Allegiant Travel Company

Good day, and thank you for standing by. Welcome to the Q3 2022 Allegiant Travel Company earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a Q and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your speaker today. Sherry Wilson, please go ahead.

Thank you, Chris. Welcome to the Allegiant Travel Company's third quarter 2022 earnings call. On the call with me today are John Redman, the company's chief executive officer, Greg Anderson, president and chief financial officer, Scott Sheldon, president and chief operating officer, Scott D'Angelo, our EBP 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 plan. 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, feel free to visit the company's investor relations site at ir.alegionair.com. With that, I'll turn it over to John.

Thank you very much, Sherry, and good afternoon, everyone. The quarter saw our airline operations getting back to more acceptable performance levels, more in line with where we were in 2019 before the pandemic. The respective teams have done a lot of hard work getting to these levels, and the effort and results have continued into Q4. The revenue picture was also solid with total average fair to shy of $126 and up 15.5% over Q3 of 19. Q4 should exceed Q4 of 19 by a similar percentage, assuming no severe weather issues in the balance of the quarter. In this rising fair environment, we are uniquely positioned to not only capture customers trading down, but to continue to grow total average fare given a significant domestic average base fare gap between us and other carriers. With the exception of the other ULCCs, all other carriers' average base fare is somewhere between two and almost four times higher than us. After adjusting for one-off items such as a Sunseeker Resort Special Charge of $35 million, the Employee Recognition Bonus of $9.3 million, and the $5 million loss on extinguishment of debt, the quarter was strong and encouraging going into Q4 and 23 as well. Turning to our balance sheet, one important point to make regarding our outstanding debt given the interest rate outlook is the fact that we are 83% fixed and only 17% floating. Our floating rate debt is all secured by aircraft in primarily shorter duration or less than five-year maturities. All this debt is very flexible, prepayable, and refinanceable. Equally important, our current maturities are only 8% of our outstanding debt. In regards to Hurricane Ian, which struck on 9-28, we are currently operational at all Florida airports. Punta Gorda was the only airport shut down post-Ian, but flying resumed October 6th. Our teams did a fantastic job relocating aircraft pre- and post-Ian allowing us to become operational faster than expected. Even better, our traffic volumes returned to normal within 14 days of reopening. Southwest Florida is incredible, and the resilience never ceases to amaze in its further validation of the Sunseeker story. Sunseeker Resort Charlotte Harbor survived Hurricane Ian, which some have referred to as the worst storm to hit the state, without any damage except from falling cranes, or unfinished parts of the building, which allowed water intrusion. We believe all storm damage to the resort is fully insured, including business interruption. The initial estimate of damage determined by the insurance carriers was 35 million, but this amount is subject to change after further assessment and understanding of impacted supply chains. We have estimated the opening of the resort to be delayed roughly 90 days. As a result, we've pushed the beginning reservation acceptance date or opening date from May 26th of 23 to September 1 of 23. Given all the IT system upgrades happening throughout the company and touching everything we do, we knew 2022 and 23 would be foundational years for our company and transformational at the same time. The effort put in by our team members has been nothing short of exceptional. This complete change out would take decades for some to achieve and never contemplated by others, but our team members will accomplish the impossible in two years. Certain upgrades will allow us to take full advantage of and more seamlessly integrate our Viva Airboost partnership. While not a certainty, we believe all necessary approvals will be in place including category one status in Mexico in the first half of 23. Our Viva partners recently reported an outstanding Q3, extending their compelling growth story. Because of the upgrades, we will be able to take full advantage of the partnership and the opportunities it offers in conjunction with the necessary approvals. In the Q2 earnings call, I made reference to ongoing negotiations with our pilots. Moria is personally involved in those negotiations, and progress is being made on a weekly basis. It's an arduous process that, frankly, takes longer than it should. We will get a deal done that works for both parties that recognizes the value and contributions of our pilots and the importance of maintaining our business model. We expect significant progress towards that end over the next couple of months. Thank you to our incredible team members for their passion and stamina you have shown not only in the quarter but throughout the year. And with that, I'll turn it over to Scott Sheldon. Thank you, John, and good afternoon, everyone.