Allegiant Travel Company · NASDAQ:ALGT
Allegiant Travel — Investor Day (November 2014)
77 slides from Allegiant Travel's investor day presentation, Nov 13, 2014
Slide 1: Allegiant Travel Company 2014 Investor Day
Allegiant Travel Company 2014 Investor day November 2014
Slide 2: Operations update
Operations update Kris Bauer – Interim COO
Slide 3: Forward looking statements
Forward looking statements 3 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 uncert
Slide 4: Pilot staffing – how did we get here?
Pilot staffing – how did we get here? Government shutdown New fleet type Still operating a growing airline 4
Slide 5: Hiring requirements
Hiring requirements 2014 has been unique 5 2014 - expected new pilots hired throughout the year
Slide 6: Resources - instructors
Resources - instructors 6 Actual 2014 / Forecasted 2014
Slide 7: Resources – simulators
Resources – simulators 7 Actual 2014 / Forecasted 2014
Slide 8: Resources – line check airmen
Resources – line check airmen 8 Actual 2014 / Forecasted 2014
Slide 9: Proposed training schedule
Proposed training schedule 9 Class 1/1 3/26 6/4 9/24 12/31 3/11 MD80 new hire 22 MD80 new hire 24 A320 transition 8 MD80 upgrade 8 MD80 upgrade 8 A320 transition 8 MD80 upgrade 10 MD80 new hire 24 MD80 upgrade 13 A320 transition 3 MD80 new hire 34 A320 new hire 3 A320 new hire 14 757 new hire 5 A320
Slide 10: MD-80 captain requirements
MD-80 captain requirements 10 100 110 120 130 140 150 160 8/3/2014 9/3/2014 10/3/2014 11/3/2014 12/3/2014 1/3/2015 2/3/2015 3/3/2015 4/3/2015 5/3/2015 6/3/2015 MD-80 captains trained vs needed MD-80 Captains required MD-80 Captains trained Shaded area is forecasted
Slide 11: New hire pilot data
New hire pilot data Not having issues finding quality pilots – 11/14/2014 Class: average total flight time 5,741 hours – 10/14/2014 Class: average total flight time 5,462 hours – 09/19/2014 Class: average total flight time 5,528 hours – 09/05/2014 Class: average total flight time 6,613 hours 11
Slide 12: Network update
Network update Lukas Johnson – VP Network & Pricing
Slide 13: Forward looking statements
Forward looking statements 13 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 uncer
Slide 14: Bio
Bio Responsible for: – Network – Revenue management – Air ancillary – Crew planning Joined Allegiant in 2010 Previously worked in actuarial consulting B.A. Math - Northwestern University 14
Slide 15: Consolidation a catalyst
Consolidation a catalyst US domestic seats 2007 vs 2014 by airport size 15 0 100 200 300 400 500 600 700 2007 2014 S e a ts - millio n s Large hubs 0 50 100 150 200 250 2007 2014 S e a ts - m ill io n s Medium hubs 0 20 40 60 80 100 2007 2014 S e a ts - millio n s Small hubs Hub classification by 20
Slide 16: Evolving our network
Evolving our network New cities announced 11/12/14 – Indianapolis, IN – Pittsburgh, PA – Jacksonville, FL – Omaha, NE – Richmond, VA Focus on underserved leisure/VFR markets – Not business routes or fortress hubs Larger origination cities – Opens up new secondary destinations – Less discountin
Slide 17: Passenger stimulation
Passenger stimulation 17 0 50 100 150 200 250 300 4Q12 - 2Q13 4Q13 - 2Q14 P D E W AUS-LAS WN G4 $168 $165 $70 0 200 400 600 800 1000 1200 1400 1600 4Q12 - 2Q13 4Q13 - 2Q14 P D E W LAX-HNL Other G4 $251 $278 $167 Numbers above PDEW bar = Average net fare in period per Diio Mi WN – Southwest Airlines
Slide 18: Airbus utilization
Airbus utilization Airbus aircraft allows previously marginal flying to be profitable – Longer routes (Bismarck, ND to Orlando) – Off-peak day flying (Columbus, OH to St. Pete Wed/Sat 2x weekly) – Off-peak season flying (Syracuse, NY to St. Pete in September) – Previously canceled markets (Ft. Way
Slide 19: 2015 scheduled ASMs and 4Q14 guidance
2015 Scheduled ASMs +9 to 13% – Increase in ASMs weighted towards 2H 2015 2015 East Coast > 50% of system ASMs – 2011 East Coast was 34% of system ASMs 2015 Average stage length down 1 to 2% 4Q14 TRASM 0 to +2% Guidance 19
Slide 20: Cost update
Cost update Trent Porter – VP Financial Planning & Analysis
Slide 21: Forward looking statements
Forward looking statements 21 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 uncer
Slide 22: Bio
Bio Responsible for: – Financial planning – Labor negotiations – Budgeting/forecasting – Business intelligence & analytics Joined Allegiant in 2009 Capital & Long Term Strategic Planning at US Airways B.S. Degrees in Accounting, Finance & Economics (Utah State) MBA – Finance (Univ. of AZ);
Slide 23: 2014 CASM ex-Fuel
2014 CASM ex-Fuel 23 *Non-Core includes Teesnap, Game Plane, GMS Racing Levy payout is associated with accelerated vesting of equity grants upon Andrew Levy’s departure from the company 5.60 0.10 0.05 0.03 0.01 0.08 0.12 0.04 0.07 5.40 5.50 5.60 5.70 5.80 5.90 6.00 6.10 6.20 6.30 '13 CASM ex Heavy M
Slide 24: 2015 Expectations: fuel and salaries
Fuel 2015 Expectations 24 Airbus AC 14% 21% 2014 2015 Airbus Block Hours 20% 32% 2014 2015 26 16 14 12 - 5 10 15 20 25 30 B757 MD80 A319 A320 Gallons/Pax Salaries & Benefits – Realization of efficiencies from multi-fleet overhead investments – Build back Pilot & Flight Attendant Productivity 70.
Slide 25: 2015 Expectations (cont.): maintenance and stations
2015 Expectations (cont.) Maintenance – 2015 Mtx / AC / Mon between ~ $100k - $110k – New Heavy Mtx (5 Yrs) – AAR (MD-80s/B757) & Pemco (Airbus) – Same Number of Events for 2015 25 $128.9 $101.9 $96.1 $107.0 $105.0 $70.4 $62.1 $56.8 $60.0 $60.0 $- $50.0 $100.0 $150.0 2011 2012 2013 2014E 2015E Mai
Slide 26: 2015 Expectations (cont.): depreciation, marketing
2015 Expectations (cont.) 26 Depreciation $59.8 $74.6 $91.4 $93.0 $95.0 $- $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 2011 2012 2013 2014E 2015E Depreciation ex AC on Lease AC on Lease Dep Depreciation per in-service AC / month Sales & Marketing – Game Plane Investments & GMS Racing sponsorship – Cre
Slide 27: 2015 CASM ex-Fuel
2015 CASM ex-Fuel 27 6.16 0.07 0.10 0.04 0.11 0.06 0.10 5.40 5.50 5.60 5.70 5.80 5.90 6.00 6.10 6.20 '14 CASM ex Levy Payout Subservice Training/Prod '15 CASM ex AC on Lease Dep Non-Core* CC Surcharge Pilot/FA Contract ??? 2015 CASM ex Guidance: (4) - 0% *Non-Core includes Teesnap, Game Plane, GMS R
Slide 28: Cash generation & CAPEX
Cash generation & CAPEX 28 $127.4 $190.1 $225.0 $282.5 $337.8 $87.0 $105.0 $178.0 $270.0 $180.0 $- $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 2011 2012 2013 2014E 2015E EBITDA vs CAPEX EBITDA CAPEX 2014 & 2015 EBITDA is based on First Call consensus as of 11/11/14 EBITDA calculation – se
Slide 29: Cumulative return to shareholders
Cumulative return to shareholders $0.6 $17.4 $42.7 $96.5 $98.4 $103.4 $187.0 $316.3 $14.9 $14.9 $53.5 $53.5 $95.3 -$30 $20 $70 $120 $170 $220 $270 $320 $370 $420 2007 2008 2009 2010 2011 2012 2013 2014 $ m m Share repurchases Dividends 29 $412m returned to shareholders since 2007 $100m remaining in
Slide 30: Fleet update
Fleet update Tom Doxey– VP Fleet & Corporate Finance
Slide 31: Forward looking statements
Forward looking statements 31 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 uncer
Slide 32: Bio
Bio Responsible for: – Fleet Planning – Aircraft Transactions – Corporate Finance – Materials / Supply Chain Joined Allegiant in 2009 Held various finance-related roles at US Airways prior to joining Allegiant BA, Brigham Young University MBA, Arizona State University 32
Slide 33: Topics of discussion
Topics of discussion Current fleet plan & transaction focus Overview of recently executed fleet deals Airbus update MD-80 update Financing flexibility 33
Slide 34: Current fleet plan & transaction focus
Current fleet plan & transaction focus 2013 2014E 2015E 2016E 2017E 2018E MD-80 (150 seat) 1 0 0 0 0 0 MD-80 (166 seat) 51 53 53 53 53 53 757 (218 seat) 6 6 6 6 6 6 A319 (156 seat) 3 4 9 12 12 24 A320 (177 seat) 5 7 10 10 10 10 Total 66 70 78 81 81 93 y/y fleet growth 5% 6% 11% 4% 0% 15% % Airbus Ai
Slide 35: Fleet deals executed during 2014
Fleet deals executed during 2014 Transactions for 16 future A320 series aircraft have been executed so far during 2014 – Forward Purchase Transactions: • 1 A320 delivering in 2015 • 1 A319 delivering in 2016 • 2 A319s delivering in 2016 – Purchase of Aircraft Currently on Lease: • 12 A319s redeliv
Slide 36: Purchase of leased A319s
Purchase of 12 leased A319s In June 2014, the Company entered into separate agreements to acquire the ownership interests in twelve special purpose companies each owning one A319 aircraft currently on lease to a European carrier until 2018 Allegiant does not intend to become a leasing company
Slide 37: Airbus update
Airbus update Current fleet of 10 A320 series aircraft (7 A320s + 3 A319s) Airbus transition allows for additional efficiency on variable costs for the higher utilization portion of the network while allowing us to maintain low costs at relatively low daily utilization High Degree of Commonali
Slide 38: Airbus update (cont’d)
Airbus update (cont’d) A320 Market Update – Lease rates have firmed somewhat over the past 18 months – Pricing for sale transactions has remained relatively constant – Fewer A320s available for sale, as many lessors have opted to lease mid- aged A320s into emerging market airlines – Many airlines
Slide 39: Fleet flexibility with MD-80 aircraft
Fleet flexibility with MD-80 aircraft MD-80 remains an important and viable component of the fleet Depreciation roll off provides flexibility to keep aircraft in the fleet or to retire aircraft if large A320 family transaction becomes available 39 - 10,000 20,000 30,000 40,000 50,000 60,000 70,0
Slide 40: Fleet flexibility with MD-80 aircraft (cont’d)
Fleet flexibility with MD-80 aircraft (cont’d) Maintenance costs have been stable over the long-term Due to maintenance program timing, costs will be lumpy in the short-term 40 $103.35 $103.01 $129.56 $102.28 $96.50 $107 (1) $90 $95 $100 $105 $110 $115 $120 $125 $130 $135 2009 2010 2011 2012 201
Slide 41: Fleet flexibility with MD-80 aircraft (cont’d)
Fleet flexibility with MD-80 aircraft (cont’d) Boeing has completed the FAA approval for the Widespread Fatigue Damage / Limit of Validity for the MD-80 at 110,000 cycles and 150,000 flight hours 41 ~ 58,000 cycles remaining on most restrictive aircraft = 77 yrs. @750 cycles / yr. ~ 80,000 flight
Slide 42: Current debt / financing flexibility
Current debt / financing flexibility Steep amortization of current loan balances will provide significant flexibility to optimize cash levels 42 Aircraft values are estimates using appraised market value forecasts and include current and committed aircraft only. Debt balances are based on amortiza
Slide 43: Marketing update
Marketing update Brian Davis – VP Business Development
Slide 44: Forward looking statements
Forward looking statements 44 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 uncer
Slide 45: Bio
Bio Responsible for: – Marketing – Public relations – Loyalty – Co-branded credit card Joined Allegiant in 2005 Worked in government affairs, charters, fuel, and airport group at Allegiant The Wharton School – University of Pennsylvania – Master of Business Administration 45
Slide 46: Allegiant 15 Years 1999-2014
we allegiant I5 YEARS 1999 - 2014
Slide 47: Allegiant – Years of Sunshine
Allegiant – 15 Years of Sunshine
Slide 48: Historic marketing strategy (1999-2013)
Historic marketing strategy (1999-2013)
Slide 49: Allegiant – evolution of marketing strategy
Individual Local National 2013 2014 Allegiant – evolution of marketing strategy
Slide 50: National marketing – television ads
National marketing – television ads
Slide 51: National marketing – The Game Plane
National marketing – The Game Plane Aligned with ALGT’s leisure focus Distributed through syndication to: 77% of US television households markets with 83% of G4 capacity
Slide 52: National Marketing – GMS Racing
National Marketing – GMS Racing Sponsorship of three drivers in ARCA and Truck Series racing High visibility among demographic with significant overlap to ALGT customers
Slide 53: National marketing – Allegiant & Make-A-Wish
75% of all Make-A-Wish wishes involve air transportation Allegiant celebrated our 210th wish in November 2014 Created special aircraft livery to celebrate our 100th wish National marketing – Allegiant & Make-A-Wish
Slide 54: Local marketing – advertising
Outdoor Print Television Local marketing – advertising
Slide 55: Direct marketing – targeted online
Dynamically populated with lowest price currently available from nearest airport Direct marketing – targeted online
Slide 56: Direct marketing – targeted online
Launched in October 2013: OTA Display • Priceline, Orbitz, CheapFlights, CheapTickets Search Result Display Ad Network Display Direct marketing – targeted online
Slide 57: Direct marketing – weekly email deals
Industry Allegiant Unique Opens 10.7% 17.4% Click Through 1.5% 3.8% Unsubscribe 0.14% 0.12% • 4.6 Million Active Subscribers • Dynamic, Market-Specific Deals • Deep Links to Featured Deals Direct marketing – weekly email deals
Slide 58: Evolution of marketing strategy
Individual Local National 2013 2014 Evolution of marketing strategy
Slide 59: Marketing – measuring effectiveness
Marketing – measuring effectiveness When compared to Google’s index of “travel”, the three-tiered marketing strategy has shown significant increases in first-time visitors to the website.
Slide 60: Technology update
Technology update Todd Cinnamon– VP IT
Slide 61: Forward looking statements
Forward looking statements 61 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 uncer
Slide 62: Bio
Bio Responsible for: – Software development lifecycle for Allegiant portfolio Joined Allegiant in 2012 24+ years in the travel space, including American Airlines, Sabre, GetThere.com and United (pre-merger) BS in Computer Science, Rensselaer Polytechnic Institute Masters in Software Engine
Slide 63: Platform advantages
Platform advantages Scalability Flexibility and agility Marketing drives, not IT Code/service re-use Ability to perform Quality Assurance at all levels of the platform 63
Slide 64: Platform overview
Platform overview 64 AIS Airline Inventory Website Mobile Apps Booking Engine Hotels Cars Products Shared Services G4Plus OTA DB Loyalty
Slide 65: IT wins - commercial
IT wins - commercial Loyalty/Co-Branded credit card platform Add car/hotel to existing bookings on WWW Customer Database / My Accounts on WWW Promo Codes Seat Masking Legroom Plus / Giant Seats New Pricing Rules Engine for Car and TripFlex Fare Buckets iPad kiosk at airport ticket
Slide 66: IT wins – airline operations
IT wins – airline operations iPads for mechanics on the line New boarding software at airport gates (DCS 1.0) Automated weight and balance / Eliminate F/A counts Mobile Check in 66
Slide 67: End of year pipeline
End of year pipeline Hotels for small markets (Priceline) Credit card surcharge 67
Slide 68: Ancillary update
Ancillary update Jude Bricker – SVP Planning
Slide 69: Forward looking statements
Forward looking statements 69 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 uncer
Slide 70: Revenue initiatives
Revenue initiatives Fare buckets Seat assignment pricing Pre-paid bag pricing Charge for check-in TripFlex pricing 70
Slide 71: Driving more towards ancillary
Driving more towards ancillary Fare is critical decision point for customer 71 25.0% 30.0% 35.0% 40.0% 45.0% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 Ancillary as a percentage of total fare Spirit Allegiant Data from public filings
Slide 72: Third party ancillary
Third party ancillary Factors on hotels – Network shift to the East – End of most favorable room rates from the CET contract in August 2013 – End of the air subsidy in November 2012 Car bookings are improving based on new pricing tools 72
Slide 73: Network shift away from Las Vegas
Network shift away from Las Vegas Opportunities have favored the east coast – Bulk of hotel bookings occur in Las Vegas 73 10% 15% 20% 25% 30% 35% 40% 45% 50% 1 /1/ 2 0 0 9 3 /1/ 2 0 0 9 5 /1/ 2 0 0 9 7 /1/ 2 0 0 9 9 /1/ 2 0 0 9 1 1 /1 /2 0 0 9 1 /1/ 2 0 1 0 3 /1/ 2 0 1 0 5 /1/ 2 0 1 0 7 /1/ 2 0 1
Slide 74: Counterintuitive to Las Vegas macro
Counterintuitive to Las Vegas macro Stronger Las Vegas strip, reduces access to hotel inventory 74 0.2 0.21 0.22 0.23 0.24 0.25 0.26 0.27 0.28 0.29 $105 $107 $109 $111 $113 $115 $117 $119 2011 2012 2013 YTD 2014 R o o m n ig h t per L a s V egas p a s s e n g e r L a s V egas A D R Las Vegas ADR v
Slide 75: Q&A
Q&A Maury Gallagher – Chairman & CEO
Slide 76: 2015 Guidance
2015 Scheduled ASMs +9 to 13% 2015 CASM ex fuel (4) to 0% 2015 CAPEX $175mm to $185mm 2015 Guidance 76
Slide 77: GAAP reconciliation EBITDA calculations
GAAP reconciliation EBITDA calculations 77 $mm 2013 2012 2011 Net Income 92.3 78.6 49.4 +Provision for Income Taxes 54.9 46.2 30.1 +Other Expenses 8.5 7.8 5.9 +Depreciation and Amortization 69.3 57.5 42.0 =EBITDA 225.0 190.1 127.4