Q1 2025 Allegiant Travel Co Earnings Call
Thank you.
Kayla: Thank you for standing by. My name is Kayla and I will be your conference operator today. At this time I would like to welcome everyone to the Allegiant Travel Company first quarter 2025 earnings call.
All lines been placed on mute to prevent any background noise.
Kayla: After the speakers are marked, there will be a question and answer session.
Kayla: If you'd like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you'd like to withdraw your question again, press the star in one. [inaudible]
Sherry Wilson: I would now like to turn the call over to Sherry Wilson, managing Director of Investor Relations, you may begin.
Sherry Wilson: Thank you, Kayla. Welcome to the Allegiant Travel Company's first quarter, 2025 earnings call. We will begin today's call with great Anderson, President and CEO , providing a high level overview of our results, along with an update on our business. We will begin today's call.
Speaker Change: Drew Wells, Chief Commercial Officer, will walk through our capacity plans and revenue performance. And finally, Robert Neal, Chief Financial Officer, will speak to our financial results and outlook.
Speaker Change: Following commentary, we will open it up to questions. We ask that you please limit yourself to one question and one follow-up. The company's comments today will contain forward-looking statements concerning our future performance and strategic plan.
Speaker Change: Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the SEC.
Speaker Change: Any forward-looking statements are based on information available to us today.
Speaker Change: We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information, or otherwise.
Speaker Change: The company cautions investors not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize.
Speaker Change: To view this earnings release as well as the rebroadcast of the call, feel free to visit the company's investor relations site at ir.allegiantair.com. And with that, I'll turn it over to Greg.
Sherry, thank you.
Greg Anderson: Before I dive in, I am pleased to announce Tyler Hollingsworth has been officially named as our Chief Operating Officer.
Greg Anderson: Over his 15 years at Allegiant, Tyler has held key roles across operations, most recently serving as interim COO, and has been instrumental in delivering the strong performance we continue to see today.
That makes Tyler an excellent fit.
Congratulations, Tyler.
Greg Anderson: Turning to the quarter, the team delivered an outstanding controllable completion rate of 99.9% on 32,000 departures.
Greg Anderson: of 14% compared to the same period last year. More than 4.4 million passengers flew our airline in a quarter, a first quarter record, with 75% being repeat customers.
Greg Anderson: Our customers recognize Allegiant's role in leisure-focused travel and consistently choose us for the distinctive value and experience we provide. This ongoing preference is evident in the strong engagement in our award-winning loyalty program, with the number of active cardholders increasing by nearly 7% year-over-year.
Greg Anderson: The solid execution of our key initiatives discussed in prior quarters helped boost financial performance improvement. We reported an airline operating margin of 9.3% during the first quarter, up 3 percentage points versus last year.
Thank you for watching. Please subscribe to my channel.
Greg Anderson: These results fell comfortably within the range of our initial guide provided in January, making us one of the few airlines to meet their initial targets.
Greg Anderson: This excellent performance demonstrates the great work done by Team Allegiant despite a challenging start to the year. I want to extend my sincere appreciation for them. Thank you.
Thank you.
Greg Anderson: In January of 2025, we turned the capacity knob up to plan for a year of strong growth. The demand backdrop was robust, and our favorable availability of crew and aircraft set us up nicely to drive meaningful margin expansion throughout the year.
Greg Anderson: However, as economic uncertainty weighed on consumer confidence and discretionary spending, we acted quickly to adapt.
Greg Anderson: Fortunately, Allegiant was built and designed with flexibility in mind. While peak leisure demand remains healthy, we responded promptly by turning the capacity knob down, primarily in the shoulder and off peak, given the demand softness that showed up during these periods.
Greg Anderson: Cost discipline is essential for us to protect margins. Aggressively managing capacity combined with additional structural cost reduction action during the quarter are expected to keep the airline solidly profitable in 2025, even in a stabilized lower demand environment. That said, we are currently seeing some improvements in our bookings.
Greg Anderson: Allegiant pioneered the successful low fare model targeting leisure travelers. Our differentiated approach allows us to not only perform better than most during downturns, but hold strong our niche in the industry.
Greg Anderson: Our airline has structural advantages, with the foundation built on the following cornerstones. First, minimizing competitive overlap with other domestic carriers, and offering a network that ensures convenient non-stop travel from the Corps Leisure Airport from CERB.
Greg Anderson: Second, a strategic design focused on tactical utilization, optimizing profitability by operating aircraft for only six to eight hours per day on average.
Greg Anderson: Third, a long-term fleet strategy centered on opportunistically acquiring and owning aircraft to support low fixed costs while building a high degree of fleet flexibility.
Greg Anderson: Lastly, maintaining an industry-leading cost structure, as most leisure travelers are highly influenced by lower fares.
Greg Anderson: For these reasons, Allegiant has been, and will continue to be, positioned uniquely. Furthermore, the execution of our key initiatives are going well, and with these initiatives are expected to further strengthen our foundation and drive margin improvement. Let me provide you with a brief update on our progress.
Earth Restoring Peak Utilization
Greg Anderson: In the first quarter, peak utilization increased by 20% compared to the previous year, and to slightly below 2019 levels. Peak leisure demand remains healthy, with same-store travel during these periods holding up well despite unmeaningful growth.
Greg Anderson: Second, fleet flexibility. We are proactively managing our aircraft to the market conditions and our strategic needs. Moreover, our fleet holds significant equity value, a value we expect to meaningfully increase as we expand our in-service max fleet.
Greg Anderson: During the first quarter, our growing cadre of MAX aircraft flew 6% of our ASMs and continues to outperform expectations operationally and financially.
Greg Anderson: By year end, we anticipate 16% of ASMs to be flown by the MAX fleet and will continue to support strengthening our differentiated model.
Greg Anderson: Third, product enhancements. Allegiant Extra is now on more than half of our fleet, a five-fold increase when compared to the first quarter of 2024, and importantly, maintaining a strong revenue premium over our standard product. Additionally, we continue to enhance our bookings and reservation system. Navitar.
Greg Anderson: These improvements have strengthened our operations and enabled us to reintroduce lost functionality and new features that are resulting in higher revenue.
and Fourth Cost Discipline.
Greg Anderson: Managing costs relentlessly is an everyday commitment to improve productivity, streamline decision making, and challenge the status quo.
Greg Anderson: Due to the recent economic downturn, material structural cost savings have already been proactively actioned, with more initiatives under review. These changes support sustainable margin growth, including adjustments in workforce alignment and enhancement through technology-enabled productivity.
Greg Anderson: And finally, Sunseeker. We are confident that our new Sunseeker resort will do well over the long term.
Greg Anderson: Some seekers' financial performance exceeded expectations during the first quarter, with EBITDA reaching $4.8 million, compared to an EBITDA loss of negative $4.6 million in the first quarter of 2024.
Greg Anderson: To that end, we recognize our core competencies lie within the airline business, where we see abundant opportunity and long-term success. Maintaining a strong industry-leading balance sheet is also a top priority of ours.
Greg Anderson: Pursuing a transaction related to the sale of the resort is an important step towards our objectives for the airline. And so we're pleased to report this process remains on track for completion this summer and we look forward to share further details when appropriate.
Greg Anderson: And I'll close where I started. In a volatile environment, consistent execution and adaptability are essential, and that's where Legion excels. Our ability to deliver strong results while maintaining operational flexibility sets us apart. The foundation of our model enables us to perform, adapt, and repeat.
Greg Anderson: As we look ahead, our True North will remain centered around expanding margins and positioning Allegiant for long-term success.
Greg Anderson: We will continue to manage capacity and cost aggressively as we closely monitor the demand environment.
Greg Anderson: And our greatest driver to success is Team Allegiant. Their dedication continues to set us apart and it is an honor to work with such a talented and inspiring team. And with that, I'll turn it over to Drew.
Drew Wells: Thank you, Greg, and thanks, everyone, for joining us this afternoon.
Drew Wells: We finished the first quarter with $668 million in airline revenue, approximately 6% above the prior year, producing a 1Q Trasm of $12.29.
Drew Wells: which was down 7.1% year-over-year, in line with our early March re-guide, and off just about a point from the initial guided figure of down just more than 6%.
Thank you.
Drew Wells: Allegiant grew total ASMs by 14.2% with stage length increasing by about 1.6%.
Drew Wells: We were able to increase aircraft utilization by approximately 19% to 7.5 hours per aircraft per day in the first quarter.
Drew Wells: Despite the growth in the quarter, utilization still remains more than 10% lower than any other reporting carrier.
Drew Wells: To expand on this a bit more, given the demand environment that existed throughout the initial capacity planning process, we grew off-peak day-a-week ASMs approximately 34% in the first quarter.
Drew Wells: Even with this growth, we still flew 73% of ASMs on the peak leisure days of Thursday, Friday, Sunday, and Monday, the highest of reporting carriers in the first quarter.
Drew Wells: As we previously communicated, 2025 growth supported growing into our infrastructure.
Drew Wells: The schedule was designed to fully leverage the existing infrastructure and, in turn, expand the margin profile.
Drew Wells: The abrupt change in demand forces to course-correct and better align our capacity with the current demand environment.
Drew Wells: We've diligently worked to find both the right price point that continues to stimulate customer demand and the right capacity to balance the overall revenue and cost outlook.
Drew Wells: Through all economic environments, Leisure customers have shown the intent to continue to travel, but typically need a lower price point to fulfill that intent.
Drew Wells: To support bookings, we've seen pressure on yields, but ancillary revenue has remained resilient.
Drew Wells: In the first quarter, our ancillary revenue per passenger of $79.28 was a record, and up nearly 5% year-over-year, primarily driven by Allegiant Xtra expansion and fully regained functionality from our Navitaire cutover in Fall 2023.
Drew Wells: Given the off-peak weakness experienced in the quarter, we focused our capacity review on shoulder season flying in May and August, and in particular, off-peak day flying in those months.
Drew Wells: More than seven and a half points of May through August capacity was removed and roughly two-thirds of that capacity came from cuts to Tuesday, Wednesday, and Saturday flying.
Drew Wells: The adjustments to peak day flying were largely driven by closure of our LAX base, a strategic decision in response to rising airport costs, along with targeted route suspensions aimed at optimizing network efficiency.
Drew Wells: Following the capacity adjustments, we anticipate 2QASMs to be up approximately 15.5% year-over-year, showcasing our continued ability to adapt and optimize in response to changing demands.
Drew Wells: Due to the timing of shifting demand trends, we had limited flexibility to adjust our April schedule.
Drew Wells: Looking ahead, while we anticipate second quarter trasm to face greater year-over-year pressure than in the first quarter, periods like Easter and peak June are expected to deliver solid performance.
Drew Wells: We will remain vigilant and flexible with capacity moving forward to remain best positioned.
Drew Wells: As we move forward, we expect to see continued strength and growth in our strategic initiatives.
Drew Wells: Nearly 65% of 2Q departures are planned to be on Allegiant Extra-Equipped Aircraft.
Drew Wells: Despite the growth in departures and route serves, we continue to see a benefit of nearly $500 per departure on flights with the seat layout.
Drew Wells: 10% of 2Q departures are expected to take place on a new Boeing MAX.
Drew Wells: To date, our capacity deployment has been done to maximize throughput of crew members completing their operating experience.
Drew Wells: Later this year, we expect to shift schedule capacity toward a more commercial-driven solution.
Drew Wells: We have lapped the first year of our Allianz Travel Insurance products and have seen the absolute contribution grow nearly 60% in April 2025 vs. April 2024.
Drew Wells: And finally, at the end of the first quarter, our co-branded Allegiant Always Beeson credit card grew cardholders approximately 11% over the last year, despite trailing 12-month ASM growth of less than 4% versus the previous 12 months.
Thank you.
Drew Wells: Additionally, consumer spend on the card was robust and outpaced 1Q year-over-year passenger growth with early indications that April remains strong as well. We look forward to continuing to grow the program alongside our partners.
Robert Neal: And now, I'd like to hand it over to Robert Neal.
Robert Neal: All right. Thank you, Drew. Good afternoon, everyone, and thank you for joining us today.
Robert Neal: I'll walk through our results and our outlook this afternoon, providing commentary on an adjusted basis, excluding any special items unless otherwise noted.
Robert Neal: For the first quarter of 2025, Allegiant Travel Company consolidated net income with $33.4 million, resulting in consolidated earnings per share of $1.81.
Robert Neal: Our airline segment reported net income of $39 million, yielding airline-only earnings per share of $2.11, placing both consolidated and airline-only EPS within our original guidance.
Robert Neal: The airline generated 121 million in EBITDA during the quarter, 25% higher than the first quarter of 2024, resulting in an EBITDA margin of 18.1%.
Robert Neal: Fuel came in at $2.61 per gallon, in line with our initial expectations. Total airline operating expenses were $606 million, approximately 2% above the first quarter of 2024, on 14% higher capacity.
Robert Neal: Excluding fuel, airline operating costs were $440 million, bringing non-fuel airline unit costs to $8.07, down 9% year-over-year, outperforming our expectations.
Robert Neal: As a reminder, CASAMEX fuel for the quarter included wage increases for our flight attendants from the April 2024 CBA, as well as approximately $20 million in costs related to our pilot retention bonus.
Thank you.
Robert Neal: The better-than-expected cost performance was attributable to various items throughout each of our cost lines, some of which are timing-related and will shift into later quarters. But I will note better-than-expected benefits from non-salary flight crew expenses and higher-than-expected gains on asset sales, both of which are reflected in the other expenses line.
Robert Neal: I'm pleased to see the cost performance coming in on plan as we benefit from better leveraging our existing infrastructure and growing into our workforce, and I'm optimistic about our cost structure looking through the rest of the year.
Thank you.
Robert Neal: Turning to the balance sheet, we ended the quarter with $1.2 billion in available liquidity comprised of $906 million in cash and investments and $275 million in undrawn revolvers.
Robert Neal: Debt repayment during the quarter was $281 million, inclusive of $246 million in prepayments and $35 million in scheduled debt repayments.
Thank you. Thank you.
Robert Neal: Net leverage improved to 2.6 turns, down from 3.2 turns at the end of 2024, driven by $191 million in cash from operations.
Robert Neal: Total debt ended at $2 billion, down 10% versus the first quarter of 2024, reflecting the final prepayment of the Sunseeker construction loan and repayment of $96 million in an unsecured bridge facility, offset by financing for four MAX aircraft deliveries.
Robert Neal: While we remain committed to investments in the business, specifically our ongoing fleet renewal, we expect to see leverage reductions in the balance of the year, with support for moderated CapEx, reduced operating expenses, and assuming we finalize a plan for Sunseeker in the coming months.
Robert Neal: As we've shared before, earning the right to grow is underpinned by balance sheet strength, which remains a top priority for our management team.
Robert Neal: Liquidity metrics remain strong with cash at 37% of trailing 12-month revenues, exclusive of $275 million in undrawn revolver capacity.
Robert Neal: Additionally, our unencumbered fleet assets carry a current market value of approximately six hundred million dollars.
Robert Neal: Capital expenditures during the quarter were $83 million, which included approximately $65 million for aircraft, engines, PDPs, and inductions, and $18 million in other airline CAPEX. Deferred heavy maintenance spend was approximately $14 million.
Thank you.
Robert Neal: On the fleet side, we retired two A320 series aircraft during the quarter and placed four 737 MAX aircraft into service, two more than previously anticipated.
Robert Neal: And we ended the quarter with 127 aircraft in the operating fleet.
Robert Neal: We're becoming increasingly confident in Boeing's ability to deliver, and we now expect 12 max deliveries during 2025, three more than our previous estimate.
Robert Neal: We've secured financing for all of our aircraft deliveries this year, with the first nine having either closed already or under definitive documentation, and the remaining three under LOI.
Robert Neal: In addition, during the second quarter, we extended $100 million of our revolving credit capacity with Credit Agricole, providing liquidity support through 2028.
Robert Neal: Notwithstanding the improved delivery performance at Boeing, we are reducing our full-year capital expenditure forecast by $80 million to $435 million at the midpoint of today's guidance.
Robert Neal: We expect aircraft-related CAPEX to come down by about $30 million from the midpoint of prior guide to approximately $270 million, as incremental aircraft delivery CAPEX is more than offset by reduction in PDP requirements from a slower delivery schedule in 2026.
Robert Neal: We're forecasting deferred heavy maintenance capex of approximately $60 million and other airline capex of approximately $105 million.
Robert Neal: Moving to our second quarter outlook.
Robert Neal: While we remain confident in the structural advantages of our model, including cost flexibility and a highly adaptable fleet. We think it's prudent to hold off on providing full year projections. So.
Robert Neal: So for the second quarter, we expect airline on the operating margin of approximately 7% at the midpoint and consolidated earnings per share of <unk> 50 with.
Robert Neal: With the airline contributing roughly $1.
Robert Neal: Our guidance today assumes a second quarter fuel cost of $2 40 per gallon.
In light of the fluid environment, we're not explicitly providing detailed unit cost guidance and our comments today that said, we do expect to perform in line with messaging provided on our February call, where we expect to see unit cost reductions throughout the year, even considering capacity reductions action to date with the first quarter delivering the straw.
Robert Neal: This year over year performance.
Robert Neal: As Greg said allegiance tactical utilization model focused exclusively on the leisure traveler has historically positioned us well during times of economic uncertainty. We expect no different this time with continued flexibility in our owned fleet as well as great opportunity in our order book.
In response to economic headlines in the challenging environment leaders from across the business have come together to implement numerous cost initiatives.
Robert Neal: <unk> early out options for certain employee groups.
Robert Neal: Closure of our crew and aircraft based in Los Angeles adjustments to overhead infrastructure and reduction of department budgets across the board in total we reduced our operating budget by more than $15 million and fixed costs and the balance of the year with the expectation to capture more than $20 million annually.
Robert Neal: Together with reduced or deferred capex, we have removed over $90 million in spend from our 2025 plan, excluding variable cost reductions from lower capacity, demonstrating the agility and responsiveness of our team.
In closing I want to thank all of our team members for their hard work and dedication not only for strong performance during the first quarter, but for coming together and making the right decisions to position a leading to outperform over the long term despite near term headwinds the strength of our model rooted in flexibility low fixed cost and bias for action provides a solid five.
Robert Neal: Nation to weather, the current environment and capitalize on future opportunities.
Robert Neal: Thank you all for your time today and with that Kayla, we can now begin the analyst questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. Please limit to one question and one follow up question.
Speaker Change: Our first question comes from the line of Duane <unk> with Evercore ISI Evercore ISI. Your line is open.
Duane: Hey, nice.
Nice to speak with you.
Speaker Change: Could you speak to I know, you're not giving full year guidance here, but just the shape of margins last year in the back half.
Speaker Change: Was was pretty variable. So maybe you could just speak in broad strokes at least on an airline normally basis.
Speaker Change: How youre thinking about that margin trajectory and specifically.
Speaker Change: The third quarter of last year, where you had a pretty decent size loss.
Speaker Change: How are you thinking about again the trajectory of margins relative to the <unk> guide that you've given here.
Greg Anderson: Hey, Duane nice to speak with you as well this is Greg why don't I kick it off and the team can add.
Speaker Change: Is there anything that I may Miss.
Speaker Change: But thank.
Speaker Change: Our true north is going to be to drive and optimize margins and so I think in the second half of the year, while we're not going to give a guide we.
Speaker Change: We will continue to aggressively manage capacity and costs.
Speaker Change: To optimize margin will have more time to adjust to the environment for drew and his team to try and optimize the capacity and also optimize the network.
Speaker Change: We will continue to assess the structural costs and if there is opportunity to pull more structural cost out of the business, we're going to continue to look at that.
Speaker Change: But to your point on the third quarter Thats generally for us in seasonally and suspend the way in the history of our model is the softest quarter of the year fourth quarter, we would see stronger earnings.
Speaker Change: In the third quarter, but we're focused on optimizing any way we can in this environment.
Speaker Change: And we're going to make the necessary decisions to do so.
Speaker Change: Going to pause there to see if drew or P. J have any other commentary on the second half.
Speaker Change: Of the year.
Speaker Change: Okay.
Speaker Change: I may just add then dwayne that we in the fourth quarter last year, we did produce I want to say it was like a 13% margin for the airline.
Speaker Change: Our goal is to continue to again optimize margins and then we will see how we can improve the third quarter, which is our quarter with the most off peak <unk>.
Speaker Change: Demand environment as we focus on the leisure customer.
Speaker Change: Got it and then maybe just on sunseeker.
Speaker Change: Can you give us an update on the on the process.
Speaker Change: And maybe timing.
Speaker Change: And then with respect to the.
Speaker Change: F&B or or out of room spend.
Speaker Change: How much of that is actually generated by customers that are staying in the resort.
Speaker Change: Versus locals and if we just think about the mix between.
Speaker Change: Room revenue and add a room revenue.
Speaker Change: Are these trends kind of.
Speaker Change: Are these trends consistent are these trends repeatable or is there something about the.
Speaker Change: First quarter that makes it a one off.
Speaker Change: Well why don't I start on the on your first question there Duane about the process and then Mike is on the call I think he can add some commentary on our second part of the question around that.
Speaker Change: Got it.
Speaker Change: Profiled F&B versus who stay in there but in terms of the process as you know we've been running a competitive process.
Speaker Change: Several months now we continue to down select along the way with the best suited Counterparties.
Speaker Change: And this includes counterparties that are well capitalized with dry powder at the meeting.
Speaker Change: We're focused on execution in this environment.
Speaker Change: But the process does remain on track to have a transaction close by this summer just given kind of the nature of the discussions we're in I should probably just leave it at that but.
Speaker Change: But the positive is we do remain on track and then Mike do you want to add.
Speaker Change: Great.
Speaker Change: <unk>.
Speaker Change: Yes, absolutely Duane the food and beverage revenues are probably 70, 30 split 70% coming from inside the hooked up to 30%.
Speaker Change: Work that we do too.
Speaker Change: To attract local to the property in terms of sustainability.
Speaker Change: The key in driving.
Speaker Change: Things in Q1, and Q2 and beyond there's been as we've talked before is really really tightly related to how will we do with group business and putting that group group business on the books in advance.
Speaker Change: In Q1, we had just about double.
Speaker Change: Versus what we had in prior year and that shows up really well in occupancy and ADR as well as in catering, which is a high margin business for us. So it's absolutely sustainable on a go forward basis, we always consider Q1 could be the strongest of the quarters in the year for sure.
Speaker Change: But that is that is the model going forward.
Speaker Change: And your next question comes from the line of Mike Lindenberg with Deutsche Bank. Your line is open.
Mike Lindenberg: Yeah, Hey, everyone.
Mike Lindenberg: Some modeling boring modeling question here.
Speaker Change: What is the underlying fuel that youre using and maybe what are you paying for jet fuel now just because it has come down so much through earnings season, and the capacity I know we started the year at 17% and then it was 13% where are we like what's a good.
Mike Lindenberg: Number for where we think your capacity is on an annual basis.
Speaker Change: Hey, Mike.
Speaker Change: On fuel until we're using $2 40.
Speaker Change: For our assumptions for the rest of the year at this point, we usually just paying to sort of what were paying immediately before the call it's pretty close to that today.
Speaker Change: And then on the capacity front jure here.
Speaker Change: Based on what's published today, what we anticipate what I think it goes on sale today or tomorrow for the last six weeks of the year.
Speaker Change: With a little bit of completion adjustment <unk> is the right number.
Speaker Change: Well, we'll see.
Speaker Change: Stay on top of that.
Greg Anderson: As we see how things progress here in the coming months, Mike its Greg.
Speaker Change: The point on that.
Speaker Change: <unk>.
Speaker Change: We're remaining very flexible, but should the demand environment not improve.
Speaker Change: Our bias up more capacity in.
Speaker Change: In the back half of the year.
Speaker Change: Okay, Great and then just as a quick follow up your other operating expenses were down pretty meaningfully I know BJ. You mentioned you ended up taking a gain.
Speaker Change: What was the I mean I didn't see it in the release and maybe you said it I apologize what is the amount on that gain and then is that as we look forward for modeling is that something we're going to continue to see in subsequent quarters. Thanks. Thanks for taking my question.
Mike Lindenberg: Thanks, Mike.
Mike Lindenberg: On the gain I don't want to give the number exactly these are from asset sales that are still happening kind of on a continued basis the fleet team.
Mike Lindenberg: Is liquidating some of the assets that we have begun to retire as these max airplanes come into service and so there is still sort of negotiated with Counterparties and whatnot.
Mike Lindenberg: We didn't disclose the gain this time like we did in the fourth quarter. So that should tell you it's not as large.
Mike Lindenberg: As as it was in the fourth quarter and then there is another meaningful good guy in the other expenses line. This year, which is a reduction in non salary flight crew expenses. So these are costs related to like crew travel and training events and things like that which was significantly lower this year and actually were elevated through all of last year.
Mike Lindenberg: Maybe lastly on the gains.
Mike Lindenberg: From sale, we don't have anything planned currently for the second quarter not to say something couldnt get done, but we don't have anything planned currently and there were some gains last year. So I would expect to see a little bit of pressure there in <unk>, but the program will continue in the back half of the year as the Max airplanes delivered.
Speaker Change: And your next question comes from the line of Catherine O'brien with Goldman Sachs. Your line is open.
Hey, good afternoon, everyone. Thanks for the time.
Speaker Change: So you called out over the last few weeks, you've seen demand stabilize and theres been some improvement over the last several days can you just give us a bit more color on that like over what period are you seeing any improvement maybe help us think about the magnitude of the step down starting in fab to stabilization and then how much.
Speaker Change: Things have improved off that bottom realizing it's a recent trend and I know you noted you know to expect a steeper RASM decline in <unk>, just trying to get a sense of how big of a step down kind of putting all of that mosaic together on trends. Thanks. So much.
Drew Wells: Yes, drew here and all and variably disappoint you by not giving you all the details youre looking for.
Speaker Change: But I mean, if you just if you just think about.
Speaker Change: Maybe size of the change in.
Speaker Change: RASM right in the last call that we'd be down just more than six.
Speaker Change: It is seven one that will be down more despite taking about five points out of the <unk> schedule. So.
Speaker Change: Theres, probably a mid accounted for all of that there's probably a mid single digit kind of kind of variance.
Speaker Change: We thought that the unit revenue production would be.
Speaker Change: So maybe read between the lines in terms of what that meant for for change in demand and then really it's been about the last week that we've seen kind of an uptick back half last week through through today is a little bit better I'll, probably stop short of magnitude of downswing upswing there.
Speaker Change: A couple of long and short of it.
Speaker Change: I guess, maybe just a quick follow up.
Speaker Change: Notable on on.
Speaker Change: <unk> seen that improvement is something regional is that close in bookings is that something beyond 30 days like any noticeable trends are it's pretty broad based.
Speaker Change: Pretty broad based in the first quarter, we or last call, we talked about Canadian border cities in particular that that stabilized I wouldn't say, it's meaningfully on the upswing, but that's at least stabilized.
Speaker Change: Seeing a little bit more come into summer a little bit less than we'd like maybe into may.
Speaker Change: But I think that bodes well and to some of the comments today around around the peak.
Speaker Change: Memorial day through through June is where we would hope to see that that lift and we're definitively still of a shoulder period here until we get to memorial day.
Speaker Change: And your next question comes from the line of Scott Group with Wolfe Research. Your line is open.
Scott Group: Hey, Thanks afternoon, just wanted to follow up there so any just.
Scott Group: Maybe I missed it in that last answer, but any directional color you can give on sort of the <unk>.
Scott Group: RASM.
Scott Group: Expectation for Q2, either sequential year over year. However, you want to think about it.
Scott Group: I'd, probably leave it where I had it in my remarks, and I will be will be down will be pressured more than we were in the first quarter on a year over year, but I think thats about it.
Scott Group: The extent of what we're sharing today.
Speaker Change: Well you just said rates are mid single digit settle a headwind of five 6% I think Scott in the second quarter is what.
Scott Group: <unk>.
Scott Group: We are estimating excuse me.
Scott Group: So I'm just wondering if you are saying that Q2 is five or six points worse than Q1.
Scott Group: No.
Scott Group: Taking relative to what we would've expected at the first quarter call that we said it would be better than where the first quarter ended up if your second quarter would be better than first and now we're on the other side of that so just trying to size the amount of the swing, which is unknown to unknown, but.
Scott Group: Yes, I think thats kind of what we're getting the plant.
Scott Group: Okay.
Scott Group: We're all you thought previously thought second quarter would be less negative than first quarter now, it's going to be more negative than first quarter and the delta between the two is about a five or six points swing, but but again, we don't know how much less negative than you. Originally thought Q2 was going to be.
Scott Group: That's right you rolled up.
Scott Group: Very well there.
Scott Group: Okay Fair enough. Okay, and then maybe just similar question around I just want to understand what you were sort of messaging is on CASM.
Scott Group: Is it.
Scott Group: Down sort of each quarter.
Scott Group: Per year of the rest of the year and anymore I don't know any more color you want to you can share on CASM.
Scott Group: Sure Scott, Yes, I just wanted to reiterate I think there was a question on the February call about sort of the cadence of CASM X through the year.
Scott Group: I think we'll maintain that although maybe not too.
Scott Group: Completely the same degree with some of the capacity pools that have taken place. So we said <unk> would be the low point in year over year cost performance, but unit cost performance will be strong throughout the year and expecting expecting unit cost to be down in the second quarter and the third quarter fourth quarter is a <unk>.
Scott Group: Little bit more challenging to remember we had a $15 million gain on sale in the fourth quarter of 2004, and we had utilization coming back up in the last few weeks of the year.
Scott Group: But feeling really good about unit cost performance.
Get the read there.
Speaker Change: Your next question comes from the line of Conor Cunningham with Melius Research. Your line is open.
Conor Cunningham: Hi, everyone. Thank you. So when I think about you guys I don't I don't necessarily view, you as someone who cares about market share as much as some of the other carriers have talked about that this earnings cycle. So I'm just trying to understand how you got to the seven and a half points of capacity that you pulled out of the market maybe like to all the questions.
Speaker Change: <unk> kind of been asked already just.
Conor Cunningham: It seems like.
Speaker Change: Your unit revenues, but deteriorating a little bit faster than you anticipate which is understandable, but why are we not pulling down more and then I'm not quite it's not quite clear to me that we're fixing in the second half issues without pulling down incrementally more from here. So just any thoughts around how you got to the 775.
Conor Cunningham: Five number in general thank you.
Francona: Yeah Francona.
Francona: So as we think about the short term kind of write catastrophe load.
Francona: We're still looking to maximize the margin profile understanding that we don't have made it quite as many levers to pull.
Francona: Broadly from from the fixed expense perspective.
Francona: So if we take a look at February about 97% of our markets cover their variable expenses. We think may is going to look somewhat similar to the similar to that maybe slightly more.
Francona: Yes.
And so that's kind of what we're targeting again right, we're targeting ensuring that the capacity. That's out there is covering the variable that will push earnings and.
Francona: By way of margin as well as high as we can.
Francona: I'm sure, we'll get some of those calls wrong, but thats kind of where we left out just taking a look at where the bookings were where we felt we were in a good place from a gross contribution.
Francona: And then of course, everything Thats spilled out from the <unk> base closure and in fact, theyre primarily through the summer, but that was the approach.
Francona: Okay and then in the second half we just carry on the second half just to hit on your point their corner around capacity.
Francona: We're monitoring the environment.
Francona: And we will but we're going to aggressively manage capacity in the second half.
Francona: Not to put words in terms of amount that we just don't have to make those decisions today on the second half, but in the coming weeks and months, we will be is that fair to start right.
Francona: Okay, and then maybe bigger picture you mentioned in the deck.
Francona: Past performance and I think that we all know your competitive advantages relative to some of these other parents out there so.
Francona: When you look at.
Francona: Potential downturn, I mean, I know what I mean.
Francona: Youre not seeing that quite yet, but a further one from here.
Francona: This cycles a lot different than prior cycles, you'll have other leisure.
Francona: The airlines that are really struggling out there and there's relative strength of the larger the larger airlines.
Francona: I'm just trying to understand on how you may approach this downturn a little bit differently. Because M&A is something that you guys would look just like what are the thought process around around a further pull back knowing that you'll be at a relative advantage to a lot of other airlines out there. Thank you.
Francona: No I appreciate that comment why don't I kick it off with an important question and I do the thing that relative to let's say prior downturns that.
Francona: The kind of foundation of a lead Gen. It's still intact, meaning I am talking about the four cornerstones that I mentioned in my script I really the network.
Francona: Tactical utilization and the flexibility within our fleet. So that gives us a lot more optionality I think to adjust to the environment.
Francona: And our infrastructure is I think you and others are aware we've been waiting for some time on the delays with the Max aircrafts, So we've been carrying and infrastructure.
Francona: Because it was larger than what we had thinking we'd have the opportunity to grow in that this year.
But with the demand environment dropping now we've already action on the infrastructure and we will continue to do so but to your point on that on your question on the industry.
Francona: I think consolidation or M&A I think we're all aligned that the industry needs by supply, particularly at the low fare space.
Francona: Leisure fares have not kept up obviously with the rising cost environment and clearly there is some low cost carriers that our models are struggling.
Francona: I think we continue to be in my opinion in a category of our own while I'll say consolidation isn't necessarily a requirement per Legion will I think we still have a great model with great assets network products has the flexibility and all of that to continue to outperform.
Francona: In a downturn and emerge in a relative stronger position.
Francona: That said, our focus is and always will be to drive shareholder value and should we should always be open to any opportunities that are in support of them.
Francona: Hey countered Vijay I would just add in.
Speaker Change: Back to your first question just to tighten up that last one I mean thats one of the reasons that you havent seen further cuts from us.
Speaker Change: The cuts that we've done to date, we believe our <unk>.
Speaker Change: Margin optimizing and doing much more than that would make us cut into our infrastructure to a place that might not put us.
Speaker Change: In such an advantageous position on the other side of all of this so we just wanted to be thinking about what we're doing today with the future in mind.
Speaker Change: Okay.
And our next question comes from the line of Andrew <unk> with Bank of America. Your line is open.
Andrew: Hey, good afternoon, everyone.
Andrew: First question might be a little bit of a stretch, but just in terms of sunseeker.
Andrew: Is there anything that youre seeing in your booking curve there maybe in the longer dated group bookings that can give you like a bit of a read in terms of how you think airline demand could trend over the rest of 2025.
Andrew: Hi.
Andrew: Yes.
Andrew: On the I don't know that we have a good answer for you on that candidly Andrew.
Andrew: What I would say, though in sunseeker, it's tough because it's more nascent right. We just opened up last year, but year over year, we've seen a lot of strength.
Andrew: On the Sunseeker side.
Andrew: Group business has been a big catalyst of that.
Andrew: And on the second quarter, I think we put out.
Andrew: Our guide was down roughly $1 million I think in EBITDA.
Andrew: A significant improvement year over year. So I think it's just a little bit difficult for us to kind of weed through just given the relatively new nature of the resort.
Andrew: But let us follow up and see if there's something we can glean from that and come back to you on maybe on the only thing I've mentioned.
Andrew: That area on the Florida, we're kind of exiting the peak season going into the off peak now is going to be tough to get a little bit of a read through from the airline side until we get that full winter schedule extended and then you'll get a bit more of a read through to the actual core peak demand for that area. So yes, it's a great point might be a little time to get back on that.
Speaker Change: No understood I knew it was a little bit of a stretch question.
Speaker Change: Again, just kind of as a follow up here just with regards to the capacity changes.
Speaker Change: Discussed on the call.
Speaker Change: I assume these are the lowest margin flying that you have some other airlines have spoken to the kind of the RASM differential of peak versus off peak any way you can help quantify that RASM differential for the routes.
Speaker Change: You've cut versus the rest of your system.
Speaker Change: I don't have that off top of my head for that.
Speaker Change: That split when we look at just overall.
Speaker Change: Through through the peak March period, I'd like I put in my remarks, it looks very much like.
Speaker Change: Like pre pandemic peak dates off peak day.
Speaker Change: So as you as you Peel that back in to what we cut back it would be.
Speaker Change: Things, we anticipate maybe a little bit weaker as you can imagine or places, where we could easily absorbed.
Speaker Change: We do believe it and I'll have a few of these in our system.
Speaker Change: Data that we can absorb onto a single with relatively little.
Speaker Change: Of revenue there.
Speaker Change: So maybe that helps a little bit.
Speaker Change: I'm not getting all the way there for you.
Speaker Change: Okay. That's all I had thank you.
Speaker Change: Thanks, Andrew.
Speaker Change: Our next question comes from Tom Fitzgerald TD Cowen Your line is open.
Tom Fitzgerald: Everyone. Thanks, so much for the time.
Tom Fitzgerald: The slides you talked about how the Max is outperforming your expectations operationally and financially I Wonder if you could give any numbers on that I can remember when the order was first place you talked about looking at it on an EBITDA per aircraft metric. So I don't know if its outperforming on your margin expectations versus the rest of the aircraft in your fleet, but any color there would be helpful.
Tom Fitzgerald: Yes, Tom Thanks, It's Craig why don't I take it and BJ may add some color if you'd like on the on.
Tom Fitzgerald: On the operational front I mean dispatch reliability is above advertise from Boeing before we place the order and it's almost a full point and maybe a little bit more than that above our system.
Average so really pleased with.
With the operational performance on the financial performance.
Tom Fitzgerald: You were alluding to this but we placed our order at a time when no one else is buying airplanes. So I was just it was timed well we believe.
Tom Fitzgerald: But in the first quarter and keep in mind, it's still early but the first quarter.
We had about I want to say, a 35% EBITDA advantage per aircraft on the on the Max fleet as compared to the <unk> hundred 20, <unk> hundred 80 seat Allegiant extra product configuration.
Tom Fitzgerald: We're seeing it perform nicely. It's still early drew mentioned this I think in his opening comments as well we haven't built the plan around the Max jet to commercialize we've been really working.
The pilots and getting them type rated and trained.
Tom Fitzgerald: Last year I think we had roughly 100 pilots are a little bit more offline waiting to be type rated.
Tom Fitzgerald: On the Max aircraft in today.
Tom Fitzgerald: Miller.
Tom Fitzgerald: All or nearly all are now through.
Tom Fitzgerald: And our clients for the most part is that fair Yeah. That's fair. So in the fall then we will begin to better commercialize the Max where we think there could even be more opportunity, but I caveat all of that with it's still early and this is the first quarter.
Tom Fitzgerald: Hey, Tom I would just add that in addition to the EBITDA performance that Greg mentioned.
Tom Fitzgerald: We've talked about depreciation expense scene.
Tom Fitzgerald: Similar to those <unk> hundred <unk> that we were adding.
Tom Fitzgerald: Kind of I'll call. It 2018, 19 timeframe and so youre seeing similar.
Tom Fitzgerald: Depreciation, but youre also seeing a benefit from the maintenance honeymoon, we haven't been adding new airplanes in a long time and so there is a meaningful benefit in maintenance on them as well.
Speaker Change: Okay. Thanks, that's really helpful color I appreciate that just as a quick follow up on the modeling side and I apologize. If you mentioned this in your prepared but on the sales and distribution line item in Opex that was down I want to make 17% was that just improvements on avatar is that.
Speaker Change: Mix of direct bookings I appreciate any any color you can provide there. Thanks again for the time everyone.
Tom Fitzgerald: Sure Tom Yes, it was a handful of things there.
Tom Fitzgerald: Some reduced spending in certain types of advertising like sponsorships, there's some improvement in credit card fees.
Tom Fitzgerald: The meaningful driver there is settlement.
Tom Fitzgerald: With one of the card processors related to processing fees going back a number of years.
Tom Fitzgerald: Yeah.
Christopher <unk>: And your next question comes from the line of Christopher <unk> with Susquehanna International Group. Your line is open.
Tom Fitzgerald: Yeah.
Tom Fitzgerald: Good afternoon.
Speaker Change: Well, let's circle back to the comments I think was from Scott on RASM. So in the prepared remarks, I heard same store RASM.
Tom Fitzgerald: I think performing.
Speaker Change: Well or up.
<unk> qualitatively more negative.
Speaker Change: Then <unk> so no we think about your route structure here your screen lower with respect to relative route overlap. So if you could perhaps if we could rank order. Your routes here what is the delta between the top quartile in bottom quartile routes.
Speaker Change: If you Wanna showed on a stage length adjusted basis, just wanted to better understand here.
Speaker Change: Given your network structure structure.
Speaker Change: Fewer overlaps how the better to kind of how that core Tyler I guess sort of rank order. However, you wanted to.
Speaker Change: Describing it is performing on a relative basis.
Speaker Change: Yes, if I remember it from Greg's remarks, you were talking to kind of a peak margin peak periods in particular, holding up quite well, which is true we're not going to sit here and say that the off peaks controls are holding up well, that's why you're seeing capacity come out in the way you have and will continue to be reviewed.
Speaker Change: I'm, not particularly interested in going through core title results here on the call.
Speaker Change: No.
Speaker Change: No.
Speaker Change: Okay.
Speaker Change: And so as a follow up on this on the shape of second half capacity any color you can provide with respect to.
Speaker Change: Mark its new route suspensions frequency and of course.
Speaker Change: Aircraft configuration that you cited earlier.
Speaker Change: So for the second half of the year, we remain.
Speaker Change: Somewhat elevated low double digits for four July.
Speaker Change: August mind, you August has come down.
Speaker Change: <unk> 15 points give or take from from what we had originally planned September I believe is in the mid to high singles.
Speaker Change: October looks quite high but remember we have a hurricane comp there that cut out a meaningful amount of capacity.
Speaker Change: Then youre kind of getting into by sending it to the holidays. That's the capacity it's going to go on sale here. This week. So we've got a lot more time to digest, what the demand environment looks like and respond accordingly, and remember we had boosted December 2024 utilization thats kind of our first peak period. So I wouldn't expect meaningful growth there, so thats kind of where we stand to.
Greg Anderson: If were published our soon to be published schedules, but as Greg mentioned, that's all very much still under review as we think about.
Speaker Change: Kind of a new route profile.
Speaker Change: We'll stay probably mid single digits, I think maybe 5% of routes that will be in a period of <unk>.
Speaker Change: Maturing so the first 12 months.
Speaker Change: The rest should be.
Speaker Change: And at the same store capacity I think we're down fourth for this year I think we've announced mid twenties number of routes that have gotten cancelled or suspended.
Speaker Change: And obviously a door is still open for more of those such that the environment calls for it.
Speaker Change: And then on aircraft configuration, sorry drew feel free data by flights on configuration. We ended 24 with 52 of our <unk> hundred Twenty's in Norwegian extra configuration at four of our Max's currently at 68, <unk> hundred 2009 matches in the fleet.
Speaker Change: And then by year end of the year I'm, showing 75, <unk> hundred <unk> extra configuration, and then all 16 matches.
Speaker Change: Less than half of whats left.
Speaker Change: Retrofitted <unk> hundred Twenty's will happen here in the next couple of weeks with the balance happening in September to round that out yes.
Speaker Change: And actually maybe just just to share if you look at the fleet plan and the earnings release for this year, we started breaking out 180 versus 180 <unk> hundred 20 to 100 ADC is the Allegiant extra configuration. So we gave a guide by quarter.
Speaker Change: Yeah.
Speaker Change: And your next question comes from the line of Dan Mckenzie with Seaport Global Your line is open.
Drew Wells: Oh, Hey, Thanks, Good afternoon, guys drew apologies for kicking the dead horse here on the recent uptick but.
Drew Wells: Does the guide embed that pickup is continuing into the month of June and I guess I'm just trying to get some.
Drew Wells: Sense of the sustainability of the current trends is that uptick just as simple as lower pricing stimulating demand further out or are you seeing it tied more to reduce say macro headline risk.
Drew Wells: Yeah. Good question so far.
Drew Wells: Fair deals have been depressed for a few months as we work to stimulate customer demand that's been successful.
Drew Wells: April sales looked really good candidly a few weeks back.
Drew Wells: So thats had definitely influence I think this is just a level deeper in terms of search traffic and overall visitation being a little bit healthier that helps drive more bookings wildfires remain.
Drew Wells: Lower as well, so a little bit of both but more recently probably being more than just based on their own.
Drew Wells: And our Q2 guide does not take into who we're not assuming any uptick in revenue.
Drew Wells: Assuming that this is continuing.
Drew Wells: Meaningfully positive fashion or something like that so thats more of a status quo kind of approach.
Drew Wells: Understood. Okay, and then I guess true Allegiant extra is on I guess over 50% of the fleet today. So I guess the question is is what does that look like at the end of the second quarter and for the full year and can you share what percent of the revenue picture It is and what rate it's growing up.
Drew Wells: I can I can try on that so.
Drew Wells: We mentioned that 65% of the second quarter departures will have a legion extra onboard.
Drew Wells: That will tick up just a little bit I believe in the third quarter.
Drew Wells: And maybe just a little bit more in the fourth.
Drew Wells: A huge number of Max is coming to the back half of the year, because it's going to be the retrofits, which takes only 15 at least the beginning of the year.
Drew Wells: So it will tick up a little bit, but I wouldn't run away with it.
Drew Wells: It's definitely out punching its weight, so remember Legion extra rolls through as an ancillary item as seat revenue and not something in the fair line.
Drew Wells: So while we don't go to that level of detail.
Drew Wells: Youre going to our pumps, 62% of departures.
Drew Wells: In terms of the contribution of a seat if that makes sense.
Drew Wells: Yeah.
Speaker Change: And I would now like to turn the call back over to Sherry Wilson.
Speaker Change: Thank you everyone for joining the call today, please feel free to reach out with questions otherwise, we'll talk to you next quarter.
Speaker Change: This concludes today's conference call you may now disconnect.
Speaker Change: Yeah.
Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Okay.