Allegiant Travel Company

Hello and welcome to the Allegiant Travel Company fourth quarter and full year 2025 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, please press star one on your telephone keypad. I would now like to turn the conference over to Sherry Wilson, Managing Director of Investor Relations. You may begin.

Thank you and welcome to Allegiant Travel Company's fourth quarter and full year 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 if needed. 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 thanks to everyone for joining us today. We close 2025 with strong momentum, capping a year of meaningful progress that strengthened our foundation and showcased the durability of our model. Let me briefly review our performance in the fourth quarter, reflect on key achievements from last year, and then frame our strategic focus for 2026. Our financial results for the fourth quarter exceeded our original expectations. We saw strong leisure demand throughout the quarter as TRASM declined just 2.6% on 10.5% capacity growth. Fuel ran slightly higher than expected, but disciplined cost execution helped us deliver a 12.9% adjusted operating margin among the best in the industry. These results demonstrate the effectiveness of our low utilization flexible capacity model. Operationally, 2025 was an outstanding year. Controllable completion was an impressive 99.9%, even as we increased peak flying. That consistency was recognized externally as well. The Wall Street Journal ranked Allegiant the second best US airline overall and number one in lowest cancellation rate, the least number of mishandled bags, and the fewest instances of involuntarily bumping passengers. This reflects the daily professionalism and execution of Team Allegiant. We also successfully integrated the MAX aircraft into our fleet. After receiving our first MAX in late 2024, we prioritized investing in pilot training and revamping our maintenance operations. This was to ensure a seamless transition. And these aircraft are performing very well, delivering roughly a 20% fuel burn advantage compared to the A320. And now, We are continuing to optimize schedules to allow us to realize the efficiency and reliability benefits from our MAX fleet. If they continue to increase their share of flying for us, they should become a meaningful tailwind for margins. Technology modernization was another important milestone. Transitioning away from our proprietary systems in favor of modern, flexible platforms was a major undertaking, but it was essential for achieving our future goals. We are now turning our focus to leveraging the state-of-the-art technology stack that allows us to introduce new tools and capabilities across the business. And our commercial initiatives are also gaining traction. Allegiant Extra continues to perform well, loyalty engagement is rising, and our improving digital capabilities are helping to make travel easier and even more enjoyable. With flash capacity growth in 2026, these commercial levers should boost earnings as their early results remain encouraging. Importantly, we strengthened our financial position while advancing all these initiatives. Unit costs fell more than 6% for the year, an industry-leading performance. And with the sale of Sunseeker, debt repayments, and improved EBITDA, net leverage was reduced to 2.3 terms, nearing our lowest levels since pre-COVID. Turning briefly to demand, we saw meaningful improvement over the holiday period, and that momentum continued into January. Currently, your demand is strong, and our customers continue to value convenience and affordability, areas where Allegiant is uniquely positioned. Looking ahead to 2026, we do not plan to grow the fleet this year as a standalone, and we expect to lean into our existing infrastructure and commercial initiatives to drive travel improvement and margin expansion. Importantly, we remain committed to balancing growth with profitability, which we refer to as earning the right to grow. We expect a 13.5% adjusted operating margin in the first quarter, which should be our second straight quarter at or near the industry lead in setting the stage for a strong 2026. And for the full year, we're guiding to adjusted EPS of more than $8 per share, an increase of approximately 60% year over year, reflecting the structural improvements we've made across the business. Strategically, Our agreement to acquire Sun Country is an important step forward as the combination is expected to accelerate our ability to build the leading leisure airline in the U.S. Given the execution over the past year and the strengthening of our foundation, the organization is well positioned to take on this significant undertaking. The two airlines share strong cultural alignment, similar fleet types, minimal network overlap, and complementary technology platforms, including Navitair, all of which help reduce integration risk. A thoughtful integration plan is underway, focusing on capturing synergies efficiently while protecting operational excellence and the respective strengths of both airlines. When you step back and look at the broader landscape, it's clear that Allegiant continues to separate itself within our segment of the industry. Our low-utilization, flexible capacity model has worked for more than 20 years, because it is purpose-built for leisure flying. We take great pride in being the leisure carrier of choice in nearly all of the 126 communities we serve, delivering convenience and reliability that travelers can count on. And none of this is possible without the consistency and dedication of Team Allegiant. Their passion shows up every single day, and I'm honored to work alongside them. And with that, let me turn it over to Drew to walk through our commercial performance.