Allegiant Travel Company Reports Operating Results (10-Q)
Allegiant Travel Company has a market cap of $810.07 million; its shares were traded at around $40.67 with a P/E ratio of 12.75 and P/S ratio of 1.45. ALGT is in the portfolios of Ronald Muhlenkamp of Muhlenkamp Fund, Jim Simons of Renaissance Technologies LLC, RS Investment Management, Pioneer Investments, Bruce Kovner of Caxton Associates, PRIMECAP Management.
Highlight of Business Operations: During the second quarter of 2010, we earned net income of $17.6 million on operating revenues of $168.4 million and achieved a 16.7% operating margin. We achieved these results despite a 48.7% increase in fuel expense driven by an increase in our system average fuel cost per gallon from $1.66 for the second quarter of 2009 to $2.28 for the same period of 2010. We grew our operating revenues primarily as a result of an increase in our scheduled service average fare from $65.16 for the second quarter of 2009 to $73.15 for the same period in 2010 as well as a 6.7% increase in scheduled service passengers. The increases in third party products contributed to our ancillary revenue per passenger growth of 6.9% to $34.48 in ancillary revenue per passenger, up from $32.27 during the same period in 2009. In addition, our operating revenue increase was in part driven by our scheduled service passenger growth of 6.7%.
Aircraft fuel expense in the second quarter of 2010 represented 44.4%, or $62.2 million of our overall operating expense. Our average total system fuel cost per gallon increased 37.3% to $2.28 during the second quarter of 2010 compared to $1.66 for the same period of 2009. Sequentially, average fuel cost per gallon has increased each quarter since the fourth quarter of 2008. Fuel availability is subject to periods of market surplus and shortage and is affected by demand for heating oil, gasoline and other petroleum products. The cost of fuel cannot be predicted with any degree of certainty and further fuel cost volatility will most likely have a significant impact on our future results of operations.
We recorded total operating revenue of $168.4 million, income from operations of $28.1 million and net income of $17.6 million for the three months ended June 30, 2010. By comparison, for the same period in 2009, we recorded total operating revenue of $148.0 million, income from operations of $37.8 million and net income of $23.9 million. We achieved a 16.7% operating margin for the second quarter of 2010 driven by our increase in scheduled service total average fare of $10.20 per passenger year-over-year, offset by a 37.3% increase in system average fuel cost per gallon from $1.66 for the second quarter of 2010 to $2.28 for the same period in 2010.
Scheduled service revenue. Scheduled service revenue increased 19.8% to $107.5 million for the three months ended June 30, 2010, up from $89.7 million in the same period of 2009. The increase was a result of a 10.5% increase in scheduled service total average fare, from $97.43 to $107.63, along with a 6.7% increase in the number of scheduled service passengers. Passenger growth was primarily a result of a 4.9% year-over-year increase in departures attributable to increased routes and the benefit of a full quarter of flying to Los Angeles, which began service in May 2009. The departure growth was also a result of further route expansion to our Phoenix market, and the effects of our route expansion to Myrtle Beach, which began seasonal service in April 2010. We increased our routes to Myrtle Beach from two routes during the second quarter in 2009 to six routes for the same period in 2010. A one percentage point increase in load factor also contributed to our growth in a number of passengers.
Ancillary revenue. Ancillary revenue increased 14.0% to $50.7 million for the three months ended June 30, 2010 up from $44.4 million in the same period of 2009, driven by a 6.9% increase in ancillary revenue per scheduled passenger from $32.27 to $34.48 and a 6.7% increase in scheduled service passengers. The following table details ancillary revenue per scheduled service passenger from air-related charges and third party products:
Other revenue. We generated other revenue of $0.3 million in the second quarter of 2010 compared to $4.4 million in the same period of 2009 primarily from flight equipment leased to third parties. We recognized $3.7 million in supplemental rents during the second quarter of 2009 as a result of maintenance deposits on three leased aircraft where reimbursements for future maintenance events were not deemed probable.
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