Allegiant Travel Company

Good day and thank you for standing by. Welcome to the Q2 2021 Allegiant Travel Company Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. As a reminder, this conference is being recorded. I would now like to hand the conference over to your speaker today, Sherry Wilson, Thank you. Please go ahead.

Thank you, Sadie. Welcome to the Allegiant Travel Company's second quarter 2021 earnings call. On the call with me today are Maury Gallagher, the company's chairman and chief executive officer, John Redman, the company's president, Greg Anderson, our EVP and chief financial officer, Scott Sheldon, our EVP and chief operating officer, Scott D'Angelo, our EVP and chief marketing officer, Drew Wells, our SVP of revenue and planning, and a handful of others to help answer questions. We will start the call with commentary and then open it up to questions. We ask that you please limit yourself to one question and one follow up. The company's comments today will contain forward looking statements concerning our future performance and strategic plans. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward looking statements. These risk factors and others are more fully disclosed in our filings with the SEC. Any forward looking statements are based on information available to us today. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information, or otherwise. The company cautions investors not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize. To view this earnings release, as well as the rebroadcast of the call, visit the company's investor relations site at ir.allegiantair.com. With that, I'll turn it over to Maury.

Thank you, Sherry, and good afternoon, everyone. Thank you for joining us again this quarter. We had an excellent Q2 quarter, as our numbers showed. While we averaged only a 65% load factor in April and May on average, June's 77% brought the quarter average up to 70%. As is usually the case, June dominated the quarter with over 40% of our passengers and departures in that one month. These highlights from June and the quarter provide the backdrop for our comments today and our cautious optimism for the remainder of this year and on into 2022. We peak our operations every summer for approximately 75 days from Memorial Day through mid-August. In this particular quarter, we grew capacity 3.3%, while June was up 12.6%. This is, again, against 2019. This peaking also applies to the major support partners critical to our operations. The oft-repeated shortage of personnel in the past 60 days was a critical problem for our operational partners, including TSA, our airport contractors, fuel suppliers, and others, which have resulted in less than a stellar operation. I mean, it's been two years, I might add, since we in the industry have had to operate at peak capacity given we took off last summer. This operational rust, as I like to call it, has been a challenge for all aspects of our industry. In spite of these speed bumps, however, demand is back. June results were proof of this fact. We continue to lead the industry out of this COVID black hole. The trend is there, and we are moving back to our historic industry-leading profit profile. The leisure sector has been extremely strong, and it's been a bit of the wild west as the industry has focused post-COVID operations almost exclusively on leisure, given the problems with business and international traffic. But this additional leisure focus by others in our industry has not affected our competitive footprint. We are still maintaining our 2019 profile of approximately 75% noncompetitive. We finished our Airbus transition in late 2018, and while we had fewer aircraft in 2019 compared to that 2018, our 2019 performance was exceptional. We increased our operating margin to an industry-leading 20%, which was a 36% increase compared to 2018. Our model at the end of 2019 was firing on all cylinders as we headed into early 2020, that early last year. We were continuing our growth and our outsized results in both January and February. ASMs during those first two months were up 16%. This is all before the onset of COVID. Today, in July 2021, it's my strong belief we are now positioned to continue where we left off in early 2020. We are bullish on our model and its ability to continue to perform. Our near-term results suggest a good outcome for 2022. Currently, we are planning above-average growth, but moreover, to that end, we have acquired all of the aircraft we believe we'll need for 2022, save single airplanes. And Greg will have additional thoughts on these comments, on these ideas. Another promising development has been our ancillary and third-party revenue efforts. We've discussed previously our focus on generating additional revenues from our customers. We want to leverage our direct one-on-one relationship we have with them. We've introduced our ancillary bundling offering early last year, just as COVID was beginning. Fast forward to today, and the hopeful benefits are being realized. Drew will have a few more comments on this particular issue. Regarding third-party revenues, we have seen excellent results from the company's credit card efforts, as well as a strong uptick in our rental car contribution. You may recall our relationship with Enterprise is one of the strongest rental car partnerships in the leisure space. The recent shortage of rental cars has benefited us on the pricing front. Another part of our optimistic belief is Sunseeker. Sunseeker is located in the very middle of perhaps the best leisure vacation area in the country, southwest Florida. than the easy driving distance of three of our top performing markets, PIE, Punta Gorda, and Sarasota. Historically, we have carried over 4 million people per year in and out of these terrific destinations. As I mentioned, in early 2020, we were well on our way to growing our model, including building out Sunseeker. We are back in the same position today as we were in that early part of 2020. Given this thought process and belief, we will be restarting and completing the construction of Sunseeker and continuing what we termed our Legion 2.0 plan. Sunseeker will contribute nicely to this strategy. The board unanimously agreed with our recommendation to finish the resort. John will have further comments about our plans and the associated financing. Lastly, we have seen a dramatic increase in our cash balances. In early May, we completed a $335 million secondary offering. These funds, combined with our aggressive cash management during the last year, plus the benefits from PSP and tax refunds has improved our cash balances to $1.2 billion, up 79% from a year ago. This threefold increase in liquidity has dramatically improved our balance sheet and positioned us for the growth we've been talking about in not only next year but the years thereafter. Lastly, our team members continue to be the backbone of our company, particularly in this difficult COVID-dominated period of the past year. They have been there during these difficult days taking care of our passengers and getting them safely to their destinations. John?