SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended		~~September~~June 30, ~~2019~~2020

OR
☐	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

Allegiant Travel Company

(Exact Name of Registrant as Specified in Its Charter)



Nevada		20-4745737

(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

1201 North Town Center Drive
Las Vegas,	Nevada	89144
(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 class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $.001	ALGT	NASDAQ 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. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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	☐

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. ☐

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

As of ~~October~~July 28, ~~2019,~~2020, the registrant had ~~16,288,448~~16,242,332 shares of common stock, $.001 par value per share, outstanding.

~~Allegiant Travel Company~~ALLEGIANT TRAVEL COMPANY

~~Form~~FORM 10-Q

~~Table of Contents~~TABLE OF CONTENTS



PART I.	FINANCIAL INFORMATION

ITEM 1.	Consolidated Financial Statements	3

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	2931

ITEM 4.	Controls and Procedures	2932

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	3032

ITEM 1A.	Risk Factors	3032

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3034

ITEM 3.	Defaults Upon Senior Securities	3034

ITEM 4.	Mine Safety Disclosures	3034

ITEM 5.	Other Information	3034

ITEM 6.	Exhibits	3135

	Signatures	3236

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands)


	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
	(unaudited)						(unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	88,114		$	81,520		$	272,210		$	121,888
Restricted cash	20,475			14,391			15,432			14,897
Short-term investments	314,822			314,464			390,864			335,928
Accounts receivable	31,450			36,014			208,573			25,516
Expendable parts, supplies and fuel, net	27,210			19,516			25,856			28,375
Prepaid expenses and other current assets	43,356			29,343			24,552			35,617
TOTAL CURRENT ASSETS	525,427			495,248			937,487			562,221
Property and equipment, net	2,102,815			1,847,268			2,076,448			2,236,808
Long-term investments	39,057			51,526			—			15,542
Deferred major maintenance, net	99,564			67,873			131,141			129,654
Operating lease right-of-use assets, net	22,433			—			99,819			22,081
Deposits and other assets	45,184			36,753			28,074			44,497
TOTAL ASSETS:	$	2,834,480		$	2,498,668		$	3,272,969		$	3,010,803
CURRENT LIABILITIES
Accounts payable	$	21,493		$	27,452		$	51,286		$	27,667
Accrued liabilities	121,399			122,027			225,284			161,693
Air traffic liability	267,676			212,230			354,735			249,950
Current maturities of long-term debt and finance lease obligations, net of related costs	138,685			152,287			227,732			173,274
TOTAL CURRENT LIABILITIES	549,253			513,996			859,037			612,584
Long-term debt and finance lease obligations, net of current maturities and related costs	1,213,299			1,119,446			1,273,439			1,248,579
Deferred income taxes	211,801			164,027			292,728			232,520
Other noncurrent liabilities	33,519			10,878			111,205			33,569
TOTAL LIABILITIES:	2,007,872			1,808,347			2,536,409			2,127,252
SHAREHOLDERS' EQUITY
Common stock, par value $.001	23			23			23			23
Treasury shares	(620,655		)	(605,037		)	(648,118		)	(617,579		)
Additional paid in capital	285,318			270,935			310,628			289,933
Accumulated other comprehensive income (loss), net	29			(661		)
Accumulated other comprehensive income, net							425			98
Retained earnings	1,161,893			1,025,061			1,073,602			1,211,076
TOTAL EQUITY:	826,608			690,321			736,560			883,551
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY:	$	2,834,480		$	2,498,668		$	3,272,969		$	3,010,803

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

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
OPERATING REVENUES:
Passenger	$	391,222		$	355,100		$	1,265,978		$	1,157,443		$	116,520		$	454,779		$	495,431		$	874,755
Third party products	18,207			15,921			53,557			44,045			8,443			18,208			24,419			35,350
Fixed fee contracts	19,797			14,791			42,859			33,000			3,237			12,487			12,156			23,061
Other	7,283			7,297			17,498			20,845			5,147			6,285			10,522			10,215
Total operating revenues	436,509			393,109			1,379,892			1,255,333			133,347			491,759			542,528			943,381
OPERATING EXPENSES:
Salary and benefits	107,586			97,706			340,589			312,314			94,790			113,592			207,436			233,003
Aircraft fuel	104,583			113,525			324,253			342,006			27,358			119,987			116,171			219,670
Station operations	43,522			43,128			128,357			122,265			27,405			45,870			68,405			84,835
Depreciation and amortization	39,436			34,658			114,112			92,641			43,296			38,494			86,995			74,676
Maintenance and repairs	24,768			31,983			68,470			75,864			13,032			20,877			34,827			43,701
Sales and marketing	17,591			16,798			59,057			54,224			8,909			20,540			27,364			41,466
Aircraft lease rental	—			671			—			767			1,427			—			2,389			—
Other	26,907			28,459			73,756			74,881			23,752			24,294			50,468			46,849
CARES Act grant recognition													(74,539		)	—			(74,539		)	—
Special charges													81,169			—			247,267			—
Total operating expenses	364,393			366,928			1,108,594			1,074,962			246,599			383,654			766,783			744,200
OPERATING INCOME	72,116			26,181			271,298			180,371
OPERATING INCOME (LOSS)													(113,252		)	108,105			(224,255		)	199,181
OTHER (INCOME) EXPENSES:
Interest expense	19,506			14,309			58,531			40,467			14,053			20,942			32,206			39,025
Capitalized interest	(903		)	—			(3,444		)	(279		)	—			(1,038		)	(4,067		)	(2,541		)
Interest income	(3,335		)	(2,425		)	(10,038		)	(6,259		)	(1,417		)	(3,502		)	(3,728		)	(6,703		)
Loss on debt extinguishment	—			—			3,677			—			—			—			1,222			3,677
Special charges													19,830			—			26,632			—
Other, net	(57		)	(118		)	(41		)	(408		)	698			(86		)	623			15
Total other expenses	15,211			11,766			48,685			33,521			33,164			16,316			52,888			33,473
INCOME BEFORE INCOME TAXES	56,905			14,415			222,613			146,850
PROVISION FOR INCOME TAXES	12,976			(732		)	51,017			26,494
NET INCOME	$	43,929		$	15,147		$	171,596		$	120,356
Earnings per share to common shareholders:
INCOME (LOSS) BEFORE INCOME TAXES													(146,416		)	91,789			(277,143		)	165,708
INCOME TAX PROVISION (BENEFIT)													(53,313		)	21,246			(151,030		)	38,041
NET INCOME (LOSS)													$	(93,103	)	$	70,543		$	(126,113	)	$	127,667
Earnings (loss) per share to common shareholders:
Basic	$	2.70		$	0.94		$	10.55		$	7.46		$	(5.85	)	$	4.33		$	(7.93	)	$	7.85
Diluted	$	2.70		$	0.94		$	10.54		$	7.45		$	(5.85	)	$	4.33		$	(7.93	)	$	7.84
Shares used for computation:
Basic	16,037			15,957			16,037			15,929			15,902			16,063			15,927			16,037
Diluted	16,039			15,962			16,045			15,938			15,902			16,069			15,927			16,050

Cash dividends declared per share:	$	0.70		$	0.70		$	2.10		$	2.10		$	—		$	0.70		$	0.70		$	1.40

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

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
NET INCOME $ 43,929
$ 15,147
$ 171,596
$ 120,356
Other comprehensive income:

Change in available for sale securities, net of tax 16
(83 ) 669
(926 )
Foreign currency translation adjustments 17
4
21
218
Change in derivatives, net of tax —
1,325
—
2,321
Total other comprehensive income 33
1,246
690
1,613
TOTAL COMPREHENSIVE INCOME $ 43,962
$ 16,393
$ 172,286
$ 121,969



	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
NET INCOME (LOSS)	$	(93,103	)	$	70,543	$	(126,113	)	$	127,667
Other comprehensive income (loss):
Change in available for sale securities, net of tax	1,057			177		324			654
Foreign currency translation adjustments	(8		)	9		3			3
Total other comprehensive income	1,049			186		327			657
TOTAL COMPREHENSIVE INCOME (LOSS)	$	(92,054	)	$	70,729	$	(125,786	)	$	128,324

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

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(unaudited)

Three Months Ended September 30, 2019
Common stock outstanding Par value Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Treasury shares Total shareholders' equity
Balance at June 30, 2019 16,305
$ 23
$ 280,783
$ (4 ) $ 1,128,822
$ (605,115 ) $ 804,509
Share-based compensation —
—
4,535
—
—
—
4,535
Shares repurchased by the Company and held as treasury shares (110 ) —
—
—
—
(15,540 ) (15,540 )
Cash dividends, $0.70 per share —
—
—
—
(11,409 ) —
(11,409 )
Other comprehensive income —
—
—
33
551
—
584
Net income —
—
—
—
43,929
—
43,929
Balance at September 30, 2019 16,195
$ 23
$ 285,318
$ 29
$ 1,161,893
$ (620,655 ) $ 826,608



	Three Months Ended June 30, 2020
	Common stock outstanding	Par value		Additional paid-in capital		Accumulated other comprehensive income (loss)			Retained earnings			Treasury shares			Total shareholders' equity
Balance at March 31, 2020	16,199	$	23	$	295,267	$	(624	)	$	1,166,588		$	(651,352	)	$	809,902
Share-based compensation	—	—		14,409		—			—			—			14,409
Stocks issued under employee stock purchase plan	41	—		—		—			—			3,234			3,234
Cash dividends	—	—		—		—			117			—			117
Other comprehensive income	—	—		—		1,049			—			—			1,049
CARES Act warrant issuance	—	—		952		—			—			—			952
Net loss	—	—		—		—			(93,103		)	—			(93,103		)
Balance at June 30, 2020	16,240	$	23	$	310,628	$	425		$	1,073,602		$	(648,118	)	$	736,560

Nine Months Ended September 30, 2019
Common stock outstanding Par value Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Treasury shares Total shareholders' equity
Balance at December 31, 2018 16,183
$ 23
$ 270,935
$ (661 ) $ 1,025,061
$ (605,037 ) $ 690,321
Share-based compensation 124
—
14,383
—
—
—
14,383
Shares repurchased by the Company and held as treasury shares (132 ) —
—
—
—
(18,549 ) (18,549 )
Stock issued under employee stock purchase plan 20
—
—
—
—
2,931
2,931
Cash dividends, $2.10 per share —
—
—
—
(34,214 ) —
(34,214 )
Other comprehensive income —
—
—
690
—
—
690
Net income —
—
—
—
171,596
—
171,596
Cumulative effect of the New Lease Standard (see Note 5) —
—
—
—
(550 ) —
(550 )
Balance at September 30, 2019 16,195
$ 23
$ 285,318
$ 29
$ 1,161,893
$ (620,655 ) $ 826,608



	Six Months Ended June 30, 2020
	Common stock outstanding		Par value		Additional paid-in capital		Accumulated other comprehensive income		Retained earnings			Treasury shares			Total shareholders' equity
Balance at December 31, 2019	16,303		$	23	$	289,933	$	98	$	1,211,076		$	(617,579	)	$	883,551
Share-based compensation	113		—		19,743		—		—			—			19,743
Shares repurchased by the Company and held as treasury shares	(217	)	—		—		—		—			(33,773		)	(33,773		)
Stocks issued under employee stock purchase plan	41		—		—		—		—			3,234			3,234
Cash dividends declared, $0.70 per share for the year	—		—		—		—		(11,361		)	—			(11,361		)
Other comprehensive income	—		—		—		327		—			—			327
CARES Act warrant issuance	—		—		952		—		—			—			952
Net loss	—		—		—		—		(126,113		)	—			(126,113		)
Balance at June 30, 2020	16,240		$	23	$	310,628	$	425	$	1,073,602		$	(648,118	)	$	736,560

Three Months Ended September 30, 2018
Common stock outstanding Par value Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Treasury shares Total shareholders' equity
Balance at June 30, 2018 16,161
$ 23
$ 263,034
$ (2,473 ) $ 991,109
$ (607,025 ) $ 644,668
Share-based compensation —
—
3,873
—
—
—
3,873
Issuance of common stock, net of forfeitures 3
—
—
—
—
—
—
Shares repurchased by the Company and held as treasury shares (5 ) —
—
—
—
(624 ) (624 )
Cash dividends, $0.70 per share —
—
—
—
(11,314 ) —
(11,314 )
Other comprehensive income —
—
—
1,246
—
—
1,246
Net income —
—
—
—
15,147
—
15,147
Balance at September 30, 2018 16,159
$ 23
$ 266,907
$ (1,227 ) $ 994,942
$ (607,649 ) $ 652,996



	Three Months Ended June 30, 2019
	Common stock outstanding		Par value		Additional paid-in capital		Accumulated other comprehensive income (loss)			Retained earnings			Treasury shares			Total shareholders' equity
Balance at March 31, 2019	16,284		$	23	$	276,247	$	(190	)	$	1,069,690		$	(607,316	)	$	738,454
Share-based compensation	6		—		4,536		—			—			—			4,536
Shares repurchased by the Company and held as treasury shares	(5	)	—		—		—			—			(730		)	(730		)
Stock issued under employee stock purchase plan	20		—		—		—			—			2,931			2,931
Cash dividends declared, $0.70 per share	—		—		—		—			(11,411		)	—			(11,411		)
Other comprehensive income	—		—		—		186			—			—			186
Net income	—		—		—		—			70,543			—			70,543
Balance at June 30, 2019	16,305		$	23	$	280,783	$	(4	)	$	1,128,822		$	(605,115	)	$	804,509

Nine Months Ended September 30, 2018
Common stock outstanding Par value Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Treasury shares Total shareholders' equity
Balance at December 31, 2017 16,066
$ 23
$ 253,840
$ (2,840 ) $ 907,943
$ (605,655 ) $ 553,311
Share-based compensation 98
—
13,067
—
—
—
13,067
Issuance of common stock, net of forfeitures 8
—
—
—
—
—
—
Shares repurchased by the Company and held as treasury shares (23 ) —
—
—
—
(3,617 ) (3,617 )
Stock issued under employee stock purchase plan 10
—
—
—
—
1,623
1,623
Cash dividends, $2.10 per share —
—
—
—
(33,919 ) —
(33,919 )
Other comprehensive income —
—
—
1,613
562
—
2,175
Net income —
—
—
—
120,356
—
120,356
Balance at September 30, 2018 16,159
$ 23
$ 266,907
$ (1,227 ) $ 994,942
$ (607,649 ) $ 652,996



	Six Months Ended June 30, 2019
	Common stock outstanding		Par value		Additional paid-in capital		Accumulated other comprehensive income (loss)			Retained earnings			Treasury shares			Total shareholders' equity
Balance at December 31, 2018	16,183		$	23	$	270,935	$	(661	)	$	1,025,061		$	(605,037	)	$	690,321
Share-based compensation	124		—		9,848		—			—			—			9,848
Shares repurchased by the Company and held as treasury shares	(22	)	—		—		—			—			(3,009		)	(3,009		)
Stock issued under employee stock purchase plan	20		—		—		—			—			2,931			2,931
Cash dividends, $1.40 per share	—		—		—		—			(22,805		)	—			(22,805		)
Other comprehensive income (loss)	—		—		—		657			(551		)	—			106
Net income	—		—		—		—			127,667			—			127,667
Cumulative effect of the New Lease Standard	—		—		—		—			(550		)	—			(550		)
Balance at June 30, 2019	16,305		$	23	$	280,783	$	(4	)	$	1,128,822		$	(605,115	)	$	804,509

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

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Nine Months Ended September 30,
2019 2018
OPERATING ACTIVITIES:
Net income $ 171,596
$ 120,356
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 114,112
92,641
(Gain)/loss on aircraft and other equipment disposals (8,553 ) 2,274
Share-based compensation expense 13,563
11,043
Deferred income taxes 47,795
21,760
Other adjustments 7,330
1,833
Changes in certain assets and liabilities:
Accounts receivable 4,564
38,005
Prepaid expenses (13,493 ) (6,709 )
Accounts payable (3,655 ) (2,437 )
Accrued liabilities (8,158 ) 5,960
Air traffic liability 55,446
27,432
Deferred major maintenance (48,081 ) (21,699 )
Other assets/liabilities (11,039 ) (336 )
Net cash provided by operating activities 321,427
290,123
INVESTING ACTIVITIES:
Purchase of investment securities (397,504 ) (263,057 )
Proceeds from maturities of investment securities 413,038
355,325
Purchase of property and equipment, including capitalized interest (350,187 ) (273,999 )
Other investing activities 10,647
(5,399 )
Net cash used in investing activities (324,006 ) (187,130 )
FINANCING ACTIVITIES:
Cash dividends paid to shareholders (34,214 ) (33,919 )
Proceeds from the issuance of debt 770,435
191,724
Repurchase of common stock (18,549 ) (3,617 )
Principal payments on debt and finance lease obligations (670,148 ) (171,438 )
Debt issuance costs (32,592 ) (1,147 )
Other financing activities 325
5,834
Net cash provided by (used in) financing activities 15,257
(12,563 )
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 12,678
90,430
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD 95,911
70,639
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD $ 108,589
$ 161,069

CASH PAYMENTS (RECEIPTS) FOR:
Interest paid, net of amount capitalized $ 53,089
$ 43,751
Income tax refunds (2,227 ) (41,145 )
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Property capitalized under operating leases $ 25,533
$ —
Flight equipment acquired under finance leases —
127,625



	Six Months Ended June 30,
	2020			2019
Cash flows from operating activities:
Net income (loss)	$	(126,113	)	$	127,667
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	86,995			74,676
Special charges	263,497			—
Other adjustments	81,630			41,667
Changes in certain assets and liabilities:
Air traffic liability	104,785			54,820
Deferred CARES Act grant recognition	62,814			—
Other - net	(196,942		)	(21,318		)
Net cash provided by operating activities	276,666			277,512
Cash flows from investing activities:
Purchase of investment securities	(296,979		)	(130,627		)
Proceeds from maturities of investment securities	258,751			258,076
Purchase of property and equipment	(170,673		)	(234,469		)
Proceeds from sale-leaseback transactions	48,000			—
Other investing activities	2,303			10,201
Net cash used in investing activities	(158,598		)	(96,819		)
Cash flows from financing activities:
Cash dividends paid to shareholders	(11,361		)	(22,805		)
Proceeds from the issuance of debt	175,712			770,435
Repurchase of common stock	(33,773		)	—
Principal payments on debt and finance lease obligations	(98,171		)	(522,616		)
Debt issuance costs	(2,852		)	(30,759		)
Other financing activities	3,234			(2,689		)
Net cash provided by financing activities	32,789			191,566
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	150,857			372,259
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD	136,785			95,911
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	287,642		$	468,170

CASH PAYMENTS (RECEIPTS) FOR:
Interest paid, net of amount capitalized	$	26,065		$	36,886
Income tax refunds	(45,321		)	(3,340		)
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Right-of-use (ROU) assets acquired	$	86,012		$	23,320
Purchases of property and equipment in accrued liabilities	22,106			6,043

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

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's investments in unconsolidated affiliates, which are 50 percent or less owned, are accounted for under the equity or cost method, and are insignificant to the 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, ~~2018~~2019 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

~~Recently Adopted Standards~~

~~In February~~On June 16, 2016, the ~~Financial Accounting Standards Board ("FASB")~~FASB issued ASU ~~2016-02, Leases (Topic 842), (the "New Lease Standard"). This~~No. 2016-13, Measurement of Credit Losses on Financial Instruments. The standard requires ~~leases, other than short-term,~~the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be ~~recognized on the balance sheet~~recorded as ~~a lease liability and a corresponding right-of-use asset.~~

Lease payments include fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties, and other payments as required by the standard. Lease payments do not include variable lease payments other than those that depend on an index or rate, any guarantee by the lesseeallowances instead of reductions to amortized cost of the ~~lessor’s debt, or any amount allocated to non-lease components. This standard is effective for interim and annual reporting periods beginning after December 15, 2018 and the~~securities. The Company adopted ~~the New Lease Standard~~this accounting standard prospectively as of January 1, ~~2019.~~2020, and it did not have a significant impact on its consolidated financial statements.

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 into the second quarter 2020. Although there were incremental demand increases during portions of the second quarter 2020, an increase in reported COVID-19 cases in various parts of the country towards the end of the quarter caused another decline in bookings. It is evident that demand in the foreseeable future will continue to fluctuate in response to fluctuations in COVID-19 cases, hospitalizations, deaths, treatment efficacy and the availability of a vaccine. The Company is continuously reevaluating flight schedules based on demand trends.

The Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted in March 2020, providing support for the airline industry and other businesses and individuals.

On April 20, 2020, the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program Agreement (the “PSPA”) with the U.S. Department of the Treasury ("Treasury") for an award Allegiant Air would receive under the CARES Act. The total amount allocated to Allegiant Air under the Payroll Support Program established under the CARES Act is $171.9 million. The Company received 3 installments of the award during the second quarter 2020, totaling $154.7 million. The fourth and final installment of $17.2 million was received in July 2020. The proceeds of the award must be used exclusively for wages, salaries and benefits.

The $154.7 million received under the PSPA during the second quarter 2020 includes direct grants, a $16.4 million loan, and warrants to purchase 19,700 shares of the Company's common stock, as further discussed below.

In consideration for the grant, Allegiant Air issued to Treasury a low-interest rate, senior unsecured term promissory note (the “PSP Note”) which will mature 10 years after issuance. The principal amount of the PSP Note is $21.6 million, of which $16.4 million relates to the funds received during the second quarter 2020, and the remaining $5.2 million relates to the funds received in July 2020. The PSP Note is guaranteed by the Company and is prepayable at any time at par (see Note 5).

Also in consideration for the grant, the Company issued warrants (the “PSP Warrants”) to Treasury to purchase 25,889 shares of common stock of the Company at a price of $83.33 per share (based on the closing price of the Company’s common stock on The Nasdaq Global Select Market on April 9, 2020). Warrants to purchase 19,700 shares (valued at $1.0 million) were issued in May and June 2020, and warrants for the remaining 6,189 shares (valued at $0.3 million) were issued in July 2020. The PSP Warrants expire five years after issuance, and will be exercisable either through net share settlement or cash, at the Company’s option. The PSP Warrants include customary anti-dilution provisions, do not have any voting rights and are freely transferable, with registration rights.

In connection with the PSPA, the Company is required to comply with the relevant provisions of the CARES Act, including those prohibiting the repurchase of common stock and the payment of common stock dividends until September 30, 2021, as well as those restricting the payment of certain executive compensation for periods through March 24, 2022.

Given the Company's efforts to conserve and raise liquidity and 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 effects of COVID-19 triggered an impairment review, and a non-cash impairment charge was recognized during the six months ended June 30, 2020 (see Note 12 - Impairment for additional detail). The Company also ~~elected~~identified expenses that were unique and specific to COVID-19. The impairment charges and other expenses that resulted from the ~~package of practical expedients, which among other things, does not require reassessment of lease classification.~~

The Company adopted the New Lease Standard using the modified retrospective transition approach as of the effective date as permitted by the amendments in ASU 2018-11, "Targeted Improvements - Leases (Topic 842)." Under this method, the cumulative effect adjustment to the opening balance of retained earnings is recognized at the adoption date. As a result, the Company was not required to adjust its comparative period financial information for effects of COVID-19 are recorded as special charges within both operating and non-operating expenses during the ~~standard or make~~six months ended June 30, 2020. See the ~~new required lease disclosures~~table below for ~~periods before~~a summary of operating and non-operating special charges recorded by segment during the ~~date of adoption on January 1, 2019.~~three and six months ended June 30, 2020.

~~The Company's consolidated balance sheet was affected by this standard, but~~



(in thousands)	Airline		Sunseeker Resort⁽¹⁾		Other non-airline			Total
Three Months Ended June 30, 2020
Operating	$	75,902	$	5,452	$	(185	)	$	81,169
Non-operating	—		19,830		—			19,830
Total special charges	$	75,902	$	25,282	$	(185	)	$	100,999
Six Months Ended June 30, 2020
Operating	$	85,442	$	135,443	$	26,382		$	247,267
Non-operating	—		26,632		—			26,632
Total special charges	$	85,442	$	162,075	$	26,382		$	273,899

(1) $6.8 million in special charges for Sunseeker Resort, related to expense during the ~~consolidated statements of income and~~first quarter 2020, were reclassified from operating special expense to non-operating special expense for the Company's liquidity were not significantly impacted. The most significant change to the consolidated balance sheet upon adoption on January 1, 2019 relates to the recognition of new right-of-use (ROU) assets of $18.0 million and operating liabilities of $19.1 million. The Company's accounting for finance leases remains substantially unchanged.six months ended June 30, 2020

See ~~Note~~additional detail below for the $273.9 million total special charges (operating and non-operating) for the six months ended June 30, 2020:

$168.4 million in impairment charges


◦	Includes Airline - $5.0 million; Sunseeker Resort - $136.8 million; Other non-airline - $26.6 million

$58.6 million adjustment resulting from the accelerated retirements of 7 airframes and 5 ~~"Leases,"~~engines, loss on sale leaseback transaction of 4 aircraft, and write-offs of other aircraft related assets

$19.7 million adjustment for ~~more information.~~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


◦	Includes Airline - $19.3 million; Sunseeker Resort - $0.4 million

$19.8 million accrual on the expectation to terminate the loan agreement with Sixth Street Partners (formerly TSSP) intended to finance the development of Sunseeker Resorts Charlotte Harbor, expected to be 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

Note 23 — Revenue Recognition

Passenger Revenue

Passenger revenue is the most significant category in our reported operating revenues. Passenger revenue is primarily composed of scheduled service revenue (including passenger ticket sales and credit voucher breakage), revenue from ancillary air-related charges (including seat fees, baggage fees, and other travel-related services performed in conjunction with a passenger’s flight), as well as co-brand credit card point redemptions, as outlined below:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Scheduled service	$	200,233	$	202,796	$	672,690	$	677,061	$	48,680	$	237,685	$	245,941	$	472,456
Ancillary air-related charges	187,776		150,095		583,003		472,443		65,294		213,527		242,258		395,227
Co-brand redemptions	3,213		2,209		10,285		7,939		2,546		3,567		7,232		7,072
Total passenger revenue	$	391,222	$	355,100	$	1,265,978	$	1,157,443	$	116,520	$	454,779	$	495,431	$	874,755

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, 2020, approximately 38.8 percent of the air traffic liability balance was related to forward bookings, with the remaining 61.2 percent related to credit vouchers for future travel.

The normal contract term of passenger tickets is twelve months and revenue associated with future travel will principally be recognized within this time frame. During the ~~nine~~six months ended ~~September~~June 30, ~~2019, $210.1~~2020, $182.2 million was recognized into passenger revenue that was recorded in the air traffic liability balance of ~~$212.2~~$250.0 million at December 31, ~~2018.~~2019.

In April 2020, the Company announced that credits issued for canceled travel in April through the end of the COVID-19 pandemic will have an extended expiration date of two years from the original booking date. This change has been considered in estimating the future breakage rate, which represents the value of credit vouchers that are not expected to be redeemed prior to their contractual expiration date.

Co-brand redemptions

In relation to the travel component of the co-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 as of the dates indicated:


	Nine Months Ended September 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2020			2019
Balance at January 1	$	10,708		$	8,903		$	15,613		$	10,708
Points awarded (deferral of revenue)	14,308			10,872			10,962			8,827
Points redeemed (recognition of revenue)	(10,285		)	(7,939		)	(7,232		)	(7,072		)
Balance at September 30	$	14,731		$	11,836
Balance at June 30							$	19,343		$	12,463

As of ~~September~~June 30, 2020 and 2019, ~~and 2018, $10.6~~$12.4 million and ~~$8.1~~$9.8 million, respectively, of the current points liability is reflected in Accrued liabilities and represents ~~our~~the Company's current estimate of revenue to be recognized in the next twelve months based on historical trends, with the remaining balance reflected in other noncurrent liabilities expected to be recognized into revenue in periods thereafter. Given the inherent uncertainty of the current operating environment due to COVID-19, the Company will continue to monitor redemption patterns and may adjust its estimates in the future.

Note 34 — Property and Equipment

~~Property~~The following table summarizes the Company's property and ~~equipment:~~

equipment as of the dates indicated:


(in thousands)	As of September 30, 2019			As of December 31, 2018			June 30, 2020			December 31, 2019
Flight equipment, including pre-delivery deposits	$	2,168,557		$	1,905,157		$	2,312,146		$	2,289,157
Computer hardware and software	158,720			140,385			147,688			171,516
Land and buildings/leasehold improvements	86,163			85,925			82,071			98,885
Other property and equipment	142,198			89,778			81,571			161,760
Total property and equipment	2,555,638			2,221,245			2,623,476			2,721,318
Less accumulated depreciation and amortization	(452,823		)	(373,977		)	(547,028		)	(484,510		)
Property and equipment, net	$	2,102,815		$	1,847,268		$	2,076,448		$	2,236,808

Accrued capital expenditures as of ~~September~~June 30, 2020 and December 31, 2019 ~~and September 30, 2018~~ were ~~$6.1~~$22.1 million and ~~$3.8~~$16.5 million, respectively.

Note 45 — Long-Term Debt

The following table summarizes the Company's Long-term debt and finance lease ~~obligations:~~

obligations as of the dates indicated:


(in thousands)	As of September 30, 2019			As of December 31, 2018			June 30, 2020			December 31, 2019
Fixed-rate debt and finance lease obligations due through 2029⁽¹⁾	$	215,839		$	640,806		$	273,157		$	235,071
Variable-rate debt due through 2029	1,136,145			630,927			1,228,014			1,186,782
Total long-term debt and finance lease obligations, net of related costs	1,351,984			1,271,733			1,501,171			1,421,853
Less current maturities, net of related costs⁽¹⁾	138,685			152,287			227,732			173,274
Long-term debt and finance lease obligations, net of current maturities and related costs	$	1,213,299		$	1,119,446		$	1,273,439		$	1,248,579

Weighted average fixed-interest rate on debt	3.9		%	5.3		%	3.2		%	3.7		%
Weighted average variable-interest rate on debt	4.8		%	4.2		%	2.6		%	4.5		%

(1) As of December 31, 2018, $428.0 million of the Company's Unsecured Senior Notes were classified as long-term as management refinanced the borrowings on a long-term basis in February 2019, as discussed below.

Maturities of long-term debt and finance lease obligations for the remainder of ~~2019~~2020 and for the next four years and thereafter, in the aggregate, are: remaining in ~~2019 - $33.0 million;~~ 2020 - ~~$138.9~~$108.8 million; 2021 - ~~$133.4~~$189.6 million; 2022 - ~~$113.8~~$121.7 million; 2023 - ~~$100.9~~$108.8 million; 2024 - $643.0 million; and ~~$832.0~~$329.3 million thereafter.

~~Consolidated Variable Interest Entity~~CARES Act Payroll Support Program Loan

In ~~March 2019,~~April 2020 the Company ~~through a wholly owned subsidiary,~~ entered into ~~agreements~~a low-interest rate, senior unsecured term promissory note (the "PSP" Note") with ~~a trust to borrow $44.0 million secured by 1 aircraft.~~the Treasury under the CARES Act payroll support program loan. The ~~trust was funded on inception. These borrowings bear~~PSP Note will mature 10 years after issuance and bears interest at a ~~blended~~ rate of ~~3.8~~1.0 percent ~~payable in quarterly installments through April 2029,~~for the first five years, with interest at ~~which~~the secured overnight financing rate (SOFR) plus 2.0 percent thereafter. The PSP Note is prepayable at any time at par, without penalty.

During the second quarter 2020, the Company ~~will have a purchase option at a fixed amount. As this transaction~~received $16.4 million in funds under the PSP Note, which is ~~a common control transaction,~~recorded within noncurrent debt on the balance sheet.

In connection with the PSP Note, the Company is required to comply with the relevant provisions of the CARES Act, including those prohibiting the repurchase of common stock and the payment of common stock dividends until September 30, 2021, as well as those restricting the ~~primary beneficiary, has measured and recorded the assets and liabilities at their carrying values, which were $39.1 million and $44.0 million, respectively, at the time~~payment of ~~borrowing.~~certain executive compensation for periods through March 24, 2022.

Senior Secured Revolving Credit Facility

The Company has a senior secured revolving credit facility under which it is able to borrow up to $81.0 million. ~~There was 0 balance under this facility as of September 30, 2019.~~ The facility has a term of 24 months and the borrowing ability is based on the value of the Airbus A320 series aircraft placed in the collateral pool. In 2019 the Company drew down $81.0 million under this facility. Aircraft remain in the collateral pool for up to two years, and, as of ~~September~~June 30, ~~2019,~~2020, there were 48 aircraft in the collateral pool.

~~Secured Debt~~

~~In June 2019, the Company entered into an agreement to borrow $213.0 million secured by 23 aircraft.~~ The ~~borrowing bears interest at a floating rate based on LIBOR, and is payable in quarterly installments over five years. A portion of the proceeds was~~

~~used~~notes for the ~~prepayment of~~amounts borrowed under the ~~balance under 6 existing debt agreements and the repayment of the outstanding balance on the senior secured revolving credit facility.~~

~~During the second quarter 2019, the Company borrowed a total of $63.4 million under loan agreements secured by spare engines. The borrowings~~facility bear interest at a floating rate based on LIBOR and are due in March 2021.

Other Secured Debt

In April 2020, the Company borrowed $31.0 million under a loan agreement secured by 2 aircraft. The note bears interest at a fixed rate, payable in quarterly installments ~~with terms ranging from seven to ten~~over eight years.

Term Loan

In February 2019, the Company entered into a Credit and Guaranty Agreement (the “Term Loan”) to borrow $450.0 million, guaranteed by all of the Company's subsidiaries, excluding Sunseeker Resorts Inc. and its subsidiaries, and other insignificant subsidiaries (the "Term Loan Guarantors"). In February 2020 the Company entered into an amendment to the Term Loan under which the interest rate was reduced by 150 basis points, and the principal amount of the debt was increased by a net amount of $100.0 million to $545.5 million. Quarterly principal payments increased under the amendment, but the remaining provisions were substantially unchanged, including the maturity date. The Term Loan is secured by substantially all property and assets of the Company and the Term Loan Guarantors, excluding aircraft and aircraft engines, and excluding certain other assets. The Term Loan ~~has a five-year term,~~ bears interest based on LIBOR and provides for quarterly interest payments along with quarterly principal payments of ~~$1.1~~$1.4 million through February 2024, at which time the Term Loan is due. The Term Loan may be prepaid at any time without penalty.

~~In connection with the Term Loan, the Company conducted a tender offer for its 5.5 percent senior unsecured obligation, as outlined below.~~

~~General Unsecured Senior Notes~~

Until February 2019, the Company had outstanding $450.0 million aggregate principal amount of senior unsecured obligations (the "Notes") which bore interest at 5.5 percent per year and matured in July 2019.

In connection with the Term Loan discussed above, the Company completed a tender offer in February 2019, whereby it purchased $347.9 million of the Notes, and incurred related debt extinguishment costs of $3.7 million. The remaining $102.1 million of the Notes were paid at their maturity in July 2019.

Construction Loan Agreement

In March 2019, Sunseeker Florida, Inc. (“SFI”), a wholly-owned subsidiary of the Company, entered into a Construction Loan Agreement with certain lenders affiliated with TPG Sixth Street Partners, LLC (the “Lender”). Under the Construction Loan Agreement, SFI ~~may~~could borrow up to $175.0 million (the “Loan”) to fund the construction of Phase 1 of Sunseeker Resort -Charlotte ~~Harbor (the “Project”). NaN~~Harbor. As of June 30, 2020, 0 amount ~~has~~had been drawn under this agreement.

Due to the various impacts of COVID-19, the Company suspended construction of Sunseeker Resort, and it is uncertain when construction will resume. In light of these conditions, the Company negotiated a settlement agreement in principle with the Lender to terminate the Loan. As the settlement was probable and estimable, as determined during the second quarter 2020, $19.8 million related to the settlement was accrued as of ~~September~~June 30, ~~2019.~~

~~Under~~2020. The expense is reflected within non-operating special charges on the ~~Construction Loan Agreement,~~statement of income, and the ~~Lender~~related accrual is ~~to provide~~reflected within accrued liabilities on the ~~final $175.0 million~~balance sheet. The settlement is expected be paid in installments between the date the settlement is signed and the end of funding for the Project, with initial funding to come from the Company. The loan is secured by the Project and, for a period of time, the surrounding land owned by SFI. The Company has guaranteed one-third of the debt, has agreed to bear responsibility under a Non-Recourse Carve-Out Guaranty, and has agreed to guarantee completion of the Project in accordance with approved plans and specifications. All of the shares in SFI are also pledged to secure the loan. The Loan bears interest based on LIBOR and matures in March 2023.2020.

Note 56 — Income Taxes

The Company recorded a $53.3 million tax benefit (36.4 percent effective tax rate) compared to a $21.2 million tax provision (23.1 percent effective tax rate) for the three months ended June 30, 2020 and 2019, respectively. 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 allows the Company to carryback the 2020 net operating loss at the 35.0 percent rate applicable in earlier years.

The Company recorded a $151.0 million tax benefit (54.5 percent effective tax rate) compared to a $38.0 million tax provision (23.0 percent effective tax rate) for the six months ended June 30, 2020 and 2019, respectively. 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 the ability to carryback the 2020 net operating loss at a 35.0 percent rate applicable in earlier years. The effective tax rate was also impacted by the remeasurement of deferred taxes and state taxes.

Note 7 — Leases

The Company determines if an arrangement is a lease at inception and has lease agreements for office facilities, office equipment, certain airport and terminal facilities, and other space and assets. These commitments have remaining non-cancelable lease terms, with lease expirations which range from 2019 to 2036.

~~As a result of the New Lease Standard, certain real estate and property~~evaluates all operating leases and ~~various other operating leases have been~~they are measured on the balance sheet with a lease liability and right-of-use asset ~~("ROU"~~(“ROU”). Airport terminal leases mostly include variable lease payments outside of those based on a fixed index, and are therefore excluded from consideration. Accounting for finance leases is substantially unchanged.

at inception. ROU assets represent the ~~Company's~~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.



(in thousands)	Classification on the Balance Sheet	June 30, 2020		December 31, 2019
Assets
Operating lease assets⁽¹⁾	Operating lease right-of-use assets	$	99,819	$	22,081
Finance lease assets⁽²⁾	Property and equipment, net	108,407		111,665
Total lease assets		$	208,226	$	133,746

Liabilities
Current
Operating⁽¹⁾	Accrued liabilities	$	11,171	$	2,662
Finance⁽²⁾	Current maturities of long-term debt and finance lease obligations	7,836		7,666
Noncurrent
Operating⁽¹⁾	Other noncurrent liabilities	90,257		21,290
Finance⁽²⁾	Long-term debt and finance lease obligations	103,969		107,930
Total lease liabilities		$	213,233	$	139,548

(1) Represents assets and liabilities ~~are recognized~~of 7 aircraft, office facilities, office equipment, certain airport and terminal facilities, and other assets under operating lease

(2) Represents assets and liabilities of 5 aircraft under finance lease

Sale-Leaseback Transaction

In June 2020, the Company entered into a sale-leaseback transaction on 4 aircraft. The transaction qualified as a sale, and generated $48.0 million of proceeds. The aircraft were removed from the Company's balance sheet within property and equipment, resulting in a $30.2 million loss on sale. The loss is reflected within operating special charges on the statement of income since the Company would not likely have transacted absent cash conservation efforts as a result of COVID. The leased aircraft were subsequently recorded within operating lease ~~commencement date based on~~right-of-use assets, with the ~~present value of~~related lease payments over the lease term. The present value of lease payments is calculated using the incremental borrowing rate at lease commencement, which takes into consideration recent debt issuances as well asliabilities recorded within accrued liabilities and other ~~applicable market data available.~~

~~Lease terms include options to extend when it is reasonably certain that the option will be exercised. Leases with a term of twelve months or less are not recorded~~noncurrent liabilities on the balance sheet. ~~Additionally, lease and non-lease components are accounted for~~This transaction is treated as ~~a single lease component for real estate agreements.~~

~~In addition to operating leases, the Company had 5 aircraft under finance leases as of September 30, 2019, with remaining terms to 2029.~~

~~Lease Costs~~

~~The components of lease costs recognized~~an cash inflow from investing activities on the ~~statements~~statement of ~~income were as follows:~~

Three Months Ended Nine Months Ended
(in thousands) Classification on the Statements of Income September 30, 2019 September 30, 2019
Finance lease costs:
Amortization of assets Depreciation and amortization $ 1,629
$ 4,888
Interest on lease liabilities Interest expense 1,306
3,978
Operating lease cost Station operations; Maintenance and repairs; Other operating expense 897
2,634
Variable lease cost Station operations; Maintenance and repairs; Other operating expense 663
1,672
Total lease cost $ 4,495
$ 13,172

~~Lease position as of September 30, 2019~~

~~The table below presents the lease-related assets and liabilities recorded on the balance sheet.~~

As of
(in thousands) Classification on the Balance Sheet September 30, 2019
Assets
Operating lease assets Operating lease right-of-use assets, net $ 22,433
Finance lease assets Property and equipment, net 113,294
Total lease assets $ 135,727

Liabilities
Current
Operating Accrued liabilities $ 2,388
Finance Current maturities of long-term debt and finance lease obligations 7,582
Noncurrent
Operating Other noncurrent liabilities 21,744
Finance Long-term debt and finance lease obligations 109,878
Total lease liabilities $ 141,592

Weighted-average remaining lease term
Operating leases 9.4 years
Finance leases 10.1 years
Weighted-average discount rate
Operating leases 4.3 %
Finance leases 4.4 %

~~Other Information~~

~~The table below presents supplemental~~ cash ~~flow information related to leases during the three and nine months ended September 30, 2019.~~

Three Months Ended Nine Months Ended
(in thousands) September 30, 2019 September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases $ 725
$ 2,190
Operating cash flows for finance leases 1,306
3,978
Financing cash flows for finance leases 1,844
5,472

~~Maturities of Lease Liabilities~~

~~The table below indicates the future minimum payments of lease liabilities as of September 30, 2019.~~

(in thousands) Operating Leases Finance Leases
Remaining in 2019 $ 726
$ 3,150
2020 3,566
12,600
2021 3,382
12,600
2022 3,361
11,095
2023 3,213
10,500
Thereafter 15,317
103,459
Total lease payments 29,565
153,404
Less imputed interest (5,433 ) (35,944 )
Total lease obligations 24,132
117,460
Less current obligations (2,388 ) (7,582 )
Long-term lease obligations $ 21,744
$ 109,878

The Company adopted the New Lease Standard on January 1, 2019 as noted above, and as required, the following disclosure is provided for periods prior to adoption. Future annual minimum lease payments as of December 31, 2018 were as follows:

(in thousands) Operating Leases Finance Leases
2019 $ 8,102
$ 12,600
2020 6,031
12,600
2021 3,643
12,600
2022 1,630
11,095
2023 1,626
10,500
Thereafter 8,297
103,458
Total lease payments $ 29,329
162,853
Less imputed interest (39,922 )
Total lease obligations 122,931
Less current obligations (7,336 )
Long-term lease obligations $ 115,595

flows.

Note 68 — 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 uses~~utilizes the market approach ~~valuation technique~~ to ~~determine~~measure 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 using~~primarily 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, 2020.

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.

Financial instruments measured at fair value on a recurring basis:


	As of September 30, 2019						As of December 31, 2018						June 30, 2020						December 31, 2019
(in thousands)	Total		Level 1		Level 2		Total		Level 1		Level 2		Total		Level 1		Level 2		Total		Level 1		Level 2
Cash equivalents
Money market funds	$	65,014	$	65,014	$	—	$	43,281	$	43,281	$	—	$	107,066	$	107,066	$	—	$	42,653	$	42,653	$	—
Municipal debt securities													32,575		—		32,575		1,202		—		1,202
Commercial paper	5,731		—		5,731		29,138		—		29,138		30,351		—		30,351		5,807		—		5,807
Federal agency debt securities													7,909		—		7,909		—		—		—
Total cash equivalents													177,901		107,066		70,835		49,662		42,653		7,009
Short-term
Commercial paper													208,194		—		208,194		161,286		—		161,286
Corporate debt securities													128,344		—		128,344		145,975		—		145,975
Municipal debt securities	4,087		—		4,087		—		—		—		36,892		—		36,892		12,237		—		12,237
Federal agency debt securities	124		—		124		—		—		—		14,375		—		14,375		13,515		—		13,515
US Treasury bonds	—		—		—		1,415		—		1,415
Total cash equivalents	74,956		65,014		9,942		73,834		43,281		30,553
Short-term
Corporate debt securities	149,854		—		149,854		101,489		—		101,489
Commercial paper	142,656		—		142,656		180,846		—		180,846
Federal agency debt securities	11,510		—		11,510		11,887		—		11,887
Municipal debt securities	7,785		—		7,785		14,252		—		14,252
US Treasury bonds	3,017		—		3,017		5,990		—		5,990		3,059		—		3,059		2,915		—		2,915
Total short-term	314,822		—		314,822		314,464		—		314,464		390,864		—		390,864		335,928		—		335,928
Long-term
Corporate debt securities	35,996		—		35,996		37,334		—		37,334		—		—		—		15,396		—		15,396
US Treasury bonds	3,061		—		3,061		2,901		—		2,901		—		—		—		146		—		146
Federal agency debt securities	—		—		—		11,291		—		11,291
Total long-term	39,057		—		39,057		51,526		—		51,526		—		—		—		15,542		—		15,542
Total financial instruments	$	428,835	$	65,014	$	363,821	$	439,824	$	43,281	$	396,543	$	568,765	$	107,066	$	461,699	$	401,132	$	42,653	$	358,479

~~The fair value~~None of the ~~Company’s~~Company's debt is publicly held long-term debt was determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets; therefore, the Company categorized its publicly held debtand as ~~Level 2. The Company's remaining debt is not publicly held, and~~a result, the Company has determined the estimated fair value of these notes to be Level ~~3, as certain~~3. Certain inputs used to determine ~~the~~ fair value 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, are as follows:


	As of September 30, 2019				As of December 31, 2018					June 30, 2020				December 31, 2019
(in thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Hierarchy Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Hierarchy Level
Non-publicly held debt	$	1,259,130	$	1,053,911	$	703,372	$	619,379	3	$	1,411,188	$	1,294,748	$	1,329,882	$	1,140,232	3
Publicly held debt	—		—		450,463		451,026		2
Total long-term debt	$	1,259,130	$	1,053,911	$	1,153,835	$	1,070,405

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

Note 79 — 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 (loss) 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.


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 ~~nine~~six months ended ~~September~~June 30, 2019, ~~and 2018,~~ respectively, 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 September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Basic:
Net income	$	43,929		$	15,147		$	171,596		$	120,356
Less net income allocated to participating securities	(578		)	(194		)	(2,441		)	(1,602		)
Net income attributable to common stock	$	43,351		$	14,953		$	169,155		$	118,754
Earnings per share, basic	$	2.70		$	0.94		$	10.55		$	7.46
Net income (loss)													$	(93,103	)	$	70,543		$	(126,113	)	$	127,667
Less income allocated to participating securities													—			(997		)	(236		)	(1,791		)
Net income (loss) attributable to common stock													$	(93,103	)	$	69,546		$	(126,349	)	$	125,876
Earnings (loss) per share, basic													$	(5.85	)	$	4.33		$	(7.93	)	$	7.85
Weighted-average shares outstanding	16,037			15,957			16,037			15,929			15,902			16,063			15,927			16,037
Diluted:
Net income	$	43,929		$	15,147		$	171,596		$	120,356
Less net income allocated to participating securities	(578		)	(194		)	(2,440		)	(1,601		)
Net income attributable to common stock	$	43,351		$	14,953		$	169,156		$	118,755
Earnings per share, diluted	$	2.70		$	0.94		$	10.54		$	7.45
Net income (loss)													$	(93,103	)	$	70,543		$	(126,113	)	$	127,667
Less income allocated to participating securities													—			(996		)	(236		)	(1,790		)
Net income (loss) attributable to common stock													$	(93,103	)	$	69,547		$	(126,349	)	$	125,877
Earnings (loss) per share, diluted													$	(5.85	)	$	4.33		$	(7.93	)	$	7.84
Weighted-average shares outstanding	16,037			15,957			16,037			15,929			15,902			16,063			15,927			16,037
Dilutive effect of stock options and restricted stock	56			35			45			42			26			39			56			39
Adjusted weighted-average shares outstanding under treasury stock method	16,093			15,992			16,082			15,971			15,928			16,102			15,983			16,076
Participating securities excluded under two-class method	(54		)	(30		)	(37		)	(33		)	(26		)	(33		)	(56		)	(26		)
Adjusted weighted-average shares outstanding under two-class method	16,039			15,962			16,045			15,938			15,902			16,069			15,927			16,050

Note 810 — Commitments and Contingencies

As of ~~September~~June 30, ~~2019,~~2020, the Company had ~~firm~~ commitments to purchase 148 Airbus A320 ~~series aircraft.~~aircraft as well as purchase agreements for 4 spare engines.

The Company's contractual purchase commitments consist primarily of aircraft and engine acquisitions. The total future commitments are as follows:


(in thousands)	As of September 30, 2019		June 30, 2020
Remaining in 2019	$	53,400
2020	157,900
Remaining in 2020			$	126,141
2021	37,900		37,900
2022	21,000		21,000
Total commitments	$	270,200	$	185,041

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.

Note 911 — Segments

Operating segments are components of a company for which separate financial and operating information is regularly evaluated and reported to the Chief Operating Decision Maker ("CODM"), and is used to allocate resources and analyze performance. The Company's CODM is the executive leadership team, which reviews information about the Company's 3 operating segments: the Airline, Sunseeker Resort, and other non-airline.

Airline Segment

The Airline segment operates as a single business unit and includes all scheduled service air transportation, ancillary air-related products and services, third party products and services, fixed fee contract air transportation and other airline-related revenue. The CODM evaluation includes, but is not limited to, route and flight profitability data, ancillary and third party product and

service offering statistics, and fixed fee contract information when making resource allocation decisions with the goal of optimizing consolidated financial results.

Sunseeker Resort Segment

The Sunseeker Resort segment represents activity related to the development and construction of Sunseeker Resort in Southwest Florida, as well as the operation of Kingsway ~~golf course. Plans for~~Golf Course. Due to the ~~resort include a 500-room hotel and two towers offering an estimated 180 one, two and three bedroom suites, bar and restaurant options, and other amenities. The golf course is a short drive from~~various impacts of COVID-19, the ~~resort site and is considered, from a planning and strategic perspective, to be an additional resort amenity. The~~Company suspended construction of Sunseeker Resort ~~is an extension~~and temporarily closed operation of ~~the Company's leisure travel focus and~~Kingsway Golf Course. At this time, it is ~~expected that many customers flying to Southwest Florida on Allegiant~~uncertain when construction will ~~elect to stay at this resort~~resume and ~~enjoy its amenities.~~when the golf course will re-open.

Other non-Airline Segment

The other non-airline segment includes the Teesnap golf course management solution and Allegiant Nonstop family entertainment centers. Allegiant Nonstop family entertainment centers are comprised of games, attractions, and food facilities.

Due to the impacts of COVID-19, the Company temporarily closed the Allegiant Nonstop location in Warren, MI, and permanently closed the Allegiant Nonstop location in Clearfield, Utah. The Company also permanently discontinued all activity for the Allegiant Nonstop location in West Jordan, Utah, which was being developed.

In July 2019, management began evaluating strategic alternatives for Teesnap, and its business-to-business software as a service offering. As the Company's current strategy has a business to customer focus, rather than business to business, management determined that the best course of action for both entities would be to sell Teesnap. Management expects the sale to be finalized before the end of the second quarter 2020. The carrying value of the disposal group expected to be transferred in the sale is approximately $5.5 million as of September 30, 2019.

Selected information for the Company's segments and the reconciliation to the consolidated financial statement amounts are as follows:


(in thousands)	Airline		Sunseeker Resort			Other non- airline			Consolidated		Airline			Sunseeker Resort			Other non- airline			Consolidated
Three Months Ended September 30, 2019
Three Months Ended June 30, 2020
Operating revenue:
Passenger	$	391,222	$	—		$	—		$	391,222	$	116,520		$	—		$	—		$	116,520
Third party products	18,207		—			—			18,207		8,443			—			—			8,443
Fixed fee contract	19,797		—			—			19,797		3,237			—			—			3,237
Other	1,648		251			5,384			7,283		809			32			4,306			5,147
Operating income (loss)	77,335		(1,281		)	(3,938		)	72,116
Operating income (loss) ⁽¹⁾											(105,389		)	(7,689		)	(174		)	(113,252		)
Interest expense, net	14,761		507			—			15,268		12,651			(15		)	—			12,636
Depreciation and amortization	38,409		329			698			39,436		43,240			56			—			43,296
Capital expenditures	98,308		16,931			479			115,718		11,845			—			—			11,845
Three Months Ended September 30, 2018
Three Months Ended June 30, 2019
Operating revenue:
Passenger	$	355,100	$	—		$	—		$	355,100	$	454,779		$	—		$	—		$	454,779
Third party products	15,921		—			—			15,921		18,208			—			—			18,208
Fixed fee contract	14,791		—			—			14,791		12,487			—			—			12,487
Other	4,611		94			2,592			7,297		1,299			373			4,613			6,285
Operating income (loss)	29,727		(1,136		)	(2,410		)	26,181		115,546			(1,695		)	(5,746		)	108,105
Interest expense, net	11,884		—			—			11,884		15,924			478			—			16,402
Depreciation and amortization	34,138		47			473			34,658		36,890			326			1,278			38,494
Capital expenditures	74,799		8,197			3,547			86,543		98,128			11,296			2,494			111,918

(in thousands)	Airline		Sunseeker Resort			Other non- airline			Consolidated		Airline			Sunseeker Resort			Other non- airline			Consolidated
Nine Months Ended September 30, 2019
Six Months Ended June 30, 2020
Operating revenue:
Passenger											$	495,431		$	—		$	—		$	495,431
Third party products											24,419			—			—			24,419
Fixed fee contract											12,156			—			—			12,156
Other											1,685			653			8,184			10,522
Operating income (loss) ⁽²⁾											(54,269		)	(140,122		)	(29,864		)	(224,255		)
Interest expense, net											23,850			561			—			24,411
Depreciation and amortization											85,691			532			772			86,995
Capital expenditures											130,744			45,160			442			176,346
Six Months Ended June 30, 2019
Operating revenue:
Passenger	$	1,265,978	$	—		$	—		$	1,265,978	$	874,755		$	—		$	—		$	874,755
Third party products	53,557		—			—			53,557		35,350			—			—			35,350
Fixed fee contract	42,859		—			—			42,859		23,061			—			—			23,061
Other	3,578		1,526			12,394			17,498		1,930			1,275			7,010			10,215
Operating income (loss)	291,371		(4,199		)	(15,874		)	271,298		214,035			(2,917		)	(11,937		)	199,181
Interest expense, net	43,906		1,143			—			45,049		29,145			636			—			29,781
Depreciation and amortization	110,528		811			2,773			114,112		72,119			482			2,075			74,676
Capital expenditures	305,356		33,502			11,329			350,187		207,048			16,571			10,850			234,469
Nine Months Ended September 30, 2018
Operating revenue:
Passenger	$	1,157,443	$	—		$	—		$	1,157,443
Third party products	44,045		—			—			44,045
Fixed fee contract	33,000		—			—			33,000
Other	14,808		94			5,943			20,845
Operating income (loss)	187,731		(1,582		)	(5,778		)	180,371
Interest expense, net	33,929		—			—			33,929
Depreciation and amortization	91,309		64			1,268			92,641
Capital expenditures	240,733		25,541			7,725			273,999

(1) For the three months ended June 30, 2020, Operating loss was impacted by special charges of: $75.9 million for the Airline; $5.5 million for Sunseeker Resort; and a $0.2 million gain for Other non-airline.

(2) For the six months ended June 30, 2020, Operating loss was impacted by special charges of: $85.4 million for the Airline; $135.4 million for Sunseeker Resort; and $26.4 million for Other non-airline.

Total assets were as follows as of the dates indicated:


(in thousands)	September 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Airline	$	2,689,869	$	2,422,523	$	3,221,917	$	2,830,236
Sunseeker Resort	104,283		56,047		35,159		133,362
Other non-airline	40,328		20,098		15,893		47,205
Consolidated	$	2,834,480	$	2,498,668	$	3,272,969	$	3,010,803

Note 12 — Impairment

Accounting Standards Codification (ASC) 360 - Property, Plant, and Equipment (ASC 360) requires long-lived assets to be assessed for impairment when events and circumstances indicate that the assets may be impaired.

As described in Note 2, in the first six months of 2020, the Company's operations and liquidity were significantly impacted by decreased passenger demand and U.S. government travel restrictions and quarantine requirements due to COVID-19. As a result of these events and circumstances, the Company performed impairment tests on its long-lived assets in connection with the preparation of its financial statements.

In accordance with ASC 360, an impairment of a long-lived asset or group of long-lived assets exists only when the sum of the estimated undiscounted future cash flows expected to be generated directly by the assets are less than the carrying value of the assets. Assets were grouped by operating segment when estimating future cash flows, and further grouped within each segment as applicable. Estimates of future cash flows were generally based on historical results, and management's best estimate of future market and operating conditions.

Airline Segment

Long-lived assets for the Airline segment consist primarily of owned and leased flight and ground equipment. To test the recoverability of the Company's airline operating fleet, undiscounted future cash flows for each aircraft under the Company's current expected operating fleet plan were assessed and it was determined that there was 0 impairment as of June 30, 2020. As the Company obtains greater clarity about the duration and extent of reduced demand and potentially executes further capacity adjustments, the Company will continue to evaluate its current fleet compared to network requirements and may decide to permanently retire additional aircraft.

The Airline has an equity investment in a technology company. A $5.0 million charge was recorded to impair the investment as of June 30, 2020, to reflect management's best estimate of the fair value of this investment based on recent market trends.

Sunseeker Resort Segment

Long-lived assets for Sunseeker Resort and related Kingsway Golf Course consist primarily of the land, construction in process, building, and other various equipment. As a result of the impairment tests performed, the Company determined the sum of the undiscounted cash flows was less than the long-lived assets' carrying value. A $136.8 million impairment charge was recorded in the first quarter 2020 to reflect the difference between the carrying values of these assets and their fair values. Fair value reflects management's best estimate,including valuation inputs from third parties and recent market transactions. Based on an evaluation of impairment indicators in the second quarter 2020, 0 additional impairment was recognized.

Other non-Airline Segment

Long-lived assets for Allegiant Nonstop family entertainment centers consist primarily of leasehold improvements, arcade games, various equipment, and ROU assets. As a result of the impairment tests performed, the Company determined the sum of the undiscounted cash flows were less than the long-lived assets' carrying value. An $18.3 million impairment charge was recorded in the first quarter 2020 to reflect the difference between the carrying values of these assets and their fair values. Fair value reflects management's best estimate,including valuation inputs from third parties and recent market trends. Based on an evaluation of impairment indicators in the second quarter 2020, 0 additional impairment was recognized.

Long-lived assets for Teesnap consist primarily of capitalized software and computer equipment. As a result of the impairment tests performed, the Company determined the sum of the undiscounted cash flows was less than the long-lived assets' carrying value. Management does not expect to recover any of the book value of the assets through operations, and an $8.3 million impairment charge was recorded in the first quarter 2020 to write down all long-lived assets to a net book value of 0. This reflects management's best estimate of the fair value of these assets based on recent market trends.

Note 13 — Subsequent Events

In July 2020, the Company received the fourth and final installment of funds under the Payroll Support Program Agreement (the "PSPA") with the Treasury under the CARES Act. The fourth installment totaled $17.2 million. The proceeds must be used exclusively for wages, salaries and benefits.

In consideration for the fourth installment of the grant, the PSP Note was increased by $5.2 million. See Note 5 for a description of the PSP Note.

Also in consideration for the fourth installment of the grant, the Company issued additional PSP Warrants to the Treasury to acquire 6,189 shares of common stock of the Company at a price of $83.33 per share (based on the closing price of the Company’s common stock on The Nasdaq Global Select Market on April 9, 2020). The PSP Warrants issued in July 2020 are valued at $0.3 million. See Note 2 for a description of the PSP Warrants.

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 ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019. Also discussed is our financial position as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019. 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, ~~2018.~~2019. 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.

~~Third Quarter 2019 Review~~

~~Highlights:~~


–	~~Achieved 17.9 percent airline operating margin, which represents a 10.3 percentage point increase year over year;~~


–	~~recognized our third consecutive quarter of ancillary air-related revenue per passenger exceeding $50, with a total of $50.03 this quarter;~~


–	~~recognized a 33.8 percent increase in fixed fee revenue quarter over quarter, which resulted in the highest quarterly fixed fee revenue in company history;~~


–	~~achieved third party products revenue per passenger of $4.85, the highest third quarter revenue since 2013;~~


–	~~achieved a total fare increase of 1.8 percent year over year despite a 5.8 percent increase in scheduled service capacity;~~


–	~~produced a 5.6 percent decrease in airline operating CASM excluding fuel;~~


–	~~ranked number two by Forbes in list of best airlines to fly this fall and received recognition from the USA Today Reader's Choice Award for having the best airline co-branded credit card;~~


–	~~achieved industry leading controllable completion of more than 99.9% during the quarter;~~


–	~~improved controllable A14 performance (flight arrival within 14 minutes of scheduled arrival) by 4.5 percentage points compared to 2018; and~~


–	~~scheduled 22 new routes which are planned to begin service in November 2019.~~

~~AIRCRAFT~~

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

September 30, 2019 December 31, 2018 September 30, 2018
A319 37
32
31
A320 ⁽¹⁾
52
44
43
MD-80 —
—
19
Total 89
76
93

~~(1) Does not include four aircraft of which we have taken delivery, but were not yet in service as of September 30, 2019.~~

As of September 30, 2019, we had firm commitments to purchase 14 aircraft and have signed an agreement to take delivery of four additional aircraft through operating leases. We expect delivery of seven of these aircraft in 2019 and the remaining aircraft in 2020 through 2022. We continually consider aircraft acquisitions on an opportunistic basis.

~~Fleet Plan~~

~~The below table indicates the number of aircraft expected to be in service as of the dates indicated, based on currently scheduled additions to our operating fleet.~~



	~~As of December 31, 2019~~
~~A319~~	38
~~A320~~	55
~~Total~~	93

NETWORK

As of ~~September~~June 30, ~~2019,~~2020, we were selling ~~466~~519 routes versus ~~421~~459 as of the same date last year, which represents a ~~10.7~~13.1 percent increase. Our total number of origination cities and leisure destinations (for operating routes) were 9497 and ~~26,~~28, respectively, as of ~~September~~June 30, ~~2019. Based on our~~2020.

Given the fluidity of the current environment amid the effects of COVID-19, we made significant capacity reductions for the third quarter.

Our unique model is predicated around expanding and contracting capacity to meet seasonal travel demands. We are currently ~~published schedule through May 2020,~~leveraging this core strength, just at a much more significant contracting level than normal seasonal demand changes would dictate. We are maintaining a broad network and ~~service announcements and cancellations by other airlines as of September 30, 2019,~~selling presence. We consistently monitor flights to assess for cash profitability. Additionally, we will ~~have direct competition (which we consider to be similar non-stop~~provide any essential air service ~~between markets) on approximately 101 routes~~ as directed by the U.S. Department of ~~that date.~~

~~As of~~Transportation, in connection with our Payroll Support agreement under the ~~date of this filing, service is scheduled on 22 new routes beginning in fourth quarter 2019, including service into West Palm Beach, FL, which we are welcoming back to the Allegiant network.~~

CARES Act.

TRENDS

The ~~transition~~COVID-19 pandemic and shelter-in-place directives have greatly impacted our operating results for the first half of 2020 and will continue to ~~an all-Airbus fleet continues~~do so into the future. Air traffic demand is down precipitously, and air fares are down as well. We cannot predict when air travel will begin to ~~produce positive operating results. Despite having an average~~pick up to customary levels or at what pace. In the meantime, our revenues will be adversely affected. Although there were incremental demand increases during portions of ~~eight fewer aircraft in service during~~ the ~~third~~second quarter 2019 compared to 2018, scheduled service ASMs increased 5.8 percent on an 8.1 percent increase in departures, and scheduled service passengers increased 8.4 percent. We accomplished the increased capacity by increasing aircraft utilization (block hours per aircraft) by 15.6 percent compared to the third quarter 2018. The increase in utilization was enabled by the younger and more reliable all-Airbus fleet. Despite the capacity increase, we were able to achieve a 1.8 percent increase in average total fare year over year.

We grew airline operating margin by 10.3 percentage points, to 17.9 percent in the third quarter 2019. This was partly due to a 3.6 percent increase in fuel efficiency (ASMs per gallon of fuel), coupled with a 10.4 percent decrease in average per gallon fuel cost. The margin improvement was also attributable to a 5.6 percent decrease in total airline unit cost excluding fuel, driven by continued improvement in operations, lower maintenance expense, and lower irregular operations costs.

Margin improvement was also bolstered by increases in revenue. 28.2 percent of our scheduled ASMs were on off-peak days in the third quarter 2019 (generally Tuesdays, Wednesdays and Saturdays) compared to 26.7 percent in the same quarter last year, and we still achieved2020, an increase in ~~total unit revenue~~reported COVID-19 cases in various parts of ~~4.3 percent. Although off-peak flying~~the country towards the end of the quarter caused another decline in bookings. We believe that demand in the forseeable future will continue to fluctuate in response to fluctuations in COVID-19 cases, hospitalizations, deaths, treatment efficacy and the availability of a vaccine.

The impacts of the pandemic have resulted in a reduction in our flight schedule. It is likely that reduced schedules will continue into the future. We are closely monitoring bookings and making decisions on schedule changes as necessary based on demand.

Though we cannot control the current demand environment, our primary focus at the current time has ~~contributed~~been to ~~our margin improvement, our operating strategy remains unchanged~~conserve cash, and we have taken immediate and extensive measures to reduce ~~flying when~~daily cash burn. We have reduced management and support teams by 220 positions. We have suspended payment of cash dividends and stock buybacks. We have suspended construction of the Sunseeker Resort in Southwest Florida as well as spend on our other non-airline subsidiaries. We have reduced airline capital expenditures for this year and into the future. We have eliminated other nonessential expenditures and are renegotiating our arrangements with outside vendors, all in an effort to conserve cash until revenues recover.

These efforts have enabled us to reduce average cash burn to under $1.0 million per day during the second quarter. We will continue to focus on conserving cash, along with managing capacity to meet demand, ~~is low. We were able to profitably decrease flight hours this September by over 48 percent when compared to~~a core strength of our ~~busiest months in 2019.~~business model.

RESPONSES TO THE COVID-19 PANDEMIC

~~Additionally,~~

Beginning in March and continuing throughout the second quarter 2020, we have ~~led~~taken many actions to mitigate the effects of COVID-19 on its business, as outlined below:

Network and Customer Experience

Reduced second quarter capacity by 50.1 percent

Continually evaluating forward schedules to adjust capacity according to demand trends

Waived change and cancellation fees for all customers

Extended expiry on credit vouchers to two years

Offered opt-in option in the booking path for customers to receive notification that their flight has reached 65.0 percent capacity with option to re-book on another flight with no fee or ~~tied for~~receive a refund

Cash Outlay Reduction

Suspended all stock buybacks and dividends

Executives temporarily reduced salaries by 50 percent and Board members are foregoing cash compensation

Enacted a hiring freeze and offered voluntary leaves

Reduced management and support teams by 220 positions (employees will be paid through September 30, 2020, in compliance with the ~~U.S. domestic airline industry lead~~CARES Act)

Suspended nearly all contractor positions, subscriptions, non-essential training and travel

Suspended all non-essential capital expenditures including, but not limited to, Sunseeker Resorts, Teesnap and Allegiant Nonstop family entertainment centers

Liquidity Response

Implemented immediate and meaningful cash burn reductions

Closed financing of $31.0 million in ~~completion factor for 18~~April 2020, secured by two aircraft

Received proceeds of $48.0 million in June through a sale-leaseback transaction on four aircraft

As of July 31, 2020, we had 24 unencumbered aircraft and 10 unencumbered spare engines


•	In April 2020, signed payroll support program agreement ("PSPA") with the Treasury to total $171.9 million comprised of direct grants, a $21.6 million low-interest 10-year loan, and warrants to purchase 25,889 shares of the Company's common stock


–	Received $154.7 million under the PSPA during the second quarter 2020 - includes direct grants, a $16.4 million loan, and warrants to purchase 19,700 shares of the Company's common stock


–	The remaining $17.2 million of funds were received in July 2020 - includes direct grants, a $5.2 million addition to the loan, and warrants to purchase 6,189 shares of the Company's common stock

Received $45.6 million of tax refunds in May 2020 related to 2018 and 2019 net operating loss carrybacks due to the change in loss carryback period under the CARES Act


–	Additional $48.7 million of tax refunds received during July


–	Expect a sizable federal income tax refund related to 2020 net operating losses

Eligible to access up to $276.0 million through a loan under the Loan Program of the ~~past 21 months since~~CARES Act by the ~~beginning~~end of ~~2018. During~~September 2020

Deferring payment of the ~~first~~employer portion of Social Security taxes, as permitted under the CARES Act, to provide additional liquidity - $4.3 million in Social Security taxes deferred as of June 30, 2020 (half to be paid by December 31, 2021 and the other half to be paid by December 31, 2022)

Health and Safety

Amid various uncertainties and public concern during the COVID-19 pandemic, we have implemented the following measures to ensure health and safety for all traveling on our flights:

Maintain a comprehensive cleaning program for all aircraft that includes a regular schedule of standard and deep-clean procedures that exceed both CDC and Airbus guidance

Aircraft receive regular treatment with an advanced antimicrobial protectant that kills viruses, germs and bacteria on contact for 14 days

Utilize VOC (volatile organic compound) filters on board every aircraft, which remove additional organic compounds and ensure that cabin air is changed, on average, every three ~~quarters~~minutes, exceeding HEPA standards

Effective July 2, 2020, require customers to wear face coverings through all phases of ~~2019, we had~~travel, including at the ticket counter, in the gate area and during flight


•	Complimentary health and safety kits,which include a single-use face mask, a pair of non-latex disposable gloves and cleaning wipes, provided to all of our customers

Crew members required to wear face masks on board and during any interaction with customers

Social distancing principles at check-in, boarding and on-board, including limiting adjacent row seating and allowing only ~~eleven days affected by maintenance cancellations, and achieved a 99.97 controllable completion percentage.~~customers on the same itinerary to utilize middle seats as practicable


•	Treat hard surfaces in all office areas, including airport station offices, maintenance facilities, headquarters/administrative offices, withantimicrobial disinfectant/protectant, and utilize wall-mounted and handheld thermometers for employee and crew member temperature checks

Partner with Quest Diagnostics to provide at home COVID-19 test kits to employees in the event local testing is not immediately available

RESULTS OF OPERATIONS

Comparison of three months ended ~~September~~June 30, ~~2019~~2020 to three months ended ~~September~~June 30, ~~2018~~2019

Operating Revenue

Passenger revenue. For the ~~third~~second quarter ~~2019,~~2020, passenger revenue ~~increased 10.2~~decreased 74.4 percent compared to ~~third~~second quarter ~~2018.~~2019. The ~~increase~~decrease was driven primarily by ~~an 8.1~~a 50.3 percent ~~increase~~decrease in scheduled service departures which ~~along with a slight increase in load factor,~~ resulted in ~~an 8.4~~a 69.4 percent ~~increase~~decrease in scheduled service passengers. ~~A 15.4~~These declines are largely due to a dramatic decline in passenger demand and government travel restrictions and quarantine requirements during the second quarter 2020, related to COVID-19. Average passenger fare (includes scheduled service and air ancillary) decreased 16.4 percent ~~increase in air-related ancillary average fare more than offset an 8.5~~overall year over year, driven mainly by a 30.7 percent decrease in scheduled service average ~~fare. Increases~~fare as fares were reduced in ~~the customer convenience fee and baggage fees contributed~~an effort to ~~the increase in air-related ancillary unit revenue to $50.03 per passenger.~~stimulate demand.

Third party products revenue. Third party products revenue for the ~~third~~second quarter ~~2019 increased 14.4~~2020 decreased 53.6 percent, compared to the same period in ~~2018.~~2019. This is primarily ~~the~~due to decreased net revenue from both rental cars and hotels, as a result of ~~increased~~substantially fewer passengers. This decline was partially offset by an overall increase in third-party revenue from our co-branded credit card program ~~as well as an increase in net revenue from both rental cars and hotels.~~during the second quarter of 2020 compared to 2019.

Fixed fee contract revenue. Fixed fee contract revenue for the ~~third~~second quarter ~~2019 increased 33.8~~2020 decreased 74.1 percent when compared to ~~2018,~~2019, primarily due to a 53.0 percent decrease in related departures. The decrease in departures is mostly due to increased flying for the Department of Defense. This increase was the result of greater availability of spare aircraft due to improved operations and an all-Airbus fleet. The grounding of the Boeing 737 Max of other airlines likely also contributed to our increaseda significant drop in fixed fee flying for Apple Vacations in the second quarter 2020 and fewer ad hoc charter opportunities, ~~during the quarter.~~all due to COVID-19.

Other revenue. Other revenue ~~remained relatively flat year over year, with a decrease of less than one~~decreased 18.1 percent for the ~~third~~second quarter ~~2019~~2020 from ~~2018.~~2019. The ~~slight decline is~~decrease was due to decreased activity in the ~~conclusion~~non-airline segments, especially for Kingsway Golf Course and our family entertainment centers. As a result of the COVID-19 pandemic, we have temporarily closed our family entertainment center in Warren, Michigan and permanently discontinued all activity for our locations in Utah. We also temporarily closed Kingsway Golf Course, initially for renovation but now the renovation has been delayed as a result of our aircraft lease revenue arrangement with a European carrier, as we had six aircraft on lease during the third quarter of 2018 and none during 2019. This was mostly offset by an increase in revenue from our non-airline activities.cash conservation efforts.

Operating Expenses

We primarily evaluate our expense management by comparing our costs per ASM across different periods, which enables us to assess trends in each expense category. The following table presents airline-only unit costs on a per ASM basis, or CASM, for the indicated periods. Excluding fuel on a per 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 September 30,		Percent		Three Months Ended June 30,			Percent
	2019	2018	Change
Airline unitized costs (in cents)
Airline only unitized costs (in cents)					2020		2019	Change
Salary and benefits	2.66	2.64	0.8	%	4.16		2.46	69.1	%
Station operations	1.12	1.18	(5.1	)	1.23		1.03	19.4
Depreciation and amortization	0.99	0.94	5.3		1.95		0.83	134.9
Maintenance and repairs	0.64	0.88	(27.3	)	0.59		0.47	25.5
Sales and marketing	0.45	0.46	(2.2	)	0.40		0.45	(11.1	)
Aircraft lease rentals					0.06		—	NM
Other	0.54	0.68	(20.6	)	0.87		0.41	112.2
Airline CASM, excluding fuel	6.40	6.78	(5.6	)
CARES Act grant recognition					(3.36	)	—	NM
Operating Special charges					3.42		—	NM
Airline CASM, excluding fuel⁽¹⁾					9.32		5.65	65.0
Aircraft fuel	2.69	3.12	(13.8	)	1.23		2.70	(54.4	)
Airline CASM	9.09	9.90	(8.2	)	10.55		8.35	26.3

Airline CASM	9.09	9.90	(8.2	)
Non-airline operating CASM*	0.28	0.17	64.7
Operating CASM (consolidated)*	9.37	10.07	(7.0	)

*Includes operating costs associated with Sunseeker Resort and other non-airline related activity. Various components of this measure do notNM - Not meaningful

(1) Although we believe we have a ~~direct correlation~~relatively large proportion of variable expenses, our Airline CASM-ex fuel increased precipitously during the quarter as our fixed costs were spread over a significantly reduced number of ASMs due to ~~ASMs but must be included to calculate total operating CASM. Consolidated operating CASM is reported to facilitate comparison with airlines reporting total costs on a per ASM basis.~~schedule reductions resulting from COVID-19.

Salary and benefits expense. Salary and benefits expense ~~increased $9.9~~decreased $18.8 million, or ~~10.1~~16.6 percent, for the ~~third~~second quarter ~~2019~~2020 when compared to the same period in ~~2018. The increase is largely due to an 11.3 percent increase in~~2019. Although the average number of full-time equivalent employees ~~supporting a 5.9~~increased 4.1 percent ~~increase in system block hours, and increased activity in our non-airline subsidiary activity. Flight crew salaries and wages per ASM~~year over year, overall expense decreased ~~for the quarter,~~ due to ~~improved productivity efficiencies gained from our transition~~temporary voluntary leave programs offered to ~~an all-Airbus fleet.~~employees, voluntary pay reductions, and suspension of the bonus accrual during the second quarter 2020.

Aircraft fuel expense. Aircraft fuel expense decreased ~~$8.9~~$92.6 million, or ~~7.9~~77.2 percent, for the ~~third~~second quarter 2020 compared to second quarter 2019, ~~compared~~partly due to ~~third quarter 2018, as~~a decrease in system average fuel cost per gallon ~~decreased 10.4~~of 50.0 percent year over ~~year.~~year as fuel prices declined due to lower worldwide demand caused by the pandemic. System fuel gallons consumed ~~increased~~decreased by ~~3.0~~54.4 percent on a ~~6.7~~50.1 percent ~~increase~~decrease in ~~ASMs. ASM growth outpaced fuel consumption~~ASMs as ~~fuel~~we reduced capacity in light of the pandemic. Fuel efficiency (measured as ASMs per gallon) increased ~~3.6~~9.4 percent ~~quarter~~year over ~~quarter,~~year due to fuel saving initiatives, as well as less weight on many of our ~~transition~~flights, due to ~~an all-Airbus fleet.~~a 32.7 percentage point year-over-year decrease in load factor.

Station operations expense. Station operations expense for the ~~third~~second quarter ~~2019 increased $0.4~~2020 decreased $18.5 million, or ~~0.9~~40.3 percent, on ~~an 8.1~~a 50.3 percent ~~increase~~decrease in scheduled service ~~departures. Stations expense per departure decreased by 6.6 percent~~departures as we reduced the number of flights offered due ~~primarily~~ to ~~a significant decrease in irregular operations experienced quarter over quarter as a result of Airbus aircraft reliability.~~reduced demand.

Maintenance and repairs expense. Maintenance and repairs expense for the ~~third~~second quarter ~~2019~~2020 decreased ~~$7.2~~$7.8 million, or ~~22.6~~37.6 percent, compared to the same period in ~~2018,~~2019, mostly due to a decrease in routine maintenance ~~costs. Furthermore,~~costs as we flew fewer ASMs and departures during the cost of major maintenance events for our Airbus aircraft is deferred in accordance with the deferral method of accounting and the amortization of these expenses is included in depreciation and amortization expense.quarter.

Depreciation and amortization expense. Depreciation and amortization expense for the ~~third~~second quarter ~~2019~~2020 increased $4.8 million, or ~~13.8~~12.5 percent, year over year, as the average number of ~~Airbus~~ aircraft in service increased ~~21.7~~6.7 percent year over year.

~~Amortization~~Accounting for most of this increase, amortization of major maintenance costs was ~~$6.8~~$9.4 million for the ~~third~~second quarter ~~2019~~2020 compared to ~~$2.9~~$6.1 million for the ~~third~~second quarter ~~2018, with increases expected~~2019, due to ~~continue as our Airbus~~an increase in the number of aircraft ~~count~~ and related deferred maintenance costs ~~grow. Further, the MD-80~~associated with them. We expect these costs will continue to increase as our fleet ~~operating in 2018 was fully depreciated prior to 2018.~~ages.

Sales and marketing expense. Sales and marketing expense for the ~~third~~second quarter ~~2019 increased slightly~~2020 decreased by 56.6 percent compared to the same period in ~~2018, mostly~~2019. Advertising spend was intentionally pulled back in the second quarter 2020 due to ~~an increase~~the pandemic. Also, there was a decrease in net credit card fees ~~paid~~ as a result of ~~the 10.2~~a 74.4 percent ~~increase~~decrease in passenger revenue ~~year over year. We have improved our utilization of customer data to optimize marketing efforts, allowing us to decrease marketing spend per passenger by 3.4 percent~~ year over year.

Other expense. Other expense ~~decreased $1.6~~remained relatively flat year over year, with a $0.5 million decrease for the second quarter 2020 compared to second quarter 2019.

CARES Act grant recognition. In April 2020, we entered into an agreement with the Treasury to receive $171.9 million in emergency relief through the CARES Act payroll support program to be paid in installments through July 2020. Approximately $150.0 million of these funds are being recognized as a credit to operating expense on the statement of income, over the periods for which the funds are intended to compensate. We recognized a $74.6 million credit to operating expense on the statement of income during the second quarter of 2020 and expect to recognize the remainder of the grant proceeds from the CARES Act payroll support program as a credit to operating expense in the third quarter ~~2019 compared~~2020.

Operating Special charges. Special charges of $81.2 million were recorded within operating expenses for the second quarter 2020. We did not have any special charges for the same period in 2019. Of these special charges, $5.0 million relates to a non-cash impairment charge for an investment in a third ~~quarter 2018,~~party. The remaining $76.2 million relates to expenses that were unique and specific to COVID-19. This includes accelerated depreciation on seven airframes and five engines resulting from an accelerated retirement plan, a loss on the sale-leaseback transaction which we would not likely have transacted absent cash conservation efforts as ~~there were decreases in flight operations related expenses, as well as~~a result of COVID, salary and benefits expense, and other various ~~general administrative~~ expenses.

Non-operating Special charges

Special charges of $19.8 million were recorded within non-operating expenses for the second quarter 2020. We did not have any special charges for the same period in 2019. The special charges relate to an accrual on the expectation to terminate the loan agreement with Sixth Street Partners (formerly TSSP) intended to finance the development of Sunseeker Resorts Charlotte Harbor. This is expected to be paid in the second half of 2020.

Income Tax Expense

We recorded a $53.3 million tax benefit (36.4 percent effective tax rate) compared to a $21.2 million tax provision (23.1 percent effective tax rate) for the three months ended June 30, 2020 and 2019, respectively. 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 allows the Company to carryback the 2020 net operating loss at the 35.0 percent rate applicable in earlier years.

Sunseeker and Other Non-airline expenses

Non-airline expenses are included in the various line items discussed above, as appropriate. The non-airline expenses include those from our Other non-Airline Segment (our Teesnap golf management business ~~Kingsway golf course,~~and Allegiant Nonstop family entertainment ~~centers,~~centers), and operating expenses attributable to Sunseeker Resort and Kingsway Golf Course (most of the Sunseeker Resort expenses ~~are being~~were capitalized ~~at this time)~~during the construction period). ~~We expect these expenses to increase as the opening~~As of ~~Sunseeker Resort approaches and with the growth in the number of family entertainment centers and the continued operation of Teesnap pending the sale of this entity.~~June 30, 2020 nearly all non-airline spend has been suspended indefinitely.

~~Income Tax Expense~~

Our effective tax rate was 22.8 percent for the three months ended September 30, 2019, compared to negative 5.1 percent for the three months ended September 30, 2018. The effective tax rate for the three months ended September 30, 2019 differed from the statutory federal income tax rate of 21.0 percent primarily due to state taxes. The effective tax rate for the three months ended September 30, 2018 was negative primarily due to a one-time income tax refund for tax deductions not previously claimed. 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. We expect to be a non-cash taxpayer for federal income tax purposes for 2019.

Comparison of ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 to ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019

Operating Revenue

Passenger revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, passenger revenue ~~increased 9.4~~decreased 43.4 percent compared with ~~2018.~~the same period in 2019. The ~~increase~~decrease was mostly attributable to a ~~9.0~~25.5 percent ~~increase~~decrease in scheduled service departures, which ~~resulted in an 8.5~~along with the pandemic, drove a 41.5 percent ~~increase~~decrease in scheduled service passengers. Decreases in scheduled service departures are due to the decrease in travel demand from March throughout the second quarter 2020 related to the effects of COVID-19. Average ~~total~~ fare per passenger ~~increased~~decreased slightly, by 3.2 percent, during the ~~nine~~six month period as a ~~13.7~~4.7 percent increase in average air-related ancillary revenue per passenger ~~more than offset the 8.1~~tempered a 9.8 percent decrease in scheduled service average fare. Increases in our customer baggage fees and convenience fee ~~and baggage fees~~ contributed to the increase in air-related ancillary revenue to ~~$51.56~~$54.80 per passenger.

Third party products revenue. Third party products revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2019 increased 21.6~~2020 decreased 30.9 percent over the same period in ~~2018.~~2019. This is primarily ~~the~~due to decreased net revenue from both rental cars and hotels, as a result of ~~increased~~substantially fewer passengers. This decline was partially offset by an overall increase in our third-party revenue from ~~our~~ co-branded credit card program ~~as well as an increase~~during the six months ended June 30, 2020 compared to the same period in ~~net revenue from rental cars.~~2019.

Fixed fee contract revenue. Fixed fee contract revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2019 increased 29.9~~2020 decreased 47.3 percent compared with ~~2018,~~the same period in 2019, primarily due to a ~~26.8~~34.6 percent ~~increase~~decrease in related departures. ~~This was the result of greater availability of spare aircraft~~The decrease in departures is mainly due to ~~improved operations~~a reduction of flying with Apple Vacations, and ~~an all-Airbus fleet. The grounding~~the cancellation of the ~~Boeing 737 Max of other airlines likely also contributed~~NCAA March Madness basketball tournament during 2020 due to ~~our increased fixed fee flying opportunities during 2019.~~COVID-19.

Other revenue. Other revenue ~~decreased $3.3 million~~increased by 3.0 percent for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~2018~~the same period in 2019. The increase is primarily ~~due to a decrease~~driven by increases in ~~aircraft lease revenue. We had six aircraft on lease to a European carrier~~subsidiary revenue during the first ~~nine months~~quarter 2020, especially in our family entertainment centers due to an additional store operating during the first quarter 2020 compared to 2019. As a result of ~~2018~~the COVID-19 pandemic, in late March 2020 we temporarily closed our family entertainment center in Warren, Michigan and ~~none during 2019. The effects of this decrease were slightly offset by increases~~permanently discontinued all activity for our locations in ~~revenue from our non-airline activities.~~Utah.

Operating Expenses

The following table presents airline-only unit costs on a per ASM basis, defined as Operating CASM, for the indicated periods:


	Nine Months Ended September 30,		Percent		Six Months Ended June 30,			Percent
	2019	2018	Change
Airline unitized costs (in cents)
Airline only unitized costs (in cents)					2020		2019	Change
Salary and benefits	2.68	2.73	(1.8	)%	3.19		2.69	18.6	%
Station operations	1.05	1.08	(2.8	)	1.09		1.02	6.9
Depreciation and amortization	0.90	0.81	11.1		1.36		0.86	58.1
Maintenance and repairs	0.56	0.67	(16.4	)	0.55		0.52	5.8
Sales and marketing	0.47	0.48	(2.1	)	0.43		0.49	(12.2	)
Aircraft lease rentals					0.04		—	NM
Other	0.47	0.60	(21.7	)	0.67		0.42	59.5
Airline CASM, excluding fuel	6.13	6.37	(3.8	)
CARES Act grant recognition					(1.19	)	—	NM
Operating Special charges					1.36		—	NM
Airline CASM, excluding fuel⁽¹⁾					7.50		6.00	25.0
Aircraft fuel	2.65	3.03	(12.5	)	1.84		2.63	(30.0	)
Airline CASM	8.78	9.40	(6.6	)	9.34		8.63	8.2

Airline CASM	8.78	9.40	(6.6	)
Non-airline operating CASM*	0.27	0.12	125.0
Operating CASM (consolidated)*	9.05	9.52	(4.9	)

*Includes operating costs associated with Sunseeker Resort and other non-airline related activity. Various components of this measure do notNM - Not meaningful

(1) Although we believe we have a ~~direct correlation~~relatively large proportion of variable expenses, our Airline CASM-ex fuel increased significantly during the six months ended June 30, 2020 as our fixed costs were spread over a reduced number of ASMs due to ~~ASMs but must be included to calculate total operating CASM. Consolidated operating CASM is reported to facilitate comparison with airlines reporting total costs on a per ASM basis.~~schedule reductions from mid-March resulting from COVID-19.

Salary and benefits expense. Salary and benefits expense ~~increased $28.3~~decreased $25.6 million, or ~~9.1~~11.0 percent, for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the same period in ~~2018. The increase is largely attributable to an 11.3 percent increase in~~2019. Although the average number of full-time equivalent employees ~~supporting~~increased by 4.1 percent year over year, overall expense decreased partly due to the fact that a ~~7.4 percent increase in system block hours, as well as increased activity in our non-airline subsidiary activity. Flight crew salaries~~large portion of the $9.5 million special charges specific to COVID-19 during the first quarter of 2020 consisted of salary and ~~wages per ASM decreased for~~benefits expense. Additionally, temporary voluntary leave programs offered to employees and voluntary pay reductions during the ~~nine~~second quarter 2020, and suspension of the bonus accrual during the six months ended ~~September~~June 30, ~~2019, due to improved productivity efficiencies gained from our transition to an all-Airbus fleet.~~2020 resulted in decreased expense.

Aircraft fuel expense. Aircraft fuel expense decreased ~~$17.8~~$103.5 million, or ~~5.2~~47.1 percent, for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the same period in ~~2018 as~~2019 partly due to a decrease in system average fuel cost per gallon ~~decreased 6.0~~of 26.1 percent year over ~~year. System~~year as fuel prices declined due to lower worldwide demand caused by the pandemic. Additionally, system fuel gallons consumed ~~increased 1.2~~decreased 28.2 percent on ~~an 8.4~~a 24.8 percent ~~increase~~decrease in ~~ASMs. ASM growth outpaced fuel consumption~~ASMs as ~~fuel~~we reduced capacity in light of the pandemic. Fuel efficiency (measured as ASMs per gallon) increased ~~7.1~~4.9 percent year over year due to fuel saving initiatives as well as less weight on many of our ~~transition~~flights, due to an ~~all-Airbus fleet.~~18.0 percentage point year-over-year decrease in load factor.

Station operations expense. Station operations expense for the ~~nine~~six months ended ~~September~~June 30, ~~2019 increased 5.0~~2020 decreased 19.4 percent on a ~~9.0~~25.5 percent ~~increase~~decrease in scheduled service departures compared to the same period in ~~2018. Stations expense per departure decreased by 3.7 percent due mostly~~2019 as we reduced the number of flights offered due to ~~additional incentives realized, contractor efficiencies gained, as well as a decrease in irregular operations costs resulting from efficiencies realized from the Airbus fleet.~~reduced demand.

Maintenance and repairs expense. Maintenance and repairs expense for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 decreased ~~9.7~~20.3 percent compared to ~~2018~~the same period in 2019 mostly due to a decrease in both major and routine maintenance ~~costs. Additionally,~~costs as we flew fewer ASMs and departures during the cost of major maintenance events for our Airbus aircraft is being deferred in accordance with the deferral method of accounting and the amortization of these expenses is included under depreciation and amortization expense.period.

Depreciation and amortization expense. Depreciation and amortization expense for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 increased ~~$21.5~~$12.3 million, or ~~23.2~~16.5 percent, compared to the same period in ~~2018.~~2019. The average number of ~~Airbus~~ aircraft in service increased ~~35.0~~11.9 percent year over year.

Amortization of major maintenance costs was ~~$17.7~~$18.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$8.0~~$10.9 million for ~~2018, with increases expected~~the same period in 2019. We expect these costs will continue to ~~continue~~increase as our ~~Airbus aircraft count and related deferred maintenance costs grow.~~fleet ages.

Sales and marketing expense. Sales and marketing expense for the ~~nine~~six months ended ~~September~~June 30, ~~2019 increased $4.8~~2020 decreased $14.1 million compared to the same period in ~~2018, partially~~2019, as advertising spend was intentionally pulled back in the last half of March and throughout the second quarter 2020 due to ~~an increase~~the pandemic. Also, there was a decrease in net credit card fees ~~paid~~ as a result of a ~~9.4~~43.4 percent ~~increase~~decrease in passenger revenue year over year. There were also increased expenses related to various marketing initiatives, including our multi-year partnerships with the Vegas Golden Knights and Minor League Baseball. However, we have improved our utilization of customer data to optimize marketing efforts, allowing us to decrease marketing spend per passenger.

Other expense. Other expense ~~decreased $1.1~~increased $3.6 million year over year ~~as there were decreases~~caused by an increase in ~~flight operations~~non-airline related expenses and other various expenses.

CARES Act grant recognition. In April 2020, we entered into an agreement with the Treasury to receive $171.9 million in emergency relief through the CARES Act payroll support program to be paid in installments through July 2020. Approximately $150.0 million of these funds are being recognized as a credit to operating expense on the statement of income, over the periods for which the funds are intended to compensate. We recognized a $74.6 million credit to operating expense on the statement of income during the six months ended June 30, 2020 and expect to recognize the remainder of the grant proceeds from the CARES Act payroll support program as a credit to operating expense in the third quarter 2020.

Operating Special charges. Special charges of $247.3 million were recorded within operating expenses for the six months ended June 30, 2020. We did not have any special charges for the same period in 2019. Of these special charges, $161.6 million relate to non-cash impairment charges. The remaining $85.7 million relates to expenses that were unique and specific to COVID-19. This includes accelerated depreciation on seven airframes and five 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.

Non-operating Special charges

Special charges of $26.6 million were 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 2019. Of these special charges, $19.8 million relates to an accrual on the expectation to terminate the loan agreement with Sixth Street Partners (formerly TSSP) intended to finance the development of Sunseeker Resorts Charlotte Harbor. This is expected to be paid in the second half of 2020. The remaining $6.8 million relates to impairment charges for Sunseeker Resort during the first quarter 2020. Note that these charges were reclassified from operating special expense to non-operating special expense for the six months ended June 30, 2020

Income Tax Expense

We recorded a $151.0 million tax benefit (54.5 percent effective tax rate) compared to a $38.0 million tax provision (23.0 percent effective tax rate) for the six months ended June 30, 2020 and 2019, respectively. 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 ~~over $12.0 million~~the ability to carryback the 2020 net operating loss at a 35.0 percent rate applicable in ~~gains from MD-80~~earlier years. The effective tax rate was also impacted by the remeasurement of deferred taxes and ~~other aircraft part sales. This was mostly offset by increases in various administrative expenses, as well as expenses related to our non-airline activities.~~state taxes.

Sunseeker and Other Non-airline expenses

Non-airline expenses are included in the various line items discussed above, as appropriate. The non-airline expenses include those from our Other non-Airline Segment (our Teesnap golf management business ~~Kingsway golf course,~~and Allegiant Nonstop family entertainment ~~centers,~~centers), and operating expenses attributable to Sunseeker Resort and Kingsway Golf Course (most of the Sunseeker Resort expenses ~~are being~~were capitalized ~~at this time). We expect these expenses to increase as~~during the ~~opening of Sunseeker Resort approaches and with the growth in the number of family entertainment centers and the continued operation of Teesnap pending the sale of this entity.~~

~~Income Tax Expense~~

Our effective tax rate was 22.9 percent for the nine months ended September 30, 2019, compared to 18.0 percent for the nine months ended September 30, 2018. The effective tax rate for the nine months ended September 30, 2019 differed from the statutory federal income tax rate of 21.0 percent primarily due to state taxes. The effective tax rate for the nine months ended September 30, 2018 was lower primarily due to a one-time income tax refund for tax deductions not previously claimed and the tax benefit from dissolution of foreign subsidiaries. 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. We expect to be a non-cash taxpayer for federal income tax purposes for 2019.construction period).

Comparative Consolidated Operating Statistics

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



	Three Months Ended June 30,				Percent
	2020		2019		Change⁽¹⁾
Operating statistics (unaudited):
Total system statistics:
Passengers	1,273,258		4,169,536		(69.5	)
Available seat miles (ASMs) (thousands)	2,220,755		4,447,066		(50.1	)
Airline operating expense per ASM (CASM) (cents)	10.55		8.35		26.3
Fuel expense per ASM (cents)	1.23		2.70		(54.4	)
Airline operating CASM, excluding fuel (cents)	9.32		5.65		65.0
ASMs per gallon of fuel	90.0		82.3		9.4
Departures	15,089		30,547		(50.6	)
Block hours	32,989		68,332		(51.7	)
Average stage length (miles)	850		853		(0.4	)
Average number of operating aircraft during period	90.7		85.0		6.7
Average block hours per aircraft per day	3.8		8.8		(56.8	)
Full-time equivalent employees at end of period	4,349		4,179		4.1
Fuel gallons consumed (thousands)	24,664		54,064		(54.4	)
Average fuel cost per gallon	$	1.11	$	2.22	(50.0	)

Three Months Ended September 30, Percent
2019 2018
Change⁽¹⁾
Operating statistics (unaudited):
Total system statistics:
Passengers 3,806,369
3,503,849
8.6
Available seat miles (ASMs) (thousands) 3,888,400
3,643,948
6.7
Operating expense per ASM (CASM) (cents) 9.37
10.07
(7.0 )
Fuel expense per ASM (cents) 2.69
3.12
(13.8 )
Operating CASM, excluding fuel (cents) 6.68
6.95
(3.9 )
ASMs per gallon of fuel 80.3
77.5
3.6
Departures 27,707
25,601
8.2
Block hours 59,678
56,329
5.9
Average stage length (miles) 823
838
(1.8 )
Average number of operating aircraft during period 87.6
95.6
(8.4 )
Average block hours per aircraft per day 7.4
6.4
15.6
Full-time equivalent employees at end of period 4,267
3,835
11.3
Fuel gallons consumed (thousands) 48,443
47,016
3.0
Average fuel cost per gallon $ 2.16
$ 2.41
(10.4 )


Scheduled service statistics:
Passengers	3,753,611			3,461,267			8.4		1,266,077			4,131,855			(69.4	)
Revenue passenger miles (RPMs) (thousands)	3,170,826			2,988,962			6.1		1,107,534			3,603,076			(69.3	)
Available seat miles (ASMs) (thousands)	3,687,473			3,485,800			5.8		2,174,683			4,311,182			(49.6	)
Load factor	86.0		%	85.7		%	0.3		50.9		%	83.6		%	(32.7	)
Departures	26,238			24,281			8.1		14,683			29,567			(50.3	)
Block hours	56,576			53,723			5.3		32,248			66,135			(51.2	)
Total passenger revenue per ASM (TRASM) (cents)⁽²⁾	11.10			10.64			4.3		5.75			10.97			(47.6	)
Average fare - scheduled service⁽³⁾	$	54.20		$	59.23		(8.5	)	$	40.46		$	58.39		(30.7	)
Average fare - air-related charges⁽³⁾	$	50.03		$	43.36		15.4		$	51.57		$	51.68		(0.2	)
Average fare - third party products	$	4.85		$	4.60		5.4		$	6.67		$	4.40		51.6
Average fare - total	$	109.08		$	107.19		1.8		$	98.70		$	114.47		(13.8	)
Average stage length (miles)	824			845			(2.5	)	855			853			0.2
Fuel gallons consumed (thousands)	46,038			44,910			2.5		24,124			52,327			(53.9	)
Average fuel cost per gallon	$	2.17		$	2.41		(10.0	)	$	1.08		$	2.22		(51.4	)
Rental car days sold	482,944			472,301			2.3		135,536			540,960			(74.9	)
Hotel room nights sold	99,991			95,690			4.5		12,772			114,191			(88.8	)
Percent of sales through website during period	93.1		%	93.7		%	(0.6	)	93.8		%	93.5		%	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.

(3) Reflects division of passenger revenue between scheduled service and air-related charges in ~~the Company's~~our booking path.


	Nine Months Ended September 30,				Percent		Six Months Ended June 30,				Percent
	2019		2018		Change⁽¹⁾		2020		2019		Change⁽¹⁾
Operating statistics (unaudited):
Total system statistics:
Passengers	11,426,183		10,510,913		8.7		4,448,708		7,619,814		(41.6	)
Available seat miles (ASMs) (thousands)	12,245,704		11,294,805		8.4		6,288,427		8,357,304		(24.8	)
Operating expense per ASM (CASM) (cents)	9.05		9.52		(4.9	)
Airline operating expense per ASM (CASM) (cents)							9.35		8.63		8.3
Fuel expense per ASM (cents)	2.65		3.03		(12.5	)	1.85		2.63		(29.7	)
Operating CASM, excluding fuel (cents)	6.41		6.49		(1.2	)
Airline operating CASM, excluding fuel (cents)							7.50		6.00		25.0
ASMs per gallon of fuel	82.2		76.8		7.1		87.2		83.1		4.9
Departures	83,454		76,912		8.5		41,401		55,747		(25.7	)
Block hours	187,829		174,838		7.4		95,112		128,151		(25.8	)
Average stage length (miles)	858		868		(1.2	)	879		876		0.3
Average number of operating aircraft during period	84.1		92.4		(9.0	)	92.1		82.3		11.9
Average block hours per aircraft per day	8.2		6.9		18.8		5.5		8.6		(36.0	)
Full-time equivalent employees at end of period	4,267		3,835		11.3		4,349		4,179		4.1
Fuel gallons consumed (thousands)	148,980		147,172		1.2		72,143		100,537		(28.2	)
Average fuel cost per gallon	$	2.18	$	2.32	(6.0	)	$	1.61	$	2.18	(26.1	)


Scheduled service statistics:
Passengers	11,307,004			10,422,579			8.5		4,420,683			7,553,393			(41.5	)
Revenue passenger miles (RPMs) (thousands)	9,964,948			9,299,355			7.2		4,033,017			6,794,122			(40.6	)
Available seat miles (ASMs) (thousands)	11,800,788			10,883,630			8.4		6,138,692			8,113,315			(24.3	)
Load factor	84.4		%	85.4		%	(1.0	)	65.7		%	83.7		%	(18.0	)
Departures	80,149			73,537			9.0		40,167			53,911			(25.5	)
Block hours	180,674			167,947			7.6		92,594			124,098			(25.4	)
Total passenger revenue per ASM (TRASM) (cents)⁽²⁾	11.18			11.04			1.3		8.47			11.22			(24.5	)
Average fare - scheduled service⁽³⁾	$	60.40		$	65.72		(8.1	)	$	57.27		$	63.49		(9.8	)
Average fare - air-related charges⁽³⁾	$	51.56		$	45.33		13.7		$	54.80		$	52.32		4.7
Average fare - third party products	$	4.74		$	4.23		12.1		$	5.52		$	4.68		17.9
Average fare - total	$	116.70		$	115.28		1.2		$	117.59		$	120.49		(2.4	)
Average stage length (miles)	861			874			(1.5	)	883			878			0.6
Fuel gallons consumed (thousands)	143,433			141,452			1.4		70,229			97,395			(27.9	)
Average fuel cost per gallon	$	2.17		$	2.31		(6.1	)	$	1.60		$	2.18		(26.6	)
Rental car days sold	1,495,502			1,408,357			6.2		616,582			1,012,558			(39.1	)
Hotel room nights sold	319,197			313,360			1.9		104,776			219,206			(52.2	)
Percent of sales through website during period	93.4		%	93.8		%	(0.4	)	93.7		%	93.5		%	0.2

(1) Except load factor and percent of sales through website during period, which are presented as a percentage point change.

(3) Reflects division of passenger revenue between scheduled service and air-related charges in ~~the Company's~~our booking path.

LIQUIDITY AND CAPITAL RESOURCES

Current liquidity

Cash, cash equivalents and investment securities (short-term and long-term) ~~decreased~~increased to $663.1 million at ~~September~~June 30, ~~2019 to $442.0 million,~~2020, from ~~$447.5~~$473.4 million at December 31, ~~2018.~~2019. Investment securities represent highly liquid marketable securities which are available-for-sale.

Restricted cash represents escrowed funds under fixed fee contracts 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.

~~Our operating cash flows~~We were approved to receive $171.9 million in assistance through the payroll support program under the CARES Act. The funds are paid in installments, and ~~long-term debt borrowings~~we received multiple installments totaling $154.7 million during the second quarter 2020. The remaining funds of $17.2 million were received in July 2020.

We have ~~allowed us~~also submitted an application to ~~invest in our fleet transition, return capital to shareholders~~the Loan Program under the CARES Act in the ~~form~~principal amount of ~~recurring regular quarterly dividends~~up to $276.0 million and expect these funds to be available through September 30, 2020 subject to reaching mutually agreeable terms with the Treasury. However, no assurance can be given that any such agreement will ever be reached. If an agreement is reached, we will be required to comply with the relevant provisions of the CARES Act, which could adversely impact our business and operations. Under the CARES Act, these restrictions will apply until one year after the loan is repaid.

Due to changes in the net operating loss carryback period under the CARES Act, we received a federal income tax refund of $45.6 million in May 2020 and an additional refund of $48.7 million in July 2020, both of which related to 2018 and 2019 net operating loss carrybacks. In the first half of 2021, we expect to receive a sizeable federal income tax refund related to a 2020 net operating loss carryback. A federal excise tax refund of up to $21.0 million related to net refunds issued during 2020 is also expected to be received during the second half of 2020.

In April 2020, we received additional proceeds of $31.0 million from a financing secured by two aircraft. As of July 31, 2020, we had 24 unencumbered aircraft and ten unencumbered spare engines.

In June 2020, we received $48.0 million of proceeds through a sale-leaseback transaction on four aircraft.

We have suspended share repurchases and ~~invest~~our quarterly cash dividend, as part of cash preservation efforts in ~~Sunseeker Resort~~response to the effects of COVID-19 on our business. In connection with our receipt of financial support under the payroll support program, we agreed not to repurchase shares or pay cash dividends through September 30, 2021. We have also suspended all non-airline capital expenditures and ~~our Allegiant Nonstop family entertainment centers. Future~~have reduced airline capital needs are primarily for the acquisition of additional aircraft, including our existing aircraft commitments, as well as planned capital outlay related to Sunseeker Resort and other travel and leisure initiatives.expenditures.

We believe we have more than adequate liquidity resources through our operating cash flows, borrowings, debt commitments, government funding, expected tax refunds, and cash balances, to meet our future contractual obligations. We will continue to consider raising funds through debt financing on an opportunistic basis.

~~In addition to our recurring quarterly cash dividend, our current share repurchase authority is $85.3 million. There is no expiration to this program.~~

Debt

Our long-term debt and finance lease obligations balance, without reduction for related issuance costs, increased from ~~$1.3~~$1.4 billion as of December 31, ~~2018~~2019 to ~~$1.4~~$1.5 billion as of ~~September~~June 30, ~~2019.~~2020. During the first ~~three quarters~~half of ~~2019,~~2020, we borrowed ~~$450.0~~a net amount of $147.4 million, including an additional $100.0 million borrowed under ~~the~~our Term Loan, ~~and $320.4 million~~additional debt secured by aircraft ~~and engines. Additionally, we retired our unsecured notes~~ of ~~$450.0~~$31.0 million, and ~~paid off six loans, plus~~$16.4 million of debt related to the ~~outstanding balance on our revolving credit facility for combined secured debt payoffs of $112.2 million.~~

~~In March 2019, we entered into a Construction Loan Agreement with certain lenders affiliated with TPG Sixth Street Partners, LLC~~PSP Note under ~~which we may borrow up to $175.0 million to fund~~ the ~~construction of Phase 1 of Sunseeker Resort - Charlotte Harbor. No amount under this loan agreement has been drawn to date.~~CARES Act Payroll Support Program Loan.

Sources and Uses of Cash

Operating Activities. Operating cash inflows are primarily derived from providing air transportation and related ancillary products and services to customers. During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, our operating activities provided ~~$321.4~~$276.7 million of cash compared to ~~$290.1~~$277.5 million during the same period of ~~2018. The increase is mainly due to a $51.2 million increase in~~2019. Although net income ~~in 2019. This~~for the six months ended June 30, 2020 decreased by $253.8 million compared to 2019, the cash effect of this fluctuation is ~~partially~~more than offset by the ~~net effect~~non-cash nature of ~~changes~~$263.5 million in ~~certain asset and liability accounts~~special charges during the ~~period, including the effect~~first half of ~~a one time income tax refund of over $41 million received in 2018.~~2020.

Investing Activities. Cash used in investing activities was ~~$324.0~~$158.6 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to ~~$187.1~~$96.8 million for the same period in ~~2018.~~2019. The increase in cash used is ~~mostly~~ due to a ~~$76.2~~$165.7 million increase in purchases of investment securities (net of maturities). This was partially offset by a $63.8 million year-over-year ~~increase~~decrease in cash outlays for the purchase of property and equipment, ~~offset by a lower amount of cash proceeds from maturities of investment securities (net of purchases). The use of cash for investing activities~~as well as $48.0 million in ~~the first nine months of 2019 was reduced by a $16.0 million difference in cash provided by other investing activities compared to the same period last year, mostly related to~~ proceeds received from the ~~sales of MD-80 parts.~~sale-leaseback transaction.

Financing Activities. Cash provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$15.3~~$32.8 million, compared to ~~$12.6~~$191.6 million ~~cash used~~for the same period in ~~financing activities~~2019. The year-over-year decrease is mostly due to the net effect of debt

activity, as debt proceeds net of principal payments and debt issuance cost payments were $74.7 million during the six months ended June 30, 2020, compared to $217.1 million during the same period in ~~2018. This year-over-year fluctuation is primarily due to debt proceeds, as we entered into debt agreements totaling $770.4~~2019. Additionally, there was an increase in share repurchases, which were $33.8 million ~~during~~in the ~~nine months ended September 30, 2019,~~first half of 2020 (before the share repurchase program was suspended) compared to ~~$191.7 million in~~none during the same period in 2018. The increase in debt proceeds was partially offset by a $498.7 million increase in principal payments on, and early payoffs of, long-term debt and finance lease obligations in the current year compared to 2018.2019.

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 ~~information~~

~~concerning~~ our ~~possible or assumed~~statements regarding future airline operations and capacity, the efficacy of cost saving measures, future expenditures, our ability to access additional funds from the Treasury, aircraft financings, the timing of aircraft acquisitions and retirements, expected capital expenditures, as well as other information concerning future results of operations, business strategies, ~~fleet plan,~~ financing plans ~~competitive position,~~and industry ~~environment, potential growth opportunities, future service to be provided, the effects of future regulation and competition, and the development of a resort in Southwest Florida.~~environment. 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,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project” 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. These risk factors include, without limitation, the impact and duration of the COVID-19 pandemic on airline travel and the economy, restrictions relating to accepting government support under the CARES Act, an accident involving, or problems with, our aircraft, public perception of our safety, our reliance on our automated systems, our reliance on third parties to deliver aircraft under contract to us on a timely basis, risk of breach of security of personal data, volatility of fuel costs, labor issues and costs, restrictions imposed by accepting funds under the CARES Act, 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, terrorist attacks, risks inherent to airlines, our 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 resort in Southwest Florida, governmental regulation, increases in maintenance costs and cyclical and seasonal fluctuations in 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

There ~~were~~have been no material changes to our critical accounting estimates during the six months ended June 30, 2020. For information regarding our critical accounting policies and estimates, ~~as of September 30, 2019, from those disclosed~~see disclosures in the Consolidated Financial Statements and accompanying notes contained in our ~~2018~~2019 Form ~~10-K.~~10-K, and in Note 1 in Part I, Item 1 of this Form 10-Q.

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 aircraft fuel expense represented ~~29.2~~15.2 percent of our operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. 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 ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, a hypothetical ten percent increase in the average price per gallon of fuel would have increased fuel expense by approximately ~~$10.7~~$2.7 million and ~~$33.3~~$11.5 million, respectively. We have not hedged fuel price risk for many years.

Interest Rates

As of ~~September~~June 30, ~~2019,~~2020, we had $1.2 billion in variable-rate debt, including current maturities and without reduction for related costs. A hypothetical 100 basis point increase in market interest rates for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 would have affected interest expense by approximately ~~$2.2~~$3.8 million and ~~$6.7~~$6.1 million, respectively.

As of ~~September~~June 30, ~~2019,~~2020, we had ~~$98.9~~$162.1 million of fixed-rate debt, including current maturities and without reduction for related costs. A hypothetical 100 basis point change in market interest rates would not impact interest expense on our fixed rate debt as of such date.

Item 4. Controls and Procedures

As of ~~September~~June 30, ~~2019,~~2020, under the supervision and with the participation of our management, including our chief executive officer ("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”) as of the end of the period covered by this report. Based on that evaluation, management, including our CEO 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 and is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure.

~~Except as noted below, there~~There were no changes in our internal control over financial reporting that occurred during the quarter ending ~~September~~June 30, ~~2019,~~2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Effective January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842). Although the New Lease Standard did not have a material impact on our ongoing net income, changes were made to relevant business processes and the related control activities in order to monitor and maintain appropriate controls over financial reporting. The operating effectiveness of these changes will be evaluated as part of our annual assessment on the effectiveness of internal controls over financial reporting.

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.

Item 1A. Risk Factors

We have evaluated our risk factors and determined there are no changes to those set forth in Part I, Item 1A of our Annual Report on Form ~~10-K.~~10-K and those additional Risk Factors below.

The COVID-19 pandemic has materially and adversely affected, and will likely continue to materially and adversely affect, our results of operations, financial position and liquidity.

In December 2019, an outbreak of COVID-19 was identified in Wuhan, China. The COVID-19 outbreak has since spread and grown globally, including within the United States and, in March 2020, the President of the United States declared a national emergency. The COVID-19 pandemic has materially and adversely affected passenger demand and bookings for air travel, thereby materially and adversely affecting operating income and cash flows from operations. We have attempted to conserve our liquidity through cost reductions and other means. These efforts include reducing airline capital expenditures, suspending all non-airline capital expenditures; reducing our published flight schedule; placing a number of aircraft in storage; retiring certain aircraft; implementing voluntary time-off programs for employees; suspending all hiring and non-contract salary increases; temporarily reducing named executive officer salaries and Board of Director cash retainer fees; and extending vendor payment terms. The extent of the impact of the COVID-19 pandemic on our business and our financial and operational performance will depend on future developments, including the duration, spread, severity and any recurrence of the COVID-19 pandemic; the duration and scope of related federal, state and local government restrictions; the extent of the impact of the COVID-19 pandemic on overall demand for air travel; and our access to capital, all of which are highly uncertain and cannot be predicted.

The COVID-19 pandemic has caused public health officials to recommend precautions to mitigate the spread of the virus. Since the onset of the COVID-19 pandemic, federal, state and local authorities have at various times instituted measures such as imposing self-quarantine requirements, issuing directives forcing businesses to temporarily close, restricting air travel and issuing shelter-in-place and similar orders limiting the movement of individuals. Such measures have depressed demand for air travel, disrupted our operations, and materially adversely affected our business. The resulting cancellations of flights has resulted in an unprecedented amount of cash refunds and the issuance of travel vouchers to customers. Further, due to the fears and restrictions involved with travel in the near term, sales of tickets for future travel have been adversely affected. The cancellations and cash refunds have negatively affected our revenues and liquidity, and we expect such negative effects to continue. We will continue to be materially adversely affected if government authorities extend existing orders or impose new orders or other restrictions intended to mitigate the spread of COVID-19, or if fear of travel continues to depress future ticket sales.

Instances of actual or perceived risk of infection among our employees, or our service providers’ employees, could further negatively impact our operations. We could also be materially adversely affected if we are unable to effectively maintain a suitably skilled and sized workforce, address employment-related matters, or maintain satisfactory relations with our employees or our employees’ labor representatives.

Moreover, the ability to attract and retain passengers depends, in part, upon the perception and reputation of our company and the public’s concerns regarding the health and safety of air travel generally. Actual or perceived risk of infection on our flights could have a material adverse effect on the public's comfort with air travel, which could harm our reputation and business. We expect we will continue to incur COVID-19 related costs as we sanitize airplanes and implement additional hygiene-related protocol to airplanes, and take other action to limit infection among our employees and passengers.

The COVID-19 pandemic has also significantly increased economic and demand uncertainty. Historically, unfavorable U.S. economic conditions have driven changes in travel patterns, including reduced spending for both leisure and business travel. Unfavorable economic conditions, when low fares are often used to stimulate traffic, have also historically hampered the ability of airlines to raise fares to counteract any increases in fuel, labor, and other costs. Any significant increases in unemployment in the United States due to the adoption of social distancing and other policies to slow the spread of the virus would likely continue to have a negative impact on passenger bookings, and these effects could exist for an extensive period of time. The COVID-19 pandemic continues to rapidly evolve. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change.

We rely on discretionary spending by individuals and households as most of our customers fly with us for leisure as opposed to business purposes.

Many attractions in the leisure destinations we serve, such as Walt Disney World in Orlando, Florida and Las Vegas hotels, temporarily closed, and those which have reopened have done so with restrictions in place, which will also impact travel to these destinations.

The spread of COVID-19 and related responsive actions have adversely impacted our financial condition, liquidity and cash flow.

The spread of COVID-19 and related government and private sector responsive actions, including actions we have taken to stem the spread of the virus, have and will continue to adversely impact our financial condition, liquidity and cash flow in the near term. While we are focused on mitigating the impact to our balance sheet by, among other things, suspending dividends and share repurchases and suspending all non-essential capital expenditures and discretionary spending, a prolonged disruption due to the COVID-19 pandemic could have a longer-term material adverse effect on our financial condition, liquidity and cash flow.

We may need to seek significant amounts of additional liquidity in the short-term, including through the issuance of additional debt securities, equity securities and equity-linked securities, as well as through credit facilities. However, the terms of our existing debt agreements, including out Term Loan, may not permit us to do so. The Term Loan contains covenants limiting our ability to, among other things, make certain types of restricted payments, including paying dividends, incur debt or liens, merge or consolidate with others, dispose of assets, enter into certain transactions with affiliates, engage in certain business activities or make certain investments. In addition, the Term Loan contains financial covenants, including requiring us, at the end of each calendar quarter, to maintain a maximum total leverage ratio of 5.00:1.00 and to maintain a minimum aggregate amount of liquidity of $300.0 million. We have pledged our assets to secure the Term Loan with the exceptions of aircraft and aircraft engines, the Sunseeker Resort and certain other exceptions. This will limit our ability to obtain debt secured by these pledged assets while the Term Loan is outstanding. The Term Loan contains various events of default (including failure to comply with the covenants under the Term Loan), and upon an event of default the lenders may, subject to various cure rights, require the immediate payment of all amounts outstanding under the Term Loan. As a result of these restrictive covenants, we may be limited in how we conduct business, and we may be unable to raise additional debt or equity financing.

Moreover, on March 17, 2020, S&P Global Ratings downgraded our corporate issue rating and Moody’s Investors Service placed our ratings on downgrade review, in both cases due to reduced demand for air travel. Our ability to raise cost-effective capital is in part dependent on our credit ratings, and we cannot assure you that our credit ratings will be stable or improve. Such downgrade actions and potential future downgrade actions may negatively affect our ability to seek additional sources of liquidity on favorable terms, if at all.

Although our working capital has been sufficient to meet our obligations to date, our future liquidity could be severely impacted by the COVID-19 pandemic and the aforementioned negative effects on our ability to raise cost-effective capital, which could have a material adverse effect on our business, financial condition and results of operations.

We have entered into agreements with the U.S. Treasury with respect to funding support pursuant to the Payroll Support Program under the CARES Act; pursuant to these agreements we have agreed to certain restrictions on how we operate our business and use our cash and which could limit our ability to take actions that we otherwise might have determined to be in the best interests of our company and our shareholders.

On March 27, 2020, the CARES Act was signed into law. The CARES Act provides liquidity in the form of grants and loans to air carriers, such as to us, that incurred, or are expected to incur, covered losses such that the continued operations of the business are jeopardized, as determined by the Treasury. In April 2020, we reached an agreement with the Treasury with respect to funding support pursuant to the Payroll Support Program. Pursuant to this agreement, we have agreed to certain restrictions on our business and operations, including the following:

We are prohibited from repurchasing our common stock and from paying dividends on our common stock until September 30, 2021;

We must place certain restrictions on certain higher-paid employee and executive pay, including limiting pay increases and severance pay or other benefits upon terminations, until March 24, 2022;

We are prohibited from involuntary terminations or furloughs of our employees (except for death, disability, cause, or certain disciplinary reasons) until September 30, 2020;

We may not reduce the salary, wages, or benefits of our employees (other than our executive officers, or as otherwise permitted under the terms of the Payroll Support Program) until September 30, 2020;

Until March 1, 2022, we must comply with any requirement issued by the Department of Transportation (“DOT”) that we maintain certain scheduled air transportation service as DOT deems necessary to ensure services to any point served by us before March 1, 2020.

These restrictions may require that we take, or limit taking, actions that we believe to be in the best interests of our company and our shareholders. For example, the restrictions could require that we change certain of our business practices, risk our ability to retain key personnel, and expose us to additional costs (including increased compliance costs). Additionally, we could be required to issue additional warrants and be subject to additional significant restrictions if we participate in additional loan programs under the CARES Act.

We have also submitted an application to the Loan Program under the CARES Act in the principal amount of approximately $276 million and expect these funds to be available through September 30, 2020 subject to reaching mutually agreeable terms with Treasury. However, no assurance can be given that any such agreement will ever be reached. If an agreement is reached, we will be required to comply with the relevant provisions of the CARES Act as listed above, which could adversely impact our business and operations. In the event we receive such a loan under the CARES Act, these restrictions will apply until one year after the loan is repaid.

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

Our Repurchases of Equity Securities

~~The following table reflects~~(a) As previously disclosed, in connection with funding that we have received under the ~~repurchases~~CARES Act, we have issued to the Treasury warrants to purchase up to 25,889 shares of our common stock ~~during~~since April 2020 under an exemption from registration pursuant to Section 4(a)(2) of the ~~third quarter 2019:~~Securities Act of 1933, as amended. Of these warrants, warrants to purchase 19,700 shares were issued prior to June 30, 2020 and warrants for an additional 6,189 shares were issued in July 2020. For additional information regarding the Warrants, see Note 2 of the Notes to Consolidated Financial Statements (unaudited).

(b) Not applicable

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 994
$ 149.14
None

August 104,539
141.64
103,943

September 3,935
148.95
None

Total 109,468
143.35
$ 85,277

~~(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~~(c) We did not 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~~any common stock ~~which has been authorized by~~during the ~~Board under a share repurchase program.~~second quarter 2020.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. Exhibits



3.1	Articles of Incorporation (1)
3.2	Bylaws of the Company as amended on ~~October 23, 2019~~May 6, 2020 (2)
10.1	Payroll Support Program Agreement dated April 20, 2020 between Allegiant Air, LLC and the U.S. Department of the Treasury. (3)
10.2	Promissory Note dated April 20, 2020 from Allegiant Air, LLC to U.S. Department of the Treasury. (3)
10.3	Warrant Agreement dated April 20, 2020 between the Company and the U.S. Department of the Treasury. (3)
12	Calculation of Ratio of Earnings to Fixed Charges of Allegiant Travel Company
31.1	Rule 13a - 14(a) / 15d - 14(a) Certification of Principal Executive Officer
31.2	Rule 13a - 14(a) / 15d - 14(a) Certification of Principal Financial Officer
32	Section 1350 Certifications
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL 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 ~~October 25, 2019.~~May 12, 2020.

(3) Incorporated by reference to Exhibit to Quarterly Report on Form 10-Q filed by the Company with the Commission on May 22, 2020.

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:	~~October 31, 2019~~August 4, 2020	By:	/s/ Gregory Anderson
		Gregory Anderson, as duly authorized officer of the Company (Chief Financial Officer) and as Principal Financial Officer

3236



		Three Months Ended		Nine Months Ended
(in thousands)	Classification on the Statements of Income	September 30, 2019		September 30, 2019
Finance lease costs:
Amortization of assets	Depreciation and amortization	$	1,629	$	4,888
Interest on lease liabilities	Interest expense	1,306		3,978
Operating lease cost	Station operations; Maintenance and repairs; Other operating expense	897		2,634
Variable lease cost	Station operations; Maintenance and repairs; Other operating expense	663		1,672
Total lease cost		$	4,495	$	13,172



		As of
(in thousands)	Classification on the Balance Sheet	September 30, 2019
Assets
Operating lease assets	Operating lease right-of-use assets, net	$	22,433
Finance lease assets	Property and equipment, net	113,294
Total lease assets		$	135,727

Liabilities
Current
Operating	Accrued liabilities	$	2,388
Finance	Current maturities of long-term debt and finance lease obligations	7,582
Noncurrent
Operating	Other noncurrent liabilities	21,744
Finance	Long-term debt and finance lease obligations	109,878
Total lease liabilities		$	141,592

Weighted-average remaining lease term
Operating leases		9.4 years
Finance leases		10.1 years
Weighted-average discount rate
Operating leases		4.3		%
Finance leases		4.4		%



	September 30, 2019	December 31, 2018	September 30, 2018
A319	37	32	31
A320 ⁽¹⁾	52	44	43
MD-80	—	—	19
Total	89	76	93



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	994	$	149.14	None
August	104,539	141.64		103,943
September	3,935	148.95		None
Total	109,468	143.35			$	85,277