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Allegiant's June Traffic Increases But Load Factor Decreases

Zacks Equity Research

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

Meanwhile, traffic for the total system including scheduled service and fixed fee contract, measured in revenue passenger miles (RPMs), improved 12.9% on a year-over-year basis to 1.37 billion. System capacity, calculated in available seat miles (ASMs), increased 13.3% to 1.62 billion in the month. Load factor dipped 30 basis points to 84.9%.

Departures at the carrier, which was responsible for transporting approximately 1.61 million passengers during June, increased 14.2%. Average stage length (average distance flown per aircraft departure) decreased 1.8% to 827 miles in the same month.

The company’s system-wide average fuel cost per gallon was approximately $2.11 in the month, lower than $2.32 in May. Allegiant, which will report second-quarter 2019 results on Jul 24, expects fuel costs per gallon of $2.22 in the to-be-reported quarter. Notably, this projection is higher than $2.14 reported by the company in first-quarter 2019.

In fact, more than fuel costs we expect labor-related expenses to hurt the company’s second-quarter earnings. However, passenger revenues, which account for the bulk of the top line, are expected to aid quarterly results owing to upbeat demand for air travel.

YTD Price Performance

Despite high costs, shares of the company have charted a solid trajectory so far this year, courtesy of impressive top-line growth driven by strong passenger revenues. The stock has gained 48.3% compared with its industry’s 12.3% growth.

Zacks Rank & Key Picks

Allegiant carries a Zacks Rank #3 (Hold). Better-ranked airline stocks include Copa Holdings CPA, United Airlines Holdings UAL and Air China AIRYY, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Copa Holdings, United Airlines and Air China have increased more than 27%, 8% and 18%, respectively, so far this year.

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