Higher fares, lower operating costs drive Allegiant’s profits up

David Becker / AP

In this Thursday, May 9, 2013, photo, Allegiant Air flight attendant Chris Killian prepares his passengers for the Laredo, Tex, bound flight before it pushes back from the terminal at McCarran International Airport in Las Vegas. While other U.S. airlines have struggled with the ups and downs of the economy and oil prices, tiny Allegiant Air has been profitable for 10 straight years.

Las Vegas-based Allegiant Travel Co., parent company of Allegiant Air, reported its second-quarter earnings Tuesday.

Company: Allegiant Travel Co. (NASDAQ: ALGT)

Revenue: $255.9 million (up 10.7 percent from second quarter of 2012). Higher revenue was attributed to air fare increases, with total fares up 4 percent from a year ago, thanks to ancillary fees climbing 6.1 percent. About a quarter of Allegiant's fare revenue is a result of ancillary fees.

Earnings: $25.8 million (up 2.3 percent from second quarter of 2012). Total operating expense per available seat mile declined 1.8 percent in spite of a 5 percent decrease in aircraft utilization.

Earnings per share: $1.34 (up 3.1 percent from second quarter of 2012)

Quote: "We are very proud to report our 42nd consecutive profitable quarter. We are pleased to drive higher earnings in spite of an exceptionally strong second quarter last year. In addition, for the first six months of this year, we have been able to drive both cash flow and operating margin expansion." — Allegiant Chairman and CEO Maurice Gallagher

What it means: The fifth-busiest commercial air carrier at McCarran International Airport continues to grow, adding a new city and four new routes. Allegiant is modernizing its fleet and in the quarter added its second Airbus A319 jet.

A pair of A320 jets were purchased in the second quarter and a third was acquired July 1.

The airline carried 1.9 million passengers for the quarter, a 5.6 percent increase over the second quarter of 2012.

Despite slightly lower load factors — the percentage of paying customers per flight — revenue increased because the airline has increased the capacity of its MD-80 jets by six seats. That has resulted in some additional expense because the company was required to add a flight attendant to each flight because of the greater capacity. In addition, pilots saw pay increases in November.

Maintenance and repair expense per passenger increased 26.8 percent due to a larger number of maintenance events compared with a year ago.