Allegiant reports 17 percent increase in revenue for third quarter

Las Vegas-based Allegiant Travel Co., parent company of Allegiant Air, offset higher fuel costs with increased revenue to propel its 35th straight profitable quarter, the company said today.

The company reported a 17 percent increase in revenue to $191.5 million for the third quarter that ended Sept. 30. But earnings shrank 27.9 percent to $9.5 million, thanks to fuel costs that spiked by 34.6 percent.

Earnings per share of 49 cents beat analysts’ estimates by 5 cents.

In the third quarter of 2010, the company reported earnings of $13.2 million, 67 cents a share, on revenue of $163.6 million.

Allegiant had improved revenue performance thanks to a 16.4 percent increase in fares, ancillary fees and third-party sales on travel-related services like hotels and car rentals.

The company also got a boost by more efficiently filling planes on fewer flights and by decreasing the length of each flight. In the third quarter, Allegiant filled 92.2 percent of its seats with paying customers compared with 89.6 percent in the third quarter of 2010, flying an average 136 passengers per flight compared with 132 a year ago. On average, each flight was 845 miles compared with 865 miles.

Larger-capacity aircraft also buoyed the company. The company began using the first of six Boeing 757 jets on domestic routes while it awaits regulatory clearance to fly to Hawaii next summer. Allegiant also deployed its first two reconfigured MD-80 jets on its Bellingham, Wash. routes. By removing galleys on the planes, the company can increase capacity on the twin-engine jets from 150 to 166 seats.

“Our 757 activity was successful during the quarter as well,” Allegiant Chairman and CEO Maurice Gallagher said in a release issued with its financial results. “We began operations with our initial 757 aircraft in late July and operated it on two routes to and from Las Vegas. For a nominal amount of additional fuel burn, we are generating 67 additional profit potential seats. These additional seats on our peak days, in the proper markets, are expected to contribute significant incremental profit.”

The success of using the 757s on domestic routes was so great that Allegiant Travel President Andrew Levy said in a conference call that the company is investigating acquiring more 757s for use on other domestic routes.

The company is still awaiting regulatory approval to operate over-water 757 flights to Hawaii and that service is still scheduled to begin next summer. [http://www.lasvegassun.com/news/2010/mar/05/las-vegas-based-allegiant-air-plans-flights-hawaii/] Company officials have not said what Hawaii routes would be flown, the executives said in today’s conference call that Los Angeles International Airport has potential, particularly since the airline abandoned its Long Beach, Calif., operation earlier this month. [http://www.vegasinc.com/news/2011/oct/03/allegiant-air-end-service-long-beach-airport/]

Levy said the conversion of the MD-80 fleet to 166 seats is expected to be completed by the end of 2012.

The company’s executives also cautioned investors of fears that the company could lose sales when the Department of Transportation regulations on fare disclosures take effect in January.

The company has a suit in U.S. District Court in Washington D.C. challenging the department’s rules, designed to give full disclosure to customers of fares and charges for optional services.

Gallagher said it has been the company’s experience that posting a long list of fees tends to discourage people from buying tickets.

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