Allegiant Reports First Quarter 2008 Financial Results

[Desert1]

Taking a look back 3 years, (in addition to work rules), we have improved our compensation package by almost 40%. We're very proud of this accomplishment, particularly considering the state of this industry. This was due to an open-door, very positive working relationship and negotiation between the pilot group and our management team. The emphasis was on the welfare of the pilot group, while simultaneously considering the financial health of the company.

As to our compensation, you'll forgive me if I take exception with the term "severely underpaid". For the sake of comparison, consider the current 3-yr plan negotiated by our in-house pilot group: Allegiant pay for 10-yr captain will exceed narrow-body 10-yr captain pay at NWA, UAL and US Air East. Keep in mind, that figure does not include the Allegiant bonus ($5K-$10K in '07)

Considering the average upgrade to be 1-2 years, there are few places in this industry where you have the ability to earn over $100K in your 2nd-3rd year of employment. Your post lists 1-2 year captain pay: I don't know of many MD-80 operators with 1-2 year captains. Although we have room for improvement in our senior FO pay, we have very few over 2 years. Once things stabilize and those numbers grow, our in-house will take another look at the FO pay scales. Until then, I can assure you there are few, if any, complaining about the pay around here.

Yes, we are a very new company and, as you put it, still in the process of 'stabilizing'. That said, our mid-term pay exceeds that of much larger, more seasoned airlines with union contracts that have been negotiated for decades.

D1

P.s., Semper Fi...

 

[chperplt]

I agree, but they also have unusually low pilot labor costs. Consider the following:

Roughly 255 pilots
Current CA pay yrs 1-5: $61,$85,$90,$96,$101
Current FO pay yrs 1-5: $41,$51,$53,$56,$56
Give CA a $30 per hr raise & FO a $10 per hr raise
If you do the math it works out to $1.4M per quarter

IOW, part of Allegiant's success is because their pilots are severely underpaid compared to other MD80 pilots. I understand it's necessary to keep costs under control when an airline is just starting. However, once an airline is comfortably established they need to start paying their pilots a more industry standard wage. It's time for Allegiant management to pay up. If they can make money in this environment they can afford a decent raise for the pilots.

IMO you have a very old and tired argument....

What is industry standard wage? The wage that people get before their companies go into CH11? Is it the wage that they get before they show up to work to find the doors padlocked?

There is no such thing as industry standard anymore when companies are folding left and right. As D1 stated, we've made great strides in pay and work rules over the past few years. We have 3rd and 4th year Captains here making low to mid 6 figures, while having the opportunity to spend every night at home.

I'd be curious to know how much more my counterpart at Midwest is making at year 3; how many nights a month and year they're spending away from home, and how secure they feel in their positions right now.

Not a kick in the pants to anyone working at Midwest, but right now I enjoy spending every night at home and having as much security in this industry as can be had.

 

[fly4surf]

Caveman,
You won't win the fight with these guys on 'payscale.'

Try retirement.

PS: Just happy to have a job after this month.

 

[Correcting]

Allegiant doesnt hedge fuel.

Looks like they hedge fuel to me.

non-cash mark-to-market loss/gain on fuel derivatives (reconciled to GAAP on pg. 7)
...................................$0.47 $0.38 23.7%

And it looks like they had a profit of $0.47 per share off the derivatives, which exactly matches their earnings per share for the quarter. So yes, it appears that without the fuel hedges, Allegiant would have broke even or been slightly in the red. Even that would have been a good quarter in this environment.

 

[chperplt]

Caveman,
You won't win the fight with these guys on 'payscale.'

Try retirement.

PS: Just happy to have a job after this month.

Retirement here sucks..... plain and simple.

 

[chperplt]

Looks like they hedge fuel to me.

And it looks like they had a profit of $0.47 per share off the derivatives, which exactly matches their earnings per share for the quarter. So yes, it appears that without the fuel hedges, Allegiant would have broke even or been slightly in the red. Even that would have been a good quarter in this environment.

The entire story....




Allegiant Travel Company provides the following guidance to investors, which is subject to revision in the event of changes in our operating environment, including, without limitation, changes in fuel prices:


-- We expect second quarter 2008 year-over-year departure growth of at
least 33% (previously 35%) and ASM growth of at least 25%.
-- By the end of 2008, Allegiant Air expects to operate at least 37
(previously 40) MD-80 aircraft.
-- We expect 2008 capital expenditures of $45 million, with an estimated
$36 million for six aircraft and $9 million for engines and other.
Capex in the first quarter amounted to $8.0 million.


We have no fuel hedges in place and our current policy is not to hedge fuel prices.


Allegiant Travel Company
Non-GAAP Presentations
Quarters Ended March 31, 2008 and 2007
(in thousands, except per share and per ASM amounts)
(Unaudited)

We do not qualify for fuel hedge accounting treatment under FAS 133. To facilitate investor comparisons with airlines that do qualify for fuel hedge accounting, we provide adjusted non-GAAP measures of net income and operating expense as if we did qualify for fuel hedge accounting, by excluding the mark-to-market non-cash gains or losses on fuel derivatives from net income and by treating cash gains or losses realized on fuel derivatives as part of aircraft fuel expense. We believe use of these non-GAAP measures assists investors in understanding the underlying economic performance of the Company without regard to different accounting treatment for fuel hedging activities.

The SEC has adopted rules (Regulation G) regulating the use of non-GAAP financial measures. Because of our use of non-GAAP financial measures, adjusted net income and adjusted aircraft fuel expense, to supplement our consolidated financial statements presented on a GAAP basis, Regulation G requires us to include in this press release a presentation of the most directly comparable GAAP measures, which are net income (which reflects the mark-to-market non-cash loss or gain on fuel derivatives), and aircraft fuel expense (which is not impacted by the cash gain or loss on fuel derivatives), and a reconciliation of the non-GAAP measures to the most comparable GAAP measures. Our utilization of non-GAAP measurements is not meant to be considered in isolation or as a substitute for net income, aircraft fuel expense and other measures of financial performance prepared in accordance with GAAP. Adjusted net income and adjusted aircraft fuel expense are not GAAP measurements and our use of them may not be comparable to similarly titled measures employed by other companies in the airline industry. The reconciliations to GAAP measures follow.

Derivation of adjusted net income (excluding non-cash mark-to-market loss or gain on fuel derivatives) from net income:

 

[tico]

I agree, but they also have unusually low pilot labor costs. Consider the following:

Roughly 255 pilots
Current CA pay yrs 1-5: $61,$85,$90,$96,$101
Current FO pay yrs 1-5: $41,$51,$53,$56,$56
Give CA a $30 per hr raise & FO a $10 per hr raise
If you do the math it works out to $1.4M per quarter

IOW, part of Allegiant's success is because their pilots are severely underpaid compared to other MD80 pilots. I understand it's necessary to keep costs under control when an airline is just starting. However, once an airline is comfortably established they need to start paying their pilots a more industry standard wage. It's time for Allegiant management to pay up. If they can make money in this environment they can afford a decent raise for the pilots.

Out of sheer boredom and a little bit of curiosity I spent the last hour doing an earnings comparison on Allegiant vs. Alaska...........

Given that Allegiant upgrades are likely to lengthen, I figured 4 years as a co-pilot and took that out to 12 years and used their premium pay calculation which appears to be the norm for them.
Given the historical average of 5 years on reserve as a co-pilot and first upgrade at 8 years, I used that as my basis for Alaska

So not accounting for retirement.......

When the Allegiant co-pilot upgrades after 4 years he will have out earned his Alaska counterpart by 12,000.00 in payroll. When the Alaska copilot upgrades at 8 years the Allegiant(now capt) copilot will have out earned his Alaska counterpart by 162,000 in payroll compensation. And at the end of 12 years(end of payscale) the Allegiant captain will still be ahead of the Alaska captain by 154,000 in payroll compensation......Now to retirement. I inquired of the ALPA retirement specialist what my A-plan would be worth at the end of year 12 for me if I were to quit....Lump sump worth 50% of total around 154,000 and about 600.00 a month in payout.......I have no concept of what the Allegiant guys have or what a 401K can be worth......I can say this. I started at Alaska right after flight 261 went in the ocean...We had about 113 airplanes...In 2009 we will have 116 and when I finish my 12 th year we will have 116 airplanes.....So our times to get off reserve as a copilot and upgrade to captain are not going to change...And i will not be off reserve as a captain at the end of 12 years either....We have little periods where copilots get lines out of training and guys have upgrade after 4 years but those come around as often as a big payoff on slot machines..........I would venture that the Allegiant guy will have spent a lot more time at home in 12 years the I will have. Makes a person wonder

 

[Fubijaakr]

tico,

Don't forget Alaska has been around 75 years. How long was the last "good idea" airline that solely served LAS around? 5 years? Do you remember their name?

I wouldn't give a plugged nickel for Allegiant's long term survival flying MD-80s in this environment. Additionally, do you really WANT to be a pariah among other airline pilots? Someone who goes to work for a non-Union carrier who undercuts YOUR salary by $50 an hour?

If you do, you'd better move to LAS because more and more Union pilots are refusing to give jumpseat rides to people who are stabbing us in the back.

 

[learflyer]

umm most Allegiant guys are home everynight, and don't have to jumpseat. Unplug that nickel, and insert one of those swords.

 

[anewunion]

Retirement here sucks..... plain and simple.

Retirement Sucks Everywhere...