Attached files
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| 8-K - FORM 8-K - Allegiant Travel CO | algt20160907_8k.htm |
Management
Presentation
September 2016
Forward looking statements
2
This presentation as well as oral statements made by officers or directors of Allegiant Travel
Company, its advisors and affiliates (collectively or separately, the "Company“) will contain forward-
looking statements that are only predictions and involve risks and uncertainties. Forward-looking
statements may include, among others, references to future performance and any comments
about our strategic plans. There are many risk factors that could prevent us from achieving our
goals and cause the underlying assumptions of these forward-looking statements, and our actual
results, to differ materially from those expressed in, or implied by, our forward-looking statements.
These risk factors and others are more fully discussed in our filings with the Securities and
Exchange Commission. Any forward-looking statements are based on information available to us
today and we undertake no obligation to update publicly any forward-looking statements, whether as
a result of future events, new information or otherwise. The Company cautions users of this
presentation not to place undue reliance on forward looking statements, which may be based on
assumptions and anticipated events that do not materialize.
Unique business model and results
Highly resilient and profitable
– Profitable last 54 quarters (1)
– LTM 2Q16 EBITDA $495.5mm (2)
– LTM 2Q16 Return on Capital 25.2%(2)
Strong balance sheet
– Rated BB and Ba3(3)
– Adjusted debt/ EBITDAR 1.3x(2)
– $106mm returned to shareholders YTD 2016
• $92 mm in share repurchase authority as of 7/29/16
– Recurring quarterly cash dividend of $0.70 per share
Management owns >20%
3
(1) Excluding non-cash mark to market hedge adjustments prior to 2008 and 4Q06 one time tax adjustment
(2) See GAAP reconciliation and other calculations in Appendix
(3) Corporate rating of Ba3 by Moody’s and BB by Standard & Poor’s
Advantages over the typical carrier
4
Leisure customer
– Will travel in all economic conditions
– Vacations are valued – price dependent
Small/medium cities
– Filling a large void
– Increasing opportunity - industry restructuring
– Diversity of network - minimizes competition
Flexibility
– Adjust rapidly to changing macro (fuel/economy)
– Changes in capacity - immediate impact on price
– Minimize threat of irrational behavior from others
Low cost fleet – used aircraft
– Match capacity to demand, highly variable
– Relatively low capital needs, higher free cash flow
– Can grow and return cash to shareholders
Built to be different
Leisure customer
Underserved markets
Little competition
Low cost aircraft
Low frequency/variable
capacity
Unbundled pricing
Closed distribution
Bundled packages
Highly profitable
Measured, profitable growth
5
226
233
296
342
175
200
225
250
275
300
325
350
2013 2014 2015 2Q16
Routes
7.89
8.69
10.24
11.12
6.00
7.00
8.00
9.00
10.00
11.00
12.00
2013 2014 2015 LTM 2Q16
A
S
M
s
-
b
ill
io
n
s
Scheduled ASMs
$996
$1,137
$1,262
$1,304
$800
$900
$1,000
$1,100
$1,200
$1,300
$1,400
2013 2014 2015 LTM 2Q16
U
S
D
-
m
m
Total revenue
66
70
80
85
60
70
80
90
2013 2014 2015 2Q16
Aircraft in service
Aircraft number and routes are end of period
A very large niche
Based on current published schedule through March 16, 2017
362 routes, 83 operating aircraft
97 small/medium cities, 20 leisure destinations
6
Stars– leisure destinations
Little competition
98
114
136
161 168
181
207
221
255
297
65
2007 2008 2009 2010 2011 2012 2013 2014 2015 August 30 August
2016
Historic level of non-competitive routes
Routes without competition
Routes with
competition
7
Based on current published schedule through March 16, 2017, announcements and cancellations as of August 30, 2016
Legacy carriers – American, Delta, Southwest, United. Brand / lower cost carriers – Alaska, Hawaiian, JetBlue
ULCC carriers – Frontier, Spirit
Competitive routes are those that have non-stop flights between similar markets
Competitors – overlapping routes
Legacy carriers 54 Brand/lower cost carriers 6 ULCC’s 32
Low frequency model
8
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
S
y
ste
m
b
lock h
o
u
rs/
A
C/
d
a
y
2013 2014 2015 2016E
Avg. block hours/AC/day
1 - Peak = peak is defined as 11/23 – 12/1, 12/21 – 1/3, 2/18 – 4/14, 6/3 – 8/18. Remaining is off peak
2 – Aircraft are end of year
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
2x 3x 4x 5x or greater
%
o
f
to
tal
d
epa
rt
u
re
s
Weekly frequency of departures
Weekly market frequency
Peak Off peak
Leisure = seasonality Small cities = low frequency(1)
2013 2014 2015 2016E
Aircraft - 2 66 70 80 85
Low costs even with low utilization
7.8
JBLU
5.4
SAVE
7.3
ALK
5.8
ALGT
5.000
5.500
6.000
6.500
7.000
7.500
8.000
5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 14.0
CA
S
M
e
x
f
u
e
l (ce
n
ts
)
Average daily aircraft utilization – LTM (block hours per day)
CASM ex fuel vs daily aircraft utilization
9
As of LTM 2Q16, ALGT – Allegiant, JBLU – JetBlue, ALK – Alaska mainline, SAVE – Spirit
Current fleet plan
10
4
48
38
13
17
22
33
35
16
21
35 52
10 12
12
0
20
40
60
80
100
2016E 2017E 2018E 2019E
Expected fleet
End of period
B757 MD-80 A319 Used A320 New A320
Total
85
Total
91
Total
93
Total
99
Future numbers include existing delivery commitments and estimate of potential future transactions
77 Airbus aircraft either owned or firm commitments as of 8/24/16
MD-80 and 757 retirements are planned and subject to change
Cumulative return to shareholders
$17.4 $42.7
$96.5 $98.4 $103.4
$
1
8
7
.0
$
3
2
6
.1
$
4
5
4
.1
$
5
1
5
.8
$14.9
$53.5
$53.5
$95.3
$157.8
$
2
0
2
.1
$0
$100
$200
$300
$400
$500
$600
$700
2008 2009 2010 2011 2012 2013 2014 2015 2016
$ m
m
Share repurchases Dividends
11
$718m returned to shareholders since 2007
$92m remaining in share repurchase authority
**-Diluted share count in 2007 was 20.5m, share count for 6/30/16 was 16.3m
*** - As of Q2 2016
2014 includes $42m returned through a special dividend declared in 2013 and paid in January 2014
2015 includes $44m returned through a special dividend declared in 2014 and paid in January 2015
2016 includes $28m returned through a special dividend declared in 2015 and paid in January 2016
Reduced diluted share count by 20% since 2007**
Implemented quarterly cash dividend in Q1 2015 – now $0.70 per share***
3Q16 TRASM (8.5) to (7.5)% vs 3Q15
3Q16 CASM ex fuel 4 to 6% vs 3Q15
FY16 CASM ex fuel 0 to 4% vs 2015
3Q16 fixed fee + other revenue $12mm to $14mm
FY16 CAPEX $360mm
FY16 maintenance per aircraft per month $105 to $115 thousand
FY16 ownership cost* per aircraft per month $100 to $110 thousand
3rd Quarter 2016 4th Quarter 2016 Full year 2016
System departures 21 to 23% 15 to 19%
System ASMs 17 to 19% 10 to 14% 13 to 17%
Scheduled departures 21 to 23% 15 to 19%
Scheduled ASMs 17 to 19% 10 to 14% 13 to 17%
Existing guidance
12
Guidance subject to change
* - Ownership cost includes both depreciation and amortization as well as aircraft rental expense
Appendix
GAAP reconciliation
EBITDA calculations
14
$mm LTM 2Q16 2015 2014 2013
Net Income attributable to Allegiant Travel Co. 234.0 220.4 86.7 92.3
+Total comprehensive income (loss) 0 (.4) 1.2 .1
+Provision for Income Taxes 138.0 126.4 50.8 54.9
+Other Expenses 1 24.6 25.1 20.4 8.5
+Depreciation and Amortization 98.9 98.1 83.4 69.3
=EBITDA 495.5 469.6 242.5 225.1
+ Write down of Boeing 757 fleet 43.3
=Adjusted EBITDA 285.8
+ Aircraft lease rental 1.4 2.3 15.9 9.2
=EBITDAR 496.9 471.9 301.7 234.3
Total debt 630.7 641.7 2 593.1 234.3
+7 x annual aircraft lease rent 9.8 16.1 111.3 64.4
Adjusted total debt 640.5 657.8 704.4 298.7
=Adjusted Debt to EBITDAR 1.3x 1.4x 2.3x 1.3x
Average # of in service aircraft in period 79 74 69 63
=EBITDA per aircraft 6.3 6.3 4.1 3.6
Interest expense 27.3 26.5 21.2 9.5
= Interest coverage 18.2x 17.7x 13.5x 23.7x
1- Ex unconsolidated affiliate earnings
2 - Prior to 2015, total debt does not include debt issuance costs reclassification per GAAP guidance update
2014 EBITDA and subsequent calculations are adjusted to exclude a one time write-down of $43.3m
GAAP reconciliation
Return on equity
15
$mm LTM 2Q16 2015 2014 2013 2012
Net Income attributable to Allegiant Travel Co. 234.0 220.4 113.2 92.3 78.6
Jun 2016 Dec 2015 Jun 2015 Dec 2014 Dec 2013 Dec 2012
Total shareholders equity 406.7 350.0 326.2 294.1 377.3 401.7
Return on equity 64% 68% 34% 24% 21%
ROE = Net income / Avg shareholders equity
2014 net income calculation found on Adjustment for special item GAAP reconciliation table
GAAP reconciliation
Return on capital employed calculation
$mm LTM 2Q16 2015 2014 2013
+ Net income attributable to Allegiant Travel Co. 234.0 220.4 113.2 92.3
+ Income tax 138.0 126.4 66.8 54.9
+ Interest expense 27.3 26.5 21.2 9.5
- Interest income 2.6 1.4 0.8 1.0
396.7 371.9 200.4 155.7
+ Interest income 2.6 1.4 0.8 1.0
Tax rate 37.1% 36.5% 37.1% 37.4%
Numerator 251.2 237.0 126.6 98.1
Total assets prior year (1) 1,317.5 1,235.1 930.2 798.2
- Current liabilities prior year (1) 384.3 362.0 290.7 210.5
+ ST debt of prior year (1) 65.2 52.6 20.2 11.6
Denominator 998.4 925.7 659.7 599.3
= Return on capital employed 25.2% 25.6% 19.2% 16.4%
16
1 - Prior to 2015, total debt does not include debt issuance costs reclassification per GAAP guidance update
2014 net income calculation found on Adjustment for special item GAAP reconciliation table
GAAP reconciliation
Adjustment for special item
17
2014 $mm – except per share amounts
Net income as reported 86.3
+ Add provision for income taxes, as reported 50.8
Income before income taxes as reported 137.1
+ Other expense 20.2
Operating income 157.3
+ Boeing 757 fleet write down 43.3
Adjusted operating income 200.6
- Other expense 20.2
Adjusted pre-tax income 180.4
- Provision for income tax 66.8
Adjusted net income 113.6
- Net loss attributable to noncontrolling interest (0.4)
Adjusted net income attributable to Allegiant Travel Co 113.2
Diluted shares (millions) 17.8
Earnings per share as adjusted for special item $6.36
Total revenue
1,137.0
Adjusted operating margin 17.6%
Adjusted EBITDA*margin 25.2%
* - see GAAP reconciliation table
Revenue components
18
$91.69 $91.30
$78.63
$73.06
$50
$60
$70
$80
$90
2013 2014 2015 LTM 2Q16
Average fare - scheduled service
$5.21
$4.56
$4.29 $4.11
$0.00
$2.00
$4.00
$6.00
2013 2014 2015 LTM 2Q16
Average fare - ancillary third party
products
$40.52
$41.37
$46.43 $45.99
$30.00
$40.00
$50.00
2013 2014 2015 LTM 2Q16
Average fare - ancillary air-related
charges
$137.43 $137.23
$129.35
$123.15
$110
$120
$130
$140
2013 2014 2015 LTM 2Q16
Average fare - total
All revenue is revenue per scheduled passenger
LTM 2Q16 cost per passenger
Low cost drivers
$24 $21 $29 $31
$10 $15
$11 $13
$10 $4
$9 $14
$25 $21
$54 $44
$20 $23
$29 $38
ALGT SAVE LUV JBLU
19
Source: Company filings
Ownership includes depreciation & amortization + aircraft rent
Other excludes special items and one-time charges for other carriers
Other
Aircraft
$44 $49
$58
$45
$83 $82
Ex fuel cost = $65
Fuel cost = $24
Total Allegiant = $89
Ex fuel cost = $103
Fuel cost = $29
Total Southwest = $132
Ex fuel cost = $109
Fuel cost = $31
Total JetBlue = $140
$40
$44
Ex fuel cost = $63
Fuel cost = $21
Total Spirit = $84
Fuel Ownership Maintenance Other Labor
Credit metrics
16.4%
19.2%
25.6% 25.2%
17.5%
10%
20%
30%
2013 2014 2015 LTM
2Q16
LUV LTM
2Q16
20
Return on capital employed
24.0%
34.0%
68.0%
64.0%
32.7%
10%
20%
30%
40%
50%
60%
70%
80%
2013 2014 2015 LTM
2Q16
LUV LTM
2Q16
Return on equity
23.7 x
13.5 x
17.7 x 18.2 x
42.0 x
10
15
20
25
30
35
40
45
2013 2014 2015 LTM
2Q16
LUV LTM
2Q16
Interest coverage
1.3 x
2.3 x
1.4 x 1.3 x
0.9 x
0
1
2
3
2013 2014 2015 LTM
2Q16
LUV LTM
2Q16
Adjusted Debt / EBITDAR
LUV = Southwest Airlines, based on published information
Please see GAAP reconciliation table in appendix for calculation
2014 EBITDAR refers to an adjusted amount found in EBITDA tables in appendix
Capitalization structure
Actual 6/30/16
(MM USD)
Debt to LTM
EBITDAR
Avg rate
Year of
maturity
LTM EBITDAR 496.9
Secured by aircraft – floating 142.1 Libor + 3.04% 2018
Secured by aircraft – floating 31.4 Libor + 2.46% 2019
Secured by aircraft – floating 68.8 Libor + 1.72% 2020
Secured by aircraft – floating 26.5 Libor + 1.75% 2021
Secured by aircraft – fixed 22.7 3.60% 2018
Total 291.5
Secured by real estate – fixed 9.2 2.86% 2018
Secured by real estate – fixed 7.2 2.86% 2020
Total 16.4
Revolver 25.0 Libor + 1.70% 2020
Total secured debt 332.9 0.7x
Senior note 298.2 5.50% 2019
Total debt 631.1 1.3x
7x LTM aircraft rent 9.7
Adjusted debt 640.8 1.3x
21
Avg rate is a weighted average of debt with common maturity years
Debt table excludes fees to be paid on the revolver due in December 2017