SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended | March 31,September 30, 2021 |
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| 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)
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| Nevada | 20-4745737 |
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| (State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
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| 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:
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| Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Common stock, par value $.001$0.001 | | 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):
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| Large accelerated filer | ☒ | | Accelerated filer | ☐ |
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| Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
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| 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 April 26,October 25, 2021, the registrant had 16,416,01918,087,726 shares of common stock, $.001$0.001 par value per share, outstanding.
ALLEGIANT TRAVEL COMPANY
FORM 10-Q
TABLE OF CONTENTS
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| PART I. | FINANCIAL INFORMATION | |
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| ITEM 1. | | |
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| ITEM 2. | | |
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| ITEM 3. | | |
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| ITEM 4. | | |
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| PART II. | OTHER INFORMATION | |
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| ITEM 1. | | |
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| ITEM 1A. | | |
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| ITEM 2. | | |
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| ITEM 3. | | |
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| ITEM 4. | | |
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| ITEM 5. | | |
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| ITEM 6. | | |
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)
| | | March 31, 2021 | | December 31, 2020 | | September 30, 2021 | | December 31, 2020 |
| | (unaudited) | | | | (unaudited) | | |
| CURRENT ASSETS | CURRENT ASSETS | | | CURRENT ASSETS | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 301,615 | | | $ | 152,764 | | Cash and cash equivalents | $ | 193,627 | | | $ | 152,764 | |
| Restricted cash | Restricted cash | 25,212 | | | 17,555 | | Restricted cash | 42,337 | | | 17,555 | |
| Short-term investments | Short-term investments | 426,381 | | | 532,477 | | Short-term investments | 877,344 | | | 532,477 | |
| Accounts receivable | Accounts receivable | 188,116 | | | 192,215 | | Accounts receivable | 147,407 | | | 192,215 | |
| Expendable parts, supplies and fuel, net | Expendable parts, supplies and fuel, net | 26,276 | | | 24,006 | | Expendable parts, supplies and fuel, net | 28,424 | | | 24,006 | |
| Prepaid expenses and other current assets | Prepaid expenses and other current assets | 32,088 | | | 24,616 | | Prepaid expenses and other current assets | 31,619 | | | 24,616 | |
| | TOTAL CURRENT ASSETS | TOTAL CURRENT ASSETS | 999,688 | | | 943,633 | | TOTAL CURRENT ASSETS | 1,320,758 | | | 943,633 | |
| Property and equipment, net | Property and equipment, net | 2,072,211 | | | 2,050,311 | | Property and equipment, net | 2,147,988 | | | 2,050,311 | |
| | Deferred major maintenance, net | Deferred major maintenance, net | 131,910 | | | 127,463 | | Deferred major maintenance, net | 146,563 | | | 127,463 | |
| Operating lease right-of-use assets, net | Operating lease right-of-use assets, net | 116,998 | | | 115,911 | | Operating lease right-of-use assets, net | 124,297 | | | 115,911 | |
| Deposits and other assets | Deposits and other assets | 24,393 | | | 21,607 | | Deposits and other assets | 27,147 | | | 21,607 | |
| TOTAL ASSETS: | TOTAL ASSETS: | $ | 3,345,200 | | | $ | 3,258,925 | | TOTAL ASSETS: | $ | 3,766,753 | | | $ | 3,258,925 | |
| CURRENT LIABILITIES | CURRENT LIABILITIES | | | | CURRENT LIABILITIES | | | |
| Accounts payable | Accounts payable | $ | 37,767 | | | $ | 34,197 | | Accounts payable | $ | 35,386 | | | $ | 34,197 | |
| Accrued liabilities | Accrued liabilities | 129,795 | | | 116,093 | | Accrued liabilities | 148,634 | | | 116,093 | |
| Current operating lease liabilities | Current operating lease liabilities | 15,247 | | | 14,313 | | Current operating lease liabilities | 17,642 | | | 14,313 | |
| Air traffic liability | Air traffic liability | 403,049 | | | 307,508 | | Air traffic liability | 351,522 | | | 307,508 | |
| Current maturities of long-term debt and finance lease obligations, net of related costs | Current maturities of long-term debt and finance lease obligations, net of related costs | 156,482 | | | 217,234 | | Current maturities of long-term debt and finance lease obligations, net of related costs | 139,590 | | | 217,234 | |
| | TOTAL CURRENT LIABILITIES | TOTAL CURRENT LIABILITIES | 742,340 | | | 689,345 | | TOTAL CURRENT LIABILITIES | 692,774 | | | 689,345 | |
| Long-term debt and finance lease obligations, net of current maturities and related costs | Long-term debt and finance lease obligations, net of current maturities and related costs | 1,459,570 | | | 1,441,777 | | Long-term debt and finance lease obligations, net of current maturities and related costs | 1,434,614 | | | 1,441,777 | |
| Deferred income taxes | Deferred income taxes | 303,390 | | | 301,763 | | Deferred income taxes | 310,952 | | | 301,763 | |
| | Noncurrent operating lease liabilities | Noncurrent operating lease liabilities | 103,103 | | | 102,289 | | Noncurrent operating lease liabilities | 110,322 | | | 102,289 | |
| Other noncurrent liabilities | Other noncurrent liabilities | 27,143 | | | 24,388 | | Other noncurrent liabilities | 27,027 | | | 24,388 | |
| TOTAL LIABILITIES: | TOTAL LIABILITIES: | 2,635,546 | | | 2,559,562 | | TOTAL LIABILITIES: | 2,575,689 | | | 2,559,562 | |
| SHAREHOLDERS' EQUITY | SHAREHOLDERS' EQUITY | | | | SHAREHOLDERS' EQUITY | | | |
| Common stock, par value $.001 | 23 | | | 23 | | |
| Common stock, par value $0.001 | | Common stock, par value $0.001 | 25 | | | 23 | |
| Treasury shares | Treasury shares | (646,008) | | | (646,008) | | Treasury shares | (642,177) | | | (646,008) | |
| Additional paid in capital | Additional paid in capital | 333,147 | | | 329,753 | | Additional paid in capital | 675,795 | | | 329,753 | |
| Accumulated other comprehensive income (loss), net | Accumulated other comprehensive income (loss), net | 1 | | | (27) | | Accumulated other comprehensive income (loss), net | 649 | | | (27) | |
| Retained earnings | Retained earnings | 1,022,491 | | | 1,015,622 | | Retained earnings | 1,156,772 | | | 1,015,622 | |
| TOTAL EQUITY: | TOTAL EQUITY: | 709,654 | | | 699,363 | | TOTAL EQUITY: | 1,191,064 | | | 699,363 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: | $ | 3,345,200 | | | $ | 3,258,925 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: | $ | 3,766,753 | | | $ | 3,258,925 | |
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 March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2021 | | 2020 | | | 2021 | | 2020 | | 2021 | | 2020 |
| OPERATING REVENUES: | OPERATING REVENUES: | | | | | OPERATING REVENUES: | | | | | | | |
| Passenger | Passenger | $ | 256,695 | | | $ | 378,911 | | | Passenger | $ | 423,796 | | | $ | 181,916 | | | $ | 1,124,237 | | | $ | 677,347 | |
| Third party products | Third party products | 13,622 | | | 15,976 | | | Third party products | 24,541 | | | 11,337 | | | 61,164 | | | 35,756 | |
| Fixed fee contracts | Fixed fee contracts | 7,692 | | | 8,919 | | | Fixed fee contracts | 11,117�� | | | 5,284 | | | 23,943 | | | 17,440 | |
| Other | Other | 1,115 | | | 5,375 | | | Other | 15 | | | 2,447 | | | 1,682 | | | 12,969 | |
| Total operating revenues | Total operating revenues | 279,124 | | | 409,181 | | | Total operating revenues | 459,469 | | | 200,984 | | | 1,211,026 | | | 743,512 | |
| OPERATING EXPENSES: | OPERATING EXPENSES: | | | | | OPERATING EXPENSES: | | | | | | | |
| Salary and benefits | Salary and benefits | 117,950 | | | 112,646 | | | Salary and benefits | 125,799 | | | 95,829 | | | 365,655 | | | 303,264 | |
| Aircraft fuel | Aircraft fuel | 82,848 | | | 88,813 | | | Aircraft fuel | 118,370 | | | 52,540 | | | 310,674 | | | 168,711 | |
| Station operations | | Station operations | 70,943 | | | 39,954 | | | 171,246 | | | 108,359 | |
| Depreciation and amortization | Depreciation and amortization | 43,174 | | | 43,699 | | | Depreciation and amortization | 46,399 | | | 45,291 | | | 134,095 | | | 132,285 | |
| Station operations | 43,094 | | | 40,999 | | | |
| Maintenance and repairs | Maintenance and repairs | 23,371 | | | 21,795 | | | Maintenance and repairs | 30,451 | | | 14,038 | | | 76,419 | | | 48,866 | |
| Sales and marketing | Sales and marketing | 11,609 | | | 18,455 | | | Sales and marketing | 22,047 | | | 7,967 | | | 51,288 | | | 35,331 | |
| Aircraft lease rental | Aircraft lease rental | 4,720 | | | 962 | | | Aircraft lease rental | 5,670 | | | 3,015 | | | 15,507 | | | 5,404 | |
| Other | Other | 17,776 | | | 26,717 | | | Other | 22,379 | | | 19,755 | | | 55,655 | | | 70,225 | |
| Payroll Support Programs grant recognition | Payroll Support Programs grant recognition | (91,758) | | | 0 | | | Payroll Support Programs grant recognition | (49,210) | | | (77,909) | | | (202,181) | | | (152,448) | |
| Special charges | Special charges | 1,738 | | | 172,900 | | | Special charges | 332 | | | 33,585 | | | 2,924 | | | 280,852 | |
| Total operating expenses | Total operating expenses | 254,522 | | | 526,986 | | | Total operating expenses | 393,180 | | | 234,065 | | | 981,282 | | | 1,000,849 | |
| OPERATING INCOME (LOSS) | OPERATING INCOME (LOSS) | 24,602 | | | (117,805) | | | OPERATING INCOME (LOSS) | 66,289 | | | (33,081) | | | 229,744 | | | (257,337) | |
| OTHER (INCOME) EXPENSES: | OTHER (INCOME) EXPENSES: | | | | | OTHER (INCOME) EXPENSES: | | | | | | | |
| Interest expense | Interest expense | 16,788 | | | 18,153 | | | Interest expense | 16,595 | | | 11,943 | | | 50,103 | | | 44,149 | |
| Capitalized interest | Capitalized interest | 0 | | | (4,067) | | | Capitalized interest | (401) | | | — | | | (401) | | | (4,067) | |
| Interest income | Interest income | (463) | | | (2,311) | | | Interest income | (375) | | | (868) | | | (1,338) | | | (4,596) | |
| Loss on debt extinguishment | Loss on debt extinguishment | 0 | | | 1,222 | | | Loss on debt extinguishment | — | | | — | | | 71 | | | 1,222 | |
| | Special charges | | Special charges | — | | | — | | | — | | | 26,632 | |
| Other, net | Other, net | (393) | | | (76) | | | Other, net | 239 | | | 552 | | | (164) | | | 1,173 | |
| Total other expenses | Total other expenses | 15,932 | | | 12,921 | | | Total other expenses | 16,058 | | | 11,627 | | | 48,271 | | | 64,513 | |
| INCOME (LOSS) BEFORE INCOME TAXES | INCOME (LOSS) BEFORE INCOME TAXES | 8,670 | | | (130,726) | | | INCOME (LOSS) BEFORE INCOME TAXES | 50,231 | | | (44,708) | | | 181,473 | | | (321,850) | |
| INCOME TAX PROVISION (BENEFIT) | INCOME TAX PROVISION (BENEFIT) | 1,801 | | | (97,717) | | | INCOME TAX PROVISION (BENEFIT) | 10,977 | | | (15,565) | | | 40,323 | | | (166,595) | |
| NET INCOME (LOSS) | NET INCOME (LOSS) | $ | 6,869 | | | $ | (33,009) | | | NET INCOME (LOSS) | $ | 39,254 | | | $ | (29,143) | | | $ | 141,150 | | | $ | (155,255) | |
| Earnings (loss) per share to common shareholders: | Earnings (loss) per share to common shareholders: | | | | | Earnings (loss) per share to common shareholders: | | | | | | | |
| Basic | Basic | $ | 0.42 | | | $ | (2.08) | | | Basic | $ | 2.18 | | | $ | (1.82) | | | $ | 8.18 | | | $ | (9.75) | |
| Diluted | Diluted | $ | 0.42 | | | $ | (2.08) | | | Diluted | $ | 2.18 | | | $ | (1.82) | | | $ | 8.18 | | | $ | (9.75) | |
| Shares used for computation: | Shares used for computation: | | | Shares used for computation: | |
| Basic | Basic | 16,167 | | | 15,952 | | | Basic | 17,766 | | | 16,006 | | | 17,005 | | | 15,953 | |
| Diluted | Diluted | 16,167 | | | 15,952 | | | Diluted | 17,767 | | | 16,006 | | | 17,015 | | | 15,953 | |
| | Cash dividends declared per share: | Cash dividends declared per share: | $ | 0 | | | $ | 0.70 | | | Cash dividends declared per share: | $ | — | | | $ | — | | | $ | — | | | $ | 0.70 | |
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 March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2021 | | 2020 | | | 2021 | | 2020 | | 2021 | | 2020 |
| NET INCOME (LOSS) | NET INCOME (LOSS) | $ | 6,869 | | | $ | (33,009) | | | NET INCOME (LOSS) | $ | 39,254 | | | $ | (29,143) | | | $ | 141,150 | | | $ | (155,255) | |
| Other comprehensive income (loss): | Other comprehensive income (loss): | | | | | Other comprehensive income (loss): | | | | |
| Change in available for sale securities, net of tax | Change in available for sale securities, net of tax | 28 | | | (733) | | | Change in available for sale securities, net of tax | 774 | | | (292) | | | 676 | | | 32 | |
| Foreign currency translation adjustments | Foreign currency translation adjustments | 0 | | | 11 | | | Foreign currency translation adjustments | — | | | 51 | | | — | | | 53 | |
| | Total other comprehensive income (loss) | Total other comprehensive income (loss) | 28 | | | (722) | | | Total other comprehensive income (loss) | 774 | | | (241) | | | 676 | | | 85 | |
| TOTAL COMPREHENSIVE INCOME (LOSS) | TOTAL COMPREHENSIVE INCOME (LOSS) | $ | 6,897 | | | $ | (33,731) | | | TOTAL COMPREHENSIVE INCOME (LOSS) | $ | 40,028 | | | $ | (29,384) | | | $ | 141,826 | | | $ | (155,170) | |
|
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 March 31, 2021 | | Three Months Ended September 30, 2021 |
| | Common stock outstanding | | Par value | | Additional paid-in capital | | Accumulated other comprehensive income (loss) | | Retained earnings | | Treasury shares | | Total shareholders' equity | | 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, 2020 | 16,405 | | | $ | 23 | | | $ | 329,753 | | | $ | (27) | | | $ | 1,015,622 | | | $ | (646,008) | | | $ | 699,363 | | |
| Balance at June 30, 2021 | | Balance at June 30, 2021 | 17,986 | | | $ | 25 | | | $ | 671,893 | | | $ | (125) | | | $ | 1,117,518 | | | $ | (642,177) | | | $ | 1,147,134 | |
| Share-based compensation | Share-based compensation | 11 | | | — | | | $ | 3,394 | | | — | | | — | | | — | | | 3,394 | | Share-based compensation | 59 | | | — | | | 3,902 | | | — | | | — | | | — | | | 3,902 | |
| | Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | $ | 28 | | | $ | — | | | — | | | 28 | | Other comprehensive income | — | | | — | | | — | | | 774 | | | — | | | — | | | 774 | |
| | Net income | Net income | — | | | — | | | — | | | — | | | $ | 6,869 | | | — | | | 6,869 | | Net income | — | | | — | | | — | | | — | | | 39,254 | | | — | | | 39,254 | |
| Balance at March 31, 2021 | 16,416 | | | $ | 23 | | | $ | 333,147 | | | $ | 1 | | | $ | 1,022,491 | | | $ | (646,008) | | | $ | 709,654 | | |
| Balance at September 30, 2021 | | Balance at September 30, 2021 | 18,045 | | | $ | 25 | | | $ | 675,795 | | | $ | 649 | | | $ | 1,156,772 | | | $ | (642,177) | | | $ | 1,191,064 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2020 |
| 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, 2019 | 16,303 | | | $ | 23 | | | $ | 289,933 | | | $ | 98 | | | $ | 1,211,076 | | | $ | (617,579) | | | $ | 883,551 | |
| Share-based compensation | 113 | | | — | | | 5,334 | | | — | | | — | | | — | | | 5,334 | |
| Shares repurchased by the Company and held as treasury shares | (217) | | | — | | | — | | | — | | | — | | | (33,773) | | | (33,773) | |
| Cash dividends declared, $0.70 per share | — | | | — | | | — | | | — | | | (11,478) | | | — | | | (11,478) | |
| Other comprehensive income (loss) | — | | | — | | | — | | | (722) | | | — | | | — | | | (722) | |
| Net loss | — | | | — | | | — | | | — | | | (33,009) | | | — | | | (33,009) | |
| Balance at March 31, 2020 | 16,199 | | | $ | 23 | | | $ | 295,267 | | | $ | (624) | | | $ | 1,166,589 | | | $ | (651,352) | | | $ | 809,903 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| 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, 2020 | 16,405 | | | $ | 23 | | | $ | 329,753 | | | $ | (27) | | 0 | $ | 1,015,622 | | | $ | (646,008) | | | $ | 699,363 | |
| Share-based compensation | 71 | | | — | | | 10,800 | | | — | | | — | | | — | | | 10,800 | |
| Issuance of common stock, net of forfeitures | 1,553 | | | 2 | | | 335,137 | | | — | | | — | | | — | | | 335,139 | |
| Stock issued under employee stock purchase plan | 16 | | | — | | | — | | | — | | | — | | | 3,831 | | | 3,831 | |
| Other comprehensive income | — | | | — | | | — | | | 676 | | | — | | | — | | | 676 | |
| Payroll Support Programs warrant issuance | — | | | — | | | 105 | | | — | | | — | | | — | | | 105 | |
| Net income | — | | | — | | | — | | | — | | | 141,150 | | | — | | | 141,150 | |
| Balance at September 30, 2021 | 18,045 | | | $ | 25 | | | $ | 675,795 | | | $ | 649 | | | $ | 1,156,772 | | | $ | (642,177) | | | $ | 1,191,064 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 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 June 30, 2020 | 16,240 | | | $ | 23 | | | $ | 310,628 | | | $ | 424 | | | $ | 1,073,603 | | | $ | (648,118) | | | $ | 736,560 | |
| Share-based compensation | 58 | | | — | | | 4,099 | | | — | | | — | | | — | | | 4,099 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Other comprehensive loss | — | | | — | | | — | | | (241) | | | — | | | — | | | (241) | |
| Payroll Support Programs warrant issuance | — | | | — | | | 423 | | | — | | | — | | | — | | | 423 | |
| Net loss | — | | | — | | | — | | | — | | | (29,143) | | | — | | | $ | (29,143) | |
| Balance at September 30, 2020 | 16,298 | | | $ | 23 | | | $ | 315,150 | | | $ | 183 | | | $ | 1,044,460 | | | $ | (648,118) | | | $ | 711,698 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 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 | 171 | | | — | | | 23,842 | | | — | | | — | | | — | | | 23,842 | |
| Shares repurchased by the Company and held as treasury shares | (217) | | | — | | | — | | | — | | | — | | | (33,773) | | | (33,773) | |
| Stock issued under employee stock purchase plan | 41 | | | — | | | — | | | — | | | — | | | 3,234 | | | 3,234 | |
| Cash dividends, $0.70 per share | — | | | — | | | — | | | — | | | (11,361) | | | — | | | (11,361) | |
| Other comprehensive income | — | | | — | | | — | | | 85 | | | — | | | — | | | 85 | |
| Payroll Support Programs warrant issuance | — | | | — | | | 1,375 | | | — | | | — | | | — | | | 1,375 | |
| Net loss | — | | | — | | | — | | | — | | | (155,255) | | | — | | | (155,255) | |
| Balance at September 30, 2020 | 16,298 | | | $ | 23 | | | $ | 315,150 | | | $ | 183 | | | $ | 1,044,460 | | | $ | (648,118) | | | $ | 711,698 | |
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | Three Months Ended March 31, | | Nine Months Ended September 30, |
| | | 2021 | | 2020 | | 2021 | | 2020 |
| Cash flows from operating activities: | Cash flows from operating activities: | | | | Cash flows from operating activities: | | | |
| Net income (loss) | Net income (loss) | $ | 6,869 | | | $ | (33,009) | | Net income (loss) | $ | 141,150 | | | $ | (155,255) | |
| Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
| Depreciation and amortization | Depreciation and amortization | 43,174 | | | 43,699 | | Depreciation and amortization | 134,095 | | | 132,285 | |
| Special charges | Special charges | 1,738 | | | 163,360 | | Special charges | 2,924 | | | 279,114 | |
| Other adjustments | Other adjustments | 8,318 | | | 67,890 | | Other adjustments | 26,778 | | | 89,342 | |
| Changes in certain assets and liabilities: | Changes in certain assets and liabilities: | | Changes in certain assets and liabilities: | |
| Air traffic liability | Air traffic liability | 95,541 | | | 53,885 | | Air traffic liability | 44,014 | | | 84,111 | |
| | Other - net | Other - net | 12,353 | | | (189,508) | | Other - net | 24,634 | | | (152,872) | |
| Net cash provided by operating activities | Net cash provided by operating activities | 167,993 | | | 106,317 | | Net cash provided by operating activities | 373,595 | | | 276,725 | |
| Cash flows from investing activities: | Cash flows from investing activities: | | | | Cash flows from investing activities: | | | |
| Purchase of investment securities | Purchase of investment securities | (89,338) | | | (105,382) | | Purchase of investment securities | (1,028,481) | | | (511,667) | |
| Proceeds from maturities of investment securities | Proceeds from maturities of investment securities | 194,534 | | | 130,720 | | Proceeds from maturities of investment securities | 679,588 | | | 421,658 | |
| | Purchase of property and equipment | Purchase of property and equipment | (69,499) | | | (134,483) | | Purchase of property and equipment | (166,502) | | | (198,567) | |
| | Proceeds from sale-leaseback transactions | | Proceeds from sale-leaseback transactions | — | | | 78,185 | |
| Other investing activities | Other investing activities | (16) | | | 2,283 | | Other investing activities | 2,062 | | | 1,247 | |
| Net cash provided by (used in) investing activities | 35,681 | | | (106,862) | | |
| Net cash used in investing activities | | Net cash used in investing activities | (513,333) | | | (209,144) | |
| Cash flows from financing activities: | Cash flows from financing activities: | | | | Cash flows from financing activities: | | | |
| Cash dividends paid to shareholders | Cash dividends paid to shareholders | 0 | | | (11,478) | | Cash dividends paid to shareholders | — | | | (11,361) | |
| Proceeds from the issuance of debt and finance lease obligations | Proceeds from the issuance of debt and finance lease obligations | 105,000 | | | 128,296 | | Proceeds from the issuance of debt and finance lease obligations | 106,657 | | | 272,548 | |
| Repurchase of common stock | Repurchase of common stock | 0 | | | (33,773) | | Repurchase of common stock | — | | | (33,773) | |
| Principal payments on debt and finance lease obligations | Principal payments on debt and finance lease obligations | (151,517) | | | (62,723) | | Principal payments on debt and finance lease obligations | (239,644) | | | (146,416) | |
| Debt issuance costs | Debt issuance costs | (649) | | | (2,530) | | Debt issuance costs | (705) | | | (4,505) | |
| | Net cash provided by (used in) financing activities | (47,166) | | | 17,792 | | |
| Proceeds from issuance of common stock | | Proceeds from issuance of common stock | 335,139 | | | — | |
| Other financing activities | | Other financing activities | 3,936 | | | 4,609 | |
| Net cash provided by financing activities | | Net cash provided by financing activities | 205,383 | | | 81,102 | |
| NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 156,508 | | | 17,247 | | NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 65,645 | | | 148,683 | |
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | 170,319 | | | 136,785 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | 170,319 | | | 136,785 | |
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 326,827 | | | $ | 154,032 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 235,964 | | | $ | 285,468 | |
| | | CASH PAYMENTS (RECEIPTS) FOR: | CASH PAYMENTS (RECEIPTS) FOR: | | CASH PAYMENTS (RECEIPTS) FOR: | |
| Interest paid, net of amount capitalized | Interest paid, net of amount capitalized | $ | 15,059 | | | $ | 12,031 | | Interest paid, net of amount capitalized | $ | 30,739 | | | $ | 36,801 | |
| Income tax payments (refunds) | Income tax payments (refunds) | (138) | | | 22 | | Income tax payments (refunds) | (12,762) | | | (95,258) | |
| SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: | SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: | | SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: | |
| Right-of-use (ROU) assets acquired | Right-of-use (ROU) assets acquired | $ | 4,733 | | | $ | 50,218 | | Right-of-use (ROU) assets acquired | $ | 23,157 | | | $ | 103,499 | |
| Flight equipment acquired under finance leases | | Flight equipment acquired under finance leases | 40,826 | | | — | |
| Purchases of property and equipment in accrued liabilities | Purchases of property and equipment in accrued liabilities | 4,064 | | | 46,452 | | Purchases of property and equipment in accrued liabilities | 12,727 | | | 19,294 | |
|
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 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, 2020 and filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.
Recent Accounting Pronouncements
On December 18, 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The standard simplifies the accounting and disclosure requirements for income taxes by clarifying existing guidance to improve consistency in application of Accounting Standards Codification ("ASC") 740. The standard also removes the requirement to calculate income tax expense for the stand-alone financial statements of wholly-owned subsidiaries. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted in any interim period within that year. The Company adopted this accounting standard prospectively as of January 1, 2021, and it did not have a significant impact on the Company's 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 and the airline industry experienced a severe reduction in air travel, which continued through the first quarter of 2021.travel. Demand has recovered to some extent in 2021, but load factors remain lower than pre-pandemic levels. Demand in the foreseeable future will continue to be affected by fluctuations in COVID-19 cases, variants, hospitalizations, deaths, treatment efficacy and the availability of vaccines. The Company is continuously reevaluating flight schedules and adjusting capacity based on demand trends.
On December 27, 2020, the Consolidated Appropriations Act, 2021 (the "Payroll Support Program Extension") was signed into law. This Payroll Support Program Extension provides an additional $15.0 billion in support to the airline industry. On January 15, 2021, the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program Extension Agreement (the “PSP2”) with the Treasury under the Payroll Support Program Extension. The Companyand received 2 installments of $45.9 million each in January and March 2021 for a total of $91.8 million under the Payroll Support Program Extension. The funds were used exclusively for wages, salaries and benefits.
During 2020,In April 2021, the Company made significant progressreceived $13.8 million in additional funds related to the PSP2 which included a loan of $1.7 million. In consideration for these additional funds, the Company issued additional warrants ( the "PSP2 Warrants") to the Treasury to acquire 924 shares of common stock at a price of $179.23 per share (based on strengthening its liquidity by suspending allthe price of the Company's common stock buybacks and dividends; executives temporarily reducing their salaries by 50 percent and temporarily foregoing cash compensation of Board members; enacting a hiring freeze and offering voluntary leave; eliminating cash bonuses; suspending all non-essential capital expenditures including, but not limited to, Sunseeker Resorts, Teesnap and Allegiant Nonstop family entertainment centers; and extending payment terms and renegotiating contracts with vendors.on the Nasdaq Global Select Market on December 24, 2020).
GivenIn April 2021, the Company's efforts to conserve and raise liquidity andCompany through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program 3 Agreement (the "PSP3") with the Company's assumptions about the future impact of COVID-19 on travel demand, which could be materially different due to the inherent uncertaintiesTreasury under section 7301 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 agreementsAmerican Rescue Plan Act of 2021 and received a total of $98.4 million. The funds were used exclusively for the next 12 months based on its current level of unrestricted cashwages, salaries and short-term investments, its anticipated access to liquidity and tax refunds, and projected cash flows from operations.benefits.
8As of September 30, 2021, all Payroll Support Program funds have been fully utilized.
Special Charges
The table below summarizes special charges recorded during the three and nine months ended March 31, 2021.September 30, 2021, and 2020.
| | | | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in thousands) | (in thousands) | | 2021 | | 2020 | (in thousands) | | 2021 | | 2020 | | 2021 | | 2020 |
| Operating | Operating | | $ | 1,738 | | | $ | 166,098 | | Operating | | $ | 332 | | | $ | 33,585 | | | $ | 2,924 | | | $ | 280,852 | |
| Non-operating | Non-operating | | 0 | | | 6,802 | | Non-operating | | — | | | — | | | — | | | 26,632 | |
| Total special charges | Total special charges | | $ | 1,738 | | | $ | 172,900 | | Total special charges | | $ | 332 | | | $ | 33,585 | | | $ | 2,924 | | | $ | 307,484 | |
Additional detail for the $1.7$2.9 million of total special charges for the threenine months ended March 31,September 30, 2021 appears below:
•$1.22.4 million resulting from the accelerated retirementsretirement of 25 airframes and 38 engines
•$0.5 million related to an impairment loss on a building in Chesterfield, Missouri associated with the Allegiant Nonstop family entertainment line of business.
InAdditional detail for the first quarter 2020, the onset of COVID-19 triggered an impairment review of long lived assets and a non-cash impairment charge of $163.4 million was recognized. The Company also identified $9.5$307.5 million of expenses, primarily comprised of salarytotal special charges (operating and benefits, that were unique and specific to COVID-19.non-operating) for the nine months ended September 30, 2020 appears below:
•$168.4 million in impairment charges primarily in our non-airline subsidiaries
•$89.3 million resulting from the accelerated retirement of 7 airframes and 5 engines, loss on sale leaseback transaction of 7 aircraft, and write-offs of other aircraft related assets
•$21.5 million for additional salary and benefits expense in relation to the elimination of positions as well as other non-recurring compensation expense associated with the acceleration of certain existing stock awards
•$19.8 million accrual on termination of the loan agreement with Sixth Street Partners (formerly TSSP) intended to finance the development of Sunseeker Resorts Charlotte Harbor, which was paid in the second half of 2020
•$5.0 million related to suspension of construction at Sunseeker
•$3.5 million write-down on various non-aircraft assets and other various expenses
Note 3 — Revenue Recognition
Passenger Revenue
Passenger revenue is the most significant category in ourthe Company's reported operating revenues, as outlined below:
| | | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in thousands) | (in thousands) | 2021 | | 2020 | | (in thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| Scheduled service | Scheduled service | $ | 131,929 | | | $ | 197,261 | | | Scheduled service | $ | 195,225 | | | $ | 79,464 | | | $ | 552,765 | | | $ | 325,404 | |
| Ancillary air-related charges | Ancillary air-related charges | 121,072 | | | 176,964 | | | Ancillary air-related charges | 224,170 | | | 100,262 | | | 558,687 | | | 342,520 | |
| Co-brand redemptions | Co-brand redemptions | 3,694 | | | 4,686 | | | Co-brand redemptions | 4,401 | | | 2,190 | | | 12,785 | | | 9,423 | |
| Total passenger revenue | Total passenger revenue | $ | 256,695 | | | $ | 378,911 | | | Total passenger revenue | $ | 423,796 | | | $ | 181,916 | | | $ | 1,124,237 | | | $ | 677,347 | |
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 March 31,September 30, 2021, approximately 55.569.8 percent of the air traffic liability balance was related to forward bookings, with the remaining 44.530.2 percent related to credit vouchers for future travel.
The normal contract term of passenger tickets is 12 months and revenue associated with future travel will principally be recognized within this time frame. $70.2$177.8 million of the $307.5 million that was recorded in the air traffic liability balance as of December 31, 2020 was recognized into passenger revenue during the threenine months ended March 31,September 30, 2021.
In 2020, the Company announced that credits issued for canceled travel beginning in January 2020 would have an extended
expiration date of two years from the original booking date. This policy continues in effect at the current time.continued for vouchers issued through June 30, 2021. This change
has been considered in estimating the future breakage rate, which represents the value of credit vouchers that are not
expected to be redeemed prior to their contractual expiration date. Estimates of revenue to be recognized from air traffic liability for credit vouchers may be subject to variability and differ from historical experience due to the change in contract duration and uncertainty regarding demand for future air travel. Effective July 1, 2021, vouchers issued have an expiration date of one year from the original booking 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 for the periods indicated:
| | | Three Months Ended March 31, | | Nine Months Ended September 30, |
| (in thousands) | (in thousands) | 2021 | | 2020 | (in thousands) | 2021 | | 2020 |
| Balance at January 1 | Balance at January 1 | $ | 21,841 | | | $ | 15,613 | | Balance at January 1 | $ | 21,841 | | | $ | 15,613 | |
| Points awarded (deferral of revenue) | Points awarded (deferral of revenue) | 4,571 | | | 6,354 | | Points awarded (deferral of revenue) | 23,319 | | | 15,018 | |
| Points redeemed (recognition of revenue) | Points redeemed (recognition of revenue) | (3,694) | | | (4,686) | | Points redeemed (recognition of revenue) | (12,785) | | | (9,510) | |
| Balance at March 31 | $ | 22,718 | | | $ | 17,281 | | |
| Balance at September 30 | | Balance at September 30 | $ | 32,375 | | | $ | 21,121 | |
As of March 31,September 30, 2021 and 2020, $10.3$15.9 million and $12.5$11.8 million, respectively, of the current points liability is reflected in accrued liabilities and represents the current estimate of revenue to be recognized in the next 12 months based on historical trends, with the remaining balance reflected in other noncurrent liabilities expected to be recognized into revenue in periods thereafter.
Note 4 — Property and Equipment
The following table summarizes the Company's property and equipment as of the dates indicated:
| | (in thousands) | (in thousands) | March 31, 2021 | | December 31, 2020 | (in thousands) | September 30, 2021 | | December 31, 2020 |
| Flight equipment, including pre-delivery deposits | Flight equipment, including pre-delivery deposits | $ | 2,370,269 | | | $ | 2,331,499 | | Flight equipment, including pre-delivery deposits | $ | 2,474,650 | | | $ | 2,331,499 | |
| Computer hardware and software | Computer hardware and software | 151,755 | | | 149,727 | | Computer hardware and software | 157,334 | | | 149,727 | |
Land and buildings/leasehold improvements (1) | Land and buildings/leasehold improvements (1) | 87,030 | | | 87,030 | | Land and buildings/leasehold improvements (1) | 87,657 | | | 87,030 | |
| Other property and equipment | Other property and equipment | 80,672 | | | 80,601 | | Other property and equipment | 97,965 | | | 80,601 | |
| Total property and equipment | Total property and equipment | 2,689,726 | | | 2,648,857 | | Total property and equipment | 2,817,606 | | | 2,648,857 | |
| Less accumulated depreciation and amortization | Less accumulated depreciation and amortization | (617,515) | | | (598,546) | | Less accumulated depreciation and amortization | (669,618) | | | (598,546) | |
| Property and equipment, net | Property and equipment, net | $ | 2,072,211 | | | $ | 2,050,311 | | Property and equipment, net | $ | 2,147,988 | | | $ | 2,050,311 | |
(1) Balance for 2021 and 2020 includes a building currently held for sale in Chesterfield, Missouri with a carrying value of $4.3 million as of September 30, 2021.
Accrued capital expenditures as of March 31,September 30, 2021 and December 31, 2020 were $4.1$12.7 million and $16.9 million, respectively.
Note 5 — Long-Term Debt
The following table summarizes the Company's Long-term debt and finance lease obligations as of the dates indicated:
| | (in thousands) | (in thousands) | March 31, 2021 | | December 31, 2020 | (in thousands) | September 30, 2021 | | December 31, 2020 |
| Fixed-rate debt and finance lease obligations due through 2029 | $ | 619,874 | | | $ | 525,240 | | |
| Fixed-rate debt and finance lease obligations due through 2030 | | Fixed-rate debt and finance lease obligations due through 2030 | $ | 634,761 | | | $ | 525,240 | |
| Variable-rate debt due through 2029 | Variable-rate debt due through 2029 | 996,178 | | | 1,133,771 | | Variable-rate debt due through 2029 | 939,443 | | | 1,133,771 | |
| Total long-term debt and finance lease obligations, net of related costs | 1,616,052 | | | 1,659,011 | | |
| Total debt and finance lease obligations, net of related costs | | Total debt and finance lease obligations, net of related costs | 1,574,204 | | | 1,659,011 | |
| Less current maturities, net of related costs | Less current maturities, net of related costs | 156,482 | | | 217,234 | | Less current maturities, net of related costs | 139,590 | | | 217,234 | |
| Long-term debt and finance lease obligations, net of current maturities and related costs | Long-term debt and finance lease obligations, net of current maturities and related costs | $ | 1,459,570 | | | $ | 1,441,777 | | Long-term debt and finance lease obligations, net of current maturities and related costs | $ | 1,434,614 | | | $ | 1,441,777 | |
| | Weighted average fixed-interest rate on debt | Weighted average fixed-interest rate on debt | 5.8 | % | | 5.7 | % | Weighted average fixed-interest rate on debt | 5.7% | | 5.7% |
| Weighted average variable-interest rate on debt | Weighted average variable-interest rate on debt | 2.5 | % | | 2.4 | % | Weighted average variable-interest rate on debt | 2.4% | | 2.4% |
Maturities of long-term debt and finance lease obligations for the remainder of 2021 and for the next four years and thereafter, in the aggregate, are: remaining in 2021 - $120.4$38.3 million; 2022 - $131.9$133.3 million; 2023 - $131.7$133.9 million; 2024 - $801.6$803.9 million; 2025 - $84.6$87.1 million; and $345.8$377.7 million thereafter.
Senior Secured Revolving Credit Facility
The senior secured revolving credit facility under which the Company was able to borrow up to $81.0 million matured on March 31, 2021. Principal payments were made during the quarter totaling $7.4 million and the final outstanding balance of $46.5 million was paid at maturity.
In March 2021, the Company entered into a new revolving credit facility under which it is entitled to borrow up to $50.0 million. The facility has a term of 24 months and the borrowing ability is based on the value of the Airbus A320 series aircraft placed into the collateral pool. The notes for amounts borrowed under the facility bear interest at a floating rate based on LIBOR and are due in March 2023. As of March 31,September 30, 2021, 0no aircraft collateral had been added to the collateral pool and the facility was undrawn.
Note 6 — Income Taxes
The Company recorded an effective tax rate of 20.821.9 percent and 74.734.8 percent for the three months ended March 31,September 30, 2021 and 2020, respectively. The effective tax rate for the three months ended March 31,September 30, 2021 differed from the statutory Federal income tax rate of 21.0 percent primarily due to state income taxes;taxes and the impact of ASU 2016-09 related to share-based payments; and reserve for uncertain tax positions.payments. The effective tax rate for the three months ended March 31,September 30, 2020 wasdiffered 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 toallowed the full utilization of 2018 and 2019 net operating losses against taxable income in earlier years in which 35.0 percent was the enacted tax rate; the abilityCompany to carryback the 2020 net operating loss at athe 35.0 percent rate applicable in earlier years; a deferred tax remeasurement related to the 2020 tax year; and state taxes.years. While the Company expects its effective tax rate to be fairly consistent in the near term, it will vary depending on recurring items such as the amount of income earned in each state and the state tax rate applicable to such income. Discrete items during interim periods may also affect the Company's tax rates.
The Company recorded an effective tax rate of 22.2 percent and 51.8 percent for the nine months ended September 30, 2021 and 2020, respectively. The effective tax rate for the nine months ended September 30, 2021 differed from the statutory Federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of ASU 2016-09 related to share-based payments. The 51.8 percent effective tax rate for the nine months ended September 30, 2020 differed from the statutory federal income tax rate of 21.0 percent primarily due to the tax accounting impact of the CARES Act which included a $40.9 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.
Note 7 — Leases
The Company evaluates all operating leases and they are measured on the balance sheet with a lease liability and right-of-use asset (“ROU”) at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. Airport terminal leases mostly include variable lease payments outside of those based on a fixed index, and are therefore not recorded as ROU assets.
The following table summarizes the Company's total assets and liabilities related to leases as of the dates indicated:
| | (in thousands) | (in thousands) | Classification on the Balance Sheet | March 31, 2021 | | December 31, 2020 | (in thousands) | Classification on the Balance Sheet | September 30, 2021 | | December 31, 2020 |
| Assets | Assets | | | | Assets | | | |
Operating lease assets(1) | Operating lease assets(1) | Operating lease right-of-use assets | $ | 116,998 | | | $ | 115,911 | | Operating lease assets(1) | Operating lease right-of-use assets | $ | 124,297 | | | $ | 115,911 | |
Finance lease assets(2) | Finance lease assets(2) | Property and equipment, net | 242,280 | | | 133,175 | | Finance lease assets(2) | Property and equipment, net | 235,759 | | | 133,175 | |
| Total lease assets | Total lease assets | | $ | 359,278 | | | $ | 249,086 | | Total lease assets | | $ | 360,056 | | | $ | 249,086 | |
| | Liabilities | Liabilities | | Liabilities | |
| Current | Current | | Current | |
Operating(1) | Operating(1) | Current operating lease liabilities | $ | 15,247 | | | $ | 14,313 | | Operating(1) | Current operating lease liabilities | $ | 17,642 | | | $ | 14,313 | |
Finance(2) | Finance(2) | Current maturities of long-term debt and finance lease obligations | 13,358 | | | 9,767 | | Finance(2) | Current maturities of long-term debt and finance lease obligations | 14,951 | | | 9,767 | |
| Noncurrent | Noncurrent | | Noncurrent | |
Operating(1) | Operating(1) | Noncurrent operating lease liabilities | 103,103 | | | 102,289 | | Operating(1) | Noncurrent operating lease liabilities | 110,322 | | | 102,289 | |
Finance(2) | Finance(2) | Long-term debt and finance lease obligations | 215,354 | | | 117,060 | | Finance(2) | Long-term debt and finance lease obligations | 247,035 | | | 117,060 | |
| Total lease liabilities | Total lease liabilities | | $ | 347,062 | | | $ | 243,429 | | Total lease liabilities | | $ | 389,950 | | | $ | 243,429 | |
(1) RepresentsThe September 30, 2021 number represents assets and liabilities of 1316 aircraft, office equipment, certain airport and terminal facilities, and other assets under operating leases
(2) March 31,The September 30, 2021 number represents assets and liabilities of 912 aircraft under finance leases
Sale-Leaseback Transaction
In MarchDuring the nine months ended September 30, 2021, the Company entered into a sale-leaseback transaction involving 3 aircraft and generating $105.0 million of proceeds. The lease was classified as a finance lease and as a result, the transaction did not qualify as a sale. The aircraft were not removed from property and equipment in the Company's balance sheet and the Company recorded a financial liability in the amount of $105.0 million. The proceeds from this transaction are treated as cash inflows from finance lease obligations and reported in financing activities on the statement of cash flows.
Note 8 — Fair Value Measurements
The Company utilizes the market approach to measure the fair value of its financial assets. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The assets classified as Level 2 primarily utilize quoted market prices or alternative pricing sources including transactions involving identical or comparable assets and models utilizing market observable inputs for valuation of these securities. No changes in valuation techniques or inputs occurred during the threenine months ended March 31,September 30, 2021.
Financial instruments measured at fair value on a recurring basis:
| | | March 31, 2021 | | December 31, 2020 | | September 30, 2021 | | December 31, 2020 |
| (in thousands) | (in thousands) | Total | | Level 1 | | Level 2 | | Total | | Level 1 | | Level 2 | (in thousands) | Total | | Level 1 | | Level 2 | | Total | | Level 1 | | Level 2 |
| Cash equivalents | Cash equivalents | | | | | | | | | | | | Cash equivalents | | | | | | | | | | | |
| Money market funds | Money market funds | $ | 160,730 | | | $ | 160,730 | | | $ | 0 | | | $ | 5,340 | | | $ | 5,340 | | | $ | 0 | | Money market funds | $ | 100,965 | | | $ | 100,965 | | | $ | — | | | $ | 5,340 | | | $ | 5,340 | | | $ | — | |
| Commercial Paper | | Commercial Paper | 25,199 | | | — | | | 25,199 | | | 48,908 | | | — | | | 48,908 | |
| Municipal debt securities | Municipal debt securities | 59,417 | | | 0 | | | 59,417 | | | 34,338 | | | 0 | | | 34,338 | | Municipal debt securities | 16,674 | | | — | | | 16,674 | | | 34,338 | | | — | | | 34,338 | |
| Commercial Paper | 21,889 | | | 0 | | | 21,889 | | | 48,908 | | | 0 | | | 48,908 | | |
| Corporate debt securities | 7,407 | | | 0 | | | 7,407 | | | 0 | | | 0 | | | 0 | | |
| | Federal agency debt securities | Federal agency debt securities | 0 | | | 0 | | | 0 | | | 51,400 | | | 0 | | | 51,400 | | Federal agency debt securities | — | | | — | | | — | | | 51,400 | | | — | | | 51,400 | |
| | Total cash equivalents | Total cash equivalents | 249,443 | | | 160,730 | | | 88,713 | | | 139,986 | | | 5,340 | | | 134,646 | | Total cash equivalents | 142,838 | | | 100,965 | | | 41,873 | | | 139,986 | | | 5,340 | | | 134,646 | |
| Short-term | Short-term | | | | | | | | | | | | Short-term | | | | | | | | | | | |
| Commercial paper | Commercial paper | 188,937 | | | 0 | | | 188,937 | | | 229,821 | | | 0 | | | 229,821 | | Commercial paper | 387,044 | | | — | | | 387,044 | | | 229,821 | | | — | | | 229,821 | |
| | Corporate debt securities | Corporate debt securities | 115,812 | | | 0 | | | 115,812 | | | 166,768 | | | 0 | | | 166,768 | | Corporate debt securities | 267,821 | | | — | | | 267,821 | | | 166,768 | | | — | | | 166,768 | |
| Municipal debt securities | Municipal debt securities | 84,294 | | | 0 | | | 84,294 | | | 87,290 | | | 0 | | | 87,290 | | Municipal debt securities | 219,479 | | | — | | | 219,479 | | | 87,290 | | | — | | | 87,290 | |
| Federal agency debt securities | Federal agency debt securities | 37,338 | | | 0 | | | 37,338 | | | 48,598 | | | 0 | | | 48,598 | | Federal agency debt securities | 3,000 | | | — | | | 3,000 | | | 48,598 | | | — | | | 48,598 | |
| Total short-term | Total short-term | 426,381 | | | 0 | | | 426,381 | | | 532,477 | | | 0 | | | 532,477 | | Total short-term | 877,344 | | | — | | | 877,344 | | | 532,477 | | | — | | | 532,477 | |
| | Total financial instruments | Total financial instruments | $ | 675,824 | | | $ | 160,730 | | | $ | 515,094 | | | $ | 672,463 | | | $ | 5,340 | | | $ | 667,123 | | Total financial instruments | $ | 1,020,182 | | | $ | 100,965 | | | $ | 919,217 | | | $ | 672,463 | | | $ | 5,340 | | | $ | 667,123 | |
None of the Company's debt is publicly held and as a result, the Company has determined the estimated fair value of these notes to be Level 3. Certain inputs used to determine 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:
| | | March 31, 2021 | | December 31, 2020 | | | September 30, 2021 | | December 31, 2020 | |
| (in thousands) | (in thousands) | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value | | Hierarchy Level | (in thousands) | Carrying Value | | Estimated Fair Value | | Carrying Value | | Estimated Fair Value | | Hierarchy Level |
| Non-publicly held debt | Non-publicly held debt | $ | 1,408,823 | | | $ | 1,197,427 | | | $ | 1,555,637 | | | $ | 1,191,008 | | | 3 | Non-publicly held debt | $ | 1,329,907 | | | $ | 1,157,257 | | | $ | 1,555,637 | | | $ | 1,191,008 | | | 3 |
Due to their short-term nature, the carrying amounts of cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value.
Note 9 — Earnings (Loss) per Share
Basic and diluted earnings (loss) per share are computed pursuant to the two-class method. Under this method, the Company attributes net income (loss) to two classes: common stock and unvested restricted stock. Unvested restricted stock awards granted to employees under the Company’s Long-Term Incentive Plan are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock.
Diluted net income per share is calculated using the more dilutive of the two methods. Under both methods, the exercise of employee stock options is assumed using the treasury stock method. The assumption of vesting of restricted stock, however, differs:
1.Assume vesting of restricted stock using the treasury stock method.
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 months ended March 31,September 30, 2021, the second method was used 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 March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2021 | | 2020 | | | 2021 | | 2020 | | 2021 | | 2020 |
| Basic: | Basic: | | | | | Basic: | | | | | | | |
| Net income (loss) | Net income (loss) | $ | 6,869 | | | $ | (33,009) | | | Net income (loss) | $ | 39,254 | | | $ | (29,143) | | | $ | 141,150 | | | $ | (155,255) | |
| Less income allocated to participating securities | Less income allocated to participating securities | (103) | | | (236) | | | Less income allocated to participating securities | (573) | | | — | | | (2,028) | | | (236) | |
| Net income (loss) attributable to common stock | Net income (loss) attributable to common stock | $ | 6,766 | | | $ | (33,245) | | | Net income (loss) attributable to common stock | $ | 38,681 | | | $ | (29,143) | | | $ | 139,122 | | | $ | (155,491) | |
| Earnings (loss) per share, basic | Earnings (loss) per share, basic | $ | 0.42 | | | $ | (2.08) | | | Earnings (loss) per share, basic | $ | 2.18 | | | $ | (1.82) | | | $ | 8.18 | | | $ | (9.75) | |
| Weighted-average shares outstanding | Weighted-average shares outstanding | 16,167 | | | 15,952 | | | Weighted-average shares outstanding | 17,766 | | | 16,006 | | | 17,005 | | | 15,953 | |
| Diluted: | Diluted: | | | | | Diluted: | | | | | | | |
| Net income (loss) | Net income (loss) | $ | 6,869 | | | $ | (33,009) | | | Net income (loss) | $ | 39,254 | | | $ | (29,143) | | | $ | 141,150 | | | $ | (155,255) | |
| Less income allocated to participating securities | Less income allocated to participating securities | (103) | | | (236) | | | Less income allocated to participating securities | (573) | | | — | | | (2,027) | | | (236) | |
| Net income (loss) attributable to common stock | Net income (loss) attributable to common stock | $ | 6,766 | | | $ | (33,245) | | | Net income (loss) attributable to common stock | $ | 38,681 | | | $ | (29,143) | | | $ | 139,123 | | | $ | (155,491) | |
| Earnings (loss) per share, diluted | Earnings (loss) per share, diluted | $ | 0.42 | | | $ | (2.08) | | | Earnings (loss) per share, diluted | $ | 2.18 | | | $ | (1.82) | | | $ | 8.18 | | | $ | (9.75) | |
Weighted-average shares outstanding(1) | 16,167 | | | 15,952 | | | |
| | Weighted-average shares outstanding | | Weighted-average shares outstanding | 17,766 | | | 16,006 | | | 17,005 | | | 15,953 | |
| Dilutive effect of stock options and restricted stock | | Dilutive effect of stock options and restricted stock | 103 | | | — | | | 121 | | | — | |
| Adjusted weighted-average shares outstanding under treasury stock method | | Adjusted weighted-average shares outstanding under treasury stock method | 17,869 | | | 16,006 | | | 17,126 | | | 15,953 | |
| Participating securities excluded under two-class method | | Participating securities excluded under two-class method | (102) | | | — | | | (111) | | | — | |
| Adjusted weighted-average shares outstanding under two-class method | | Adjusted weighted-average shares outstanding under two-class method | 17,767 | | | 16,006 | | | 17,015 | | | 15,953 | |
(1) Dilutive effect of common stock equivalents excluded from the diluted per share calculation is not material.
Note 10 — 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 11 — Subsequent Events
Sunseeker Resort
On October 13, 2021, Sunseeker Florida, Inc. (“SFI”), a wholly-owned subsidiary of the Company, entered into a Credit Agreement pursuant to which SFI may borrow up to $350.0 million (the “Loan”) funded by one or more entities directly or indirectly managed by Castlelake, L.P.(“Lender”) to be applied to the remaining construction of the initial phases of Sunseeker Resorts at Charlotte Harbor (the “Project”). The Company expects $175.0 million of the loan to be advanced before the end of October with the remaining balance to be received in 2 tranches scheduled for April and October 2022.
The Loan is secured by the Project. All of the shares in SFI are also pledged to secure the Loan. The Loan bears interest at 5.75 percent per annum payable semi-annually, provides for semi-annual principal payments of $26.0 million beginning in 2025 and matures in October 2028. The Credit Agreement includes covenants similar to the covenants in the Company’s Term Loan B.
To support the credit, the Company has guaranteed the full amount of the debt and has agreed to guarantee completion of the Project in accordance with approved plans and specifications.
The Credit Agreement contains various events of default and upon an event of default the Lender may, subject to various customary cure rights, be relieved of further obligations to fund and require the immediate payment of all amounts outstanding under the Loan. SFI and the Company will use the proceeds of the Loan to fund the construction of the Project.
Federal Income Tax Refund
In AprilOctober 2021, the Company received $13.8$115.8 million in fundsfederal income tax refunds related to the PSP2. In consideration for these additional funds, the Company issued additional warrants ( the "PSP2 Warrants") to the Treasury to acquire 924 shares of common stock at a price of $179.23 per share (based on the price of the Company's common stock on the Nasdaq Global Select Market.on December 24, 2020). Also, in consideration for these additional funds received, the PSP2 note was increased to $1.7 million.2020 net operating losses.
Collective Bargaining Agreement
In AprilOctober 2021, maintenance technician and related employees represented by the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program 3 Agreement (the "PSP3")International Brotherhood of Teamsters (IBT) have voted to ratify their first collective bargaining agreement with the Treasury under section 7301Company. The contract is effective from the date of the American Rescue Plan Act of 2021. The total amount expected to be allocated to Allegiant Air under the PSP3 is approximately $98.4 million, which must be used exclusivelyratification - October 26, 2021 – for wages, salaries and benefits.a five-year term. The Company received an initial installment of $49.2 million in April 2021currently employs 415 maintenance technician and the remainder of the funds are expected to be received during the second quarter 2021.related employees – a group which includes line and heavy maintenance technicians, as well as stores employees and some administrative maintenance staff.
If additional funds are allocated by the Treasury under the PSP3 such that the amount received by the Company exceeds $100.0 million, then Allegiant Air will issue a note for 30 percent for the funds received under the PSP3 in excess of $100.0 million and the Company will be required to issue warrants based on the amount of the notes.
On April 30, 2021, the Company closed on a transaction to sell 85 percent of Teesnap, its golf course management software subsidiary. The Company will retain 15 percent ownership in the business.
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 months ended March 31,September 30, 2021 and 2020. Also discussed is our financial position as of March 31,September 30, 2021 and December 31, 2020. You should read this discussion in conjunction with our unaudited consolidated financial statements, including the notes thereto, appearing elsewhere in this Form 10-Q and our consolidated financial statements appearing in our annual report on Form 10-K for the year ended December 31, 2020. This discussion and analysis contains forward-looking statements. Please refer to the section below entitled “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.
First
Third Quarter 2021 Review
Highlights:
–EarningsDiluted earnings per share of $0.42 as the PSP funds contributed to our first net profit since the onset of the pandemic$2.18
–Restored capacity to pre-pandemic levelsTotal operating revenue was $459.5 million, up 5.3 percent when compared with scheduled service capacity up 3.1 percent versus firstthe third quarter of 2019
–Continued sequential quarterly improvement in total revenue with first quarter 2021 total revenueTotal average fare of $116.91, up 13.27.2 percent from the fourth quarter 2020year over two-year
–Fixed fee revenue of $7.7 million,Continued sequential improvement in load factor, which came in at 76.6 percent, up nearly 6 percentage points from the strongestsecond quarter since the onset of the pandemic
–Total cash and investments at March 31,September 30, 2021 were $728 million,$1.11 billion, up from $685$702.8 million at December 31, 2020
–IncludedYield remained strong throughout the quarter down only 5.9 percent year over two-year on Forbes' listscheduled service capacity increases of America's Best Employers for Diversity in 202117.0 percent
–Partnered with The Smith CenterAllegiant World Mastercard voted USA Today Readers' Choice Best Airline Co-Branded Credit Card for the Performing Arts as a sponsor ofthird consecutive year
–Launched the annual Heart of Education Awards honoring outstanding teachers in Southern Nevada by awarding travel vouchers to 700 teachersAllways Rewards program during the quarter with over 13 million active members
AIRCRAFT
The following table sets forth the aircraft in service and operated by us as of the dates indicated:
| | | March 31, 2021 | | December 31, 2020 | | | September 30, 2021 | | December 31, 2020 | |
| A319 | A319 | 35 | | | 34 | | | A319 | 35 | | | 34 | | |
A320(1) | A320(1) | 65 | | | 61 | | | A320(1) | 71 | | | 61 | | |
| Total | Total | 100 | | | 95 | | | Total | 106 | | | 95 | | |
(1) Does not include fourseven aircraft of which we have taken delivery as of September 30, 2021, but were not yet in service as of March 31, 2021.that date.
As of March 31, 2021, we had firm commitments to purchase four aircraft. We expect delivery of three of these aircraft in 2021 and the remaining aircraft in 2022.
NETWORK
As of March 31,September 30, 2021, we were selling 580598 routes versus 520 as of the same date last year,in 2020 and 466 as of September 30, 2019, which represents an 11.5a 15.0 and 28.3 percent increase.increase, respectively. Our total active number of origination cities and leisure destinations (for operating routes) were 9796 and 32,31, respectively, as of March 31,September 30, 2021. During the first quarter, we announced the addition of a new base in Austin, Texas, beginning base operations in November 2021, which is expected to house three A320 aircraft.
Our unique model is predicated around expanding and contracting capacity to meet seasonal travel demands. We are maintainingmaintained a broad network and selling presence.presence during the pandemic and have grown our network as air travel is recovering. We consistently monitor flights to assess for cash profitability.
TRENDS
COVID-19
The COVID-19 pandemic has significantly impacted our operating results for the three and nine months ending March 31,September 30, 2021 and willmay continue to do so into the future. Air traffic demand is down substantially and base air faresOur load factors are down as well.a result. We cannot predict when air travel will return to customarypre-pandemic levels or at what pace. In the meantime, our revenues will be adversely affected. We believe that demand in the foreseeable future will continue to fluctuate in response to fluctuations in COVID-19 cases, new variationsvariants of the virus, hospitalizations, deaths, treatment efficacy, and the availability of vaccines.vaccines, CDC recommendations, and government restrictions.
Despite the pandemicpandemic and airline industry challenges, since the beginning of 2021 and through March 31,September 30, 2021, we have announced service on 50on 120 new routes and to threenine new cities, includingincluding seasonal and temporary routes. We will continue to manage capacity to meet demand, which we believe is a core strength of our business model.
Operations
Noncontrollable and controllable factors have contributed to a higher than normal level of cancellations beginning in second quarter 2021 and have resulted in increased irregular operations costs. The noncontrollable factors include weather, TSA delays generally and particularly at smaller airports, airport overcrowding, supply chain disruptions and labor shortages. Controllable issues relate to various aspects of our operations as we had to readjust to providing peak capacity while also facing a number of external issues as indicated above. We believe these issues are not unique to Allegiant nor do we believe they are systemic. Our primary focus duringirregular operations costs are also impacted by our policy to provide what we believe to be generous allowances to passengers impacted by our cancellations.
We are investing incrementally in our operations in an attempt to improve performance and this may put pressure on unit costs in the pandemic has beennear term and into 2022. However, if these problems persist, we may suffer reputational damage and incur higher costs for irregular operations.
Growth
We plan to conserve cash.continue to grow our aircraft fleet and route network and have executed agreements to acquire 22 incremental aircraft year-to-date, of which 14 have yet to be delivered at September 30, 2021. Our future profitability will be affected by the success of our growth initiatives.
Aircraft Fuel
The cost of fuel is volatile, as it is subject to many economic and geopolitical factors we can neither control nor predict. Significant increases in fuel costs could materially affect our operating results and profitability. We have suspended payment of cash dividends and stock buybacks. not sought to use financial derivative products to hedge our exposure to fuel price volatility, nor do we have any plans to do so in the future.
Sunseeker Resort
We have suspendedrecommenced the construction of theour Sunseeker Resort in Southwest Florida and closed and disposed of our family entertainment centers. We have eliminated other nonessential expenditures and have renegotiated arrangements with outside vendors, all in an effort to conserve cash until revenues more fully recover.
Health and Safety
Amid various uncertainties and public concern during the COVID-19 pandemic, we have implemented the below measures to ensure health and safety for all traveling on our flights. Due to our focus on these health and safety measures, we were ranked by Safe Travel Barometer in August 2020 as2021. In October 2021, we entered into a credit agreement with affiliates of Castlelake L.P. to finance up to $350 million of the #1 airline among North American carriers and amongremaining construction cost. With this funding, we expect to complete the top five worldwide for best COVID-19 Traveler Safety Measures, with results based on an independent audit of more than 150 airlines.Project by early 2023.
–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 minutes, exceeding HEPA standards
–Require customers to wear face coverings through all phases of 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 and cleaning wipes, available 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 to the extent 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 March 31,September 30, 2021 to three months ended March 31,September 30, 2020
OperationsAs comparisons of our 2021 results to periods during 2020 reflect disproportionate changes due to the first quarterimpact of 2020 consistedthe pandemic on air travel, we have also provided analysis of two months of pre-pandemic activitycertain revenue and March 2020, which was substantially impacted by the pandemic. The entirety of first quarter 2021 was impacted by continuing reduced demand for air travel.expense line items to 2019 results where helpful to understand trends in our performance.
Operating Revenue
Passenger revenue. For the firstthird quarter 2021, passenger revenue decreased 32.3increased 133.0 percent compared to first quarterthe same period in 2020. This declineincrease was due to a significant decline in passenger demand related to COVID-19 as scheduledduring the third quarter 2020. Scheduled service passengers were down 26.4up 91.4 percent and scheduled service average base fare was down 8.8up 27.7 percent.
Passenger revenue for the third quarter 2021, as compared to third quarter 2019, increased by 8.3 percent, as passengers increased by 2.2 percent on a 17.0 percent increase in capacity resulting in a 9.4 percentage point decrease in load factor. Average scheduled service fares increased by 6.0 percent over the same period 2019 as a result of a 16.8 percent increase in air ancillary revenue per passenger.
The increase in air ancillary revenue per passenger was primarily driven by a higher take rate on bundled products.
Third party products revenue. Third party products revenue for the firstthird quarter 2021 decreased 14.7increased 116.5 percent compared to the firstthird quarter 2020. This2020 and 34.8 percent compared to the third quarter 2019. The increase from 2020 is primarily due to decreased net revenue from boththe result of greater travel demand for rental cars and hotels as a resultthan during the early part of the pandemic. The increase from 2019 is attributable to increased rental car rates (which more than offset the impact of fewer passengersrental car days) and with respect to hotel room revenue, particularly reductionsgrowth in those traveling to Las Vegas. On a per passenger basis, third party products revenue was up 15.9 percent year over year and 17.0 percent year over first quarter 2019.our co-branded credit card revenues.
Fixed fee contract revenue. Despite increased fixed fee flying for March Madness in the first quarter 2021, fixedFixed fee contract revenue for the firstthird quarter 2021 decreased 13.8increased 110.4 percent compared to the same period in 2020 as a result of a 57.0 percent increase in related departures due to decreases in demand. The decreases in fixedlower charter activity during the pandemic.
Fixed fee contract revenue are relatedfor the third quarter 2021, as compared to COVID-19.2019, decreased by 43.8 percent due to continuing depressed demand for group charters compared to pre-pandemic periods.
Other revenue. Other revenue decreased 79.399.4 percent for the firstthird quarter 2021 from the same period in 2020. The decrease was due to decreased activity in the non-airline subsidiaries including the closure of the family entertainment centers.subsidiaries.
Operating Expenses
We primarily evaluate our expense management by comparing our costs per available seat mile (ASM) across different periods, which enables us to assess trends in each expense category. The following table presents 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 March 31, | | Percent | | Three Months Ended September 30, | | Percent Change |
| Unitized costs (in cents) | Unitized costs (in cents) | 2021 | | 2020 | | Change | Unitized costs (in cents) | 2021 | | 2020 | | 2019 | | YoY | | Yo2Y |
| Salary and benefits | Salary and benefits | 2.94 | | | 2.77 | | | 6.1 | % | Salary and benefits | 2.83 | | | 2.72 | | | 2.77 | | | 4.0 | % | | 2.2 | % |
| Aircraft fuel | Aircraft fuel | 2.06 | | | 2.18 | | | (5.5) | | Aircraft fuel | 2.67 | | | 1.49 | | | 2.69 | | | 79.2 | | | (0.7) | |
| Station operations | | Station operations | 1.60 | | | 1.13 | | | 1.12 | | | 41.6 | | | 42.9 | |
| Depreciation and amortization | Depreciation and amortization | 1.08 | | | 1.07 | | | 0.9 | | Depreciation and amortization | 1.04 | | | 1.29 | | | 1.01 | | | (19.4) | | | 3.0 | |
| Station operations | 1.07 | | | 1.01 | | | 5.9 | | |
| Maintenance and repairs | Maintenance and repairs | 0.58 | | | 0.54 | | | 7.4 | | Maintenance and repairs | 0.69 | | | 0.40 | | | 0.64 | | | 72.5 | | | 7.8 | |
| Sales and marketing | Sales and marketing | 0.29 | | | 0.45 | | | (35.6) | | Sales and marketing | 0.50 | | | 0.23 | | | 0.45 | | | 117.4 | | | 11.1 | |
| Aircraft lease rentals | Aircraft lease rentals | 0.12 | | | 0.02 | | | 500.0 | Aircraft lease rentals | 0.13 | | | 0.09 | | | — | | | 44.4 | | | NM |
| Other | Other | 0.44 | | | 0.66 | | | (33.3) | | Other | 0.50 | | | 0.56 | | | 0.69 | | | (10.7) | | | (27.5) | |
| Payroll Support Programs grant recognition | Payroll Support Programs grant recognition | (2.28) | | | — | | | NM | Payroll Support Programs grant recognition | (1.12) | | | (2.21) | | | — | | | (49.3) | | | NM |
| Operating Special charges | 0.04 | | | 4.25 | | | (99.1) | | |
| Operating special charges | | Operating special charges | 0.01 | | | 0.95 | | | — | | | (98.9) | | | NM |
| CASM | CASM | 6.34 | | | 12.95 | | | (51.0) | | CASM | 8.85 | | | 6.65 | | | 9.37 | | | 33.1 | | | (5.5) | |
| Operating CASM, excluding fuel | Operating CASM, excluding fuel | 4.28 | | | 10.77 | | | (60.3) | | Operating CASM, excluding fuel | 6.18 | | | 5.16 | | | 6.68 | | | 19.8 | | | (7.5) | |
|
NM - Not meaningful
Salary and benefits expense. Salary and benefits expense increased $5.3$30.0 million, or 4.731.3 percent, for the firstthird quarter 2021 when compared to the same period in 2020. The increase is due toAlthough the classificationaverage number of $9.5 million as COVID-19 related special charges in the first quarter 2020 (consisting almost entirely of salary and benefit expense) offset by a decline in full time equivalent employees remained relatively flat year over year, overall expense increased due to temporary voluntary leave programs offered to employees, voluntary pay reductions, and suspension of 9.9 percent whenthe bonus accrual that were in effect during the third quarter 2020.
When compared to March 31, 2020.the same period in 2019, salaries and benefits expense increased by $18.2 million or 16.9 percent on a relatively flat number of full time equivalent employees year over two year. On a per ASM basis, salary and benefits expense increased only 2.2 percent. The cost increases primarily relate to annual increases in crew pay and increased costs associated with irregular operations.
Aircraft fuel expense. Aircraft fuel expense decreased $6.0increased $65.8 million, or 6.7125.3 percent, for the firstthird quarter 2021 compared to firstthird quarter 2020 as2020. This is primarily due to the recovery from the COVID-19 pandemic driving increased capacity resulting in a 35.3 percent increase in fuel gallons consumed on a 25.8 percent increase in departures and a 66.7 percent increase in average fuel cost per gallon which was relatively flat year over year. Systemdepressed during the pandemic.
When compared to the same period in 2019, aircraft fuel expense increased by 13.2 percent as average fuel cost per gallon increased 1.9 percent, departures increased 10.7 percent, and fuel gallons consumed decreased by 6.4increased 11.2 percent.
Station operations expense. Station operations expense for the third quarter 2021 increased $31.0 million, or 77.6 percent on a 1.3 percent decrease in ASMs. Fuel efficiency (measured as ASMs per gallon) increased 5.5 percent year over year due to fuel saving initiatives, as well as less weight on many of our flights, due to a 18.5 percentage point decrease in load factor as compared to the first quarter 2020.same period in 2020 due to increased departures of 25.8 percent and increased costs associated with irregular operations.
Compared to the same period in 2019, station operations expense increased by $27.4 million or 63.0 percent. This increase is due to an increase in departures of 10.7 percent, a 54 percent and 47 percent increase in airport and landing fees respectively, and increased costs associated with irregular operations.
Depreciation and amortization expense. Depreciation and amortization expense for the firstthird quarter 2021 was relatively flatincreased by 2.4 percent as compared to the firstthird quarter 2020 with a 1.2 percent decrease due toas the retirement and sale lease-back transactionsaverage number of aircraft during 2020.
Station operations expense. Station operations expense for the first quarter 2021owned and in service increased $2.1 million, or 5.18.9 percent compared to the same period in 2020 primarily due to a 12.7 percent increase in airport and landing fees.year over year.
Maintenance and repairs expense. Maintenance and repairs expense for the firstthird quarter 2021 increased $1.6$16.4 million, or 7.2116.9 percent, compared to the same period in 2020. Routine maintenance costs increased as aircraft utilization was up 1.411.1 percent duringfor the quarter and we incurred incremental costs preparingthe average number of aircraft in service increased 16.4 percent year over year. In addition, our fleetmaintenance expenses during the pandemic were unusually low due to operate at full capacity again.reduced flying during that period.
Compared to the same period in 2019, maintenance and repairs expense increased by $5.7 million or 22.9 percent primarily due to a 20.5 percent increase in the average number of aircraft in service and a 10.7 percent increase in departures year over two year.
Sales and marketing expense. Sales and marketing expense for the firstthird quarter 2021 decreasedincreased by 37.1176.7 percent compared to the same period in 2020, due to a decreasean increase in net credit card fees as a result of a 32.3133.0 percent decreaseincrease in passenger revenue year-over-year as well as efforts to more adeptly deployreduced advertising spend in 2020 during the pandemic.
Compared to the same period in 2019, sales and marketing expense increased by 25.3 percent due to an 8.3 percent increase in passenger revenue compared to the same period in 2019 as well as our entrance into new marketing agreements.
Other operating expense. Other expense decreased $8.9increased $2.6 million for the first quarter 2021 compared to the firstthird quarter 2020 mostly dueas increases in other operating expenses attributable to decreased activityincreases in service compared to 2020 more than offset decreases in expenses in our non-airline subsidiaries.
Payroll Support ProgramPrograms grant recognition.recognition. We received a total of $91.8$203.9 million in direct grants during the first quarterfunds in 2021 through the Payroll Support Extension Program. Thepayroll support programs. Of the total, $202.2 million of these funds represent direct grants, and were recognized as a credit to operating expense on our statement of income, over the periods for which the funds were intended to compensate. We recognized the entire $91.8$49.2 million as an offset to operating expense on our statement of income during the firstthird quarter of 2021.
During 2020, we received $176.9 million in funds through the payroll support program and recognized a $77.9 million offset to operating expense on our statement of income for the third quarter 2020.
Special charges. Special charges of $1.7$0.3 million were recorded within operating expenses for the firstthird quarter 2021 compared to $172.9$33.6 million for the same period in 2020. The special charges relate to expenses that were unique and specific to COVID-19. These charges in 2021 include accelerated depreciation on airframes and engines resulting from an accelerated retirement plan, and losses within our non-airline subsidiaries. Special charges recorded in the first quarter 2020 primarily consisted of impairments related to our non-airline subsidiaries.plan. See Note 2 of Notes to Consolidated Financial Statements (unaudited) for further information.information on the special charges recorded in 2020.
Interest Expense
Interest expense for the quarter ended March 31,September 30, 2021 declinedincreased by $1.4$4.7 million, or 7.539.0 percent as a result of declines in LIBOR impacting our variableover third quarter 2020, due to new fixed rate debt.debt and finance lease transactions entered into during the pandemic.
Income Tax Expense
Our effective tax rate was 20.821.9 percent and 74.734.8 percent for the three months ended March 31,September 30, 2021 and 2020, respectively. The effective tax rate for the three months ended March 31,September 30, 2021 differed from the statutory federal income tax rate of 21.0 percent primarily due to state income taxes;taxes and the impact of ASU 2016-09 related to share-based payments; and reserve for uncertain tax positions.payments. The effective tax rate for the three months ended March 31,September 30, 2020 was primarily due to the tax accounting impact of the CARES Act which allowed us to carryback the 2020 net operating loss at the 35.0 percent rate applicable in earlier years.
Comparison of nine months ended September 30, 2021 to nine months ended September 30, 2020
Operations during the nine months ended September 30, 2020 consisted of two months of pre-pandemic activity and the period from March 2020 through September 2020 which was substantially impacted by the pandemic. The comparisons below of the results for the nine month periods ended September 30, 2021 and September 30, 2020 should be read with this in mind.
As comparisons of our 2021 results to periods during 2020 reflect disproportionate changes due to the impact of the pandemic on air travel, we have also provided analysis of certain revenue and expense line items to 2019 results where helpful to understand trends in our performance.
Operating Revenue
Passenger revenue. For the nine months ended September 30, 2021, passenger revenue increased 66.0 percent compared with the same period in 2020. The increase is primarily attributable to the effects of COVID-19 in 2020, where a significant decline in passenger demand impacted operations from March to September 2020. Scheduled service passengers and average base fares in the current period are up 53.1 percent and 10.3 percent, respectively, over the same period in 2020.
As compared to the same period in 2019, passenger revenue decreased by 11.2 percent, as the impact of a 16.4 percentage point decline in scheduled service load factor was partially offset by an 8.0 percent increase in capacity.
Air ancillary average fare for the nine months ended September 30, 2021 increased by 6.5 percent when compared to 2020 and 10.1 percent when compared to 2019, the increase over 2019 more than offsetting a 4.8 percent decline in average base fares. The increase is primarily driven by an increased take rate on bundled products.
Third party products revenue. Third party products revenue for the nine months ended September 30, 2021 increased 71.1 percent over the same period in 2020 and 14.2 percent when compared to 2019. The increase from 2020 is primarily the result of greater travel demand for rental cars and hotels than the early part of the pandemic. The increase from 2019 is attributable to growth in our co-branded credit card revenues, which more than offset declines in rental car days and hotel room nights.
Fixed fee contract revenue. Fixed fee contract revenue for the nine months ended September 30, 2021 increased 37.3 percent compared with the same period in 2020. This is primarily due to a 28 percent increase in related departures due to increased charter activity. During the nine months ended September 30, 2021, ad-hoc charters increased by 246.9 percent over 2020 levels and we benefited from March Madness flying which did not occur in the prior year due to the pandemic.
Fixed fee contract revenue for the nine months ended September 30, 2021 as compared to the same period in 2019 decreased by 44.1 percent due to continuing depressed demand for group charters compared to pre-pandemic periods.
Other revenue. Other revenue decreased by 87.0 percent for the nine months ended September 30, 2021, when compared to the same period in 2020. The decrease is due to decreased activity in the non-airline subsidiaries, including the closure of the family entertainment centers and the sale of our Teesnap golf management business in the second quarter 2021.
Operating Expenses
The following table presents unit costs on a per ASM basis, defined as Operating CASM, for the indicated periods: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | Percent Change |
| Unitized costs (in cents) | 2021 | | 2020 | | 2019 | | YoY | | Yo2Y |
| Salary and benefits | 2.80 | | | 3.09 | | | 2.78 | | | (9.4) | % | | 0.7 | % |
| Aircraft fuel | 2.38 | | | 1.72 | | | 2.65 | | | 38.4 | | | (10.2) | |
| Station operations | 1.31 | | | 1.10 | | | 1.05 | | | 19.1 | | | 24.8 | |
| Depreciation and amortization | 1.03 | | | 1.35 | | | 0.93 | | | (23.7) | | | 10.8 | |
| Maintenance and repairs | 0.59 | | | 0.50 | | | 0.56 | | | 18.0 | | | 5.4 | |
| Sales and marketing | 0.39 | | | 0.36 | | | 0.48 | | | 8.3 | | | (18.8) | |
| Aircraft lease rentals | 0.12 | | | 0.06 | | | — | | | 100.0 | | | NM |
| Other | 0.43 | | | 0.71 | | | 0.60 | | | (39.4) | | | (28.3) | |
| Payroll Support Programs grant recognition | (1.55) | | | (1.55) | | | — | | | — | | | NM |
| Operating Special charges | 0.02 | | | 2.86 | | | — | | | (99.3) | | | NM |
| CASM | 7.52 | | | 10.20 | | | 9.05 | | | (26.3) | | | (16.9) | |
| Operating CASM, excluding fuel | 5.14 | | | 8.48 | | | 6.40 | | | (39.4) | | | (19.7) | |
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Salary and benefits expense. Salary and benefits expense increased $62.4 million, or 20.6 percent, for the nine months ended September 30, 2021 compared to the same period in 2020. Although the average number of full-time equivalent employees
remained relatively flat year over year, expense increased due to temporary voluntary leave programs offered to employees, voluntary pay reductions, and suspension of the bonus accrual that were in effect during the nine months ended September 30, 2020.
Salary and benefits expense increased by $25.1 million or 7.4 percent as compared to the nine months ended September 30, 2019. Although the average number of full time equivalent employees remained relatively flat, overall expense increased primarily due to annual increases in crew pay.
Aircraft fuel expense. Aircraft fuel expense increased $142.0 million, or 84.1 percent, for the nine months ended September 30, 2021 compared to the same period in 2020. This is primarily due to the recovery from the COVID-19 pandemic as departures increased by 33.6 percent resulting in an increase of 36.2 percent in fuel gallons consumed. The increase is also driven by a 35.1 percent increase in average fuel cost per gallon.
Aircraft fuel expense decreased by $13.6 million or 4.2 percent for the nine months ended September 30, 2021 compared to the same period in 2019. This is primarily driven by a decrease in average fuel cost per gallon of 6.4 percent, offset by a 4.1 percent improvement in available seat miles per gallon.
Station operations expense. Station operations expense for the nine months ended September 30, 2021 increased $62.9 million or 58.0 percent primarily due to a 33.6 percent increase in departures, increased costs associated with irregular operations, and increased airport and landing fees.
As compared to the nine month period ended September 30, 2019, station operations expense increased by $42.9 million or 33.4 percent due to a 5.3 percent increase in departures, increased costs associated with irregular operations and airport fees.
Depreciation and amortization expense. Depreciation and amortization expense for the nine months ended September 30, 2021 increased $1.8 million or 1.4 percent as compared to the same period in 2020 due to an increase of 7.9 percent in the average number of owned aircraft in service.
When compared to the nine months ended September 30, 2019, depreciation and amortization expense increased 17.5 percent as the average number of aircraft in service during the period increased 20.8 percent.
Maintenance and repairs expense. Maintenance and repairs expense for the nine months ended September 30, 2021 increased by $27.6 million or 56.4 percent compared to the same period in 2020. This is primarily due to a 10.3 percent increase in the average number of aircraft in service and a 22.4 percent increase in utilization year over year.
As compared to the nine months ended September 30, 2019, maintenance and repairs expense increased by $7.9 million or 11.6 percent as the number of aircraft in service increased by 20.8 percent, offset by the effect of a 13.4 percent decrease in utilization year over two year.
Sales and marketing expense. Sales and marketing expense for the nine months ended September 30, 2021 increased 45.2 percent compared to the same period in 2020. In 2020, advertising spend was intentionally pulled back beginning in March due to the pandemic. There was also an increase in net credit card fees in the current year as a result of a 66.0 percent increase in passenger revenue year over year.
As compared to the nine months ended September 30, 2019, sales and marketing expense decreased by 13.2 percent due to our efforts to more adeptly deploy advertising spend.
Other expense. Other expense decreased by $14.6 million or 20.7 percent year over year, due to decreased activity in our non-airline subsidiaries.
Payroll Support Programs grant recognition. We received a total of $203.9 million during the nine months ended September 30, 2021 through the payroll support programs. The direct grants were recognized as a credit to operating expense on our statement of income, over the periods for which the funds were intended to compensate.
During the first nine months of 2020, we received $176.9 million in funds through the payroll support program and recognized a $152.4 million offset to operating expense on our statement of income for the nine months ended September 30, 2020.
Special charges. Special charges of $2.9 million were recorded within operating expenses for the nine months ended September 30, 2021 compared to $280.9 million for the same period in 2020. The special charges relate to expenses that were unique and specific to COVID-19. These charges in 2021 include accelerated retirements of 5 airframes and 8 engines and an impairment loss on a building associated with the Allegiant Nonstop familiy entertainment line of business. Special charges recorded in the first nine months of 2020 included accelerated retirements of aircraft and airframes, a loss on the sale-leaseback transaction we would not likely have transacted absent cash conservation efforts as a result of COVID, salary and benefits expense, and other various expenses during the nine months ended September 30, 2020. See Note 2 of the Notes to Consolidated Financial Statement (unaudited) for further information.
Non-operating special charges. Special charges of $26.6 million were recorded within non-operating expenses for the nine months ended September 30, 2020. We did not have any non-operating special charges for the same period in 2021. Of these special charges in 2020, $19.8 million related to the termination of the loan agreement with Sixth Street Partners (formerly TSSP) intended to finance the development of Sunseeker Resorts Charlotte Harbor. The remaining $6.8 million related to impairment charges for Sunseeker Resort during the first quarter 2020. These charges were reclassified from operating special charges to non-operating special charges for the nine months ended September 30, 2020.
Income Tax Expense
We recorded a $40.3 million tax expense (22.2 percent effective tax rate) compared to a ($166.6 million) tax benefit (51.8 percent effective tax rate) for the nine months ended September 30, 2021 and 2020 respectively. The 22.2 percent effective tax rate for the nine months ended September 30, 2021 differed from the statutory federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of ASU 2016-09 related to share-based payments. The 51.8 percent effective tax rate for the nine months ended September 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$40.9 million discrete federal income tax benefit related to the full utilization of 2018 and 2019 net operating losses against taxable income in earlier years in which 35.0 percent was the enacted tax rate;as well as the ability to carryback the 2020 net operating loss at a 35.0 percent rate applicable in earlier years; a deferred tax remeasurement related to the 2020 tax year; and state taxes. While we expect our effective 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.years.
Comparative Consolidated Operating Statistics
The following tables set forth our operating statistics for the periods indicated:
| | | Three Months Ended March 31, | | Percent | | Three Months Ended September 30, | | Percent Change (1) |
| | 2021 | | 2020 | | Change(1) | | 2021 | | 2020 | | 2019 | | YoY | | Yo2Y |
| Operating statistics (unaudited): | Operating statistics (unaudited): | | | | | | Operating statistics (unaudited): | | | | | | | | | |
| Total system statistics: | Total system statistics: | | | | | | Total system statistics: | | | | | |
| Passengers | Passengers | 2,334,503 | | | 3,175,450 | | | (26.5) | | Passengers | 3,872,651 | | | 2,016,241 | | | 3,806,369 | | | 92.1 | % | | 1.7 | % |
| | Available seat miles (ASMs) (thousands) | Available seat miles (ASMs) (thousands) | 4,013,989 | | | 4,067,671 | | | (1.3) | | Available seat miles (ASMs) (thousands) | 4,441,201 | | | 3,521,508 | | | 3,888,400 | | | 26.1 | | | 14.2 | |
| | Operating expense per ASM (CASM) (cents) | Operating expense per ASM (CASM) (cents) | 6.34 | | | 12.96 | | | (51.1) | | Operating expense per ASM (CASM) (cents) | 8.85 | | | 6.65 | | | 9.37 | | | 33.1 | | | (5.5) | |
| Fuel expense per ASM (cents) | Fuel expense per ASM (cents) | 2.06 | | | 2.18 | | | (5.5) | | Fuel expense per ASM (cents) | 2.67 | | | 1.49 | | | 2.69 | | | 79.2 | | | (0.7) | |
| Operating CASM, excluding fuel (cents) | Operating CASM, excluding fuel (cents) | 4.28 | | | 10.77 | | | (60.3) | | Operating CASM, excluding fuel (cents) | 6.19 | | | 5.15 | | | 6.68 | | | 20.2 | | | (7.3) | |
| | ASMs per gallon of fuel | ASMs per gallon of fuel | 90.4 | | | 85.7 | | | 5.5 | | ASMs per gallon of fuel | 82.5 | | | 88.5 | | | 80.3 | | | (6.8) | | | 2.7 | |
| Departures | Departures | 25,684 | | | 26,312 | | | (2.4) | | Departures | 30,663 | | | 24,365 | | | 27,707 | | | 25.8 | | | 10.7 | |
| Block hours | Block hours | 60,373 | | | 62,123 | | | (2.8) | | Block hours | 67,398 | | | 52,238 | | | 59,678 | | | 29.0 | | | 12.9 | |
| Average stage length (miles) | Average stage length (miles) | 898 | | | 895 | | | 0.3 | | Average stage length (miles) | 829 | | | 834 | | | 823 | | | (0.6) | | | 0.7 | |
| Average number of operating aircraft during period | Average number of operating aircraft during period | 97.3 | | | 93.5 | | | 4.1 | | Average number of operating aircraft during period | 105.6 | | | 90.7 | | | 87.6 | | | 16.4 | | | 20.5 | |
| Average block hours per aircraft per day | Average block hours per aircraft per day | 7.4 | | | 7.3 | | | 1.4 | | Average block hours per aircraft per day | 7.0 | | | 6.3 | | | 7.4 | | | 11.1 | | | (5.4) | |
| Full-time equivalent employees at end of period | Full-time equivalent employees at end of period | 3,998 | | | 4,436 | | | (9.9) | | Full-time equivalent employees at end of period | 4,246 | | | 4,275 | | | 4,267 | | | (0.7) | | | (0.5) | |
| Fuel gallons consumed (thousands) | Fuel gallons consumed (thousands) | 44,426 | | | 47,479 | | | (6.4) | | Fuel gallons consumed (thousands) | 53,850 | | | 39,786 | | | 48,443 | | | 35.3 | | | 11.2 | |
| Average fuel cost per gallon | Average fuel cost per gallon | $ | 1.86 | | | $ | 1.87 | | | (0.5) | | Average fuel cost per gallon | $ | 2.20 | | | $ | 1.32 | | | $ | 2.16 | | | 66.7 | | | 1.9 | |
| | Scheduled service statistics: | Scheduled service statistics: | | | | | Scheduled service statistics: | | | | |
| Passengers | Passengers | 2,323,302 | | | 3,154,606 | | | (26.4) | | Passengers | 3,834,956 | | | 2,003,648 | | | 3,753,611 | | | 91.4 | | | 2.2 | |
| Revenue passenger miles (RPMs) (thousands) | Revenue passenger miles (RPMs) (thousands) | 2,166,417 | | | 2,925,482 | | | (25.9) | | Revenue passenger miles (RPMs) (thousands) | 3,302,519 | | | 1,714,622 | | | 3,170,826 | | | 92.6 | | | 4.2 | |
| Available seat miles (ASMs) (thousands) | Available seat miles (ASMs) (thousands) | 3,921,090 | | | 3,964,009 | | | (1.1) | | Available seat miles (ASMs) (thousands) | 4,312,893 | | | 3,449,339 | | | 3,687,473 | | | 25.0 | | | 17.0 | |
| Load factor | Load factor | 55.3 | % | | 73.8 | % | | (18.5) | | Load factor | 76.6 | % | | 49.7 | % | | 86.0 | % | | 26.9 | | | (9.4) | |
| Departures | Departures | 24,947 | | | 25,484 | | | (2.1) | | Departures | 29,593 | | | 23,710 | | | 26,238 | | | 24.8 | | | 12.8 | |
| Block hours | Block hours | 58,851 | | | 60,346 | | | (2.5) | | Block hours | 65,296 | | | 51,057 | | | 56,576 | | | 27.9 | | | 15.4 | |
Total passenger revenue per ASM (TRASM) (cents)(2) | 6.89 | | | 9.96 | | | (30.8) | | |
Average fare - scheduled service(3) | $ | 58.38 | | | $ | 64.02 | | | (8.8) | | |
Average fare - air-related charges(3) | $ | 52.11 | | | $ | 56.10 | | | (7.1) | | |
| Average seats per departure | | Average seats per departure | 174.3 | | | 173.2 | | | 170.8 | | | 0.6 | | | 2.0 | |
Yield (cents) (2) | | Yield (cents) (2) | 6.04 | | | 4.76 | | | 6.42 | | | 26.9 | | | (5.9) | |
Total passenger revenue per ASM (TRASM) (cents)(3) | | Total passenger revenue per ASM (TRASM) (cents)(3) | 10.40 | | | 5.60 | | | 11.10 | | | 85.7 | | | (6.3) | |
Average fare - scheduled service(4) | | Average fare - scheduled service(4) | $ | 52.05 | | | $ | 40.75 | | | $ | 54.20 | | | 27.7 | | | (4.0) | |
Average fare - air-related charges(4) | | Average fare - air-related charges(4) | $ | 58.45 | | | $ | 50.04 | | | $ | 50.03 | | | 16.8 | | | 16.8 | |
| Average fare - third party products | Average fare - third party products | $ | 5.86 | | | $ | 5.06 | | | 15.8 | | Average fare - third party products | $ | 6.40 | | | $ | 5.66 | | | $ | 4.85 | | | 13.1 | | | 32.0 | |
| Average fare - total | Average fare - total | $ | 116.35 | | | $ | 125.18 | | | (7.1) | | Average fare - total | $ | 116.91 | | | $ | 96.45 | | | $ | 109.08 | | | 21.2 | | | 7.2 | |
| Average stage length (miles) | Average stage length (miles) | 902 | | | 900 | | | 0.2 | | Average stage length (miles) | 834 | | | 839 | | | 824 | | | (0.6) | | | 1.2 | |
| Fuel gallons consumed (thousands) | Fuel gallons consumed (thousands) | 43,306 | | | 46,105 | | | (6.1) | | Fuel gallons consumed (thousands) | 52,249 | | | 38,853 | | | 46,038 | | | 34.5 | | | 13.5 | |
| Average fuel cost per gallon | Average fuel cost per gallon | $ | 1.82 | | | $ | 1.87 | | | (2.7) | | Average fuel cost per gallon | $ | 2.20 | | | $ | 1.32 | | | $ | 2.17 | | | 66.7 | | | 1.4 | |
| Rental car days sold | Rental car days sold | 275,584 | | | 481,046 | | | (42.7) | | Rental car days sold | 366,407 | | | 255,800 | | | 482,944 | | | 43.2 | | | (24.1) | |
| Hotel room nights sold | Hotel room nights sold | 56,208 | | | 92,004 | | | (38.9) | | Hotel room nights sold | 66,626 | | | 44,655 | | | 99,991 | | | 49.2 | | | (33.4) | |
| Percent of sales through website during period | Percent of sales through website during period | 93.3 | % | | 93.6 | % | | (0.3) | | Percent of sales through website during period | 95.4 | % | | 92.3 | % | | 93.1 | % | | 3.1 | | | 2.3 | |
(1) Except load factor and percent of sales through website during period, which are presented as a percentage point change.
(2) Defined as scheduled service revenue divided by revenue passenger miles.
(3) 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)(4) Reflects division of passenger revenue between scheduled service (base fare) and air-related charges in our booking path.
Comparative Consolidated Operating Statistics
The following tables set forth our operating statistics for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Percent Change (1) |
| 2021 | | 2020 | | 2019 | | YoY | | Yo2Y |
| Operating statistics (unaudited): | | | | | | | | | |
| Total system statistics: | | | | | | | | | |
| Passengers | 9,906,371 | | | 6,464,949 | | | 11,426,183 | | | 53.2 | % | | (13.3) | % |
| | | | | | | | | |
| Available seat miles (ASMs) (thousands) | 13,049,732 | | | 9,809,934 | | | 12,245,704 | | | 33.0 | | | 6.6 | |
| | | | | | | | | |
| | | | | | | | | |
| Operating expense per ASM (CASM) (cents) | 7.52 | | | 10.20 | | | 9.05 | | | (26.3) | | | (16.9) | |
| Fuel expense per ASM (cents) | 2.38 | | | 1.72 | | | 2.65 | | | 38.4 | | | (10.2) | |
| Operating CASM, excluding fuel (cents) | 5.14 | | | 8.48 | | | 6.41 | | | (39.4) | | | (19.8) | |
| | | | | | | | | |
| ASMs per gallon of fuel | 85.6 | | | 87.6 | | | 82.2 | | | (2.3) | | | 4.1 | |
| Departures | 87,854 | | | 65,766 | | | 83,454 | | | 33.6 | | | 5.3 | |
| Block hours | 197,581 | | | 147,350 | | | 187,829 | | | 34.1 | | | 5.2 | |
| Average stage length (miles) | 852 | | | 862 | | | 858 | | | (1.2) | | | (0.7) | |
| Average number of operating aircraft during period | 101.6 | | | 92.1 | | | 84.1 | | | 10.3 | | | 20.8 | |
| Average block hours per aircraft per day | 7.1 | | | 5.8 | | | 8.2 | | | 22.4 | | | (13.4) | |
| Full-time equivalent employees at end of period | 4,261 | | | 4,275 | | | 4,267 | | | (0.3) | | | (0.1) | |
| Fuel gallons consumed (thousands) | 152,464 | | | 111,929 | | | 148,980 | | | 36.2 | | | 2.3 | |
| Average fuel cost per gallon | $ | 2.04 | | | $ | 1.51 | | | $ | 2.18 | | | 35.1 | | | (6.4) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Scheduled service statistics: | | | | | | | | | |
| Passengers | 9,838,512 | | | 6,424,331 | | | 11,307,004 | | | 53.1 | | | (13.0) | |
| Revenue passenger miles (RPMs) (thousands) | 8,657,151 | | | 5,747,639 | | | 9,964,948 | | | 50.6 | | | (13.1) | |
| Available seat miles (ASMs) (thousands) | 12,739,769 | | | 9,588,031 | | | 11,800,788 | | | 32.9 | | | 8.0 | |
| Load factor | 68.0 | % | | 59.9 | % | | 84.4 | % | | 8.1 | | | (16.4) | |
| Departures | 85,303 | | | 63,877 | | | 80,149 | | | 33.5 | | | 6.4 | |
| Block hours | 192,481 | | | 143,651 | | | 180,674 | | | 34.0 | | | 6.5 | |
| Average seats per departure | 173.8 | | | 172.7 | | | 171.0 | | | 0.6 | | | 1.6 | |
Yield (cents) (2) | 6.53 | | | 5.83 | | | 6.85 | | | 12.0 | | | (4.7) | |
Total passenger revenue per ASM (TRASM) (cents)(3) | 9.30 | | | 7.44 | | | 11.18 | | | 26.9 | | | (16.8) | |
Average fare - scheduled service(4) | $ | 57.48 | | | $ | 52.12 | | | $ | 60.40 | | | 10.3 | | | (4.8) | |
Average fare - air-related charges(4) | $ | 56.79 | | | $ | 53.32 | | | $ | 51.56 | | | 6.5 | | | 10.1 | |
| Average fare - third party products | $ | 6.22 | | | $ | 5.57 | | | $ | 4.74 | | | 11.7 | | | 31.2 | |
| Average fare - total | $ | 120.49 | | | $ | 111.00 | | | $ | 116.70 | | | 8.5 | | | 3.2 | |
| Average stage length (miles) | 857 | | | 867 | | | 861 | | | (1.2) | | | (0.5) | |
| Fuel gallons consumed (thousands) | 148,578 | | | 109,082 | | | 143,433 | | | 36.2 | | | 3.6 | |
| Average fuel cost per gallon | $ | 2.01 | | | $ | 1.50 | | | $ | 2.17 | | | 34.0 | | | (7.4) | |
| Rental car days sold | 1,046,751 | | | 872,382 | | | 1,495,502 | | | 20.0 | | | (30.0) | |
| Hotel room nights sold | 195,535 | | | 149,431 | | | 319,197 | | | 30.9 | | | (38.7) | |
| Percent of sales through website during period | 93.8 | % | | 93.2 | % | | 93.4 | % | | 0.6 | | | 0.4 | |
(1) Except load factor and percent of sales through website during period, which are presented as a percentage point change.
(2) Defined as scheduled service revenue divided by revenue passenger miles.
(3) 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.
(4) Reflects division of passenger revenue between scheduled service (base fare) and air-related charges in our booking path.
LIQUIDITY AND CAPITAL RESOURCES
Current liquidity
Cash, cash equivalents and investment securities (short-term and long-term) increased to $728.0 million$1.1 billion at March 31,September 30, 2021, from $685.2 million at December 31, 2020. Investment securities represent highly liquid marketable securities which are available-for-sale.
Restricted cash represents escrowed funds under fixed fee contracts, escrowed project funds and cash collateral against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties. Under our fixed fee flying contracts, we require our customers to prepay for flights to be provided by us. The prepayments are escrowed until the flight is completed and are recorded as restricted cash with a corresponding amount reflected as air traffic liability.
During the first quarternine months ended September 30, 2021, we received a total of $91.8$203.9 million in assistance through the Payroll Support Extension Program.payroll support programs.
We have suspended share repurchases and our quarterly cash dividend, as part of cash conservation efforts in 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, 2022.
We believe we have more than adequate liquidity resources through our cash balances, operating cash flows, borrowings and expected tax refunds, to meet our future contractual obligations. We will continue to consider raising funds through debt financing on an opportunistic basis.
Debt
Our debt and finance lease obligations balance, without reduction for related issuance costs, decreased from $1.68 billion as of December 31, 2020 to $1.64$1.59 billion as of March 31,September 30, 2021. During the first quarter ofnine months ended September 30, 2021, we borrowed $105.0$149.1 million and we made principal payments of $151.5$239.6 million, including $53.9 million on our senior secured revolving credit facility that matured on March 31, 2021 and a $54.8$57.0 million prepayment of debt secured by aircraft.
Despite substantially lower revenues and profitability caused by the pandemic compared to pre-pandemic periods, our total debt and finance lease obligations declined by 2.7%5.4 percent from December 31, 2020 until March 31,to September 30, 2021.
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 threenine months ended March 31,September 30, 2021, our operating activities provided $168.0$373.6 million of cash compared to $106.3$276.7 million during the same period of 20202020. This change is mostly attributable to a $39.9$296.4 million increase in net income offset by the impact of special charges in 2020 and a $41.7 million larger increasechanges in air traffic liability.current assets and liability accounts.
Investing Activities. Cash provided byused in investing activities was $35.7$513.3 million during the threenine months ended March 31,September 30, 2021 compared to cash used of $106.9$209.1 million for the same period in 2020. The change is due to a $65.0 million year-over-year decrease in cash outlays for the purchase of property and equipment and an increase of $79.9$258.9 million of proceeds from maturitiespurchases of investment securities, net of purchases.maturities, and $78.2 million related to proceeds from sale-leaseback transactions during the nine months ended September 30, 2020 compared to no such transactions in 2021. Purchases of property and equipment were $32.1 million less in the current year.
Financing Activities. Cash usedprovided by financing activities for the threenine months ended March 31,September 30, 2021 was $47.2$205.4 million, compared to cash provided of $17.8$81.1 million for the same period in 2020. The year-over-year change is mostly due to the equity offering completed on May 10, 2021 which resulted in the receipt of $335.1 million in cash. This was offset by the net effect of debt activity, as principal payments and debt issuance costs exceeded debt proceeds by $47.2$133.7 million during the threenine months ended March 31,September 30, 2021, compared to $63.0$121.6 million of debt proceeds (net of related costs) in excess of principal payments during the same period in 2020. Additionally, there were no share repurchases or dividends paid in the first quarternine months of 2021, (the share repurchase programwhere there was suspended) compared to $33.8 million duringand $11.4 million of such activity, respectively, in the first three monthssame period of 2020. Dividends paid decreased by $11.5 million year-over-year as dividend payments were also suspended due to the pandemic.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this quarterly report on Form 10-Q, and in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” that are based on our management’s beliefs and assumptions, and on information currently available to our management. Forward-looking statements include our statements regarding future expenses, revenues, earnings, ASM growth, fuel consumption, expected capital expenditures, number of contracted aircraft to be placed in service in the future, the development and financing of our Sunseeker Resort, as well as other information concerning future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe," "expect," "anticipate," "intend," "plan," "estimate," “project,” “hope” or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements may be found in our periodic reports filed with the Securities and Exchange Commission at www.sec.gov. These risk factors include, without limitation, the impact and duration of the COVID-19 pandemic on airline travel and the economy, liquidity issues resulting from the effect of the COVID-19 pandemic on our business, restrictions imposed on us a result of accepting government grants under the Payroll Support Programs, an accident involving, or problems with, our aircraft, public perception of our safety, our reliance on 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, 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 to be acquired, 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 have been no material changes to our critical accounting estimates during the threenine months ended March 31,September 30, 2021. For information regarding our critical accounting policies and estimates, see disclosures in the Consolidated Financial Statements and accompanying notes contained in our 2020 Form 10-K, and in Note 1 of Notes to Consolidated Financial Statements (unaudited).
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. Aircraft fuel expense for the threenine months ended March 31,September 30, 2021 represented 32.631.7 percent of our total operating expenses. Increases in fuel prices, or a shortage of supply, could have a material impact on our operations and operating results. Based on our fuel consumption for the three and nine months ended March 31,September 30, 2021, a hypothetical ten percent increase in the average price per gallon of fuel would have increased fuel expense by approximately $8.2 million.$11.9 million and $30.8 million respectively. We have not hedged fuel price risk for many years.
Interest Rates
As of March 31,September 30, 2021, we had $1.01$0.95 billion of variable-rate debt, including current maturities and without reduction for $16.8$13.8 million in related costs. A hypothetical 100 basis point change in interest rates would have affected interest expense on variable rate debt by approximately $2.8$7.7 million for the threenine months ended March 31,September 30, 2021.
Item 4. Controls and Procedures
As of March 31,September 30, 2021, 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.
There were no changes in our internal control over financial reporting that occurred during the quarter ending March 31,September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control 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 for the year ended December 31, 2020 and filed with the Commission on March 1, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Our Repurchases of Equity Securities
(a) Not applicable
(b) Not applicable
(c) We did not repurchase any common stock during the firstthird quarter 2021.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
None
Item 6. Exhibits
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| 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 May 12, 2020.
(3) Incorporated by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Commission on March 1,October 18, 2021.
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.
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| | ALLEGIANT TRAVEL COMPANY |
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| Date: | May 4,October 28, 2021 | By: | /s/ Gregory Anderson |
| | Gregory Anderson, as duly authorized officer of the Company (Chief Financial Officer) and as Principal Financial Officer |
