Allegiant Travel Company · NASDAQ:ALGT
Allegiant Travel — Investor Presentation (December 2008)
31 slides from Allegiant Travel's investor presentation, Dec 9, 2008
Slide 1: Management Presentation December 2008
Management Presentation December 2008
Slide 2: Notice on Forward Looking Statements
1 Notice on 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 a
Slide 3: Allegiant Travel Company Highlights
2 Allegiant Travel Company $mm Highlights – Best operating margins – Excellent balance sheet – Lowest costs – Profitable last 23 quarters (1) Unique, expandable & defensible – Leisure, small cities, MD-80s – Ancillary revenue Profitable in 1Q08, 2Q08, 3Q08 – Unique in the US – No hedges 6.9% YE3Q08
Slide 4: Nationwide
3 Nationwide Expected at Dec 31, 2008: 65 cities, 116 routes, 38 Aircraft
Slide 5: And Growing: New Routes Announced Since August
4 And Growing 24 New Routes Announced Since August 1 12 new routes between existing cities 12 new routes involving 10 new cities New routes to new cities Connect the dots
Slide 6: Minimal Direct Competition
5 Minimal Direct Competition At YE2007, head-to-head competition on nine routes YE2008: two Head-to-head competition on only two routes • To date, only one airline has entered one of our routes • That attempt lasted a year and has not been repeated • Other airlines appear to see us as an annoyance,
Slide 7: Recent Strategy
6 Recent Strategy Managed through fuel spike by: – Reducing capacity, especially on long-haul routes – Tighten focus on flying only when we make money – More ancillary products and higher fees on existing products – Increase load factors Helps drive ancillary revenue Reduces cost/passenger, particul
Slide 8: Increasing Ancillary Revenues & Pax/Departure
7 Increasing Ancillary Revenues & Pax/Departure Ancillary revenues/pax increased over 50% year over year Significant increase in year-over-year pax/dept benefits include: – More passengers mean more ancillary – Reduces gallons/passenger Average air fare up in spite of reduced stage length 3Q08 3Q07
Slide 9: Operating Profit, Fuel Price and Scheduled Air Fare
8 Operating Profit, Fuel Price and Scheduled Air Fare Past and Proforma, Per Passenger “YE3Q08 Proforma N%” is pro-forma performance for YE3Q08 with lower fuel prices (assuming Nov 08 actual fuel price of $2.14/gal vs. actual price/gal of $3.11) and illustrating operating profit at reduced scheduled
Slide 10: Ancillary Products
9 Ancillary Products Third Party Products – Hotels – Car rentals – Shuttle bus transfers – Show tickets – Theme park tickets – VIP night club access Unbundling the traditional product – Convenience fee ($11.50/pax; use of website) – Assigned seat ($9-25/seg) – Priority boarding ($5-10/seg) – Checked
Slide 11: Industry-Leading Ancillary Revenue/Passenger
10 Industry-Leading Ancillary Revenue/Passenger Ancillary/passenger has grown at 34% CAGR in 24 months
Slide 12: Ancillary Revenue By Destination
11 Ancillary Revenue By Destination Balanced and consistent Period: 9 months ended 3Q08 $28.34
Slide 13: Las Vegas Perfect Storm
12 Las Vegas Perfect Storm Number of rooms increasing as number of seats dropping Reduction in seats while number of rooms increase is driving significantly lower room rates in Las Vegas Las Vegas is becoming a bargain again, helping to bolster demand for Las Vegas vacations, but with lower underlyi
Slide 14: Las Vegas Perfect Storm
13 Las Vegas Perfect Storm Net revenue up 14% year/year Room nights up 24% year/year Cost per room down 17% year/year To date, we have successful piloted through the Las Vegas perfect storm Las Vegas “Fly Free” sales results 2008 2007 Change Room nights booked 36,577 29,435 +24% Departures 4,738 4,5
Slide 15: Las Vegas Perfect Storm
14 Las Vegas Perfect Storm Las Vegas remains important, but is no longer dominant
Slide 16: Advantageous Cost Structure
15 Advantageous Cost Structure Greatest Leverage to Fuel Source: Morgan Stanley Research, 12/2/08 Fuel expense as a percent of operating expense, YE3Q08 Lowest Non-Fuel Costs YE3Q08 operating expense net fuel expense, normalized to 1000 mile stage length Source: Morgan Stanley Research 12/2/08
Slide 17: Focus Flying On Days We Can Make Money
16 Substantial frequency variation by day, week, month Focus Flying On Days We Can Make Money Average daily scheduled flights, by month Daily scheduled flights 2007-2008 2006-2007
Slide 18: Best Operating Margins
17 Best Operating Margins YE3Q08 Operating Margins YE3Q08 Pre-Tax Margins Source: public filings of the respective companies. Without Southwest Hedge (14.5pp)
Slide 19: Balance Sheet, Liquidity
18 Balance Sheet, Liquidity Cash equivalents as a percent of YE3Q08 operating revenue Total cash net Air Traffic Liability as percent of YE3Q08 operating revenue Adjusted net debt as percent of adjusted EV(1) Excellent liquidity position by any measure Negative net debt, even adjusted for operating
Slide 20: Capitalization
19 Capitalization (mm, except number of owned aircraft) Sep 30, 2008 Dec 31, 2006(1) Cash, cash equivalents and Short-term investments $138.6 $144.7 Total assets 402.6 305.7 Total debt 70.1 72.8 Owned aircraft (including capitalized leases) 41 22 Retained earnings 67.6 19.1 Total shareholders’ equit
Slide 21: Management Presentation: Appendix December 2008
Management Presentation: Appendix December 2008
Slide 22: Appendix: YE3Q08 Cost Breakdown
21 Appendix: YE3Q08 Cost Breakdown 10.0 9.8 10.7 11.0 11.7 Source: Company filings. (1) Ownership includes Depreciation and Amortization plus Aircraft Rent. (1) 6.8 5.4 5.0 7.0 6.0 Aircraft Labor Other 3.2 4.4 5.7 4.1 5.8 Total CASM MD-80: reasonable cost aircraft
Slide 23: Appendix: Responding to High Fuel Prices
22 Appendix: Responding to High Fuel Prices As fuel prices increased starting in 4Q07, we cut aircraft hours in Las Vegas repeatedly – So 2H08 hours below 2H07 But we primarily cut long-haul routes while adding short-haul flying, meaning the average flight now absorbs fewer aircraft hours – 2H08 sta
Slide 24: Appendix: Fuel Hedging
23 Appendix: Fuel Hedging Not core business – travel company, not a commodities trading house Hedges run out – don’t protect from permanent fuel price shift, just provide temporary respite; we manage the business for the long term We believe investors look past it – LUV questions focus more on stren
Slide 25: Appendix: Ancillary Revenue
24 Appendix: Ancillary Revenue Voluntary extra spend > $32 net per passenger segment – Traditional airline product unbundling – high margins – Third party product sales How do we do it: – Product innovation – Custom reservation system – key advantage Obstacles for other carriers: – Legacies limited
Slide 26: Appendix: Control the Customer
25 Appendix: Control the Customer www.allegiantair.com – Leverage direct relationship with customers – Maximize e-commerce opportunities – 3Q08 unique visitors 3.0 mm, up 24% year-over-year – Instantly relevant to leisure customers in our small cities – Accounts for almost 90% of sales – Generates e
Slide 27: Appendix: Unique Website Visitors
26 Appendix: Unique Website Visitors Increasing eyeballs / maintaining web sales Source: Allegiant, Google Analytics
Slide 28: Appendix: Competition Diminishing
27 Appendix: Competition Diminishing Orlando, Las Vegas, Tampa Bay & Phoenix hit particularly hard Las Vegas – Significant room additions thru 2010 – Room rates already dropping & believe will drop further – Lower room rates enhance our ability to keep fares high Improved terms in rental cars and ot
Slide 29: Appendix: Fixed-Fee Flying
28 Appendix: Fixed-Fee Flying Recent growth Typically slow-growing relative to our scheduled business – Boost this year because of new Tunica flying – 10% of revenues for YE3Q08 Consistently profitable – Ad-hoc especially is more profitable than average cost analysis shows, since it incurs only marg
Slide 30: Appendix: Capacity Optimization
29 Longer seasonal suspensions in Florida Obviously enabled by low capital-cost MD-80 fleet Accounts for part of our 2008 reduction in growth (though reaction to fuel prices by far the greater part) Better job of not flying (as much) when we don’t make money – and flying more when we do Appendix: Ca
Slide 31: Appendix: Capacity Optimization
30 19% reduction in 4Q08 departures in markets that existed in 4Q07 Masked by growth into new markets First cut at 4Q08 capacity sizing when fuel was high Collared existing market growth by entering many new markets Appendix: Capacity Optimization Significant market-by-market reductions * Includes d
Allegiant Travel — Investor Presentation (December 2008) on 6ix