Q2 2026 Allegiant Travel Co Earnings Call

August 4, 2026

Speaker #1: Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Allegiant Travel Company Q2 2026 earnings call.

Operator: Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Allegiant Travel Company Second Quarter 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Sherry Wilson, Managing Director of Investor Relations. Please go ahead.

Operator: Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Allegiant Travel Company Q2 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Sherry Wilson, Managing Director of Investor Relations. Please go ahead.

Speaker #1: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.

Speaker #1: If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Sherry Wilson.

Speaker #1: Managing Director of Investor Relations, please go ahead.

Speaker #2: Thank you, and good afternoon, everyone. Welcome to Allegiant Travel Company Q2 2026 earnings call. On the call with me today are Gregory Anderson, Chief Executive Officer; Drew Wells, Chief Commercial Officer; and Robert Neal, President and Chief Financial Officer.

Sherry Wilson: Thank you, and good afternoon, everyone. Welcome to Allegiant Travel Company's Q2 2026 earnings call. On the call with me today are Greg Anderson, Chief Executive Officer, Drew Wells, Chief Commercial Officer, and Robert Neal, President and Chief Financial Officer. Earlier this afternoon, we issued our Q2 earnings release, which is available on the investor relations section of our website, along with the supplemental materials accompanying today's call. We ask that you refer to those documents as we walk through our results. The company's comments today will contain forward-looking statements, including our Q3 and full year 2026 outlook, statements regarding the integration of Sun Country and expected synergies, and other statements concerning our future performance and strategic plans. These statements are subject to risks and uncertainties, and actual results could differ materially from those anticipated.

Speaker #2: This afternoon, we issued our Q2 earnings release, which is available on the Investor Relations section of our website, along with the supplemental materials accompanying today's call.

Speaker #2: We ask that you refer to those documents as we walk through our results. The company's comments today will contain forward-looking statements, including our Q3 and full year 2026 outlook.

Speaker #2: Statements regarding the integration of Sun Country and expected synergies, and other statements concerning our future performance and strategic plans: these statements are subject to risks and uncertainties, and actual results could differ materially from those anticipated.

Speaker #2: For additional information, please refer to the Safe Harbor language in this afternoon's earnings release and our filings with the SEC. We will also be discussing non-GAAP financial measures.

Sherry Wilson: For additional information, please refer to the safe harbor language in this afternoon's earnings release and our filings with the SEC. We will also be discussing non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measures, where available, is included in the earnings release posted on our investor relations website. Before we begin, a brief note on comparability. Q2 results presented in this afternoon's earnings release include the full quarter of Allegiant, as well as Sun Country results from 13 May, the date of acquisition, through 30 June. Prior year results are Allegiant standalone. In order to provide the most meaningful commentary, some results will be discussed on an Allegiant standalone basis on today's call and will be noted as such. Outlook commentary on today's call is generally for the combined entity, unless otherwise specified.

Speaker #2: A reconciliation of these measures, to the most directly comparable GAAP measures, where available, is included in the earnings release posted on our Investor Relations website.

Speaker #2: Before we begin, a brief note on comparability. Q2 results are presented in this afternoon's earnings release, include the full quarter of Allegiant as well as Sun Country results from May 13, the date of acquisition, through June 30.

Speaker #2: Prior-year results are Allegiant standalone. In order to provide the most meaningful commentary some results will be discussed on an Allegiant standalone basis on today's call, and will be noted as such.

Speaker #2: Outlook commentary on today's call is generally for the combined entity unless otherwise specified. Finally, in order to fully outline the results of the combined entity, our prepared remarks today are a bit longer than usual.

Sherry Wilson: Finally, in order to fully outline the results of the combined entity, our prepared remarks today are a bit longer than usual. In the interest of time, we ask that each analyst limit themselves to one question. If a follow-up is required, please re-enter the question queue, and we will get to as many questions as time allows. With that, I'll turn the call to Greg.

Speaker #2: In the interest of time, we ask that each analyst limit themselves to one question. If a follow-up is required, please re-enter the question queue, and we will get to as many questions as time allows.

Speaker #2: With that, I'll turn the call over to Greg.

Speaker #3: Thank you, Sherry. And thanks to everyone joining our call. I also want to welcome the Sun Country team members who are on the call for the first time as part of the Allegiant family.

Greg Anderson: Thank you, Sherry, and thanks to everyone joining our call. I also want to welcome the Sun Country team members that are on the call for the first time as part of the Allegiant family. We are thrilled to have you with us. Let me begin with our results. Q2 delivered record quarterly revenue, with both Allegiant and Sun Country achieving year-over-year TRASM improvement of more than 20%. Importantly, unit revenue growth outpaced unit costs, driven in part by strong execution across several new commercial initiatives. This performance helped us lead the industry in operating margin for the third consecutive Q, underscoring the strength and resilience of both standalone business models and the exceptional contributions of our team members. We delivered strong operational results, including industry-leading controllable completion and mishandled bag performance, while in-flight NPS remains very healthy.

Speaker #3: We are thrilled to have you with us. So let me begin with our results. The Q2 delivered record quarterly revenue, with both Allegiant and Sun Country achieving year-over-year TRASM improvement of more than 20%.

Speaker #3: Importantly, unit revenue growth outpaced unit costs. Driven in part by strong execution across several new commercial initiatives. This performance helped us lead the industry in operating margin for the third consecutive quarter.

Speaker #3: Underscoring the strength and resilience of both standalone business models and the exceptional contributions of our team members. We delivered strong operational results, including industry-leading controllable completion and mishandled bag performance, while in-flight NPS remains very healthy.

Speaker #3: These achievements are even more impressive given we delivered them while closing the Sun Country acquisition and beginning integration. June, our first full month post-close in a peak summer demand period, was particularly strong for both companies.

Greg Anderson: These achievements are even more impressive given we delivered them while closing the Sun Country acquisition and beginning integration. June, our first full month post-closed in a peak summer demand period, was particularly strong for both companies. We are excited about what we can achieve together, we remain focused on disciplined growth from a strong operating foundation, our performance shows we are doing just that. While I'm pleased with the Q's results, I'm proud of why we believe they are sustainable. Our performance is supported by a distinct competitive moat that is difficult to replicate. First, outstanding service to our customers is the foundation of our business and is the key to building a loyal customer base that continues to fly with us. Roughly 70% of our customers are repeat flyers. Second, our operating philosophy is the engine behind our success.

Speaker #3: We are excited about what we can achieve together and we remain focused on disciplined growth from a strong operating foundation. And our performance shows we are doing just that.

Speaker #3: And so while I'm pleased with the quarter's results, I'm proud of why we believe they are sustainable. Our performance is supported by a distinct competitive moat that is difficult to replicate.

Speaker #3: First, outstanding service to our customers is the foundation of our business and is the key to building a loyal customer base that continues to fly with us.

Speaker #3: Roughly 70% of our customers are repeat flyers. Second, our operating philosophy is the engine behind our success. We run a low-utilization model, maximizing flying during high-demand periods while reducing capacity on days that do not meet our financial hurdles.

Greg Anderson: We run a low utilization model, maximizing flying during high-demand periods while reducing capacity on days that do not meet our financial hurdles. Third, owning our aircraft at attractive prices gives us significant operational flexibility and adds to our cost advantage versus our peers. MAX deliveries are contributing meaningfully to our results, with these aircraft representing 21% of scheduled service ASMs in Q2, this is up from 11% during the same period last year. Together with Sun Country, our well-timed MAX order gives us valuable aircraft access and expands our attractive route opportunities. Fourth, our deep community relationships create powerful local brand equity in markets we serve. Together, Allegiant and Sun Country are the number 1 or number 2 carriers in roughly 95% of our originating markets. Finally, our strong balance sheet is a critical advantage.

Speaker #3: Third, owning our aircraft at attractive prices gives us significant operational flexibility and adds to our cost advantage versus our peers. Max deliveries are contributing meaningfully to our results.

Speaker #3: With these aircraft representing 21% of scheduled service ASMs in Q2, up from 11% during the same period last year. Together with Sun Country, our well-timed MAX order gives us valuable aircraft access and expands our attractive route opportunities.

Speaker #3: Fourth, our deep community relationships create powerful local brand equity in markets we serve. Together, Allegiant and Sun Country are the number one or number two carriers in roughly 95% of our originating markets.

Speaker #3: A strong balance sheet is a critical advantage. Thanks to our deleveraging efforts over the past year and our combination with Sun Country, an already strong balance sheet is even stronger.

Greg Anderson: Thanks to our de-leveraging efforts over the past year and our combination with Sun Country, an already strong balance sheet is even stronger. The true sustainability of our business comes from checking all of those boxes. In short, we are better positioned today than at any point in our history. Next, I want to turn to our commercial initiatives, which are gaining real momentum. Over the past 2 years, we've modernized our commercial technology, we are now building on that foundation with enhanced digital, data, and distribution capabilities as we build greater flexibility to personalize customer offerings. Previous highlighted initiatives, such as Allegiant Extra, improved bundling, and schedule and network optimization, continue to mature and are contributing meaningfully to our TRASM outperformance. I'm also encouraged by the new initiatives our teams continue to advance. Our co-brand credit card is a clear example.

Speaker #3: The true sustainability of our business comes from checking all of those boxes. And in short, we are better positioned today than at any point in our history.

Speaker #3: Next, I want to turn to our commercial initiatives, which are gaining real momentum. Over the past two years, we've modernized our commercial technology and we are now building on that foundation.

Speaker #3: It's enhanced digital, data, and distribution capabilities as we build greater flexibility to personalize customer offerings. Previously highlighted initiatives, such as Allegiant Xtra, improved bundling, and schedule and network optimization, continue to mature and are contributing meaningfully to our TRASM outperformance.

Speaker #3: I'm also encouraged by the new initiatives our teams continue to advance. Our co-brand credit card is a clear example. With remuneration to us up 24% year-over-year, coupled with planned enhancements to this program, we remain confident we can double co-brand remuneration over time—from 5% of revenue today to 10%.

Greg Anderson: With remuneration to us up 24% year over year, coupled with planned enhancements to this program, we remain confident we can double co-brand remuneration over time from 5% of revenue today to 10%. Third-party distribution is another example. Our recently launched Expedia partnership marks Allegiant's entry into OTAs. Retaining control of our brand, product offering, and customer relationship is non-negotiable. Our direct API connection with Expedia enables us to reach new travelers while complementing, not replacing, the direct channels that remain at the core of our strategy. Additionally, building on the success of Allegiant Extra and strong demand for premium products, we recently announced plans to debut Allegiant First, which will be phased in on select aircraft in 2027. Together, these initiatives further strengthen our customer value proposition and are expected to support sustained earnings momentum in the years ahead. Turning to the integration.

Speaker #3: Third-party distribution is another example. Our recently launched Expedia partnership marks Allegiant's entry into OTAs. Retaining control of our brand, product offering, and customer relationship is non-negotiable.

Speaker #3: And our direct API connection with Expedia enables us to reach new travelers while complementing not replacing the direct channels that remain at the core of our strategy.

Speaker #3: Additionally, building on the success of Allegiant Xtra and strong demand for premium products, we recently announced plans to debut Allegiant First. Which will be phased in on select aircraft in 2027.

Speaker #3: Together, these initiatives further strengthen our customer value proposition and are expected to support sustained earnings momentum in the years ahead. Turning to the integration, the quick close of our Sun Country acquisition reflects strong team alignment and early momentum.

Greg Anderson: The quick close of our Sun Country acquisition reflects strong team alignment and early momentum. We remain very confident in the synergies we outlined, and both airlines continue to perform well independently. Importantly, we have already made some good progress with our integration. Customers can now search for flights across both airlines, access a broader range of destinations, and complete bookings through a redirect to the operating carrier. Our commercial teams are beginning to form a holistic view of the combined network with an eye towards the future of optimizing schedules and route decisions based on demand, financial returns, and the seasonal strengths of each network. Our procurement teams are finding ways to streamline the supplier base and leverage the combined company scale. In fact, in the coming days, we will integrate our Las Vegas airport real estate.

Speaker #3: We remain very confident in the synergies we outlined and both airlines continue to perform well independently. Importantly, we have already made some good progress with our integration.

Speaker #3: Customers can now search for flights across both airlines, access a broader range of destinations, and complete bookings through a redirect to the operating carrier.

Speaker #3: Our commercial teams are beginning to form a holistic view of the combined network, with an eye towards the future of optimizing schedules and route decisions based on demand, financial returns, and the seasonal strengths of each network.

Speaker #3: Our procurement teams are finding ways to streamline the supplier base and leverage the combined company scale. In fact, in the coming days, we will integrate our Las Vegas Airport real estate.

Speaker #3: On the regulatory front, we submitted our single operating certificate transition plan to the FAA and are targeting approval in the first half of 2028.

Greg Anderson: On the regulatory front, we submitted our single operating certificate transition plan to the FAA and are targeting approval in H1 2028. That said, over the past few months, Sun Country has experienced elevated pilot attrition, concentrated among its junior MSP pilots and largely driven by increased hiring at the largest carrier in the Twin Cities. In response to this attrition and elevated fuel prices, we are reducing off-peak capacity in the Twin Cities during the back half of the year. We have already taken steps to expand training classes in preparation for Q1 2027, and the supply of qualified pilots remains strong. Our training classes are full, and these pilots are scheduled to enter service later this year.

Speaker #3: That said, over the past few months, Sun Country has experienced elevated pilot attrition, concentrated among its junior MSP pilots and largely driven by increased hiring at the largest carrier in the Twin Cities.

Speaker #3: In response to this attrition, and elevated fuel prices, we are reducing off-peak capacity in the Twin Cities during the back half of the year.

Speaker #3: We have already taken steps to expand training classes and preparation for the first quarter of 2027. The supply of qualified pilots remains strong, our training classes are full, and these pilots are scheduled to enter service later this year.

Speaker #3: We are confident this capacity reduction is temporary, and we expect to grow MSP capacity in 2027 through a combination of Sun Country and Allegiant flying.

Greg Anderson: We are confident this capacity reduction is temporary, and we expect to grow MSP capacity in 2027 through a combination of Sun Country and Allegiant flying. Turning to our Allegiant pilots, we are pleased to have reached a new collective bargaining agreement with nearly 80% voting in favor. This is an important milestone that recognizes the hard work of our pilots while preserving the work rules that support our differentiated scheduling model. I want to thank both negotiating teams for their tireless work in getting this agreement across the finish line. In looking ahead, we expect unit revenue growth to be in line with Q2's 24.6% increase for Q3.

Speaker #3: Turning to our Allegiant pilots, we're pleased to have reached a new collective bargaining agreement, with nearly 80% voting in favor. This is an important milestone that recognizes the hard work of our pilots while preserving the work rules that support our differentiated scheduling model.

Speaker #3: I want to thank both negotiating teams for their tireless work in getting this agreement across the finish line. And looking ahead, we expect unit revenue growth to be in line with Q2's 24.6% increase for the third quarter.

Speaker #3: We also expect the combined company to generate an operating profit in the third quarter. A meaningful improvement from the modest operating losses reported in the same period over the last two years.

Greg Anderson: We also expect the combined company to generate an operating profit in Q3, a meaningful improvement from the modest operating losses reported in the same period over the last two years, despite much lower fuel prices at that time. As a reminder, Q3 is seasonally the weakest period for both carriers. For the full year, we continue to see broad-based demand supported by strong bookings. We will remain aggressive in managing capacity through this volatile fuel environment. As a result, we expect full-year 2026 EPS for the combined company to be at least $6 per share. This assumes fuel per gallon at $3.75 for the remainder of the year, which reflects the recent forward curve. I should note that fuel prices remain volatile. For reference, a $0.10 increase in fuel is worth roughly $0.50 of earnings per share in the combined company.

Speaker #3: Despite much lower fuel prices at that time. As a reminder, the September quarter is seasonally the weakest period for both carriers. For the full year, we continue to see broad-based demand supported by strong bookings.

Speaker #3: And we will remain aggressive in managing capacity through this volatile fuel environment. As a result, we expect full-year 2026 EPS for the combined company to be at least $6 per share.

Speaker #3: This assumes fuel per gallon at $3.75 for the remainder of the year, which reflects the recent forward curve. I should note that fuel prices remain volatile, and for reference, a $0.10 increase in fuel is worth roughly $0.50 of earnings per share in the combined company.

Speaker #3: We are proud of our ability to navigate a wide range of challenges while remaining an industry profitability leader. We remain focused on what we can control—delivering great service to our loyal customers, operating safely and reliably, maintaining capacity discipline, managing costs tightly, and seamlessly integrating Sun Country to unlock operating synergies.

Greg Anderson: We are proud of our ability to navigate a wide range of challenges while remaining an industry profitability leader. We remain focused on what we can control, delivering great service to our loyal customers, operating safely and reliably, maintaining capacity discipline, managing costs tightly, and seamlessly integrating Sun Country to unlock operating synergies. Before I hand things over, I want to again thank our team members across both airlines. This quarter, we delivered strong operating and financial results while closing a historic transaction. For the full year, we remain on track for margin expansion despite significantly higher fuel costs. Allegiant is better positioned than ever. Our commitment to building the leading leisure carrier in the US remains unwavering. Every single day, our team is focused on delivering continuous improvement.

Speaker #3: And before I hand things over, I want to again thank our team members across both airlines. This quarter, we delivered strong operating and financial results while closing a historic transaction.

Speaker #3: For the full year, we remain on track for margin expansion despite significantly higher fuel costs. Allegiant is better positioned than ever, and our commitment to building the leading leisure carrier in the US remains unwavering.

Speaker #3: Every single day, our team is focused on delivering continuous improvement. And finally, please mark your calendars for December 7 in Las Vegas, when we plan to host an Analyst Day.

Greg Anderson: Finally, please mark your calendars for 7 December in Las Vegas when we plan to host an Analyst Day. We look forward to sharing a deeper look at our business, providing an integration update, and outlining our long-term financial framework to highlight the full value of the combined company. With that, I'll turn it over to Drew to discuss our commercial performance.

Speaker #3: We look forward to sharing a deeper look at our business, providing an integration update, and outlining our long-term financial framework to highlight the full value of the combined company.

Speaker #3: With that, I'll turn it over to Drew to discuss our commercial performance.

Speaker #1: Thank you, Greg, and thanks to everyone for joining us this afternoon. Standalone Allegiant finished the second quarter with a 776 million dollars in total revenue.

Drew Wells: Thank you, Greg. Thanks to everyone for joining us this afternoon. Standalone Allegiant finished Q2 with $776 million in total revenue, up 16.1% versus the prior year. Despite 6.8% less system capacity in the quarter, we held passenger counts nearly flat. Set yet another record revenue quarter, overtaking Q1 2026. Similarly, the standalone Allegiant Q2 TRASM of $0.1442, up 24.6% year-over-year, set an all-time Allegiant best. The gains came from nearly every lever. Yields up more than 40%, load factor up approximately 4 points, and third party per passenger up more than 30%. In a quarter with many incredible revenue data points, my favorite is this. Standalone Allegiant scheduled service air revenue increased $102 million versus last year, more than covering the $99 million increase in fuel expense.

Speaker #1: Up 16.1% versus the prior year. Despite 6.8% less system capacity in the quarter, we held passenger counts nearly flat and set yet another record revenue quarter, overtaking the first quarter of 2026.

Speaker #1: Similarly, the standalone Allegiant 2Q Trazum of 14.42 cents up 24.6% year over year, set an all-time Allegiant best. The gains came from nearly every lever.

Speaker #1: Yields up more than 40%. Load factor up approximately 4 points, and third-party per-passenger up more than 30%. In a quarter with many incredible revenue data points, my favorite is this.

Speaker #1: Standalone Allegiant scheduled service air revenue increased $102 million versus last year, more than covering the $99 million increase in fuel expense. Zooming out to the combined company, we produced $943.5 million across all lines of business, including Sun Country brand contribution from May 13 close to quarter end. Highlighting some full-quarter figures for context.

Drew Wells: Zooming out to the combined company, we produced $943.5 million across all lines of business, including Sun Country brand contribution from 13 May close to quarter-end, highlighting some full-quarter figures for context. The $14.5 million standalone Allegiant fixed fee revenue was down approximately 14.7%, but in line with expectations. Standalone Sun Country fixed fee revenue of $65.7 million and Sun Country cargo revenue of $50.6 million were record quarters for standalone Sun Country for full Q2 2026. Focusing on the Sun Country brand a bit, the record cargo revenue perhaps comes as no surprise. During the Q3 2025 Sun Country earnings call, cargo expansion was discussed as a focus, and in January, we mentioned two additional airplanes coming online this summer.

Speaker #1: The $14.5 million standalone Allegiant fixed-fee revenue was down approximately 14.7%, but in line with expectations. Standalone Sun Country fixed-fee revenue of $65.7 million, and Sun Country cargo revenue of $50.6 million, were record quarters for standalone Sun Country for the full second quarter of 2026.

Speaker #1: Focusing on the Sun Country brand a bit, the record cargo revenue perhaps comes as no surprise. During the Q3 '25 Sun Country earnings call, cargo expansion was discussed as a focus, and in January we mentioned two additional airplanes coming online this summer.

Speaker #1: As a reminder, at standalone Sun Country and in the current state of integration, cargo flying is less efficient on a crew-hour basis and will typically draw from scheduled service resources during the ramp-up periods as additional aircraft enter the cargo program.

Drew Wells: As a reminder, at standalone Sun Country and in the current state of integration, cargo flying is less efficient on a crew hour basis and will typically draw from scheduled service resources during the ramp-up period as additional aircraft enter the cargo program. As a result of the additional aircraft coming online, we expect cargo revenue to ramp slightly into Q3 as compared with Q2. One final reminder on the cargo front, the program is a fuel pass-through. Fixed fee charter programs represent a fuel pass-through as well, and in combination with cargo, they provide a very predictable foundation in any environment. On top of which we can continue to drive highly flexible scheduled service options to match our capacity with demand.

Speaker #1: As a result of the additional aircraft coming online, we expect cargo revenue to ramp slightly into the third quarter as compared with the second.

Speaker #1: One final reminder on the cargo front, the program is a fuel pass-through. Fixed fee charter programs represent a fuel pass-through as well. And in combination with cargo, they provide a very predictable foundation in any environment.

Speaker #1: On top of which, we can continue to drive highly flexible scheduled service options to match our capacity with demand. Our long-term fixed fee and cargo programs including both brands constitute approximately 9% of our trailing 12-month revenue, and we opportunistically fill in the broader schedule with additional fixed fee flying.

Drew Wells: Our long-term fixed fee and cargo programs, including both brands, constitute approximately 9% of our trailing 12-month revenue, we opportunistically fill in the broader schedule with additional fixed fee flying. On the scheduled service side, the Sun Country standalone TRASM of $0.1264 was also a robust 22% higher year-over-year in the full Q2. While the commercial approach is quite similar between the brands, it is important to note that the Sun Country stage length is nearly 20% longer than the Allegiant one. In fact, when comparing the trailing 12 months, more than 85% of Sun Country brand flights are longer than the average Allegiant brand flight. Turning to the network.

Speaker #1: On the scheduled service side, the Sun Country standalone Trazum of 12.64 cents was also a robust 22% higher year over year in the full second quarter.

Speaker #1: And while the commercial approach is quite similar between the brands, it is important to note that the Sun Country stage length is nearly 20% longer than the Allegiant one.

Speaker #1: In fact, when comparing the trailing 12 months, more than 85% of Sun Country brand flights are longer than the average Allegiant brand flight. Turning to the network, as noted earlier this year, 39 markets began operation across the first two quarters of the year in the standalone Allegiant network, and represent between 9% to 10% of the second and third quarter ASMs.

Drew Wells: As noted earlier this year, 39 markets began operations across Q1 and Q2 of the year in the standalone Allegiant network and represent between 9% to 10% of the Q2 and Q3 ASMs. We are encouraged by the outperformance of the new market additions through the summer. As we look to start optimizing our combined networks into 2027, there is tremendous potential. While Allegiant's strength is connecting underserved, small, and mid-sized communities to leisure destinations, Sun Country brings a powerful position in Minneapolis-St. Paul. Together, these brands create a network that is broader, more flexible, and more resilient. The core theme through the quarter for both standalone Allegiant and standalone Sun Country networks was the continued exceptional demand. While the macro environment certainly played a role, we were very deliberate in our peak-focused schedule.

Speaker #1: We are encouraged by the outperformance of the new market additions through the summer. As we look to start optimizing our combined networks into 2027, there is tremendous potential.

Speaker #1: While Allegiant's strength is connecting underserved, small, and mid-sized communities to leisure destinations, Sun Country brings a powerful position in Minneapolis, St. Paul. Together, these brands create a network that is broader, more flexible, and more resilient.

Speaker #1: The core theme throughout the quarter for both standalone Allegiant and standalone Sun Country networks was the continued exceptional demand. And while the macro environment certainly played a role, we were very deliberate in our peak-focused schedule.

Speaker #1: Even with the overall reduction of ASMs, standalone Allegiant was able to grow peak days approximately 1%. The leisure customer remains incredibly resilient and all indications internal and external are that travel spend remains strong, even into the fall.

Drew Wells: Even with the overall reduction of 6.2% scheduled service ASMs, standalone Allegiant was able to grow peak days approximately 1%. The leisure customer remains incredibly resilient, and all indications, internal and external, are that travel spend remains strong, even into the fall. Most importantly, cash sales were up double digits through July, despite forward capacity remaining slightly down year over year. This amounts to an expectation of Q3 total revenue up approximately 16.5% against combined airline-only Q3 2025 revenue of approximately $808 million. Specific to scheduled service, we expect Q3 ASMs for the combined entity to be down approximately 5.5% from the prior year pro forma base of 6.1 billion ASMs. Two dynamics are at work in that figure. First, in response to the fuel environment, both Allegiant and Sun Country brands have reduced off-peak flying in the back half of Q3.

Speaker #1: Most importantly, cash sales were up double digits through July, despite forward capacity remaining slightly down year over year. This amounts to an expectation of third quarter total revenue of approximately 16.5% against combined airline-only third quarter 2025 revenue of approximately 808 million.

Speaker #1: Specific to scheduled service, we expect third-quarter ASMs for the combined entity to be down approximately 5.5% from the prior year pro forma base of 6.1 billion ASMs.

Speaker #1: Two dynamics are at work in that figure. First, in response to the fuel environment, both Allegiant and Sun Country brands have reduced off-peak flying in the back half of the third quarter.

Speaker #1: Second, as Greg discussed, Sun Country brand additionally pulled down September capacity in response to elevated pilot attrition and the planned increases in cargo flying.

Drew Wells: Second, as Greg discussed, Sun Country brand additionally pulled down its September capacity in response to elevated pilot attrition and the planned increases in cargo flying. On our Q1 call, I indicated standalone Allegiant capacity would be flat to slightly down in Q3. With fuel remaining elevated, standalone Allegiant will now be down a little more than 3%. No other business model is better positioned to remain flexible in sculpting a schedule to protect the best flying through peak periods and peak days of week. While fuel continues to be volatile, I expect a downward bias to Q4 ASMs for the combined airline and a full year number to be down mid-single digits. Some of the support for the Q3 unit revenue outlook will come from our first external distribution connection with Expedia. After a measured rollout, we were 100% live on 10 July.

Speaker #1: On our first quarter call, I indicated standalone Allegiant capacity would be flat to slightly down in the third quarter. With fuel remaining elevated, standalone Allegiant will now be down a little more than 3%.

Speaker #1: No other business model is better positioned to remain flexible in sculpting a schedule to protect the best flying through peak periods and peak days of week.

Speaker #1: While fuel continues to be volatile, I expect a downward bias to fourth quarter ASMs for the combined airline, and a full-year number to be down mid-single digits.

Speaker #1: Some of the support for the third quarter unit revenue outlook will come from our first external distribution connection with measured rollout, we were 100% live on July 10.

Speaker #1: In the few weeks since launch, approximately 3% of bookings have come from the Expedia network, with meaningfully more than half of bookings coming from net new customers to Allegiant.

Drew Wells: In the few weeks since launch, approximately 3% of bookings have come from the Expedia network, with meaningfully more than half of bookings coming from net new customers to Allegiant. We're thrilled with the early returns as an acquisition channel. Beyond the near-term booking contribution, the channel helps address one of the unique challenges of operating such a broad network by providing a scalable way to build awareness, attract new customers, and accelerate demand in newer markets. In past Sun Country filings, they've noted approximately 20% of bookings from external distribution, part of that coming from Expedia. We intentionally launched with a simplified airfare-only offering and over time, expect to enhance the integration with additional products and capabilities. While preserving the flexibility that has long been a hallmark of our commercial approach, in the meantime, we still maintain control of ancillary sales post-purchase for these bookings.

Speaker #1: We're thrilled with the early returns as an acquisition channel. Beyond the near-term booking contribution, the channel helps address one of the unique challenges of operating such a broad network by providing a scalable way to build awareness, attract new customers, and accelerate demand in newer markets.

Speaker #1: In past Sun Country filings, they've noted approximately 20% of bookings from external distribution as part of that coming from Expedia. We intentionally launched with a simplified airfare-only offering and, over time, expect to enhance the integration with additional products and capabilities while preserving the flexibility that has long been a hallmark of our commercial approach.

Speaker #1: In the meantime, we still maintain control of ancillary sales post-purchase for these bookings. Expedia isn't the only commercial initiative underway, however. Our Navitair platform, an initiative we've discussed at length on prior calls, is paying an added dividend in the integration.

Drew Wells: Expedia isn't the only commercial initiative underway, however. Our Navitaire platform, an initiative we've discussed at length on prior calls, is paying an added dividend in the integration. With Sun Country running on the same Navitaire passenger service system back-end, the platform combination is meaningfully simplified. Even so, we will have a lot of decisions to make around policy and product alignment in the coming weeks and months. Our move to complimentary onboard beverages is the first of those and a true win for our customers' experience onboard. While this will pose a mild near-term headwind to air ancillary revenue and commissary costs, we expect to grow Q3 air ancillary per passenger.

Speaker #1: With Sun Country running on the same Navitair passenger service system back end, the platform combination is meaningfully simplified. Even so, we will have a lot of decisions to make around policy and product alignment in the coming weeks and months.

Speaker #1: Our move to complimentary onboard beverages is the first of those, and a true win for our customers' experience onboard. And while this will pose a mild near-term headwind to air ancillary revenue and commissary costs, we expect to grow third-quarter air ancillary per passenger.

Speaker #1: That expectation comes on the heels of air ancillary per passenger being roughly flat year over year for the last four quarters, as our larger focus on conversion and, in turn, driving yield success produced the intended total revenue result.

Drew Wells: That expectation comes on the heels of air ancillary per passenger being roughly flat year-over-year for the last four quarters as our larger focus on conversion and in turn driving yield success produced the intended total revenue result. Into the Q3, the improvements Greg referred to on our product merchandising and dynamic pricing capabilities continue to mature and are beginning to impact a larger swath of bookings supporting that increase in air ancillary per passenger. Our Allegiant Allways Rewards card program contribution continues to excel. Bank compensation increased 24% versus Q2 2025, and new cardholder acquisition ramped slightly higher than that. In fact, when official numbers come across, we expect July 2026 to set a record for new accounts. We expect continued momentum into the quarter before hitting more challenging comps from the end of 2025.

Speaker #1: Into the third quarter, the improvements Greg referred to on our product merchandising and dynamic pricing capabilities continue to mature and are beginning to impact a larger swath of bookings, supporting that increase in air ancillary per passenger.

Speaker #1: Our Allegiant always rewards card program contribution continues to excel. Bank compensation increased 24% for its Q2 25, and new cardholder acquisition ramped slightly higher than that.

Speaker #1: In fact, when official numbers come across, we expect July 2026 to set a record for new accounts. We expect continued momentum into the quarter before hitting more challenging comps from the end of 2025.

Speaker #1: I expect to have more detail to speak to during our analyst day later this year. Lastly, we are excited about the recent announcement of our new premium product coming spring 2027, Allegiant First.

Drew Wells: I expect to have more detail to speak to during our Analyst Day later this year. Lastly, we are excited about the recent announcement of our new premium product coming spring 2027, Allegiant First. After Allegiant Extra exceeded our expectations by such a wide margin, this was a logical next step, and it's been a couple of years in the making. The success of Extra clearly demonstrates the value of our customers and their appetite for premium services and products. The product is based on the elements most important to those customers, as shared directly by them, including extra legroom and recline. The entire cabin will feature a new Recaro seat design with the extra cabin and main cabin each seeing improvements, including the seat cushion and power available throughout.

Speaker #1: After Allegiant Xtra exceeded our expectations by such a wide margin, this was a logical next step, and it's been a couple of years in the making.

Speaker #1: The success of Xtra clearly demonstrates the value of our customers and their appetite for premium services and products. The product is based on the elements most important to those customers, as shared directly by them, including extra legroom and recline.

Speaker #1: The entire cabin will feature a new Recaro seat design with the extra cabin and main cabin each seeing improvements, including the seat cushion and power available throughout.

Speaker #1: The new layout is a reduction of just two seats from our current 190-seat max layout, with the upside of eight premium seats. I also look forward to providing more detail, including expected economics about Allegiant First, during our analyst day.

Drew Wells: The new layout is a reduction of just two seats from our current 190-seat MAX layout with the upside of 8 premium seats. I also look forward to providing more detail, including expected economics about Allegiant First during our Analyst Day. Demand persisted through the quarter at incredible levels and looks strong into the Q3, even into the off-peak fall. When coupled with the initiatives we've talked about, we're creating significant short- and long-term tailwinds while maintaining the core scheduling flexibility principles that make the now larger Allegiant story so compelling. I'd like to thank the commercial teams that have worked so hard to deliver these incredible results and to all of our team members for making travel and experiences possible for millions. With that, I'd like to turn it to Robert.

Speaker #1: Demand persisted through the quarter, at incredible levels, and looks strong into the third quarter, even into the off-peak fall. When coupled with the initiatives we've talked about, we're creating significant short and long-term tailwinds while maintaining the core scheduling flexibility principles that make the now larger Allegiant story so compelling.

Speaker #1: I like to think the commercial teams that have worked so hard to deliver these incredible results and to all of our team members for making travel and experiences possible for millions.

Speaker #1: With that, I'd like to turn it to Robert.

Speaker #2: Thank you, Drew, and good afternoon. I appreciate everyone joining us today. 2026 has already been an eventful year, and the strength of the model is alive and well in our results.

Robert Neal: Thank you, Drew, and good afternoon. I appreciate everyone joining us today. 2026 has already been an eventful year, and the strength of the model is alive and well in our results. My comments will reference financial results on an adjusted basis, and year-over-year comps will reference prior year Allegiant Air-only results unless otherwise noted. For the Q2, the combined entity produced pre-tax income of $64.5 million, with Sun Country contributing $13.4 million during the stub period, resulting in a consolidated earnings per share of $2.19. We delivered a consolidated operating margin of 9.2%, which is the best of any US carrier this quarter, and generated nearly $158 million of EBITDA, with Sun Country contributing $29.7 million and yielding a consolidated EBITDA margin of nearly 17%.

Speaker #2: My comments will reference financial results on an adjusted basis, and year-over-year comps will reference prior-year Allegiant airline-only results unless otherwise noted. For the second quarter, the combined entity produced pre-tax income of $64.5 million, with Sun Country contributing $13.4 million during the stub period, resulting in consolidated earnings per share of $2.19.

Speaker #2: We delivered a consolidated operating margin of 9.2%, which is the best of any U.S. carrier this quarter, and generated nearly $158 million of EBITDA, with Sun Country contributing $29.7 million and yielding a consolidated EBITDA margin of nearly 17%.

Speaker #2: These results came in well ahead of our June 30th guidance update, with the outperformance driven primarily by a 6-cent improvement in fuel price, along with some non-fuel cost shifts, which I'll touch on in a moment.

Robert Neal: These results came in well ahead of our 30 June guidance update, with the outperformance driven primarily by a $0.06 improvement in fuel price, along with some non-fuel cost shifts, which I'll touch on in a moment. Drew has already covered the revenue detail, so I'll simply note that record revenue performance, cost discipline across the businesses, and strong ops execution made this quarter successful. Turning to cost, Q2 non-fuel unit costs for Allegiant on a standalone basis were $0.0817, up 6.4% year-over-year on capacity down 6.8%. CASM ex-fuel came in modestly better than we were estimating in our recent guidance update and ahead of our initial expectation for a sequential step-up from the Q1. Primary drivers of that beat included maintenance and labor expenses, some of which we expect to shift into the Q3.

Speaker #2: Drew has already covered the revenue detail, so I'll simply note that record revenue performance, cost discipline across the businesses, and strong ops execution made this quarter successful.

Speaker #2: Turning to costs, second-quarter non-fuel unit costs for Allegiant, on a standalone basis, were $8.17, up 6.4% year over year, on capacity down 6.8%.

Speaker #2: Casamex fuel came in modestly better than we were estimating in our recent guidance update and ahead of our initial expectation for a sequential step-up from the first quarter.

Speaker #2: Primary drivers of that beat included maintenance and labor expenses, some of which we expect to shift into the third quarter. Looking at the cost trajectory through the remainder of the year, as Greg noted, we are pleased to have reached a new CDA with legacy Allegiant pilots.

Robert Neal: Looking at the cost trajectory through the remainder of the year, as Greg noted, we are pleased to have reached a new CBA with legacy Allegiant pilots, providing well-deserved compensation along with other benefits. While wage rates for Allegiant pilots will step up just about 2% through the remainder of the year from the bonus rates we were accruing, these wages will now become subject to 401(k) contributions and other benefit elements, creating incremental cost pressure in the H2 at the Legacy Segment. However, we continue to expect increased crew productivity to be achieved ahead of the March peak, at which point that cost pressure should begin to abate. With the timing elements previously mentioned, removal of planned capacity from our schedules, and incremental pilot benefit cost discussed, we now expect the Q3 to mark our peak CASM ex year-over-year increase.

Speaker #2: Providing well-deserved compensation, along with other benefits. While wage rates for Allegiant pilots will step up just about 2% through the remainder of the year from the bonus rates we were accruing, these wages will now become subject to 401(k) contributions and other benefit elements, creating incremental cost pressure in the back half of the year at the legacy segment.

Speaker #2: However, we continue to expect increased crew productivity to be achieved ahead of the March peak. At which point, that cost pressure should begin to abate.

Speaker #2: With the removal of planned capacity from our schedules, and incremental pilot benefit cost discussed, we now expect the third quarter to mark our peak Casamex year-over-year increase.

Speaker #2: During the second quarter, we invested $188 million in capital expenditures on a combined basis, including $157 million in aircraft-related investments and $31 million in other CapEx.

Robert Neal: During the Q2, we invested $188 million in capital expenditures on a combined basis, including $157 million in aircraft-related investments and $31 million in other CapEx. In addition, we had $18 million of deferred heavy maintenance spend across the two airlines. For the full year, we have updated our CapEx outlook to approximately $850 million. The increase from our prior guide includes capital spending in the Sun Country Segment, as well as incremental PDP payments for future aircraft, as we've now aligned our 2027 aircraft delivery estimates to contractual commitments following the much improved delivery performance at Boeing this year. We ended the quarter in a strong financial position with total available liquidity of $1.3 billion, including $1.1 billion in cash and investments and $250 million in undrawn revolvers.

Speaker #2: In addition, we had $18 million of deferred heavy maintenance spend across the two airlines. For the full year, we have updated our CapEx outlook to approximately $850 million.

Speaker #2: The increase from our prior guide includes capital spending in the Sun Country segment, as well as incremental PDP payments for future aircraft as we've now aligned our 2027 aircraft delivery estimates to contractual commitments, following the much-improved delivery performance at Boeing this year.

Speaker #2: We ended the quarter in a strong financial position, with total available liquidity of $1.3 billion, including $1.1 billion in cash and investments, and $250 million in undrawn revolvers.

Speaker #2: Total debt at quarter end was $2.8 billion, and net debt was $1.7 billion, with pro forma net leverage of approximately $2.6 times for the combined entity.

Robert Neal: Total debt at quarter end was $2.8 billion, and net debt was $1.7 billion, with pro forma net leverage of approximately 2.6x for the combined entity. During June, we completed the refinancing and upsize of our senior secured notes, issuing $650 million in aggregate principal amount. The new notes are due in 2031 and carry a coupon of 7.125%. We were very pleased with the level of subscription and overall execution of the transaction. I want to recognize our finance, accounting, and treasury teams at both airlines for their work in getting this done and for moving at such pace during the quarter to support this right on top of the acquisition program. Reflecting the new bond terms as well as Sun Country interests, we are expecting $43 million in net interest expense in the Q3.

Speaker #2: During June, we completed the refinancing and upsizing of our senior secured notes, issuing $650 million in aggregate principal amount. The new notes are due in 2031 and carry a coupon of 7.18%.

Speaker #2: We were very pleased with the level of subscription and overall execution of the transaction. I want to recognize our finance, accounting, and treasury teams at both airlines for their work in getting this done and for moving it such pace during the quarter to support this right on top of the acquisition closing.

Speaker #2: Reflecting the new bond terms, as well as Sun Country interest, we are expecting $43 million in net interest expense in the third quarter. As we look at liquidity and leverage through year end, there are a few things to keep in mind.

Robert Neal: As we look at liquidity and leverage through year-end, there are a few things to keep in mind. First, we expect to pay out our pilot retention bonus of approximately $275 million in the coming weeks. This is inclusive of payroll taxes and will be funded from cash on the balance sheet. This is a planned, discrete use of cash that has been fully contemplated in our liquidity planning, and the balance sheet has the strength and flexibility to absorb it without the need to seek further financing commitments. Second, I wanted to touch on some of the financing commitments we've disclosed during this year.

Speaker #2: First, we expect to pay out our pilot retention bonus of approximately $275 million in the coming weeks. This amount is inclusive of payroll taxes and will be funded from cash on the balance sheet.

Speaker #2: This is a planned discrete use of cash that has been fully contemplated in our liquidity planning and the balance sheet has the strength and flexibility to absorb it without the need to seek further financing commitments.

Speaker #2: And second, I wanted to touch on some of the financing commitments we've disclosed during this year. Early in the second quarter, we took a proactive approach to liquidity planning, mindful of a sharp rise in fuel costs, the accelerated closing timeline for Sun Country, the anticipated payout of the pilot retention bonus, upcoming 2026 fleet CapEx, and the 2027 maturity of our senior secured notes.

Robert Neal: Early in Q2, we took a proactive approach to liquidity planning, mindful of a sharp rise in fuel costs and accelerated closing timeline for Sun Country, an anticipated payout of the pilot retention bonus, upcoming 2026 fleet CapEx, and the 2027 maturity of our senior secured notes. We raised more than $750 million in commitments for aircraft and PDP financing in addition to the upsized bond refinance I just mentioned. We had drawn approximately $200 million at the end of the quarter, with the remaining $550 million available for drawing into 2027 with significant flexibility. With this in mind, we do not anticipate the need for additional financing commitments until next year and currently expect remaining 2026 aircraft deliveries to be unencumbered at year-end. Taken together, we expect net leverage to move up slightly and reach its peak following payout of the retention bonus.

Speaker #2: We raised more than $750 million in commitments for aircraft and PDP financing, in addition to the upsized bond refinance I just mentioned. We had drawn approximately $200 million at the end of the quarter, with the remaining $550 million available for drawing into 2027, with significant flexibility.

Speaker #2: With this in mind, we do not anticipate the need for additional financing commitments until next year, and currently expect remaining 2026 aircraft deliveries to be unencumbered at year end.

Speaker #2: Taken together, we expect net leverage to move up slightly and reach its peak following payout of the retention bonus. Cash as a percentage of trailing 12-month pro forma revenue stood at 27%, which remains a bit higher than we need.

Robert Neal: Cash as a percentage of trailing 12-month pro forma revenues stood at 27%, which remains a bit higher than we need. You'll likely see us carry less cash on hand by year-end, especially considering pre-arranged financing. Moving to fleet. We ended the quarter with 193 aircraft in the combined operating fleet, including 105 Airbus A320 family aircraft, 66 Boeing 737 passenger aircraft, and 22 Boeing 737 cargo aircraft, which are owned or leased by our cargo customer. 69 of these airplanes are operated on the Sun Country certificate, while the remaining 124 are operated by Legacy Allegiant. We've taken delivery of 1 Boeing 737 MAX aircraft in July and expect 6 additional MAX deliveries through year-end. This will result in 6 Boeing 737 MAX aircraft entering service in H2, offset by 7 aircraft retirements, leaving the year-end operating fleet count for the combined entity at 192.

Speaker #2: So you'll likely see us carry less cash on hand by year-end, especially considering pre-arranged financing. And moving to fleet, we ended the quarter with 193 aircraft in the combined operating fleet.

Speaker #2: Including 105 A320 family aircraft, 66 737 passenger aircraft, and 22 737 cargo aircraft, which are owned or leased by our cargo customer. Sixty-nine of these airplanes are operated on the Sun Country certificate, while the remaining 124 are operated by legacy Allegiant.

Speaker #2: We've taken delivery of a single 737 MAX aircraft in July and expect six additional MAX deliveries through year end. This will result in six 737 MAX aircraft entering service in the second half, offset by seven aircraft retirements, leaving the year-end operating fleet count for the combined entity at 192.

Speaker #2: In addition, we have three 737NGs leased to other operators and scheduled to return to us through 2029. Looking further out, our 2027 MAX aircraft will deliver with the new Allegiant First configuration Drew highlighted.

Robert Neal: In addition, we have 3 737NGs leased to other operators and scheduled to return to us through 2029. Looking further out, our 2027 Boeing 737 MAX aircraft will deliver with the new Allegiant First configuration Drew highlighted. These airplanes will operate with just 2 fewer seats as compared to our existing MAXes, preserving our competitive unit cost profile while increasing our premium seat offering. At this time, we are planning for the new cabin only on new deliveries and have not yet contemplated retrofit on the in-service fleet. We can make broader fleet-wide decisions after we've taken some time to gather further information from both airlines, and we expect to update on that program at our 7 December Analyst Day. More broadly, fleet flexibility underpinned by aircraft ownership continues to be a key competitive advantage for the company. Turning to our earnings outlook.

Speaker #2: These airplanes will operate with just two fewer seats compared to our existing MAXes, preserving our competitive unit cost profile while increasing our premium seat offering.

Speaker #2: At this time, we are planning for the new cabin only on new deliveries and have not yet contemplated retrofit on the in-service fleet. We can make broader fleet-wide decisions after we've taken some time to gather further information from both airlines, and we expect to update on that program at our December 7 analyst day.

Speaker #2: More broadly, fleet flexibility, underpinned by aircraft ownership, continues to be a key competitive advantage for the company. Now turning to our earnings outlook. For the third quarter, we expect combined entity scheduled service capacity to be down approximately 5.5% year over year.

Robert Neal: For the Q3, we expect combined entity scheduled service capacity to be down approximately 5.5% year over year. Based on an assumed fuel price of $3.80 per gallon, we expect an operating margin of 2% at the midpoint and a consolidated loss per share of approximately $0.50 based on an assumed share count of 27.3 million. This guide is reflective of another quarter of margin improvement year over year, despite the significantly higher fuel price. As a reminder, the Q3 is the softest seasonal period of the year at both airlines. We are maintaining our disciplined approach to capacity with reductions focused on off-peak day of week and shoulder season flying, which ties directly to the cost cadence I discussed a moment ago. For the full year, we now expect consolidated earnings per share of greater than $6 based on an assumed share count of 23.9 million.

Speaker #2: Based on an assumed fuel price of $3.80 per gallon, we expect an operating margin of 2% at the midpoint and a consolidated loss per share of approximately 50 cents, based on an assumed share count of 27.3 million.

Speaker #2: This guide is reflective of another quarter of margin improvement year over year despite the significantly higher fuel price. As a reminder, the third quarter is the softest seasonal period of the year at both airlines.

Speaker #2: We are maintaining our disciplined approach to capacity, with reductions focused on off-peak days of the week and shoulder season flying, which ties directly to the cost cadence I discussed a moment ago.

Speaker #2: For the full year, we now expect consolidated earnings per share of greater than $6, based on an assumed share count of 23.9 million. This number assumes a fuel price per gallon of $3.80 for the third quarter and $3.70 for the fourth quarter.

Robert Neal: This number assumes a fuel price per gallon of $3.80 for the Q3 and $3.70 for the Q4. Our ability to flex capacity and respond to changing industry headwinds such as higher fuel continues to position Allegiant as the leading carrier in leisure travel. On the integration, the team is working hard to identify and capture synergies across the combined business. We remain confident in a minimum of $140 million in run rate synergies expected by 2029. As we continue working through the data, we will provide further updates on both the size and timing of synergy capture at our upcoming Analyst Day.

Speaker #2: Our ability to flex capacity and respond to changing industry headwinds, such as higher fuel, continues to position Allegiant as the leading carrier in leisure travel.

Speaker #2: On the integration, the team is working hard to identify and capture synergies across the combined business, and we remain confident in a minimum of 140 million in run-rate synergies expected by 2029.

Speaker #2: As we continue working through the data, we'll provide further updates on both the size and timing of synergy capture at our upcoming Analyst Day.

Speaker #2: In closing, I'd like to thank our more than 9,000 team members at Allegiant and Sun Country for their tremendous efforts and unwavering professionalism as we are hard at work on integrating the two airlines, while continuing to deliver unbeatable value for our customers day in and day out.

Robert Neal: In closing, I would like to thank our more than 9,000 team members at Allegiant and Sun Country for their tremendous efforts and unwavering professionalism, as we are hard at work on integrating the two airlines while continuing to deliver unbeatable value for our customers day in and day out. With that, operator, this concludes our prepared remarks. We can now begin the Q&A portion of the call.

Speaker #2: And with that, Operator, this concludes our prepared remarks. We can now begin the Q&A portion of the call.

Operator: 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. We will pause for a moment to compile the Q&A roster. Your first question comes from the line of Atul Maheswari with UBS. Your line is open.

Speaker #1: At this time, I would like to remind everyone in order to ask a question, press star, then the number 1 on your telephone keypad.

Speaker #1: We'll pause for a moment to compile the Q&A roster. And your first question, come to the line of a two-mesh buoy with UBS. Your line is open.

Speaker #3: Good evening. Thanks a lot for taking my question. I know we're not talking 2027 yet, but do you have any preliminary thoughts around capacity plans for next year?

Atul Maheswari: Good evening. Thanks a lot for taking my question. I know we're not talking 2027 yet, but do you have any preliminary thoughts around capacity plans for next year? related to that, now that the pilot deal is done, what capacity growth do you need to fully leverage cost inflation next year? Thank you.

Speaker #3: And then, related to that, now that the pilot deal is done, what capacity growth do you need to fully leverage cost inflation next year?

Speaker #3: Thank you.

Speaker #4: This is Greg. I'll kick it off. Just maybe more high level, and Drew may want to add some of his thoughts for next year.

Greg Anderson: Atul. Hey, it's Greg. I'll kick it off. Just maybe more high level, and Drew may want to add some on his thoughts for next year. The way we think about capacity at Allegiant here is that we need to earn the right to grow and that the returns and the environment, they should drive that growth. We're not just going to grow for growth's sake. I'd like to see more flying in the peak periods. I was impressed by what Drew and team have been able to do this year in 2026, where we've had less capacity overall, but in the peak periods, we were up a point in capacity. Just as a philosophy, the fleet flexibility really supports our discipline around capacity growth. Drew, you want to add anything, how you're thinking about it in the near term?

Speaker #4: But the way we think about capacity at Allegiant here is that we need to earn the right to grow, and that the returns in the environment, they should drive that growth.

Speaker #4: We're not just going to grow for growth's sake. I'd like to see more flying in the peak periods. I was impressed by what Drew and team have been able to do this year in '26, where we've had less capacity overall, but in the peak periods, we were up a point in capacity.

Speaker #4: And just as a philosophy, the fleet flexibility really supports our discipline around capacity growth. But Drew, you want to add anything? You're thinking about it in the near term?

Speaker #5: Yeah, maybe just at that kind of highest level. I think we've communicated in the past that our kind of mature run rate would be maybe in the mid-single digits to the higher single digits, such that, to Greg's point, the environment dictates.

Drew Wells: Yeah, maybe just at the highest level. I think we've communicated in the past that our mature run rate would be maybe in the mid-single digits to the higher single digits, such that, to Greg's point, the environment dictates. I think fuel will obviously be the biggest driver in how much we're able to fly next year. There's obviously some slack in the schedule relative to what we have pulled back this year. I don't know if Robert wants to talk to fleet at all, but we have a number of MAX deliveries next year, which will provide us with the ultimate flexibility on how much we'd like to grow into the year.

Speaker #5: I think fuel will obviously be the biggest driver in how much we're able to fly next year. There's obviously some slack in the schedule relative to what we have pulled back this year.

Speaker #5: And then I don't know if Robert wants to talk to fleet at all, but we have a number of MAX deliveries next year which will provide us with the ultimate flexibility on how much we'd like to grow into the year.

Speaker #4: Sure. Hey, tool. Yeah. I think we've shared in the past that 2027 is our peak year for quantity of aircraft deliveries from our firm order.

Robert Neal: Sure. Hey, Atul. Yeah, I think we've shared in the past that 2027 is our peak year for quantity of aircraft deliveries from our firm order. We do have a bit of a step-up in available fleet next year. I don't really think of that specifically as growth. I think that's just an option for growth. Like Greg said, we'll earn the right to grow based on how the business is performing, and we just have a lot of flexibility to retire some of our older aircraft.

Speaker #4: So, we do have a bit of a step-up in available fleet next year. I don't really think of that specifically as growth; I think that's an option for growth.

Speaker #4: But like Greg said, we'll earn the right to grow based on how the business is performing, and we just have a lot of flexibility to retire some of our older aircraft.

Speaker #3: Thank you.

Atul Maheswari: Thank you.

Speaker #4: Thanks for tool.

Greg Anderson: Thanks, Atul.

Speaker #1: Your next question, come to the line of Scott, group with Wolf Research. Your line is open.

Operator: Your next question comes to the line of Scott Group with Wolfe Research. Your line is open.

Scott Group: Hey, thanks. Afternoon. I'm wondering, I know the guidance was sort of all on a consolidated basis. Just, I guess, a two-parter. I know this quarter you reported consolidated but gave us a breakdown of Allegiant or Sun Country. Are you going to continue to do that for the time being? I guess, assuming that you are, any way you can help us break down some of the pieces of the guide between Allegiant and Sun Country in terms of some of the margins and earnings and maybe some of the RASM and CASM commentary, that'd be helpful. Thank you.

Speaker #6: Hey. Thanks. Afternoon. So I'm wondering, I know the guidance was sort of all on a consolidated basis just, I guess, a two-parter. I know this quarter you reported consolidated, but gave us a breakdown of Allegiant.

Speaker #6: For Sun Country, are you going to continue to do that for the time being? And I guess, assuming that you are, any way you can help us break down some of the pieces of the guide between Allegiant and Sun Country in terms of some of the margins and earnings and maybe some of the rasm and chasm commentaries, that'd be helpful.

Speaker #6: Thank you.

Speaker #5: Hey, Scott, it's BJ. Yeah, so how we reported today, I think, is how you should expect things to look—at least through the end of the year. So we would report two business segments: legacy Allegiant and Sun Country.

Robert Neal: Hey, Scott. It's BJ. How we reported today, I think is how you should expect things to look at least through the end of the year. We would report two business segments being legacy Allegiant and Sun Country. We may continue doing that through 2027. There's some materiality tests that we'd have to look at. We'll make that decision as we get closer to next year. I do think we will break out cargo expenses so that you can understand non-fuel unit costs excluding cargo across the combined entity. Did I get the question? What else am I missing? Just help on margin and guidance.

Speaker #5: We may continue doing that through 2027. There's some materiality tests that we'd have to look at. And so we'll make that decision as we get closer to next year.

Speaker #5: I do think we will continue to we will break out cargo expenses so that you can understand non-fuel unit costs excluding cargo. Across the combined entity.

Speaker #5: Did I get the question? What else am I missing? Just help on margin and guidance. Yeah. We had talked about we've talked for the last couple of quarters about moving away from providing unit metrics but maybe I'll just use this since we didn't in the prepared remarks to tell you a little bit about kind of how we're thinking about the unit cost side of things, at least for the third quarter.

Robert Neal: We've talked for the last couple of quarters about moving away from providing unit metrics. Maybe I'll just use this since we didn't in the prepared remarks to tell you a little bit about how we're thinking about the unit cost side of things, at least for Q3. Recognize that if you're looking through the guide, you're probably getting a really high all-in CASM next year over year if you're looking at that number compared to Allegiant standalone in 2025. Maybe I'll just break it out for you to tell you what we're thinking about Q3, which would be, I would expect legacy Allegiant non-fuel unit cost to be up in the 9% to 10% area. I would expect consolidated non-fuel unit costs, excluding cargo, to be up a little bit more than that. Let's call it 10% to 12%.

Speaker #5: Recognize that if you're looking through the guide, you're probably getting a really high all-in chasm X year over year if you're looking at that number compared to Allegiant standalone in 2025.

Speaker #5: So maybe I'll just break it out for you to tell you what we're thinking about the third quarter. Which would be, I would expect legacy Allegiant non-fuel unit costs to be up in the 9 to 10 percent area.

Speaker #5: And then I would expect consolidated non-fuel unit costs excluding cargo to be up a little bit more than that. Let's call it 10 to 12 percent.

Speaker #5: Now, I want to be clear, it's not a guide. It's an estimate. We're working with this information relatively fresh, but hopefully that helps a little bit with modeling.

Robert Neal: I want to be clear, it's not a guide, it's an estimate. We're working with this information relatively fresh. Hopefully that helps a little bit with modeling.

Scott Group: That does. Just as long as you're doing unit, when you talked about RASM being similar in Q3 as Q2, was that a Allegiant comment or an all-in comment?

Speaker #6: That does. And just as long as you're doing unit when you talked about rasm being similar in Q3 as Q2, was that a Allegiant comment or a all-in comment?

Speaker #5: It was a consolidated comment, though I'll peel it back one layer deeper that you're not going to see a ton of variance in the individual components.

Drew Wells: It was a consolidated comment, so I'll peel it back one layer deeper that you're not going to see a ton of variance in the individual components.

Speaker #6: Thank you, guys.

Scott Group: Thank you, guys.

Speaker #1: Your next question. Your next question, come to the line of Mike, Lichtenberg, your line is open.

Operator: Your next question.

Drew Wells: Thanks, Kyle.

Greg Anderson: Thanks, Kyle.

Drew Wells: Your next question comes to the line of Mike Linenberg. Your line is open.

Speaker #2: Yeah. Hey, good afternoon, everyone. Just three months into the merger, where are the quick wins or low-hanging fruit? What are the pain points? I know Drew, you mentioned moving into the OTA world for the first time.

Mike Linenberg: Yeah. Hey, good afternoon, everyone. Just 3 months into the merger, where are the quick wins or low-hanging fruit? What are the pain points? I know, Drew, you mentioned, moving into the OTA world for the 1st time, obviously uncharted territory for Allegiant. If you could just run through some of the, what you're seeing and maybe how things play out in this first year since you're going to maintain a separate operating certificate. Thanks.

Speaker #2: Obviously, uncharted territory for Allegiant. If you could just kind of run through some of the sort of what you're seeing and maybe how things play out in this first year since you are going to maintain a separate operating certificate.

Speaker #2: Thanks.

Greg Anderson: Mike, hey, it's Greg. Thanks for the question. I'll start it off, and Drew may want to jump in on the distribution or other elements of it. Overall, I think the integration and bringing the two companies together is off to a strong start. It's, 1st and foremost, stability above all. Both airlines are performing well operationally, financially. As we're going through the plan, we have similar cultures, which is good. We have tech systems that align several of them, so that's also very positive. I mentioned in my opening remarks some of the early progress that we've made. Some of that's around cross-selling on the websites or we filed with the FAA on our single operating certificate, although that'll take some time to work through on the procurement and supply chain side as well.

Speaker #4: Mike, hey. It's Greg. Thanks for the question. I'll start it off and Drew may want to jump in on the distribution or other elements of it.

Speaker #4: But overall, I think the integration and bringing the two companies together is off to a strong start. First and foremost, it's about stability above all—both airlines are performing well.

Speaker #4: Operationally, financially, as we're going through the plan, we have similar cultures, which is good. We have tech systems that align—several of them.

Speaker #4: So that's also very positive. I mentioned in my opening remarks some of the early progress that we've made. Some of that's around cross-selling on the websites or we filed with the FAA on our single operating certificate, although that'll take some time.

Speaker #4: To work through on the procurement and supply chain side as well. But what I'm encouraged by with the Integration Management Office, the IMO, is just even with all of that—the big milestones, which are the SOC, the PSS, or the JCBA—just the plans we have in place as we think about those. Those are a little bit longer-term.

Greg Anderson: What I'm encouraged by with the integration office, the IMO, is just even with all of that, but the big milestones, which are the SOC or the PSS or the JCBA, just the plans we have in place as we think about those. Those are a little bit longer-term, but I wanted to highlight just we have the right people in the right places with experts helping us plan out so that we can continue to integrate as smoothly as possible. Drew, any other comments you want to add?

Speaker #4: But I wanted to highlight that we have the right people in the right places, with experts helping us plan, so that we can continue to integrate as smoothly as possible.

Speaker #4: But Drew, any other comments you want to add?

Speaker #5: Yeah. Not a ton from my side. Obviously, the Expedia process, we had started well before we knew we'd be coming together through the acquisition.

Drew Wells: Not a ton from my side. Obviously, the Expedia process we had started well before we knew we'd be coming together through the acquisition. I think it's going to be very helpful as we think about combining some of the commercial processes and some of the connectivity we'll need to fully optimize what we'd like to do. Just yet, the teams coming together and having a unique perspective on how to accomplish a lot of the same goals has led to some really fun debates, and I think it's going to lead to some really incredible results as we can get from planning into the execution. Really excited where this is going to go.

Speaker #5: I think it's going to be very helpful as we think about combining some of the commercial processes and some of the connectivity we'll need to fully optimize what we'd like to do.

Speaker #5: But just, yeah, the teams coming together and having kind of a unique perspective on how to accomplish a lot of the same goals has led to some really fun debates and I think is going to lead to some really incredible results as we can get from planning into execution.

Speaker #5: So really excited where this is going to go.

Speaker #2: Great. Thanks.

Mike Linenberg: Great. Thanks.

Speaker #4: Thanks, Mike.

Greg Anderson: Thanks, Mike.

Speaker #1: Your next question, come to the line of John Godin, with Citigroup, your line is open.

Operator: Your next question comes from the line of Jon Godin with Citigroup. Your line is open.

Speaker #3: Hey, guys. This is Max on for John. Thanks for taking my question. I wanted to plug into your fleet strategy at large a bit.

[Analyst] (Citigroup): Hey, guys. This is Max on for Jon. Thanks for taking my question. I wanted to plug into your fleet strategy at large a bit. Can you speak a bit more on the delivery cadence of the 737s through 2027 and the incremental margin you're expecting from these aircraft in the short to medium term? If you can provide some of the contours around fuel efficiency, capacity contributions, and segmentation benefits you expect from these aircraft, including the Allegiant First? Thanks.

Speaker #3: Can you speak a bit more on the delivery cadence of the 737s? Kind of through '27 and the incremental margin you're expecting from these aircraft, kind of in the short to medium term?

Speaker #3: And if you can provide some of the contours around fuel efficiency, capacity contributions, and segmentation benefits you expect in these aircraft, including the Allegiant first.

Speaker #3: Thanks.

Greg Anderson: Hey, Max. This is Greg. Thanks for the question. Let me give some high-level thoughts and turn it over to the team. Overall, you asked about our fleet strategy, I'd say owning our fleet and buying and selling aircraft at the right prices are a key part of our strategy. We want to be, I think we are very good at both operating aircraft and also very good as asset traders. I think that shows because we have some of the lowest ownership costs, when it comes to fleet, I think, in the industry. On the MAX order specifically, I just want to call out we view that as a competitive advantage. It provides us access to aircraft at very attractive prices and kind of tying it all together with the fleet strategy.

Speaker #4: Hey Max, this is Greg. Thanks for the question. Let me give some high-level thoughts and then turn it over to the team. Overall, you asked about our fleet strategy, and I’d say owning our fleet—and buying and selling aircraft at the right prices—are key parts of our strategy.

Speaker #4: We want to be, and I think we are, very good at both operating aircraft and also very good as asset traders. I think that shows because we have some of the lowest ownership costs when it comes to fleet, I think, in the industry.

Speaker #4: On the max order specifically, I just want to call out, we view that as a competitive advantage. It provides us access to aircraft at very attractive prices and kind of tying it all together with the fleet strategy.

Speaker #4: What EJ, Austin, and team have done is with some of the older less utilized assets, that we've sold, we've been able to pay for, I think, roughly 25% of the max order.

Greg Anderson: What E.J. Austin and team have done is, with some of the older, less utilized assets that we've sold, we've been able to pay for, I think, what, roughly 25% of the MAX orders. Just hats off to the team and how they're handling the fleet. E.J., do you want to get into the specifics on how they're performing, how the MAX is performing and the benefits?

Speaker #4: So just hats off to the team and how they're handling the fleet. But EJ, do you want to get into the specifics on how they're performing, how the max is performing and the benefits?

Speaker #6: Sure. Yeah. Maybe, Max, I'll hit on your question about the schedule first. You asked about what the delivery cadence looks like from here.

Robert Neal: Sure. Yeah. Maybe Max, I'll hit on your question on schedule first. You asked about sort of what does the delivery cadence look like from here. What you see in the release largely covers our deliveries through this year. There may be one or two aircraft on property that are not in service at the end of 2026. I would expect the MAX fleet to grow by around 20 shells during 2027. That should take you up to, call it, 45 to 47 in-service airplanes at the end of 2027. Just remember, our firm order was for 50 aircraft. The rest of those would deliver in 2028. They are all MAX8 variant at this point. That's the entirety of the firm order.

Speaker #6: What you see in the release largely covers our deliveries through this year. There may be one or two aircraft on property that are not in service at the end of 2026.

Speaker #6: I would expect the max fleet to grow by around 20 shells during 2027. That should take you up to, call it, 45 to 47 in-service airplanes at the end of 2027.

Speaker #6: And then just remember our firm order was for 50 aircraft. The rest of those would deliver in 2028. They are all max 8 variant at this point.

Speaker #6: And so that's the entirety of the firm order. As I think you're aware, we do have a very attractive option book which kicks in in early 2028 and runs out past the end of the decade.

Robert Neal: As I think you're aware, we do have a very attractive option book, which kicks in in early 2028 and runs out past the end of the decade. We're taking a close look at that now. Of course, the combination with Sun Country opens up a lot of opportunities to dip into that option book a little bit more. The way I'm kind of thinking about that, at least certainly in the current environment with fuel where it is, the MAX aircraft are outperforming probably the 737NGs, but certainly the A320s on an ASMs per gallon basis, which is driving incrementally better earnings at a higher fuel price.

Speaker #6: So we're taking a close look at that now. Of course, the combination with Sun Country opens up a lot of opportunities to dip into that option book.

Speaker #6: A little bit more. And then the way I'm kind of thinking about that, at least certainly in the current environment with fuel where it is, the max aircraft are outperforming the probably the NGs, but certainly the 320s on an ASMs per gallon basis, which is driving incrementally better earnings at a higher fuel price.

Speaker #6: And then just the last thing I would mention is we're starting to appreciate quite a bit more at this point that we were one of the later operators to have a power by the hour agreement on our engines.

Robert Neal: Just the last thing I would mention is, we're starting to appreciate quite a bit more at this point, that we were one of the later operators to have a Power by the Hour agreement on our engines. We just have an attractive engine maintenance profile on the new airplanes as well.

Speaker #6: And so we just have an attractive engine maintenance profile on the new airplanes as well. And that's another reason to consider those airplanes very seriously.

Michael Broderick: That's another reason to consider those airplanes very seriously.

Robert Neal: That's another reason to consider those airplanes very seriously.

Speaker #5: One thing we didn't hit on this quarter but did last, just the fuel efficiency aspect and kind of the second order effects. We think it saved about a percent worth of capacity in the current year by having that fuel efficient max aircraft, which won't show up directly in kind of the margin difference between the two, but does show up on the bottom line.

Drew Wells: One thing we didn't hit on this quarter but did last, just the fuel efficiency aspect and kind of the second-order effect. We think it saves about 1% worth of capacity in the current year by having that fuel-efficient MAX aircraft, which won't show up directly in the margin difference between the two, but does show up on the bottom line, and I think it's important to keep in mind.

Speaker #5: And I think it's important to keep in mind.

Speaker #3: Great. Thanks, guys.

Greg Anderson: Great. Thanks, guys.

Speaker #1: Your next question, come to the line of Savvy, Seth, your line is open.

Operator: Your next question comes from the line of Savanthi Syth. Your line is open.

Savanthi Syth: Hey, good afternoon. I know there's a lot of planning here and stay tuned for Investor Day. I was hoping we could drill down a little bit more on the two things you're actually doing today, which is Expedia, just the reason for that change and what might be different doing an OTA today versus maybe in the past that kept you away. The onboard beverages, just how much of an impact should we think of that in terms of cost or efficiency and things like that?

Savi Syth: Hey, good afternoon. I know there's a lot of planning here and stay tuned for Investor Day. I was hoping we could drill down a little bit more on the two things you're actually doing today, which is Expedia, just the reason for that change and what might be different doing an OTA today versus maybe in the past that kept you away. The onboard beverages, just how much of an impact should we think of that in terms of cost or efficiency and things like that?

Speaker #7: Hey, good afternoon. I know there's a lot of kind of planning here and kind of stay tuned for investor day, but I was kind of hoping we could drill down a little bit more on the two things you're actually kind of doing today, which is kind of Expedia just the reason for that change and what might be different kind of doing an OTA today versus maybe in the past that kind of kept you away.

Speaker #7: And then the onboard kind of beverages, just how much of a impact should we think of that in terms of cost or kind of efficiency and things like that?

Speaker #5: Sure. So I'd be happy to take that. Expedia was really about finding an efficient source for the breadth of network that we have, and we've will continue to have direct bookings as our core source of revenue generation.

Drew Wells: Sure. Savi, happy to take that. Expedia was really about finding an efficient source for the breadth of network that we have. We will continue to have direct bookings as our core source of revenue generation. When you think about a network with 120-plus cities, 550-plus routes at any given time, achieving efficient marketing across the entirety of that breadth is not always easy. This was a method that we found to be scalable and effective at reaching folks that were in or showing interest for travel, a product that we're proud of and proud to put out there. I don't view it so much as a huge pivot away from the core pillars. Direct will remain that. This is an attractive customer acquisition plot from my side.

Speaker #5: But when you think about a network with 120-plus cities, 550-plus routes at any given time, achieving efficient marketing across the entirety of that breadth is not always easy.

Speaker #5: And so this was a method that we found to be scalable and effective at reaching folks that were in or showing interest for travel a product that we're proud of and proud to put out there.

Speaker #5: So I don't view it so much as a huge pivot away from the core pillars, directly remain that, but this is an attractive kind of customer acquisition plot from my side.

Speaker #5: On the in-flight beverages, this is the first of kind of those healthy debates I was referring to in a previous answer. Both the Sun Country brand and the Allegiant brand are very interested in kind of customer experience and exploring kind of this void that exists in kind of the smart value area of the industry.

Drew Wells: On the in-flight beverages, this is the first of those healthy debates I was referring to in a previous answer. Both the Sun Country brand and Allegiant brand are very interested in customer experience and exploring this void that exists and the smart value area of the industry. For me, as we started talking, it became a no-brainer that we go down this path and explore and match the Sun Country offering on complimentary in-flight beverages. I don't have the number off the top of my head for explicit headwinds. I don't think it's a material headwind, especially as we're talking about still expanding the air ancillary unit revenue into the next quarter.

Speaker #5: And for me, as we started talking, it became a no-brainer that we go down this path and explore and match the Sun Country offering on complimentary in-flight beverages.

Speaker #5: I don't have the number off the top of my head for explicit headwinds, I don't think it's a material headwind, especially as we're talking about it still expanding the air ancillary unit revenue into the next quarter.

Speaker #4: Yeah, on the cost side, it's not material, at least for the remainder of this year.

Robert Neal: Yeah, on the cost side, it's not material, at least for the remainder of this year.

Michael Broderick: Yeah, on the cost side, it's not material, at least for the remainder of this year.

Drew Wells: Yeah.

Drew Wells: Yeah. Thanks.

Greg Anderson: Thanks.

Greg Anderson: Savi, I just want to add.

Speaker #6: And Savvy, I just want to add just a little finer point on the Expedia commentary that Drew provided. And that's just we know the direct bookings, that's part of our DNA that will always be part of our DNA.

Greg Anderson: Savi, I just want to add.

Greg Anderson: Oh

Savi Syth: Oh

Greg Anderson: I want to add just a little finer point on the Expedia commentary that Drew provided. That's just, we know the direct bookings, that's part of our DNA. That will always be part of our DNA. It's important as Drew and the team, they work through the Expedia structure, that we continue to own the relationship with our customer. That was an important part of the deal for us. As Drew mentioned, the early results, they're very encouraging. The vast majority of folks using this channel are new customers or win-backs. We're pleased with what we see thus far.

Speaker #6: And it's important, as Drew and the team work through the Expedia structure, that we continue to own the relationship with our customer. That was an important part of the deal for us.

Speaker #6: As Drew mentioned, the early results, they're very encouraging. The vast majority of folks using this channel are new customers or win back. So we're pleased with what we see thus far.

Speaker #7: That sounds thank you.

Savanthi Syth: Sounds. Thank you.

Savi Syth: Sounds. Thank you.

Speaker #1: Your next question, come to the line of Dwayne, Fanningworth, with Evercore. Your line is open.

Operator: Your next question comes from the line of Duane Pfennigwerth with Evercore. Your line is open.

Speaker #8: Hey, thank you. Good afternoon. It'll be tough for me to limit it to one, but I'm going to follow directions here. Can you speak to when you think you'll be able to get code sharing switched on?

Duane Pfennigwerth: Hey, thank you. Good afternoon. It'll be tough for me to limit it to one, but I'm going to follow directions here. Can you speak to when you think you'll be able to get code-sharing switched on? And I guess any early learnings as you look at the combined network. How do the peaks at Sun Country differ from the peaks at Allegiant seasonally, for example?

Speaker #8: And I guess any earlings any early learnings as you look at the combined network, how do the peaks at Sun Country differ from the peaks at Allegiant seasonally, for example?

Speaker #5: Yeah, Dwayne, I'll take that one. So we're able to kind of cross-sell today, which is effectively showcasing the inventory that the other carrier has and then shift them into the appropriate booking funnel to continue the purchase path.

Drew Wells: Yeah, Duane, I'll take that one. We're able to cross-sell today, which is effectively showcasing the inventory that the other carrier has and then ship them into the appropriate booking funnel to continue the purchase path. I think a little bit later this year, we'll expand what we're able to do from that merchandising perspective, a full code-share or selling will probably come single PSS timeframe, I'd assume, and you're 12 to 18 months out, looking at Michael Broderick maybe for confirmation, maybe 12 to 18 months out on that.

Speaker #5: I think a little bit later this year, we'll expand what we're able to do from that merchandising perspective, but a full code share or selling will probably come single PSS timeframe.

Speaker #5: I'd assume in your 12 to 18 months out, looking at Michael Brodrick maybe for confirmation, maybe 12 to 18 months out on that.

Speaker #4: Yeah.

Michael Broderick: Yeah.

Speaker #5: Yeah. And then talking seasonality and peaks, we're both very much after the leisure customers. So there's going to be a lot of similarities from that perspective.

Drew Wells: Talking seasonality and peaks, we're both very much after the leisure customer, so there's going to be a lot of similarities from that perspective. I think you're going to get a slightly, I guess, more hyper peak in the spring period, which is common for the geography coming out of Minneapolis-St. Paul, and probably a slightly stronger summer peak coming from the Allegiant side, and maybe one other strong peak in October on Sun Country.

Speaker #5: I think you're going to get a slightly—well, I guess, more hyper peak in the spring period, which is common for the geography coming out of Minneapolis, St.

Speaker #5: Paul. And probably a slightly stronger summer peak coming from the Allegiant side. And maybe one other strong peak in October on some country.

Speaker #4: In Minneapolis.

Greg Anderson: Yeah.

Michael Broderick: Yeah.

Speaker #5: Yeah, so nothing drastically different—just some of the seasonality, peaks up slightly more for one carrier or another.

Greg Anderson: Yeah. Nothing drastically different, just some of the seasonality peaks up slightly more for one carrier or another.

Drew Wells: Yeah. Nothing drastically different, just some of the seasonality peaks up slightly more for one carrier or another.

Speaker #8: Thank you.

Duane Pfennigwerth: Thank you.

Speaker #1: Your next question, come to the line of Dan, McKenzie, with Seaport Global. Your line is open.

Operator: Your next question-

Greg Anderson: Thanks, Duane

Operator: comes from the line of Dan McKenzie with Seaport Global. Your line is open.

Speaker #9: Oh, hey, good afternoon, guys. Congrats on the quarter here. Drew, I wonder if you can elaborate more on the decision for a first-class product.

Dan McKenzie: Oh, hey. Good afternoon, guys. Congrats on the quarter here. Drew, wondering if you can elaborate more on the decision for a first-class product. Is it simply a competitive response since others in the low-cost segment have introduced it, so Allegiant has to do it as well? Or was it something you've been planning for a while? I guess historically, I think the average fare in the first class has typically been four to six times the leisure fare. I'm just curious if, on the work that you did there to arrive at that decision, and what this could really mean to the business as you look ahead, say two to three years out, say as a percent of total revenue.

Speaker #9: And I guess I'm just— is it simply a competitive response since others in the low-cost segment have introduced it? So Allegiant has to do it as well.

Speaker #9: Or was it something you've been planning for a while? And I guess, historically, I think the average fare in first class has typically been four to six times the leisure fare.

Speaker #9: And I'm just curious if on the work that you did there to arrive at that decision, and what this could really mean to the business as you look ahead, say two to three years out, say it's a percent of total revenue.

Speaker #5: Yeah, I'll probably save any of the economic discussion for the analyst day a little later. This has been a couple of years in the making.

Drew Wells: Yeah, I'll probably save any of the economic discussion for the Analyst Day later this year. Speaking to the process a little bit, this has been a couple of years in the making. It really did generate from the results we saw through the Allegiant Extra process, right? We started that in.

Speaker #5: And it really did generate from the results we saw through the Allegiant Extra process. We started that in 2018, 2019 as a test across four aircraft.

Drew Wells: 2018, 2019 as a test across four aircraft. Never could have dreamed it would've expanded to the success that we've seen, what, over the last two, three years. When we couple that with looking at our customer strengths and, in particular, household income meaningfully over 100K, and a nice tail end of that distribution into the higher income brackets, and some of the repeat travelers we have inside Allegiant Extra, it really opened the door, at least to me, to say that, Hey, there's more that we can provide that gives value to the customer. We'll have more of the economics there, but it really came down to the success we saw in Allegiant Extra and the customer strength profile.

Speaker #5: It never could have dreamed it would have expanded to the success that we've seen over the last two or three years. So when we couple that with kind of looking at our customer strengths, and in particular household incomes meaningfully over $100K, and a nice tail end to that distribution into the higher income brackets, and some of the repeat travelers we have inside Allegiant Extra, it really opened the door, at least to me, to say that, hey, there's more that we can provide that gives value to the customer.

Speaker #5: So what we'll have more of the economics there, but it really came down to the success that's on Allegiant Extra and the customer strength profile.

Dan McKenzie: Thanks so much, you guys. I'll stick to one here.

Speaker #9: Thanks so much, you guys. I'll stick to one here.

Dan McKenzie: Thanks so much, you guys. I'll stick to one here.

Speaker #1: Your next question, come to the line of Ravi, Shankar, with Morgan Stanley. Your line is open.

Operator: Your next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is open.

Speaker #8: Great answer for everyone. Plenty to unpack on the call, but if I can just follow up on the pilot situation with your competitor, kind of taking some of your junior pilots, can you just expand on that a little bit?

Ravi Shanker: Great. Thanks everyone. Plenty to unpack on the call, if I can just follow up on the pilot situation with your competitor taking some of your junior pilots. Can you just expand on that a little bit? How convinced are you that this is a one-time event? Even though you said that you're pretty confident in the pipeline being restored later this year, is this potentially likely to be an ongoing thing? Thank you.

Speaker #8: How convinced are you that this is a one-time event and even though you said that you're pretty confident in the pipeline being restored, later this year, kind of is this potentially likely to be an ongoing thing?

Speaker #8: Thank you.

Greg Anderson: Ravi, hey, it's Greg. Let me take that one. Yeah, we view it as temporary. Just maybe taking a step back, in general, like pilot attrition, we have a number of pilots across both airlines that ultimately, it's a small number I would hope, but ultimately that want to work for a full service carrier. As we drill down a little bit deeper with our Sun Country pilots and what we've seen there, the vast majority of them have been hired within the last three years. They're going to the largest full service carrier in MSP, who recently increased their hiring by maybe double or more. Importantly, and you called out, our schoolhouse is full. It's full on the Sun Country side. We have multiple classes on the Allegiant side. We just opened a class.

Speaker #6: Ravi, hey, it's Greg. Let me take that one. Yeah, we view it as temporary, but just maybe taking a step back, just in general, like pilot attrition, we have a number of pilots across both airlines that ultimately it's a small number, I'd hope, but ultimately that want to work for a full-service carrier.

Speaker #6: As we drill down a little bit deeper, with our Sun Country pilots and what we've seen there, the vast majority of them have been hired within the last three years.

Speaker #6: And then they're going to the largest full-service carrier in MSP who recently increased their hiring by maybe double or more. But importantly, and you called out, our schoolhouse is full.

Speaker #6: It's full on the Sun Country side. We have multiple classes on the Allegiant side. We just opened a class. The number of applications for candidates and cadets and pilots is off the charts.

Greg Anderson: The number of applications for candidates, cadets, and pilots is off the charts. Very highly qualified, they value what we offer. We offer competitive pay, we also offer unique quality of life overall, where our team members, our flight crews are home every night. We're confident we'll manage through it. It's a headwind in the near term. We're going to manage through it, and we look forward to restoring and getting back to where we want to be, and particularly for flying in March of 2027.

Speaker #6: Very highly qualified. And they value what we offer. We offer competitive pay, but we also offer unique quality of life, overall, where our team members are flight crews are home, every night.

Speaker #6: And so we're confident we'll manage through it. It's a headwind in the near term. We're going to manage through it. And we look forward to restoring and getting back to where we want to be.

Speaker #6: And particularly for flying in March of ’27.

Speaker #8: Apologies for the follow-up, but do you think that this is a precursor to more capacity coming in from them in MSP or kind of why are they doing this?

Ravi Shanker: Apologies for the follow-up, do you think that this is a precursor to more capacity coming in from them, in MSP, or why are they doing this?

Speaker #6: I don't want to comment on other carriers and why they're hiring, but I don't believe it's from a capacity standpoint trying to come in MSP.

Greg Anderson: I don't want to comment on other carriers and why they're hiring, I don't believe it's from a capacity standpoint trying to come into MSP.

Speaker #8: Understood. Thank you.

Ravi Shanker: Understood. Thank you.

Speaker #6: Thanks for Ravi.

Greg Anderson: Thanks, Ravi.

Speaker #1: Your next question, come to the line of James Kirby, with JP Morgan, your line is open.

Operator: Your next question comes from the line of Jamie Baker with JPMorgan. Your line is open.

Speaker #9: Hey, good afternoon, guys. Thanks for the question. Just wanted to ask about the implied step change from Q3 to Q4. I know you talked about the CASMX being peak in Q3, so I assume a step down in Q4, but maybe just any Rasm assumptions or macro that is embedded in the implied 4Q guide, or any color you can share really how it's booking I assume you only have like a month or two of data there, but any color you can share on how Rasm is trending there.

Jamie Baker: Hey, good afternoon, guys. Thanks for the question. Just wanted to ask about the implied step change from Q3 to Q4. I know you talked about the CASM ex-fuel being peak in Q3, so I assume a step down in Q4, but maybe just any RASM assumptions or macro that is embedded in the implied Q4 guide, or any color you can share really on how it's booking. I assume you only have like a month or two of data there, but any color you can share on how RASM's trending there?

James Kirby: Hey, good afternoon, guys. Thanks for the question. Just wanted to ask about the implied step change from Q3 to Q4. I know you talked about the CASM ex-fuel being peak in Q3, so I assume a step down in Q4, but maybe just any RASM assumptions or macro that is embedded in the implied Q4 guide, or any color you can share really on how it's booking. I assume you only have like a month or two of data there, but any color you can share on how RASM's trending there?

Speaker #6: Sure. Drew here, real early for 4Q, still more than 80, 85 percent left to go there. So everything is kind of small sample size theater.

Drew Wells: Sure. Drew here. Real early for Q4, still more than 80% to 85% left to go there. Everything is kind of small sample size theater for now. Things look great. We're not baking in any kind of reduction or slowdown in the demand environment. Our growth rate ticks up a little bit from combined, down five or down five and a half. The Allegiant stand-alone getting slightly positive there. We haven't talked to a combined piece. Then just bear in mind that the Q4 comp from last year got meaningfully tougher on our end as well. I think the environment persists. I'm extremely bullish and have been. I think I've communicated all year that the holiday period is going to show up, and show up really well. I think Q4 is going to be really strong again.

Speaker #6: For now, I mean, things look great. I mean, we're not baking in any kind of reduction or slowdown in the demand environment. Our growth rate ticks up a little bit from combined down five or down five and a half to the Allegiant standalone getting slightly positive there.

Speaker #6: We haven't talked to a combined piece and then just bear in mind that the Q4 comp from last year got meaningfully tougher on our end as well.

Speaker #6: So I think the environment persists. I'm extremely bullish and have been, I think, communicated all year that the holiday period is going to show up and show up really well.

Speaker #6: So I think 4Q is going to be really strong again.

Speaker #9: Got it. And then just a really quick follow-up on the Sun Country pilot attrition. Are you expecting that to kind of be the worst in 3Q and then improve in 4Q?

Jamie Baker: Got it. Just a really quick follow-up on the Sun Country pilot attrition. Are you expecting that to be the worst in Q3 and then improve in Q4? I know you said 2027 is when you expect it fully to abate, and probably return to growth there at MSP, just for the case rest of the year.

James Kirby: Got it. Just a really quick follow-up on the Sun Country pilot attrition. Are you expecting that to be the worst in Q3 and then improve in Q4? I know you said 2027 is when you expect it fully to abate, and probably return to growth there at MSP, just for the case rest of the year.

Speaker #9: I know you said 2027 is when you expect it fully to abate and probably return to growth there in MSP, but just for the case rest of the year.

Robert Neal: Hey, Jay. Yeah, the recent trends over the past couple of weeks have been encouraging, we're planning for the worst, and we're going to continue to hire and try and get ahead of it as quickly as we can. I don't want to make a call here or there. It's out of our control to a degree, like I said, we're going to react and manage through it with the tools we have the best we can.

Speaker #6: AJ, yeah, the recent trend over the past couple of weeks have been encouraging, but we're planning for the worst and we're going to continue to hire and try and get ahead of it as quickly as we can.

Speaker #6: But, so, I don't want to make a call here or there. There's still—it's out of our control to a degree, but like I said, we're going to react and manage through it with the tools we have, the best we can.

Speaker #9: Got it. Thanks for the question, guys.

Jamie Baker: Got it. Thanks for the question, guys.

James Kirby: Got it. Thanks for the question, guys.

Speaker #6: Thanks, James.

Robert Neal: Thanks, Jay.

Greg Anderson: Thanks, Jay.

Speaker #1: Your next question comes from the line of Chris Stethoulopoulos with SIG. Your line is open.

Operator: Your next question comes from the line of Chris Stathoulopoulos with Susquehanna. Your line is open.

Speaker #10: Good afternoon, everyone. On the CBA with the pilots, we depreciate the COLA, with the 401(k) contribution, the cash piece, and we're still seeing comments around the crew productivity side.

Chris Stathoulopoulos: Good afternoon, everyone. On this CBA with the pilots, appreciate the color with the 401(k) contribution, the cash piece. There is some comments around the crew productivity side and if you could frame how we should think, I am guessing you are thinking about that in utilization or block hours per aircraft, but the timing around that and the cadence or perhaps the Q4 exit rate and how you are thinking about that utilization for next year.

Speaker #10: And if you could frame how we should think I'm guessing you're thinking about that in utilization or block hours per aircraft, but the timing around that and the cadence or perhaps the fourth quarter exit rate and how you're thinking about that utilization for next year.

Robert Neal: First and foremost, we are very happy to have a deal ratified by our pilots. It has been a long time coming. As you mentioned, it improves pay benefits, quality of life. There is a unique pay feature with the retention bonus in there as well that we have been accruing since May of 2023 and just genuinely happy to be able to pay that out. Very well-earned and deserved. Importantly, I think, on both sides that we are able to roll out a new preferential bidding system that is off the shelf. It is called N-PBS. Many other carriers use it. Within that bidding system, we think that we will have that in place by the end of the year is what we are working towards.

Speaker #6: Chris, hey, it's Greg. Why don't I kick it off, and if BJ wants to add some commentary, he'll jump in here. But first and foremost, we're very happy to have a deal ratified by our pilots.

Speaker #6: It's been a long time coming. And as you mentioned, it improves pay benefits, quality of life. There's a unique pay feature with the retention bonus.

Speaker #6: In there as well that we've been accruing since May of 2023 and just genuinely happy to be able to pay that out. Very well earned and deserved.

Speaker #6: Importantly, I think on both sides, it's we're able to roll out a new preferential bidding system that is off the shelf. It's called NavBlue.

Speaker #6: Many other carriers use it. Within that bidding system, we think that we'll have that in place by the end of the year, is what we're working towards.

Speaker #6: And I think this will just help with transparency. It'll help us in the sense of building more productive lines around scheduling. And so I think that's what BJ's or that's what we've been talking about, that we'll see that won't happen until next year.

Robert Neal: I think this will just help with transparency. It'll help us in the sense of building more productive lines around scheduling. I think that's what we've been talking about that won't happen until next year, we would expect. BJ, any other commentary you want to hit? Chris, I think you mentioned the 401(k) contribution and some of the other benefit elements, then there's just a small step-up in wage rates through the end of this year versus the rates that we were accruing. That's probably driving 1 to 2 points in CASM-ex in the back half of the year. No, keep in mind, pilot headcount is relatively flat on more than 1,300 pilots. I think we're down around 50 heads year over year, something like that.

Speaker #6: We would expect but BJ, any other commentary you want to hit?

Speaker #3: Yeah, Chris, I mean, I think you mentioned the 401(k) contribution and some of the other benefit elements and then there's just a small step up in wage rates through the end of this year, versus the rates that we were accruing.

Speaker #3: That's probably driving one to two points in CASMX in the back half of the year, but keep in mind pilot headcount is relatively flat on more than 1,300 pilots.

Speaker #3: I think we're down around 50 heads, year over year, something like that. And so we just you just were going to see a little bit of cost pressure because we didn't have the aircraft to fully utilize the crew members that we had through the end of this year.

Robert Neal: We're going to see a little bit of cost pressure because we didn't have the aircraft to fully utilize the crew members that we had through the end of this year, and that's where the productivity comes back in as we head into March.

Speaker #3: And that's where the productivity comes back in as we head into March.

Speaker #10: Okay. Thank you.

Chris Stathoulopoulos: Okay. Thank you.

Speaker #3: Thanks, Chris.

Robert Neal: Thanks, Chris.

Speaker #1: Your next question comes from the line of Connor Cunningham with Mellis Research. Your line is open.

Operator: Your next question comes from the line of Conor Cunningham with Melius Research. Your line is open.

Robert Neal: Hey, Conor. You there?

Speaker #6: Hey, Connor, you there?

Speaker #1: And going to the next question.

Operator: Going to the next question.

Robert Neal: Operator. Go ahead.

Speaker #6: Operator. Go ahead.

Speaker #1: And going to the next question, from Catherine O'Brien with Goldman Sachs. Your line is open.

Operator: Going to the next question from Catherine O'Brien with Goldman Sachs. Your line is open.

Catherine O'Brien: Hey, good afternoon, everyone. Thanks for the time. One question, admittedly a little bit of a multi-parter on RASM. I guess first, what drove the better Allegiant standalone RASM versus your 30 June guide? Could you maybe give us some color just on where you exited Q2 on a consolidated RASM basis? If not an exact number for June, just maybe how to think about it versus that total Q2 performance. How much of Q3 do you have booked and any parts of the network you'd call out as bright spots? Thanks for humoring the multi-parter.

Speaker #11: Hey, good afternoon, everyone. Thanks for the time. One question, admittedly a little bit of a multi-parter on Rasm, but I guess first, what drove the better Allegiant standalone Rasm versus your June 30 guide?

Speaker #11: And could you maybe give us some color just on where you exited 2Q on a consolidated Rasm basis? If not an exact number for June, just maybe how to think about it versus that total 2Q performance.

Speaker #11: And how much of Q3 do you have booked, and are there any parts of the network you'd call a bright spot? Thanks for humoring the multi-parter.

Speaker #3: I will do my best to handle all the parts. Maybe just kind of generally on the Q2 cadence, end of April was probably the relative low point, and then we hit kind of a, I don't know, almost flattish period from early May through the end of June.

Drew Wells: I will do my best to handle all the parts. Maybe, just kind of generally on the Q2 cadence, end of April was probably the relative low point, and then we hit kind of an almost flattish from early May through the end of June. Maybe not quite as stark of a cadence through the quarter as some others have commented on, but everything looked pretty good for virtually the entirety of the quarter. I feel really good about that, and I think that's true generally of the combined entity that I'm speaking specifically to Allegiant on that front. Probably won't talk too much about hotspots either. Again, with the unit revenue performance, it's hard to point to a lot of things that didn't live up to the excitement. Feel really good broadly there. Katie, what else did you want to hit on?

Speaker #3: Maybe not quite as stark of a cadence through the quarter as some others have commented on, but everything looked pretty good for virtually the entirety of the quarter.

Speaker #3: So I feel really good about that, and I think that's true generally of the combined entity, though I'm speaking specifically to Allegiant on that front.

Speaker #3: Probably won't talk too much about hot spots either. Again, with the unit revenue performance, there's hard to point to a lot of things that didn't live up to the excitement.

Speaker #3: So I feel really good broadly there. Katie, what else did you want to hit on?

Speaker #11: Oh, just how much of 3Q is booked?

Catherine O'Brien: Oh, just how much of Q3 is booked?

Speaker #3: Yeah, I always hate admitting this number in this call. We're about 80% booked for the quarter. So we have pretty good line of sight to 3Q at this point.

Drew Wells: Yeah. I always hate admitting this number in this call. We're about 80% booked for the quarter. We have pretty good line of sight to 3Q at this point.

Catherine O'Brien: That's great. Okay. That was it. Thanks, Drew.

Speaker #11: That's great. Okay. That was it. Thanks, Drew.

Speaker #6: Thanks, Katie.

Robert Neal: Thanks, Katie.

Greg Anderson: Thanks, Katie.

Speaker #1: I will now turn the call back over to Sherry Wilson for closing remarks.

Operator: I will now turn the call back over to Sherry Wilson for closing remarks.

Speaker #12: Thank you all for joining today's call. Please reach out if you have questions; otherwise, we will talk to you next quarter.

Sherry Wilson: Thank you all for joining today's call. Please reach out if you have questions. Otherwise, we will talk to you next quarter.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Q2 2026 Allegiant Travel Co Earnings Call

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