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  Allegiant Air

  IATA/ICAO Code:

  G4/AAY

  Airline Type:

  Ultra-Low-Cost Carrier

  Year Founded:

  1997

  CEO:

  John Redmond

  Country:

  United States

  Region:

  North America

US Ultra Low-Cost Carrier Allegiant Air reports that fuel prices per gallon in Spring/Q2 2022 were high enough to damage earnings for the airline. This is even with 90% of the available seats filled (load factor), according to its traffic report issued July 25.

Rising fuel costs cutting into earnings

For Allegiant Air’s Executive Vice President, Chief Financial Officer Gregory Anderson, the fuel cost reduces earnings per share.

Our fuel cost per gallon was $4.32, slightly above our previous guidance. This increase in fuel price coupled with a slight reduction in fuel efficiency from the first quarter, attributable to a more than eight-point increase in load factor, resulted in roughly $9 million in incremental fuel expense for the quarter. Based on the above results, we expect an earnings per share, excluding 2022 employee recognition bonus, of roughly $0.62 for the second quarter.

The previous guidance was $4.32 per gallon. In fact, in previous Simple Flying coverage about Allegiant Air’s financial position; Gregory Anderson, the Executive Vice President and Chief Financial Officer addressed this concern stating,

The average cost per fuel gallon in May was $4.41, and we now expect to finish the quarter at an average price per gallon of $4.30... This increased fuel cost over our previous guide of $4.00 per gallon will result in roughly $18 million in excess expense throughout the quarter.

It's worth noting that Alaska Airlines, in its second quarter Earnings Call, had Executive Vice President Finance and Chief Financial Officer Shane Tackett say Alaska Airlines expects a fuel price of $3.79 to $3.89 in the third quarter. According to IATA.org, for the week ending July 22, the North America price per gallon of jet fuel is 334.69 or $3.35~ - coming down from spring highs.

The S&P Global report from April 4th shows New York jet fuel hit a peak of $7.5861 a gallon. With sanctions on Russian petroleum products from Russia’s war on Ukraine, the demand for diesel – the close relative product in refining petroleum to jet fuel – was so high that petroleum markets were incentivized to produce more diesel than jet fuel.

More passengers than in 2019

In the second quarter of 2019, the last year before the COVID-19 pandemic hit, Allegiant Air flew 4.131 million passengers. In the second quarter of 2022, in scheduled service, Allegiant Air flew 4.711 million passengers system-wide - an apparent growth of 14.0%. This is in response to available seat miles jumping from 3.603 million to 4.267 million at 12.2%.

Assisting this was Allegiant Air addition of new routes in May. New routes with twice-weekly service are:

• From May 18th, between Orange County (SNA) and Idaho Falls (IDA)
• From May 20th, between Des Moines (DSM) and Newark (EWR)
• From May 27th, between Las Vegas (LAS) and Orlando’s secondary airport Orlando Sanford (SFB)

Allegiant Air likes to operate routes in underserved markets and use secondary airports to reduce the cost of landing fees. This is a means to the end of Allegiant Air's stated goal as per a press kit handed out by the airline:

Since 1999, Allegiant Air has linked travelers in small-to-medium cities to world-class vacation destinations with all-nonstop flights and industry-low average fares. Today, Allegiant's all-Airbus fleet serves communities across the nation, with base airfares less than half the cost of the average domestic round-trip ticket.

Next earnings call

The next earnings call is scheduled for 4:30 PM EDT, August 3, 2022. One can listen here.

Sources: IATA.org, S&P Global