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Allegiant's August Traffic Rises But Load Factor Declines

Zacks Equity Research

Allegiant Travel Company ALGT reported a decline in load factor (% of seats filled by passengers) for August as traffic growth was outpaced by capacity expansion.

Traffic Report

Backed by upbeat demand for air travel, system-wide traffic — measured in revenue passenger miles (RPMs) — improved 4% on a year-over-year basis to 1.07 billion.  Notably, system-wide traffic includes scheduled service and fixed fee contract. System capacity, calculated in available seat miles (ASMs), expanded 5.2% to 1.31 billion in August. Meanwhile, load factor declined 100 basis points to 81.6%.

Notably, the carrier has been grappling with decrease in load factor so far this year. Evidently, the metric declined 130 basis points to 82.2% in second-quarter 2019.

Coming back to Allegiant’s August traffic report, departures increased 7.3%. Average stage length (average distance flown per aircraft departure) decreased 2.3% to 824 miles in the same month. The carrier was responsible for transporting approximately 1.26 million passengers during August.

The company’s system-wide average fuel cost per gallon was approximately $2.13 in the month, lower than $2.20 in May. Allegiant expects fuel cost per gallon of $2.15 for 2019.

Price Performance

Despite declining load factor, shares of Allegiant have charted a solid trajectory so far this year, courtesy of impressive top-line growth driven by strong passenger revenues. In the first half of 2019, passenger revenues increased 9%. The stock has gained 46.9% compared with its industry’s 4.5% growth.

Zacks Rank & Other Key Picks

Allegiant carries a Zacks Rank #2 (Buy). Some other top-ranked airline stocks are Controladora Vuela Compania de Aviacion, S.A.B. de C.V. VLRS, Copa Holdings, S.A. CPA and SkyWest SKYW. While Controladora Vuela and Copa sport a Zacks Rank #1 (Strong Buy), SkyWest carries the same Zacks Rank as Allegiant. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Controladora Vuela, Copa and SkyWest have rallied more than 93%, 26% and 33% so far this year, respectively.

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