Allegiant earnings soar, while Hawaii service off to strong start
Las Vegas-based Allegiant Travel Co., parent company of Allegiant Air, doubled earnings over last year’s second quarter thanks to a combination of higher ancillary revenue, reduced operational costs and a decline in the price of fuel.
It was Allegiant’s 38th straight profitable quarter and it was the first time that second-quarter results were greater than in the usually stronger first quarter.
But the best news for Allegiant was that earnings for the quarter that ended June 30 didn’t include revenue from the company’s new Hawaii service that began June 29 and is turning out to be better than executives expected based on the first month of operation.
Allegiant reported net income of $25.2 million, $1.30 a share, on revenue of $231.2 million compared with net income of $11.9 million, 62 cents a share, on revenue of $200.4 million.
“This was clearly a terrific outcome,” Allegiant Chairman and CEO Maurice Gallagher said in a conference call Wednesday afternoon. “And, we’re very pleased with the initial Hawaii results.”
Allegiant carried 15.1 percent more passengers for the quarter than a year ago and generated the highest ancillary revenue per passenger — $39.67, up 7.8 percent over last year — in the company’s history.
The airline is starting to receive the benefit of adding 16 seats to each of the company’s MD-80 twin-engine jets. The company now has 30 jets with 166 seats and will have all its West Coast-operating MD-80s retrofitted with the additional seats by the end of the third quarter.
Ancillary revenue was up primarily due to Allegiant’s institution of a $35 fee on carry-on bags that began in April. Executives found that the new bag fee resulted in more passengers paying baggage fees in addition to the carry-on cost.
The number of hotel room nights Allegiant sold climbed 9.8 percent to 204,300 and the number of rental car days was up 28.4 percent to 201,600.
Allegiant also had success reducing operational costs. The company outsourced its Las Vegas station personnel a year ago and that has resulted in a 3.4 percent cut in salary and benefit expenses. The airline also had a 64 percent decline in engine overhaul expenses because fewer planes were scheduled for heavy maintenance checks during the quarter.
The airline is anticipating a 15 percent increase in fees at McCarran International Airport as a result of the opening of the new Terminal 3. Airlines share expenses even if they don’t use the new gates.
A 5.3 percent drop in fuel costs also helped the airline’s financial performance. The fuel cost per passenger fell $2.93 to $52.50 for the quarter.
While the company’s Hawaii flying didn’t enter into the company’s quarterly results, executives were excited about the first month of operations.
Allegiant President Andrew Levy said the company maintained high profit margins on the airline’s new routes between Las Vegas and Fresno, Calif., to Honolulu with flights on average 97.4 percent full. Levy said part of the reason for the success is that passengers in Honolulu are as anxious to fly to Las Vegas as Southern Nevadans to Hawaii.
New Honolulu service start-ups will run through mid-November to Honolulu from Bellingham, Wash.; Eugene, Ore.; and Santa Maria, Monterey and Stockton, Calif. The airline also plans service to Maui from Bellingham.
Levy said additional Hawaii flights would be announced in the next few weeks.
Allegiant is operating the routes on four newly acquired Boeing 757 jets, and two more planes will be entering service later this year.
Hawaii already has become the second best hotel room sales market for Allegiant behind Las Vegas. Executives had anticipated good ancillary sales for bags and seat selections because of the length of the flights.