Allegiant reports higher earnings than expected

By Richard N. Velotta

Monday, April 20, 2009 | 7:32 a.m.

At a glance ...

+ By passenger volume, Allegiant is the No. 7 carrier at McCarran International Airport.

+ "The first quarter was superb, with an all-time high 31.3 percent operating margin. This quarter marked a return to capacity growth after last year’s pullback, with modest growth in departures amplified by increases in passengers per departure and load factor." – Maurice Gallagher, CEO

+ Fuel prices were down nearly 50 percent for the quarter.

+ Allegiant began four new routes in the first quarter and will begin flights to its newest leisure destination market, Los Angeles, on May 1.

+ The average fare on Allegiant dropped 14.3 percent to $74.52.

+ The average number of passengers per departure was up 3.9 percent to 132.

+ The company reported 52-week stock price highs of $49.42 (April 2), $55.31 (April 13) and $55.55 (April 16) in the current quarter.

+ April 17 stock price: $52.72.

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Las Vegas-based Allegiant Travel Co., parent of Allegiant Air, the discount airline specializing in transporting small-town tourists to leisure destinations, reported unexpectedly high earnings today in a major departure from industry norms.

Allegiant, the seventh-leading passenger generator at McCarran International Airport, reported earnings of $28.2 million, $1.37 a share, on revenue of $142.1 million for the first quarter that ended March 31. That compared with $9.7 million, 47 cents a share, on revenue of $133.1 million for the same quarter a year earlier.

The results easily outpaced analysts’ expectations with an average forecast of $1.26.

Results could get even better in the second quarter.

“Looking forward, we expect second-quarter costs to be substantially lower than the prior year, both because of significantly lower fuel costs and increased utilization,” said Allegiant CEO Maurice Gallagher. “Fuel cost per passenger for the first half of April was slightly more than $26, substantially below the $62.48 we paid in the second quarter of 2008.”

But Gallagher remained conservative and offered no revenue guidance for investors because travelers continue to book much closer to the time of travel, making projections difficult.

Growth is in the forecast for the airline, which has 39 routes to Las Vegas, 30 to Orlando, 20 to Tampa Bay and 15 to suburban Phoenix. Allegiant expects second quarter year-over-year departure growth of 20 percent and third-quarter growth of 35 percent. The airline expects to operate 43 MD-80 twin-engine jets by the end of the second quarter and 45 by the end of the year, up from the existing fleet of 41.

The airline, which added four routes in the first quarter with service to Punta Gorda, Fla., near Fort Myers, will add 18 more this quarter, including 13 to its newest leisure destination at Los Angeles International Airport beginning May 1.

Although Allegiant saw its total operating revenue increase 6.7 percent in the quarter, its scheduled service revenue fell 1.7 percent and its fixed-fee contract revenue was off 29 percent, a reflection of the current economy. But the company more than made up the difference with a 52.2 percent increase in ancillary revenue.

Allegiant – one of the first to embrace an a la carte list of add-on fees – has an aggressive ancillary revenue program that generated $41.3 million in the first quarter.

With much larger Southwest Airlines reporting consecutive losses in recent quarters, Allegiant becomes one of the rarest of the rare – an airline that turns a profit. Southwest has been set back by losing money on fuel hedges recently with the plunge in oil costs.

Allegiant has no fuel hedge program in place.