Profits drop for Allegiant Travel

Las Vegas-based Allegiant Travel Co. said Wednesday its bottom line and stock price suffered in the second quarter largely due to a sharp increase in fuel prices since last year.

Although the company's revenue increased 13.8 percent to $168.4 million in the quarter, its profit margin tightened to 16.7 percent, or $28.1 million, from 25.5 percent, or $37.8 million, in 2009.

"Revenues, while up nicely year over year, did not keep pace with the rise in fuel prices, which resulted in an operating margin below our 20 percent goal and down from our performance in the second quarter last year," Allegiant Travel Chairman and Chief Executive Officer Maurice Gallagher said in a statement.

Although profits were down for the quarter ended June 30, it was Allegiant's 30th consecutive profitable quarter and seventh in a row with a double-digit profit margin.

Quarterly net income declined 26.4 percent to $17.6 million, and diluted earnings per share dropped 25.6 percent to 87 cents per share from the $1.17 per share reported a year earlier.

The latest per-share result topped the 86 cents-per-share forecast of analysts polled by Thomson Reuters.

Cash flow, defined as earnings before interest, taxes, depreciation and amortization, dropped 19.2 percent to $36.5 million.

The company said its fuel costs per gallon increased 64 cents, or 36 percent, to $2.42 since the second quarter of 2009.

Gallagher said the company expects a stable revenue environment and fuel prices through the end of the year.

Allegiant placed its 50th MD-80 aircraft into service in June, and plans to add another by year's end. The company has nine MD-80 aircraft in storage that will meet the company's growth needs through 2012, Gallagher said.

Average stage length, the distance of any given flight, increased 5 percent to 869 miles, an increase in flight time that raises fuel and labor costs. The number of passengers increased 4.6 percent to 1.54 million as the company's routes increased to 143 from 134 prior year.

Load factor, the percentage of full seats on a given flight, increased 0.4 percentage points to 88.6 percent, which equates to a slight increase in efficiency.

Per-passenger cost, excluding fuel, increased 9.1 percent to $50.61.

Allegiant delayed its entry into the Hawaii market until 2011 while the company works to gain the proper permits from the Federal Aviation Administration. The company had previously announced it had hoped to enter Hawaii at the end of this year and bought six Boeing 757 jets to use for its new routes.

"Our efforts on the 757 certification are progressing and we hope to be permitted to start service to Hawaii sometime in the first half of 2011," Gallagher said. "We are working closely with the FAA to obtain the necessary authorizations."

For the first six months ended June 30, revenue increased 16.5 percent to $338 million from $290.1 million, and its profit margin shrunk from 28.4 percent to 19 percent.

Net income decreased 22.8 percent during the first six months to $40.2 million, and diluted earnings per share dropped to $2 per share from $2.54 prior year.

Allegiant's stock slipped $2.65 per share, or 5.75 percent, to close at $43.50 Wednesday on the Nasdaq National Market. That share price is a 17.2 percent decrease from $52.52 per share since the company paid a 75 cents dividend May 12.

Contact reporter Arnold M. Knightly at
aknightly@reviewjournal.com or 702-477-3893.