Allegiant Travel Company Reports Operating Results (10-Q)
Allegiant Travel Company has a market cap of $968.7 million; its shares were traded at around $49.19 with a P/E ratio of 15.47 and P/S ratio of 1.74. ALGT is in the portfolios of Ronald Muhlenkamp of Muhlenkamp Fund, Diamond Hill Capital of Diamond Hill Capital Management Inc, Jim Simons of Renaissance Technologies LLC, Bruce Kovner of Caxton Associates, Pioneer Investments, Steven Cohen of SAC Capital Advisors, RS Investment Management, George Soros of Soros Fund Management LLC, PRIMECAP Management.
Highlight of Business Operations:During the third quarter of 2010, we earned net income of $13.2 million on operating revenues of $163.6 million and achieved an 11.9% operating margin. The third quarter is typically our seasonally weakest quarter of the year, and we achieved these results in a period with substantial capacity increases. We had a 21.9% increase in system available seat miles (“ASMs”) and 16.5% increase in system passengers. Higher fuel prices were the largest contributor to the reduction of our operating margin from the comparable period of the prior year. Our system average fuel cost per gallon increased from $1.88 for the third quarter of 2009 to $2.25 for the same period of 2010.
In July and September 2010, our Board of Directors approved expansions of our stock repurchase program with authorization to purchase up to an additional $75.0 million of our common stock. During the three months ended September 30, 2010, we spent $40.4 million of cash on stock repurchases. We believe the use of this cash to invest in our stock is appropriate with consideration of our capital expenditure requirements and other cash flow needs related to our growth.
Aircraft fuel expense in the third quarter of 2010 represented 43.4%, or $62.5 million of our overall operating expense. Our average total system fuel cost per gallon increased 19.7% to $2.25 during the third quarter of 2010 compared to $1.88 for the same period of 2009. 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 $163.6 million, income from operations of $19.5 million and net income of $13.2 million for the three months ended September 30, 2010. By comparison, for the same period in 2009, we recorded total operating revenue of $133.1 million, income from operations of $21.9 million and net income of $13.8 million. We achieved an 11.9% operating margin for the three months ended September 30, 2010 with system growth in ASMs of 21.9%, departure growth of 14.8%, and an increase in scheduled service total average fare of $3.30 per passenger year-over-year.
Ancillary revenue. Ancillary revenue increased 24.7% to $50.1 million for the three months ended September 30, 2010 up from $40.2 million in the same period of 2009, driven by a 23.2% increase in scheduled service passengers, while our ancillary revenue per scheduled service passenger increased from $33.24 to $33.66. The following table details ancillary revenue per scheduled service passenger from air-related charges and third party products:
Fixed fee contract revenue. Fixed fee contract revenue decreased 20.4% to $9.0 million for the three months ended September 30, 2010 compared to $11.3 million in the same period of 2009. Fixed fee contract revenue was higher during the third quarter of 2009 primarily as a result of the Cuban Family Charter Program which started in June 2009 and permanently ceased in October 2009. For the periods presented, the block hours flown under our fixed fee flying agreement with Harrah s, and the change in mix of our other fixed fee program flying and ad-hoc charter flying for others had minimal impact on our fixed fee contract revenue.
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