Allegiant Travel Company

Thank you, Kayla. Welcome to the Allegiant Travel Company's first quarter 2025 earnings call. We will begin today's call with Greg Anderson, President and CEO, providing a high-level overview of our results, along with an update on our business. Drew Wells, Chief Commercial Officer, will walk through our capacity plans and revenue performance. And finally, Robert Neal, Chief Financial Officer, will speak to our financial results and outlook. 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.allegiantair.com. And with that, I'll turn it over to Greg.

Sherry, thank you. Before I dive in, I am pleased to announce Tyler Hollingsworth has been officially named as our Chief Operating Officer. Over his 15 years at Allegiant, Tyler has held key roles across operations, most recently serving as interim COO, and has been instrumental in delivering the strong performance we continue to see today. That makes Tyler an excellent fit. Congratulations, Tyler. Thanks, Greg. Turning to the quarter. The team delivered an outstanding controllable completion rate of 99.9% on 32,000 departures, of 14% compared to the same period last year. More than 4.4 million passengers flew our airline in the quarter, a first quarter record, with 75% being repeat customers. Our customers recognize Allegiant's role in leisure-focused travel and consistently choose us for the distinctive value and experience we provide. This ongoing preference is evident in the strong engagement in our award-winning loyalty program, with the number of active cardholders increasing by nearly 7% year-over-year. The solid execution of our key initiatives discussed in prior quarters helped boost financial performance improvement. We reported an airline operating margin of 9.3% during the first quarter, up 3 percentage points versus last year. These results fell comfortably within the range of our initial guide provided in January, making us one of the few airlines to meet their initial targets. This excellent performance demonstrates the great work done by Team Allegiant, despite a challenging start to the year. I want to extend my sincere appreciation for them. Thank you. In January of 2025, we turned the capacity knob up to plan for a year of strong growth. The demand backdrop was robust, and our favorable availability of crew and aircraft set us up nicely to drive meaningful margin expansion throughout the year. However, as economic uncertainty weighed on consumer confidence and discretionary spending, we acted quickly to adapt. Fortunately, Allegiant was built and designed with flexibility in mind. While peak leisure demand remains healthy, we responded promptly by turning the capacity knob down, primarily in the shoulder and off-peak, given the demand softness that showed up during these periods. Cost discipline is essential for us to protect margins. Aggressively managing capacity combined with additional structural cost reductions action during the quarter are expected to keep the airline solidly profitable in 2025, even in a stabilized lower demand environment. That said, we are currently seeing some improvements in our bookings. Allegiant pioneered the successful low fare model targeting leisure travelers. Our differentiated approach allows us to not only perform better than most during downturns, but hold strong our niche in the industry. Our airline has structural advantages, with the foundation built on the following cornerstones. First, minimizing competitive overlap with other domestic carriers and offering a network that ensures convenient nonstop travel from the core leisure airports we serve. Second, a strategic design focused on tactical utilization, optimizing profitability by operating aircraft for only six to eight hours per day on average. Third, a long-term fleet strategy centered on opportunistically acquiring and owning aircraft to support low fixed costs while building a high degree of fleet flexibility. Lastly, maintaining an industry-leading cost structure, as most leisure travelers are highly influenced by lower fares. For these reasons, Allegiant has been and will continue to be positioned uniquely. Furthermore, the execution of our key initiatives are going well, and with these initiatives are expected to further strengthen our foundation and drive margin improvements. Let me provide you with a brief update on our progress. First, restoring peak utilization. In the first quarter, peak utilization increased by 20% compared to the previous year and just slightly below 2019 levels. Peak leisure demand remains healthy with same-store travel during these periods holding up well despite meaningful growth. Second, fleet flexibility. We are proactively managing our aircraft to the market conditions and our strategic needs. Moreover, our fleet holds significant equity value, a value we expect to meaningfully increase as we expand our in-service MAX fleet. During the first quarter, our growing cadre of MAX aircraft lose 6% of our ASMs and continues to outperform expectations operationally and financially. By year end, we anticipate 16% of ASMs to be flown by the MAX fleet and will continue to support strengthening our differentiated model. Third, product enhancements. Allegiant Extra is now on more than half of our fleet, a five-fold increase when compared to the first quarter of 2024, and importantly, maintaining a strong revenue premium over our standard product. Additionally, we continue to enhance our bookings and reservation system, Navitare. These improvements have strengthened our operations and enabled us to reintroduce loss functionality and new features that are resulting in higher revenue. And fourth, cost discipline. Managing costs relentlessly is an everyday commitment to improve productivity, streamline decision-making, and challenge the status quo. Due to the recent economic downturn, material structural cost savings have already been proactively actioned with more initiatives under review. These changes support sustainable margin growth, including adjustments in workforce alignment and enhancement through technology-enabled productivity. And finally, Sunseeker. We are confident that our new Sunseeker resort will do well over the long term. Sunseeker's financial performance exceeded expectations during the first quarter, with EBITDA reaching $4.8 million compared to an EBITDA loss of negative $4.6 million in the first quarter of 2024. To that end, we recognize our core competencies lie within the airline business, where we see abundant opportunity and long-term success. Maintaining a strong industry-leading balance sheet is also a top priority of ours. Pursuing a transaction related to the sale of the resort is an important step towards our objectives for the airlines. And so we're pleased to report this process remains on track for completion this summer, and we look forward to share further details when appropriate. And I'll close where I started. In a volatile environment, consistent execution and adaptability are essential, and that's where Allegiant excels. Our ability to deliver strong results while maintaining operational flexibility sets us apart. The foundation of our model enables us to perform, adapt, and repeat. As we look ahead, our True North will remain centered around expanding margins and positioning Allegiant for long-term success. We will continue to manage capacity and cost aggressively as we closely monitor the demand environment. And our greatest driver to success is Team Allegiant. Their dedication continues to set us apart, and it is an honor to work with such a talented and inspiring team. And with that, I'll turn it over to Drew.

Thank you, Greg, and thanks to everyone for joining us this afternoon. We finished the first quarter with $668 million in airline revenue, approximately 6% above the prior year, producing a 1Q TRASM of 12.29 cents, which was down 7.1% year-over-year, in line with our early March re-guide, and off just about a point from the initial guided figure of down just more than 6%. Allegiant grew total ASMs by 14.2%, with stage length increasing by about 1.6%. The first quarter capacity continues to build upon the unique attributes of our business model while supporting growth without adding aircraft and personnel. We were able to increase aircraft utilization by approximately 19% to 7.5 hours per aircraft per day in the first quarter. Despite the growth in the quarter, utilization still remains more than 10% lower than any other reporting carrier. To expand on this a bit more, given the demand environment that existed throughout the initial capacity planning process, we grew off-peak day-of-week ASMs approximately 34% in the first quarter. Even with this growth, we still flew 73% of ASMs on the peak leisure days of Thursday, Friday, Sunday, and Monday, the highest of reporting carriers in the first quarter. Due to the rapidly changing demand dynamics in the first quarter, this became increasingly important as the spread from peak day to off-peak day unit revenue performance returned to pre-pandemic variance. As we previously communicated, 2025 growth supported growing into our infrastructure. The schedule was designed to fully leverage the existing infrastructure and, in turn, expand the margin profile. The abrupt change in demand forces to course-correct and better align our capacity with the current demand environment. That current demand environment continues to present challenges across the industry. We've diligently worked to find both the right price point that continues to stimulate customer demand and the right capacity to balance the overall revenue and cost outlook. Through all economic environments, Leisure customers have shown the intent to continue to travel, but typically need a lower price point to fulfill that intent. To support bookings, we've seen pressure on yields, but ancillary revenue has remained resilient. In the first quarter, our ancillary revenue per passenger of $79.28 was a record, and up nearly 5% year-over-year, primarily driven by Allegiant Extra expansion and fully regained functionality from our Navitare cutover in fall 2023. Given the off-peak weakness experienced in the quarter, we focused our capacity review on shoulder season flying in May and August, and in particular, off-peak day flying in those months. More than 7.5 points of May through August capacity was removed, and roughly two-thirds of that capacity came from cuts to Tuesday, Wednesday, and Saturday flying. The adjustments to peak day flying were largely driven by closure of our LAX base, a strategic decision in response to rising airport costs, along with targeted route suspensions aimed at optimizing network efficiency. Following the capacity adjustments, we anticipate two QASMs to be up approximately 15.5% year-over-year, showcasing our continued ability to adapt and optimize in response to changing demand. In comparison to other airlines, we removed a larger percentage of capacity than any other carrier relative to published schedules at the start of the year. The quarter's ASM jump is predominantly driven by April's roughly 20% capacity increase based on the late Easter shift and a comp of down double digits in April 2024. Due to the timing of shifting demand trends, we had limited flexibility to adjust our April schedule. Looking ahead, while we anticipate second quarter TRASM to face greater year-over-year pressure than in the first quarter, periods like Easter and peak June are expected to deliver solid performance. We will remain vigilant and flexible with capacity moving forward to remain best positioned. Recent booking trends are promising, and we are optimistic about the continued recovery and growth in demand. As we move forward, we expect to see continued strength and growth in our strategic initiatives. Nearly 65% of 2Q departures are planned to be on Allegiant Extra Equipped aircraft. Despite the growth in departures and route serves, we continue to see a benefit of nearly $500 per departure on flights with a seat layout. 10% of 2Q departures are expected to take place on a new Boeing MAX. To date, our capacity deployment has been done to maximize throughput of crew members completing their operating experience. However, later this year, we expect to shift scheduled capacity toward a more commercial-driven solution. We have lapped the first year of our Allianz travel insurance product and have seen the absolute contribution grow nearly 60% in April 2025 versus April 2024. And finally, at the end of the first quarter, Our co-branded Allegiant Always Visa credit card grew cardholders approximately 11% over the last year, despite trailing 12-month ASM growth of less than 4% versus the previous 12 months. Additionally, consumer spend on the card was robust and outpaced 1Q year-over-year passenger growth, with early indications that April remains strong as well. We look forward to continuing to grow the program alongside our partners. And now, I'd like to hand it over to Robert Neal.