Allegiant Q4 2023 operating income falls 88% YoY to $10.6 million

Allegiant has reported a consolidated operating income of $10.6 million in the fourth quarter of 2023, a decrease of 88.1% from $89.2 million in the same period of 2022. However, the total operating revenue remained stable at $611 million, decreasing only 0.1% from $611.5 million in the same period of 2022. Net income dropped from $52.5 million in the fourth quarter 2022 to $2 million in the same period of 2023. Diluted earnings per share for the fourth quarter fell to $0.13 from $2.87 YoY. “We still have work to do to restore margins to historical levels,” said Allegiant Travel Company CEO and chairman Maurice Gallagher. “We are focused on returning to our long-term financial targets as we head into 2024.” Its consolidated performance for the year of 2023 was stronger, reporting a net income of $117.6 million up from $2.5 million in 2022. Operating revenue was up 9% from $2.3bn in 2022 to $2.5bn in 2023. Meanwhile, operating income increased from $91.6 million in 2022 to $221 million in 2023, increasing 141.3% YoY. The company’s consolidated diluted earnings per share for the year jumped from $0.14 in 2022 to $6.29 in 2023. Allegiant's airline-only results for the full year reported an operating revenue of $2.5bn up 8.9% from $2.3bn the year prior. The airline’s operating revenue saw an 83.6% increase YoY, increasing from $137 million to $251.5 million. The airline’s net income for the year saw a significant increase from $44.6 million in 2022 to $140.5 million in 2023. Gallagher said the airline will focus on restoring its peak-period utilisation and to induct its first Boeing MAX aircraft in the year ahead. Despite the manufacturing issues that have led to the Federal Aviation Administration (FAA) temporarily grounding the MAX 737 fleet following a door plug blowing out mid-flight on an Alaska Airlines flight in January 2024, Gallagher is confident the issue is temporary. “We are confident the recent issues facing the MAX will be solved by Boeing and the FAA,” said Greg Anderson, president of Allegiant on a February 5 earnings call. “The continued uncertainty around the timing of our MAX deliveries means we are being extra flexible with our 2024 capacity plans.” In a previous investor update, Allegiant had expected to receive its first 737 MAX delivery in the first week of 2024, but are now expecting to take the delivery between late March and early April. With this uncertainty surrounding the delivery, the company said it would prove difficult to ramp up flights. “Our current estimates differ from contractual commitments as we are conservatively planning to take delivery of 12 and place into service 10 737 Max 200 aircraft by the end of this year,” said Allegiant senior vice president and chief financial officer Robert Neal. Neal confirmed that the first four aircraft were committed to a financing agreement signed last year - a $412million secured hybrid term loan secured by 11 narrowbody aircraft and is structured with competitive pricing and a highly competitive LTV achieved through a A?B term loan structure. BNP Paribas underwrote the entire series A and aircraft lessor Jackson Square Aviation underwrote the entire series B. This combination of bank and lessor capital, which provided 100% financing for the aircraft garnered the deal the Airline Economics Aviation 100 Americas Overall Deal of the Year in October 2023. Neal further confirmed that the company would seek to ""tap into the bank market... and look at finance leases"" adding that the team was focused on financing products that provided a ""lot of flexibility"", indicating that further ahead it could also consider the EETC option as well. ""What all of those things have in common is those are financing products that lead the assets on the balance sheet,"" said Neal. Allegiant ended the year with just over $1.1bn in total liquidity, comprised of $870 million in cash and investments and $275 million in undrawn revolvers. Net debt at year-end was just under $1.4bn. During the year, the company prepaid approximately $210 million in 2024 debt maturities, including a $150 million payoff of senior secured notes in the fourth quarter. Allegiant senior vice president and chief revenue officer Drew Wells agreed in the earnings call that while the MAX delivery delays had posed difficulties in providing a coherent outlook for 2024, he said that the company is not “as dependent on the MAX” in reference to its summer schedule, particularly through the second and third quarter of 2024. The company aims to retire eight of its oldest A320 aircraft, down from its originally planned retirement of 11 A320 aircraft.