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Allegiant's (ALGT) August Traffic Increases, Load Factor Down

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Allegiant Travel Company (ALGT - Free Report) delivered a mixed traffic report for August. Even though traffic increased substantially on account of rising demand for air travel, load factor (percentage of seats filled with passengers) in the month declined as traffic growth was outpaced by capacity expansion.

Traffic for the total system, including scheduled service and fixed fee contract — measured in revenue passenger miles (RPMs) — climbed 14.9% on a year-over-year basis to 1.03 billion. System capacity, calculated in available seat miles (ASMs), expanded 15.9% to 1.24 billion in the month. Consequently, load factor contracted 70 basis points year over year to 82.6%.

Allegiant’s passenger count rose 15.7% in August. Its system-wide average fuel cost per gallon was approximately $2.40 in the month.


Of late, the company has been struggling with a few headwinds. In May, its business suffered a setback on the revenue front due to late deliveries. In another unfortunate case, Allegiant’s dispatchers failed to ratify the provisional agreement with the relevant union (International Brotherhood of Teamsters).

With up trending fuel prices being a common issue for the entire airline industry, Allegiant too is bearing the brunt of it. Average fuel cost per gallon surged 29.5% year over year in the first half of the year. Moreover, the company has trimmed its earnings per share guidance for 2018 to $9-$10 from the previous $10-$12 on the same ground. The Zacks Consensus Estimate for current-year earnings stands at $9.65 per share.  Fuel costs are expected to be $2.35 per gallon in the year, higher than $2.20 anticipated earlier.

Zacks Rank & Key Picks

Allegiant carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are SkyWest, Inc (SKYW - Free Report) , C.H. Robinson Worldwide, Inc. (CHRW - Free Report) and Trinity Industries, Inc. (TRN - Free Report) . While C.H. Robinson holds a Zacks Rank #2 (Buy), SkyWest and Trinity sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of SkyWest, C.H. Robinson and Trinity have rallied more than 59%, 37% and 21%, respectively, in a year.

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