Spiking jet fuel costs lead to losses for Allegiant Travel Co.

Las Vegas-based Allegiant Travel reported a rare earnings loss in the company’s third quarter as the parent company of Allegiant Air struggled to sustain its low-fare profile while jet fuel prices spiked as a result of the war in the Middle East.

Allegiant minimized financial damage by continuing to fly its leisure-focused variable capacity schedule on the most fuel-efficient jets it operates. Airline executives accomplished that by reducing flying on low-capacity days like Wednesdays and Saturdays, concentrating more on peak days leading up to or ending weekends.

Increases in the cost of fuel have battered all the major airlines with Allegiant reporting costs up 55.7 percent to $3.97 per gallon from $2.55 a year ago.

Allegiant CEO Greg Anderson said the airline put its flexible scheduling model to the test “as we reduced pro forma capacity by nearly 6 percent year over year to protect margins in a high-fuel environment.”

Allegiant also is integrating the $1.5 billion acquisition of Minneapolis-based Sun Country Airlines announced in April. Anderson said the blending of the two carriers, which operate independently of each other, continues to be a work in progress. Airline officials said earlier in the year the biggest challenge in merging the carriers would be to integrate the technology systems of the two airlines.

The third quarter traditionally is the weakest for airlines and the additional higher fuel-cost issues showed in the quarterly earnings.

Allegiant reported an adjusted net loss of $900,000, 3 cents a share, on revenue of $961.6 million. That compares with a third-quarter net loss of $37.7 million, $2.09 a share, on revenue of $561.9 million for the same period a year ago, for the quarter ending Sept. 30.

The 71.1 percent increase in revenue seems to reflect that consumers haven’t lost the desire to travel.

Allegiant also focused on running flights on the most fuel-efficient aircraft they have access to. For Allegiant, that means greater usage of the Boeing 737 MAX 8, 737-800 and 737-900 ER jets that represent nearly half of Allegiant’s fleet of 170 passenger jets.

The company also operates 22 cargo jets in a lucrative shipment contract with Amazon.

But Allegiant’s primary revenue driver continues to be leisure flying, connecting small city airports to resort destinations. The merger with Sun Country is designed to transport travelers from cold-weather cities to warm-weather leisure destinations including Las Vegas and Florida.

Through Allegiant and Sun Country, the company serves 22 million customers annually on scheduled and chartered flights, operating more than 650 routes to 175 U.S. cities and some international destinations.

“Leisure demand is still strong,” Anderson said in Wednesday’s earnings call.

“Matching capacity to demand with discipline is a key reason we consistently have the highest margin of all the leisure-focused airlines, and are among the leaders in the industry,” he said. “Our total fares are roughly 30 percent below the industry average, and we are the No. 1 or No. 2 carrier in more than 90 percent of our origination markets, underscoring our commitment to the communities that we serve.”

Allegiant Travel shares soared on the Nasdaq exchange Wednesday, closing up $7.07, 9.5 percent, to $81.53 a share, and continued to climb after hours.

Contact Richard N. Velotta at [email protected] or 702-477-3893. Follow @RickVelotta on X.