Allegiant Travel Company (ALGT)
Q1 2008 Earnings Call Transcript
April 29, 2008 1:00 pm ET
Maury Gallagher – CEO, President
Ponder Harrison – Managing Director of Sales & Marketing
Andrew Levy – CFO, Managing Director of Planning
Mike Linenberg – Merrill Lynch
Duane Pfennigwerth – Raymond James
Jim Parker – Raymond James
Bob McAdoo – Avondale Partners
Previous Statements by ALGT
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We wish to remind listeners to this webcast that the company's comments today will contain forward-looking statements that are only predictions and involve risks and uncertainties. Forward-looking statements made today may include among others references to future performance and comments about our strategic plans. There are many risk factors that could prevent us from achieving our goals and cause the underlying assumptions of these forward-looking statements and our actual results to differ materially from those expressed in or implied by our forward-looking statements. These risk factors and others are more fully discussed in our filings with the Securities and Exchange Commission.
Any forward-looking statements are based on information available to us today, and we undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information, or otherwise. The company cautions users of this presentation not to place undue reliance on forward-looking statements, which may be based on assumptions and anticipated events that do not materialize. The earnings release as well as a rebroadcast of this call are available at the company's Investor Relations site at ir.allegiantair.com.
At this time, I'd like to turn the call over to Maury Gallagher for his opening remarks.
Good morning, everyone. Thank you for joining us today. As Lori mentioned, joining me today are Andrew Levy, CFO and Managing Director of Planning, and Ponder Harrison, our Managing Director of Sales and Marketing. They will be commenting each after I have finished with my brief remarks. I will take you through some of my general thoughts and beliefs, Ponder will comment on our revenue results, and Andrew will wrap up with comments on aircraft plans, our network activity, expenses balance sheet and such.
As I said in our press release, we had a terrific quarter. Our revenues increased 58% to $133 million. On a 48% increase in departures and non fuel expenses were up only 42%. These are the types of increases I thoroughly enjoy between revenues and expenses. We were able to accomplish these results with our two new destinations, Phoenix-Mesa and Ft. Lauderdale, which we inaugurated in the last quarter of 2007. They generated 18% of our scheduled service revenues this quarter.
Also for the first time, our revenues in Las Vegas were less than 50% of our scheduled system. 44% to be exact. Last year at this time, they were 60%. To show you how fast we've been moving, Las Vegas represented our only scheduled service revenues in mid-2005. This percentage is to be expected given the growth in Florida and Arizona during the past three years. Orlando revenues in particular were up strong, 53% on a 51% increase in departures, and St. Pete's revenue growth was even more impressive, 43% on only 21% increase in departures. In Q1 Orlando represented 27% of our scheduled revenues while St. Pete was 11%. As you can see from these numbers Florida is performing extremely well. We have truly become a national company, diversified across the entire country. We have told you consistently during the past two years that we'll add just capacity to fit market requirements.
During the past six months in response to escalating fuel prices, we've indeed reduced our planned capacity growth. This reduction has allowed us to maintain our selling fare if not increase it slightly during the past year. Unit revenue growth has been the driver of our profitability, particularly our ancillary revenues. Our commitment to developing this secondary revenue source has allowed us to move away from depending solely on the selling fare. The effort by Ponder and his team during the past three years has produced almost a fourfold increase in our employee revenue per passenger, from $7 in 2005 to just short of $26 in our most recent quarter. During this year's first quarter, ancillary revenues increased 36% to almost $26 from $19 in Q1 '07.
Ponder will have further comments and other information in a moment. We have also improved our revenues this quarter by increasing load factors. We have told you during the second half of last year we were focusing on flying full airplanes. Our Q1 '08 year-over-year scheduled service load factor increased 4.4 load factor points to 86.9%. High ancillary revenues and high load factors go well together in the revenue game. With our $25-plus per passenger ancillary rate, the benefits of high load factors are obvious. High load factors also facilitate our cost management. During Q1 last year, our non-fuel cost per passenger was $51.60 and during Q1 this year, it was just under $48, at $47.87, a 7.2% decline.
On the fuel front, we consumed only 19 gallons per passenger this quarter versus 21 gallons last year, due again to higher loads and somewhat shorter stage length. Clearly, our efforts to reduce long-haul flights, to shorten our stage length and to fly fuller aircraft have been worth the effort. These are unprecedented times. The increased fuel costs, the pace at which they have come on are forcing the entire industry to retool itself to survive. Survivors, first and foremost, must have strong balance sheets and particularly cash reserves. As of March 31, we had almost 46% of our trailing 12 months of revenue in cash; the highest in the industry. Survivors should and will have low cost as well. We are among the lowest cost providers currently operating. If high fuel prices persist, the industry is going to reduce capacity dramatically in the next 12 to 24 months. It has no other choice.