials say working conditions and morale fell once the vote was certified. The union said pilot benefits were reduced below prior negotiated levels, which would be a violation of the Railway Labor Act. The union sued and won a court-ordered injunction to restore benefits to previous levels, which representatives say has not occurred.

Contact reporter Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Find him on Twitter: @RickVelotta.