Allegiant Raises Q3 Guidance Despite September Traffic Fall

Allegiant Travel Company (NASDAQ:ALGT) has reported traffic numbers for September. Traffic in the month has been significantly affected by Hurricane Irma, leading to more than 455 flight cancellations between Sep 6 and Sep 12.

Measured in revenue passenger miles (RPMs), traffic for the total system (including scheduled service and fixed fee contract) decreased 8.4% on a year-over-year basis to 600.73 million. System capacity, calculated in available seat miles (ASMs), deteriorated 2.6% in the month to 799.26 million. With traffic declining more than the fall in capacity, load factor (percentage of seats filled in with passengers) contracted 470 basis points year over year to 75.2%.

Allegiant’s September passenger count reduced 9.1%. Its system-wide average fuel cost per gallon was approximately $2.03 in the month.

Bullish Q3 Guidance

Shares of the company rose 3.4% to $138.15 at the close of trading session on Oct 11, following its revised guidance for the third quarter of 2017. Results are scheduled to be out on Oct 25.

The company’s total revenue per scheduled ASM (TRASM) view for the third quarter has been edged up to 0.3-0.7% range from the prior outlook of -0.5-1.5%. Cost per available seat mile excluding fuel (CASM-ex fuel) is expected to grow between 16.7% and 17.1%. Previous guidance had called for a rise of 16-18% in the metric. Also, Fixed fee revenues and other revenues are predicted to be in the band of $22-$22.5 million (earlier view:$17-$19 million range).

4Q17 & 1Q18 Outlook

The company expects system-wide capacity to climb in the 9-13% range during the fourth quarter of 2017, unchanged from its past estimate. For the first quarter of 2018, the metric is expected to improve between 10% and 14%.

The company anticipates departures for the fourth quarter unchanged in the 7-11% band. In the first quarter of 2018, the metric is expected to increase 8-12% year over year.

Zacks Rank & Key Picks

Allegiant currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the airline space are Deutsche Lufthansa (DE:LHAG) AG (OTC:DLAKY) , AZUL SA (NYSE:AZUL) and Bristow Group Inc (NYSE:BRS) . While Deutsche Lufthansa sports a Zacks Rank #1 (Strong Buy), AZUL and Bristow carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Deutsche Lufthansa and AZUL have rallied more than 100% and 26%, respectively, in a year. While Bristow shares have surged more than 39% in the last three months.

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