Allegiant Travel Company

Ladies and gentlemen, thank you for standing by. My name is Colby, and I'll be your conference operator today. At this time, I would like to welcome you to the Allegiant Travel Company first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, we will conduct a question and answer session. We please ask that you limit yourself to one question and one follow-up if needed. Thank you. If you would like to ask a question at that time, please press star then the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question at any time, please press star one again. I will now turn the call over to Sherry Wilson. You may begin.

Thank you and welcome to the Allegiant Travel Company's first quarter 2026 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.allegionaire.com. And with that, I'll turn it to Greg.

Thank you, Sherry, and thanks to everyone for joining us this afternoon. For today's call, I'll start with a brief overview of our first quarter performance and then update you on our commercial initiatives, outline how we're navigating the current environment, and close with a few remarks on the status of our acquisition of Sun Country. We started the year on a very strong note. Our first quarter results reflect the momentum we built through last year, delivering a 14.9% adjusted operating margin of nearly six points year over year and slightly above our guided range. Importantly, we achieved our highest first quarter adjusted operating margin since pre-COVID, and we believe our margin will prove to be industry leading for the second quarter in a row. That performance reflects our deliberate operating strategy. We prioritize flexible capacity to capitalize on peak demand periods rather than chasing maximum utilization over the entire year. Notably, we achieved those results serving the leisure traveler without large international networks or premium cabins. That highlights the strength of our model and execution. Our focus remains on running a highly reliable, efficient airline because when we operate well, The financial results follow. To that point, our operational performance was outstanding, with a 99.9% controllable completion factor, even with a higher mix of peak day flying. Demand was particularly strong in peak periods, helping to drive a 16.4% increase in TRASM. ASMs were down 5.9% from the previous year and heavily influenced our CASM-X, which was up 7.1% compared to last year. However, excluding fuel, our adjusted operating expenses were down nearly 6% year over year. Our cost structure remains one of the best in the industry. We ended the quarter with total liquidity of 1.2 billion. We have a very strong financial position, and that will even be stronger as we join forces with some country. Turning to our commercial initiatives. After several years of investing in our technology, we're now positioned to leverage our platform to accelerate our commercial strategy. Our co-branded credit card currently has over 600,000 cardholders. Today, card remuneration represents just over 5% of our annual revenue and is a significant contributor to our profits. In the first quarter, compensation from the bank increased by 9% compared to the same period last year, reflecting ongoing significant opportunities to encourage greater customer adoption. Our premium seeding product, Allegiant Extra, is continuing to outpace expectations by contributing to our TRASM growth and driving higher loyalty. With an increasing number of Allegiant Extra purchasers being repeat customers, we expect continued strong performance. Let me now shift to how we are managing through the current environment. We have always focused on what we can control and manage through what we can't. We strive to optimize our network for profitability and flex our schedules to match capacity with demand throughout each year. Making adjustments is simply part of our DNA. Overall, leisure demand is still strong, as shown by our robust cash sales. We had many record sales days in the quarter and continue our double digit growth over prior year. The main pressure point is jet fuel costs, which have risen sharply and crack spreads nearly tripled to about $1.70 per gallon in early April, but have since dropped to $1.20, still about twice as much as the pre-conflict level of roughly $0.50. We are looking forward to taking deliveries on our max order book, particularly as that aircraft offers more than a 20% improvement in fuel burn efficiency. While we continue to see healthy fare strength overall, we are navigating the volatility by reducing off-peak capacity where margin pressure is most acute. We have also reduced service on some of our longer stage length routes where the hurdle on fuel cost is higher. All told, we are now planning for a 6.5% year over year reduction in ASMs in the second quarter, down from our initial plan at the start of the year. And we are not seeing any reasons to pull back on our peak flying. Given the strong demand and higher mix of peak flying, we expect TRASM will be up sequentially in the second quarter. We continue to closely monitor the evolving geopolitical environment and will adjust our operations as conditions warrant. While we have already taken some modest schedule actions, our flexible model and agility still give us ample time to refine these decisions as the year unfolds. The sharp rise in fuel prices will weigh on near-term industry profits. We are not immune. This is reflected in our second quarter guidance. That said, a silver lining is that the gap between efficient, well-run airlines and weaker operators is widening. Allegiant and Sun Country are on the right side of that gap. I'm very pleased with the progress we've made toward closing on our Sun Country deal, which is now expected in the coming weeks and just over four months from the announcement. This super compressed timeline underscores the strong execution and the agility of both organizations. Our integration planning has reinforced our confidence in what this combination can deliver. Meanwhile, the value of some countries' charter and cargo businesses, which carry contractual fuel pass-through structures, is even more beneficial in today's volatile fuel environment. Both airlines own their aircraft, and our fleet strategies complement each other. In a market where managing capacity is crucial, owners have greater flexibility than those who lease. We look forward to completing the merger and demonstrating the value of the combined companies in the coming quarters. In closing, Allegiant continues to separate itself from the pack. We have the model, the balance sheet, the people, and the strategic transaction to extend our leadership position within the value segment. We take great pride in being the leisure carrier of choice in the communities we serve and delivering convenience and reliability that our customers know that they can count on. That performance is all because of the tireless efforts of Team Allegiant, whose dedication and passion shows up every single day. And I'm deeply appreciative of all of you and honored to work by your side. With that, let me turn it over to Drew to walk through our commercial performance.