Las Vegas-based Allegiant Travel Co., parent company of Allegiant Air, recorded its 36th straight profitable quarter Wednesday, but earnings continued to decline as a result of higher fuel costs.
Allegiant, the sixth-busiest passenger carrier at McCarran International Airport, reported earnings of $10.8 million, 56 cents a share, on revenue of $193.9 million for the fourth quarter that ended Dec. 31. That compares with earnings of $12.4 million, 64 cents a share, on revenue of $162 million in the same quarter a year earlier.
Earnings matched the average expectation of 15 analysts.
While the airline’s system capacity climbed 9.3 percent since December 2010, revenue was up 19.7 percent during that period. But the cost of fuel soared 31.4 percent at the same time.
In a conference call peppered with critical remarks about recently implemented Department of Transportation consumer protection rules, airline executives said the company had above-average bookings in January and was still on track to begin nonstop service to Hawaii in June from an unspecified West Coast city.
Allegiant, which last month announced plans for a new base of operations in Oakland, continues to work toward adding seats to its MD-80 jet fleet and in the over-water certification of recently acquired Boeing 757 jets that will be used for Hawaii service.
The airline plans to have 16 of its 52 MD-80 jets converted to 166 seats from 150 by the end of March. It currently has one 757 jet being used to transport passengers. By the end of the year, it plans to have six 757s flying. Executives said early indications were that the 757s could be operated far more efficiently than the MD-80s, primarily because of fuel burn and the larger capacity.
Allegiant also has embarked on a project to boost maintenance on its fleet and overhaul jet engines, the largest nonfuel expense on the airline’s books. The company says the high level of maintenance will boost aircraft reliability, and the expense will drop in 2012 as the company completes the major overhauls.
“For the full year, engine overhaul and repairs expense totaled $19 million, as projected, substantially higher than the $5 million in 2010,” said Scott Sheldon, senior vice president and chief financial officer of Allegiant. “In 2012, engine overhaul and repairs expense is expected to diminish, now that 50 percent of our engine pool has fewer than 1,000 cycles since overhaul as compared with only 11 percent in January 2011.”
Executives said they were still uncertain about how much business they would pursue and were offering conservative projections for charter flying, which in the past has picked up for Allegiant in March when it transports basketball teams for the NCAA basketball tournament.
The company tries to maintain an adequate level of aircraft and crews for scheduled service and will gauge how much charter flying it will do based on operating efficiencies.
Allegiant has kept ahead of expenses by charging more for tickets, collecting more ancillary revenue per passenger and keeping its planes full.
Over the last year, the airline’s average fare for scheduled service has climbed 16.9 percent from an average $76.26 to $89.15. While air-related ancillary revenue has gone up only 3.1 percent from $30.25 per passenger to $31.18, third-party add-ons — hotel bookings, car rentals and show tickets — have gone up 19.4 percent. As a result, the average total fare on the airline has gone up 13.2 percent to $125.51 since the beginning of last year.
Allegiant’s load factor — the percentage of seats on planes filled with revenue passengers — hit 91.7 percent in 2011, 0.9 percentage points higher than a year earlier.
What remains an unknown for the company is how the U.S. Department of Transportation’s recently enacted consumer protection rules on displaying airfare pricing is affecting sales.
Allegiant Chairman and CEO Maurice Gallagher said since the rules have been in effect for just under a week, it’s hard to tell how much, if at all, sales have been affected. But Gallagher had plenty to tell analysts in his conference call how he felt about the new rules.
“It’s nothing more than a blatant attempt to reregulate our industry,” Gallagher said in his opening remarks. “The Department of Transportation intrusion of protecting our customers against the evil airline is offensive.”
In the analyst question-and-answer session, Gallagher also complained about the Department of Transportation’s new rule giving customers 24 hours to cancel or change booked reservations without penalty.
“What is unfair or deceptive about a fare that’s nonrefundable when you buy it?” Gallagher asked. “(The new rule) is a license for these people to do what they want to. It places power and control in a place where they don’t need to be. There’s never been more transparency in this frickin’ industry.”