Allegiant Travel Company Q2 FY2025 earnings call

• Greg highlighted a 99.9% controllable completion rate, over 5 million passengers in Q2 (a record for the quarter), 70% repeat customers, and an 8.6% airline operating margin. The MAX fleet is boosting performance, with its contribution to ASMs expected to exceed 15% by year-end. Allegiant Extra is in high demand, adding to margin and TRASM.
• Drew discussed revenue of $669 million in Q2, a 3% year-over-year increase, with TRASM down 11.2%. Capacity adjustments for the second half, focusing on aligning with demand. New markets launched, including service to Southwest Florida International and Gulf Shores. Allegiant Extra is growing, and a review of the co-branded credit card and loyalty programs is underway.
• Robert reported consolidated net income of $22.7 million and EPS of $1.23 in Q2. Special charges of $103 million related to Sunseeker were noted. The third quarter is expected to have operating losses at Sunseeker, with full-year airline-only earnings expected to be greater than $3.25 per share. Fleet plans include retiring 8 A320 family aircraft and inducting 9 MAX aircraft in 2026.

The Airline segment had net income of $34.3 million in the second quarter, with an airline operating margin of 8.6%, exceeding initial guidance. The company flew over 5 million passengers in Q2, with approximately 70% being repeat customers. The MAX fleet accounted for roughly 10% of ASMs in Q2 and is expected to exceed 15% by year-end. Second quarter airline revenue was $669 million, with TRASM at $0.1157, down 11.2% year-over-year. The Airline segment's net income contributed significantly to the overall financials, with a strong performance despite softer domestic leisure demand.

• Third quarter expected to have a consolidated loss per share of $2.25, including a loss from Sunseeker. Full-year 2025 airline-only earnings are expected to be greater than $3.25 per share, with consolidated EPS above $2.25.
• 2026 expects capacity to be relatively flat, with a higher mix of peak flying versus off-peak. Expect to retire 8 A320 family aircraft and induct 9 MAX aircraft, with a focus on revenue initiatives to improve unit revenue.

• Macro and geopolitical uncertainty impacting capacity growth expectations.
• Variability in the demand environment, particularly softer domestic leisure demand in certain periods.
• Impact of pilot deal negotiations on labor costs and operational planning.

Q: On the full year guidance, how is the Sunseeker impact factored in?

A: The guide assumes Sunseeker is excluded from earnings moving forward, with the third quarter number reflecting that, and airline-only EPS expected to be about $1.25.

Q: On Sunseeker, is the sale clean with $200 million cash proceeds?

A: Yes, Sunseeker is 100% sold to Blackstone, with $200 million in cash proceeds to be used for debt repayment.

Q: On 2026 cost execution, how to think about nonfuel costs?

A: Still determining capacity and pilot deal impact, but salaries and wages are expected to be managed, with room for cost leverage as MAX fleet grows.

Q: On RASM and CASM in Q3, how is the outlook?

A: Expect a sequential improvement in TRASM year-over-year in Q3 and Q4, but not at normal levels, with demand ramping similar to 2024.

Q: On RASM initiatives, how are they impacting?

A: Allegiant Extra is ancillary revenue, Navitaire is impacting load factor and conversion, not just ancillary per passenger lift.

Q: On booking curve and growth right to earn, how is it considered?

A: Booking curve normalized with 2024, growth considered based on margin, balance sheet, and cost of capital, focusing on strengthening core competencies.