What changed in this filing

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Item 1. Business

2022-03-01 compared with 2021-03-01 · 182 added, 134 removed, 310 unchanged (50% of the section changed)

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Our developed nation-wide route network, pricing philosophy, direct distribution, advertising, and product offerings built around relationships with premier leisure companies, are all intended to appeal to leisure travelers and make it attractive for them to purchase air travel and related services and products from us.

In connection with our leisure travel focus, we are seeking to finance (through debt or strategic partnership) the development of Sunseeker Resort in Florida.

Construction of the Resort has been suspended since the onset of the COVID-19 pandemic.

In connection with our leisure travel focus, we have recommenced the construction of our Sunseeker Resort in Southwest Florida.

In October 2021, we entered into a credit agreement with affiliates of Castlelake L.P.

to finance up to $350 million of the remaining construction cost.

With this funding, we expect to open the Resort in early 2023.

Below is a brief description of the travel services and products we provide to our customers:

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We provide unbundled air-related services and products in conjunction with air transportation for an additional cost to customers.

These optional air-related services and products include baggage fees, advance seat assignments, our own travel protection product, change fees (suspended effective April 2020), use of our call center for purchases, priority boarding, a customer convenience fee, food and beverage purchases on board, and other air-related services.

The revenue for ancillary air-related products and services is reflected in the Passenger revenue income statement line item, along with scheduled service air transportation revenue and travel point redemptions from the co-branded Allegiant World Mastercard® credit card.

These optional air-related services and products include baggage fees, advance seat assignments, our own travel protection product, change fees, use of our call center for purchases, priority boarding, a customer convenience fee, food and beverage purchases on board, and other air-related services.

Third party products and services.

We offer third party travel products such as hotel rooms and ground transportation (rental cars and hotel shuttle products) for sale to our passengers.

The marketing component of revenue related to our co-branded credit card is also accounted for in this category.

The marketing component of revenue related to our co-branded credit card is also included for in this category.

Fixed fee contract air transportation.

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Other revenue.

We have generated revenue from our non-airline activities including our Sunseeker Resort related golf course (now temporarily closed), family entertainment centers (no longer operated, having all been closed), and our management solution to golf courses around the country (now being held for sale).

We may also choose to act as lessor temporarily from time to time in the future on an opportunistic basis.

We have generated revenue from our non-airline activities including our Sunseeker Resort related golf course (temporarily closed since March 2020 and now under renovation), family entertainment centers (no longer operated, having all been closed in 2020), and our management solution to golf courses around the country (business sold in April 2021).

Allegiant 2.0

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– maintaining our foundation of providing affordably accessible air travel while refining and strengthening our air travel product;

– expanding our already broad domestic network as we have identified more than 1,400 incremental routes of which approximately 80 percent currently have no non-stop service;

– seeking to offer (subject to government approval) transborder international scheduled service into Mexico through our partnership with Viva Aerobus;

– utilizing our customer data to capture accretive, asset-light direct-to-consumer revenue opportunities;

– transforming our eCommerce strategy to seek to create a frictionless experience for our customers and drive increased air ancillary and third party revenue generation;

– expanding our successful co-branded credit card program to launch our first-ever loyalty program;

– enhancing our marketing investment by entering into dynamic agreements, such as the naming rights agreement with

the Raiders of the National Football League for Allegiant Stadium in Las Vegas;

– expanding our travel company focus and offerings with the construction of Sunseeker Resorts (construction having been suspended since the onset of the pandemic).

– expanding our co-branded credit card program with the launch in August 2021 of our first-ever non-card loyalty program;

– expanding our travel company focus and offerings with the construction of Sunseeker Resort-Charlotte Harbor (construction having recommenced in August 2021).

– refining our marketing investment dollars by entering into dynamic agreements, such as the naming rights agreement with the Raiders of the National Football League for Allegiant Stadium in Las Vegas

Our principal executive offices are located at 1201 N.

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Unique Business Model

We have developed a unique business model that primarily focuses on leisure travelers in small and medium-sized cities.

We have developed a unique business model that primarily focuses on leisure travelers in under-served cities.

The business model has evolved as our experienced management team has looked differently at the traditional way business has been conducted in the airline and travel industries.

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High base fares/low ancillary revenue Low base fares/high ancillary revenue

By unbundling our air-related services and products such as baggage fees, advance seat assignments, travel protection, change fees, priority boarding, and food and beverage purchases, we are able to lower our airfares and target leisure travelers who are more concerned with price and the ability to customize their experience with us by only purchasing the additional conveniences they value.

This strategy allows us to generate additional passenger revenues from these ancillary charges.

We have established a route network with a national footprint, providing service on 504 routes between 97 origination cities and 29 leisure destinations, and serving 43 states as of February 12, 2021.

By separating base airfare from our air-related services and products such as baggage fees, advance seat assignments, travel protection, change fees, priority boarding, and food and beverage purchases, we are able to lower our airfares and target leisure travelers who are more concerned with price and the ability to customize their experience with us by only purchasing the additional conveniences they value.

This strategy allows us to generate additional passenger revenues from our customers' decisions to purchase these ancillary products.

We have established a broad route network with a national footprint, providing service on 593 routes between 98 origination cities and 33 leisure destinations, and serving 43 states as of February 14, 2022.

As of this same date, we were selling 615 routes.

In most of these cities, we provide service to more than one of our leisure destinations which are offered either on a year-round or seasonal basis.

Our vast network footprint provides us with a diversified, resilient network.

We operate to more cities than any carrier (excluding major carriers including their regional airline feeders) protecting us against overexposure to any one

geographic location.

Our 20 bases (including Des Moines starting in July 2021) provide us the flexibility to redeploy capacity to best match demand trends around the country.

Our vast network footprint, coupled with our low frequency scheduling, provides us with a diversified, resilient network.

We operate to more cities than any non-legacy carrier, protecting us against overexposure to any one geographic location.

Our 23 bases (including Flint and Appleton starting in February and March 2022, respectively) provide us the flexibility to redeploy capacity to best match demand trends around the country.

The geographic diversity of our route network protects us from regional variations in the economy and helps insulate us from competitive actions, as it would be difficult for a competitor to materially impact our business by targeting one city or region.

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The orange dots represent leisure destinations and the blue dots represent origination cities.

We have identified up to 1,400 additional domestic routes which we could target in the future to further expand our network.

In developing a unique business model, our ancillary offerings (ancillary air-related items included in passenger revenue as well as the sale of third party products and services) have been a significant source of our revenue growth.

We have increased revenue related to these ancillary items from $5.87 per passenger in 2004 to $64.73 per passenger in 2021.

We own and manage our own air reservation system, which gives us the ability to modify our system to enhance product offerings based on specific needs, without being dependent on non-customized product upgrades from outside suppliers.

We own and manage our own eCommerce platform, which gives us the ability to modify our system to enhance third party product offerings based on specific needs, without being dependent on non-customized product upgrades from outside suppliers.

We believe the control of our automation systems has allowed us to be innovators in the industry by providing our customers with a variety of different travel services and products, and allowing us to seek to increase revenues through testing of alternative revenue management approaches.

We believe the following strengths from our unique business model allow us to maintain a competitive advantage in the markets we serve:

Focus on leisure traffic from small and medium-sized cities

Focus on leisure traffic from under-served cities

We believe small and medium-sized cities represent a large, under-served market, especially for leisure travel.

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By focusing primarily on under-served cities and routes, we believe we avoid the intense competition in high traffic domestic air corridors.

In most of our small and medium-sized city markets, travelers previously faced high airfares and cumbersome connections, or long drives, to major airports in order to reach our leisure destinations.

In most of our markets, travelers previously faced high airfares and cumbersome connections, or long drives, to major airports in order to reach our leisure destinations.

Based on published data from the U.S.

Department of Transportation (“DOT”), we believe the initiation of our service stimulates demand, as we have typically seen a substantial increase in traffic subsequent to new service beginning.

Our market strategy is neither hostile to legacy carriers, whose historical focus has been connecting small cities to business markets with regional jets, nor to traditional low cost or ultra-

low cost carriers generally focused on larger markets.

Our market strategy is neither hostile to legacy carriers, whose historical focus has been connecting small cities to business markets with regional jets, nor to traditional low cost or ultra-low cost carriers generally focused on larger markets.

Additionally, major carriers have reduced service to medium-sized cities which we believe they no longer consider to be core hubs.

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Our ability to quickly adjust capacity helps us maintain profitability in the dynamic travel industry.

Because of our low fixed cost structure, our flexibility allows us to uniquely match capacity with the demand environment.

Because of highly variable cost structure, our flexibility allows us to uniquely match capacity with the demand environment.

Our core business model manages seat capacity by increased utilization of our aircraft during periods of high leisure demand and decreased utilization in low leisure demand periods.

By way of illustration, in 2019 (as 2020 was not reflective of our normal operations), during our peak demand period in July, we averaged 9.8 system block hours per aircraft per day while in September, our lowest month for demand, we averaged only 5.0 system block hours per aircraft per day.

By way of illustration, in 2021, during our peak demand period in July, we averaged 9.4 system block hours per aircraft per day while in September, our lowest month for demand, we averaged only 4.9 system block hours per aircraft per day.

Our management of seat capacity also includes changes in weekly frequency of certain markets based on identified peak and off-peak travel demand throughout the year.

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In 2021, we were able to profitably fly a disproportionately low 13.1 percent of our scheduled ASMs on off-peak days (Tuesdays and Wednesdays).

As another example of our approach, we did not operate a single scheduled flight on a Tuesday in 2021 as of February 12, 2021.

Our strong revenue production from ancillary items, coupled with our ability to rapidly deploy or contract capacity, has allowed us to consistently operate profitably throughout periods of high fuel prices and economic recession and to perform better financially than other airlines during the pandemic.

To effectively hedge against fuel cost increases during periods of high fuel cost, we consider reducing capacity which allows us to raise average fares due to supply-demand dynamics and thereby offset the fuel cost increase.

Our strong revenue production from ancillary items, coupled with our ability to rapidly deploy or contract capacity, has allowed us to consistently operate profitably and produce industry leading margins in challenging macro environments, including periods of high fuel prices, economic recession and a pandemic.

Low cost structure

We believe a low cost structure is essential to competitive success in the airline industry.

Our ASMs decreased 18.8 percent year over year due to capacity reduction as a result of the pandemic.

Our operating expense per available seat mile ("CASM") was 9.68¢ in 2020 versus 9.13¢ in 2019.

Excluding the cost of fuel, our operating CASM was 7.99¢ in 2020 versus 6.48¢ in 2019.

We believe a low cost structure is essential to competitive success in the airline industry, particularly as a solely leisure focused carrier.

Our ASMs increased 8.1 percent in 2021 compared to 2019.

Our adjusted operating expense per available seat mile ("CASM") was 9.12¢ in 2021 versus 9.13¢ in 2019.

Excluding the cost of fuel, our adjusted operating CASM was 6.60¢ in 2021 versus 6.48¢ in 2019.

We continue to focus on maintaining low operating costs through the following tactics and strategies:

Low aircraft ownership costs.

We achieve low aircraft ownership costs by purchasing primarily used aircraft with meaningful remaining useful lives, at reduced prices.

As of February 12, 2021, we own or finance lease all but 11 of the aircraft in our operating fleet and believe that we properly balance lower aircraft acquisition costs and operating costs to minimize our total costs.

We achieve low aircraft ownership costs by primarily owning our aircraft.

As of February 14, 2022, we own or finance lease all but 15 of the aircraft in our operating fleet.

In addition, we believe that we properly balance lower aircraft acquisition costs and operating costs to minimize our total costs.

We primarily purchase used aircraft with meaningful remaining useful lives, at reduced prices.

As of February 14, 2022, our operating fleet consists of 110 Airbus A320 series aircraft, of which 97 were acquired used.

In December 2021, we signed an agreement with The Boeing Company to purchase 50 newly manufactured 737MAX aircraft scheduled to be delivered in 2023 to 2025 with options to purchase an additional 50 737’s.

We believe this new aircraft purchase is complimentary with our low cost strategy.

Our intent to retain ownership of the aircraft, coupled with the longer useful life for depreciation purposes should result in similar ownership expense when compared with a used aircraft in our fleet.

In addition, the expected fuel savings of up to 20 percent, improved operational reliability, and other savings expected from the use of these new aircraft should aid in improving our overall low cost structure.

Low distribution costs.

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The purchase of travel through our website is the least expensive form of distribution for us and accounted for 94.7 percent of our scheduled service revenue during 2021.

Operational efficiencies.

After the completion of our transition to an all-Airbus fleet in November 2018, our operating performance has continued to improve, allowing us to achieve industry leading controllable completion of over 99.8 percent in 2020, which is 35 basis points above the industry average for the period.

We are continuing to focus on capturing data to identify trends and patterns in an effort to gain efficiencies and decrease costs.

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As such, we sell only nonstop flights;

we do not code-share or interline with other carriers;

we do not currently code-share or interline with other carriers;

we have a single class cabin;

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and we do not offer other perks such as airport lounges.

Small and medium-sized city market airports.

Our business model focuses on residents of small and medium-sized cities in the United States.

Under-served market airports.

Our business model focuses on residents of under-served cities in the United States.

Typically, the airports in these cities have lower operating costs than airports in larger cities.

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We believe many leisure travelers are concerned primarily with purchasing air travel at the least expensive price.

As such, we have unbundled the air transportation product by charging fees for services many U.S.

airlines have historically bundled in their product offering.

As such, we offer the unbundling of the air transportation product by charging fees for services many U.S.

airlines have historically only bundled in their base fare.

This pricing structure allows us to target travelers who are most concerned with low fare travel while also allowing travelers to customize their experience with us by purchasing only the additional conveniences they value.

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In addition, snacks and beverages are sold individually on the aircraft, allowing passengers to purchase only items they value.

In addition, our direct to consumer distribution method enables a variety of added revenue opportunities with direct “one-stop” shopping solutions and managed product offerings.

Our direct to consumer distribution method enables a variety of added revenue opportunities with direct “one-stop” shopping solutions and managed product offerings.

We offer various bundled ancillary products whereby customers can elect to purchase multiple ancillary products at a discount.

Revenue from ancillary items will continue to be a key component in our total average fare as we believe leisure travelers are less sensitive to ancillary fees than the base fare.

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Financial position

As of December 31, 2020, we had $685.2 million of unrestricted cash, cash equivalents and investment securities, and total debt and finance lease obligations of $1.66 billion.

We had net debt (total debt and finance lease obligations less cash, cash equivalents and investment securities) of $974 million as of December 31, 2020, relatively flat from the $964 million balance as of December 31, 2019, despite the losses caused by the pandemic.

Given our efforts to conserve and raise liquidity and our assumptions about the future impact of COVID-19 on travel demand, which could be materially different due to the inherent uncertainties of the current operating environment, we expect to meet our cash obligations as well as remain in compliance with the debt covenants in our existing financing agreements for the next 12 months based on our current level of unrestricted cash and short-term investments, our anticipated access to liquidity and tax refunds, and projected cash flows from operations.

As of December 31, 2021, we had $1.19 billion of unrestricted cash, cash equivalents and investment securities, and total debt and finance lease obligations (net of related costs) of $1.74 billion.

We had net debt (total debt and finance lease obligations less cash, cash equivalents and investment securities) of $557.5 million as of December 31, 2021, a 42.8 percent decrease from the $973.8 million balance as of December 31, 2020.

Based on our assumptions about the future impact of COVID-19 on travel demand, which could be materially different due to the inherent uncertainties of the current operating environment, we expect to meet our cash obligations as well as remain in compliance with the debt covenants in our existing financing agreements for the next 12 months given our current level of unrestricted cash and short-term investments, our anticipated access to liquidity, and projected cash flows from operations.

Our financial position and discipline regarding use of capital allow us to have greater financial flexibility to grow our business and to efficiently and effectively adapt to changing economic conditions.

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Our current scheduled air service (including seasonal service) predominantly consists of limited frequency, nonstop flights into leisure destinations from under-served cities across the continental United States.

The scheduled service routes we are selling as of February 12, 2021 are summarized below (includes 504 routes we are currently serving, and 73 new routes on which will begin service in 2021):

The scheduled service routes we are selling as of February 14, 2022 are summarized below (includes 593 routes we are currently serving, and 22 new announced routes on which will begin service in 2022):

Routes to Orlando 69

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Automation is key to this strategy as we continue to enhance our capabilities.

Our redesigned website streamlines the booking process and strengthens our ability to sell air ancillary and third party products.

Our redesigned website and mobile app streamline the booking process and strengthen our ability to sell air ancillary and third party products.

Additionally, we expect other automation enhancements will create additional revenue opportunities by allowing us to capitalize on customer loyalty with additional product offerings.

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Database marketing opportunities span the full customer journey including the time of travel purchase, between purchase and travel, and after travel is complete.

Beyond allegiant.com, we market our products and services through a combination of digital and traditional advertising including print, radio and television.

To this end, we entered into a multi-year collaboration with Amazon Web Services to strengthen customer engagement through increased personalization across our digital channels, while affording a more elastic, reliable IT infrastructure with significant development advantages for marketing as well as for other business units across the company.

Beyond allegiant.com, we market our products and services through a combination of digital and traditional advertising including radio and television.

Whether introducing new service to a community or promoting existing routes, our advertising is often supported by airport authorities and destination marketing organizations.

We continue to see benefit from these cooperative marketing campaigns, as well as from high-profile sponsorships like Allegiant Stadium.

Underpinning our advertising efforts, high-profile sponsorships add credibility to our brand and enhance our national profile.

Additionally, we are prioritizing customer loyalty and expect to expand our loyalty program in 2021.

Our co-branded Allegiant World Mastercard® incentivizes customers who fly more often to maximize their benefits with members-only promotions and travel perks like priority boarding.

Underpinning our advertising efforts, high-profile sponsorships add credibility to our brand, drive new customer acquisition and enhance our national profile.

Our co-branded Allegiant World Mastercard® incentivizes customers who fly more often to maximize their benefits with members-only promotions and travel perks like complimentary priority boarding.

Cardholders are among our most engaged customers and book air ancillary and third party products at a higher rate than other customers.

We also plan to introduce our first non-carded loyalty program, Allways, to develop and maintain direct, long-term relationships with our customers.

Similar to our cardholder program, we will provide greater value to our Allways members through personalized promotions and targeted communications which we expect will result in substantial benefits over time.

Our non-card loyalty program, Allways Rewards™, launched in August 2021, allows us to develop and maintain direct, long-term relationships with our customers.

Similar to our cardholder program, we provide greater value to our Allways members through personalized promotions and targeted communications which we expect will result in customer loyalty and increased revenues over time.

The airline industry is highly competitive.

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Competitors may also choose to enter after we have developed a market.

We believe our under-served city strategy has reduced the intensity of competition we might otherwise face.

As of February 12, 2021, we are the only mainline domestic scheduled carrier operating out of the Orlando Sanford International Airport, Phoenix-Mesa Gateway Airport, Punta Gorda Airport, and St.

We believe our under-served city strategy and less than daily service has reduced the intensity of competition we might otherwise face.

As of February 14, 2022, we are the only mainline domestic scheduled carrier operating out of the Orlando Sanford International Airport and at 11 other airports in our network.

We and Sun Country Airlines are the only mainline domestic scheduled carriers serving Phoenix Mesa Gateway Airport, Punta Gorda Airport, and St.

Petersburg-Clearwater Airport.

Although no other mainline domestic scheduled carriers operate in these airports, most U.S.

airlines serve the major airports for Orlando, Phoenix, Fort Myers, and Tampa.

airlines serve the major airport for Orlando, Phoenix, Fort Myers, and Tampa.

In addition, many U.S.

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As a result, there is potential for increased competition on our routes.

There have been recent announcements concerning start-up airlines envisioning service to be initiated to smaller markets in the U.S.

Once service begins, these start-up airlines could potentially compete with us or serve routes that we may be considering for future service.

As of February 12, 2021, we face mainline competition on fewer than 17 percent of our operating and announced routes.

We compete with Southwest Airlines on 74 routes, Frontier Airlines on 46 routes, Spirit Airlines on 24 routes, American Airlines on nine routes, Delta Airlines on ten routes, JetBlue Airlines on 11 routes and United Airlines on one route.

In some cases, we face competition from more than one other airline on the same route.

As of February 3, 2022, we face mainline competition on approximately 27 percent of our operating and announced routes.

We overlap with Southwest Airlines on 119 routes, Frontier Airlines on 60 routes, Spirit Airlines on 34 routes, American Airlines on 19 routes, Delta Airlines on 16 routes, Breeze Airways on 12 routes, United Airlines on ten routes, JetBlue Airlines on nine routes, Sun Country Airlines on seven routes and Alaska Airlines on two routes.

In many cases, we face competition from more than one other airline on the same route, resulting in a total of 167 competitive routes as of that date.

We may also experience additional competition based on recent route announcements of other airlines.

Indirectly, we compete with various carriers that provide nonstop service to our leisure destinations from airports near our cities.

We also face indirect competition from legacy carriers offering hub-and-spoke connections to our markets, although these fares tend to be substantially higher, with much longer elapsed travel times.

Several airlines also offer competitive one-stop service from the medium-sized cities we serve.

We also face indirect competition from legacy carriers offering hub-and-spoke connecting flights to our markets, although these fares tend to be substantially higher, with much longer elapsed travel times.

Several airlines also offer competitive one-stop service from the cities we serve.

In our fixed fee operations, we compete with other scheduled airlines in addition to independent passenger charter airlines.

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The basis of competition in the fixed fee market is cost, equipment capabilities, service, reputation, and schedule flexibility.

Data Security

We continue to invest heavily in cyber-security, cyber-risk, and privacy initiatives.

We employ experienced staff dedicated to cyber-security and cyber-risk analysis, process and technology.

We continue to evaluate and proactively implement new preventive and detective processes and technologies including forward-looking threat intelligence and data-centric security measures.

One of our current and ongoing data security initiatives is the migration of critical business applications into the cloud infrastructure, which will allow us to take advantage of analytics and automation functionality.

These improvements also provide further opportunities to increase business intelligence and flexibility, improve business continuity and mitigate disaster scenarios.

We intend to continue investing resources in cyber security to protect our data and our customers' privacy.

Environmental, Social and Governance (ESG)

We recognize our responsibility to reduce environmental impact from our operations.

As an integrated travel company with an expanding airline business, we believe that solidifying our commitment to ESG efforts is a natural integration into our long-term corporate strategy and will enable us to better serve our stakeholders.

In 2022, we entered a 3-year partnership with Schneider Electric to develop a comprehensive ESG program.

Through this partnership, we will:

– Identify and prioritize relevant ESG topics through a materiality assessment

– Establish ESG goals and environmental goal achievement plans

– Develop inaugural ESG report referencing the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) frameworks

– Provide ongoing carbon emissions reporting of Scope 1, 2 and 3 greenhouse gas (GHG) emissions using Schneider Electric’s EcoStruxureTM Resource Advisor

– Support the communications efforts around our ESG program

In addition, we made recent investments in several ESG areas that will enable us to build a more resilient business, drive greater efficiencies and give back to our communities.

These include the following:

– Environmental :

Agreed to purchase 50 Boeing 737 aircraft, which burn up to 20% less fuel than our existing Airbus A320 fleet.

Sponsored Girls in Aviation Day in partnership with Women in Aviation Las Vegas and resumed in-kind travel for Make-a-Wish kids and their families in late 2021.

Donated portions of proceeds from pink in-flight refreshment sales in October to the National Breast Cancer Foundation.

– Governance:

Sought greater boardroom diversity and, as a result, achieved a board membership that is 25 percent female and 12.5 percent ethnically diverse.

Selected Amazon Cloud Services (AWS) as our preferred cloud provider to ensure greater security and reliability in its IT infrastructure.

The aviation industry accounts for roughly two percent of global greenhouse gas emissions, almost all of which is attributable to aircraft fuel.

We believe we have a responsibility to reduce our overall impact on the environment.

Our unique business model of closely matching capacity with demand to provide only non-stop service from underserved cities to leisure destinations, with high load factors, aligns with this objective.

In 2013, we began the process of transitioning our fleet from a mixture of MD-80 aircraft and Boeing 757 aircraft to an all-Airbus fleet with the transition concluding in November of 2018.

Throughout this transition period and continuing into 2020, we saw significant improvement in fuel efficiency.

During 2020, we consumed 149 million gallons of fuel averaging 87.8 ASMs per gallon of fuel, a 39 percent improvement when compared to 2012, and a 7 percent increase over 2019.

Throughout this transition period and continuing through 2021, we saw significant improvement in fuel efficiency.

During 2021, we consumed 205 million gallons of fuel averaging 85.4 ASMs per gallon of fuel, a 36 percent improvement when compared to 2012.

We recently announced an agreement with Boeing and CFM International to purchase 50 Boeing 737 aircraft powered by LEAP 1-B engines, with deliveries beginning mid-2023.

This aircraft is expected to burn up to 20 percent less fuel than our existing fleet, while offering increased seating capacity.

As of December 31, 2021, the composition of our fleet included a mix of A319 and A320 aircraft with seat configurations ranging from 156 to 186 seats, some of which are fitted with fuel-efficient Sharklets.

As we grow the fleet over the next several years, the preference will be to continue adding 186-seat aircraft.

We expect to continue to see modest improvements in fuel efficiency as a result of further upgauging.

As we grow the fleet over the next several years, the preference will be to continue adding 186-seat Airbus aircraft in addition to our Boeing 737 order.

We expect to continue to see modest improvements in fuel efficiency due to further upgauging.

Despite the significant fuel efficiencies gained over the past decade, we recognize we have a responsibility to do more.

We have an internal Fuel Steering Committee that meets monthly to discuss various alternatives to conserve fuel.

In conjunction with the focused efforts and contributions of our pilots, dispatchers, and stations personnel, we have implemented several fuel conservation practices, which include the following:

In conjunction with the

focused efforts and contributions of our pilots, dispatchers, and stations personnel, we have implemented several fuel conservation practices, which include the following:

• Single engine taxi in and out, as time permits

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Unlike many air carriers focused on business travel, our strategy is to provide access to affordable travel for leisure travelers who highly value their vacations and are likely to take vacations in any economic environment.

We are a low utilization air carrier focusing on leisure travel, thus we seek to match our available capacity with demand trends.

By way of example, in 2019 (as 2020 was not reflective of our normal operations) during our peak demand period in July, we averaged 9.8 system block hours per aircraft per day while in September, we averaged only 5.0 system block hours per aircraft per day when leisure demand is seasonally lower.

We are a low utilization air carrier focusing on leisure travel, thus we seek to closely match our available capacity with demand trends in providing only non-stop service from under-served cities to leisure destinations.

By way of example, in 2021 during our peak demand period in July, we averaged 9.4 system block hours per aircraft per day while in September, we averaged only 4.9 system block hours per aircraft per day when leisure demand is seasonally lower.

This practice of significantly reduced flying during the off-peak periods leads to consistently high load factors, and further enhances fuel efficiency.

During 2021, we consumed roughly 16.6 gallons of fuel per thousand revenue passenger miles compared with an industry average of 18.9 gallons per thousand revenue passenger miles, or 12 percent more efficient on a revenue passenger mile basis.

We offer all non-stop flights, directly from 129 cities, providing service in many markets abandoned or under-served by larger carriers.

We offer all non-stop flights, directly from 132 cities as of February 14, 2022, providing service in many markets abandoned or under-served by larger carriers.

If not for Allegiant, many of the customers we serve would not have access to direct flights by virtue of either geography or price point.

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Significant increases in fuel costs could materially affect our operating results and profitability.

We have not used financial derivative products to hedge our exposure to fuel price volatility in many years, nor do we have any plans to do so in the future.

Our flexible cost structure allows us to adjust to capacity accordingly based on the fuel environment.

We have not used financial derivative products to hedge our exposure to fuel price volatility in over 15 years, nor do we have any plans to do so in the future.

Our largely variable cost structure allows us to adjust to capacity accordingly based on the fuel environment.

Data Security

We continue to invest heavily in cyber-security, cyber-risk, vendor-risk and privacy initiatives.

We employ experienced staff dedicated to cyber-security and cyber-risk analysis, process and technology.

We continue to evaluate and proactively implement new preventive and detective processes and technologies including forward-looking threat intelligence and data-centric security measures.

These improvements also provide further opportunities to increase business intelligence and flexibility, improve business continuity and mitigate disaster scenarios.

We intend to continue investing resources in cyber security to protect our data and our customers' privacy.

As of December 31, 2021, we employed 4,458 full-time equivalent employees, which consisted of 4,183 full-time and 550 part-time employees.

Full-time equivalent employees consisted of 896 pilots, 1,393 flight attendants, 258 airport operations personnel, 343 mechanics, 155 reservation agents, 41 flight dispatchers, and 777 management and other personnel.

Full-time equivalent employees consisted of approximately 1,100 pilots, 1,500 flight attendants, 350 airport operations personnel, 550 maintenance personnel, 200 reservation agents, 40 flight dispatchers, and 750 management and other personnel.

Our relations with labor organizations representing our airline employee groups are governed by the Railway Labor Act ("RLA").

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At the end of this “cooling-off” period, the parties may engage in self-help, which among other events, could result in a strike from employees or for us to hire new employees to replace any striking workers.

The collective bargaining agreements for our pilots, flight attendants and dispatchers last for a contractual term of five years each, expiring in 2021, 2022, and 2024, respectively.

Our maintenance technician and related employees elected representation in March 2018 and negotiations with this group for an initial collective bargaining agreement are ongoing.

The collective bargaining agreement with our pilots is currently amendable and the parties have begun to discuss the terms of a new labor agreement for this work group.

The collective bargaining agreements for our flight attendants, dispatchers and maintenance technicians last for a contractual term of five years each, expiring in 2022, 2024 and 2026 respectively.

If we are unable to reach a labor agreement with any employee group, they may seek to institute work interruptions or stoppages following unsuccessful Federal mediation and other work stoppage protections provided for under the RLA.

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The safety and well-being of our team members is a top priority, and we believe each and every team member plays an essential role in creating a safe and healthy workplace.

Our health and safety policies and practices are intended to protect not only our team members but also our customers in all things we do, and for 2020 include our vigorous COVID-19 response.

Additionally,

our human capital focus has been externally recognized through Allegiant’s placement on Glassdoor’s Best Companies to Work For 2020 and Forbes’ Best Mid-Size Employers 2021 lists.

Aircraft Maintenance

We have a Federal Aviation Administration ("FAA") approved maintenance program, which is administered by our maintenance department headquartered in Las Vegas.

Technicians employed by us have appropriate experience and hold required licenses issued by the FAA.

We provide them with comprehensive training and maintain our aircraft in accordance with FAA regulations.

The maintenance performed on our aircraft can be divided into three general categories:

line maintenance, major maintenance, and component and engine overhaul and repair.

Line maintenance is generally performed by our personnel in certain cities of our network and by contractors elsewhere.

We contract with outside organizations to provide major maintenance and component and engine overhaul and repair.

We have chosen not to invest in facilities or equipment to perform our own major maintenance, engine overhaul or component work.

Our management supervises all maintenance functions performed by our personnel and contractors employed by us, and by outside organizations.

In addition to the maintenance contractors we presently utilize, we believe there are sufficient qualified alternative providers of maintenance services that we can use to satisfy our ongoing maintenance needs.

Our health and safety policies and practices are intended to protect not only our team members but also our customers in all things we do, and include our vigorous COVID-19 response.

Additionally, our human capital focus has been externally recognized through Allegiant’s placement on Newsweek's Most Loved Workplaces 2021 and Forbes' America's 500 Best Employers in Diversity 2021.

Community Involvement

Allegiant has worked with the Make-A-Wish® Foundation since 2012 by flying "wish kids" and their families to their desired destinations, at no cost, and donating a portion of proceeds from our in-flight Wingz Kids Snack Pack to the organization.

Beginning in 2020, the flights were suspended due to COVID-19 and have resumed as of December 31, 2021.

Additionally, we donate the use of 7,500 square feet of office space at our headquarters campus to the Southern Nevada chapter of Make-A-Wish, providing a home for the nonprofit organization's administrative office at no cost.

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In addition, Allegiant has sponsored community blood drives and preparedness efforts such as home smoke detector installation in under-served neighborhoods.

During the COVID-19 pandemic, we have provided additional support in our home community of Las Vegas, donating surplus in-flight food and beverage items such as juices, sodas and snacks to a local community food bank for distribution to families in need.

We also provided flight vouchers to 800 local elementary and high school teachers as part of The Smith Center for the Performing Arts’ Heart of Education Awards program.

Our goal was to help ensure that educators who have worked tirelessly despite the incredible challenges of the pandemic have an opportunity to take a well-deserved vacation in the future.

During the COVID-19 pandemic and periodically, we provide additional support in our home community of Las Vegas, donating surplus in-flight food and beverage items such as juices, sodas and snacks to a local community food bank for distribution to families in need.

We also provide flight vouchers on an annual basis to hundreds of local elementary and high school teachers as part of The Smith Center for the Performing Arts’ Heart of Education Awards program.

Our goal is to help ensure that educators who continue to work tirelessly despite the incredible challenges of the pandemic have an opportunity to take a well-deserved vacation in the future.

Aircraft Maintenance

We have a Federal Aviation Administration ("FAA") approved maintenance program, which is administered by our maintenance department headquartered in Las Vegas.

Technicians employed by us have appropriate experience and hold required licenses issued by the FAA.

We provide them with comprehensive training and maintain our aircraft in accordance with FAA regulations.

The maintenance performed on our aircraft can be divided into three general categories:

line maintenance, major maintenance,

and component and engine overhaul and repair.

Line maintenance is generally performed by our personnel in certain cities of our network and by contractors elsewhere.

We contract with FAA-approved outside organizations to provide major maintenance and component and engine overhaul and repair.

We have chosen not to invest in facilities or equipment to perform our own major maintenance, engine overhaul or component work.

Our management supervises all maintenance functions performed by our personnel and contractors employed by us, and by outside organizations.

Viva Aerobus Alliance

In December 2021, we announced plans for a fully-integrated commercial alliance agreement with Viva Aerobus, designed to expand options for nonstop leisure air travel between our markets in the United States and Mexico.

We and Viva Aerobus have submitted a joint application to the DOT requesting approval of and antitrust immunity for the alliance.

We believe this alliance is consistent with the DOT's goal of providing maximum benefits to the public, as the alliance is expected to increase competition, reduce transborder fares and provide increased nonstop service for our consumers traveling between the US and Mexico.

The alliance is anticipated to add new transborder routes and nonstop competition where currently only connecting service is available.

More than 250 new potential nonstop route opportunities have been identified as part of the DOT application, though specific routes targeted for service wilI be announced at a later date, following the application's approval.

We and Viva Aerobus currently expect to offer flights under the alliance beginning in the first quarter of 2023, pending governmental approval of the applications.

In addition, we have made an equity investment of $50.0 million in Viva Aerobus, and our Chairman Maurice J.

Gallagher, Jr.

is expected to join the Viva Aerobus board of directors.

The transactions are also subject to clearance by the Mexican Federal Economic Competition Commission.

Non-Airline Initiatives

Sunseeker Resort

We have made the decision to develop a 512-room hotel and two towers offering an estimated 189 one, two and three bedroom suites, numerous bar and restaurant options, and other amenities in Southwest Florida (the "Resort" or "Sunseeker Resort").

We are developing a resort in Southwest Florida (the "Resort" or "Sunseeker Resort").

When completed, the Resort will feature approximately 500 hotel rooms, more than 180 extended-stay suites, 55,000 square feet of meeting and conference space, 19 restaurants and bars, a rooftop pool and a ground level pool, a fitness center and spa and retail outlets along a harbor walk.

We also own a golf course which is a short drive from the Resort site and is considered to be an additional Resort amenity.

Construction on the Resort began in the first quarter of 2019 but construction was suspended in March 2020 so that we could conserve liquidity during the pandemic.

The golf course closed for renovation just before the pandemic and the renovation has been suspended as we continue to conserve liquidity during the pandemic.

We do not currently intend to re-commence construction of Sunseeker Resort until we secure satisfactory financing arrangements.

We operate Teesnap as a golf course management solution.

As of December 31, 2020, we were providing these services to approximately 443 golf courses in all 47 states in the country.

To date, the financial results have not been significant to our overall performance.

As we continue to focus our business on the airline and consumer offerings, we continue to explore options to divest our interest in Teesnap.

Construction on the Resort began in the first quarter of 2019 and was suspended in March 2020 so that we could conserve liquidity during the pandemic.

The golf course closed for renovation just before the pandemic and the renovation was suspended to conserve liquidity during the pandemic.

We recommenced construction on the Resort in August 2021 and commenced the golf course renovation in November 2021.

In October 2021, we entered into a credit agreement with affiliates of Castlelake L.P.

to finance up to $350 million of the remaining construction cost.

With this funding, we expect to open the Resort in early 2023.

We expect that the renovated golf course will open simultaneously with the Resort.

We previously operated Teesnap as a golf course management solution.

In April 2021, we closed on a transaction to sell 85 percent of Teesnap, retaining a 15 percent ownership in the business.

Family Entertainment Centers

We previously opened two family entertainment centers ("FECs") in 2019 in Clearfield, UT and Warren, MI.

We closed both FECs as a result of the pandemic and we have now disposed of those assets with the exception of a building in Chesterfield, Missouri, which remains on our balance sheet as of December 31, 2020.

We closed both FECs as a result of the pandemic and we have now disposed of those assets.

We will no longer pursue this business line.

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We maintain insurance policies we believe are of types customary in the airline industry and as required by the DOT, and are in amounts we believe to be adequate to protect us against material loss.

The policies principally provide coverage for public liability, war-risk, passenger liability, baggage and cargo liability, property damage, including coverages for loss or damage to our flight equipment, directors and officers, workers’ compensation, and cyber security insurance.

The policies principally provide coverage for public liability, war-risk, passenger liability, baggage and cargo liability, property damage, including coverages for loss or damage to our flight equipment and directors and officers, workers’ compensation.

We also maintain what we believe to be customary insurance on Sunseeker Resort and as required by the terms of our construction loan.

There is no assurance, however, that the amount of insurance we carry will be sufficient to protect us from material loss in all cases.

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The DOT monitors the continuing fitness of carriers and has the authority to promulgate regulations and to investigate (including by on-site inspections) and institute proceedings to enforce its regulations and related federal statutes, and may assess civil penalties, suspend or revoke operating authority, and seek criminal sanctions.

The DOT also has authority to restrict or prohibit a carrier’s cessation of service to certain communities if such cessation would leave the community without scheduled airline service, and to require carriers to maintain certain levels of service systemwide as a condition of receiving federal financial assistance under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), signed into law on March 27, 2020.

The DOT also has authority to restrict or prohibit a carrier’s cessation of service to certain communities if such cessation would leave the community without scheduled airline service.

In addition, the DOT has authority to approve alliance or partnership agreements under which two or more air carriers collaborate and to grant immunity from U.S.

antitrust laws for the provision of such collaboration.

On December 1, 2021, we (i.e., our airline subsidiary) and Aeroenlaces Nacionales, S.A.

doing business as Viva Aerobus (“Viva”), a Mexican airline, submitted to DOT a joint application requesting approval of and antitrust immunity for a comprehensive alliance agreement applicable to all routes we and/or Viva may operate between points in the United States and points in Mexico.

The joint application explains how the proposed Allegiant-Viva alliance is expected to benefit the traveling public by bringing significant new competition and service options, including lower fares, additional capacity on existing routes, and increased overall transborder capacity in the form of nonstop flights on routes now served only via connecting service.

We and Viva have asked DOT to provide final approval of the alliance agreement and to issue antitrust immunity by July 31, 2022, to help facilitate inauguration of service under the agreement in the first quarter of 2023.

Some previous applications involving other carriers have taken DOT far longer to process, and there is no assurance our proposed time frame will be achieved.

Nor is there assurance DOT will ultimately approve the agreement and grant antitrust immunity.

We hold DOT certificates of public convenience and necessity authorizing us to engage in scheduled air transportation of passengers, property and mail within the United States, its territories and possessions, and between the United States and all countries that maintain a liberal aviation trade relationship with the United States (known as “open skies” countries).

We also hold DOT authority to engage in scheduled air transportation of passengers, property and mail between the United States and Mexico.

And, we hold DOT authority to engage in charter air transportation of passengers, property, and mail on a domestic and international basis.

We also hold DOT authority to engage in charter air transportation of passengers, property, and mail on a domestic and international basis.

The FAA primarily regulates flight operations and safety, including matters such as airworthiness and maintenance requirements for aircraft, pilot, mechanic, dispatcher and flight attendant training and certification, flight and duty time limitations, and air traffic control.

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however, they may be issued without advance notice or opportunity for comment if, in the FAA’s judgment, safety requires such action.

We believe we are operating in

compliance with applicable DOT and FAA regulations, interpretations and policies and we hold all necessary operating and airworthiness authorizations, certificates and licenses.

We believe we are operating in compliance with applicable DOT and FAA regulations, interpretations and policies and we hold all necessary operating and airworthiness authorizations, certificates and licenses.

The FAA periodically conducts extensive or targeted audits of our operations.

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It also has the authority to issue regulations, including in cases of emergency, the authority to do so without advance notice, including issuance of a grounding order as occurred on September 11, 2001.

In addition, TSA has authority over face mask requirements applicable to individuals across all U.S.

public transportation networks,

including at airports and onboard commercial aircraft.

In August 2021 TSA extended the face mask requirement through March 18, 2022;

a further extension is possible.

Aviation Taxes and Fees .

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All carriers are required to collect these taxes from passengers and pass them through to the federal government.

Under the CARES Act, signed into law on March 27, 2020, applicability of FET was suspended for the remainder of 2020;

it was reinstated as of January 1, 2021.

In addition to FET, there are federal fees related to services provided by the TSA, and, in the case of international flights, U.S.

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In 2022 or thereafter, Congress may consider legislation that could increase the amount of FET and/or one or more of the other federally imposed or approved fees identified above.

Increasing the overall price charged to passengers could lessen demand for air travel or force carriers, including us, to lower fares to maintain demand.

Also in 2021 or thereafter, Congress may consider privatization of the U.S air traffic control ("ATC") system with user fee based funding.

The effect of such action, if adopted as law, on our operating costs is unknown.

Increasing the overall price charged to passengers could lessen demand for air travel.

Additionally, federal funding to airports and/or airport bond financing could be affected through future legislation, which could result in higher fees, rates, and charges at many of the airports we serve.

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Environmental Protection Agency (“EPA”) formally concluded that current and projected concentrations of greenhouse gases ("GHG") emitted by various aircraft, including all of the aircraft we and other air carriers operate, threaten public health and welfare.

This finding may be a precursor to EPA regulation of commercial aircraft emissions in the United States, as has taken effect for operations within the European Union under EU legislation.

Binding international measures adopted under the auspices of the International Civil Aviation Organization (“ICAO”), a specialized agency of the United Nations, are scheduled to become effective over the next several years, with the pilot phase beginning in 2021.

This finding may be a precursor to increased EPA regulation of commercial aircraft emissions in the United States, as has taken effect for operations within the European Union under EU legislation.

In January 2021 the EPA adopted regulations setting emissions standards equivalent to ICAO’s for newly-designed aircraft, with immediate effect, and for in-production aircraft, effective 2028.

The aircraft we currently operate are not affected by these standards.

Similarly, in December 2021, the EPA proposed particulate matter emission standards and test procedures applicable to certain classes of jet engines (including those commonly used in the airline industry) to replace the existing smoke standards for aircraft.

These proposed standards and procedures would harmonize with ICAO requirements and apply to newly-designed and in-production aircraft engines.

At present, the aircraft we operate are not affected by these standards.

We anticipate that in 2022 and thereafter, legislative and regulatory concern with the environmental impacts of the air transportation industry will increase, and that the longer-term effects on our fleet and operating costs may be substantial.

Aviation accounts for approximately 2.6 percent of total U.S.

GHG emissions and approximately 9 percent of emissions by the U.S.

In September 2021, the Biden Administration announced plans to release a comprehensive aviation climate action plan in the coming months.

According to the White House announcement, civil aviation accounts for 11 percent of emissions by the U.S.

transportation sector as a whole.

As recently as February 2021, legislation was introduced in the U.S.

Congress to incentivize the production of sustainable aviation fuel (also known as biofuel) and to assist the aviation industry in reducing GHG emissions.

If enacted as proposed, the legislation would establish a national goal for the U.S.

aviation sector to achieve a net 35 percent reduction in GHG emissions by 2035 and net zero emissions by 2050.

We cannot predict whether this or any similar legislation will be introduced or pass the Congress or, if enacted into law, how it ultimately would apply to the airline industry.

Other executive actions taken by the Administration are intended to serve the goal of reducing aviation emissions by 20% by 2030 and unlocking the potential for a zero-carbon aviation sector as of 2050.

We cannot predict whether these or similar initiatives will lead to legislation that will pass the Congress or, if enacted into law, how they ultimately would apply to our operations or the airline industry.

Federal law recognizes the right of airport operators with special noise problems to implement local noise abatement procedures so long as those procedures do not interfere unreasonably with interstate and foreign commerce and the national air transportation system.

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This means we must be under the actual control of U.S.

citizens and we must satisfy certain other requirements,

including that our president/chief executive officer and at least two-thirds of our board of directors and other managing officers are U.S.

citizens and we must satisfy certain other requirements, including that our president/chief executive officer and at least two-thirds of our board of directors and other managing officers are U.S.

citizens, and that not more than 25 percent of our voting stock is owned or controlled by non-U.S.

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We must comply with the laws, rules and regulations of each country to, from, or over which we operate.

Our proposed U.S.-Mexico alliance with Viva, described above, is subject to prior approval by Mexico’s Federal Economic Competition Commission (COFECE) in a manner generally similar to the DOT procedure;

a joint application has been submitted to COFECE.

International flights are also subject to U.S.

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During the Persian Gulf War of 1990-91 and on other occasions, CRAF carriers were required to permit the military to use their aircraft in this manner.

As a result of our CRAF participation, we are eligible to bid on and be awarded peacetime airlift contracts with the military.

As a result of our CRAF participation, we are eligible to bid on and be awarded peacetime airlift contracts with the military on a preferential basis.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business