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Allegiant's (ALGT) April Load Factor Rises on Robust Demand

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Allegiant Travel Company (ALGT - Free Report) reported impressive traffic numbers for April. Traffic for the total system, which includes scheduled service and fixed fee contract — measured in revenue passenger miles (RPMs) — increased 12% on a year-over-year basis to 1.05 billion. System capacity, calculated in available seat miles (ASMs), improved 9% to 1.27 billion in the same month.

With traffic growth outpacing capacity expansion, load factor (percentage of seats filled with passengers) registered a rise of 230 basis points year over year to 83.2%. Strong demand for air travel contributed to the increase in load factor. In fact, this Las Vegas-based carrier transported 1.16 billion passengers in April, reflecting an improvement of 13.5% on a year-over-year basis.

Price Performance

Allegiant’s impressive traffic report comes close on the heels of the carrier’s outperformance, with respect to earnings per share and revenues in the first quarter of 2018. Results were announced late last month. Despite the twin good news, the stock has lost 5.1% over the past month.

 

In fact, it seems that the stock is still suffering from CBS News' report, 60 Minutes, alleging that it was facing a number of safety-related issues. The damaging television program was aired on Apr 15.

High Fuel Costs Remain a Bane

Apart from the safety-related issues, escalating fuel costs are expected to continue hurting the company’s bottom line going ahead. In the first quarter, fuel costs increased in excess of 20% year over year to $2.18 per gallon.

In April, the fuel cost was even higher — 2.28 per gallon. With oil prices surging above the $70 a barrel mark, it will not be surprising if Allegiant revises its current-year fuel price guidance of $2.20 per barrel upward in the near future.

Zacks Rank & Key Picks

Allegiant carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Zacks Transportation sector are SkyWest, Inc. (SKYW - Free Report) , GATX Corporation (GATX - Free Report) and Gol Linhas Aereas Inteligentes S.A. . While SkyWest sports a Zacks Rank #1 (Strong Buy), GATX and GOL carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In a year’s time, shares of SkyWest, Gol Linhas and GATX have gained 54.8%, 39% and 17.7%, respectively.  

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