Friday, 26 July 2019

Seconrd-quarter results for Allegiant

Allegiant Travel Company  this week reported the following financial results for the second quarter 2019, as well as comparisons to the prior year:
ConsolidatedThree Months EndedJune 30,Percent Six Months Ended 
June 30,
Percent
(unaudited)2019 2018Change 2019 2018Change
Total operating revenue (millions)$491.8  $436.8 12.6% $943.4  $862.2 9.4%
Operating income (millions)108.1  74.2 45.7  199.2  154.2 29.2 
Net income (millions)70.5  50.0 41.0  127.7  105.2 21.3 
Diluted earnings per share$4.33  $3.10 39.7% $7.84  $6.52 20.2%

Airline onlyThree Months Ended 
June 30,
Percent Six Months Ended 
June 30,
Percent
(unaudited)2019 2018Change 2019 2018Change
Airline operating revenue (millions)$486.8  $434.6 12.0% $935.1  $858.9 8.9%
Airline operating income (millions)115.5  76.1 51.8  214.0  158.0 35.4 
Airline operating margin(2)23.7% 17.5%6.2  22.9% 18.4%4.5 
Airline diluted earnings per share(1)$4.81  $3.21 49.8  $8.80  $6.75 30.4 
          
Airline CASM ex fuel (cents)(1)5.65  6.02 (6.1) 6.00  6.17 (2.8)
(1) Denotes a non-GAAP financial measure. Refer to the Non-GAAP Presentation section within this document for further information.
(2) Percent point change


"I’m happy to report the second quarter of 2019 was Allegiant’s 66th consecutive profitable quarter," stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company. "We commented last quarter about the benefits of our all Airbus fleet. These benefits are continuing and increasing. We led the industry in Q1 with a 22 percent airline operating margin; this quarter the airline generated a 24 percent operating margin, a six percentage point increase from the previous year. And we accomplished these results with seven fewer aircraft this year compared to 2018. The fuel efficiencies of the Airbus continue to impress. We consumed 4.9 percent more fuel in Q2 compared to last year but produced 13.4 percent more ASMs. Correspondingly, our CASM ex-fuel declined 6.1 percent year over year. I’m comfortable stating we believe we will be the only carrier this quarter who had lower unit costs this year versus last year.
"On the revenue front, scheduled service revenue was $11 million per aircraft during the first six months of the year, over $2 million more than last year’s per aircraft revenue during the same period. Additionally, we generated approximately $3.5 million of EBITDA per aircraft in the same period or about $1.1 million greater per aircraft than the same period last year.
"Our operations continue to excel. We have solely led or tied for the industry lead in completion factor every month in 2019.  One of our challenges in the past few years has been our ability to scale our operations during our peak periods in the summer months and maintain a high completion rate.  In June 2018, we were number five in completion rate; this year we were number one. I’m happy to report we have had only ten days where we have had a mechanical cancellation since the beginning of the year.
"This combination of superior financial results and industry-leading operational performance, along with the proprietary model we have developed and continue to operate is a tribute to our excellent team members. Looking forward, we are excited about the opportunities in front of us including our ability to operate our leisure model to Mexico and the Caribbean in the coming years."
Airline operational highlights
•         Departures in the second quarter up 13.8 percent year over year despite seven fewer average aircraft in service
•         Average number of aircraft in service decreased 7.6 percent from 92 to 85 year over year
•         Spare aircraft reduced from twelve down to four spares year over year
•         Block hour utilization increased by 20.5 percent to 8.8 block hours per aircraft per day
•         Led industry in completion every month in 2019
•         Maintenance cancellations down 87.6 percent year over year
•         On time performance (A-14) for the quarter was 77.7 percent up 2.8pts year over year
•         Net promoter score is up an average of 8pts year over year
•         Irregular operation costs - second quarter down $7.2 million or 57.6 percent
Airline only second quarter 2019 results
•         Diluted earnings per share were $4.81, up 49.8 percent year over year
•         23.7 percent operating margin for the quarter and 22.9 percent year to date
•         TRASM decreased 1.6 percent on capacity growth of 13.6 percent
•         May TRASM grew 2.4 percent on 11 percent growth in ASMs
•         June TRASM grew 0.7 percent on 13.5 percent growth in ASMs
•         Total fare is down only 0.5 percent despite increasing aircraft utilization by 20.5 percent
•         Year-to-date average total fare has increased 1.0 percent to $120.49
•         Fixed fee flying revenue increased 63.2 percent
•         Fuel gallons used increased only 4.9 percent on ASM growth of 13.4 percent
•         Increase in ASMs per gallon of 8.1 percent to 82.3
•         Airline unit cost excluding fuel decreased by 6.1 percent
•         Maintenance and operational improvements were the largest drivers
Liquidity and shareholder returns
•         Total cash and investments at June 30 were $695 million
•         Paid off high yield bond balance of $102 million in July 
•         Currently, we have 26 unencumbered aircraft
•         $81 million available under the revolving credit facility
•         Returned $11 million in dividends in the second quarter
•         Expect to pay dividend of $0.70 per share on September 27, 2019 to shareholders of record as of September 20, 2019
Non-airline highlights
•         Non-airline businesses resulted in a combined operating loss of $7.4 million during second quarter
•         Evaluating strategic alternatives for Teesnap
•         Triggered the business classification of an entity held for sale in July 2019
•         SunseekerResorts FY19 CAPEX reduced to a range between $150 and $175 million
•         Operated two family entertainment centers (FEC's) during second quarter
•         Rebranded FEC’s from G4CE to Allegiant Nonstop effective June 1, 2019
Guidance, subject to revision  
   
Full year 2019 guidance PreviousCurrent
Fuel cost per gallon $2.26$2.15
Available seat miles (ASMs) / gallon 81.0 to 83.082.0 to 83.0
    
Interest expense (millions) $70 to $80$75 to $80
Tax rate 24 to 25%23 to 24%
Share count (millions)  15.9 15.9
Earnings per share $13.25 to $14.75$13.50 to $14.25
    
System ASMs - year over year change 7.5 to 9.5%8 to 9%
Scheduled service ASMs - year over year change 7.5 to 9.5%8 to 9%
    
Depreciation expense (millions) $150 to $160$155 to $160
Airline operating CASM excluding fuel - year over year change (3.5) to (1.5)%(4) to (3)%
Non airline operating income (millions) ($17) to ($12)****
    
Airline CAPEX - full year 2019   
Capital expenditures (millions) $400 to 410$385 to 390
Capitalized Airbus deferred heavy maintenance (millions) * $85 to 105$85 to 95
    
Sunseeker Resorts CAPEX   
Project to date (millions) $54$67
Expected 2019 spend (millions) $250 to 300$150 to 175
Total project spend remaining ** $416$403
    
Other CAPEX - full year 2019***   
Capital expenditures (millions) $15 to 20$15 to 20
Previous guidance as of April 24, 2019
* Not included in capital expenditure total
** Of the total remaining capex, expect to receive $175m in third party financing from an affiliate of TPG Sixth Street Partners as the last funds in the project, of which 2/3 will be non-recourse to Allegiant Travel Company
*** Includes Allegiant Nonstop
**** With Teesnap entity being held for sale, suspending guidance
Aircraft fleet plan by end of period     
      
Aircraft - (seats per AC)YE181Q192Q193Q19YE19
A319 (156 seats)32 37 37 37 38 
A320 (177/186 seats)44 47 49 53 55 
Total76 84 86 90 93 
Aircraft listed in table above include only in-service aircraft and future aircraft under contract (subject to change)
Allegiant Travel Company will host a conference call with analysts at 4:30 p.m. ET Wednesday, July 24, 2019 to discuss its second quarter 2019 financial results. A live broadcast of the conference call will be available via the Company’s Investor Relations website homepage at http://ir.allegiantair.com. The webcast will also be archived in the “Events & Presentations” section of the website.







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