Allegiant Travel Company (ALGT)
Q2 2008 Earnings Call
July 24, 2008 10:00 am ET
Maurice J. Gallagher, Jr. - Chairman, Chief Executive Officer
Andrew C. Levy - Chief Financial Officer, Managing Director - Planning
M. Ponder Harrison - Managing Director - Marketing & Sales
Michael Linenberg - Merrill Lynch
James Parker - Raymond James
Kevin Crissey - UBS Securities
Bob McAdoo - Avondale Partners LLC
Stephen O’Hara - Sidoti & Company
Welcome everyone to Allegiant Travel Company’s second quarter 2008 financial results conference call.
Previous Statements by ALGT
» Allegiant Travel Company Q4 2008 Earnings Call Transcript
» Allegiant Travel Company F3Q08 (Qtr End 9/27/08) Earnings Call Transcript
» Allegiant Travel Company Q1 2008 Earnings Call Transcript
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 any comments about our strategic plans. There are many risk factors that could prevent us from achieving our goals and cause the underlying assumption 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 website at www.ir.allegiantair.com.
At this time it’s my pleasure to turn the call over to Maury Gallagher for opening remarks.
Maurice J. Gallagher, Jr.
[Audio silence] and Andrew will wrap up with comments on aircraft plans, network activity, expenses and our balance sheet.
During the past three, four, five months virtually every comment we’ve seen in written press and many cases verbal have been about companies such as ours with gas guzzling MD-80s and catering to the leisure soft demand environment that seems to be plaguing the US. We in spite of these labels are proud to sit here today and tell you we had a very good quarter. We were profitable again.
As we go forward though we should comment on fuel somewhat. Since December, in only six months, we have seen our fuel increase over $1.00 per gallon from an exceptionally high base of $2.64 at the end of last year to over $3.70 through June. That $1.00+ increase has cost us almost $45 million in the past six months. Yet even with this substantial increase we’ve managed a $19 million operating profit through the first six months through June. These results have confirmed our strong belief that we can manage in a high fuel environment; we just need some stability and have time to catch up to the ever-accelerating costs that seem to have been plaguing us the past six months.
On the revenue front our revenues increased 48% to $132 million on just 36% increase in departures. Unit revenue growth has been the driver of our profitability in recent years, particularly our ancillary revenues. Our $27.75 per passenger amount is a 32% increase from last year’s second quarter and a $2.00 increase over Q1 from $25.75 per passenger in that first quarter. Ponder will have further comments in a moment on our ancillary activity and revenues overall.
Many of the trends talked about in our first quarter call continue to aid our results including emphasizing short-haul flying and our increasing passengers for departure. During this past second quarter we have eliminated more long-haul flights such as Rockford and Fort Wayne to Fort Lauderdale and added service to new shorter routes such as Monterey and Santa Barbara to Las Vegas.
We flew an average of 881 miles in our scheduled service system this quarter versus 921 miles in the same quarter last year. In June our scheduled service stage length in particular was reduced even further to 867 miles. The shorter stage lengths reduced our growth in fuel requirements. We only had a 29% increase in our gallons of fuel consumed on our 36% increase in departures.
Our passengers per departure have increased as well. We averaged a 90% load factor for the quarter or 133 passengers per departure. This is up 10 passengers per departure from last year. As we reported we averaged as well a 94% load factor in June or 137 passengers per departure, up eight passengers during the same period in 2007.
While revenues certainly benefited from these improved densities, our costs did as well particularly fuel. We only consumed 17.7 gallons per passenger during the quarter, down from 19.6 gallons last year. Higher densities allow us to spread our fixed trip fuel over greater numbers. Our cost per passenger ex fuel declined as well although frankly not as much as I would have liked. Our maintenance expenses were above the norm during the quarter impacting our cost per passenger totals. Andrew will have further comments in just a moment.
The increased fuel costs, the pace of which they have come on, are forcing our industry to remake itself. There have been numerous announcements of capacity reductions in a number of our world class leisure destinations, in particular as of October there are 15% fewer ASMs for sale in Las Vegas, 11% fewer in both Orlando and Phoenix. What hasn’t been publicized however are the reductions in service to small cities. The 50-seat RJ does not do well in a $130 fuel environment. Major carriers have been aggressively removing RJ capacity from small cities and in a number of instances suspending services altogether.