Allegiant Q4 2024 slides: Operating margin doubles as airline plans 17% capacity growth

Introduction & Market Context

Allegiant Travel Company (NASDAQ:ALGT) reported a significant financial turnaround in its fourth quarter 2024 earnings presentation, highlighting substantial margin improvement and ambitious expansion plans for 2025. The airline, which specializes in leisure travel to underserved markets, has shown strong recovery momentum despite industry-wide challenges.

The company’s stock has experienced volatility over the past year, trading between $36.08 and $107.57, according to recent market data. Following the earnings release, Allegiant’s shares have shown positive movement in premarket trading, up 2.84% to $54.28, suggesting investor confidence in the company’s growth strategy and financial performance.

Quarterly Performance Highlights

Allegiant delivered impressive financial results in Q4 2024, with adjusted airline-only operating margin reaching 13.2%, a substantial 6.6 percentage point improvement from the same period in 2023.

As shown in the following chart comparing operating margins:

The company reported consolidated adjusted net income of $38.9 million for the fourth quarter, resulting in adjusted earnings per share of $2.10, compared to just $0.11 in Q4 2023. The airline segment alone generated adjusted net income of $55.6 million, yielding adjusted airline-only EPS of $3.00, a significant increase from $0.86 in the prior year.

This earnings growth is illustrated in the following comparison:

Total (EPA:TTEF) airline revenue for the fourth quarter approached $610 million, driven by several factors including faster-than-expected recovery in hurricane-impacted destinations, strong ancillary revenue performance, and better-than-anticipated holiday period demand.

Strategic Initiatives

Allegiant’s presentation outlined three key strategic initiatives driving its performance improvement: restoring peak period utilization, commercial technology upgrades, and fleet modernization.

The company has made substantial progress in aircraft utilization, with December 2024 showing a 21% increase in peak period average aircraft utilization compared to December 2023, rising from 7.9 to 9.6 hours per aircraft. This improved efficiency was accompanied by a 16% capacity increase and an impressive 99.7% controllable completion rate in December.

Looking ahead, Allegiant announced a record-tying 44 new routes with start dates planned for Spring and Summer 2025, demonstrating its aggressive network expansion strategy. The company is also significantly increasing deployment of its premium "Allegiant Extra" seating configuration, with plans for these aircraft to operate more than five times as many departures in the first quarter of 2025 compared to the same period in 2024.

The planned capacity growth is illustrated in this chart showing scheduled service ASM (Available Seat Miles) growth:

Financial Analysis

Beyond the impressive earnings growth, Allegiant has made significant progress in strengthening its balance sheet. The company ended 2024 with $1.1 billion in available liquidity, providing financial flexibility to support its growth initiatives.

Notably, Allegiant has successfully reduced its leverage, with net leverage (measured as net debt to adjusted EBITDA) improving to 3.2x at the end of Q4, down from 4.1x at the end of Q3 2024. This deleveraging trend is particularly impressive given the company’s simultaneous investment in growth.

The following chart illustrates this positive trend in net leverage throughout 2024:

For the full year 2024, Allegiant reported consolidated adjusted net income of $45.7 million, resulting in adjusted consolidated EPS of $2.48. The company’s fourth quarter fuel cost averaged $2.50 per gallon, while adjusted airline non-fuel unit costs (CASM-ex) were 8.29 cents.

Forward Guidance

Allegiant provided a detailed outlook for both the first quarter and full year 2025, projecting continued growth and profitability. For Q1 2025, the company expects:

• System ASMs to increase approximately 13.5% year-over-year
• Scheduled service ASMs to grow approximately 14.0%
• Fuel cost per gallon of approximately $2.60
• Operating margin between 8.0% and 11.0%, excluding special charges
• Airline-only earnings per share between $1.75 and $2.75, excluding special charges

For the full year 2025, Allegiant projects:

• System ASMs to increase approximately 16.0% year-over-year
• Scheduled service ASMs to grow approximately 17.0%
• Fuel cost per gallon of approximately $2.60
• Interest expense between $130 million and $140 million

The detailed airline outlook is presented in this comprehensive guidance table:

Notably, the company’s actual Q1 2025 performance has already validated much of this guidance. According to recent earnings results, Allegiant delivered Q1 2025 EPS of $1.81, within the projected range of $1.75-$2.75, though revenue of $699.1 million slightly missed analyst expectations. The company maintained the 14% capacity increase projected in its guidance.

Sunseeker Resort Integration

While the airline segment remains Allegiant’s core business, the presentation also addressed the company’s Sunseeker Resort. For Q1 2025, Allegiant projected Sunseeker would generate approximately $2 million in EBITDA (excluding special charges), with a 60% occupancy rate and an average daily rate of approximately $320.

The Sunseeker outlook is detailed in this guidance summary:

Recent performance data indicates the resort is beginning to contribute positively to the company’s overall results, though it remains a smaller component of Allegiant’s business compared to the airline operations.

Conclusion

Allegiant’s Q4 2024 presentation reveals a company executing effectively on its strategic initiatives, with significant improvements in profitability and operational efficiency. The airline’s ambitious growth plans for 2025, including 17% capacity expansion and 44 new routes, demonstrate confidence in its business model despite industry challenges.

The company’s focus on deleveraging while funding growth provides a balanced approach to capital allocation that appears to be resonating with investors, as evidenced by recent stock performance. As Allegiant moves through 2025, its ability to maintain margin improvement while executing its aggressive growth strategy will be key metrics for investors to monitor.

Full presentation:

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