Allegiant Travel Company Second Quarter 2014 Financial Results

Second Quarter Fully Diluted Earnings per Share of $1.86

Allegiant Travel Company (NASDAQ: ALGT) today reported the following financial results for the second quarter 2014, as well as comparisons to prior year equivalents:

* - see appendix for calculation

"We are very proud to report our 46th consecutive profitable quarter," stated Maurice J. Gallagher, Jr., Chairman and CEO of Allegiant Travel Company. "We have been working very hard to mitigate the crew training issues that have impacted us in the past two quarters. Although these issues did contribute to operational inefficiencies and incremental costs during this past quarter we are trending in the right direction and hope these issues have minimal impact in the third quarter. On a much more positive note, in June we completed multiple aircraft transactions to add 14 additional aircraft to our future fleet and raised $300 million of debt in the high yield market with very competitive terms. We could not have done this without the tremendous effort of our Team Members."

Notable company highlights

• Increased operating margin, EBITDA margin and return on capital employed versus the same time last year
• Acquired 12 incremental A319 Airbus aircraft for delivery in 2018. See table below for financial impact of this transaction
• Signed agreements to acquire one A320 and one A319 to be in service in 2015 and 2016, respectively
• Entered into a letter of intent to purchase eight A319s, previously committed to under operating leases. Two of these are currently under operating lease to Allegiant, one is expected to be delivered in 2014 and five are expected to be delivered in 2015
• In-service Airbus fleet of 10 aircraft accounted for 21.9 percent of total ASM production during the quarter
• Prepaid $121.1 million, 5.75 percent term loan facility due 2017
• Raised $300 million, 5.50 percent senior unsecured notes due 2019, corporate rating of BB- by Standard & Poor's and Ba3 by Moody's
• Raised $85.3 million collateralized by 53 MD-80 and six 757 aircraft
• Initiated service on 12 new routes in the second quarter
• Named Top-Performing Airline in North America by AVIATION WEEK for third consecutive year. The Company also has the best five-year average score of any airline worldwide, 76.9, more than 5 points higher than the second-ranked carrier

Second quarter 2014 revenue performance

• Eighteenth consecutive quarter of year-over-year growth in total fare
• Same store routes, operated in both the second quarter 2014 and 2013, generated a 5.8 percent increase in TRASM
• Florida TRASM remained flat despite 36 percent growth in capacity

ASMs = available seat miles
PRASM = scheduled passenger revenue per scheduled available seat mile
TRASM = (scheduled passenger revenue + ancillary air revenue + ancillary third party revenue) per scheduled available seat mile

Third party products performance

• Car rental net revenue increased 7.3 percent primarily driven by growth in our Florida destinations
• Hotel room night production continues to be impacted by declines in performance in the Las Vegas market. The company's prior pre-purchase agreement for discounted rooms in Las Vegas concluded in the third quarter 2013, and the rates under a new pre-purchase room agreement with the same gaming company are not as attractive due to the improved Las Vegas hotel market

* - Includes payment expenses and travel agency commissions.

Second quarter 2014 cost performance

• Total operating expense per ASM (CASM) increased 2.5 percent year over year
• CASM ex fuel was impacted by approximately $3.4 million of nonrecurring expenses in the form of aircraft sub-service, crew training and passenger displacement costs related to training and crew availability delays
• Fuel expense per ASM increased only 0.2 percent despite a 2.9 percent increase in average cost per gallon. Our fuel efficiency metrics continued to improve as gallons per passenger declined 6.8 percent and ASMs per gallon increased by 2.5 percent
• Salaries and benefits expense increased 19.3 percent versus last year primarily due to a 16.8 percent increase in the number of full time equivalent employees and $1.2 million in costs associated with an inflight "early out program". Headcount growth was mostly attributable to an increase in flight crews required to support a 5.3 percent year-over-year increase in average number of aircraft in service and flight operations and maintenance staff to support this growth
• Sales and marketing expense increased 23.1 percent from the prior year due to higher credit card fees driven by a 12.9 percent increase attributable to higher scheduled service revenue, and marketing support to launch new routes
• Depreciation and amortization expense increased 10.4 percent due to fleet growth and partial period depreciation expense related to twelve owned A319 aircraft currently on lease to a European carrier

* - Total system includes scheduled service, fixed-fee contract and non-revenue flying.

Third quarter 2014 cost trends

• CASM is expected to increase between three and five percent. This guidance assumes an average fuel cost per gallon of $3.17, same as second quarter
• CASM ex fuel is expected to increase between 8.5 and 10.5 percent
• We expect higher depreciation and amortization expense due to 12 owned aircraft currently on lease. These aircraft are not ASM producing, however, will be depreciated as if they were being operated in our scheduled service fleet. See table below for impact of non-ASM producing depreciation guidance. On a full year basis, the company expects depreciation and amortization expense between $110 and $115 thousand per in-service aircraft, per month

Balance sheet highlights

• Prepaid $121.1 million, 5.75 percent term loan facility
• Raised $300 million, 5.50 percent senior unsecured notes, corporate rating of BB- by Standard & Poor's and Ba3 by Moody's
• Assumed $142 million in debt secured by 12 A319 aircraft currently on lease to a European operator
• Raised $85.3 million through two transactions, collateralized by 53 MD-80s and six 757 aircraft
• 2014 CAPEX is now expected to be between $390 and $400 million driven by the purchase of 12 A319 aircraft on lease to a European carrier, two A320 aircraft expected to be purchased at the end of 2014, and two A319s currently operated by the company under operating lease
• The company has $68 million of share repurchase authority remaining

* - Unrestricted cash includes investments in marketable securities.

At this time, Allegiant Travel Company provides the following guidance to investors, subject to revision.

CASM ex fuel - cost per available seat mile excluding fuel expense

* - Assumed system fuel price of $3.17 per gallon

Financial detail of 12 A319 transaction

On June 13, 2014, the company announced the purchase of 12 A319 aircraft currently leased to a European low cost carrier. The table below shows the financial impact to the company as well as the estimated incremental impact on CASM ex fuel for both the third quarter, and full year of 2014

* - Lease revenue will appear as other revenue in operating revenue

Aircraft listed in table above include only in service aircraft

Allegiant Travel Company will host a conference call with analysts at 4:30 p.m. ET Wednesday, July 23, 2014 to discuss its second quarter 2014 financial results. A live broadcast of the conference call will be available via the Company's Investor Relations website homepage at http://ir.allegiant.com. The webcast will also be archived in the "Events & Presentations" section of the website.

Refer to full documentation in attachments box, located at the top left, below the headline.