Allegiant Travel Co (ALGT) Q4 2024 Earnings Call Highlights: Strong Operational Gains Amid ...

Adjusted Operating Margin: Over 13% for the December quarter, a six and five-point increase from the previous year. Capacity Increase: 16% increase in December capacity, with aircraft utilization averaging 9.6 hours per day, a 21% year-over-year increase. Controllable Completion Rate: 99.7% during the peak holiday period. Airline Revenue: $2.44 billion for 2024, approximately 2.6% below the prior year. Fourth Quarter Airline Revenue: Nearly $610 million, up slightly year-over-year.

Net Income: $38.9 million for the fourth quarter, with earnings per share of $2.10. Full Year Net Income: $45.7 million, resulting in a consolidated EPS of $2.48. Airline Segment Net Income: $107.5 million for 2024, or $5.84 of airline-only earnings per share. EBITDA Margin: 22.8% for the fourth quarter, nearly seven points higher than the fourth quarter of 2023. Fuel Cost: Average of $2.50 per gallon for the fourth quarter.

Available Liquidity: $1.1 billion, including $833 million in cash and investments. Net Leverage: Improved to 3.2 times by the end of the year. Capital Expenditures: $326 million for the full year 2024. Aircraft Fleet: Ended the year with 125 airplanes in the operating fleet. 2025 Capacity Growth Expectation: Over 15% throughout the year.

2025 Airline EPS Guidance: $9, suggesting an improvement in earnings of over 50% compared to 2024. Warning! GuruFocus has detected 13 Warning Signs with ALGT. Release Date: February 04, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Positive Points Allegiant Travel Co (NASDAQ:ALGT) achieved an adjusted airline-only operating margin of over 13% for the December quarter, marking a significant improvement from the previous year. The company successfully increased December capacity by 16% due to improved aircraft utilization, achieving a controllable completion rate of 99.7% during peak holiday periods.

Allegiant Travel Co (NASDAQ:ALGT) introduced new max aircraft and upgraded commercial technology, leading to incremental revenue improvements expected to continue into 2025. The Allegiant Always credit card program performed well, with expectations to receive over $140 million in total remuneration during 2025. The company is optimistic about its capacity growth of over 15% throughout 2025, which is expected to enhance operational efficiency and leverage existing infrastructure. Negative Points Allegiant Travel Co (NASDAQ:ALGT) reported a decrease in total airline revenue by approximately 2.6% compared to the prior year. The company faces challenges with the Sunseeker resort, requiring a new capital partner to achieve its full potential, and has launched a competitive process for a potential sale.

There is a need for continued deleveraging efforts, as leverage remains a key focus despite improvements. The strengthening US dollar against the Canadian dollar has applied pressure on certain origination cities, impacting revenue. The company anticipates a headwind from Easter timing and a mild stage increase, which could affect revenue in the first quarter of 2025. Story Continues Q & A Highlights Q: Can you provide an overview of the capacity growth for Allegiant Travel Co across the quarters in 2025? A: Drew Wells, Chief Commercial Officer, explained that the first quarter will see approximately 14% growth, with similar growth expected in the second and third quarters, reaching the low-20s. The fourth quarter will have the lowest year-over-year growth due to comparisons with December 2024.

Growth will focus on peak months like March, June, and July, with significant increases also in shoulder months such as February, April, and August. Q: How should we think about unit cost improvements throughout 2025? A: Robert Neal, CFO, noted that unit costs will likely see the most significant year-over-year decrease in the first quarter. The second and third quarters will also show improvements, but not as pronounced due to factors like the introduction of Boeing aircraft and increased utilization of A319s. The fourth quarter will have less year-over-year improvement due to prior growth and engine sales gains in 2024. Q: What is the strategy behind paying down debt related to Sunseeker, and how is it being financed? A: Robert Neal explained that the debt was paid down to avoid upcoming amortization and to improve the balance sheet.

This was achieved through proceeds from equipment sales, improved earnings, and repayment of a loan to another entity. The focus is on maintaining flexibility and improving leverage. Q: How is Sunseeker's financial performance expected to impact Allegiant's earnings in 2025? A: Robert Neal stated that Sunseeker is expected to be EBITDA positive in the first quarter, with improvements throughout the year. However, the full-year impact on EPS is expected to be less negative than in 2024. The company is still evaluating interest expense allocations for Sunseeker.

Q: How does Allegiant plan to manage capacity if fuel prices rise significantly? A: Drew Wells mentioned that Allegiant would reduce capacity in shoulder and off-peak periods if fuel prices spike. The company would prioritize customer service and adjust supply to manage fare increases. The introduction of more fuel-efficient Boeing aircraft will also help mitigate fuel cost impacts. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus.

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