Allegiant Travel Company · NASDAQ:ALGT
Allegiant Travel — Investor Presentation (September 2012)
44 slides from Allegiant Travel's investor presentation, September 2012
Slide 1: Management Presentation September 2012
Management Presentation September 2012
Slide 2: Forward looking statements
Forward looking statements 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 uncertai
Slide 3: Unique business model and results
Unique business model and results Highly resilient and profitable Built to be different – Profitable last 38 quarters (1) Leisure customer – $162mm EBITDA (2) LTM 2Q12 Small cities – LTM Return on Capital 14.4% (2) Little competition Strong balance sheet Low cost aircraft – Rated BB- and Ba3 (3)
Slide 4: Leisure customer in small cities
Leisure customer in small cities Taking people where they want to vacation Stimulation of demand - non-stop flights, low prices Prior to ALGT, small cities had few good options Leisure - more resilient than business, proven repeatedly Packages – air + hotels, cars, etc. Variable capacity
Slide 5: Nationwide footprint
Nationwide footprint Yellow dots – leisure destinations Blue dots – small cities Large dots - bases Based on current published schedule through April 15, 2013 197 routes, 63 operating aircraft 76 small cities, 13 leisure destinations 5
Slide 6: Little competition
Little competition Uniquely built to profitably serve small city markets 180 165 125 85 45 17 5 Competitors – overlapping routes Routes w Routes wo competition competition Frontier – 5 Spirit – 1 Southwest – 4 AirTran / Southwest – 1 Hawaiian – 2 Alaska - 3 Sun Country – 1 US Airways - 3 6
Slide 7: Capacity management
Capacity management Leisure = seasonality Small cities = low frequency(1) 8.0 Avg. block hours/AC/day Weekly market frequency 80.0% 7.5 Peak Off peak 70.0% System block hours/AC/day 7.0 60.0% % of total departures 6.5 50.0% 40.0% 6.0 30.0% 5.5 20.0% 5.0 10.0% 4.5 0.0% Jan Feb Mar Apr May Jun Jul Aug
Slide 8: Ancillary revenue – third party products
Ancillary revenue – third party products Ancillary revenue – 3rd party Bundled vacation packages $140.0 $116.1 $120.0 Very high margins $100.0 $89.3 $106.4 USD mm – 31% of LTM pre-tax income $80.0 $60.0 Wholesale price for hotel & car, $40.0 $24.4 $29.9 $33.5 we manage margin, no inventory $20
Slide 9: Excellent cost structure
Excellent cost structure Operating cost ex fuel/ASM Operating cost/ASM (CASM) (CASM ex) vs stage length vs stage length 8 13 7.7 LUV 7.6 12.5 7.5 ALK(1) 12.5 LUV Total cost ex fuel per ASM (cents) 12.0 12 Total cost per ASM (cents) 7 ALK(1) 6.8 JBLU 11.5 6.5 11.4 JBLU 11 6 6.0 10.6 SAVE 10.5 ALGT 10
Slide 10: Best pre-tax margins
Best pre-tax margins 25.0% ALGT 20.0% ALGT ALGT 15.0% SAVE SAVE(1) ALK SAVE SAVE ALK ALGT 10.0% ALK LUV LUV JBLU ALK(1) JBLU 5.0% LUV(1) JBLU(1) JBLU LUV 0.0% 2009 2010 2011 1H12 Recession Recovery Runaway ??? Oil Avg AC in period 43 49 52 58 Avg scheduled service fuel cost $1.90 $2.43 $3.30 $3.39 (
Slide 11: Profitable growth
Profitable growth External – intense focus on unit revenue Internal – intense focus on profitability Year over year 1Q12 2Q12 Scheduled ASMs 22.0% 20.4% PRASM 3.1% (5.6)% TRASM 2.4% (3.1)% Operating income 30.5% 102.1% Pre-tax income 26.5% 111.1% Net income 26.5% 110.8% EPS 25.8% 109.7% 11
Slide 12: Better equipped to handle higher fuel
Better equipped to handle higher fuel 1H 08 1H 12 % change System ASMs (billions) 2.5 3.8 52% Average aircraft 37 58 57% Avg fare – scheduled service $85.28 $92.20 8% Avg ancillary - total $26.75 $38.70 45% Avg fare - total $112.03 $130.90 17% Pre-tax margin 7.1% 15.9% $mm 115 $4.00 $103 105 $3.42 $
Slide 13: Airbus
Airbus 2 deals for 19 A319, 156 seat aircraft - working on other deals Long term growth/replacement strategy, 1st AC in service 2Q 2013 Superior to MD-80 – Better fuel, better maintenance costs, higher ownership costs – Better range and short field performance, opportunity 20+ new cities Use
Slide 14: No change in strategy
No change in strategy NO ASSUMPTION OF INCREASED FLEET UTILIZATION Used aircraft = value Core competence with used equipment No changes in capacity management approach – Moderately higher fixed costs, lower variable costs – Some MD-80 marginal flying can be very profitable with A319 Even l
Slide 15: Hawaii update
Hawaii update Las Vegas and Fresno, CA to Honolulu – 1st flights June 29/30 – July HNL operating margin outperforming company operating margin Additional growth announced to date – HNL to Bellingham, WA, Eugene, OR, Santa Maria, Stockton, Monterey, CA • Mid Nov 2012 – Maui to Bellingham, WA • Mi
Slide 16: Carry on bag fee
Carry on bag fee Charging for bags to be placed in overhead – Bags that fit under the seat are free Introduced fee April 2012, began policing fee in June 2012 Avg fare – ancillary air related $33.90 $34 $33 $32.39 $ per passenger $32 $31.46 $31.51 $31 $30.38 $30 $29 $28 2Q11 3Q11 4Q11 1Q12 2Q12
Slide 17: PRASM vs TRASM
PRASM vs TRASM Significant impact made by carry on bag fee 15.0% 10.3% 10.0% 8.0% 5.0% 2.3% 2.7% 1.8% 1.2% 0.0% -1.5%-1.7% -1.6% -2.8% -5.0% -3.5% -4.1% -7.4% -10.0% -10.4% -15.0% Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 YoY TRASM YoY PRASM PRASM = scheduled revenue / scheduled ASMs TRASM =
Slide 18: Labor
Labor TWU – Flight attendants Dec 2010 – Negotiating 1st contract IBT – Pilots Aug 2012 No short term impact Long term – mgmt committed to not permit cost structure or flexibility to change 18
Slide 19: Guidance
Guidance 3Q 12 PRASM (9) to (7)% Schedule currently selling through April 15, 2013 3Q 12 CASM ex fuel (2)% to 0% 3Q 12 Fixed fee + other revenue $10mm to $12mm 2012 CAPEX $105mm to $115mm 2013 scheduled ASM growth +20% to 25% 3rd Quarter 2012 4th Quarter 2012 System departures 2 to 6% 5
Slide 20: Appendix
Appendix g Travel is our deal.
Slide 21: GAAP reconciliation
GAAP reconciliation EBITDA calculations $mm LTM 2Q12 1H 2012 2011 2010 2009 2008 1H 2008 Net Income 67.2 46.9 49.4 65.7 76.3 35.4 12.3 +Provision for Income Taxes 40.5 27.5 30.1 37.6 44.2 19.8 6.5 +Other Expenses 7.3 3.8 5.9 1.3 1.6 .7 .1 +Depreciation and Amortization 47.1 25.1 42.0 35.0 29.6 23.5
Slide 22: GAAP reconciliation
GAAP reconciliation Return on equity $mm LTM 2Q12 2011 2010 2009 Net Income ($mm) 67.2 49.4 65.7 76.3 Jun 2012 Jun 2011 Dec 2011 Dec 2010 Dec 2009 Total shareholders equity ($mm) 403.0 328.3 351.5 297.7 292.0 Return on equity 18% 15% 22% ROE = Net income / Avg shareholders equity 22
Slide 23: GAAP reconciliation
GAAP reconciliation Return on capital employed calculation $mm LTM 2Q12 2011 2010 2009 + Net income 67.2 49.4 65.7 76.3 + Income tax 40.5 30.1 37.6 44.2 + Interest expense 8.4 7.2 2.5 4.7 - Interest income 1.1 1.2 1.2 2.5 EBIT 115.0 85.5 104.6 122.7 + Interest income 1.1 1.2 1.2 2.5 Tax rate 37.6% 3
Slide 24: Current fleet plan
Current fleet plan Current & EOY EOY EOY EOY 2012 2013 2014 2015 MD-80 58 56 56 56 757 4 6 6 6 A319 0 6 13 19 Total 62 68 75 81 – Expected number of aircraft by end of period – Includes only committed aircraft transactions – In service dates (not delivery) 24
Slide 25: A319 - GECAS
A319 - GECAS 9 units – easyJet, sister ships – 8 – 10 years old at delivery Operating lease – 96 months # aircraft Delivered In Service 1 Q4 2012 Q2 2013 1 Q1 2013 Q2 2013 1 Q3 2014 Q4 2014 1 Q4 2014 Q1 2015 1 Q1 2015 Q2 2015 4 Q2 2015 Q3 2015 25
Slide 26: A319 - Cebu Pacific Air
A319 - Cebu Pacific Air 10 units – Approximately 7 years old at delivery – Sister ships – High level of commonality to easyJet fleet Structure of deal still being negotiated # aircraft Delivered In Service 1 Q1 2013 Q2 2013 1 Q2 2013 Q3 2013 2 Q3 2013 Q4 2013 3 Q4 2013 Q1 2014 2 Q1 2014 Q2 2014
Slide 27: Introduction of used Airbus A319 to ALGT
Introduction of used Airbus A319 to ALGT 19 aircraft – 9 operating lease, 10 (structure to be determined) – 156 seats, 4 exit door variant – 9 easyJet sister ships, 10 Cebu Pacific sister ships – 7 – 10 years old at delivery to ALGT Delivery schedule – Starts 4Q 2012 through 2Q 2015 – 1st aircra
Slide 28: Aircraft cost comparison
Aircraft cost comparison (utilization of 8.9 hours/day) Projected costs per passenger Total Ex fuel costs = $54 Ex fuel costs = $55 Fuel cost = $52 Fuel cost = $41 Total MD-80 = $106 Total A319 = $96 Other $17 $18 $34 $36 $17 $18 $15 $5 $9 Aircraft $10 $72 $60 $52 $41 MD80 (166 seats) A319 used Fuel
Slide 29: Revenue momentum
Revenue momentum Average fare - total Average fare - ancillary third party $135 products $131 $6.00 $130 $127 $5.56 $126 $125 $5.50 $5.26 $5.18 $120 $5.00 $115 $111 $4.50 $4.34 $110 $105 $4.00 2010 2011 1H11 1H12 2010 2011 1H11 1H12 Average fare - scheduled service Average fare - ancillary air-relat
Slide 30: Fuel efficiency improvements
Fuel efficiency improvements System ASMs per gallon 63.0 62.0 61.4 61.0 60.1 59.1 59.0 58.7 57.0 2Q11 3Q11 4Q11 1Q12 2Q12 YoY chg – Sys ASMs/gal 0.2% (0.2)% 2.4% 4.6% 5.6% # of 757 ac in svc (end of qtr) 1 1 1 3 # of 166 seat ac in svc (end of qtr) 1 7 17 26 30
Slide 31: Market management over time
Market management over time 18 16 14 12 # of markets 10 8 6 4 2 0 Routes added Routes deleted Does not include shifting of 10 markets from Sanford to Orlando International in 1Q10 and shifted back to Sanford in 1Q 11 31
Slide 32: Revenue model
Revenue model Revenue growth ($mm) Scheduled service $900 $854 – Air fare from small cities to Total revenue leisure destinations $53 $800 $779 $34 Ancillary – air related charges $54 $700 $30 – Unbundled air product $664 $201 $42 Ancillary 3rd party products $600 $558 $24 $180 – Hotels, renta
Slide 33: Unit revenue changes vs capacity changes
Unit revenue changes vs capacity changes 40% 35% 35% 33% 30% 26% 24% 25% 24% 24% 25% 22% 22% 20% 19% 19% 20% 17% 17% 14% 10% 15% 12% 11% 11% 10% 10% 8% 8% 7% 6% 7% 6% 5% 2% 1% 1% 1% 1% 0% -2% -2% -2% -5% -3% -4% -3% -10% -8% -8% -9% -10% -15% Scheduled ASM growth PRASM growth July 2012 is midpoint o
Slide 34: 166 seat project economics
166 seat project economics Revenue (actual LTM 2Q12) Average scheduled fare $90.36 Average ancillary fare $37.48 Total scheduled fare $127.84 Assumptions 75% load factor (16 x .75) 12 pax $ per pax fuel ($3.12* gal x 40 gal/dept) $10.40 $ per pax non fuel (inflight, D&A, marketing, etc.) $30.00 Tota
Slide 35: Credit metrics
Credit metrics Return on capital employed Return on equity 20% 30% 15.3% 14.4% 20.1% 20% 18.0% 15.0% 10% 7.7% 10% 3.1% 4.8% 0% 0% 2011 LTM 2Q12 LUV LTM ALK LTM 2011 LTM 2Q12 LUV LTM ALK LTM 2Q12 2Q12 2Q12 2Q12 Interest coverage Debt / EBITDA 25 5 19.3 x 3.9 x 20 17.7 x 4 15 3 2.4 x 10.2 x 10 8.4 x 2
Slide 36: PRASM vs jet fuel
PRASM vs jet fuel High historical correlation between PRASM and jet fuel ~.93 – Actively managing capacity to offset fuel cost increases 9.5 9.3 $3.40 $3.28 8.8 $3.22 $3.14 9.0 $3.13 $3.20 8.9 9.0 8.6 $3.12 8.5 $3.08 8.8 $3.00 $2.87 8.0 8.0 $2.80 7.9 7.5 $2.60 $2.51 7.0 $2.40 6.9 $2.25 6.5 $2.20 6
Slide 37: Balance sheet
Balance sheet $ mil 6/30/12 6/30/11 Unrestricted cash $171 $172 Total debt $156 $142 Equity $403 $328 CAPEX (YTD) $61 $51 Free cash flow (YTD) $56 $53 37
Slide 38: No change in business plan
No change in business plan Built to be different A319 Better performance, opportunity to serve +20 cities MD-80 cannot fly into. Some Small cities marginal MD-80 routes will be profitable A319 markets Distressed asset. New engine technology Low cost aircraft will continue to drive asset values down
Slide 39: Automation
Automation New site – Currently 10-20% of traffic, 100% by Nov 2012 Early returns – Higher conversion rate of some ancillary fees – Total fare higher on new site vs old 39
Slide 40: Costs
Costs Headwinds – A319 start up expenses – New international terminal in Las Vegas – Accelerated depreciation for early retirements of MD-80s Tailwinds – Crew productivity – Engine maintenance (MD-80s) – Utilization impact 40
Slide 41: Low cost drivers
Low cost drivers LTM 2Q12 cost per passenger Ex fuel cost = $56 Ex fuel cost = $65 Ex fuel cost = $90 Ex fuel cost = $96 Fuel cost = $54 Fuel cost = $45 Fuel cost = $56 Fuel cost = $63 Total Allegiant = $110 Total Spirit = $110 Total Southwest = $146 Total JetBlue = $159 $28 $36 Other $24 $70 $72 $1
Slide 42: Our website is our only store
Our website is our only store 25mm uniques LTM 2Q12 Low acquisition costs – $0.83/pax LTM 2Q12 Low transaction costs – High debit card usage – Debit discount 91% of YTD 2012 sales were through the site 42
Slide 43: Low cost aircraft
Low cost aircraft MD-80 – 58 owned - 54 in service, 58 EOY 2012 • 2 MD-87s retire in 2013 – $3mm total for purchase + induction – $2.9mm EBITDA/aircraft LTM 2Q12(1) • 34 166 seat AC Aug 31, 37 – 39 by 3Q12, 51 EOY 757 – 6 owned - 4 in service, 2 leased out, 6 operating in 1Q13 – $15mm total for
Slide 44: Capacity changes
Capacity changes Year over year change in scheduled ASMs 30% 25% 24% 22% 20% 20% 17% 15% 14% 11% 10% 8% 5% 3% 1% 0% -3% -2% -5% -3% -10% -9% -15% -13% 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012E 4Q 2012E Total scheduled ASM growth Same store ASM growth ASMs – available seat miles Scheduled ASM
Allegiant Travel Company — Investor Presentation (September 2012) on 6ix