Allegiant's net income slips in the second quarter

Allegiant's consolidated net income slipped to $13.7 million in the second quarter of 2024, falling 84.5% over the same period last year. The company's consolidated total operating revenues slipped a marginal 2.6% down to $666.3 million for the quarter, while its total operating expenses climbed 14.7% to $631.4 million. The travel company's consolidated operating income fell 73.8% down to $34.9 million in the quarter. Narrowing in on its airline performance, it also saw a 5% drop in revenues, reporting $649.5 million. Operating expenses for the airline climbed 8.3% to $602.5 million. ""This summer experienced increased capacity across the industry,"" said Allegiant Travel Company CEO and chairman Maurice J. Gallagher. ""While this has affected yields overall, our unique network structure has provided us with a layer of insulation."" TD Cowen analysts Helane Becker and Thomas Fitzgerald said this provides ""further evidence"" of the growing oversupply in leisure markets in the US. The airline's net income before tax was down 67.8% to $35.5 million. For the first six months of the year, the airline's net income was 12.8 million, down 91.1%. Gallagher added: ""We operate in our own swim lane with 75 percent of our routes facing no nonstop, direct competition. This number has remained virtually unchanged for over a decade and our expected growth profile maintains this non-competitive landscape."" TD Cowen analysts said: ""Management anticipates a six-point margin benefit from flying its aircraft closer to 2019 peak utilisation levels. We are not so sure. Allegiant is already experiencing pricing weakness at its current flying levels. This is in spite of mainly flying monopoly routes, or what its outgoing CEO calls 'private swim lanes'."" Gallagher will retire on September 1, 2024, and will be succeeded by the company's president Greg Anderson. The company added that it will be engaging with Prospect Hotel Advisors to ""conduct a strategic review"" of its Sunseeker resort property to improve the performance. Gallagher added: ""We now expect to receive up to $10 million of business interruption insurance for the full year 2024 due to delays in opening the resort. This will offset our expected full-year EBITDA loss of $25 million, reducing our cash loss estimate to approximately $15 million."" The Sunseeker Resort Charlotte Harbor reported a total operating revenue of $16.8 million during the second quarter with its occupancy at 35%. In its third quarter guidance for the airline, it anticipates both system and scheduled service capacity to be up around 1.3% over the previous year. Fuel costs are expected to be $2.80 per gallon. Operating margin is set to be between a negative 4.5-6.5%. The airline's loss per share, excluding special charges is forecast to be between $1.50-$2.50. The group's consolidated loss per share, excluding special charges, is anticipated to be between $2.50 and $3.50. Gallagher said: ""Looking forward to 2025, we are on track to both return to pre-pandemic utilisation levels and reduce operating inefficiencies related to Boeing's delivery delays. We now expect to receive our first aircraft in September."" The analysts commented further: ""It is quite possible that Allegiant's opportunity set is fully matured and that the airline is reaching the limits of how large a low-utilisation [ultra low-cost carrier] can be. Regardless, we struggle to see how more flying in this environment will not further degrade pricing."" They continued: ""We sense growing frustration among investors due to this disconnect as well as increasingly opaque accounting adjustments. Management needs a sustained period of execution in order to gain investor credibility."" As of June 30, 2024, the group's total available liquidity was $1.1bn, consisting of $851.1 million in cash and investments, and $275 million in undrawn revolving credit facilities. Total debt at the end of the quarter was $2.2bn and net debt was $1.4bn.