Budget airlines | Budget airline Allegiant lowers profit expectations due to rising expenses

Budget airlines | Budget airline Allegiant lowers profit expectations due to rising expenses

After the firm lowered its earnings forecast for the second quarter, shares of Allegiant Air’s parent company are declining.

(AP) LAS VEGAS — After-hours trading on Monday saw a sharp decline in shares of Allegiant Air’s parent company after the low-cost carrier provided a dismal preview of its second-quarter results, which it claimed were hindered by increasing costs, notably fuel.

After the market closed, Allegiant Travel Company announced that it anticipates reporting earnings of 62 cents per share. According to a FactSet survey, analysts had been even more positive than the company, predicting a profit of $1.36 per share. The company had previously predicted a profit of 92 cents per share.

In Monday’s extended trading, its shares experienced a decline of more than 18%.

What larger airlines have been stating over the previous two weeks was reflected by Allegiant’s problems: People still want to travel after more than two years of the pandemic, which is driving up demand for tickets, but costs for fuel, labor and other factors are growing quickly.

The airline based in Las Vegas reported that revenue for the April through June quarter was over $629 million, up 28% from the same time in 2019. Strong sales have continued in July, with flights typically operating at slightly more than 90% capacity.

In contrast, Allegiant paid $4.32 per gallon for fuel in the quarter, which was more than it had anticipated pay, and jets used $9 million in more fuel than necessary. The airline attributed this to the fact that it was carrying more passengers per flight, which makes the aircraft heavier. Compared to 2019, expenses other than fuel increased by 14% per mile.

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