SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q
(Mark One)
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172021
OR
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to            

Commission File Number 001-33166
algt-20210630_g1.jpg
Allegiant Travel Company
(Exact Name of Registrant as Specified in Its Charter)
Nevada20-4745737
Nevada20-4745737
(State or Other Jurisdiction of Incorporation or Organization)(IRS Employer Identification No.)
1201 North Town Center Drive
Las Vegas, NevadaNevada89144
(Address of Principal Executive Offices)(Zip Code)
Registrant’s Telephone Number, Including Area Code: (702) 851-7300


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $0.001ALGTNASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesý☒  No o☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý☒  No o☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
Large accelerated filer  x
Accelerated filer  o
Non-accelerated filer  o
Smaller reporting company  o
(Do not check if a smaller reporting company)
Emerging growth company  o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o☐  No ý☒


The numberAs of July 16, 2021, the registrant had 17,986,507 shares of the registrant’s common stock, outstanding as of the close of business on October 16, 2017 was 16,077,909.

$0.001 par value per share, outstanding.


Allegiant Travel Company

FormALLEGIANT TRAVEL COMPANY
FORM 10-Q
Table of Contents

TABLE OF CONTENTS
PART I.FINANCIAL INFORMATION
ITEM 1.
3
ITEM 2.
1120
ITEM 3.
2035
ITEM 4.
2136
PART II.OTHER INFORMATION
ITEM 1.
2137
ITEM 1A.
2138
ITEM 2.
2239
ITEM 3.
2240
ITEM 4.
2241
ITEM 5.
2242
ITEM 6.
2343
2444

2


PART I. FINANCIAL INFORMATION


Item 1. Consolidated Financial Statements

ALLEGIANT TRAVEL COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)

June 30, 2021December 31, 2020
September 30, 2017 December 31, 2016(unaudited)
(unaudited)  
CURRENT ASSETS:   
CURRENT ASSETSCURRENT ASSETS 
Cash and cash equivalents$74,023
 $64,711
Cash and cash equivalents$418,448 $152,764 
Restricted cash17,335
 11,647
Restricted cash32,942 17,555 
Short-term investments351,519
 269,269
Short-term investments767,410 532,477 
Accounts receivable22,780
 40,667
Accounts receivable175,388 192,215 
Expendable parts, supplies and fuel, net20,444
 16,797
Expendable parts, supplies and fuel, net30,194 24,006 
Prepaid expenses25,102
 16,277
Other current assets6,771
 2,686
Prepaid expenses and other current assetsPrepaid expenses and other current assets32,537 24,616 
TOTAL CURRENT ASSETS517,974
 422,054
TOTAL CURRENT ASSETS1,456,919 943,633 
Property and equipment, net1,331,798
 1,095,314
Property and equipment, net2,116,618 2,050,311 
Long-term investments76,913
 124,834
Deferred major maintenance, net27,551
 17,347
Deferred major maintenance, net145,296 127,463 
Operating lease right-of-use assets, netOperating lease right-of-use assets, net128,537 115,911 
Deposits and other assets11,736
 12,027
Deposits and other assets27,336 21,607 
TOTAL ASSETS$1,965,972
 $1,671,576
CURRENT LIABILITIES:   
TOTAL ASSETS:TOTAL ASSETS:$3,874,706 $3,258,925 
CURRENT LIABILITIESCURRENT LIABILITIES
Accounts payable$19,247
 $16,010
Accounts payable$57,143 $34,197 
Accrued liabilities84,210
 96,661
Accrued liabilities182,914 116,093 
Current operating lease liabilitiesCurrent operating lease liabilities16,940 14,313 
Air traffic liability224,554
 194,001
Air traffic liability436,728 307,508 
Current maturities of notes payable, net of related costs165,837
 86,226
Current maturities of long-term debt and finance lease obligations, net of related costsCurrent maturities of long-term debt and finance lease obligations, net of related costs144,382 217,234 
TOTAL CURRENT LIABILITIES493,848
 392,898
TOTAL CURRENT LIABILITIES838,107 689,345 
Long-term debt, net of current maturities and related costs845,727
 722,048
Long-term debt and finance lease obligations, net of current maturities and related costsLong-term debt and finance lease obligations, net of current maturities and related costs1,441,083 1,441,777 
Deferred income taxes140,050
 75,338
Deferred income taxes310,700 301,763 
Noncurrent operating lease liabilitiesNoncurrent operating lease liabilities114,761 102,289 
Other noncurrent liabilities12,521
 7,670
Other noncurrent liabilities22,921 24,388 
TOTAL LIABILITIES:1,492,146
 1,197,954
TOTAL LIABILITIES:2,727,572 2,559,562 
SHAREHOLDERS' EQUITY:   
Common stock, par value $.00123
 22
Treasury stock(606,918) (517,803)
SHAREHOLDERS' EQUITYSHAREHOLDERS' EQUITY
Common stock, par value $0.001Common stock, par value $0.00125 23 
Treasury sharesTreasury shares(642,177)(646,008)
Additional paid in capital251,032
 238,236
Additional paid in capital671,893 329,753 
Accumulated other comprehensive loss, net(1,645) (230)Accumulated other comprehensive loss, net(125)(27)
Retained earnings831,334
 753,397
Retained earnings1,117,518 1,015,622 
TOTAL EQUITY473,826
 473,622
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$1,965,972
 $1,671,576
TOTAL EQUITY:TOTAL EQUITY:1,147,134 699,363 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY:TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY:$3,874,706 $3,258,925 
 
The accompanying notes are an integral part of these consolidated financial statements.

3


ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
 (unaudited)

 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
OPERATING REVENUES:
Passenger$443,747 $116,520 $700,441 $495,431 
Third party products23,001 8,443 36,622 24,419 
Fixed fee contracts5,134 3,237 12,827 12,156 
Other551 5,147 1,667 10,522 
   Total operating revenues472,433 133,347 751,557 542,528 
OPERATING EXPENSES:
Salary and benefits121,906 94,790 239,856 207,436 
Aircraft fuel109,456 27,358 192,305 116,171 
Station operations57,210 27,405 100,303 68,405 
Depreciation and amortization44,522 43,296 87,696 86,995 
Maintenance and repairs22,597 13,032 45,968 34,827 
Sales and marketing17,632 8,909 29,241 27,364 
Aircraft lease rental5,117 1,427 9,837 2,389 
Other15,501 23,752 33,276 50,468 
Payroll Support Programs grant recognition(61,213)(74,539)(152,971)(74,539)
Special charges854 81,169 2,592 247,267 
   Total operating expenses333,582 246,599 588,103 766,783 
OPERATING INCOME (LOSS)138,851 (113,252)163,454 (224,255)
OTHER (INCOME) EXPENSES:
Interest expense16,720 14,053 33,508 32,206 
Capitalized interest0 0 0 (4,067)
Interest income(500)(1,417)(963)(3,728)
Loss on debt extinguishment71 0 71 1,222 
Special charges0 19,830 0 26,632 
Other, net(11)698 (404)623 
   Total other expenses16,280 33,164 32,212 52,888 
INCOME (LOSS) BEFORE INCOME TAXES122,571 (146,416)131,242 (277,143)
INCOME TAX PROVISION (BENEFIT)27,544 (53,313)29,346 (151,030)
NET INCOME (LOSS)$95,027 $(93,103)$101,896 $(126,113)
Earnings (loss) per share to common shareholders:
Basic$5.49 $(5.85)$6.04 $(7.93)
Diluted$5.49 $(5.85)$6.04 $(7.93)
Shares used for computation:
Basic17,064 15,902 16,618 15,927 
Diluted17,073 15,902 16,632 15,927 
Cash dividends declared per share:$0 $0 $0 $0.70 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
OPERATING REVENUE:       
Scheduled service revenue$183,064
 $177,361
 $615,777
 $568,089
Ancillary revenue:       
  Air-related charges130,818
 127,301
 407,789
 376,944
  Third party products12,348
 11,259
 39,394
 34,482
    Total ancillary revenue143,166
 138,560
 447,183
 411,426
Fixed fee contract revenue11,831
 9,183
 34,120
 22,690
Other revenue10,708
 8,377
 28,140
 24,743
   Total operating revenue348,769
 333,481
 1,125,220
 1,026,948
OPERATING EXPENSES:       
Aircraft fuel80,421
 69,305
 250,470
 182,969
Salary and benefits88,788
 73,424
 277,307
 211,185
Station operations37,148
 32,252
 107,979
 96,313
Maintenance and repairs28,870
 26,263
 87,611
 82,016
Depreciation and amortization31,894
 25,881
 92,571
 75,962
Sales and marketing13,884
 5,650
 36,744
 16,774
Aircraft lease rentals533
 472
 3,098
 924
Other24,315
 23,394
 68,440
 58,363
   Total operating expenses305,853
 256,641
 924,220
 724,506
OPERATING INCOME42,916
 76,840
 201,000
 302,442
OTHER (INCOME) EXPENSE:       
Interest expense10,041
 6,938
 27,332
 21,567
Interest income(1,454) (781) (4,193) (2,102)
Other, net(400) (308) (1,254) (972)
   Total other expense8,187
 5,849
 21,885
 18,493
INCOME BEFORE INCOME TAXES34,729
 70,991
 179,115
 283,949
PROVISION FOR INCOME TAXES12,436
 25,538
 66,715
 105,669
NET INCOME$22,293
 $45,453
 $112,400
 $178,280
Earnings per share to common stockholders:       
Basic$1.39
 $2.76
 $6.85
 $10.74
Diluted$1.39
 $2.75
 $6.85
 $10.73
Shares used for computation:       
Basic15,852
 16,389
 16,142
 16,493
Diluted15,862
 16,406
 16,160
 16,514
        
Cash dividends declared per share:$0.70
 $0.70
 $2.10
 $1.70


The accompanying notes are an integral part of these consolidated financial statements.

4


ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
NET INCOME (LOSS)$95,027 $(93,103)$101,896 $(126,113)
Other comprehensive income (loss):  
Change in available for sale securities, net of tax(126)1,057 (98)324 
Foreign currency translation adjustments0 (8)0 3 
Total other comprehensive income (loss)(126)1,049 (98)327 
TOTAL COMPREHENSIVE INCOME (LOSS)$94,901 $(92,054)$101,798 $(125,786)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income$22,293
 $45,453
 $112,400
 $178,280
Other comprehensive (loss) income: 
  
    
Change in available for sale securities, net of tax230
 (101) 453
 336
Foreign currency translation adjustments(117) 238
 (416) 176
Change in derivatives, net of tax(193) (208) (749) (533)
Reclassification of derivative gains into Other revenue(175) (247) (703) (756)
Total other comprehensive loss(255) (318) (1,415) (777)
TOTAL COMPREHENSIVE INCOME$22,038
 $45,135
 $110,985
 $177,503


The accompanying notes are an integral part of these consolidated financial statements.

5


ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)
Three Months Ended June 30, 2021
Common stock outstandingPar valueAdditional paid-in capitalAccumulated other comprehensive income (loss)Retained earningsTreasury sharesTotal shareholders' equity
Balance at March 31, 202116,416 $23 $333,147 $1 $1,022,491 $(646,008)$709,654 
Share-based compensation1 — 3,504 — — — 3,504 
Issuance of common stock, net of forfeitures1,553 2 335,137 — — — 335,139 
Stock issued under employee stock purchase plan16 — — — — 3,831 3,831 
Other comprehensive income— — — (126)— — (126)
Payroll Support Programs warrant issuance— — 105 — — — 105 
Net income— — — — 95,027 — 95,027 
Balance at June 30, 202117,986 $25 $671,893 $(125)$1,117,518 $(642,177)$1,147,134 

Six Months Ended June 30, 2021
Common stock outstandingPar valueAdditional paid-in capitalAccumulated other comprehensive income (loss)Retained earningsTreasury sharesTotal shareholders' equity
Balance at December 31, 202016,405 $23 $329,753 $(27)0$1,015,622 $(646,008)$699,363 
Share-based compensation12 — 6,898 — — — 6,898 
Issuance of common stock, net of forfeitures1,553 2 335,137 — — — 335,139 
Stock issued under employee stock purchase plan16 — — — — 3,831 3,831 
Other comprehensive loss— — — (98)— — (98)
Payroll Support Programs warrant issuance— — 105 — — — 105 
Net income— — — — 101,896 — 101,896 
Balance at June 30, 202117,986 $25 $671,893 $(125)$1,117,518 $(642,177)$1,147,134 











6

Three Months Ended June 30, 2020
Common stock outstandingPar valueAdditional paid-in capitalAccumulated other comprehensive income (loss)Retained earningsTreasury sharesTotal shareholders' equity
Balance at March 31, 202016,199 $23 $295,267 $(624)$1,166,588 $(651,352)$809,902 
Share-based compensation— — 14,409 — — — 14,409 
Shares issued under employee stock purchase plan41 — — — — 3,234 3,234 
Cash dividends, $0.70 per share— — — — 117 — 117 
Other comprehensive income— — — 1,049 — — 1,049 
Payroll Support Programs warrant issuance— — 952 — — — 952 
Net loss— — — — (93,103)— $(93,103)
Balance at June 30, 202016,240 $23 $310,628 $425 $1,073,602 $(648,118)$736,560 

Six Months Ended June 30, 2020
Common stock outstandingPar valueAdditional paid-in capitalAccumulated other comprehensive incomeRetained earningsTreasury sharesTotal shareholders' equity
Balance at December 31, 201916,303 $23 $289,933 $98 $1,211,076 $(617,579)$883,551 
Share-based compensation113 — 19,743 — — — 19,743 
Shares repurchased by the Company and held as treasury shares(217)— — — — (33,773)(33,773)
Stock issued under employee stock purchase plan41 — — — — 3,234 3,234 
Cash dividends, $0.70 per share— — — — (11,361)— (11,361)
Other comprehensive income— — — 327 — — 327 
Payroll Support Programs warrant issuance— — 952 — — — 952 
Net loss— — — — (126,113)— (126,113)
Balance at June 30, 202016,240 $23 $310,628 $425 $1,073,602 $(648,118)$736,560 
7

ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

 Six Months Ended June 30,
 20212020
Cash flows from operating activities:
Net income (loss)$101,896 $(126,113)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization87,696 86,995 
Special charges2,592 263,497 
Other adjustments18,184 81,630 
Changes in certain assets and liabilities:
Air traffic liability129,220 104,785 
Deferred Payroll Support Programs grant recognition49,210 62,814 
Other - net16,175 (196,942)
Net cash provided by operating activities404,973 276,666 
Cash flows from investing activities:
Purchase of investment securities(673,722)(296,979)
Proceeds from maturities of investment securities436,364 258,751 
Purchase of property and equipment(134,484)(170,673)
Proceeds from sale-leaseback transactions0 48,000 
Other investing activities2,443 2,303 
Net cash used in investing activities(369,399)(158,598)
Cash flows from financing activities:
Cash dividends paid to shareholders0 (11,361)
Proceeds from the issuance of debt and finance lease obligations106,657 175,712 
Repurchase of common stock0 (33,773)
Principal payments on debt and finance lease obligations(199,627)(98,171)
Debt issuance costs(606)(2,852)
Proceeds from issuance of common stock335,137 0 
Other financing activities3,936 3,234 
Net cash provided by financing activities245,497 32,789 
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH281,071 150,857 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD170,319 136,785 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD$451,390 $287,642 
CASH PAYMENTS (RECEIPTS) FOR:
Interest paid, net of amount capitalized$26,379 $26,065 
Income tax payments (refunds)4,873 (45,321)
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Right-of-use (ROU) assets acquired$23,157 $86,012 
Flight equipment acquired under finance leases13,833 0 
Purchases of property and equipment in accrued liabilities5,088 22,106 
 Nine Months Ended September 30,
 2017 2016
OPERATING ACTIVITIES:   
Net income$112,400
 $178,280
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization92,571
 75,962
Loss on aircraft and other equipment disposals6,619
 3,510
Provision for obsolescence of expendable parts, supplies and fuel2,900
 1,803
Amortization of deferred financing costs1,059
 1,154
Share-based compensation expense10,847
 4,342
Deferred income taxes64,296
 2,336
Changes in certain assets and liabilities:   
(Increase) decrease in accounts receivable17,709
 (9,957)
(Increase) decrease in prepaid expenses(8,825) 3,147
Increase (decrease) in accounts payable3,671
 4,220
Increase (decrease) in accrued liabilities(11,183) 23,083
Increase (decrease) in air traffic liability30,553
 22,391
(Increase) in deferred major maintenance(14,779) (4,365)
Other, net(11,444) 2,187
Net cash provided by operating activities296,394
 308,093
INVESTING ACTIVITIES:   
Purchase of investment securities(273,796) (291,954)
Proceeds from maturities of investment securities239,920
 268,037
Purchase of property and equipment, including capitalized interest(333,746) (264,085)
Other investing activities1,338
 3,999
Net cash used in investing activities(366,284) (284,003)
FINANCING ACTIVITIES:   
Cash dividends paid to shareholders(34,462) (55,895)
Proceeds from the issuance of debt292,540
 120,410
Repurchase of common stock(90,445) (63,363)
Principal payments on debt(88,026) (63,478)
Other financing activities(405) (158)
Net cash provided by (used in) financing activities79,202
 (62,484)
Net change in cash and cash equivalents9,312
 (38,394)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD64,711
 87,112
CASH AND CASH EQUIVALENTS AT END OF PERIOD$74,023
 $48,718
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:   
CASH PAYMENTS FOR:   
Interest paid, net of amount capitalized$31,733
 $17,070
Income taxes paid, net of refunds$(18,757) $79,818


The accompanying notes are an integral part of these consolidated financial statements.

8


ALLEGIANT TRAVEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


Note 1 — Summary of Significant Accounting Policies


Basis of Presentation


The accompanying unaudited consolidated financial statements include the accounts of Allegiant Travel Company (the “Company”) and its majority-owned operating subsidiaries. The Company has no independent assetsCompany's investments in unconsolidated affiliates, which are 50 percent or operations,less owned, are accounted for under the equity or cost method, and all guarantees ofare insignificant to the Company's publicly held debt are full and unconditional and joint and several. Any subsidiaries of the parent company other than the subsidiary guarantors are minor.consolidated financial statements. All intercompany balances and transactions have been eliminated.


These unaudited consolidated financial statements reflect all normal recurring adjustments which management believes are necessary to present fairly the financial position, results of operations, and cash flows of the Company for the respective periods presented. Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto included in the annual report of the Company on Form 10-K for the year ended December 31, 2016,2020 and filed with the Securities and Exchange Commission.


The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.


Recent Accounting Pronouncements


In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" intended to create a unified model to determine when and how revenue is recognized. Under this ASU and subsequently issued amendments, the core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company will adopt this standard using the full-retrospective approach on January 1, 2018.

Under the new standard, revenue for certain air-related ancillary fees that are directly related to ticket revenue, such as seat fees and baggage fees, will no longer be considered distinct performance obligations separate from passenger travel and will be reclassified into scheduled service revenue. Although finalization is in process, for 2016, the amount expected to be reclassified from air-related charges into scheduled service revenue will be approximately $500 million. In addition, certain fees previously recognized when incurred by the customer, will be deferred and recognized as revenue when air travel is provided and reclassified into scheduled service revenue. The Company believes that adoption will not have a material effect on earnings, although the classification of certain operating revenue and operating expense items will change.

In February 2016,On December 18, 2019, the FASB issued ASU 2016-02 relatedNo. 2019-12, Simplifying the Accounting for Income Taxes. The standard simplifies the accounting and disclosure requirements for income taxes by clarifying existing guidance to leases. Thisimprove consistency in application of Accounting Standards Codification ("ASC") 740. The standard will require leases with durations greater than twelve monthsalso removes the requirement to be recognized oncalculate income tax expense for the balance sheet as a lease liability and a corresponding right-of-use asset, andstand-alone financial statements of wholly-owned subsidiaries. The standard is effective for fiscal years, and interim and annual reporting periods within those years, beginning after December 15, 20182020, with early adoption permitted.permitted in any interim period within that year. The Company hasadopted this accounting standard prospectively as of January 1, 2021, and it did not completed the assessment of this new standard. The Company believes adoption will have a significant impact on the Company's consolidated financial statements.
9

Note 2 — Impact of the COVID-19 Pandemic

The rapid spread of COVID-19 and the related government restrictions, social distancing measures, and consumer fears have impacted flight loads, resulted in unprecedented cancellations of bookings and substantially reduced demand for new bookings throughout the airline industry. Starting in March 2020, the Company experienced a severe reduction in air travel, which continued through the first quarter of 2021. Demand in the foreseeable future will continue to be affected by fluctuations in COVID-19 cases, variants, hospitalizations, deaths, treatment efficacy and the availability of vaccines. The Company is continuously reevaluating flight schedules and adjusting capacity based on demand trends.

On December 27, 2020, the Consolidated Appropriations Act, 2021 (the "Payroll Support Program Extension") was signed into law. This Payroll Support Program Extension provides an additional $15.0 billion in support to the airline industry. On January 15, 2021, the Company through its consolidatedairline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program Extension Agreement (the “PSP2”) with the Treasury and received $91.8 million under the Payroll Support Program Extension. The funds were used exclusively for wages, salaries and benefits.

In April 2021, the Company received $13.8 million in additional funds related to the PSP2 which included a loan of $1.7 million. In consideration for these additional funds, the Company issued additional warrants ( the "PSP2 Warrants") to the Treasury to acquire 924 shares of common stock at a price of $179.23 per share (based on the price of the Company's common stock on the Nasdaq Global Select Market on December 24, 2020).

In April 2021, the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program 3 Agreement (the "PSP3") with the Treasury under section 7301 of the American Rescue Plan Act of 2021. The Company received a total of $98.4 million in second quarter 2021. The funds must be used exclusively for wages, salaries and benefits.

Based on the Company's assumptions about the future impact of COVID-19 on travel demand, which could be materially different due to the inherent uncertainties of the current operating environment, the Company expects to meet its cash obligations as well as remain in compliance with the debt covenants in its existing financing agreements for the next 12 months based on its current level of unrestricted cash and short-term investments, its anticipated access to liquidity and tax refunds, and projected cash flows from operations.

Special Charges

The table below summarizes special charges recorded during the three and six months ended June 30, 2021, and 2020.
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2021202020212020
Operating$854 $81,169 $2,592 $247,267 
Non-operating0 19,830 0 26,632 
Total special charges$854 $100,999 $2,592 $273,899 

Additional detail for the $2.6 million of total special charges for the six months ended June 30, 2021 appears below:

•$2.1 million resulting from the accelerated retirements of 4 airframes and 6 engines
•$0.5 million impairment loss on a building in Chesterfield, Missouri associated with the Allegiant Nonstop family entertainment line of business.

Additional detail for the $273.9 million of total special charges (operating and non-operating) for the six months ended June 30, 2020 appears below:

•$168.4 million in impairment charges primarily in our non-airline subsidiaries
•$58.6 million resulting from the accelerated retirement of 7 airframes and 5 engines, loss on sale leaseback transaction of 4 aircraft, and write-offs of other aircraft related assets
•$19.7 million for additional salary and benefits expense in relation to the elimination of positions as well as other non-recurring compensation expense associated with the acceleration of certain existing stock awards
•$19.8 million accrual on termination of the loan agreement with Sixth Street Partners (formerly TSSP) intended to finance the development of Sunseeker Resorts Charlotte Harbor, which was paid in the second half of 2020
•$5.0 million related to suspension of construction at Sunseeker
•$2.4 million write-down on various non-aircraft assets and other various expenses
10

Note 3 — Revenue Recognition

Passenger Revenue

Passenger revenue is the most significant category in the Company's reported operating revenues, as outlined below:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2021202020212020
Scheduled service$225,613 $48,680 $357,540 $245,941 
Ancillary air-related charges213,445 65,294 334,518 242,258 
Co-brand redemptions4,689 2,546 8,383 7,232 
Total passenger revenue$443,747 $116,520 $700,441 $495,431 

Sales of passenger tickets not yet flown are recorded in air traffic liability. Passenger revenue is recognized when transportation is provided or when ticket voucher breakage occurs, to the extent different from estimated breakage. As of June 30, 2021, approximately 69.8 percent of the air traffic liability balance sheets butwas related to forward bookings, with the remaining 30.2 percent related to credit vouchers for future travel.

The normal contract term of passenger tickets is 12 months and revenue associated with future travel will principally be recognized within this time frame. $150.4 million of the $307.5 million that was recorded in the air traffic liability balance as of December 31, 2020 was recognized into passenger revenue during the six months ended June 30, 2021.

In 2020, the Company announced that credits issued for canceled travel beginning in January 2020 would have an extended expiration date of two years from the original booking date. This policy continued for bookings through June 30, 2021. This change has been considered in estimating the future breakage rate, which represents the value of credit vouchers that are not expected to significantlybe redeemed prior to their contractual expiration date. Estimates of revenue to be recognized from air traffic liability for credit vouchers may be subject to variability and differ from historical experience due to the change in contract duration and uncertainty regarding demand for future air travel. Effective July 1, 2021, vouchers issued have an expiration date of one year from the recognition, measurement or presentation of associated expense within the consolidated statements of income or cash flows.original booking date.



Co-brand redemptions

In August 2016,relation to the FASB issued ASU 2016-15, which amendstravel component of the guidanceco-branded credit card contract with Bank of America, the Company has a performance obligation to provide cardholders with points to be used for future travel award redemptions. Therefore, consideration received from Bank of America related to the travel component is deferred based on its relative selling price and is recognized into passenger revenue when the points are redeemed and the transportation is provided.

The following table presents the activity of the co-brand point liability for the periods indicated:
Six Months Ended June 30,
(in thousands)20212020
Balance at January 1$21,841 $15,613 
Points awarded (deferral of revenue)10,696 10,962 
Points redeemed (recognition of revenue)(8,383)(7,232)
Balance at June 30$24,154 $19,343 

As of June 30, 2021 and 2020, $11.7 million and $12.4 million, respectively, of the current points liability is reflected in Accounting Standards Codification ("ASC") 230 onaccrued liabilities and represents the classificationcurrent estimate of certain cash receipts and paymentsrevenue to be recognized in the statement of cash flows. The primary purpose ofnext 12 months based on historical trends, with the ASU isremaining balance reflected in other noncurrent liabilities expected to reduce the diversitybe recognized into revenue in practice that has resulted from the lack of consistency on this topic. The standard is effective for annual and interim periods beginning after December 15, 2017, and the Company will adopt it effective January 1, 2018. Significant classification modifications are not expected as a result of adoption.thereafter.

11



Note 24 — Property and Equipment


PropertyThe following table summarizes the Company's property and equipment (in thousands):as of the dates indicated:

(in thousands)June 30, 2021December 31, 2020
Flight equipment, including pre-delivery deposits$2,429,482 $2,331,499 
Computer hardware and software154,248 149,727 
Land and buildings/leasehold improvements (1)
87,116 87,030 
Other property and equipment82,613 80,601 
Total property and equipment2,753,459 2,648,857 
Less accumulated depreciation and amortization(636,841)(598,546)
Property and equipment, net$2,116,618 $2,050,311 
(1) Balance includes a building currently held for sale in Chesterfield, Missouri with a carrying value of $4.3 million

Accrued capital expenditures as of June 30, 2021 and December 31, 2020 were $5.1 million and $16.9 million, respectively.

12
 As of September 30, 2017 As of December 31, 2016
Flight equipment, including pre-delivery deposits$1,634,835
 $1,377,829
Computer hardware and software119,658
 101,850
Other property and equipment101,121
 81,786
Total property and equipment1,855,614
 1,561,465
Less accumulated depreciation and amortization(523,816) (466,151)
Property and equipment, net$1,331,798
 $1,095,314


Note 35 — Long-Term Debt


The following table summarizes the Company's Long-term debt (in thousands):and finance lease obligations as of the dates indicated:
(in thousands)June 30, 2021December 31, 2020
Fixed-rate debt and finance lease obligations due through 2030$621,750 $525,240 
Variable-rate debt due through 2029963,715 1,133,771 
Total long-term debt and finance lease obligations, net of related costs1,585,465 1,659,011 
Less current maturities, net of related costs144,382 217,234 
Long-term debt and finance lease obligations, net of current maturities and related costs$1,441,083 $1,441,777 
Weighted average fixed-interest rate on debt5.7%5.7%
Weighted average variable-interest rate on debt2.5%2.4%
 As of September 30, 2017 As of December 31, 2016
Fixed-rate notes payable due through 2020$465,527
 $465,748
Variable-rate notes payable due through 2027546,037
 342,526
Total long-term debt, net of related costs1,011,564
 808,274
Less current maturities, net of related costs165,837
 86,226
Long-term debt, net of current maturities and related costs$845,727
 $722,048
    
Weighted average fixed-interest rate5.41% 5.41%
Weighted average variable-interest rate3.25% 3.16%


Maturities of long-term debt and finance lease obligations for the remainder of 20172021 and for the next fivefour years and thereafter, in the aggregate, are: remaining in 2017 - $25.0 million; 2018 - $218.3 million; 2019 - $540.0 million; 2020 - $73.4 million; 2021 - $46.1$75.8 million; 2022 - $131.9 million; 2023 - $132.5 million; 2024 - $802.3 million; 2025 - $85.4 million; and $108.9$357.6 million thereafter.

Secured Debt

In the first nine months of 2017, the Company borrowed $236.5 million under loan agreements secured by 12 Airbus A320 series aircraft. The notes bear interest at a floating rate based on LIBOR plus a weighted average margin of 1.62 percent and are payable in monthly or quarterly installments over five or ten years.


Senior Secured Revolving Credit Facility


In the third quarter of 2017,March 2021, the Company drew down $56.0 million under its senior securedentered into a new revolving credit facility, with six Airbus A320 series aircraft in the collateral pool. In 2015, the Company, through a wholly owned subsidiary, entered into this facility under which it is ableentitled to borrow up to $56.0$50.0 million. The facility had an originalhas a term of 24 months was extendedand the borrowing ability is based on the value of the Airbus A320 series aircraft placed into the collateral pool. The notes for an additional one-year term in 2016, and may be extended for an additional one-year period, at the lender’s option. Any notesamounts borrowed under the facility bear interest at a floating rate based on LIBOR plus 1.85 percent. An individualand are due in March 2023. As of June 30, 2021, 0 aircraft may remain incollateral had been added to the collateral pool and the facility was undrawn.

13

Note 6 — Income Taxes

The Company recorded an effective tax rate of 22.5 percent and 36.4 percent for upthe three months ended June 30, 2021 and 2020, respectively. The effective tax rate for the three months ended June 30, 2021 differed from the statutory Federal income tax rate of 21.0 percent primarily due to twostate income taxes and the impact of ASU 2016-09 related to share-based payments. The effective tax rate for the three months ended June 30, 2020 differed from the statutory federal income tax rate of 21.0 percent primarily due to the tax accounting impact of the CARES Act which allowed the Company to carryback the 2020 net operating loss at the 35.0 percent rate applicable in earlier years. While the Company expects its effective tax rate to be fairly consistent in the near term, it will vary depending on recurring items such as the amount of income earned in each state and the state tax rate applicable to such income. Discrete items during interim periods may also affect the Company's tax rates.

The Company recorded an effective tax rate of 22.4 percent and 54.5 percent for the six months ended June 30, 2021 and 2020, respectively. The effective tax rate for the six months ended June 30, 2021 differed from the statutory Federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of ASU 2016-09 related to share-based payments. The 54.5 percent effective tax rate for the six months ended June 30, 2020 differed from the statutory federal income tax rate of 21.0 percent primarily due to the tax accounting impact of the CARES Act which included a $39.6 million discrete federal income tax benefit related to the full utilization of 2018 and 2019 net operating losses as well as the ability to carryback the 2020 net operating loss at a 35.0 percent rate applicable in earlier years.

14

Note 47 — Leases

The Company evaluates all operating leases and they are measured on the balance sheet with a lease liability and right-of-use asset (“ROU”) at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. Airport terminal leases mostly include variable lease payments outside of those based on a fixed index, and are therefore not recorded as ROU assets.

The following table summarizes the Company's total assets and liabilities related to leases as of the dates indicated:
(in thousands)Classification on the Balance SheetJune 30, 2021December 31, 2020
Assets
Operating lease assets(1)
Operating lease right-of-use assets$128,537 $115,911 
Finance lease assets(2)
Property and equipment, net239,019 133,175 
Total lease assets$367,556 $249,086 
Liabilities
Current
Operating(1)
Current operating lease liabilities$16,940 $14,313 
Finance(2)
Current maturities of long-term debt and finance lease obligations13,835 9,767 
Noncurrent
Operating(1)
Noncurrent operating lease liabilities114,761 102,289 
Finance(2)
Long-term debt and finance lease obligations225,039 117,060 
Total lease liabilities$370,575 $243,429 
(1) Represents assets and liabilities of 16 aircraft, office equipment, certain airport and terminal facilities, and other assets under operating leases
(2) The June 30, 2021 number represents assets and liabilities of 10 aircraft under finance leases

Sale-Leaseback Transaction

During the six months ended June 30, 2021, the Company entered into a sale-leaseback transaction involving 3 aircraft and generating $105.0 million of proceeds. The lease was classified as a finance lease and as a result, the transaction did not qualify as a sale. The aircraft were not removed from property and equipment in the Company's balance sheet and the Company recorded a financial liability in the amount of $105.0 million. The proceeds from this transaction are treated as cash inflows from finance lease obligations and reported in financing activities on the statement of cash flows.
15

Note 8 — Fair Value Measurements


The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received by selling an asset or paid to transfer a liability in an orderly transaction between market participants.

Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active

markets for identical assets or liabilities; Level 2, defined as inputs other than Level 1 inputs that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company usesutilizes the market approach valuation technique to determinemeasure the fair value for investment securities.of its financial assets. The assets classified as Level 1 consist of money market funds for which original cost approximates fair value.approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The assets classified as Level 2 consist of commercial paper, municipal debt securities, federal agency debt securities, US Treasury Bonds, and corporate debt securities, which are valued usingprimarily utilize quoted market prices or alternative pricing sources including transactions involving identical or comparable assets and models utilizing market observable inputs. The Company has no investment securities classified as Level 3.inputs for valuation of these securities. No changes in valuation techniques or inputs occurred during the six months ended June 30, 2021.

For those assets classified as Level 2 that are not in active markets, the Company obtains fair value from pricing sources using quoted market prices for identical or comparable instruments, and uses pricing models which include all significant observable inputs: maturity dates, issue dates, settlement dates, benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers and other market related data. These inputs are observable or can be derived from, or corroborated by, observable market data for substantially the full term of the asset.

The fair value of the Company's derivative instrument is determined using standard valuation models. The significant inputs used in these models are readily available in public markets or can be derived from observable market transactions and therefore have been classified as Level 2. Inputs used in these standard valuation models for derivative instruments include the applicable exchange and interest rates.


Financial instruments measured at fair value on a recurring basis (in thousands):basis:
June 30, 2021December 31, 2020
(in thousands)TotalLevel 1Level 2TotalLevel 1Level 2
Cash equivalents   
Money market funds$157,320 $157,320 $0 $5,340 $5,340 $0 
Municipal debt securities78,996 0 78,996 34,338 0 34,338 
Commercial Paper66,292 0 66,292 48,908 0 48,908 
Federal agency debt securities0 0 0 51,400 0 51,400 
Total cash equivalents302,608 157,320 145,288 139,986 5,340 134,646 
Short-term     
Commercial paper345,809 0 345,809 229,821 0 229,821 
Corporate debt securities217,631 0 217,631 166,768 0 166,768 
Municipal debt securities178,870 0 178,870 87,290 0 87,290 
Federal agency debt securities25,100 0 25,100 48,598 0 48,598 
Total short-term767,410 0 767,410 532,477 0 532,477 
Total financial instruments$1,070,018 $157,320 $912,698 $672,463 $5,340 $667,123 
 As of September 30, 2017 As of December 31, 2016
 Total Level 1 Level 2 Total Level 1 Level 2
Cash equivalents           
Money market funds$21,112
 $21,112
 $—
 $123
 $123
 $—
US Treasury Bonds4,550
 —
 4,550
 —
 —
 —
Commercial paper3,594
 —
 3,594
 —
 —
 —
Federal agency debt securities—
 —
 —
 19,399
 —
 19,399
Municipal debt securities—
 —
 —
 1,843
 —
 1,843
Total cash equivalents29,256
 21,112
 8,144
 21,365
 123
 21,242
Short-term 
  
    
  
  
Municipal debt securities152,369
 —
 152,369
 78,826
 —
 78,826
Corporate debt securities84,667
 —
 84,667
 76,570
 —
 76,570
Commercial paper83,051
 —
 83,051
 108,372
 —
 108,372
Federal agency debt securities28,432
 —
 28,432
 3,895
 —
 3,895
US Treasury Bonds3,000
 —
 3,000
 1,606
 —
 1,606
Total short-term351,519
 —
 351,519
 269,269
 —
 269,269
Long-term 
  
  
  
  
  
Corporate debt securities71,142
 —
 71,142
 25,048
 —
 25,048
Federal agency debt securities5,771
 —
 5,771
 24,160
 —
 24,160
Derivative instruments475
 —
 475
 1,660
 —
 1,660
Municipal debt securities—
 —
 —
 72,623
 —
 72,623
US Treasury Bonds—
 —
 —
 3,003
 —
 3,003
Total long-term77,388
 —
 77,388
 126,494
 —
 126,494
Total financial instruments$458,163
 $21,112
 $437,051
 $417,128
 $123
 $417,005


The fair valueNone of the Company’sCompany's debt is publicly held long-term debt is determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets; therefore,and as a result, the Company has categorized its publicly held debt as Level 2. The remaining debt agreements are not publicly held. The Company has determined the estimated fair value of these notes to be Level 3, as certain3. Certain inputs used to determine the fair value of these agreements are

unobservable and, therefore, could be sensitive to changes in inputs. The Company utilizes the discounted cash flow method to estimate the fair value of Level 3 debt.


Carrying value and estimated fair value of long-term debt, including current maturities and without reduction for related costs, (in thousands):are as follows:

June 30, 2021December 31, 2020
(in thousands)Carrying ValueEstimated Fair ValueCarrying ValueEstimated Fair ValueHierarchy Level
Non-publicly held debt$1,366,042 $1,170,576 $1,555,637 $1,191,008 3
 As of September 30, 2017 As of December 31, 2016  
 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Hierarchy Level
Publicly held debt$451,536
 $467,340
 $452,179
 $468,005
 2
Non-publicly held debt565,512
 526,955
 360,999
 340,866
 3
Total long-term debt$1,017,048
 $994,295
 $813,178
 $808,871
  


Due to thetheir short-term nature, the carrying amounts of cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value.


16

Note 59 — Derivative Instruments

The Company entered into a foreign currency swap (expiring in 2018) in order to mitigate the foreign currency exchange rate risk associated with the forecasted lease revenue from 12 Airbus A320 series aircraft leased to a European carrier until 2018. The Company uses a cash flow hedge to minimize the variability in cash flows of assets, liabilities and forecasted transactions caused by fluctuations in foreign currency exchange rates. For the nine months ended September 30, 2017, the net change in fair value recorded in accumulated other comprehensive income related to an unrealized loss on the hedge was $0.7 million compared to $0.5 million for the nine months ended September 30, 2016.

At inception, the Company formally designated and documented this financial instrument as a hedge of a specific underlying exposure, the risk management objective, and the strategy for undertaking the hedge transaction. The Company also assessed whether the financial instrument used in the hedging transactions was effective at offsetting changes in either the fair values or cash flows of the related underlying exposures. This assessment is monitored on at least a quarterly basis, and the change in fair market value of any ineffective portion of a financial instrument would be immediately recognized into earnings. For the nine months ended September 30, 2017, the Company realized $0.7 million in gains from its cash flow hedge into Other revenue, compared to $0.8 million for the nine months ended September 30, 2016. As of September 30, 2017, the Company expects $0.3 million to be reclassified from Other comprehensive income into Other revenue within the next 12 months.

At September 30, 2017, the fair value of the Company's derivative instrument was $0.5 million compared to $1.7 million at December 31, 2016, and is reported in the Company's consolidated balance sheet within deposits and other assets. Refer to Note 4 - Fair Value Measurements for additional information related to the estimated fair value.

Note 6 — Shareholders’ Equity

The Company is authorized by the Board of Directors to acquire its stock through open market purchases under its share repurchase program. As repurchase authority is used, the Board of Directors has, to date, authorized additional expenditures for share repurchases.

For the three months ended September 30, 2017 and 2016, the Company had no open market share repurchases. For the nine months ended September 30, 2017 and 2016, share repurchases consisted of the following:

 Nine Months Ended September 30,
 2017 2016
Shares repurchased (not in thousands)604,497
 369,997
Average price per share$142.66
 $166.70
Total (in thousands)$86,240
 $61,679

During the nine months ended September 30, 2017, the Company declared and paid recurring cash dividends of $2.10 per share, or $34.5 million.

Note 7 — Earnings (Loss) per Share


Basic and diluted earnings (loss) per share are computed pursuant to the two-class method. Under this method, the Company attributes net income (loss) to two classes: common stock and unvested restricted stock. Unvested restricted stock awards granted to employees under the Company’s Long-Term Incentive Plan are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock.


Diluted net income per share is calculated using the more dilutive of the two methods. Under both methods, the exercise of employee stock options is assumed using the treasury stock method. The assumption of vesting of restricted stock, however, differs:


1.Assume vesting of restricted stock using the treasury stock method.

1.Assume vesting of restricted stock using the treasury stock method.
2.Assume unvested restricted stock awards are not vested, and allocate earnings to common shares and unvested restricted stock awards using the two-class method.


2.Assume unvested restricted stock awards are not vested, and allocate earnings to common shares and unvested restricted stock awards using the two-class method.

For the three and ninesix months ended SeptemberJune 30, 2017,2021, the second method which assumes unvested awards are not vested, was used in the computation because it was more dilutive than the first method.


The following table sets forth the computation of net income (loss) per share, on a basic and diluted basis, for the periods indicated (share count and dollar amounts other than per-share amounts in the table are in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Basic:  
Net income (loss)$95,027 $(93,103)$101,896 $(126,113)
Less income allocated to participating securities(1,285)0 (1,451)(236)
Net income (loss) attributable to common stock$93,742 $(93,103)$100,445 $(126,349)
Earnings (loss) per share, basic$5.49 $(5.85)$6.04 $(7.93)
Weighted-average shares outstanding17,064 15,902 16,618 15,927 
Diluted:    
Net income (loss)$95,027 $(93,103)$101,896 $(126,113)
Less income allocated to participating securities(1,284)0 (1,449)(236)
Net income (loss) attributable to common stock$93,743 $(93,103)$100,447 $(126,349)
Earnings (loss) per share, diluted$5.49 $(5.85)$6.04 $(7.93)
Weighted-average shares outstanding17,064 15,902 16,618 15,927 
Dilutive effect of stock options and restricted stock123 0 128 0 
Adjusted weighted-average shares outstanding under treasury stock method17,187 15,902 16,746 15,927 
Participating securities excluded under two-class method(114)0 (114)0 
Adjusted weighted-average shares outstanding under two-class method17,073 15,902 16,632 15,927 
17
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Basic:       
Net income$22,293
 $45,453
 $112,400
 $178,280
Less net income allocated to participating securities(315) (298) (1,747) (1,074)
Net income attributable to common stock$21,978
 $45,155
 $110,653
 $177,206
Net income per share, basic$1.39
 $2.76
 $6.85
 $10.74
Weighted-average shares outstanding15,852
 16,389
 16,142
 16,493
Diluted: 
  
  
  
Net income$22,293
 $45,453
 $112,400
 $178,280
Less net income allocated to participating securities(315) (297) (1,745) (1,073)
Net income attributable to common stock$21,978
 $45,156
 $110,655
 $177,207
Net income per share, diluted$1.39
 $2.75
 $6.85
 $10.73
Weighted-average shares outstanding15,852
 16,389
 16,142
 16,493
Dilutive effect of stock options and restricted stock18
 26
 60
 34
Adjusted weighted-average shares outstanding under treasury stock method15,870
 16,415
 16,202
 16,527
Participating securities excluded under two-class method(8) (9) (42) (13)
Adjusted weighted-average shares outstanding under two-class method15,862
 16,406
 16,160
 16,514


For the three and nine months ended September 30, 2017, anti-dilutive shares excluded from the calculation of earnings per share were 129,989 and 51,439 (shares not in thousands), respectively.

Note 810 — Commitments and Contingencies

As of September 30, 2017, the Company had firm commitments to purchase the following aircraft:

Aircraft TypeNumber of Aircraft Under Contract
Airbus A3193
Airbus A32017

In addition, the Company has entered into lease agreements for an additional 13 Airbus A320 aircraft expected to be delivered between fourth quarter 2017 and the end of 2018.

Future minimum fixed payments for the Company's commitments related to the acquisition of aircraft (including aircraft lease obligations), airport fees under use and lease agreements, and other operating lease obligations are as follows as of September 30, 2017 (in thousands):

 As of September 30, 2017
Remaining in 2017$141,093
2018140,702
2019113,873
202076,016
202134,723
Thereafter231,358
Total commitments$737,765

Contingencies


The Company is subject to certain legal and administrative actions it considers routine to its business activities. The Company believes the ultimate outcome of any potential and pending legal or administrative matters will not have a material adverse impact on its financial position, liquidity or results of operations.


18

Note 9 — Related Party Transactions

The Company previously entered into a lease agreement for approximately 70,000 square feet of office space in a building in which the Company’s Chairman and Chief Executive Officer ("CEO") and the Company's President owned minority interests as limited partners. The Company exercised its option to terminate the lease effective in May 2015 and paid $1.3 million in January 2016 in settlement of related litigation.

Entities owned or controlled by the Company's Chairman and CEO have been paid for the building of corporate training content. This approach to training focuses on concept mastery, recognizing that individuals learn at varying paces, through different styles, and is designed to ensure the trainee fully understands each module before moving on to more advanced training. During the nine months ended September 30, 2017 and 2016, the Company made payments to these entities of $0.2 million and $1.4 million, respectively, and no further payments are expected.

Note 1011 — Subsequent Events


In October 2017, the Company received funding under loan agreements secured by two Airbus A320 aircraft for $68.0 million, executed in September 2017. The notes bear interest atThrough a floating rate based on LIBOR plus a margin of 1.45 percent and are payable in quarterly installments through 2027.

Also in October 2017,wholly-owned subsidiary, the Company executed purchase agreementsConditional Sale Agreements (CSA’s) on July 26, 2021 through Air Lease Corporation for four10 Airbus A320 series aircraft. These 10 aircraft are expected to be delivered to the Company between November 2021 and July 2022. Each CSA has a term of 123 months and provides for whichmonthly payments and a purchase option exercisable at the expiration of the term. Upon delivery, is expected in the fourth quarter 2017.CSA’s will be recorded as finance leases on the Company’s financial statements.


The Company's board of directors approved a fleet plan atCompany has announced the October 2017 meeting which further accelerates the retirementrecommencement of the MD-80 fleetconstruction of its Sunseeker Resort in Southwest Florida. The Company expects to fourth quarter 2018. As a resultfinance the balance of this operational update, the Company is evaluatingconstruction cost and complete the MD-80 fleet and its related assets for impairment. The carrying value of these assets was $40.2 million at September 30, 2017.Resort by early 2023.

19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations


The following discussion and analysis presents factors that had a material effect on our results of operations during the three and ninesix months ended SeptemberJune 30, 20172021 and 2016.2020. Also discussed is our financial position as of SeptemberJune 30, 20172021 and December 31, 2016.2020. You should read this discussion in conjunction with our unaudited consolidated financial statements, including the notes thereto, appearing elsewhere in this Form 10-Q and our consolidated financial statements appearing in our annual report on Form 10-K for the year ended December 31, 2016.2020. This discussion and analysis contains forward-looking statements. Please refer to the section below entitled “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.


20
THIRD QUARTER REVIEW


Second Quarter 2021 Review
Highlights:


Added six Airbus A320 series aircraft into–Earnings per share of $5.49 as the PSP funds augmented our first net profit since the onset of the pandemic
–Restored capacity to pre-pandemic levels with scheduled service capacity up 4.5 percent versus second quarter of 2019
–Continued sequential quarterly improvement in total revenue with second quarter 2021 total revenue up 69.3 percent from the first quarter 2021
–Total cash and retired five MD-80 aircraft;investments at June 30, 2021 were $1.2 billion, up from $685 million at December 31, 2020
paid recurring cash dividends of $11.3 million during the quarter, and $34.5 million year to date;
21
raised $158.0 million in debt;
achieved significant operational improvements resulting in a 61 percent reduction of controllable canceled flights period over period;

operating 373 routes as of quarter-end versus 337 at the same point in 2016; and
announced plans to develop Sunseeker Resorts, a hotel/condo resort in Charlotte County, Florida.

AIRCRAFT


The following table sets forth the aircraft in service and operated by us as of the dates indicated:

 September 30, 2017 December 31, 2016 September 30, 2016
MD-8040
 47
 48
B757-2002
 4
 4
A319 (1)21
 17
 15
A32026
 16
 16
Total89
 84
 83
June 30, 2021December 31, 2020
A31935 34 
A320(1)
68 61 
Total103 95 
(1) Excludes 12 A319Does not include seven aircraft on lease to a European carrier until 2018.of which we have taken delivery, but were not yet in service as of June 30, 2021.




22

NETWORK

As of SeptemberJune 30, 2017, we had firm commitments to purchase 20 Airbus A320 series aircraft and had executed lease agreements for 13 Airbus A320 series aircraft for which we have not taken delivery. We expect delivery of eight aircraft in the last quarter of 2017 and the remaining aircraft in 2018 through 2020. We continually consider aircraft acquisitions on an opportunistic basis.

Fleet Plan

The below table indicates the number of aircraft expected to be in service by the end of 2017 and 2018, based on currently scheduled additions to, and retirements from, our operating fleet.

 As of December 31, 2017 As of December 31, 2018
MD-8037
 —
B757-200—
 —
A31922
 32
A32029
 50
Total88
 82

NETWORK

Our operating network as of September 30, 2017 represents a 10.7 percent increase in the number of routes flown compared to September 30, 2016. Our total number of under-served cities and leisure destinations were 99 and 20 as of September 30, 2017, compared with 95 and 18 as of September 30, 2016. As of October 16, 2017,2021, we were selling 405 routes.

TRENDS

In continuing with our fleet transition to an all-Airbus fleet, we added six Airbus A320 series aircraft to our operating fleet during the third quarter 2017. Airbus aircraft flew 62.6 percent of our system ASMs for the quarter and we expect four more Airbus A320 series aircraft to be placed in service by the end of 2017.

We retired five MD-80 aircraft during the quarter and expect to retire three more MD-80 aircraft and our two remaining Boeing 757-200 aircraft by the end of 2017. Our board of directors approved a fleet plan at the October 2017 meeting which further accelerates the retirement of the entire MD-80 fleet to fourth quarter 2018. We expect to retire our remaining 40 MD-80 aircraft and take delivery of 35 additional Airbus aircraft by the end of 2018 to implement the fleet transition. Our growth will be limited until the fleet transition is complete.

As of September 30, 2017, we were offering service on 122 medium-sized city607 routes compared to 90versus 519 as of the same date last year and 459 as of June 30, 2019, which represents a 17.0 and 32.2 percent increase, respectively. Our total number of origination cities and leisure destinations (for operating routes) were 97 and 32, respectively, as of June 30, 2021.

Our unique model is predicated around expanding and contracting capacity to meet seasonal travel demands. We maintained a broad network and selling presence during the pandemic and have grown our network as air travel is recovering. We consistently monitor flights to assess for cash profitability.

23

TRENDS

The COVID-19 pandemic has significantly impacted our operating results for the three and six months ending June 30, 2021 and may continue to do so into the future. Our load factors are down significantly as a result. We cannot predict when air travel will return to customary levels or at what pace. In the meantime, our revenues will be adversely affected. We believe that demand in 2016. Wethe foreseeable future will continue to fluctuate in response to fluctuations in COVID-19 cases, variants of the virus, hospitalizations, deaths, treatment efficacy, the availability of vaccines, CDC recommendations, and government restrictions.
Despite the pandemic and airline industry challenges, since the beginning of 2021 and through June 30, 2021, we have 31announced service on 95 new routes expectedand to begineight new cities, including seasonal and temporary routes. We will continue to manage capacity to meet demand, which we believe is a core strength of our business model.
We plan to continue to grow our aircraft fleet and route network and have executed agreements to acquire 21 incremental aircraft year-to-date. Our future profitability will be affected by the fourthsuccess of our growth initiatives.

Noncontrollable and controllable factors have contributed to a higher than normal level of cancellations during peak periods during and after second quarter 2021 and have resulted in increased irregular operations costs. The noncontrollable factors include weather, TSA delays generally and particularly at smaller airports and airport overcrowding. Controllable issues relate to various aspects of 2017, including service into two new cities: Milwaukee, Wisconsinour operations as we had to readjust to providing peak capacity during the summer while also facing a number of external issues as indicated above. We believe many airlines are suffering from these problems at this time. We are working to resolve the controllable issues, but if these problems persist, we may suffer reputational damage and Norfolk, Virginia.incur higher costs for irregular operations.


We have announced plans to develop Sunseeker Resorts which will be a hotel and condo resort in Charlotte County, Florida. This project is intended to further establish our brand as a leisure company. Construction is currently expected to begin in mid-2018, with openingthe recommencement of the resortconstruction of its Sunseeker Resort in late 2019 orSouthwest Florida. We expect to finance the balance of the construction cost and complete the Resort by early 2020.2023.

24
Incremental expense related to the collective bargaining agreement reached with the International Brotherhood of Teamsters for our pilots was approximately $41 million (including head count increases) for the nine months ended September 30, 2017. This agreement remains in effect until 2021.


We have two employee groups which have voted for union representation and with which we have yet to reach agreement - flight attendants and flight dispatchers. These employees make up approximately 30 percent of our total employee base. Any labor actions following an inability to reach collective bargaining agreements with these employee groups could materially impact our operations during the continuance of any such activity. Any labor agreement reached following negotiations would also likely increase our operating costs.

RESULTS OF OPERATIONS


Comparison of three months ended SeptemberJune 30, 20172021 to three months ended SeptemberJune 30, 20162020


As comparisons of our 2021 results to periods during 2020 reflect disproportionate changes due to the impact of the pandemic on air travel, we have also provided analysis of certain revenue and expense line items to 2019 results where helpful to understand trends in our performance.

Operating Revenue


Scheduled servicePassenger revenue. Scheduled serviceFor the second quarter 2021, passenger revenue for the third quarter 2017 increased 3.2280.8 percent compared to 2016. Thethe same period in 2020. This increase was drivendue to a significant decline in passenger demand related to COVID-19 during the second quarter 2020. Revenue in the second quarter 2021 was favorably impacted by estimates of breakage on vouchers whose expiration was extended as a 3.2 percent increase in scheduledresult of the pandemic. Scheduled service passengers whilewere up 190.7 percent and scheduled service average base fare was flat.up 54.7 percent.


Ancillary air-related charges. Ancillary air-related chargesPassenger revenue for the thirdsecond quarter 2017 increased 2.8 percent2021, as compared to 2016, due mostly to the increasesecond quarter 2019, decreased by 2.4 percent, as load factor decreased by 13 percentage points resulting in a 10.9 percent decline in scheduled service passengers. The increase was slightly diluted by a 0.5 percent decrease in average ancillary air-related fare per passenger which correlates with a 2.3 percent reduction in stage length, as shorter trips tend to produceimpact of lower ancillary charges.

Ancillary third party revenue. Ancillary third party revenue increased 9.7 percent for the third quarter 2017 compared to 2016 due to revenue generated from our co-branded credit card program. This increase from co-branded credit card revenueloads was partially offset by a decrease in net revenue from third party products (hotel rooms, rental cars, attraction and show tickets) resulting from a 20.3 percent and 15.4 percent decrease in hotel room nights and rental car days, respectively. Hurricane Irma had a significant impact on rental car sales in our Florida markets as over 200 flights entering these markets were canceled. Overall, there was a 6.27.2 percent increase in average base fare over the same period in 2019.

Air ancillary thirdaverage fare for the second quarter 2021 increased by 12.5 percent when compared to 2020 and 12.2 percent when compared to 2019.

Third party products revenue. Third party products revenue per passenger year over year.for the second quarter 2021 increased 172.4 percent compared to the second quarter 2020 and 26.3 percent compared to the second quarter 2019. The increase from 2020 is primarily the result of greater travel demand for rental cars and hotels than during the early part of the pandemic. The increase from 2019 is attributable to increased rental car rates and growth in our co-branded credit card revenues.


Fixed fee contract revenue. Fixed fee contract revenue for the thirdsecond quarter 20172021 increased $2.6 million from 201658.6 percent compared to the same period in 2020 as a result of a 21.8 percent increase in related departures due mostly to increased flying under our Apple Vacations charter.charter activity.


Fixed fee contract revenue for the second quarter 2021, as compared to 2019, decreased by 58.9 percent due to continuing depressed demand for group charters resulting from the pandemic.

Other revenue. Other revenue decreased 89.3 percent for the second quarter 2021 from the same period in 2020. The decrease was due to decreased activity in the non-airline subsidiaries.


Operating Expenses


We primarily evaluate our expense management by comparing our costs per passenger and per ASMavailable seat mile (ASM) across different periods, which enables us to assess trends in each expense category. The following table presents operating expenseunit costs on a per passengerASM basis, or CASM, for the indicated periods. The table also presents operating expenseExcluding fuel on a per passenger, excluding fuel, a statistic which gives

ASM basis provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors beyond our control.

 Three Months Ended June 30,Percent Change
Unitized costs (in cents)202120202019YoYYo2Y
Salary and benefits2.65 4.27 2.55 (37.9)%3.9 %
Aircraft fuel2.38 1.23 2.70 93.5 (11.9)
Station operations1.25 1.23 1.03 1.6 21.4 
Depreciation and amortization0.97 1.95 0.87 (50.3)11.5 
Maintenance and repairs0.49 0.59 0.47 (16.9)4.3 
Sales and marketing0.38 0.40 0.46 (5.0)(17.4)
Aircraft lease rentals0.11 0.06 — 83.3 NM
Other0.34 1.07 0.55 (68.2)(38.2)
Payroll Support Programs grant recognition(1.33)(3.36)— (60.4)NM
Operating special charges0.02 3.66 — (99.5)NM
CASM7.26 11.10 8.63 (34.6)(15.9)
Operating CASM, excluding fuel4.88 9.87 5.93 (50.6)(17.7)
NM - Not meaningful
25

 Three Months Ended September 30, Percent
 2017 2016 Change
Aircraft fuel$26.41
 $23.58
 12.0%
Salary and benefits29.15
 24.98
 16.7
Station operations12.20
 10.97
 11.2
Maintenance and repairs9.48
 8.94
 6.0
Depreciation and amortization10.47
 8.81
 18.8
Sales and marketing4.56
 1.92
 137.5
Aircraft lease rentals0.18
 0.16
 12.5
Other7.97
 7.96
 0.1
Operating expense per passenger$100.42
 $87.32
 15.0%
Operating expense per passenger, excluding fuel$74.01
 $63.74
 16.1%


The following table presents unit costs on a per ASM basis, or CASM, for the indicated periods. As on a per-passenger basis, excluding fuel on a per ASM basis provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility.

 Three Months Ended September 30, Percent
 2017 2016 Change
Aircraft fuel
2.50¢ 
2.22¢ 12.6%
Salary and benefits2.76
 2.35
 17.4
Station operations1.15
 1.03
 11.7
Maintenance and repairs0.90
 0.84
 7.1
Depreciation and amortization0.99
 0.83
 19.3
Sales and marketing0.43
 0.18
 138.9
Aircraft lease rentals0.02
 0.02
 —
Other0.75
 0.75
 —
CASM
9.50¢ 
8.22¢ 15.6%
Operating CASM, excluding fuel
7.00¢ 
6.00¢ 16.7%

During third quarter 2017, cost per passenger and per ASM were negatively impacted by the cancellation of approximately two percent of our ASMs due to Hurricane Irma.

Aircraft fuel expense. Aircraft fuel expense increased 16.0 percent for the third quarter 2017 compared to 2016 as the system average fuel cost per gallon increased by 15.3 percent. Fuel consumption remained relatively flat on a 3.2 percent increase in system ASMs as fuel efficiency increased 2.8 percent percent year over year.

Salary and benefits expense. Salary and benefits expense increased $15.4$27.1 million, or 20.928.6 percent, for the thirdsecond quarter 20172021 when compared to the same period last year. The increase is largely attributable to $9.8 million in incremental expense related to2020. Although the collective bargaining agreement with our pilots, which went into effect in August 2016, as well as costs associated with a 12.7 percent increase in theaverage number of full-timefull time equivalent employees neededdecreased 5.6 percent year over year, overall expense increased due to support additional operating aircrafttemporary voluntary leave programs offered to employees, voluntary pay reductions, and suspension of the transition to a single fleet type.bonus accrual during the second quarter 2020.


Station operations expense. Station operations expense for the third quarter 2017 increased 15.2 percent on a 5.4 percent increase in scheduled service departuresWhen compared to the same period in 2016.2019, salaries and benefits expense increased by $8.3 million or 7.3 percent on a relatively flat number of full time equivalent employees year over two year. On a per ASM basis, salary and benefits expense increased only 3.92 percent. The per ASM cost increase relates to annual increases in crew pay.

Aircraft fuel expense. Aircraft fuel expense increased $82.1 million, or 300.1 percent, for the second quarter 2021 compared to second quarter 2020. This is primarily due to the recovery from the COVID-19 pandemic driving increased capacity resulting in a 119.7 percent increase in expense outpaced thefuel gallons consumed on a 108.8 percent increase in departures dueand an 82.0 percent increase in average fuel cost per gallon which was depressed during the pandemic.

When compared to servicing more mid-size cities at higher frequencies, as well as increased interrupted travel costs related to irregularthe same period in 2019, aircraft fuel expense decreased by 8.8 percent, which is in line with the decrease in average fuel cost per gallon of 9.0 percent.

Station operations and various supplementary station expenses.


Maintenance and repairs expense. Maintenance and repairsexpense. Station operations expense for the thirdsecond quarter 20172021 increased 9.9$29.8 million, or 108.8 percent compared to the same period in 2016 which is partially2020 primarily due to a 6.8increased departures of 108.8 percent.

Compared to the same period in 2019, station operations expense increased by $11.3 million or 24.7 percent. This increase is due an increase in departures of 3.1 percent increase inand increased costs associated with irregular operations.

Depreciation and amortization expense. Depreciation and amortization expense for the second quarter 2021 increased by 2.8 percent as compared to the second quarter 2020 as the average number of aircraft in service. There was also an increase in expenses related to routine maintenance in the current quarter, mostly for our MD-80 aircraft.service increased 12.2 percent year over year.


DepreciationMaintenance and amortizationrepairs expense. Depreciation Maintenance and amortizationrepairs expense for the thirdsecond quarter 20172021 increased 23.2$9.6 million, or 73.4 percent, compared to 2016, partially relatedthe same period in 2020. Routine maintenance costs increased as aircraft utilization was up 97.4 percent during the quarter and we incurred incremental costs preparing our fleet to operate at full capacity again.

Compared to the same period in 2019, maintenance and repairs expense increased by $1.7 million or 8.2 percent primarily due to incremental costs preparing our fleet to operate at full capacity, and the maintenance and repairs on additional aircraft purchased over the past two years.

Sales and marketing expense. Sales and marketing expense for the second quarter 2021 increased by 97.9 percent compared to the same period in 2020, due to a 6.8increase in net credit card fees as a result of a 280.8 percent increase in average numberpassenger revenue year-over-year as well as reduced advertising spend in 2020 during the pandemic.

Compared to the same period in 2019, sales and marketing expense decreased by 14.2 percent due to efforts to more adeptly deploy advertising spend.

Other operating expense. Other expense decreased $8.3 million compared to the second quarter 2020, mostly due to decreased activity in our non-airline subsidiaries.

Payroll Support Programs grant recognition. We received a total of aircraft$112.2 million in service. Additionally, depreciationfunds during the second quarter 2021 through the payroll support programs. Of the total, $110.4 million of these funds represent direct grants, and will be recognized as a credit to operating expense relatedon our statement of income, over the periods for which the funds were intended to MD-80 aircraft was approximately $5.0compensate. We recognized $61.2 million as an offset to operating expense on our statement of income during the second quarter of 2021.

During 2020, we received $176.9 million in funds through the payroll support program and recognized a $74.5 million offset to operating expense on our statement of income for the thirdsecond quarter 2017 and 2016. With the recent decision to accelerate the retirement2020.

Special charges. Special charges of the MD-80 fleet to fourth quarter 2018, we are evaluating this fleet and related assets for possible impairment charge in the fourth quarter 2017. As a result, depreciation expense for our MD-80 fleet for future periods will likely be impacted by the decision to accelerate the retirement of this fleet and any impairment charge taken.

We also continue to add Airbus aircraft into service which results in higher incremental monthly depreciation expense than our MD-80s. Depreciation expense related to Airbus A320 series aircraft was $15.7$0.9 million were recorded within operating expenses for the thirdsecond quarter 20172021 compared to $11.3$81.2 million for the same period in 2016. Amortization of major maintenance costs under2020. The special charges relate to expenses that were unique and specific to COVID-19. These charges in 2021 include accelerated depreciation on airframes and engines resulting from an accelerated retirement plan, and losses within our non-airline subsidiaries. Special charges recorded in the deferral method of accounting for the Airbus aircraft was $1.7 million for the third quarter 2017 compared to $0.4 million for the third quarter 2016, as our first major maintenance event on our Airbus aircraft did not occur until second quarter 2016.2020 included accelerated depreciation on airframes and engines resulting from an accelerated retirement plan, a loss on a sale-leaseback transaction which we would not likely have transacted absent cash conservation efforts as a result of COVID, salaries and benefits expense, and a non-cash impairment charge for an investment in a third party. See Note 2 of Notes to Consolidated Financial Statements (unaudited) for further information.

26

Sales and marketing expense. Sales and marketing
Interest Expense

Interest expense for the third quarter 2017ended June 30, 2021 increased $8.2by $2.7 million, or 19.0 percent over second quarter 2020, due to increased market rates for the fixed rate debt entered into during the pandemic offset by lower interest rates on our variable debt.

Income Tax Expense

Our effective tax rate was 22.5 percent and 36.4 percent for the three months ended June 30, 2021 and 2020, respectively. The effective tax rate for the three months ended June 30, 2021 differed from the statutory federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of ASU 2016-09 related to share-based payments. The effective tax rate for the three months ended June 30, 2020 was primarily due to the tax accounting impact of the CARES Act which allowed the Company to carryback the 2020 net operating loss at the 35.0 percent rate applicable in earlier years.
27

Comparison of six months ended June 30, 2021 to six months ended June 30, 2020

Operations during the six months ended June 30, 2021 consisted of two months of pre-pandemic activity and the period from March 2020 through June 2020 which was substantially impacted by the pandemic. The comparisons below of the results for the six month periods ended June 30, 2021 and June 30, 2020 should be read with this in mind.

As comparisons of our 2021 results to periods during 2020 reflect disproportionate changes due to the impact of the pandemic on air travel, we have also provided analysis of certain revenue and expense line items to 2019 results where helpful to understand trends in our performance.

Operating Revenue

Passenger revenue. For the six months ended June 30, 2021, passenger revenue increased 41.4 percent compared with the same period in 2020. Revenue in the second quarter 2021 was favorably impacted by estimates of breakage on vouchers whose expiration was extended as a result of the pandemic. The increase is primarily attributable to the effects of COVID-19 in 2020, where a significant decline in passenger demand impacted operations from March to June 2020. Scheduled service passengers and base fares in the current period are up 35.8 percent and 6.4 percent, respectively, over the same period in 2020.
As compared to the same period in 2016, mostly due to an2019, passenger revenue decreased by 19.9 percent, as a 24.1 percent decline in scheduled service load factor was partially offset by a 3.9 percent increase in net credit card fees paid by us. We previously charged for credit card fee reimbursement (a fee charged to customers for using a credit card) at zero margin, which was applied as a reduction to sales and marketing expense, and the net amount paid by us for credit card fees was reduced. We discontinued the charge for credit card fee reimbursement in January 2017, and as such, credit card fee reimbursementscapacity.
Air ancillary average fare for the third quarter were minimalsix months ended June 30, 2021 increased by 1.7 percent when compared to $6.2 million in the third quarter 2016. There were also year-over-year increased expenses related to various marketing initiatives for our growing network.

Income Tax Expense

Our effective tax rate remained relatively flat quarter over quarter, at 35.82020 and 6.5 percent for the three months ended September 30, 2017,when compared to 36.0 percent for the three months ended September 30, 2016. While we expect our tax rate to be fairly consistent in the near term, it will vary depending on recurring items such as the amount of income we earn in each state and the state tax rate applicable to such income. Discrete items during interim periods may also affect our tax rates.2019.



Comparison of nine months ended September 30, 2017 to nine months ended September 30, 2016
Operating Revenue

Scheduled service revenue. Scheduled serviceThird party products revenue. Third party products revenue for the ninesix months ended SeptemberJune 30, 20172021 increased 8.450.0 percent compared with 2016. The increase was mostly the result of a 9.5 percent increase in scheduled service passengers offset by a 1.0 percent decrease in scheduled service average base fare.
Ancillary air-related charges. Ancillary air-related charges for the nine months ended September 30, 2017 increased 8.2 percent compared with 2016 due mostly to the increase in scheduled service passengers.

Ancillary third party revenue. Ancillary third party revenue for the nine months ended September 30, 2017 increased $4.9 million over the same period in 2016 due2020 and 3.6 percent when compared to revenue generated2019. The increase from 2020 is primarily the result of greater travel demand for rental cars and hotels than the early part of the pandemic. The increase from 2019 is attributable to growth in our co-branded credit card program. This increase from co-branded credit card revenue was offset by a decrease in net revenue from third party products (hotel rooms, rental cars, attraction and show tickets) resulting from a 10.4 percent and 5.4 percent decrease in hotel room nights and rental car days, respectively. Hurricane Irma had a significant impact on rental car sales in our Florida markets during the third quarter 2017. Overall, there was a 4.3 percent increase in ancillary third party revenue per passenger year over year.revenues.


Fixed fee contract revenue. Fixed fee contract revenue for the ninesix months ended SeptemberJune 30, 20172021 increased 50.45.5 percent compared with 2016,the same period in 2020. This is primarily due to an 11.2 percent increase in related departures due to increased charter activity. During the six months ended June 30, 2021, ad-hoc charters increased by 217.6 percent over 2020 levels and we benefited from March Madness flying which did not occur in the prior year due to the pandemic.

Fixed fee contract revenue for both the Departmentsix months ended June 30, 2021 as compared to the same period in 2019, decreased by 44.4 percent due to continuing depressed demand for group charters since the onset of Defense and under our Apple Vacations charter.the pandemic.


Other revenue. Other revenue decreased by 84.2 percent for the six months ended June 30, 2021, when compared to the same period in 2020. The decrease is due to decreased activity in the non-airline subsidiaries, including the closure of the family entertainment centers.

Operating Expenses

The following table presents operating expense per passenger for the indicated periods:
 Nine Months Ended September 30, Percent
 2017 2016 Change
Aircraft fuel*$27.13
 $21.76
 24.7 %
Salary and benefits30.03
 25.11
 19.6
Station operations11.69
 11.45
 2.1
Maintenance and repairs9.49
 9.75
 (2.7)
Depreciation and amortization10.03
 9.03
 11.1
Sales and marketing3.98
 1.99
 100.0
Aircraft lease rentals0.34
 0.11
 209.1
Other7.41
 6.94
 6.8
Operating expense per passenger*$100.10
 $86.14
 16.2 %
Operating expense per passenger, excluding fuel$72.97
 $64.38
 13.3 %
*Includes effect of $8.3 million fuel tax refunds in the second quarter of 2016.


The following table presents unit costs on a per ASM basis, defined as Operating CASM, for the indicated periods:
 Six Months Ended June 30,Percent Change
Unitized costs (in cents)202120202019YoYYo2Y
Salary and benefits2.79 3.30 2.79 (15.45)%— %
Aircraft fuel2.23 1.85 2.63 20.54 (15.21)
Station operations1.17 1.09 1.02 7.34 14.71 
Depreciation and amortization1.02 1.38 0.89 (26.09)14.61 
Maintenance and repairs0.53 0.55 0.52 (3.64)1.92 
Sales and marketing0.34 0.44 0.50 (22.73)(32.00)
Aircraft lease rentals0.11 0.04 — 175.00 NM
Other0.39 0.80 0.56 (51.25)(30.36)
Payroll Support Programs grant recognition(1.78)(1.19)— 49.58 NM
Operating Special charges0.03 3.93 — (99.24)NM
CASM6.83 12.19 8.91 (43.97)(23.34)
Operating CASM, excluding fuel4.60 10.34 6.28 (55.51)(26.75)

 Nine Months Ended September 30, Percent
 2017 2016 Change
Aircraft fuel*
2.46¢ 
1.97¢ 24.9 %
Salary and benefits2.72
 2.27
 19.8
Station operations1.06
 1.04
 1.9
Maintenance and repairs0.86
 0.88
 (2.3)
Depreciation and amortization0.91
 0.82
 11.0
Sales and marketing0.36
 0.18
 100.0
Aircraft lease rentals0.03
 0.01
 200.0
Other0.68
 0.62
 9.7
CASM*
9.08¢ 
7.79¢ 16.6 %
Operating CASM, excluding fuel
6.62¢ 
5.82¢ 13.7 %
*Includes effect of $8.3 million fuel tax refunds in the second quarter of 2016.

Aircraft fuelSalary and benefits expense. Aircraft fuel Salary and benefits expense increased 36.9$32.4 million, or 15.6 percent, for the ninesix months ended SeptemberJune 30, 20172021 compared to the same period in 2016. Excluding2020. Although the effectaverage number of one-time $8.3 million in fuel tax refunds in the second quarter 2016, fuel expense would have increased 31.0 percent and the system average fuel cost per gallon would have increased full-time equivalent employees decreased
28

by 21.1 percent. Additionally, there was an 8.6 percent increase in system fuel gallons consumed due to an increase in total system capacity of 9.5 percent. ASM growth outpaced fuel consumption as average ASMs per gallon increased 0.85.6 percent year over year.year, expense increased due to temporary voluntary leave programs offered to employees, voluntary pay reductions, and suspension of the bonus accrual during the six months ended June 30, 2020.
Salary and benefits expense.
Salary and benefits expense increased 31.3by $6.9 million or 2.9% as compared to the six months ended June 30, 2019. Although the average number of full time equivalent employees decreased by 1.8 percent, overall expense increased due to annual increases in crew pay.

Aircraft fuel expense. Aircraft fuel expense increased $76.1 million, or 65.5 percent, for the ninesix months ended SeptemberJune 30, 20172021 compared to the same period in 2016.2020. This is primarily due to the recovery from the COVID-19 pandemic as departures increased by 38.1 percent resulting in an increase of 36.7 percent in fuel gallons consumed. The increase is largely attributable to $40.8 million in incremental expense related to the collective bargaining agreement with our pilots, which went into effect in August 2016, as well as costs associated with a 12.7 percentalso partially driven by an increase in the numberfuel expense per ASM of full-time equivalent employees needed20.5 percent due to support additional operating aircraft and the transition to a single fleet type. Additionally, stock compensationan increase in fuel prices.
Aircraft fuel expense increased incrementallydecreased by $5.9$27.4 million related to management equity grants which were not in place until late third quarter and fourth quarter 2016.
Station operations expense. Station operations expenseor 12.5 percent for the ninesix months ended SeptemberJune 30, 2017 increased 12.1 percent on a 13.0 percent increase in scheduled service departures2021 compared to the same period in 2016.2019. This is primarily driven by a decrease in average fuel cost per gallon of 10.6 percent.

Station operations expense. Station operations expense for the six months ended June 30, 2021 increased $31.9 million or 46.6 percent primarily due to a 61.8 percent increase in airport and landing fees as a result of an increase in travel demand and
a 38.1 percent increase in departures.

As compared to the six month period ended June 30, 2019, station operations expense increased by $15.5 million or 18.2 percent due to a 2.6 percent increase in departures, increased costs associated with irregular operations and airports fees.

Maintenance and repairs expense. Maintenance and repairs expense for the ninesix months ended SeptemberJune 30, 20172021 increased 6.8by $11.1 million or 32.0 percent compared withto the same period in 2016,2020. This is primarily due primarily to a 3.8 percentthe increase in averageaircraft utilization and incremental costs preparing our fleet to operate at full capacity again.

As compared to the six months ended June 30, 2019, maintenance and repairs expense increased by $2.3 million or 5.2 percent as the number of aircraft in service as well as incremental expenses related to parts repairs and routine maintenance.increased by 20.9 percent.

Depreciation and amortization expense. Depreciation and amortization expense for the ninesix months ended SeptemberJune 30, 20172021 remained relatively flat as compared to the same period in 2020. Although the average number of aircraft in service increased by 21.98.0 percent, a majority of the increase was due to aircraft on operating lease.

When compared to the six months ended June 30, 2019, depreciation and amortization expense increased 17.4 percent as the average number of aircraft in service during the period increased 20.9 percent.

Sales and marketing expense. Sales and marketing expense for the six months ended June 30, 2021 increased 6.9 percent compared to the same period in 2016, partially related to a 3.8 percent increase2020. In 2020, advertising spend was intentionally pulled back beginning in average number of aircraft in service. Depreciation expense related to MD-80 aircraft declined to $16.4 million for the nine months ended September 30, 2017 compared to $17.4 million for the same period in 2016 as we have fewer MD-80 aircraft in service and all are nearing retirement.
We also continue to add Airbus aircraft into service which results in higher incremental monthly depreciation expense than our MD-80s. Depreciation expense related to Airbus A320 series aircraft was $42.2 million for the nine months ended September 30, 2017 compared to $33.0 million for the same period in 2016. Amortization of major maintenance costs under the deferral method of accounting for the Airbus aircraft was $4.6 million for the nine months ended September 30, 2017 compared to $0.7 million for the same period in 2016, as our first major maintenance event on our Airbus aircraft did not occur until June 2016.

Sales and marketing expense. Sales and marketing expense for the nine months ended September 30, 2017 increased $20.0 million comparedMarch due to the same period in 2016, mostly due topandemic. There was also an increase in net credit card fees paid by us. We previously charged for credit card fee reimbursement (a fee charged to customers for using a credit card) at zero margin, which was appliedin the current year as a reductionresult of a 41.4 percent increase in passenger revenue year over year.

As compared to the six months ended June 30, 2019, sales and marketing expense decreased by 29.5 percent due to our efforts to more adeptly deploy advertising spend.

Other expense. Other expense decreased by $17.2 million or 34.1 percent year over year, due to decreased activity in our non-airline subsidiaries.

Payroll Support Programs grant recognition. We received a total of $203.9 million during the six months ended June 30, 2021 through the payroll support programs. The direct grants were recognized as a credit to operating expense on our statement of income, over the periods for which the funds were intended to compensate.

During 2020, we received $176.9 million in funds through the payroll support program and the net amount paid by us for credit card fees was reduced. We discontinued the charge for credit card fee reimbursement in January 2017, although this charge still appliesrecognized a $74.5 million offset to travel booked up to the discontinuation date. Consequently, credit card fee reimbursementsoperating expense on our statement of income for the ninesix months ended SeptemberJune 30, 20172020.


declined to $4.0Special charges. Special charges of $2.6 million from $19.4 million in the first nine months of 2016. There were also year-over-year increasedrecorded within operating expenses related to various marketing initiatives for our growing network.
Aircraft lease rentals expense. Aircraft lease rentals expense for the ninesix months ended SeptemberJune 30, 2017 increased $2.22021. The special charges relate to expenses that were unique and specific to COVID-19. This includes accelerated depreciation on four airframes and six engines resulting from an accelerated retirement plan, a loss on the sale-leaseback transaction we would not likely have transacted absent cash conservation efforts as a result of COVID, salary and benefits expense, and other various expenses during the six months ended June 30, 2020.

29

Non-operating special charges. Special charges of $26.6 million compared towere recorded within non-operating expenses for the six months ended June 30, 2020. We did not have any special charges for the same period in 2016 due2021. Of these special charges in 2020, $19.8 million relates to additional subservice flights neededthe termination of the loan agreement with Sixth Street Partners (formerly TSSP) intended to finance the development of Sunseeker Resorts Charlotte Harbor. The remaining $6.8 million relates to impairment charges for irregular operations inSunseeker Resort during the secondfirst quarter 2017. We do not currently have2020. These charges were reclassified from operating aircraft under lease.

Other expense. Other operatingspecial expense to non-operating special expense for the ninesix months ended SeptemberJune 30, 2017 increased $10.1 million compared to 2016. The increase is partially due to losses recorded on disposed aircraft parts in 2017 compared to a gain of over $2.0 million recorded on an engine sale in 2016. Expenses related to crew training in 2017 to support our fleet transition and network growth also increased year over year.2020.


Income Tax Expense


OurWe recorded a $29.3 million tax expense (22.4 percent effective tax rate remained flat at 37.2rate) compared to a ($151.0 million) tax benefit (54.5 percent effective tax rate) for each of the ninesix months ended SeptemberJune 30, 20172021 and 2016.2020 respectively. The 22.4 percent effective tax rate for the ninesix months ended SeptemberJune 30, 20172021 differed from the statutory federal income tax rate of 35.021.0 percent primarily due to executive compensation deduction limitationsstate income taxes and the impact of ASU 2016-09 related to share-based payments. The 54.5 percent effective tax rate for the six months ended June 30, 2020 differed from the statutory federal income tax rate of 21.0 percent primarily due to the tax accounting impact of the CARES Act which includes a $39.6 million discrete federal income tax benefit related to the full utilization of 2018 and 2019 net operating losses as well as state and foreign taxes. While we expect our tax ratethe ability to be fairly consistent incarryback the near term, it will vary depending on recurring items such as the amount of income we earn in each state and the state tax2020 net operating loss at a 35.0 percent rate applicable to such income. Discrete items during interim periods may also affect our tax rates.in earlier years.

30


Comparative Consolidated Operating Statistics


The following tables set forth our operating statistics for the periods indicated:

Three Months Ended June 30,
Percent Change (1)
202120202019YoYYo2Y
Operating statistics (unaudited):   
Total system statistics:   
Passengers3,699,217 1,273,258 4,169,536 190.5 (11.3)
Available seat miles (ASMs) (thousands)4,594,542 2,220,755 4,447,066 106.9 3.3 
Operating expense per ASM (CASM) (cents)7.26 11.10 8.63 (34.6)(15.9)
Fuel expense per ASM (cents)2.38 1.23 2.70 93.5 (11.9)
Operating CASM, excluding fuel (cents)4.88 9.87 5.93 (50.6)(17.7)
ASMs per gallon of fuel84.8 90.0 82.3 (5.8)3.0 
Departures31,507 15,089 30,547 108.8 3.1 
Block hours69,809 32,989 68,332 111.6 2.2 
Average stage length (miles)838 850 853 (1.4)(1.8)
Average number of operating aircraft during period101.8 90.7 85.0 12.2 19.8 
Average block hours per aircraft per day7.5 3.8 8.8 97.4 (14.8)
Full-time equivalent employees at end of period4,104 4,349 4,179 (5.6)(1.8)
Fuel gallons consumed (thousands)54,188 24,664 54,064 119.7 0.2 
Average fuel cost per gallon$2.02 $1.11 $2.22 82.0 (9.0)
Scheduled service statistics:  
Passengers3,680,254 1,266,077 4,131,855 190.7 (10.9)
Revenue passenger miles (RPMs) (thousands)3,188,215 1,107,534 3,603,076 187.9 (11.5)
Available seat miles (ASMs) (thousands)4,505,786 2,174,683 4,311,182 107.2 4.5 
Load factor70.8 %50.9 %83.6 %19.9 (12.8)
Departures30,763 14,683 29,567 109.5 4.0 
Block hours68,334 32,248 66,135 111.9 3.3 
Total passenger revenue per ASM (TRASM) (cents)(2)
10.36 5.75 10.97 80.2 (5.6)
Average fare - scheduled service(3)
$62.58 $40.46 $58.39 54.7 7.2 
Average fare - air-related charges(3)
$58.00 $51.57 $51.68 12.5 12.2 
Average fare - third party products$6.25 $6.67 $4.40 (6.3)42.0 
Average fare - total$126.82 $98.70 $114.47 28.5 10.8 
Average stage length (miles)842 855 853 (1.5)(1.3)
Fuel gallons consumed (thousands)53,022 24,124 52,327 119.8 1.3 
Average fuel cost per gallon$2.01 $1.08 $2.22 86.1 (9.5)
Rental car days sold404,760 135,536 540,960 198.6 (25.2)
Hotel room nights sold72,701 12,772 114,191 469.2 (36.3)
Percent of sales through website during period94.3 %93.8 %93.5 %0.5 0.8 
 Three Months Ended September 30, Percent
 2017 2016 Change*
Operating statistics (unaudited):     
Total system statistics:     
Passengers3,045,642
 2,939,055
 3.6
Revenue passenger miles (RPMs) (thousands)2,672,963
 2,645,533
 1.0
Available seat miles (ASMs) (thousands)3,220,246
 3,121,762
 3.2
Load factor83.0% 84.7% (1.7)
Operating expense per ASM (CASM) (cents)9.50
 8.22
 15.6
Fuel expense per ASM (cents)2.50
 2.22
 12.6
Operating CASM, excluding fuel (cents)7.00
 6.00
 16.7
ASMs per gallon of fuel72.6
 70.6
 2.8
Departures22,723
 21,384
 6.3
Block hours49,932
 47,739
 4.6
Average stage length (miles)842
 864
 (2.5)
Average number of operating aircraft during period89.7
 84.0
 6.8
Average block hours per aircraft per day6.1
 6.2
 (1.6)
Full-time equivalent employees at end of period3,704
 3,287
 12.7
Fuel gallons consumed (thousands)44,346
 44,187
 0.4
Average fuel cost per gallon$1.81
 $1.57
 15.3
Scheduled service statistics:     
Passengers2,998,476
 2,904,295
 3.2
Revenue passenger miles (RPMs) (thousands)2,618,446
 2,603,849
 0.6
Available seat miles (ASMs) (thousands)3,073,360
 2,997,529
 2.5
Load factor85.2% 86.9% (1.7)
Departures21,498
 20,398
 5.4
Block hours47,481
 45,740
 3.8
Total scheduled service revenue per ASM (TRASM) (cents)**10.61
 10.54
 0.7
Average fare - scheduled service$61.05
 $61.07
 —
Average fare - ancillary air-related charges$43.63
 $43.83
 (0.5)
Average fare - ancillary third party products$4.12
 $3.88
 6.2
Average fare - total$108.80
 $108.78
 —
Average stage length (miles)849
 869
 (2.3)
Fuel gallons consumed (thousands)42,193
 42,439
 (0.6)
Average fuel cost per gallon$1.80
 $1.59
 13.2
Percent of sales through website during period93.3% 94.6% (1.3)
*(1) Except load factor and percent of sales through website during period, which are presented as a percentage point change.
**(2) Various components of this measure do not have a direct correlation to ASMs. This measure is provided on a per ASM basis so as to facilitate comparison with airlines reporting revenues on a per ASM basis.

(3) Reflects division of passenger revenue between scheduled service (base fare) and air-related charges in our booking path.


31
 Nine Months Ended September 30, Percent
 2017 2016 Change*
Operating statistics (unaudited):     
Total system statistics:     
Passengers9,233,083
 8,410,422
 9.8
Revenue passenger miles (RPMs) (thousands)8,340,269
 7,831,436
 6.5
Available seat miles (ASMs) (thousands)10,181,292
 9,302,051
 9.5
Load factor81.9% 84.2% (2.3)
Operating expense per ASM (CASM) (cents)***9.08
 7.79
 16.6
Fuel expense per ASM (cents)***2.46
 1.97
 24.9
Operating CASM, excluding fuel (cents)6.62
 5.82
 13.7
ASMs per gallon of fuel72.2
 71.6
 0.8
Departures69,739
 61,271
 13.8
Block hours159,181
 142,515
 11.7
Average stage length (miles)870
 896
 (2.9)
Average number of operating aircraft during period86.6
 83.4
 3.8
Average block hours per aircraft per day6.7
 6.2
 8.1
Full-time equivalent employees at end of period3,704
 3,287
 12.7
Fuel gallons consumed (thousands)141,054
 129,862
 8.6
Average fuel cost per gallon***$1.78
 $1.41
 26.2

Scheduled service statistics:     
Passengers9,110,745
 8,321,716
 9.5
Revenue passenger miles (RPMs) (thousands)8,183,636
 7,714,172
 6.1
Available seat miles (ASMs) (thousands)9,747,395
 8,967,614
 8.7
Load factor84.0% 86.0% (2.0)
Departures66,355
 58,744
 13.0
Block hours151,988
 137,066
 10.9
Total scheduled service revenue per ASM (TRASM) (cents)**10.91
 10.92
 (0.1)
Average fare - scheduled service$67.59
 $68.27
 (1.0)
Average fare - ancillary air-related charges$44.76
 $45.30
 (1.2)
Average fare - ancillary third party products$4.32
 $4.14
 4.3
Average fare - total$116.67
 $117.71
 (0.9)
Average stage length (miles)875
 901
 (2.9)
Fuel gallons consumed (thousands)134,906
 125,291
 7.7
Average fuel cost per gallon***$1.76
 $1.41
 24.8
Percent of sales through website during period94.1% 94.3% (0.2)
Comparative Consolidated Operating Statistics
*
The following tables set forth our operating statistics for the periods indicated:
Six Months Ended June 30,
Percent Change (1)
202120202019YoYYo2Y
Operating statistics (unaudited):   
Total system statistics:   
Passengers6,033,720 4,448,708 7,619,814 35.6 (20.8)
Available seat miles (ASMs) (thousands)8,608,531 6,288,427 8,357,304 36.9 3.0 
Operating expense per ASM (CASM) (cents)6.83 12.19 8.90 (44.0)(23.3)
Fuel expense per ASM (cents)2.23 1.85 2.63 20.5 (15.2)
Operating CASM, excluding fuel (cents)4.60 10.35 6.27 (55.6)(26.6)
ASMs per gallon of fuel87.3 87.2 83.1 0.1 5.0 
Departures57,191 41,401 55,747 38.1 2.6 
Block hours130,183 95,112 128,151 36.9 1.6 
Average stage length (miles)865 879 876 (1.6)(1.3)
Average number of operating aircraft during period99.5 92.1 82.3 8.0 20.9 
Average block hours per aircraft per day7.2 5.5 8.6 30.9 (16.3)
Full-time equivalent employees at end of period4,104 4,349 4,179 (5.6)(1.8)
Fuel gallons consumed (thousands)98,614 72,143 100,537 36.7 (1.9)
Average fuel cost per gallon$1.95 $1.61 $2.18 21.1 (10.6)
Scheduled service statistics:  
Passengers6,003,556 4,420,683 7,553,393 35.8 (20.5)
Revenue passenger miles (RPMs) (thousands)5,354,632 4,033,017 6,794,122 32.8 (21.2)
Available seat miles (ASMs) (thousands)8,426,876 6,138,692 8,113,315 37.3 3.9 
Load factor63.5 %65.7 %83.7 %(2.2)(24.1)
Departures55,710 40,167 53,911 38.7 3.3 
Block hours127,185 92,594 124,098 37.4 2.5 
Total passenger revenue per ASM (TRASM) (cents)(2)
8.75 8.47 11.22 — (22.0)
Average fare - scheduled service(3)
$60.95 $57.27 $63.49 6.4 (4.0)
Average fare - air-related charges(3)
$55.72 $54.80 $52.32 1.7 6.5 
Average fare - third party products$6.10 $5.52 $4.68 10.5 30.3 
Average fare - total$122.77 $117.59 $120.49 4.4 1.9 
Average stage length (miles)869 883 878 (1.6)(1.0)
Fuel gallons consumed (thousands)96,329 70,229 97,395 37.2 (1.1)
Average fuel cost per gallon$1.92 $1.60 $2.18 20.0 (11.9)
Rental car days sold680,344 616,582 1,012,558 10.3 (32.8)
Hotel room nights sold128,909 104,776 219,206 23.0 (41.2)
Percent of sales through website during period93.8 %93.7 %93.5 %0.1 0.3 
(1) Except load factor and percent of sales through website during period, which are presented as a percentage point change.
**(2) Various components of this measure do not have a direct correlation to ASMs. This measure is provided on a per ASM basis so as to facilitate comparison with airlines reporting revenues on a per ASM basis.
*** Includes effect(3) Reflects division of $8.3 million fuel tax refundspassenger revenue between scheduled service (base fare) and air-related charges in the second quarter of 2016.our booking path.



32

LIQUIDITY AND CAPITAL RESOURCES


Current liquidity


Cash, restricted cash equivalents and investment securities (short-term and long-term) increased to $1.2 billion at June 30, 2021, from $470.5$685.2 million at December 31, 2016 to $519.8 million at September 30, 2017. 2020. Investment securities represent highly liquid marketable securities which are available-for-sale.

Restricted cash represents escrowed funds under fixed fee contracts, escrowed project funds and cash collateral against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties. Under our fixed fee flying contracts, we require our customers to prepay for flights to be provided by us. The prepayments are escrowed until the flight is completed and are recorded as restricted cash with a corresponding amount reflected as air traffic liability. Investment securities represent highly liquid marketable securities which are available-for-sale.


During the first ninesix months ended June 30, 2021, we received a total of 2017, our primary source of funds was $296.4 million generated by operations as well as $292.5$203.9 million in proceeds from debt issuance. Our operatingassistance through the payroll support programs.

We suspended share repurchases and our quarterly cash flows and borrowings have allowed usdividend, as part of cash conservation efforts in response to invest inthe effects of COVID-19 on our fleet transition and return capitalbusiness. In connection with our receipt of financial support under the payroll support program, we agreed not to shareholders. repurchase shares or pay cash dividends through September 30, 2022.

We believe we have more than adequate liquidity resources through our cash balances, operating cash flows, borrowings and cash balances,expected tax refunds, to meet our future contractual obligations, and expect to finance a significant portion of the purchase price of our remaining newly manufactured Airbus aircraft order on acceptable terms.obligations. We will continue to consider raising funds through debt financing on an opportunistic basis.

In addition to our recurring quarterly cash dividend, we plan to continue repurchasing our stock in the open market subject to availability of cash resources and compliance with our debt covenants. Our current repurchase authority is $100 million. There is no expiration to this program.


Debt


Our long-term debt and finance lease obligations balance, without reduction for related issuance costs, increaseddecreased from $813.2 million$1.68 billion as of December 31, 20162020 to $1,017.0 million$1.60 billion as of SeptemberJune 30, 2017 as2021. During the six months ended June 30, 2021, we borrowed additional funds secured by aircraft, while making scheduled repayments$122.1 million and we made principal payments of $199.6 million, including $53.9 million on our existing debt. During the third quarter 2017 we borrowed $102.0 million secured by three aircraft as well as $56.0 million against our senior secured revolving credit facility.facility that matured on March 31, 2021 and a $57.0 million prepayment of debt secured by aircraft.


Despite substantially lower revenues caused by the pandemic compared to pre-pandemic periods, our total debt and finance lease obligations declined by 4.6 percent from December 31, 2020 to June 30, 2021.

Sources and Uses of Cash


Operating Activities. During the nine months ended September 30, 2017, our operating activities provided $296.4 million of cash compared to $308.1 million during the same period of 2016. The year-over-year decrease in cash inflows is principally the result of a $65.9 million decrease in net income, offset by the effect of an increase in deferred income taxes.

Operating cash inflows are primarily derived from providing air transportation and related ancillary products and services to customers,customers. During the six months ended June 30, 2021, our operating activities provided $405.0 million of cash compared to $276.7 million during the same period of 2020. This change is mostly attributable to a $228.0 million increase in net income offset by changes in special charges and we expect to use that cash flow to purchase aircraftcurrent assets and equipment, make scheduled debt payments, and return capital to shareholders through share repurchases and dividends. liability accounts.


Investing Activities. Cash used in investing activities was $366.3$369.4 million during the ninesix months ended SeptemberJune 30, 20172021 compared to $284.0$158.6 million for the same period in 2016.2020. The year-over-year increasechange is due primarily to $333.7an increase of $199.1 million inof purchases of investment securities, net of maturities, and a decrease of $48.0 million related to proceeds from sale-leaseback transactions during the six months ended June 30, 2020. Purchases of property and equipment purchases duringwere $36.2 million less in the first ninecurrent year.

Financing Activities. Cash provided by financing activities for the six months of 2017ended June 30, 2021 was $245.5 million, compared to $264.1 million in the same period of 2016. Additionally, our net cash used to purchase investment securities (net of proceeds from maturities) was $33.9 million during the first nine months of 2017 compared to $23.9$32.8 million for the same period in 2016.

Financing Activities. Cash2020. The year-over-year change is mostly due to the equity offering completed on May 10, 2021 which resulted in the receipt of $335.1 million in cash. This was offset by the net effect of debt activity, as principal payments and debt issuance costs exceeded debt proceeds from financing activities forby $93.6 million during the ninesix months ended SeptemberJune 30, 2017 exceeded cash used by $79.22021, compared to $74.7 million while cash used exceeded cashof debt proceeds by $62.5 million for(net of related costs) in excess of principal payments during the same period in 2016. Proceeds from2020. Additionally, there were no share repurchases or dividends paid in the issuancefirst half of debt net2021, where there was $33.8 million and $11.4 million of principal payments were $204.5 million in 2017 and $56.9 millionsuch activity, respectively, in the same period of 2016. During the first nine months of 2017, we repurchased common stock for $90.4 million and paid cash dividends of $34.5 million, compared to the repurchase of common stock for $63.4 million and payment of cash dividends of $55.9 million ($27.7 million of which was a special dividend declared in December 2015) in the same period of 2016.2020.


33

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


We have made forward-looking statements in this quarterly report on Form 10-Q, and in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” that are based on our management’s beliefs and assumptions, and on information currently available to our management. Forward-looking statements include our statements regarding number of contracted aircraft to be placed in service in the future, the development and financing of our Sunseeker Resort, as well as other information concerning our possible or assumed future results of operations, business strategies, fleet plan, financing plans, competitive position, industry environment, potential growth opportunities, future service to be provided, the effects of future regulation

and competition, and the developmenteffects of a hotel-condo resort.competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,"believe," "expect," "anticipate," "intend," "plan," "estimate," “project,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project”“hope” or similar expressions.



Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements may be found in our periodic reports filed with the Securities and Exchange Commission at www.sec.gov.www.sec.gov. These risk factors include, without limitation, the impact and duration of the COVID-19 pandemic on airline travel and the economy, liquidity issues resulting from the effect of the COVID-19 pandemic on our business, restrictions imposed on us a result of accepting government grants under the Payroll Support Programs, an accident involving, or problems with, our aircraft, public perception of our safety, our reliance on automationour automated systems, limitationour reliance on growth as we transitionthird parties to deliver aircraft under contract to us on a single fleet type,timely basis, risk of breach of security of personal data, volatility of fuel costs, labor issues and costs, the ability to obtain regulatory approvals as needed, the effect of economic conditions on leisure travel, debt covenants and balances, the ability to finance aircraft under contract,to be acquired, terrorist attacks, risks inherent to airlines, theour competitive environment, our reliance on third parties who provide facilities or services to us, the possible loss of key personnel, economic and other conditions in markets in which we operate, the ability to successfully develop and finance a hotel-condo resort in Southwest Florida, governmental regulation, increases in maintenance costs and cyclical and seasonal fluctuations toin our operating results.


Any forward-looking statements are based on information available to us today and we undertake no obligation to publicly update any forward-looking statements, whether as a result of future events, new information or otherwise.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES


A description ofThere have been no material changes to our critical accounting estimates during the six months ended June 30, 2021. For information regarding our critical accounting policies is includedand estimates, see disclosures in Item 7 ofthe Consolidated Financial Statements and accompanying notes contained in our Annual Report on2020 Form 10-K, for the year ended December 31, 2016. There has been no material changeand in Note 1 of Notes to these policies during the nine months ended September 30, 2017.Consolidated Financial Statements (unaudited).


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Item 3. Quantitative and Qualitative Disclosures About Market Risk


We are subject to certain market risks, including commodity prices (specifically aircraft fuel). The adverse effects of changes in these markets could pose potential losses as discussed below. The sensitivity analysis provided does not consider the effects that such adverse changes may have on overall economic activity, nor does it consider additional actions we may take to mitigate our exposure to such changes. Actual results may differ.


Aircraft Fuel


Our results of operations can be significantly impacted by changes in the price and availability of aircraft fuel, as aircraftfuel. Aircraft fuel expense for the six months ended June 30, 2021 represented 27.1 percent32.7% of our total operating expenses for the nine months ended September 30, 2017.expenses. Increases in fuel prices, or a shortage of supply, could have a material impact on our operations and operating results. Based on our fuel consumption for the three and ninesix months ended SeptemberJune 30, 2017,2021, a hypothetical ten percent increase in the average price per gallon of fuel would have increased fuel expense by approximately $7.8$10.8 million and $26.0$19.7 million respectively. We have not hedged fuel price risk for many years.


Interest Rates


We have market risk associated with changing interest rates due to the short-term natureAs of our cashJune 30, 2021, we had $0.98 billion of variable-rate debt, including current maturities and investment securities and variable-rate debt. We invest available cashwithout reduction for $15.2 million in government and corporate debt securities, investment grade commercial paper, and other highly rated financial instruments. Because of the short-term nature of these investments, the returns earned closely parallel short-term floating interest rates.related costs. A hypothetical 100 basis point change in interest rates for the nine months ended September 30, 2017 would have affected interest income from cash and investment securities by approximately $2.6 million.

As of September 30, 2017, we had a total of $549.7 million in variable-rate debt, including current maturities and without reduction for related costs. A hypothetical 100 basis point change in market interest rates for the nine months ended September 30, 2017, would have affected interest expense on variable rate debt by approximately $3.4 million.

As of September 30, 2017, we had $467.4$5.3 million of fixed-rate debt, including current maturities and without reduction for related costs, which had a fair value of $482.4 million. A hypothetical 100 basis point change in market interest rates would not impact interest expense or have a material effect on the fair value of our fixed-rate debt instruments as of such date.

See Item 7A "Quantitative and Qualitative Disclosures About Market Risk" in the Company's Annual Report on Form 10-K for the yearsix months ended December 31, 2016, for further information about market risk.June 30, 2021.


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Item 4. Controls and Procedures


As of SeptemberJune 30, 2017,2021, under the supervision and with the participation of our management, including our chief executive officer (“CEO”("CEO") and chief financial officer (“CFO”), we evaluated the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.”Act”) as of the end of the period covered by this report. Based on thisthat evaluation, management, including our managementCEO and CFO, has concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information we are required to disclose is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based upon this evaluation, management concluded that our disclosure controlsforms and procedures are effective in providing reasonable assurance that information required to be disclosed in our reports filed with the SEC under the Exchange Act is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure.


There were no changes in our internal control over financial reporting that occurred during the quarter ending SeptemberJune 30, 2017,2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II. OTHER INFORMATION


Item 1. Legal Proceedings


We are subject to certain legal and administrative actions we consider routine to our business activities. We believe the ultimate outcome of any pending legal or administrative matters will not have a material adverse impact on our financial position, liquidity or results of operations.


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Item 1A.  Risk Factors


We have evaluated our risk factors and determined the followingthere are no changes to those set forth in Part I, Item 1A in the Form 10-K since we filedof our Annual Report on Form 10-K.10-K for the year ended December 31, 2020 and filed with the Commission on March 1, 2021.


The acceleration of the retirement of our MD-80 fleet will put pressure on our fleet induction team to complete the fleet transition on a timely basis.
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Although we have been able to successfully add 23 Airbus aircraft to our operating fleet since the beginning of 2016, the accelerated retirement of our MD-80 fleet per our fleet transition plan contemplates placing into service an additional 35 Airbus aircraft through November 2018. Most of these aircraft are used and they will come from different sources. This is a significant undertaking which will require operational efficiency to accomplish on a timely basis. If we are unable to complete these inductions as contemplated, the fleet replacement plan could be delayed which could increase costs or impact revenues.


The successful development of a hotel-condo resort is dependent on commercial and economic factors, many of which are beyond our control.

We have announced the development of a hotel-condo resort in Southwest Florida with construction expected to begin in mid-2018 and completion of the hotel expected in late 2019 or early 2020. The successful development of the project will be subject to various risks inherent in construction projects (such as financing, cost overruns and construction delays) as well as risks of gaining sufficient interest from purchasers of the condo units at the prices we envision, the desirability of the project’s location, competition and the ability to profitably operate the hotel and related offerings once open.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


Our Repurchases of Equity Securities


The following table reflects the repurchases of our(a) Not applicable

(b) Not applicable

(c) We did not repurchase any common stock during the thirdsecond quarter 2017:2021.


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Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of
Shares Purchased as Part of our Publicly
Announced Plan		 Approximate Dollar Value of Shares that
May Yet be Purchased
Under the Plans or
Programs (in thousands) (2)
July 508
 $139.78
 None  
August None
 None
 None  
September 4,278
 115.71
 None  
Total 4,786
 $118.27
   $100,000

(1)Includes shares repurchased from employees who vested a portion of their restricted stock grants. These share repurchases were made at the election of each employee pursuant to an offer to repurchase by us. In each case, the shares repurchased constituted the portion of vested shares necessary to satisfy income tax withholding requirements.
(2)
Represents the remaining dollar amount of open market purchases of our common stock which has been authorized by the Board under a share repurchase program.

Item 3. Defaults Upon Senior Securities


None


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Item 4. Mine Safety Disclosures


Not applicable


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Item 5. Other Information


None

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Item 6. Exhibits
101.INS101.SCHXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Labels Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to Exhibit filed with Registration Statement #333-134145 filed by the Company with the Commission and amendments thereto.
(2) Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Commission on May 12, 2020.



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(1)Incorporated by reference to Exhibit filed with Registration Statement #333-134145 filed by the Company with the Commission and amendments thereto.
(2)Incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, filed with the Commission on November 1, 2016.




SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ALLEGIANT TRAVEL COMPANY
Date:OctoberJuly 30, 20172021By:/s/ Scott SheldonGregory Anderson
Scott Sheldon,Gregory Anderson, as duly authorized officer of the Company (Chief Financial Officer) and as Principal Financial Officer

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