Allegiant brings in more from less flying. The payoff is still thin.
A smaller combined flight schedule produced stronger revenue than expected. Higher fuel costs help explain why the airline kept its earnings outlook in place.
Allegiant got more revenue out of a smaller flight schedule in the third quarter. Higher fares, fuller planes and more spending on extras helped the airline absorb a sharp rise in fuel prices.
The improvement was stronger than management had expected on revenue per available seat mile, a measure of how much money an airline earns from the capacity it offers. But the reward was modest: a 3.1% adjusted operating margin and a small adjusted net loss.
Less flying, better revenue
Allegiant completed its acquisition of Sun Country on May 13. To compare the business fairly, it presents last year's figures as though the two airlines had already combined, with the since-sold Sunseeker resort removed.
On that basis, Q3 revenue rose 19% to $961.6 million while scheduled passenger capacity fell 5.7%. The much larger 71% increase in reported revenue includes the effect of adding Sun Country.
Chief Executive Officer Greg Anderson said the company cut weaker flying while protecting busy periods. Higher base fares and ancillary revenue, which includes charges and other passenger extras, helped it make more from the remaining schedule.
Revenue per available seat mile rose 28.3%, ahead of the roughly 24.6% growth management had expected in August. Ancillary revenue per passenger increased 5.8% on the combined-company comparison. Separately, Allegiant Air's co-branded credit-card remuneration rose 23.6%.
Fuel leaves a narrow cushion
Fuel averaged $3.98 a gallon, above the $3.80 assumed in the earlier Q3 forecast and 55.5% higher than a year earlier.
Even so, adjusted operating margin improved from a comparable loss margin of 0.3% to a positive 3.1%. That was just above the top of management's 1% to 3% forecast.
The adjusted loss was 3 cents a share, within the earlier range of a $1 loss to break-even. On the standard GAAP accounting basis, Allegiant lost $15.2 million, or 56 cents a share. Its adjustments mainly remove integration and other special charges, with a separate adjustment for a debt repayment gain.
The airline is making progress in a difficult cost environment. The thin margin also leaves little room for costs to outrun fares.
The cash outflow has a separate explanation
Allegiant used $211 million of operating cash in Q3, including a $267 million pilot retention payment. Its newly filed quarterly report shows that $235.9 million of that payment had been accrued before 2026. Much of the cash bill therefore settled an obligation built up in earlier periods.
For the first nine months, operating cash flow was positive at $103.2 million, down from $277.6 million a year earlier. Aircraft investment and merger spending also draw on cash. Allegiant ended September with $864.7 million in cash and investments, plus $250 million of undrawn revolving credit. It drew a separate $177.5 million aircraft facility in October.
The next test gets more expensive
For Q4, Allegiant expects revenue per available seat mile to rise more than 20% on the combined-company basis. It also assumes fuel at $4.75 a gallon, a substantial step up from Q3.
Management expects adjusted earnings of $1 to $1.50 a share and an adjusted operating margin of 6% to 7%. It kept its full-year adjusted earnings forecast above $6 a share, the target first introduced in August.
Q3 shows that cutting weaker flights and improving revenue can protect operating earnings. Q4 will test that approach against a still higher fuel bill.
Our Allegiant company profile tracks the earlier forecasts, cash flow, debt and Sun Country integration.