Allegiant's (ALGT) March Load Factor Rises on Higher Demand

Allegiant Travel Company ALGT reported impressive traffic numbers for March. Traffic for the total system, including scheduled service and fixed fee contract — measured in revenue passenger miles (RPMs) — increased 17.7% on a year-over-year basis to 1.28 billion. System capacity, calculated in available seat miles (ASMs), improved 13.3% to 1.49 billion in the same month.

With traffic growth outpacing capacity expansion, load factor (percentage of seats filled with passengers) registered a rise of 320 basis points year over year to 85.9%. Strong demand for air travel contributed to the increase in load factor. In fact, this Las Vegas-based carrier transported 1.37 billion passengers in the month, reflecting an improvement of 18.3% on a year-over-year basis.

On a year-to-date basis, traffic rose 14.3% and capacity expanded 10.4%. Load factor increased 280 basis points to 83% on higher traffic growth.

Impressive Price Performance

In the past six months, shares of Allegiant have outperformed the industry  it belongs to. The stock has rallied 32.4% compared with the industry’s gain of 5%.

 

The impressive traffic report is anticipated to boost the stock further.

High Costs – A Headwind

Despite the impressive traffic numbers, driven by strong demand for air travel, escalating costs (labor and fuel) are expected to continue hurting the company’s bottom line going ahead.

In the fourth quarter of 2017, cost per available seat miles (CASM), excluding fuel, increased 20.2% backed by the new pilot agreement, among other factors.

Labor costs are likely to be high in the first quarter of 2018 too, thus limiting bottom-line growth. The rise in fuel costs, which is expected to be $2.18 per gallon in the first quarter, also does not bode well for the stock.

Zacks Rank & Key Picks

Allegiant carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Zacks Transportation sector are United Continental Holdings, Inc. UAL, SkyWest, Inc. SKYW and Triton International Limited TRTN, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of United Continental and SkyWest have gained 9.3% and 21.1%, over the past six months. Meanwhile, Triton International has an impressive earnings history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 10%.

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