Allegiant Travel Company

Thank you for standing by. My name is Rebecca and I will be your conference operator today. At this time, I would like to welcome everyone to the Allegiant Travel Company fourth quarter and full year 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, Simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now turn the call over to Sherry Wilson, Managing Director of Investor Relations. Please go ahead.

Thank you, Rebecca. Welcome to the Allegiant Travel Company's fourth quarter and full year 2024 earnings call. We will begin today's call with Greg Anderson, President and CEO, providing an update on our business and high-level overview of our results. Drew Wells, Chief Commercial Officer, will walk through our revenue performance and outlook. And finally, Robert Neal, Chief Financial Officer, will speak to our financial performance. Following commentary, we will 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.allegionair.com. And with that, I'll turn it to Greg.

Sherry, thank you, and good afternoon, everyone. We appreciate you joining us today. Before we get into it, I wanted to take a moment to extend our heartfelt condolences to the loved ones of the passengers and crew who were involved in the tragic accident near DCA Reagan Airport last week. Our thoughts are with the individuals, their families, and all those impacted during this difficult time. Now to our earnings report. We concluded 2024 with a commendable performance, achieving an adjusted airline-only operating margin of over 13% for the December quarter. marking a six and a half point increase from the previous year. This was driven by a 16% increase in December capacity, primarily due to aircraft utilization averaging 9.6 hours per day during the peak holiday period, reflecting a 21% year-over-year increase. Despite significant growth during the peak period, our team attained a controllable completion rate of 99.7%, and I want to thank them for ensuring smooth operations during one of the busiest times of the year. Last year, we introduced three primary initiatives, one of which focused on restoring utilization during peak leisure demand periods, a goal we successfully achieved in December and expect to maintain this momentum throughout 2025, particularly during spring and summer peak periods. Additionally, we prioritized upgrading our commercial technology and introducing new MAX aircraft, and we have made substantial progress in both of these areas. The ongoing optimization of our Navitare system has already led to incremental improvements and is expected to continue enhancing revenue throughout 2025. Furthermore, we ended the year with four MAX aircraft in service, beginning to address operational inefficiencies caused by previous aircraft delivery delays. The tactical excellence demonstrated by Team Allegiant around these three key priorities significantly strengthens our foundation for improved performance. Underlying our execution is the deliberate efforts of being laser focused on our core strength, the airline. Consequently, a significant step in this strategy is the goal of transitioning Sunseeker off Allegiance balance sheet. Over recent months, we have made significant progress in our strategic review of Sunseeker. This unique resort, located in a popular state, offers excellent amenities and is managed by a highly skilled team. We have great confidence in Sunseeker's future success and have observed material improvements in its financial performance. Nonetheless, we need to acknowledge that a new capital partner will be important for Sunseeker to achieve its full potential. As such, we have launched a competitive process with our team of experienced advisors for a potential sale or stake sale and have received promising indications of interest from several high-quality name investors. Our goal is to conclude this process by summer. We will update when appropriate, and BJ will touch on the impairment announced last week and how we are guiding for the resort. Further strengthening our balance sheet remains crucial. Although leverage is improving, there is still work to be done, and it continues to be a key focus for this management team. Fortunately, we own the vast majority of our aircraft, which has allowed the fleet team to strategically sell older underutilized A320 assets in a favorable market. resulting in substantial cash proceeds supporting our deleveraging efforts. The sell of these assets is aligned with our growing confidence in the delivery schedule from Boeing. Given the firmness of the aircraft market and the timing of our order, each MAX delivered and purchased represents significant value. In addition to the day one equity value, the operating economics of our MAX aircraft exceed the fleet average by as much as 30%. To add to that, Every new aircraft delivered to us is configured with our impactful premium seating product, Allegiant Extra. Currently, 46% of our fleet is equipped with our Allegiant Extra product, and we plan to end the year at 70%. This compares favorably with prior year's average of 23%. We continue to see strong demand from our customers for this premium seating as we expand the product more broadly across the network. Similarly, The Allegiant Always credit card continues to perform as we expect to receive more than $140 million in total remuneration during 2025. As we advance our commercial technology structure, we are enthusiastic about the future products we will introduce to our customers, aiming to drive more to the top line and improve upon our industry-leading ancillary revenue. Starting out 2025, we have a clear path ahead to deliver on. The industry capacity backdrop is one of the most constructive we have seen for some time. The health of the consumer is strong, and we are well positioned to capitalize on this trend with expected capacity growth of over 15% throughout the year. This growth will further enhance our operational efficiency by utilizing our existing infrastructure and expanding productively. The midpoint of our airline full-year EPS guidance of $9 suggests an improvement in earnings of over 50% compared to 2024. This is an exciting new chapter for Allegiant. which would not be possible without the ongoing excellence demonstrated by Team Allegiant and their persistent dedication and hard work. Additionally, I am encouraged by recent progress in contract negotiation with our pilot team. It is a privilege to work alongside the most talented team in the industry as we strengthen our position as the leading airline in the communities we serve, delivering reliable, nonstop travel at unbeatable value.