Allegiant Travel Co. is burning through more than $2 million per day as it copes with the industry’s struggles because of the coronavirus crisis.
In a quarterly earnings report released Tuesday, the parent company for Allegiant Air listed a 9% drop in operating revenues (just over $409 million) during the first three months of this year when compared to the same period in 2019.
Allegiant also reported an 87% decline in passenger traffic during April when compared to the same month last year.
“The events that have unfolded over the last eight weeks are truly unprecedented,” said Maury Gallagher, the company’s CEO and chairman, in a statement. “We began to see the first signs of demand weakness at the end of February, with a steep downward demand trajectory by mid-March.”
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In April, the airline announced it was receiving more than $170 million in emergency federal aid through the CARES Act to help pay its workers. Gallagher said Monday that $86 million has been received. The remaining funds — which include a $21.6 million unsecured 10-year loan — are expected to be received in the next three months.
Allegiant previously stated that the funds would cover close to 75% of the company’s payroll and benefits costs through September.
Gallagher said Allegiant also expects to receive close to $100 million in federal income tax refunds in the coming months.
About one-quarter of its workforce — more than 1,100 employees — have agreed to participate in voluntary leave and pay reduction programs since the onset of the pandemic, company officials said.
The company expects its second-quarter cash burn rate to be about $2.1 million per day.
“We took early and decisive action to preserve liquidity and reduce cash burn,” Gallagher said. “These measures have brought immediate and significant progress over the past few weeks. I am humbled by (team member) generosity and personal investment in our company. These investments will help preserve jobs and the company alike.”
Allegiant executives, the company said, have agreed to reduce their own pay by half. Gallagher and company president John Redmond are not drawing salaries.
Mike Boyd, president of the Colorado-based aviation consulting firm Boyd Group International, said Monday that he expects the discount airline to bounce back as quickly as any U.S. airline once the economy begins to recover.
“Allegiant is in the business of providing a leisure product,” Boyd said. “That’s going to be much easier to resuscitate. Being focused in Las Vegas, that’s going to be one of the first places to come back. Allegiant is probably the best-postured airline out there right now to be able to take advantage of the economy as it returns.”
For now, Allegiant and other airlines are steeped in a waiting game as customers, politicians and regulators decide when demand might start to return to pre-pandemic levels.
“Near term is painful and will continue to be painful,” Gallagher said. “But I believe our model, given the current economic impact, is best-suited to withstand the brutal impact from this pandemic.”
Gallagher added that Allegiant could shrink its fleet of 90 airplanes by as many as 25, although he said the company does not have “meaningful” aircraft purchase commitments in 2021 and beyond.
Allegiant shares closed at $73.20 in Nasdaq Composite trading Tuesday, down just slightly for the day. On Feb. 12, before the effects of the pandemic set in, the stock closed at $166.38 per share.