On this page of StockholderLetter.com we present the latest annual shareholder letter from Allegiant Travel CO — ticker symbol ALGT. Reading current and past ALGT letters to shareholders can bring important insights into the investment thesis.

May 7, 2024
Dear Allegiant Shareholders:
I am excited to talk to you again and provide comments on the state of Allegiant and the airline industry. As you are well aware, it
has been a tumultuous few years since 2020 and the pandemic. This hundred year event has had a seismic impact on the
airline space, how people travel and as a result the competitive landscape.
Since 2020 and the pandemic, there have been structural changes in the underpinnings of the industry:




Travel habits have been altered     Given the decline in business travel, the upper end of the industry, Delta,
United and American (who I refer to as the    Majors    or    Big 3   ) have migrated towards a more leisure focused
approach. This    coming    down market has affected what is known as the low cost, ULCC segment. More recently,
in Q1 2024, the Majors and Alaska have commented about the strength in corporate demand as the economy
continues to show strong results in spite of the Fed   s interest rate efforts.
Government     there has been a seismic shift in how the federal government is viewing airlines. In many ways the
industry has become the    whipping    boy for current politicians who are stressing airline practices such as junk fees,
reliability etc. Concurrently the current administration   s DOJ has a    no-prisoners    policy when it comes to mergers
or other relationships (for example, the Northeast Alliance or NEA).
Pilots/Labor cost/shortage     the long tale of the 1500 hour rule promulgated by the FAA in 2013 has reared its
head. A pilot shortage was inevitable with this change. It manifested itself during the past three years. Pilot wages
are up as much as 40% in recent contracts. Carriers such as Allegiant were interim stops for pilots on their way to
more lucrative programs offered by the Majors. Labor costs, in general, across all aspects of the industry, have
increased substantially.
Competitive landscape     Going into the pandemic, the airline industry playing field was reasonably well balanced
    the Big 3 and Southwest had their space - the low cost carriers theirs. The low cost segment throughout the
teens had been the financial stars     impressive growth and the best margins. Today that equation has flipped     the
Majors have the upper hand with impressive industry leading earnings and balance sheets, improved products and
excellent frequent flyer programs. The Majors are the darlings; the low cost ULCC label has been changed to the
   LMA    or Low Margin Airlines.
Allegiant     a lot going on
2023 was another eventful year for G4. We once again were among the industry leaders in profitability generating a 10%
operating margin. Earnings for the year were $6.29 per share. Weighing on the Company   s results were costs from Sunseeker
Resort which opened December 15th. It reported a $30M loss for the year     all attributable to pre-opening costs.
We ran one of the best operations in the airline industry last year     a 99.8% controllable completion factor. We were ranked third
by the Wall Street Journal in their annual review of the airline industry, moving up from 5th the previous year. The Journal
acknowledged our improved brand and top-of-the-industry operational performance.
I am happy to report that Sunseeker has been completed and came on line December 15th of last year. As a sidebar, a note of
congratulations to the Sunseeker team of Micah Richins and Jason Shkorupa, they battled numerous headwinds including two
hurricane delays in less than a year, supply chain shortages as well as other pandemic induced problems. In spite of these
headwinds they have created a magnificent destination resort. We could not be more proud of their efforts.
It will take time to bring Sunseeker to its peak financial performance as we market this world class property to the millions of
customers in our data base. In past letters, I have stressed the importance of our direct-to-consumer distribution system. It will
earn its keep in the coming years. One area that has performed above expectations is food and beverage. Sunseeker created
twenty separate restaurant brands     a gourmet   s delight - all owned by Sunseeker.
Sunseeker Resort     785 rooms, twenty different and unique food and beverage outlets and 60,000 square feet of
convention space
Sunseeker is located in one of the premier vacation destinations for the U.S., the west coast of Florida, located within a ten
minute drive to our Punta Gorda (PGD) airport, sandwiched between Sarasota/Tampa-St. Pete to the north and Ft. Myers/Naples
to the south. This location will serve us well. The property speaks for itself.
Our Route Map
Below is a map of the U.S. detailing the 124 cities we serve, 33 of which we label as    destination cities    (the orange dots). As you
can see, we have nationwide coverage to more cities than every airline except the three Majors, American, Delta and United.
Of our 552 routes, 77 percent or 454 do not have direct nonstop competition. We offer only non-stop, point-to-point flights, a
critical product differentiation in today   s difficult service environment.
We service our routes from 24 Bases, each of which is self-contained with our dedicated aircraft, pilots, mechanics, flight
attendants and the necessary tools and parts to support our operations. We have used this    out and back    pattern since our
earliest days. It provides the most efficient scheduling approach as well as operational simplicity. We believe we have up to
1,400 additional domestic routes we can grow into using our incoming Boeing MAX fleet in the coming years.
The Allegiant Route Map as of April 2024     124 Total Cities
To facilitate this growth, we have upgraded our systems this past year including installing SAP for financial management,
Navitaire for reservations and stations operations and this year the planned implementation of Trax as our maintenance
management system. As I have stated in past letters, this is us transitioning to adulthood, moving from our teenage years to a
more sophisticated entity with the proper tools. The addition of Navitaire will allow us to work with our future Joint Venture
partner, Viva Aerobus (hopefully in place in the next 12 months) in what should be a complimentary partnership for both
companies. Attempting all of these installations in one year was a heavy lift. We had some indigestion as we rolled into 2024.
Long term, these systems should be extremely accretive to our efforts, particularly the Navitaire upgrade.
Boeing
The other major project ongoing is the introduction of our Boeing MAX aircraft. Deliveries have been delayed because of
Boeing   s ongoing problems chronicled in the press. These new generation aircraft will provide us with improved economics and
allow us to add as many as 1400 new routes previously mentioned. Originally, we had planned on 20+ deliveries in 2024. As
this is written, given the reported delays, we have adjusted our plans to six aircraft in 2024. We have fifty firm MAX-7s (163
seats) and MAX 8200s (190 seats) plus options for another 80 aircraft or a total order of up to 130 aircraft.
I am happy to report that the team has done an excellent job preparing for the MAX. However, there is a cost to this process
including adding the necessary pilots to allow current Airbus crews to transition to the MAX. Unfortunately, we will have an
expense overhang given the delivery delays. As I write this we are unsure about delivery dates given Boeing   s problems. Long
term the MAX should be extremely accretive. Both aircraft types will come equipped with our extra leg room    Allegiant Extra   
product which to date has shown excellent results.
Everyone is aware of the trials and tribulations Boeing is going through     they cannot seem to get off the front page. I have
personal experience in this phenomena     the smallest event regarding Boeing becomes front page news or the first headline
mentioned in a broadcast. Recently Delta had a flat tire on a 30 year old 757     the news report was about a    Boeing 757. . .!   
This will pass. Boeing makes an excellent aircraft. Their production history in the past few years, however, has had its issues.
Over the past 15 years, the tables have been turned in this duopoly business. Boeing was number one; now they are number
two. During the early 2000s their success may have taken away their edge     they were on top and had only one way to go.
Airbus was hungry and scrappy     we personally experienced both companies offerings as we looked to add a new generation
aircraft in the late 2000s.
Boeing missed the opportunity to build a new generation narrowbody aircraft (the current 737 fuselage is from a 1960s design).
Airbus upped the game in 2012 when they introduced an upgraded offering with new generation engines     the A320NEO.
Boeing was forced to react and has been playing catch up since.
Boeing is a quality company. The MAX is an excellent product     safe and reliable; it will enhance our economics. The MAX had
a flaw, a manageable one with qualified pilots and capable operators. Boeing could not have handled this crisis any worse and
as a result have become easy prey.
Since the fatal accidents in 2018 and 2019 and the follow on stories of design flaws, Boeing has been pilloried about both their
aircraft design and certification and most recently about their manufacturing process. Problems with certification continue - most
recently they have been unable to meet the FAA   s certification requirements for the two additional MAX models     the -10 and the
-7. Boeing has substantial order books for both models.
Manufacturing issues have been much more front and center the past few months after the Alaska incident in January. As a
result, Boeing is going through a self-examination from the CEO   s office on down, reviewing their practices, their leadership.
Recently the CEO, David Calhoun announced his retirement at the end of 2024 and Stan Deal, CEO of the Boeing Commercial
Airplanes, resigned immediately (this is late March 2024). These changes are not a surprise given the Company   s history with
the accidents and recent manufacturing problems. To their defense, this complex business has become even more challenging
post pandemic. If there is one industry that has been a victim of supply chain problems, aerospace manufacturing has been at
the head of the list. They need to regain their manufacturing prowess.
The lesson at hand is that quality matters in the highly regulated world Boeing lives in. Having said that, we have gotten to know
their senior management and are impressed by their commitment and focus.
And one last comment on Boeing, during the political brouhaha of the past many years, there was not a public condemnation of
the MAX by any of the U.S. pilot unions, those that fly the aircraft every day. Their    endorsement    is what really counts.
Pilots
Another problem of the past three years has been pilots. There have been two issues     one a national problem     a general
shortage affecting all carriers and our local problem, namely negotiations with our pilot union, Teamsters Local 2118.
In early 2021, our Teamsters Local 2118 was newly formed. Per Teamsters International rules, new locals are begun under
trusteeship as they develop their bylaws and management teams. The Teamsters designee to lead Allegiant   s Local was an
Allegiant pilot. He proved to be a good politician, a good communicator - he had the support of the crews. But he and his team
had never been involved in the management of a union. He did not build the necessary infrastructure to run a Local, did not
develop the appropriate policies and procedures and did not delegate authority. The lack of experience, lack of basic business
knowledge was readily apparent. At the bargaining table for the past three years, none of the 2118 representatives (including
their legal counsel) had any previous experience at airline labor negotiations. The president of the union was also the head of
every committee including the negotiating committee. In three years of negotiation, from early 2021 through the end of 2023, the
Company and the union did not agree on any substantive updates to the contract.
In March of this year, the Teamsters International relieved the Allegiant 2118 Local president and its officers from their positions
via an emergency trusteeship. The past three years under Local 2118   s leadership have been extremely damaging to our pilots
and our Company. As a result of the incoming new leadership, I am confident we will be able to move forward quickly and work
with our pilots to finalize an agreement allowing us to return to the successful partnership which has benefited both the pilots and
the Company the past twenty years as we have grown our unique model.
The Other Pilot Issue
The national shortage of pilots, which is well known, has also been a critical component limiting our performance post pandemic.
I am happy to report we have seen an increase in pilot availability in the past 8-10 months     the hiring at the Majors has slowed
because of delivery delays from Boeing and Airbus as well as engine issues with the Pratt & Whitney new generation motor.
Since late 2020 through mid-2023, we were nothing more than a pilot training facility. At the end of 2021 we employed 1100
pilots. During the past two years, through the end of 2023, we hired 524 pilots but today employ just over 1200 or an attrition
rate of four for every five new hire pilots. The industry pecking order in pilot movements has had three layers     At the bottom regional carriers, the middle - the low cost carriers and then the Majors. We and the other low cost carriers (including Southwest)
 • shareholder letter icon 5/10/2024 Letter Continued (Full PDF)
 • stockholder letter icon 5/10/2023 ALGT Stockholder Letter
 • stockholder letter icon More "Airlines" Category Stockholder Letters
 • Benford's Law Stocks icon ALGT Benford's Law Stock Score = 67


ALGT Shareholder/Stockholder Letter Transcript:


May 7, 2024
Dear Allegiant Shareholders:
I am excited to talk to you again and provide comments on the state of Allegiant and the airline industry. As you are well aware, it
has been a tumultuous few years since 2020 and the pandemic. This hundred year event has had a seismic impact on the
airline space, how people travel and as a result the competitive landscape.
Since 2020 and the pandemic, there have been structural changes in the underpinnings of the industry:




Travel habits have been altered     Given the decline in business travel, the upper end of the industry, Delta,
United and American (who I refer to as the    Majors    or    Big 3   ) have migrated towards a more leisure focused
approach. This    coming    down market has affected what is known as the low cost, ULCC segment. More recently,
in Q1 2024, the Majors and Alaska have commented about the strength in corporate demand as the economy
continues to show strong results in spite of the Fed   s interest rate efforts.
Government     there has been a seismic shift in how the federal government is viewing airlines. In many ways the
industry has become the    whipping    boy for current politicians who are stressing airline practices such as junk fees,
reliability etc. Concurrently the current administration   s DOJ has a    no-prisoners    policy when it comes to mergers
or other relationships (for example, the Northeast Alliance or NEA).
Pilots/Labor cost/shortage     the long tale of the 1500 hour rule promulgated by the FAA in 2013 has reared its
head. A pilot shortage was inevitable with this change. It manifested itself during the past three years. Pilot wages
are up as much as 40% in recent contracts. Carriers such as Allegiant were interim stops for pilots on their way to
more lucrative programs offered by the Majors. Labor costs, in general, across all aspects of the industry, have
increased substantially.
Competitive landscape     Going into the pandemic, the airline industry playing field was reasonably well balanced
    the Big 3 and Southwest had their space - the low cost carriers theirs. The low cost segment throughout the
teens had been the financial stars     impressive growth and the best margins. Today that equation has flipped     the
Majors have the upper hand with impressive industry leading earnings and balance sheets, improved products and
excellent frequent flyer programs. The Majors are the darlings; the low cost ULCC label has been changed to the
   LMA    or Low Margin Airlines.
Allegiant     a lot going on
2023 was another eventful year for G4. We once again were among the industry leaders in profitability generating a 10%
operating margin. Earnings for the year were $6.29 per share. Weighing on the Company   s results were costs from Sunseeker
Resort which opened December 15th. It reported a $30M loss for the year     all attributable to pre-opening costs.
We ran one of the best operations in the airline industry last year     a 99.8% controllable completion factor. We were ranked third
by the Wall Street Journal in their annual review of the airline industry, moving up from 5th the previous year. The Journal
acknowledged our improved brand and top-of-the-industry operational performance.
I am happy to report that Sunseeker has been completed and came on line December 15th of last year. As a sidebar, a note of
congratulations to the Sunseeker team of Micah Richins and Jason Shkorupa, they battled numerous headwinds including two
hurricane delays in less than a year, supply chain shortages as well as other pandemic induced problems. In spite of these
headwinds they have created a magnificent destination resort. We could not be more proud of their efforts.
It will take time to bring Sunseeker to its peak financial performance as we market this world class property to the millions of
customers in our data base. In past letters, I have stressed the importance of our direct-to-consumer distribution system. It will
earn its keep in the coming years. One area that has performed above expectations is food and beverage. Sunseeker created
twenty separate restaurant brands     a gourmet   s delight - all owned by Sunseeker.

Sunseeker Resort     785 rooms, twenty different and unique food and beverage outlets and 60,000 square feet of
convention space
Sunseeker is located in one of the premier vacation destinations for the U.S., the west coast of Florida, located within a ten
minute drive to our Punta Gorda (PGD) airport, sandwiched between Sarasota/Tampa-St. Pete to the north and Ft. Myers/Naples
to the south. This location will serve us well. The property speaks for itself.
Our Route Map
Below is a map of the U.S. detailing the 124 cities we serve, 33 of which we label as    destination cities    (the orange dots). As you
can see, we have nationwide coverage to more cities than every airline except the three Majors, American, Delta and United.
Of our 552 routes, 77 percent or 454 do not have direct nonstop competition. We offer only non-stop, point-to-point flights, a
critical product differentiation in today   s difficult service environment.
We service our routes from 24 Bases, each of which is self-contained with our dedicated aircraft, pilots, mechanics, flight
attendants and the necessary tools and parts to support our operations. We have used this    out and back    pattern since our
earliest days. It provides the most efficient scheduling approach as well as operational simplicity. We believe we have up to
1,400 additional domestic routes we can grow into using our incoming Boeing MAX fleet in the coming years.

The Allegiant Route Map as of April 2024     124 Total Cities
To facilitate this growth, we have upgraded our systems this past year including installing SAP for financial management,
Navitaire for reservations and stations operations and this year the planned implementation of Trax as our maintenance
management system. As I have stated in past letters, this is us transitioning to adulthood, moving from our teenage years to a
more sophisticated entity with the proper tools. The addition of Navitaire will allow us to work with our future Joint Venture
partner, Viva Aerobus (hopefully in place in the next 12 months) in what should be a complimentary partnership for both
companies. Attempting all of these installations in one year was a heavy lift. We had some indigestion as we rolled into 2024.
Long term, these systems should be extremely accretive to our efforts, particularly the Navitaire upgrade.
Boeing
The other major project ongoing is the introduction of our Boeing MAX aircraft. Deliveries have been delayed because of
Boeing   s ongoing problems chronicled in the press. These new generation aircraft will provide us with improved economics and
allow us to add as many as 1400 new routes previously mentioned. Originally, we had planned on 20+ deliveries in 2024. As
this is written, given the reported delays, we have adjusted our plans to six aircraft in 2024. We have fifty firm MAX-7s (163
seats) and MAX 8200s (190 seats) plus options for another 80 aircraft or a total order of up to 130 aircraft.
I am happy to report that the team has done an excellent job preparing for the MAX. However, there is a cost to this process
including adding the necessary pilots to allow current Airbus crews to transition to the MAX. Unfortunately, we will have an
expense overhang given the delivery delays. As I write this we are unsure about delivery dates given Boeing   s problems. Long
term the MAX should be extremely accretive. Both aircraft types will come equipped with our extra leg room    Allegiant Extra   
product which to date has shown excellent results.
Everyone is aware of the trials and tribulations Boeing is going through     they cannot seem to get off the front page. I have
personal experience in this phenomena     the smallest event regarding Boeing becomes front page news or the first headline
mentioned in a broadcast. Recently Delta had a flat tire on a 30 year old 757     the news report was about a    Boeing 757. . .!   
This will pass. Boeing makes an excellent aircraft. Their production history in the past few years, however, has had its issues.
Over the past 15 years, the tables have been turned in this duopoly business. Boeing was number one; now they are number
two. During the early 2000s their success may have taken away their edge     they were on top and had only one way to go.

Airbus was hungry and scrappy     we personally experienced both companies offerings as we looked to add a new generation
aircraft in the late 2000s.
Boeing missed the opportunity to build a new generation narrowbody aircraft (the current 737 fuselage is from a 1960s design).
Airbus upped the game in 2012 when they introduced an upgraded offering with new generation engines     the A320NEO.
Boeing was forced to react and has been playing catch up since.
Boeing is a quality company. The MAX is an excellent product     safe and reliable; it will enhance our economics. The MAX had
a flaw, a manageable one with qualified pilots and capable operators. Boeing could not have handled this crisis any worse and
as a result have become easy prey.
Since the fatal accidents in 2018 and 2019 and the follow on stories of design flaws, Boeing has been pilloried about both their
aircraft design and certification and most recently about their manufacturing process. Problems with certification continue - most
recently they have been unable to meet the FAA   s certification requirements for the two additional MAX models     the -10 and the
-7. Boeing has substantial order books for both models.
Manufacturing issues have been much more front and center the past few months after the Alaska incident in January. As a
result, Boeing is going through a self-examination from the CEO   s office on down, reviewing their practices, their leadership.
Recently the CEO, David Calhoun announced his retirement at the end of 2024 and Stan Deal, CEO of the Boeing Commercial
Airplanes, resigned immediately (this is late March 2024). These changes are not a surprise given the Company   s history with
the accidents and recent manufacturing problems. To their defense, this complex business has become even more challenging
post pandemic. If there is one industry that has been a victim of supply chain problems, aerospace manufacturing has been at
the head of the list. They need to regain their manufacturing prowess.
The lesson at hand is that quality matters in the highly regulated world Boeing lives in. Having said that, we have gotten to know
their senior management and are impressed by their commitment and focus.
And one last comment on Boeing, during the political brouhaha of the past many years, there was not a public condemnation of
the MAX by any of the U.S. pilot unions, those that fly the aircraft every day. Their    endorsement    is what really counts.
Pilots
Another problem of the past three years has been pilots. There have been two issues     one a national problem     a general
shortage affecting all carriers and our local problem, namely negotiations with our pilot union, Teamsters Local 2118.
In early 2021, our Teamsters Local 2118 was newly formed. Per Teamsters International rules, new locals are begun under
trusteeship as they develop their bylaws and management teams. The Teamsters designee to lead Allegiant   s Local was an
Allegiant pilot. He proved to be a good politician, a good communicator - he had the support of the crews. But he and his team
had never been involved in the management of a union. He did not build the necessary infrastructure to run a Local, did not
develop the appropriate policies and procedures and did not delegate authority. The lack of experience, lack of basic business
knowledge was readily apparent. At the bargaining table for the past three years, none of the 2118 representatives (including
their legal counsel) had any previous experience at airline labor negotiations. The president of the union was also the head of
every committee including the negotiating committee. In three years of negotiation, from early 2021 through the end of 2023, the
Company and the union did not agree on any substantive updates to the contract.
In March of this year, the Teamsters International relieved the Allegiant 2118 Local president and its officers from their positions
via an emergency trusteeship. The past three years under Local 2118   s leadership have been extremely damaging to our pilots
and our Company. As a result of the incoming new leadership, I am confident we will be able to move forward quickly and work
with our pilots to finalize an agreement allowing us to return to the successful partnership which has benefited both the pilots and
the Company the past twenty years as we have grown our unique model.
The Other Pilot Issue
The national shortage of pilots, which is well known, has also been a critical component limiting our performance post pandemic.
I am happy to report we have seen an increase in pilot availability in the past 8-10 months     the hiring at the Majors has slowed
because of delivery delays from Boeing and Airbus as well as engine issues with the Pratt & Whitney new generation motor.
Since late 2020 through mid-2023, we were nothing more than a pilot training facility. At the end of 2021 we employed 1100
pilots. During the past two years, through the end of 2023, we hired 524 pilots but today employ just over 1200 or an attrition
rate of four for every five new hire pilots. The industry pecking order in pilot movements has had three layers     At the bottom regional carriers, the middle - the low cost carriers and then the Majors. We and the other low cost carriers (including Southwest)



shareholder letter icon 5/10/2024 Letter Continued (Full PDF)
 

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