Allegiant (ALGT) Q1 2026 Earnings Transcript

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DATE

Thursday, April 30, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Greg Anderson
• Chief Commercial Officer — Drew Wells
• President and Chief Financial Officer — Robert Neal

TAKEAWAYS

• Adjusted Operating Margin -- 14.9%, an increase of nearly six points year over year and the highest first quarter margin since pre-pandemic periods, surpassing internal guidance.
• Total Revenue -- $732.4 million, up 9.6% year over year on 5.9% less capacity, representing the company's highest quarterly revenue to date.
• TRASM (Total Revenue per Available Seat Mile) -- 14.31¢, up 16.4% year over year, cited as a record quarterly result.
• Net Income -- $69.6 million with earnings per share of $3.77, up nearly 80% from prior year airline-only results.
• Adjusted Operating Expenses ex-Fuel -- Down nearly 6% year over year; total non-fuel unit costs (CASM ex) were 8.64¢, up 7.1% year over year due to capacity reduction.
• Fuel Cost -- Averaged $3.04 per gallon, exceeding prior guidance of $2.60, with late-quarter crack spreads nearly tripling to about $1.70 per gallon before easing to $1.20.
• Controllable Completion Factor -- 99.9%, achieved despite winter storm disruptions and a higher share of peak-day flying.
• Liquidity -- Total available liquidity of $1.2 billion at quarter end, including $933.5 million in cash and investments and $250 million in undrawn revolver capacity.
• Net Debt -- $858 million, down by over $100 million sequentially from the fourth quarter, reflecting strong cash generation.
• EBITDA and Margin -- EBITDA of $168 million, with an EBITDA margin of 22.9% for the quarter.
• Fixed Fee Revenue -- $18.1 million, up 11.5% year over year, with management describing fixed fee as "phenomenal" through early April.
• Co-branded Credit Card -- Over 600 thousand cardholders, with 9% remuneration growth year over year and remuneration now accounting for just over 5% of annual revenue.
• Allegiant Extra (Premium Seating) -- Premium seating demand outpaced expectations, contributing materially to both TRASM growth and customer loyalty.
• Record Cash Sales -- Numerous all-time sales days reported, with ongoing double-digit annual cash sales growth and healthy booking trends through April.
• Peak vs. Off-Peak Capacity -- Shift to prioritizing peak demand, with second quarter ASMs projected down 6.5% year over year and a 1%-2% decrease in off-peak mix.
• Fleet and CapEx -- 123 aircraft at quarter end, $176 million in capital expenditures for the quarter, including $155 million for aircraft; one 737 MAX delivered and one A320 retired.
• 737 MAX Efficiency -- More than 20% improvement in fuel burn efficiency per seat; MAX responsible for over 20% of current ASM production, projected to rise to 50% by 2028.
• Sun Country Acquisition -- Department of Transportation approval received in April; shareholder votes set for May 8 and closing expected around May 13, bringing combined passenger fleet ownership to 163 of 172 aircraft.
• Second Quarter Outlook -- Standalone operating margin guidance at 1%, with an expected loss per share of approximately $0.50, assuming a fuel price of $4.35 per gallon and about $120 million in incremental operating expense versus prior expectations.
• Synergy Target -- $140 million in anticipated run-rate synergies with Sun Country, with management maintaining "a very high degree of conviction" in that target despite fuel volatility.

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RISKS

• Robert Neal stated, "Fuel averaged $3.04 per gallon in the quarter, compared to our initial guide of $2.60, highlighting the increased energy prices and widening crack spreads that we saw late in the quarter."
• Greg Anderson said, "The sharp rise in fuel prices will weigh on near-term industry profits. We are not immune. This is reflected in our second quarter guidance."
• Drew Wells confirmed, "Zero impact from the Sun Country timeline or integration. This is purely a fuel-related decision," when discussing capacity reductions, making clear that higher fuel costs have driven operational adjustments.
• Robert Neal indicated, "At the midpoint of our guided range, we expect to produce an operating margin of 1% and to generate a loss per share of approximately $0.50, based on an assumed fuel price of $4.35 per gallon in the quarter, which is driving nearly $120 million of incremental operating expense relative to expectations at the time of our last call."

SUMMARY

Allegiant Travel Company (NASDAQ:ALGT) delivered record revenue and unit revenue growth in the first quarter by aggressively optimizing capacity and leveraging demand for leisure air travel, though rising fuel costs have materially changed the company's operating outlook for the second quarter. The company accelerated capacity reductions for upcoming quarters, targeting a 6.5% ASM cut in the second quarter and signaling additional flexibility for further pullbacks if fuel remains elevated. The acquisition of Sun Country is expected to close ahead of schedule, providing significant fleet ownership and exposure to fixed fee and cargo businesses with contractual fuel pass-through, which management sees as a hedge in the current energy environment. Management did not update full-year guidance due to pending transaction close, but expressed confidence in $140 million of expected merger synergies, projecting near-term margin pressure counterbalanced by operational and financial strength after integration.

• Leadership highlighted that nearly half of the current fleet remains unencumbered, granting additional balance sheet flexibility for future capital needs.
• Rapid growth in co-branded credit card accounts and usage materially increased third-party revenue per passenger and is targeted to reach 10% of total revenue with expanded product offerings and partnership amendments.
• Premium seating offerings, particularly Allegiant Extra, have demonstrated meaningful pricing power and repeat purchase rates, creating a new customer segment less sensitive to airfares in high-fuel environments.
• Management stressed that recent capacity adjustments were entirely attributable to fuel volatility, stating, "Zero impact from the Sun Country timeline or integration. This is purely a fuel-related decision."
• The combined Allegiant-Sun Country entity will consolidate ownership of 163 out of 172 passenger aircraft post-merger, supporting further operational adaptability and reducing dependency on lessor constraints.

INDUSTRY GLOSSARY

• TRASM (Total Revenue per Available Seat Mile): Revenue generated per mile flown per seat offered, a key airline industry unit revenue metric.
• ASM (Available Seat Mile): One seat transported one mile, representing airline capacity.
• CASM ex (Cost per Available Seat Mile excluding Fuel): Non-fuel operating expenses divided by total seat miles offered, measuring cost efficiency.
• Fixed Fee Revenue: Income from contract flying—generally charters or services with fuel cost pass-through—carried out for a third party.
• Crack Spread: Difference between crude oil prices and the cost of refined jet fuel; an indicator of jet fuel price volatility.

Full Conference Call Transcript

Sherry Wilson: We will begin today’s call with Greg Anderson, CEO, providing a high level overview of the quarter along with an update on our business. Drew Wells, Chief Commercial Officer, will walk through demand commentary and revenue performance, and finally, Robert Neal, President and Chief Financial Officer, will speak to our financial results and outlook. Following commentary, we will open it up to questions. We ask that you please limit yourself to one question and one follow-up if needed. The company’s comments today will contain forward-looking statements concerning our future performance and strategic plan. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements.

These risk factors and others are more fully disclosed in our filings with the SEC. Any forward-looking statements are based on information available to us today. 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 investors not to place undue reliance on forward-looking statements which may be based on assumptions and events that do not materialize. To view this earnings release as well as the rebroadcast of the call, feel free to visit the company’s investor relations site at ir.allegiantair.com. And with that, I will turn it to Greg.

Greg Anderson: Thank you, Sherry, and thanks to everyone for joining us this afternoon. For today’s call, I will start with a brief overview of our first quarter performance and then update you on our commercial initiatives, outline how we are navigating the current environment, and close with a few remarks on the status of our acquisition of Sun Country. We started the year on a very strong note. Our first quarter results reflect the momentum we built through last year, delivering a 14.9% adjusted operating margin, up nearly six points year over year and slightly above our guided range.

Importantly, we achieved our highest first quarter adjusted operating margin since pre-COVID, and we believe our margin will prove to be industry leading for the second quarter in a row. That performance reflects our deliberate operating strategy. We prioritize flexible capacity to capitalize on peak demand periods rather than chasing maximum utilization over the entire year. Notably, we achieved those results serving the leisure traveler, without large international networks or premium cabins. That highlights the strength of our model and execution. Our focus remains on running a highly reliable, efficient airline because when we operate well, the financial results follow.

To that point, our operational performance was outstanding, with a 99.9% controllable completion factor, even with a higher mix of peak day flying. Demand was particularly strong in peak periods, helping to drive a 16.4% increase in TRASM. ASMs were down 5.9% from the previous year and heavily influenced our CASM ex, which was up 7.1% compared to last year. However, excluding fuel, our adjusted operating expenses were down nearly 6% year over year. Our cost structure remains one of the best in the industry. We ended the quarter with total liquidity of $1.2 billion. We have a very strong financial position and that will even be stronger as we join forces with Sun Country.

Turning to our commercial initiatives, after several years of investing in our technology, we are now positioned to leverage our platform to accelerate our commercial strategy. Our co-branded credit card currently has over 600 thousand cardholders. Today, card remuneration represents just over 5% of our annual revenue and is a significant contributor to our profits. In the first quarter, compensation from the bank increased by 9% compared to the same period last year, reflecting ongoing significant opportunities to encourage greater customer adoption. Our premium seating product, Allegiant Extra, is continuing to outpace expectations by contributing to our TRASM growth and driving higher loyalty, with an increasing number of Allegiant Extra purchasers being repeat customers. We expect continued strong performance.

Let me now shift to how we are managing through the current environment. We have always focused on what we can control and manage through what we cannot. We strive to optimize our network for profitability and flex our schedules to match capacity with demand throughout each year. Making adjustments is simply part of our DNA. Overall, leisure demand is still strong, as shown by our robust cash sales. We had many record sales days in the quarter and continue our double-digit growth over prior year.

The main pressure point is jet fuel costs, which have risen sharply, and crack spreads nearly tripled to about $1.70 per gallon in early April but have since dropped to $1.20, still about twice as much as the pre-conflict level of roughly $0.60. We are looking forward to taking deliveries on our MAX order book, particularly as that aircraft offers more than a 20% improvement in fuel burn efficiency. While we continue to see healthy fare strength overall, we are navigating the volatility by reducing off-peak capacity where margin pressure is most acute. We have also reduced service on some of our longer stage length routes where the hurdle on fuel cost is higher.

All told, we are now planning for a 6.5% year over year reduction in ASMs in the second quarter, down from our initial plan at the start of the year. And we are not seeing any reasons to pull back on our peak flying. Given the strong demand and higher mix of peak flying, we expect TRASM will be up sequentially in the second quarter. We continue to closely monitor the evolving geopolitical environment and will adjust our operations as conditions warrant. While we have already taken some modest schedule actions, our flexible model and agility still give us ample time to refine these decisions as the year unfolds.

The sharp rise in fuel prices will weigh on near-term industry profits. We are not immune. This is reflected in our second quarter guidance. That said, a silver lining is that the gap between efficient, well-run airlines and weaker operators is widening. Allegiant Travel Company and Sun Country are on the right side of that gap. I am very pleased with the progress we have made toward closing on our Sun Country deal, which is now expected in the coming weeks, in just over four months from the announcement. This super compressed timeline underscores the strong execution and the agility of both organizations. Our integration planning has reinforced our confidence in what this combination can deliver.

Meanwhile, the value of Sun Country’s charter and cargo businesses, which carry contractual fuel pass-through structures, is even more beneficial in today’s volatile fuel environment. Both airlines own their aircraft, and our fleet strategies complement each other. In a market where managing capacity is crucial, owners have greater flexibility than those who lease. We look forward to completing the merger and demonstrating the value of the combined companies in the coming quarters. In closing, Allegiant Travel Company continues to separate itself from the pack. We have the model, the balance sheet, the people, and the strategy to extend our leadership position within the value segment.

We take great pride in being the leisure carrier of choice in the communities we serve and delivering convenience and reliability that our customers know they can count on. That performance is all because of the tireless efforts of Team Allegiant Travel Company, whose dedication and passion shows up every single day, and I am deeply appreciative of all of you and honored to work by your side. With that, let me turn it over to Drew to walk through our commercial performance.

Drew Wells: Thank you, Greg, and thanks, everyone, for joining us this afternoon. We finished the first quarter with $732.4 million in total revenue, up 9.6% versus the prior year, on 5.9% less capacity, producing a first quarter TRASM of 14.31¢, up 16.4% year over year. Both total revenue and TRASM represent first quarter records for the company, and in fact, the strongest quarterly performance in our history, with revenue approximately 7% higher than any previous quarter. Our fixed fee results contributed meaningfully to the first quarter. Revenue came in at $18.1 million, up 11.5% versus the prior year, an incredible performance. The demand environment was exceptional through the first quarter.

Load factors increased four points, and yields were up 21%, a year over year result rivaled only by the revenge travel surge early 2023. Strength is also supported by a unit revenue-favorable schedule deployment, highlighting the benefits of our flexible capacity approach. It is worth reminding that despite the overall ASM reduction in the first quarter, peak day-of-week capacity grew very slightly versus first quarter 2025. A huge shout out and thank you to so many, including our frontline team members, for continuing to deliver while we push further on our best days of flying.

While the demand environment certainly facilitated some of the load factor growth, our continued adoption and usage of Navitaire tools are coming together to drive meaningful performance lift. As Greg touched on, co-brand performance was a standout in the quarter, helping push average third-party revenue per passenger up 20% year over year. Card acquisition trends remain strong, continuing on last quarter’s remarks with seven of the last eight months being double-digit higher on a year over year basis. In addition to the healthy growth in new accounts, spend on the card remains robust, with both metrics exceeding 15% year over year in each month of the quarter.

Our plan for the second quarter had a similar feeling with overall capacity down, but the expectation of peak day ASMs growing slightly. In fact, given the demand environment year to date, we were on the verge of targeted capacity increases right as fuel spiked higher, turning a feeling of potentially missed opportunity to one of feeling nearly appropriately scheduled for the environment. We now expect second quarter capacity to be slightly lower than implied on the last call and down approximately 6.5% year over year. Perhaps most importantly, cash sales are running up double digits through April, despite the reduction in capacity, and booking trends remain healthy.

While I will refrain from providing a specific TRASM guide, we do expect second quarter year over year unit revenue growth to exceed the 16.4% delivered in the first quarter. Despite the macro uncertainty, our customer base continues to show strong intent to travel. Through all economic environments, leisure customers have shown the desire to continue to travel, and we are seeing that play out in our booking trends. That said, we remain disciplined. We will continue to leverage the flexibility inherent in our model to align capacity with demand, particularly during off-peak periods as we work through the current fuel environment.

We have already refined second quarter capacity as noted, and expect further adjustments as we move into the third quarter. While we had previously anticipated modest growth in the third quarter, we now expect capacity to be flat to perhaps slightly down year over year, and we will solidify that plan further in the coming weeks. As has been our approach, the reductions are primarily focused on off-peak day-of-week and shoulder season flying, and as is possible in such a fluid environment, we maintain flexibility to add capacity back should the overall environment warrant.

It remains early to provide specific commentary on the fourth quarter, though I remain incredibly bullish about holiday performance given extreme resiliency over the past several years. I wanted to take just a moment to mention our national partner, Make-A-Wish. April is World Wish Month, and we have been a proud partner since 2012. It is an incredibly worthy cause, which is why we have, throughout our partnership, donated over $32 million to the organization through in-kind flights and sponsorship. Most importantly, we have flown more than 2 thousand Wish kids and their families to their Wish destination, making a transformative difference in their lives. Stepping back, what we are seeing today reinforces the strength of our model.

Demand remains resilient, even against a higher fuel backdrop, and our ability to dynamically align capacity with demand continues to be a key differentiator. While still ramping into the commercial platforms Greg mentioned, we are seeing the burgeoning combination of foundational technology investment and product performance align in a really powerful way. The team is truly making a strong impact on the Allegiant Travel Company results. We are operating with discipline, prioritizing peak flying, owning off-peak exposure, and maintaining the flexibility to adjust as conditions evolve. The unit revenue results speak for themselves, and we believe we are well positioned heading into the summer and beyond. And with that, I would like to hand it over to Robert.

Robert Neal: Thank you, Drew, and good afternoon, everyone. I will walk through our first quarter financial results and then provide an update on our cost performance, balance sheet, and outlook. As with prior calls, my comments today will reference results on an adjusted basis excluding special items, and year over year comparisons will reference prior year airline-only results unless otherwise noted. Let me start by echoing the comments you have already heard regarding operational performance. Despite several winter storm systems that added complexity throughout the quarter, our team delivered reliably and efficiently without missing a beat. It is their level of execution that continues to underpin our financial performance.

For the first quarter, we generated net income of $69.6 million, resulting in earnings per share of $3.77, coming in just above our mid-March updated guidance and up nearly 80% versus airline-only results in the prior year quarter, as demand for leisure travel remained strong throughout the period. We delivered an adjusted operating margin of 14.9% and generated $168 million in EBITDA, resulting in an EBITDA margin of 22.9%. This performance reflects the progress we have made over the past several years executing against our margin expansion initiatives, and it is a direct result of the hard work and dedication our team members bring day in and day out.

Turning to costs, first quarter non-fuel unit costs were 8.64¢, up 7.1% year over year, primarily driven by a 5.9% reduction in capacity and slightly above our initial expectations. Fuel averaged $3.04 per gallon in the quarter, compared to our initial guide of $2.60, highlighting the increased energy prices and widening crack spreads that we saw late in the quarter. This dynamic is consistent with what we have seen more broadly across the industry, where fuel volatility has been a key driver of near-term earnings pressure. We are encouraged to see ASMs per gallon increase 1.2% year over year to 86.7, marking our fifth consecutive quarter of improvement.

We are pleased with the continued contribution from the integration of our 737 MAX fleet and expect further efficiency gains as additional aircraft deliver. Turning to the balance sheet, we ended the quarter in a strong financial position, with total available liquidity of $1.2 billion, including $933.5 million in cash and investments and $250 million of undrawn revolver capacity. Cash and investments stood at 36% of trailing twelve-month revenues at quarter end, alongside unencumbered fleet assets with a market value of approximately $1.3 billion. Total debt at quarter end was $1.8 billion, roughly flat to 2025. Net debt was $858 million, down more than $100 million from the fourth quarter, the result of strong cash generation from operations.

We made $29.4 million of debt principal payments and ended the period with net leverage of 1.8 times. Looking ahead, we expect to refinance our 2027 senior secured notes in the coming months, pending constructive market conditions. Importantly, we remain well positioned to fund upcoming capital expenditures with significant flexibility. Nearly half of our fleet remains unencumbered, providing an additional source of liquidity if needed, particularly in a more uncertain fuel environment. During the first quarter, we invested $176 million in capital expenditures, including $155 million in aircraft-related spend and $21 million in other airline investments. In addition, we had deferred heavy maintenance spend of $11 million.

Moving to fleet, we ended the quarter with 123 aircraft in operation, taking delivery of one 737 MAX and retiring one A320 during the period. As we move to the second quarter, we expect to take delivery of three 737 MAX and to retire one A320. Our delivery schedule for the remainder of the year remains consistent with prior guidance. Fleet flexibility, underpinned by aircraft ownership, continues to be a key competitive advantage for Allegiant Travel Company, notably in a high fuel environment, because we retain the optionality to accelerate retirements of older aircraft if elevated fuel prices persist. And when actioned, those retirements support reductions in heavy maintenance spend.

Following closing of the Sun Country transaction in a few weeks’ time, we expect the combined entity to own 163 of the 172 aircraft in the passenger fleet, further enhancing our financial and operational flexibility. On the topic of the Sun Country transaction, we received DOT approval in April, with the remaining step being shareholder votes for each of Allegiant Travel Company and Sun Country scheduled for May 8. Assuming a favorable vote at each entity, the transaction should close around May 13. Given the expectation of a near-term closing, along with the current fuel environment, we do not believe it would be valuable to provide updates to our full-year guidance at the moment.

We stand to gain a great deal of insight into the combined business over the coming months, and expect to share more on full-year earnings estimates in due course. And so the guidance we are providing today is for Allegiant Travel Company on a stand-alone basis for the second quarter. At the midpoint of our guided range, we expect to produce an operating margin of 1% and to generate a loss per share of approximately $0.50, based on an assumed fuel price of $4.35 per gallon in the quarter, which is driving nearly $120 million of incremental operating expense relative to expectations at the time of our last call.

At this time, we are maintaining our full-year CapEx guidance, as the transaction is not expected to materially change that outlook. Similar to prior updates, our CapEx guidance assumes management’s best estimate differs from contractual obligations. While we are not providing post-close guidance for the combined entity, we want to reiterate our confidence in the $140 million in expected synergies and our ability to grow earnings in the first full year post close. The first quarter reflected strong demand, improved cost structure, and predictable aircraft deliveries, all of which contributed to an industry-leading operating margin. As we move to the second quarter, our focus shifts to navigating the elevated fuel environment.

We will continue to actively manage capacity and optimize profitability consistent with the disciplined approach we have taken in prior periods of volatility. Importantly, our healthy balance sheet and flexible operating model set us up well to manage through this environment from a position of strength, and to focus on the structural advantages that have made this model successful throughout various cycles. In closing, I would like to thank our team members for their continued hard work and operational execution this quarter. Their efforts remain the foundation of our performance. We are excited about what lies ahead, especially as we approach closing of the Sun Country acquisition and continue to build on the strong foundation both airlines have established.

And with that, operator, we can open the line for analyst questions.

Operator: Thank you. We will now begin the question and answer session. Again, we please ask you to limit yourself to one question and one follow-up if needed. If you would like to ask a question, please press star then the number one on your telephone keypad. If you would like to withdraw your question at any time, simply press star 1 again. We will pause just for a moment to compile the roster. Your first question comes from Mike Linenberg. Your line is open.

Mike Linenberg: Hey, good afternoon, everyone. Really two questions here. Just dialing back capacity in June—and you sort of gave us a hint on what the third quarter could be. How much of that is just the higher fuel? Or how much of that maybe is a function of the fact that the Sun Country merger seems like it is closing much faster than anticipated, and so you are probably going to have a few more shells to play with. Is that having some impact on how you think about the full-year capacity outlook? And then second, I know that you are one of the card-carrying members of the Value Airline Association. What sort of feedback have you received?

I know the letter went out, whatever, a week ago. I know we have been seeing a lot about Spirit and the government wanting to help them. I have not seen much in response to that. Anything that you can tell us on the response from the administration, etcetera? Thanks.

Drew Wells: Hey, Mike. Drew here. Zero impact from the Sun Country timeline or integration. This is purely a fuel-related decision.

Greg Anderson: Mike, it is Greg. Thanks for the question there. We have not seen, or I have not heard of, any specific feedback from some of the asks. Maybe a little background on it: the DOT requested a meeting of the AVA carriers, which we are a member of at Allegiant Travel Company. I think that was last week. The intent of the meeting was just to discuss how our segment of the industry is doing, particularly in this environment. As a follow-up of that meeting, the department did request AVA to provide some potential options that could be helpful in navigating this high fuel environment.

Just candidly, Allegiant Travel Company and Sun Country—we are two of the stronger, or in a stronger financial position than some of the other members of AVA. However, if there is federal assistance, we just want to preserve our option there to consider. But we really have not heard much specifics back outside of what I just shared there.

Operator: Your next question comes from the line of Duane Pfennigwerth with Evercore ISI. Your line is open.

Duane Pfennigwerth: Hey. Thanks. Can you talk a little bit about the mix of fixed fee flying in your going-forward plan? Historically, I think you have leaned into that when fuel prices are higher because it is a pass-through. Maybe you could just speak to that as a potential lever and what demand looks like on the fixed fee side. And then a follow-up on the card remuneration being 5% of revenue—where do you think that could go longer term, and how would you benchmark that with where Sun Country sits today, if you know it?

Drew Wells: I will speak to the extent I can. Fixed fee through the first quarter and into early April was phenomenal. I mentioned that in the prepared remarks. Going forward, I do not foresee any difference in aiming to, in high fuel environments, focus on the lines of revenue that have the fuel pass-through. Of course, it takes two parties to get that fuel pass-through, and you need counterparties that want to continue to fly and pay that rate. So I do not foresee any differences as we do integrate and plan—we are pretty like-minded in that approach. On the card remuneration, what we have talked about in the past has been kind of 10% of revenue being that stretch goal.

Given some of the success we have had over really the last eight months, I think that is something that is more achievable as we go through and really try to modernize the offering and go back for our first major amendment with the bank that we have had in ten years since signing. I think there is an immense amount of upside here, and I feel more confident today than I probably did six to eight months ago saying that the 10% is achievable. I do not know specifics on the Sun Country side.

They were more recent to turn over the bank provider on that side, so I think there was a little bit of time through that transition where acquisition spend was maybe a little bit slower than what they had anticipated, but as far as I am aware, it is kind of on track now.

Greg Anderson: And as part of the merger with Sun Country, bringing on their meaningful fixed fee and cargo business—I think it is roughly 35% to 40% of their revenues—fuel is agnostic there, and you are able to pass that through. In the combined company, it will be a meaningful part of our combined business, I think roughly 10% or maybe a little over 10%. So just as we think about this fuel environment, bringing that into the combined business will be obviously very beneficial.

Operator: Your next question comes from the line of Atul Maheswari with UBS. Your line is open.

Atul Maheswari: Good afternoon. Thanks a lot for taking my question. I have a question on the RASM cadence for this year. Based on what you know today, should we expect the second quarter RASM growth year over year to be the high watermark of the year for the standalone company, given your compares are the easiest in the second quarter? It sounds like the third and fourth quarter capacity might pick up a little bit related to the down 6.5% for the second quarter. Or do you think there is any possibility of your algorithm accelerating even further in the back half of the year?

And then as a follow-up, what is the zine for yield and load factors in the second quarter RASM? I assume yield would be driving the majority of the RASM growth, but would you expect load factors to be up or down year over year for the second quarter?

Drew Wells: I would never say never, but I have to imagine the second quarter will be the high watermark. There is still over 80% of the third quarter left to book, so there are some pretty wide error bars there. But I think you hit the major components as to why second quarter should be the highest, with probably the easiest comp and a lower growth rate there. On your follow-up, I expect to see some continued load factor expansion. I do not know that they have got all the way to four points again. I think you are right in your hunch that yields will probably lead the way.

Operator: Your next question comes from the line of Savi Syth from Raymond James. Your line is open.

Analyst: Good afternoon, guys. This is Carter Eads on for Savi. Two questions for me. First, as you mentioned, you are aggressively adjusting the capacity plan in response to higher fuel, and you are no longer looking to grow in the third quarter. Could you speak further to the key aspects of those adjustments and, directionally, how we should think about the impact on standalone unit costs in the back half of the year? And secondly, did you provide quarterly fuel recapture targets, and if not, can you help frame how much you are looking to drive via fares versus capacity actions?

Drew Wells: I will take the beginning on the capacity. You are primarily looking at the fall off-peak changes. Summer, we feel pretty good about. I think we pulled back July maybe a couple of points. I think there is going to be more that comes out of August and September that bridge the gap between what you see in the public filings and where I think we will end up. September is still showing about a 9% growth rate, and that should certainly come down a little bit. So, certainly more focused in off-peak periods than anything. On fuel recapture, we did not provide that explicitly.

We are handling primarily through two functions: refining and honing capacity in the off peaks where we are going to be most sensitive to the fare changes, and then pushing fare where appropriate in the peaks. The 20% yield bump we saw in the first quarter gives us confidence in how customers are reacting, and we will keep dynamically approaching that on a flight-by-flight basis. We are not the carrier that is going to be passing arbitrary $5 and $10 fares through. It is more responding to where demand takes us, and so far, so good.

Robert Neal: Carter, on the cost side, most of the comments that we gave at our last call should generally hold true or at least directionally remain intact. We talked about unit costs for the year being up mid-single digits. There is going to be a little bit of pressure from where we had expected to be in February to where we would expect to be now, but that range is still achievable. Based on the shape of our capacity this year, we would expect the second quarter to be the high point, and that probably still holds true.

The only other thing we mentioned to help with modeling is that we were expecting non-fuel unit cost in 2026 absolute to still be down versus 2024—again, an area where there is a little bit of pressure now with some ASMs coming out of plan, but not unachievable.

Operator: Your next question comes from the line of Analyst with Citigroup. Your line is open.

Analyst: Hey, guys. Thank you for taking my question. I wanted to talk a little bit more about the 737 and their performance in this new fuel environment. I recall you previously saying that the EBITDA contribution was 40% higher, and they are much more fuel efficient. Any updates to incremental contribution of those aircraft? Any ability to accelerate fleet planning on the back of the fuel shock, or are you thinking this is temporary?

Greg Anderson: Hey, thanks. It is a great question. I will start, and Robert will add some detail. High level on the MAX, it continues to represent a larger share of our ASMs. We mentioned more than 20% improvement in fuel burn efficiency. On an ASM per gallon basis, it is closer to 30% just because of the seat configuration. This year, we would expect a little over 20% of our ASMs to be produced by the MAX aircraft. That is going to step up each year. By 2028, we expect to get to about 50% of our ASMs.

An important point: while that fuel benefit is coming in—and it is beneficial in this environment—we are going to maintain at or about the same ownership cost as our used A320.

Robert Neal: Thanks, Greg. The only thing I would add is we talked on the last call about our excitement for the results we are seeing from the MAX aircraft and coming up on opportunities to exercise some of the options from our order book. We remain just as excited today as we did at the time of the last call. Given what we are seeing in fuel, there is an opportunity to potentially accelerate some retirements of some of our older A320s, but we are not making any calls quite yet. We will see how long this lasts. At the end of the day, the balance sheet will drive those decisions and how quickly we can make drastic fleet changes.

Drew Wells: Maybe one last plug here on the capacity side. Having the MAX in the fleet enabled us to keep probably about 1% of added capacity in that we would have otherwise canceled in an all-Airbus state. It has benefits even in the state that are probably overweighted relative to other scenarios. It has been huge having that.

Analyst: And they also have additional premium fee count in general. Does that allow you to kind of price a little bit more smartly in a high fuel price environment?

Drew Wells: We are doing that across the board. We do see, while we predominantly have a price-sensitive customer, a little bit less price sensitivity in those that are picking up the Allegiant Extra seats. That has been a fascinating development for us to see that segmentation form through the customer base. Having those seats on the MAX and across all of our 180-seat Airbus A320s has proven to be really valuable for us, as Greg mentioned in his remarks.

Operator: Your next question comes from the line of Connor Cunningham with Melius Research. Your line is open.

Connor Cunningham: Hi, everyone. Thank you. I had a question. Taking everything that you have set out so far—RASM accelerating on a sequential basis, and then, Robert, your comments around second quarter CASM ex being the most elevated—to get to your guide, it seems like it implies a sequential deceleration versus first quarter where the RASM to CASM ex spread was like nine points. Can you help reconcile that? And then on the fleet side, you have two of the smaller A320s hanging in there a little bit longer—does that give you some swing capacity in the second half if fuel improves?

Robert Neal: Hey, Connor. What you are seeing for the most part in our guide is the ASMs for the full quarter at the higher fuel rate. We do have a little bit of pressure in a handful of line items on the non-fuel side, but the main driver is capacity shape. We probably have CASM ex accelerating slightly faster in the second quarter. I mentioned second quarter would be our peak, and first quarter came in just slightly above what I was thinking at the time of the last call; I expect the same dynamic in the second quarter.

On the fleet question, after the last call in early February, we were very excited about what we were seeing in the demand environment. The teams found a way to extend the useful lives on those older A320s by a number of weeks or months with a very small maintenance check. So it is actually not that big of a move, but I recognize it looks like a step up in the high fuel environment.

Drew Wells: It is friendly to be able to use those as extra operational spares in a way to keep the operation humming, allowing us to use non-smaller-gauge A320s a bit more often. Even if they do not see the light of day, they do have benefit within the fleet.

Operator: Your next question comes from the line of Catherine O’Brien with Goldman Sachs. Your line is open.

Catherine O'Brien: Hey, good afternoon, everyone. Thanks for the time. I wanted to pull apart what is driving the acceleration in second quarter RASM growth. I am guessing a big piece is higher industry fares, but can you give color on how much more of second quarter capacity will be flown during peak times versus first quarter given some of the cuts? What does the ramp in Allegiant Extra contribution look like between the quarters, or any other Allegiant Travel Company-specific drivers you would call out apart from industry uplift? And then a follow-up for Robert: how should we think about where costs can come out as capacity is trimmed and still achieve the mid-single-digit unit cost guide?

Drew Wells: Great question, Katie. On peak versus off-peak, it is not wildly different from a day-of-week perspective. The second quarter should be about 20% off-peak versus 22% or 23% in the first quarter, so generally the same. I think macro demand has just run really strong since we talked ninety days ago and continues to be a benefit. We had the biggest headwind to us on same-store markets last year, and we had a little bit of cautious optimism about what that could mean. I think we are hitting closer to the hope rather than the fear of where it could go.

Robert Neal: In the back half of the year, a couple of different things drive CASM ex. Salaries—what does attrition look like, and how productive are we in the third and fourth quarters—and then the changes that could still take place with respect to capacity are why I was cautious on our non-fuel CASM guide. With more time, we can avoid scheduling certain crews and better align variable costs to capacity. While there is a range implied in mid-single digits, we still think that is achievable.

Operator: Your next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is open.

Analyst: Hi, thanks for taking the question. This is Madison on for Ravi. Could you give more color on how you are thinking about growing again—could you start growing again standalone, or do you think that is only after absorbing Sun Country? And then do you have a sense of Investor Day timing?

Drew Wells: It depends on the timeline. If we pull some capacity out here in the near term, there will be slack that we could grow back into, should the overall environment call for it—demand remains healthy and fuel comes back to us. On the longer term, there is a lot to figure out post close. But I would expect there to be growth given our delivery schedule in the back half of this year and into next year.

Robert Neal: We shared on the last call that we would expect 2027 to be the high point for aircraft deliveries from our firm Boeing order. Over the last few years, we have used a lot of our deliveries for replacement. Next year, we have a lot of flexibility in how many aircraft we decide to retire, but we expect next year to be the peak year for firm deliveries on a standalone basis.

Greg Anderson: On Investor Day, we certainly recognize the importance of having an Investor Day to update you on our outlook. Near term, we are focused on closing our Sun Country transaction. We still plan to have an Investor Day when it is practical. Ideally, it is before the end of this year, but we have not firmed that up yet.

Operator: Your next question comes from the line of Dan McKenzie with Seaport Global. Your line is open.

Dan McKenzie: Hey, good afternoon, guys. A couple of questions. Media outlets are reporting that a government rescue at Spirit has hit an impasse. You do not have a lot of overlap with them, but would it nonetheless impact your guide for the second quarter if they do not make it? And secondly, on premium revenue, I think that was previously quantified at $500 per departure. Given industry fare increases, how would you characterize that revenue today? And does Sun Country have a similar premium revenue component?

Drew Wells: There is a lot of speculation there. Where I will steer is we have grown meaningfully in Fort Lauderdale in the last two years—about 30% up year over year on a trailing twelve months ending October, on a base of about 20% in the year before that. We have been growing nicely and seeing results that I would expect. If that capacity were to go away, there would be some amount of spillover coming to us, but I am not going to change the guide on that. It is probably pretty small in the grand scheme of the whole network.

Greg Anderson: The only thing I would add is we are a very different model than Spirit and in a very different financial position. Whatever happens with them should not impact the success we expect to see here at Allegiant Travel Company.

Drew Wells: On premium revenue, if you look at the first quarter results, the vast majority of our improvement came on the yield line, while third-party—primarily co-brand—was relatively flat. Our Allegiant Extra revenue goes into the ancillary line. You have probably seen us hold pretty steady on that $500 per departure. The hurdle rate goes up as load factor rises, but I would not move that number right now. With the Sun Country product, you are looking at a very similar layout. They have about six rows of extra legroom seats with a product mix very similar to Allegiant Extra. It is complementary, and I would expect similar strong results from them in a cohesive experience as we combine.

Operator: Your next question comes from the line of Christopher Stathoulopoulos with Susquehanna. Your line is open.

Christopher Stathoulopoulos: Good afternoon. As we think about the second half—post-Labor Day—demand tends to get a little squishy. If fuel is higher for longer, how are you thinking about capacity decisions so you do not cut too close or too far out?

Drew Wells: We would probably be looking at that timeline in the coming weeks—May into early June, as I referred to in the prepared remarks. I am not interested in getting too close and having to cut too many passengers because things did not materialize to the eightieth percentile. I am fine to take a little less risk on upside, generating and canceling a little bit further out for passenger convenience to the extent we can.

Christopher Stathoulopoulos: Did you give the spread in peak versus off-peak? If we parse out RASM—core versus initiatives—any color there?

Drew Wells: We did not go down that path for this call. At 16.4% in the first quarter, just about everything was clicking—peak and off-peak looked great. We talked before the quarter about the holiday shift and a meaningful amount of traffic coming into early January from New Year’s travel, and a little bit of benefit from Easter shifting forward. Suffice to say, everything looked great no matter how you slice it.

Operator: And our last question will come from Scott Group with Wolfe Research. Your line is open.

Scott Group: Hey, thanks. I apologize if you touched on this. I got on a little bit late. I think I heard CASM ex accelerates a little bit more in second quarter than RASM. Can you put any numbers around that? And then is third quarter the opposite of that? And separately, since you announced Sun Country, a lot has changed with fuel. How does this change the timeline or magnitude of synergies? Lastly, the guide you gave us for second quarter—is that purely standalone or does that include Sun Country? How will you report after close?

Drew Wells: We have not really touched on third quarter. The world is variable enough that it is challenging. We still have over 80% of third quarter left. I feel pretty good about how July is going to go. It will be interesting to watch what happens with leisure demand through the fall—traditionally weaker for leisure. Demand looks great right now, so we will see.

Robert Neal: On CASM ex versus RASM, we did not give numbers. I referred back to commentary from February on the shape of CASM ex and said that first quarter came in a little bit above our expectations and that we expect second quarter to be the high point from a year over year perspective. With capacity as we have it today, it is possible that third quarter could be the opposite effect on the spread, though not necessarily the same magnitude inversely.

Greg Anderson: On synergies, as we have gone through integration planning, we retain a very high degree of conviction on the $140 million synergy target. Some of the network synergies in a higher fuel environment may be under pressure, but we would expect that to normalize over time and achieve the $140 million in synergies.

Robert Neal: When we announced the transaction, we talked about $140 million in run-rate synergies. We said it would not be unreasonable to expect to achieve half of that rate in the first full year post close. I tried to be clear that we were really thinking of that as 2027. From that perspective, they probably pull forward a little bit with the closing coming up, but we have also got a faster ramp rate now, and that is challenging when some of those synergies were coming from added capacity. That said, with the baseline changing in light of the fuel environment, I do not see a substantial change.

We also see a lot of the value in this combination beyond P&L synergies—flexibility in fleet ownership, scale benefits, and a broader loyalty program. On your last question, the guide is standalone Allegiant Travel Company for the second quarter. We talked about expecting the closing around May 13. We realize the guide goes a little bit stale, but it should still give you some color into how the Allegiant Travel Company business is performing in the second quarter. As soon as possible after the closing, once we have insight into Sun Country’s financials, we hope to provide updated guidance on the combined entity.

We are still working through how we expect to report and guide—what segments we will show—and expect to have answers in the coming weeks.

Operator: And thank you. With no further questions in queue, I would like to turn the conference back over to Sherry for closing remarks.

Sherry Wilson: Thank you all for joining this afternoon’s call. We will speak again soon.

Operator: This concludes today’s conference call. You may now disconnect.

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