Amid rumblings of strike, Allegiant posts record first-quarter profits

Allegiant Travel Co. had record first-quarter earnings, but it’s the prospect of a pilot strike that held most financial analysts’ attention in Wednesday’s company conference call.

Las Vegas-based Allegiant, parent company of Allegiant Air, reported an 89.8 percent earnings increase of $64.9 million on revenue of $329.2 million compared with first-quarter 2014 earnings of $34.2 million on revenue of $302.5 million. Earnings per share more than doubled from $1.86 to $3.74.

A survey of 10 analysts anticipated the company would report earnings of $3.53 per share for the quarter that ended March 31.

Chairman and CEO Maurice Gallagher offered no preliminary remarks on the company’s 49th straight profitable quarter and the first question he fielded was on the company’s icy relations with the Airline Professionals Association Teamsters Local 1224, which has threatened to walk off the job in a dispute over pilot scheduling procedures.

“That is the elephant in the room,” Gallagher told analysts on the call.

The bottom line for company management is that it is confident it will prevail in its dispute with the union.

The company and the pilots are awaiting a decision from U.S. District Judge Andrew Gordon on Allegiant’s bid for an injunction preventing the pilots from striking.

The union and Allegiant management argued three days in court. After both sides completed their court testimony on Thursday, Gordon said he would “rule expeditiously, but not overnight.” Company officials said they are anticipating a decision from Gordon next week or the week after.

By then, the two sides presumably would be back to scheduled mediated bargaining sessions. The two sides haven’t met on a contract for six months.

The pilots are equally confident they’ve convinced Gordon that Allegiant has not returned to status-quo work rules he ordered in July 2014, particularly on pilot scheduling. The company deployed a new trip bidding system that pilots say moved it from a seniority-based preferential system to a line system that gives the pilots less say on when they fly.

The pilots also publicized a report from the Aviation Mechanics Coalition stating that Allegiant aircraft barely pass acceptable safety standards and that 38 incidents involving schedule disruptions resulting from mechanical issues have been reported in the first three months of 2015.

The company addressed the report and also stated that pilots would be eligible for pay increases as a result of the company’s financial results.

The Federal Aviation Administration has stepped up inspections in light of the company’s labor tensions — a procedure Gallagher said is routine during labor spats.

“We are not aware of any findings from the FAA related to this increased surveillance,” Gallagher said in a statement. “However, the FAA has indicated their heightened focus and surveillance associated with the labor activity will continue until the outcome of the litigation is known. While this increased surveillance is in place, the FAA has indicated it will not process any current or additional requests for work that may relate to our planned growth. At the current time, we do not expect any immediate effect on our operations.”

Gallagher also said pilots would be eligible for pay increases of 5 percent to 7 percent per hour on May 1.

“As part of our pilots’ variable pay band structure, pilot pay scales will increase,” Gallagher said.

As for Allegiant’s operations, the company is growing its East Coast market while Las Vegas route expansion is flat.

In the conference call, company officials said the rollout of Cincinnati service has been the most successful launch in the airline’s history.

The company also announced it is acquiring three used Airbus A320 series jets that will enter service for the company this year.

Allegiant stock closed down $1.10, less than 1 percent, to $167.85 on average volume trading Wednesday.

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

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