Allegiant Travel Company

managing director of investor relations. Please go ahead.

Thank you, Kelvin. Welcome to the Allegiant Travel Company's third quarter 2025 earnings call. We will begin today's call with Greg Anderson, CEO, providing a high-level overview of the quarter, along with an update on our business. Drew Wells, chief commercial officer, will walk through demand commentary and revenue performance. And finally, Robert Neal, President and 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 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, feel free to visit the company's investor relations site at ir.legionair.com. And with that, I'll turn it to Greg.

Sherry, thank you, and thank you, everyone, for joining us today. As I reflect back on the past year plus as CEO, I am proud of the great strides we have made to strengthen our core airline and our focus on making sure we return to our roots as a solid double-digit operating margin business. A hallmark of our success is that we are the leisure carrier of choice in the communities we serve by offering convenient on-site flights at the lowest fares. That success is also because of Team Allegiant's dedication and execution that underscores our ability to provide consistent and reliable operations for our customers. Our performance is demonstrated by our industry-leading completion factor for July, a peak period that set a new monthly record for the number of customers flown. It is also reinforced by our Net Promoters Force, which remain near all-time highs, reaffirming the loyalty of our customer base and the strength of our brand. I am particularly proud that we were recognized by USA Today's Reader's Choice Award for the best airline credit card for the seventh year in a row and best frequent flyer program for the second consecutive year. We designed our programs to serve the needs of our leisure customers, which include high-value and frequent travelers. The success of our loyalty program and the fact that we are on pace to generate $135 million in remuneration from it this year underscores our relevancy in the markets we serve, and we see a lot of opportunities to enhance these programs to drive outsized growth in the years ahead. Turning to the third quarter, we saw steady improvement in the demand environment, allowing us to outperform our initial forecast in both revenue and cost. As expected, we reported a modest operating loss, It was typically our weakest period of the year, but it was at the better end of our guidance range. So far this year, average daily peak utilization per aircraft is over nine hours, near record 2019 levels, and we are delivering one of our best operational performances despite the higher level of applying on these peak days. The fruit of our cost structure initiatives can be seen in our industry-leading CASMX, which is down 7% year-to-date. That reflects our efforts to remove structural costs and grow ASMs without adding aircraft or personnel. As discussed on prior calls, there are several continuing heat initiatives driving financial performance improvement. By year end, we anticipate having 16 MAX aircraft in service. Bringing on this new fleet type has been a long time coming, and its integration this year has gone very well. We are now on pace for the MAX fleet to comprise over 20% of our ASMs in 2026, and earn strong returns on the investments we have made in them over the past few years. The MAX fleet continues to perform nicely both operationally and financially and is much improved from our older gen A320s. In addition, owning our aircraft rather than leasing gives us important flexibility to respond to dynamic market conditions. Our Allegiant Extra product is now available on 70% of our planes and is exceeding expectations and demand and customer satisfaction, with positive benefits to travel and margins. We continue to modernize our technology. Now that our Navitainer system is post-implementation, we are turning our sites to other technology initiatives for improvement, such as website conversion, customer personalization, customer journey, and enhancing communication throughout all phases of travel. we are investing in our technology staff to take advantage of the power of AI and optimize our infrastructure for faster interactions and data-driven decision-making. As we turn towards the remainder of 2025, we are seeing improvement in leisure demand, particularly around the holidays. We expect a fourth quarter operating margin in double digits and a full year airline operating margin of approximately 7%. As a result, we raised our airline EPS our airline-only EPS guide to more than $4.35 per share for the full year 2025. And we are optimistic if we look forward to 2026. From an industry perspective, carriers are moderating their domestic capacity plans, and we are planning on flattish capacity next year as we drive a higher percentage of peak-day flying and harness a full year of benefits from the initiatives I just mentioned. When you put it all together, we are poised to deliver margin expansion that continues to set us apart from our peers, further highlighting our low-utilization, flexible capacity model is truly differentiated. Our capital allocation priorities remain the same. Our top priority is reinvesting in our business. We will remain disciplined in our goal to balance growth with margins and maintain flexibility, which has served us well throughout our history. And before I conclude, I'd like to congratulate BJ on his promotion to president. He will also continue to serve in the Chief Financial Officer role. BJ has been an exceptional partner and leader, instrumental in driving both Allegiant's financial and operational strengths alongside our strategic execution. He knows our business and its industry well, and I look forward to continuing to work closely with him and the rest of our excellent management team in shaping Allegiant's bright future. I also want to extend my sincere gratitude to the entire team at Allegiant. Their hard work and discipline have meaningfully strengthened our foundation and positions us well for 2026 and beyond. Lastly, I also want to thank the aviation professionals across the system, both within Allegiant and throughout the industry, who have continued to work tirelessly throughout the government shutdown and ongoing ATC constraints. Thanks to their dedication, we have successfully minimized disruption and protected the journeys of our customers. And with that, let me turn it over to Drew to provide details on our commercial performance. Thank you, Greg, and thanks, everyone, for joining us this afternoon. We finished the third quarter with $553 million in airline revenue, approximately half a percent above the prior year, producing a third-quarter travel of 11.19%. This is down 8.4% year-over-year, in line with our internal expectations from our mid-quarter update, inconsistent with the original expectation of sequential year-over-year improvements. Allegiant grew total ASM 9.7% versus 3Q24, with overall utilization of 10%. Also consistent with our audit call was the expected unit revenue improvement in same capacity markets first to second quarter, which recovered approximately one point to down about 5% year over year. Again, perhaps oversimplified, with a growth expected travel headwind of approximately four points, we slightly outperformed the combination of core flat capacity performance AND THE EXPECTATION FROM OUR ELEVATED GROWTH RATE. FURTHER, WITHIN THE QUARTER, WE THOUGHT ALL THREE MONTHS PRODUCED BETTER YEAR-OVER-YEAR UNIVERSITY FIGURES THAN ANY MONTH ON THE SECOND QUARTER, AND THE BEST LOW FACTOR RESULTS FOR THIS PRIOR YEAR OF ANY MONTH YEAR-TO-DATE. MEANWHILE, THE PROFILE OF NEW MARKET ASM HAS A PERCENT OF THE TOTAL STEADILY TICKED HIGHER. THE THIRD QUARTER ENDED AROUND 5%, WHILE THE FOURTH QUARTER WILL RAMP UP TO OVER 5.5% OF SCHEDULED SERVICE ASM. and is expected to rise again in the first quarter. 51 routes operated in the summer of 2025 that did not operate in the previous summer. Of those, approximately 85% of them contributed positively to earnings in their first summer of operation. The results from these markets rolled into announcing more new and exciting route opportunities through the third quarter. 19 new routes are set to begin Thanksgiving to early spring, including four new cities, Fort Myers, Florida, Huntsville, Alabama, Atlantic City, New Jersey, and Burbank, California. We're encouraged by the early performance of our new cities and markets and continue to see customers embrace our reliable and convenient travel at unbeatable value. The third quarter of 2025 marked three consecutive years of industry commentary around abnormal peak to off-peak relationships in the quarter, be it the tail end of the post-pandemic demand surge into a more typical fall in 2023, or the relatively sluggish July marked by late summer demand uptick into the fall over the last two years. All three of those quarters saw sequential traveling declines in the second quarter below pre-pandemic median levels. Meanwhile, the fourth quarter has remained more resilient with each of the last three years hitting a traveling above 13 cents, a feat we'd accomplished in just one quarter pre-pandemic. As a result of the diverging quarterly trends, our 4Q performance has looked relatively better each year, and that pattern is expected to continue in 2025. As mentioned on the last column, We expect sequential improvement in the year-over-year travel intervals for the fourth quarter, and that should hold into the first quarter of 2026 as well. The converting benefits from Medicare development we discussed in the last call yield a low factor benefit in the third quarter, as I described earlier, and should persist into the fourth quarter. Despite a roughly 10% scheduled service ASM growth profile in 4Q25, we expect low factors to be flat to slightly up in the fourth quarter versus 4Q24. And While capacity for the corner as a whole is expected to grow roughly 10%, much of that is due to the weather-impacted comparisons of October 2024. November and December 2025 expects the volume to be approximately 6% higher year-over-year for scheduled service ASNs. Our peak Thanksgiving and Christmas week utilization profiles slightly higher than prior year and around all-time highs during the peak period. We are incredibly encouraged by peak holiday demand, profiling similar to last year as well. Our customer base remains well positioned for leisure travel. Our network lends itself to a lower cost of living profile with median household income over $100,000. We continue to see demand trend closely to legacy commentary on main cabin performance, as well as continued opportunity with our Legion Extra cabin, our award-winning Allegiant Always co-branding credit card and loyalty programs, and beyond. We have completed a multi-year journey retrofitting our Airbus aircraft with the Allegiant Extra layout. We continue to see revolts hold through the expanded offering and repurchase rates growing. Further, the revolts on the MAX aircraft are in line with the expectations set by current Airbus performance, and we should start to see efficiency benefits from the transition of our Fort Lauderdale base to solely MAX aircraft in the fourth quarter. Our formal review of the co-brand program is nearing an end. We expect to receive approximately 135 million dollars of remuneration in full year 25, but As we'd expect, given the time since program launch, we believe there will be meaningful opportunities for evolution and improvement. However, there are a few ways to get to the easy part. Of course, we will soon shift into execution mode, working through the negotiations, logistics, and bringing the plan to life. In the short term, we continue to test new acquisition tactics and offers. We realized a mid-20% lift on new card acquisition in the months of September and October. As a multi-year core system transition moves into the rearview mirror, our foundation and technology can enable further commercial individuals, and we're excited to bring the customer experience out of value into focus. Elysian Extra, co-brand program updates, and other commercial developments allow us a better segment for a broad spectrum of customer preferences. And now, I'd like to hand it over to Robert Hinn, Mr. President.