Profit up for Las Vegas-based Allegiant

By Steve Green, Richard N. Velotta

Tuesday, Jan. 27, 2009 | 8:41 a.m.

KEY HIGHLIGHTS:

• By passenger volume, Allegiant is the No. 7 carrier at McCarran International Airport.
• Lower fuel prices helped Allegiant to a record operating margin.
• The airline added 18 routes in the fourth quarter.
• This month, Allegiant entered a one-year contract to provide charter service to Gulfport, Miss.’s Beau Rivage Resort from St. Petersburg, Fla.
• “Looking forward, we are seeing a tighter booking curve, reduced passenger yields and thus a softer base air fare for our scheduled service operation. We estimate that for the first quarter of 2009, scheduled total average air fare will be down 4 percent to 6 percent over the prior year or between $4 and $7.” – Maurice Gallagher, chief executive
• Jan. 26 stock price: $37.91 (52-week high: $49.06)

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A Las Vegas-based airline today reported its quarterly profit increased as revenue rose and expenses fell.

Allegiant Travel Co., parent of Allegiant Air and Allegiant Vacations, said that for the fourth quarter ended Dec. 31 it earned $18.2 million or 88 cents per share, up from $4.8 million or 23 cents in the year-ago quarter.

Revenue increased from $101 million to $122.4 million as Allegiant sold more tickets per flight, boarding an average of 131 passengers per flight for a load factor of 89.7 percent. That's up from one year ago when the average flight carried 115 passengers for a load factor of 79.3 percent.

Allegiant's average fair increased from about $111 to about $116 while average expenses fell from about $106 to about $97. The company does not hedge fuel prices and benefitted from falling prices for aviation fuel, which ran about $1.65 per gallon in December.

Allegiant said it expects its strong performance to continue in 2009 as it expands. It expects to operate 41 aircraft by the end of the first quarter and 43 by the end of the year. The company now has 38 MD-80 planes.

In December, a 2.6 percent reduction in capacity (average seat miles) did not result in less business for the airline. Even with departures falling from 2,950 in December 2007 to 2,946 in December 2008, the number of passengers carried rose 12.6 percent to 379,907. McCarran International Airport said Allegiant carried 153,630 passengers to and from Las Vegas in December, down from 163,434 passengers in the year-ago month. The Las Vegas numbers do not include charter operations (550 passengers in December vs. 1,297 in the year-earlier month).

"We had an outstanding fourth quarter, leading to a double-digit operating margin for the year," Chairman and Chief Executive Maurice Gallagher Jr. said in a statement. "Similar to prior quarters, we had tuned the airline to handle high fuel prices in the fourth quarter, as evidenced by the year-over-year reduction in capacity, and substantial increases in passengers per departure, load factor and total average air fare. We were therefore well-positioned to benefit from the dramatic collapse in oil prices during the second half of the year."

Allegiant's fourth quarter fuel price was down 21 percent year-over-year -- 40 percent sequentially -- and helped pave the way for profit to surge close to 400 percent year-over-year, he said. Allegiant added 18 new routes in the fourth quarter.

"Looking forward, we are seeing a tighter booking curve, reduced passenger yields and thus a softer base air fare for our scheduled service operation. We estimate that for the first quarter of 2009 scheduled total average air fare (the sum of air fare plus ancillary revenue per passenger), will be down 4 percent to 6 percent over the prior year or between $4 and $7. But this decline in revenue per passenger should be more than offset by our expected reduction in fuel cost per passenger and non-fuel cost per passenger (due to increased aircraft utilization) in the first quarter," he said.

Allegiant said its board of directors authorized a share repurchase program to acquire up to $25 million of the company's common stock. This replaces a prior program the board authorized last year at this time that is expiring.

Allegiant focuses on linking small cities with big leisure destinations such as Las Vegas, Phoenix, Fort Lauderdale, Fla.; Orlando, Fla.; and Tampa Bay/St. Petersburg, Fla. It offers charter services for casinos and can bundle travel with hotel rooms, rental cars and other travel-related services.