Allegiant Travel Company Q1 2026 Earnings Call Summary

Key Financial Results
- Q1 Net Income: $69.6 million ($3.77 EPS, 80% vs Q1 2025 airline-only)
- Q1 Adjusted Operating Margin: 14.9% (~6 points YoY) – highest Q1 margin since pre-COVID, industry-leading for 2nd consecutive quarter
- Q1 EBITDA: $168 million (22.9% margin)
- Q1 Total Revenue: $732.4 million (9.6% on 5.9% less capacity) – Q1 record, strongest quarterly performance in company history
- Q1 TRASM: $0.1431 (16.4% YoY) – Q1 record
- Q1 CASM-ex: $0.0864 (+7.1% YoY, driven by 5.9% capacity reduction)
- Q1 Fuel: $3.04/gallon (vs $2.60 initial guide)
- Controllable Completion Factor: 99.9%

Balance Sheet & Liquidity
- Total Liquidity: $1.2 billion ($933.5M cash/investments + $250M undrawn revolver)
- Cash: 36% of trailing 12-month revenues
- Total Debt: $1.8 billion (flat vs Q4 2025)
- Net Debt: $858 million (down >$100M from Q4)
- Net Leverage: 1.8x
- Unencumbered Fleet Assets: ~$1.3 billion market value (nearly half of fleet)
- Q1 CapEx: $176 million ($155M aircraft-related, $21M other)
- Plans to refinance 2027 senior secured notes in coming months

Q2 2026 Guidance (Stand-alone Allegiant Only)
- Operating Margin: ~ 1% (midpoint)
- EPS: ~ $0.50 loss
- Capacity (ASM): – 6.5% YoY (down from initial plan; purely fuel-driven)
- TRASM: Expect to exceed Q1’s 16.4% YoY growth (no specific guidance)
- Fuel Assumption: $4.35/gallon (~$120M incremental operating expense vs prior expectations)
- Load factors expected to continue expanding; yields likely leading TRASM growth

Fuel Crisis Response

Capacity Adjustments:
- Q2: -6.5% YoY (down from initial plan)
- Q3: Flat to slightly down YoY (previously anticipated modest growth)
- Q4: Still early, but “incredibly bullish about holiday performance”
- Reductions focused on off-peak day-of-week and shoulder season flying
- No pullback on peak flying given strong demand
- Higher mix of peak flying continues
- Maintain flexibility to add capacity back if environment warrants

Fuel Environment:
- Crack spreads nearly tripled to ~$1.70/gallon in early April
- Since dropped to $1.20 (still 2x pre-conflict level of ~$0.60)
- Reduced service on longer stage-length routes (higher fuel cost hurdle)

Demand Resilience:
- “Leisure demand still strong”
- Many record sales days in Q1
- Cash sales running double-digit growth YoY through April despite capacity reduction
- Booking trends remain healthy
- Q1 load factors: +4 points; yields: +21% (rivaled only by early 2023 revenge travel surge)

Fleet Strategy

Current Fleet: 123 aircraft (Q1: took delivery of 1 737 MAX, retired 1 A320)

Q2 Deliveries: 3 737 MAX; retire 1 A320

737 MAX Performance:
- 20% fuel burn efficiency improvement (650 gallons/block hour)
- ~30% improvement on ASM-per-gallon basis (due to seat configuration)
- 2026: ~20% of ASMs from MAX
- 2028: ~50% of ASMs from MAX
- Ownership cost at or about same as used A320
- Enables keeping ~1% added capacity vs what would cancel in all-Airbus state
- ASMs per gallon: 86.7 (+1.2% YoY) – 5th consecutive quarter of improvement

Fleet Flexibility:
- Optionality to accelerate retirements of older A320s if elevated fuel prices persist
- Accelerated retirements support heavy maintenance spend reduction
- Excited about exercising options from order book
- 2027 expected to be peak year for firm Boeing deliveries

Sun Country Acquisition Update

Closing Timeline:
- Expected around May 13, 2026 (just over 4 months from announcement – “super compressed timeline”)
- DOT approval received April 2026
- Shareholder votes scheduled May 8 for both companies

Combined Fleet Post-Close:
- 172 aircraft passenger fleet total
- 163 owned (94.8% ownership) – “further enhancing financial and operational flexibility”

Synergies & Value (unchanged):
- $140 million run rate synergies (high conviction maintained)
- Half of run rate expected in first full year post-close (2027 timeframe)
- Some network synergies under pressure in high fuel environment but expected to normalize
- Significant value outside P&L synergies: Fleet ownership flexibility, scale, broader loyalty program

Sun Country Charter/Cargo Benefits:
- Represents ~35-40% of Sun Country revenues (~10%+ of combined company)
- Contractual fuel pass-through structures – “even more beneficial in today’s volatile fuel environment”
- Fixed fee Q1 performance: $18.1M (+11.5% YoY) – “incredible performance”

Integration Progress:
- Planning reinforced confidence in combination value
- Working through reporting/segment structure (updates expected in coming weeks)
- Given near-term closing + fuel environment, not providing updated full year guidance currently
- Will share full year earnings estimates for combined entity in due course

Commercial Initiatives & Performance

Co-branded Credit Card:
- 600,000+ cardholders
- ~5% of annual revenue currently
- Stretch goal: 10% of revenue (more confident now than 6-8 months ago)
- Q1 bank remuneration: +9% YoY
- 7 of last 8 months: Double-digit YoY card acquisition growth
- Card spend: +15% YoY each month in Q1
- First major amendment with bank in 10 years underway

Allegiant Extra (Premium Seating):
- Outpacing expectations
- Contributing to TRASM growth and higher loyalty
- Increasing repeat customers
- ~$500 per departure contribution
- Less price sensitivity among Extra seat purchasers vs base customers
- Available on MAX and all 180-seat A320s

Third-Party Revenue: +20% per passenger YoY

Navitaire Tools: Adoption driving meaningful performance lift

Cost Management
- Q1 nonfuel operating expenses: Down nearly 6% YoY (despite CASM-ex up 7.1% due to capacity reduction)
- Cost structure “remains one of the best in the industry”
- Full year CASM-ex guidance: Up mid-single digits (still achievable despite pressure)
- Q2 expected to be high point for unit costs
- 2026 nonfuel unit costs (absolute) expected down vs 2024 (still achievable but under pressure)

Association for Value Airlines (AVA)

Government Engagement:
- DOT requested meeting with AVA carriers last week to discuss high-fuel environment
- DOT requested AVA provide potential options for federal assistance
- Allegiant and Sun Country in stronger financial position than some AVA members
- “If there is federal assistance offered, we just want to preserve our option to consider”
- No specific feedback received yet on AVA requests

Strategic Positioning
- Operating strategy prioritizes flexible capacity to capitalize on peak demand periods vs maximum utilization
- “Serving leisure traveler without large international networks or premium cabins” – highlights model strength
- “Gap between efficient, well-run airlines and weaker operators is widening. Allegiant and Sun Country are on the right side of that gap.”
- Full year CapEx guidance maintained (merger not expected to materially change outlook)

Management expressed confidence in model resilience, strong execution despite fuel headwinds, and excitement about completing Sun Country merger to demonstrate combined company value.