Allegiant Travel Co.

11/06/2026 | Press release | Distributed by Public on 11/06/2026 15:02

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis presents factors that had a material effect on our results of operations during the three and nine months ended September 30, 2026 and 2025. Also discussed is our financial position as of September 30, 2026 and December 31, 2025. You should read this discussion in conjunction with our unaudited consolidated financial statements, including the notes thereto, appearing elsewhere in this Form 10-Q and our consolidated financial statements appearing in our annual report on Form 10-K for the year ended December 31, 2025. This discussion and analysis contains forward-looking statements. Please refer to the section below entitled "Cautionary Note Regarding Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions associated with these statements.
Third Quarter 2026 Highlights
•Consolidated total operating revenue of $961.6 million
•Record third-quarter total passenger revenue per ASM ("TRASM") of 14.18 cents, up 26.7 percent over the prior year Allegiant Air results
•Total fixed fee revenue of $83.6 million
◦Allegiant standalone fixed fee revenue of $20.6 million, up 9.4 percent year over year
•Total ancillary revenue per passenger of $76.64, up 4.6 percent from the prior year Allegiant Air results
•$42.1 million in total Allegiant Air co-brand credit card remuneration received, up 23.6 percent year over year (excluding Sun Country)
•Named 2026's Best Low-Cost Airline in North America by Skytrax, the international air transport rating organization, marking the third consecutive year Allegiant has won the award
•Earned the top spot in USA TODAY's 10Best 2026 Readers' Choice Awards, being recognized as Number 1 for Best Airline Credit Card and Best Frequent Flyer Program
•In October, exercised six Boeing 737-8 aircraft purchase options for delivery in 2028, bringing total firm aircraft orders under the Boeing purchase agreement to 56, of which 22 have been delivered to date, with 74 options remaining
AIRCRAFT
The following table sets forth the aircraft in service and operated by us as of the dates indicated:
September 30, 2026 December 31, 2025
Passenger service
Airbus A320(1)
76 79
Airbus A319(2)
27 28
Boeing 737 MAX 8200 21 16
Boeing 737-800 (Sun Country)(3)
43 -
Boeing 737-900ER (Sun Country) 3 -
Total aircraft in passenger service 170 123
Boeing 737-800 in cargo service 22 -
Aircraft held for operating lease
Boeing 737-800(4)
1 -
Boeing 737-900ER 2 -
Total 195 123
(1)Includes 23 aircraft under finance lease and nine aircraft under operating lease as of September 30, 2026 and December 31, 2025. Excludes three aircraft under operating lease as of December 31, 2025, which were removed from service pending redelivery.
(2)Excludes three aircraft under operating lease that were removed from service pending redelivery as of December 31, 2025.
(3)Includes 12 aircraft under finance lease as of September 30, 2026.
(4)Includes one aircraft under finance lease as of September 30, 2026.
As of October 30, 2026, we are party to forward purchase agreements for 34 aircraft with deliveries expected between November 2026 and 2028.
Due to the heavy maintenance needs on certain aging Airbus airframes and capacity constraints at the maintenance, repair, and overhaul contractors, we identified aging airframes for early retirement to coincide with the delivery schedule for our 737 MAX aircraft provided in an amendment to our Boeing purchase agreement signed in September 2023. As of September 30, 2026, 19 airframes have been retired, with five additional retirements scheduled between November 2026 and January 2027. The accelerated depreciation resulting from the revised estimated useful life of these aircraft is recorded as a special charge in the consolidated financial statements, including $0.8 million recognized in third quarter 2026. The engines from these aircraft will be retained for future overhaul cost mitigation and may be sold on an opportunistic basis if we determine the engine has no better economic use in our operating fleet.
NETWORK
As of September 30, 2026, and with the Sun Country acquisition, we were selling 664 routes versus 551 being sold by Allegiant Air as of the same date in 2025. Network growth in the future will continue to be affected by high fuel prices, the timing of aircraft deliveries, aircraft in heavy maintenance, crew availability, airport construction and disruption, trends in domestic, leisure air travel demand and other factors such as macroeconomic conditions and geopolitical unrest. We have identified over 1,400 incremental domestic nonstop routes as opportunities for future network growth, of which over 75 percent currently have no non-stop service. The Allegiant Air network included 90 origination cities and 33 leisure destinations, as of September 30, 2026.
Minneapolis-Saint Paul International Airport ("MSP") is the largest and primary base for our Sun Country operation. At MSP, we are the largest low-cost carrier and the second largest airline overall. As of September 30, 2026, our MSP network served approximately 85 markets. As of that date, our overall Sun Country operation served approximately 14 non-MSP markets and was selling a total of 109 routes.
TRENDS
Acquisition of Sun Country Airlines
In May 2026, we completed our acquisition of Sun Country. Integration of Sun Country's business with our existing business is underway and is expected to be a complex, costly, and time-consuming process. We believe the combination will enhance our network breadth, operational flexibility, and ability to respond to demand shifts, while supporting the passenger and charter operations of both airlines.
Both companies continue to operate as separate airlines under FAA rules. We have applied with the FAA for a single operating certificate ("SOC") which we currently expect will be obtained in 2028. Our ability to combine operations will be limited until we receive a single operating certificate and there are joint collective bargaining agreements in place with the various unionized work groups.
In addition to our application to the FAA to operate the two airlines under a SOC, we are also focused on combining the two companies' passenger platforms into a single passenger reservation system ("PSS"). Once the SOC is granted by the FAA and the combined PSS is implemented (which is currently expected in 2028), we believe we will be able to begin to capture more of the revenue and cost synergies sought from the transaction.
Aircraft Fuel
The cost of fuel, including refining costs and applicable crack spreads, remains volatile, and is influenced by numerous economic and geopolitical factors beyond our control or prediction, including geopolitical conflict and war. Our third quarter fuel expense was $293.6 million or $3.98 per gallon, which is 55.5 percent higher than the $2.56 per gallon Allegiant Air paid in third quarter 2025. As hostilities in the Middle East continue to significantly impact the market prices of products that are derived from crude oil, we may continue to experience elevated fuel costs that will materially impact our overall cost structure, operating results and profitability. We have not used financial derivative products to hedge against fuel price volatility, nor do we have any plans to do so in the future.
Demand Environment
Although air travel demand throughout 2026 has been strong, demand could be impacted in the future by macroeconomic, geopolitical, and airline industry events as it has in the past. Throughout 2026 at Allegiant Air, we strategically reduced off-peak day of week capacity and, in turn, increased peak day ASMs on fewer average total aircraft year-over year. For Allegiant Air, this contributed to a 2.7 percentage point increase in load factor on a 3.2 percent decrease in scheduled service capacity in third quarter 2026. Our unique model is predicated around expanding and contracting capacity to meet seasonal leisure travel demands. We expect to continue to manage our peak period utilization as the demand environment allows.
Commercial Initiatives
In July 2026, we entered into a 12-month exclusive distribution agreement with Expedia Group, making Allegiant Air's nonstop network available through an authorized online travel agency ("OTA") partner for the first time. The agreement makes our flights available across Expedia Group's U.S. brands and expands our reach to new leisure customers. Since its launch in July 2026, approximately four percent of our Allegiant Air bookings have come from this distribution channel, and a significant portion of these are new customers to Allegiant.
In August 2026, we introduced complimentary inflight beverage service on all Allegiant Air flights. We have also announced Allegiant First, a new premium seating tier scheduled to debut on future MAX deliveries, with service expected to begin in spring 2027. Allegiant First will feature a redesigned and enhanced cabin with eight new Allegiant First seats with minimal impact to seating capacity. The new seating configuration on these future deliveries will feature improved seat cushions and in-seat power in all cabins.
Boeing Agreement
We have signed an agreement and amendments with Boeing to purchase 56 newly manufactured 737 MAX aircraft with options to purchase up to an additional 74 737 MAX aircraft. Through September 30, 2026, we have taken delivery of 21 737 MAX aircraft from this order, and all of these aircraft are currently in revenue service. We believe this new aircraft purchase is complementary with our low-cost strategy based on our intent to retain ownership of the aircraft, the longer useful life for depreciation purposes, and expected fuel savings and operational reliability from the use of these new aircraft. Our 737 MAX aircraft represented approximately 22.1% of the Allegiant Air ASMs in third quarter 2026 as compared to 12.7% during the same period in 2025.
We currently expect four aircraft to be delivered to us in the last three months of 2026 with the remaining aircraft under contract to be delivered in 2027 and 2028. Delays in aircraft deliveries could impact our ability to schedule additional growth when the demand environment allows.
Union Negotiations
The Allegiant Air pilots, who are represented by the International Brotherhood of Teamsters ("IBT"), ratified a new collective bargaining agreement on July 31, 2026. Among other new and modified terms, that new agreement provides for increased compensation and enhanced benefits to the Allegiant Air pilot group and contains improvements to the scheduling process which we expect will increase pilot productivity. Following ratification of the collective bargaining agreement, we paid pilot retention bonuses (which we began accruing in May 2023) totaling $267.0 million, including related taxes.
In 2026, the collective bargaining agreement between Allegiant Air and its air dispatchers represented by the IBT became amendable under the Railway Labor Act ("RLA"). The parties are engaged in negotiations over new and modified rates of pay, rules, and working conditions pursuant to the procedures set forth in Section 6 of the RLA.
In 2025, the collective bargaining agreement covering the Sun Country pilots, who are represented by the Air Line Pilots Association ("ALPA"), became amendable. The parties continue to engage in negotiations under Section 6 of the RLA for a new agreement addressing rates of pay, rules, and working conditions for those employees.
In order to fully integrate the pre-merger union represented employee groups of Allegiant Air and Sun Country, we may be required to negotiate joint collective bargaining agreements covering the respective combined crafts or classes of employees. Where necessary, these negotiations will likely begin after a single post-merger representative has been certified by the National Mediation Board.
RESULTS OF OPERATIONS
Items affecting comparability
As the acquisition of Sun Country was completed on May 13, 2026, the three months ended September 30, 2026 include Sun Country's results for the full three month period, while the nine months ended September 30, 2026 include Sun Country's results from May 13, 2026 through September 30, 2026, which we also refer to as the "stub period." The comparative periods in 2025 do not include Sun Country's results. Consolidated revenue and expenses all increased compared to the prior year periods due to the incorporation of Sun Country's operations into the Company. As a result, the discussion below of changes to our revenue and expenses compared to the prior year largely focuses on material factors independent of the acquisition.
Comparison of three months ended September 30, 2026 to three months ended September 30, 2025
Operating Revenue
Three Months Ended September 30, 2026 Three Months Ended September 30, 2025 Percent Change
Operating Revenues (in thousands) Allegiant Air Sun Country Consolidated Allegiant Air Sunseeker* Consolidated YoY
Passenger $ 620,668 $ 156,780 $ 777,448 $ 494,144 $ - $ 494,144 57.3 %
Third party products 42,292 2,324 44,616 39,397 - 39,397 13.2 %
Fixed fee contracts 20,627 63,019 83,646 18,852 - 18,852 343.7 %
Cargo - 52,393 52,393 - - - NM
Resort and other 174 3,282 3,456 181 9,358 9,539 NM
Total operating revenues $ 683,761 $ 277,798 $ 961,559 $ 552,574 $ 9,358 $ 561,932 71.1 %
NM Not meaningful
* Sunseeker numbers only through September 4, 2025 when the Resort was sold
Passenger revenue. Passenger revenue increased $283.3 million or 57.3 percent, of which Sun Country contributed $156.8 million.
The remaining increase is attributable to strength in demand, which drove a 23.6 percent increase in average total fare for Allegiant Air, including a 54.5 percent increase in average scheduled service base fare. Allegiant Air scheduled service passengers decreased by 0.5 percent on a capacity reduction of 3.2 percent, resulting in a 2.7 percentage point improvement in load factor.
Third party products revenue. Third party products revenue increased $5.2 million or 13.2 percent, of which Sun Country contributed $2.3 million.
The remaining increase is attributable to continued growth in the marketing component of Allegiant Air's co-brand remuneration, along with moderate growth in third party travel insurance and rental car sales.
Fixed fee contract revenue. Fixed fee contract revenue increased $64.8 million, the majority of which was contributed by Sun Country.
Allegiant Air fixed fee revenue increased $1.8 million or 9.4 percent, primarily driven by a 16.1 percent increase in revenue per departure, partially offset by a modest decrease in charter departures during the quarter.
Cargo revenue. Cargo revenue was $52.4 million, which was wholly attributable to Sun Country.
Resort and other revenue. Resort and other revenues decreased by $6.1 million, primarily due to a $9.4 million decrease in resort revenue as a result of the sale of Sunseeker Resort in September 2025, offset by $3.3 million of other revenue contributed by Sun Country (mostly aircraft lease revenue).
Sun Country standalone operating revenue comparison. In comparison with Sun Country standalone (pre-acquisition) performance in third quarter 2025, Sun Country scheduled service passenger revenue was up 25.3 percent on a 14.1 percent decrease in scheduled service ASMs as TRASM increased by 27.2 percent and load factor increased by 50 basis points. Fixed fee revenue was up 7.4 percent on a 13.8 percent increase in revenue per departure and cargo revenue was up 19.0 percent due to a higher number of aircraft in cargo service.
Operating Expenses
The following table presents airline only operating unit costs on a per available seat mile (ASM) basis, defined as Operating CASM, for the indicated periods. Excluding fuel on a per ASM basis provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors beyond our control. We also show Operating CASM excluding fuel costs, special charges, and cargo expenses. Excluding fuel costs, special charges, and cargo expenses allows management and investors to better compare our airline unit costs with those of other airlines. Sun Country cargo expenses (which are included in aircraft fuel, salaries and benefits, station operations, depreciation and amortization, maintenance and repairs, and other expenses in our consolidated statements of income) are excluded from the CASM calculation as those expenses do not drive ASMs.
Three Months Ended September 30, 2026 Three Months Ended September 30, 2025 Percent Change
Airline Unitized costs (in cents) Allegiant Air Sun Country Consolidated Allegiant Air Allegiant Air
Aircraft fuel 4.74 ¢ 4.39 ¢ 4.66 ¢ 3.06 ¢ 54.9 %
Salaries and benefits 3.96 6.42 4.56 3.86 2.6
Station operations 1.64 2.33 1.81 1.45 13.1
Depreciation and amortization 1.21 1.54 1.29 1.19 1.7
Maintenance and repairs 0.82 1.34 0.95 0.81 1.2
Sales and marketing 0.58 0.53 0.57 0.45 28.9
Aircraft rent 0.16 - 0.12 0.22 (27.3)
Other 0.66 1.36 0.82 0.49 34.7
Special charges 0.25 0.48 0.30 0.06 NM
Airline operating CASM 14.02 ¢ 18.39 ¢ 15.08 ¢ 11.59 ¢ 21.0
Airline operating CASM, excluding fuel 9.28 ¢ 13.99 ¢ 10.42 ¢ 8.53 ¢ 8.8
Cargo expenses - ¢ 3.66 ¢ 0.89 ¢ - ¢ N/A
Airline operating CASM, excluding fuel, special charges, and cargo expenses 9.03 ¢ 9.86 ¢ 9.23 ¢ 8.47 ¢ 6.6
NM Not meaningful
Airline operating CASM, excluding fuel, special charges and cargo expenses. Allegiant Air operating CASM, excluding fuel, special charges and cargo expenses ("CASM-ex"), increased 6.6 percent to 9.03 ¢ in third quarter 2026 from 8.47 ¢ in third quarter 2025. The increase was primarily driven by a 3.4 percent decrease in Allegiant Air capacity compared to the prior year quarter, which resulted in higher unit costs across most expense categories. CASM-ex was also impacted by the year-over-year expense increases discussed below.
Sun Country CASM, excluding fuel, special charges, and cargo expenses, was 9.86 ¢ in third quarter 2026 and drove a 0.20 ¢ spread between Allegiant Air and Consolidated CASM. In comparison with Sun Country standalone (pre-acquisition) CASM in third quarter 2025, Sun Country CASM, excluding fuel, special charges, and cargo expenses in third quarter 2026 increased by 16.5 percent as cost per ASM in most line items increased due to a 13.4 percent decrease in capacity.
Aircraft fuel expense. Aircraft fuel expense increased by $142.3 million or 94.1 percent, of which Sun Country contributed $67.4 million.
The remaining increase of $74.9 million was primarily driven by a 55.0 percent increase in Allegiant Air's average fuel cost per gallon to $3.97 from $2.56 in the prior year quarter, primarily attributable to geopolitical unrest in the Middle East. The increase was partially offset by a 3.5 percent decrease in fuel gallons consumed, consistent with a 3.4 percent decrease in total system ASMs.
Salaries and benefits expense. Salaries and benefits expense increased by $91.0 million or 46.3 percent, of which Sun Country contributed an increase of $98.4 million, offset by a decrease of $5.9 million resulting from the sale of Sunseeker Resort.
The remaining decrease was driven by organizational restructuring initiatives implemented by Allegiant Air during 2025, which resulted in a 7.2 percent reduction in average full-time equivalent Allegiant Air employees, offset by increased wages for certain employee workgroups due to contractual and annual merit raises.
Station operations expense. Station operations expense increased $42.6 million or 59.7 percent, of which Sun Country contributed $35.7 million.
The remaining increase of $6.9 million was primarily driven by airport fee refunds received in the prior year that were not present in the current year period, the transition of certain station positions to outsourced operations, and other stations-related costs. These increases were offset by a 3.5 percent decrease in departures and lower Allegiant Air building rent and aircraft parking costs due to the closure of certain bases.
Depreciation and amortization expense. Depreciation and amortization expense increased by $22.2 million or 37.7 percent. Sun Country contributed an increase of $23.6 million.
Allegiant Air depreciation and amortization expense decreased slightly as a result of aircraft and engine retirements, partially offset by new aircraft placed into service.
Maintenance and repairs expense. Maintenance and repairs expense increased $19.9 million, or 49.8 percent, of which Sun Country contributed $20.6 million.
Allegiant Air maintenance and repairs expense decreased slightly, consistent with a 3.3 percent decrease in scheduled service departures.
Sales and marketing expense. Sales and marketing expense increased $12.8 million or 55.4 percent, of which $8.2 million was contributed by Sun Country and a decrease of $0.9 million was attributable to the sale of Sunseeker Resort.
The remaining increase of $5.5 million or 25.1 percent for Allegiant Air was primarily driven by higher credit card processing fees consistent with the 25.6 percent increase in Allegiant Air passenger revenue compared to the prior year quarter.
Aircraft rent. Aircraft rent decreased $3.4 million as a result of lease return costs accrued during the prior year quarter that were not present in third quarter 2026 and eight leased aircraft that were returned to lessors since September 30, 2025.
Other operating expense. Other operating expenses increased $18.7 million or 55.5 percent, of which an increase of $20.7 million was contributed by Sun Country, which was partially offset by an $8.9 million decrease resulting from the sale of Sunseeker Resort.
The remaining $6.8 million increase was primarily attributable to lower net gains on the sale of flight equipment at Allegiant Air compared to the prior year quarter.
Special charges. Special charges were $19.1 million in third quarter 2026, of which $18.9 million related to the Sun Country acquisition, $1.3 million related to accelerated amortization of software identified for redevelopment, and $0.8 million related to accelerated depreciation of airframes identified for early retirement. These charges were partially offset by a benefit of $1.9 million related to final closing adjustments from the sale of Sunseeker Resort.
During third quarter 2025, special charges included $0.6 million of asset write-downs and transaction-related adjustments associated with the sale of the Resort, net of final insurance recoveries related to prior weather and associated events, and $2.9 million of accelerated depreciation associated with airframes identified for early retirement.
Comparison of nine months ended September 30, 2026 to nine months ended September 30, 2025
Operating Revenue
Nine Months Ended September 30, 2026 Nine Months Ended September 30, 2025 Percent Change
Operating Revenues (in thousands) Allegiant Air
Sun Country*
Consolidated Allegiant Air
Sunseeker*
Consolidated YoY
Passenger $ 2,009,483 $ 262,256 $ 2,271,739 $ 1,728,802 $ - $ 1,728,802 31.4 %
Third party products 129,110 3,599 132,709 108,249 - 108,249 22.6 %
Fixed fee contracts 53,273 94,218 147,491 52,123 - 52,123 183.0 %
Cargo - 79,978 79,978 - - - NM
Resort and other 533 5,031 5,564 536 60,680 61,216 NM
Total operating revenues $ 2,192,399 $ 445,082 $ 2,637,481 $ 1,889,710 $ 60,680 $ 1,950,390 35.2 %
NM Not meaningful
* Sun Country numbers only after May 13, 2026, and Sunseeker numbers only through September 4, 2025 when the Resort was sold
Passenger revenue. Passenger revenue increased $542.9 million or 31.4 percent, of which $262.3 million was contributed by Sun Country during the stub period.
The remaining increase is attributable to strength in demand, which drove a 16.8 percent increase in average total fare for Allegiant Air, including a 35.7 percent increase in scheduled service base fare. Allegiant Air passengers decreased by 0.3 percent on a scheduled service capacity reduction of 5.2 percent, resulting in a 3.6 percentage point increase in Allegiant Air load factor.
Third party products revenue. Third party products revenue increased $24.5 million or 22.6 percent, of which $3.6 million was contributed by Sun Country during the stub period.
The remaining increase is primarily attributable to a $16.5 million increase in the marketing component of Allegiant Air co-brand remuneration, along with moderate growth in third party rental car and travel insurance sales. These increases were slightly offset by a decrease in hotel room revenue.
Fixed fee contract revenue. Fixed fee contract revenue increased $95.4 million or 183.0 percent, of which $94.2 million was contributed by Sun Country during the stub period.
Allegiant Air fixed fee revenue remained relatively flat year-over-year, despite a modest decrease in fixed fee contract departures during the period.
Cargo revenue. Cargo revenue was $80.0 million, which was wholly attributable to Sun Country and was generated during the stub period.
Resort and other revenue. Resort and other revenue decreased $55.7 million, of which a decrease of $60.7 million was due to the sale of Sunseeker Resort in September 2025 and an increase of $5.0 million was contributed by Sun Country during the stub period (mostly aircraft lease revenue).
Operating Expenses
The following table presents airline only operating unit costs on a per available seat mile (ASM) basis, defined as Operating CASM, for the indicated periods. Excluding fuel on a per ASM basis provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors beyond our control. Excluding fuel costs, special charges, and cargo expenses allows management and investors to better compare our airline unit costs with those of other airlines. Sun Country cargo expenses (which are included in aircraft fuel, salaries and benefits, station operations, depreciation and amortization, maintenance and repairs, and other expenses in the Company's consolidated statements of income) are excluded from the CASM calculation as those expenses do not drive ASMs.
Nine Months Ended September 30, 2026 Nine Months Ended September 30, 2025 Percent Change
Airline Unitized costs (in cents) Allegiant Air Sun Country* Consolidated Allegiant Air Allegiant Air
Aircraft fuel 4.39 ¢ 4.34 ¢ 4.38 ¢ 2.99 ¢ 46.8 %
Salaries and benefits 3.97 5.82 4.24 3.79 ¢ 4.7
Station operations 1.51 2.18 1.60 1.36 11.0
Depreciation and amortization 1.14 1.41 1.18 1.13 0.9
Maintenance and repairs 0.74 1.20 0.81 0.69 7.2
Sales and marketing 0.56 0.53 0.56 0.44 27.3
Aircraft rent 0.15 - 0.12 0.17 (11.8)
Other 0.52 1.28 0.63 0.47 10.6
Special charges 0.52 1.33 0.63 0.12 NM
Airline operating CASM 13.50 ¢ 18.09 ¢ 14.15 ¢ 11.16 ¢ 21.0
Airline operating CASM, excluding fuel 9.11 ¢ 13.75 ¢ 9.77 ¢ 8.17 ¢ 11.5
Cargo expenses - ¢ 3.16 ¢ 0.45 ¢ - ¢ N/A
Airline operating CASM, excluding fuel, special charges, and cargo expenses 8.59 ¢ 9.25 ¢ 8.69 ¢ 8.05 ¢ 6.7
NM Not meaningful
* Sun Country numbers only after May 13, 2026
Airline operating CASM, excluding fuel, special charges and cargo expenses. Allegiant Air operating CASM, excluding fuel, special charges, and cargo expenses, increased by 6.7 percent to 8.59 ¢ compared to 8.05 ¢ for the same period in 2025. The increase was primarily driven by a 5.4 percent reduction in Allegiant Air capacity compared to the prior year period, which resulted in higher unit costs across most expense categories. CASM-ex was also impacted by the year-over-year expense increases discussed below.
Sun Country CASM, excluding fuel, special charges, and cargo expenses, was 9.25 ¢ during the stub period and drove a 0.10 ¢ spread between Allegiant Air and Consolidated CASM.
Aircraft fuel expense. Aircraft fuel expense increased $298.1 million or 61.7 percent, of which Sun Country contributed $109.9 million during the stub period.
The remaining increase of $188.2 million was driven by a 47.9 percent increase in Allegiant Air average fuel cost per gallon to $3.74 from $2.53 in the prior year period, primarily attributable to geopolitical unrest in the Middle East. Increased fuel costs were partially offset by a 6.1 percent decrease in fuel gallons consumed on a 5.4 percent decrease in total system ASMs and incremental increases in fuel efficiency as the percentage of ASMs flown by MAX aircraft continues to increase.
Salaries and benefits expense. Salaries and benefits expense increased by $113.9 million or 17.7 percent. Sun Country contributed an increase of $147.4 million during the stub period, and a decrease of $27.6 million resulted from the sale of Sunseeker Resort.
The remaining decrease of $5.9 million was primarily driven by organizational restructuring initiatives implemented at Allegiant Air during 2025, which resulted in a 7.2 percent reduction in average full-time equivalent Allegiant Air employees, offset by increased wages for certain employee workgroups due to contractual and annual merit raises.
Station operations expense. Station operations expense increased $65.9 million or 29.9 percent, of which Sun Country contributed $55.1 million during the stub period.
The remaining increase of $10.7 million was primarily driven by higher ground handling, airport and landing fees, and other stations-related costs associated with the transition of certain station positions to outsourced operations. These increases were partially offset by a 5.2 percent decrease in departures.
Depreciation and amortization expense. Depreciation and amortization expense increased $19.0 million or 10.0 percent. Sun Country contributed an increase of $35.8 million during the stub period, and the sale of Sunseeker Resort resulted in a decrease of $7.2 million.
The remaining decrease of $9.6 million was driven primarily by lower Allegiant Air heavy maintenance amortization resulting from a lower volume of recent engine overhauls and 13 capitalized engine overhauls which became fully amortized since the prior year period.
Maintenance and repairs expense. Maintenance and repairs expense increased $33.1 million or 29.8 percent, of which Sun Country contributed $30.5 million during the stub period.
The remaining increase of $2.6 million was driven by a higher volume of Allegiant Air engine check and repair costs compared to the prior year period.
Sales and marketing expense. Sales and marketing expense increased $24.2 million or 32.3 percent, of which $13.5 million was contributed by Sun Country during the stub period and a decrease of $4.4 million was attributable to the sale of Sunseeker Resort.
The remaining increase of $15.1 million or 21.4 percent was primarily driven by higher Allegiant Air credit card processing fees, consistent with the 16.2 percent increase in Allegiant Air passenger revenue compared to the prior year period.
Aircraft rent. Aircraft rent decreased $5.8 million or 20.8 percent as a result of certain lease return costs accrued during the prior year period which are not present in current period results and eight leased aircraft which have been returned to the lessor from operating leases since September 30, 2025.
Other operating expense. Other operating expenses increased $3.0 million or 2.8 percent. An increase of $32.2 million was contributed by Sun Country during the stub period, and a $34.1 million decrease resulted from the sale of Sunseeker Resort.
The remaining $4.9 million increase was primarily attributable to lower net gains on the sale of flight equipment compared to the prior year period.
Special charges. Special charges were $112.8 million for the nine months ended September 30, 2026, of which $83.7 million related to costs of the Sun Country acquisition and integration, $21.2 million related to accelerated amortization of software identified for redevelopment, $7.0 million related to a credit loss on a note receivable, and $3.5 million related to accelerated depreciation of airframes identified for early retirement. These charges were partially offset by a benefit of $2.6 million related to final closing adjustments from the sale of Sunseeker Resort.
During the nine months ended September 30, 2025, special charges included a $100.9 million write-down of Sunseeker Resort assets as a result of the agreement to sell the Resort, $12.1 million of organizational restructuring charges, and $6.8 million from accelerated depreciation of airframes identified for early retirement.
Comparative Operating Statistics
The following tables set forth our operating statistics for the three-month periods indicated. Year over year changes for many line items are not representative of the extent of the differences because Sun Country performance is included in the 2026 period but not in the corresponding period in 2025.
Three Months Ended September 30,
Percent Change (1)
2026 2025 YoY
Airline operating statistics (unaudited):
Total system statistics:
Passengers 5,707,095 4,629,834 23.3 %
Available seat miles (ASMs) (thousands) 6,305,477 4,939,441 27.7
Operating expense per ASM, excluding cargo expenses (CASM) (cents) 14.14 ¢ 11.59 ¢ 22.0
Operating CASM, excluding fuel, special charges, and cargo expenses (cents) 9.23 ¢ 8.47 ¢ 9.0
Departures 45,747 32,991 38.7
Block hours (including cargo) 109,816 75,466 45.5
Average stage length (miles) 887 850 4.4
Average block hours per aircraft per day (excluding cargo) 6.1 6.6 (7.6)
Full-time equivalent employees at end of period 8,210 5,871 39.8
Fuel gallons consumed (thousands) 73,579 59,015 24.7
ASMs per gallon of fuel 85.7 83.7 2.4
Average fuel cost per gallon $ 3.98 $ 2.56 55.5
Scheduled service statistics:
Passengers 5,447,166 4,572,081 19.1
Revenue passenger miles (RPMs) (thousands) 5,024,132 4,022,761 24.9
Available seat miles (ASMs) (thousands) 5,796,211 4,769,245 21.5
Load factor 86.7 % 84.3 % 2.4
Departures 36,011 31,656 13.8
Block hours 87,376 72,726 20.1
Average seats per departure 178.1 175.6 1.4
Yield (cents) (2)
8.05 ¢ 4.94 ¢ 63.0
Total passenger revenue per ASM (TRASM) (cents)(3)
14.18 ¢ 11.19 ¢ 26.7
Average fare - scheduled service(4)
$ 74.27 $ 43.44 71.0
Average fare - air-related charges(4)
$ 68.45 $ 64.64 5.9
Average fare - third party products $ 8.19 $ 8.62 (5.0)
Average fare - total $ 150.92 $ 116.70 29.3
Average stage length (miles) 900 856 5.1
Fuel gallons consumed (thousands) 67,765 56,952 19.0
Average fuel cost per gallon $ 3.97 $ 2.55 55.7
(1)Except load factor during the period, which is presented as a percentage point change.
(2)Defined as scheduled service revenue divided by revenue passenger miles.
(3)Various components of this measure do not have a direct correlation to ASMs. This measure is provided on a per ASM basis so as to facilitate comparison with airlines reporting revenues on a per ASM basis.
(4)Reflects division of passenger revenue between scheduled service (base fare) and air-related charges in our booking path.
The following tables set forth our operating statistics for the nine-month periods indicated. Year over year changes for many line items are not representative of the extent of the differences because Sun Country performance is included in the 2026 period from and after May 13, 2026 but not in the nine-month period ended September 30, 2025.
Nine Months Ended September 30,
Percent Change (1)
2026 2025 YoY
Airline operating statistics (unaudited):
Total system statistics:
Passengers 15,889,097 14,208,165 11.8 %
Available seat miles (ASMs) (thousands) 17,842,343 16,190,434 10.2
Operating expense per ASM, excluding cargo expenses (CASM) (cents) 13.64 ¢ 11.16 ¢ 22.2
Operating CASM, excluding fuel, special charges, and cargo expenses (cents) 8.69 ¢ 8.05 ¢ 8.0
Departures 120,150 103,540 16.0
Block hours (including cargo) 293,291 248,086 18.2
Average stage length (miles) 902 891 1.2
Average block hours per aircraft per day (excluding cargo) 6.8 7.3 (6.8)
Full-time equivalent employees at end of period 8,210 5,871 39.8
Fuel gallons consumed (thousands) 207,071 191,103 8.4
ASMs per gallon of fuel 86.2 84.7 1.8
Average fuel cost per gallon $ 3.77 $ 2.53 49.0
Scheduled service statistics:
Passengers 15,461,480 14,070,680 9.9
Revenue passenger miles (RPMs) (thousands) 14,461,097 12,904,411 12.1
Available seat miles (ASMs) (thousands) 16,884,878 15,703,477 7.5
Load factor 85.6 % 82.2 % 3.4
Departures 103,985 99,845 4.1
Block hours 256,132 240,120 6.7
Average seats per departure 177.1 175.2 1.1
Yield (cents) (2)
8.27 ¢ 5.93 ¢ 39.5
Total passenger revenue per ASM (TRASM) (cents)(3)
14.24 ¢ 11.70 ¢ 21.7
Average fare - scheduled service(4)
$ 77.33 $ 54.38 42.2
Average fare - air-related charges(4)
$ 69.60 $ 68.49 1.6
Average fare - third party products $ 8.58 $ 7.69 11.6
Average fare - total $ 155.51 $ 130.56 19.1
Average stage length (miles) 913 896 1.9
Fuel gallons consumed (thousands) 195,961 185,197 5.8
Average fuel cost per gallon $ 3.76 $ 2.53 48.6
(1)Except load factor during the period, which is presented as a percentage point change.
(2)Defined as scheduled service revenue divided by revenue passenger miles.
(3)Various components of this measure do not have a direct correlation to ASMs. This measure is provided on a per ASM basis so as to facilitate comparison with airlines reporting revenues on a per ASM basis.
(4)Reflects division of passenger revenue between scheduled service (base fare) and air-related charges in our booking path.
(5)Sun Country performance shown only for the period from May 13, 2026 through September 30, 2026.
LIQUIDITY AND CAPITAL RESOURCES
Current liquidity
Cash, cash equivalents and investment securities (short-term and long-term) increased to $864.7 million as of September 30, 2026, from $838.5 million at December 31, 2025. Investment securities represent highly liquid marketable securities which are available-for-sale.
As of September 30, 2026, we had $250.0 million of undrawn capacity under revolving credit facilities and $336.8 million of undrawn capacity under aircraft and PDP financing facilities.
Restricted cash represents escrowed funds under fixed fee contracts and cash collateral against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties. Under our fixed fee flying contracts, we require our customers to prepay for flights to be provided by us. The prepayments are escrowed until the flight is completed and are recorded as restricted cash with a corresponding amount reflected as air traffic liability.
Our operating cash flows and long-term debt borrowings have allowed us to invest in our fleet renewal. Future capital needs are primarily for the acquisition of additional aircraft, including our existing aircraft commitments, as well as investments related to the integration and ongoing operations of Sun Country following the acquisition.
Our share repurchase authority at September 30, 2026 is $64.7 million. We did not repurchase any shares on the open market during the first nine months of 2026. We have indefinitely suspended our quarterly cash dividend in anticipation of upcoming capital needs related to our fleet investments.
We believe we have more than adequate liquidity resources through our cash, cash equivalent and short-term investment balances, existing aircraft financing facilities, our undrawn capacity under existing credit facilities, operating cash flows and anticipated access to liquidity, to meet our current contractual obligations and remain in compliance with the debt covenants in our existing financing agreements for the next 12 months. We will continue to consider raising funds through debt financing as needed to fund capital expenditures.
Debt
Our debt and finance lease obligations balance, before reduction for related issuance costs, was $3.0 billion as of September 30, 2026, compared to $1.8 billion as of December 31, 2025. Net debt (total debt less unrestricted cash, cash equivalents, and investments) totaled $2.1 billion as of September 30, 2026, representing an increase of $1.1 billion from December 31, 2025.
During the nine months ended September 30, 2026, we borrowed $1.1 billion, including the issuance of $650.0 million aggregate principal amount of Senior Secured Notes due 2031. A portion of the proceeds from the Senior Secured Notes due 2031 was used to refinance our Senior Secured Notes due 2027. The borrowings during the period also included $493.9 million of debt secured by aircraft and aircraft related assets. In addition to the new borrowings, we also assumed approximately $570.3 million of debt and finance lease obligations in connection with our acquisition of Sun Country. The debt structure assumed in the acquisition consisted primarily of finance lease obligations, enhanced equipment trust certificates, and term loan borrowings. During the period, we made principal payments of $562.3 million, including the repurchase of approximately $403.0 million aggregate principal amount of our Senior Secured Notes due 2027 in a tender offer and a $25.1 million prepayment under our PDP financing facility.
As of September 30, 2026, approximately 61.3 percent of our debt and finance lease obligations are fixed-rate.
Sources and Uses of Cash
Operating Activities
During the nine months ended September 30, 2026, and 2025, we generated cash flows from operations of $103.2 million and $277.6 million respectively.
Our operating cash flows are impacted by the following factors:
Advance Ticket Sales. Tickets for air travel are typically purchased in advance of the travel date. When we receive a cash payment at the time of booking, we record the cash received as deferred revenue in air traffic liability. When the flight is flown, we recognize the liability from air traffic liability into revenue. Due to the seasonal nature of our operations, our air traffic liability balances will fluctuate in line with our peak flying seasons.
Fuel. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. With the recent fuel price increases, fuel is our largest expense. During the nine months ended September 30, 2026, we experienced a 49.0 percent increase in average fuel cost per gallon over the same period in 2025, stemming from the Iranian conflict beginning in February 2026. We expect to continue to experience material increases in fuel costs while these circumstances persist.
Salaries and Benefits. Salaries and benefits expense represents our second largest expense and has increased considerably in recent years. Cash payments for our salaries and benefits expense are typically made in the period incurred, except for the pilot retention bonus that had accumulated prior to ratification of the new collective bargaining agreement and was paid during third quarter 2026. During the quarter ended September 30, 2026, we paid $267.0 million in pilot retention bonus, including related payroll taxes, that had been accrued beginning in May 2023. Of that amount, $235.9 million was accrued prior to 2026.
Investing Activities
Investments. We hold various financial assets and will strategically purchase and sell these assets based on operational cash needs. During the nine months ended September 30, 2026, we had $186.6 million of net investment maturities (net cash inflows) compared to $117.8 million of net investment purchases (net cash outflows) during the same period in 2025.
Capital Expenditures. Capital expenditures for the nine months ended September 30, 2026 and 2025 were $523.5 million and $334.1 million, respectively. In December 2021, we committed to purchase 50 Boeing 737 MAX aircraft, of which we began to receive delivery in September 2024. During the nine months ended September 30, 2026, we took delivery of five aircraft and made pre-delivery payments on certain of the remaining 29 aircraft under firm commitment.
Proceeds from Sale of Sunseeker Assets. During the nine months ended September 30, 2025, we received $189.9 million in proceeds from the sale of Sunseeker Resort, which was completed on September 4, 2025.
Acquisition of Sun Country. During the nine months ended September 30, 2026, we paid cash consideration of $167.1 million to acquire Sun Country, which is net of $139.9 million cash acquired.
Financing Activities
Long-Term Debt and Finance Leases. Cash provided by financing activities for the nine months ended September 30, 2026 was $559.9 million, which was net of $47.2 million used by Sun Country during the stub period, compared to $25.3 million used for financing activities of legacy Allegiant only during the same period in 2025. During the nine months ended September 30, 2026, we received proceeds of $1.1 billion from our Senior Secured Notes due 2031 and other borrowings secured by aircraft and made principal payments of $562.3 million on our debt and finance lease obligations. During the nine months ended September 30, 2025, we made $647.2 million of principal repayments on our debt and finance leases, largely related to prepayments of the Sunseeker construction loan and a PDP financing facility, and received proceeds of $638.9 million from the issuance of aircraft financing debt.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this quarterly report on Form 10-Q, and in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," that are based on our management's beliefs and assumptions, and on information currently available to our management. Forward-looking statements include our statements regarding future airline operations, revenue, expenses and earnings, available seat mile growth, expected capital expenditures, the cost of fuel, the timing of aircraft acquisitions and retirements, the number of contracted aircraft to be placed in service in the future, our ability to consummate announced aircraft transactions, estimated tax rate, as well as other information concerning future results of operations, business strategies, financing plans, industry environment and potential growth opportunities. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe," "expect," "anticipate," "intend," "plan," "estimate", "project", "hope" or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements generally may be found in our periodic reports filed with the Securities and Exchange Commission at www.sec.gov. These risk factors include, without limitation, regulatory reviews of, and production limits on, Boeing impacting our aircraft delivery schedule, an accident involving, or problems with, our aircraft, public perception of our safety, our reliance on our automated systems, our reliance on Boeing to deliver aircraft under contract to us on a timely basis, risk of breach of security of personal data, volatility of fuel costs, labor issues and costs, the ability to obtain regulatory approvals as needed in connection with our fleet and network, the effect of economic conditions on leisure travel, debt covenants and balances, the impact of government regulations on the airline industry, the ability to finance aircraft to be acquired, the ability to obtain necessary government approvals to offer international service, terrorist attacks, risks inherent to airlines, our competitive environment, our reliance on third parties who provide facilities or services to us, the impact of the possible loss of key personnel, economic and other conditions in markets in which we operate, increases in maintenance costs and availability of outside maintenance contractors to perform needed work on our aircraft on a timely basis and at acceptable rates, cyclical and seasonal fluctuations in our operating results, the perceived acceptability of our environmental, social and governance efforts, the risk that the combined company after the Sun Country acquisition will not realize expected benefits, cost savings, accretion, synergies and/or growth from the Sun Country acquisition or that any of the foregoing may take longer to realize or be more costly to achieve than expected, the diversion of management's attention and time from ongoing business operations and opportunities to integration matters, the risk that the integration of Sun Country's operations will be materially delayed or will be more costly or difficult than expected or that Allegiant is otherwise unable to successfully integrate Sun Country's businesses into the combined company, and reputational risk and potential adverse reactions of Allegiant's or Sun Country's customers, suppliers, employees, labor unions or other business partners, including those resulting from the completion of the Sun Country acquisition and the integration of the companies.
Any forward-looking statements are based on information available to us today and we undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Except as set forth below, there were no material changes to our critical accounting estimates during the nine months ended September 30, 2026. For information regarding our critical accounting policies and estimates, see disclosures in the Consolidated Financial Statements and accompanying notes contained in our 2025 Form 10-K, and in Note 1 of Notes to Consolidated Financial Statements (unaudited) in this Form 10-Q.
Business Combination Accounting
To record the value of assets acquired and liabilities assumed as a result of our acquisition of Sun Country on May 13, 2026, we have performed a purchase price allocation utilizing the best information available to management. The purchase price allocation is provisional and is subject to further adjustments as additional information becomes available concerning the fair value of the assets acquired and liabilities assumed, with any adjustments to the purchase price allocation to be made as soon as practicable but no later than May 13, 2027. Business combination accounting requires management to make assumptions and apply judgment. The fair values of the assets and liabilities acquired were determined using a market basis, relief from royalty, or multi-period excess earnings approach. Key assumptions include, but are not limited to, selecting discount rates and valuation methodologies. These estimates and assumptions are subjective.
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