What changed in this filing

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Item 1. Business

2023-02-27 compared with 2022-03-01 · 164 added, 141 removed, 351 unchanged (46% 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 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.

In connection with our leisure travel focus, we are completing the construction of our Sunseeker Resort in Southwest Florida, which we expect to open in late 2023.

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

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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.

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 and our non-card loyalty program.

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 our co-branded Allegiant credit card and our non-card loyalty program.

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 included for in this category.

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

Fixed fee contract air transportation.

We provide air transportation through fixed fee agreements and charter service on a year-round and ad-hoc basis.

Other revenue.

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;

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

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

– 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 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).

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

– expanding our co-branded credit card program and our non-card loyalty program;

– expanding our travel company focus and offerings with the construction of Sunseeker Resort at Charlotte Harbor (the "Resort" or "Sunseeker Resort") (expected to open in late 2023).

– 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

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Primarily large and mid-sized markets Primarily small/medium-sized under-served markets

Flight Connections:

Nonstop or connect through hubs All nonstop

Uniform throughout the week Low frequency/variable capacity

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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.

We operate to more cities than any non-legacy U.S.

carrier, protecting us against overexposure to any one geographic location.

Our 24 bases spread throughout the country 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.

We have identified more than 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 $67.74 per passenger in 2022.

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 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.

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.

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We actively manage our seat capacity to match leisure demand patterns.

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

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

This is enabled by our highly variable cost structure which allows us to increase capacity in high demand periods.

This has resulted in our being able to generate as much as 60 percent of our operating income in the peak periods of March, summer (June and July) and the holiday seasons.

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.

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In 2022, we were able to profitably fly a disproportionately low 12 percent of our scheduled ASMs on off-peak days (Tuesdays and Wednesdays).

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.

To effectively hedge against fuel cost increases during periods of high fuel cost, we will often pull back capacity, particularly in off peak periods, and focus our flying in peak periods which drives higher fares to offset the fuel cost increases.

Conversely, during periods of lower fuel costs, we will increase flying in off peak periods as marginally profitable flights will become more profitable with lower fuel costs.

Our strong revenue production from ancillary items, coupled with our ability to rapidly adjust capacity, has allowed us to consistently operate profitably and in many cases, 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, 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.

In evaluating our cost performance, our management team typically compares to the following other publicly held domestic airlines:

Delta Air Lines, American Airlines, United Airlines, Southwest Airlines, JetBlue Airways, Alaska Airlines, Hawaiian Airlines, Spirit Airlines, Frontier Airlines and Sun Country Airlines (which we refer to as the "Industry").

Our airline operating CASM, excluding fuel (that is, excluding Sunseeker) was 7.33 ¢ in 2022, which was 25.0 percent lower than the Industry average of 9.77 ¢ for 2022.

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 primarily owning our aircraft.

We achieve low aircraft ownership costs by opportunistically acquiring aircraft and by primarily owning our aircraft.

As of February 1, 2023, we own or finance lease all but 17 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.

Throughout our history, we have primarily purchased used aircraft with meaningful remaining useful lives, at reduced prices.

As of February 1, 2023, our operating fleet consists of 122 Airbus A320 series aircraft, of which 109 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.

In December 2021, we opportunistically negotiated 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 737MAX aircraft.

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.

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

We expect to continue to acquire used aircraft as necessary to support planned growth and aircraft retirements.

Low distribution costs.

Our nontraditional marketing approach results in very low distribution costs.

Our nontraditional marketing approach reduces distribution costs.

We do not sell our product through outside sales channels, thus avoiding the fees charged by travel websites (Expedia, Orbitz or Travelocity) and traditional global distribution systems (“GDS”) (Sabre or Worldspan).

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The purchase of travel through our website is the least expensive form of distribution for us and accounted for 96.0 percent of our scheduled service revenue during 2022.

We are a data driven organization.

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

For example, we utilize predictive maintenance to identify necessary aircraft maintenance before a problem arises, thereby avoiding unscheduled maintenance events which are costly and disruptive to our schedule.

In addition, our direct to consumer distribution method results in significant sales and marketing cost savings.

In addition, our direct to consumer distribution method results in enhanced data which helps us deepen our relationship with our customers and increase sales.

Highly productive workforce.

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For example, we have partnered exclusively with Enterprise Holdings Inc.

for the sale of rental cars packaged with air travel, which generated approximately 58 percent of our third party products revenue in 2021.

for the sale of rental cars packaged with air travel.

The pricing of each product and our margin can be adjusted based on customer demand because our customers purchase travel directly through our booking engine.

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As of December 31, 2022, we had $1.02 billion of unrestricted cash, cash equivalents and investment securities, and total debt and finance lease obligations (net of related costs) of $2.10 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.

We had net debt (total debt and finance lease obligations less cash, cash equivalents and investment securities) of $1.08 billion as of December 31, 2022.

As of February 1, 2023, we have $275.0 million of undrawn capacity under revolving credit facilities plus another $169.7 million of undrawn capacity under our pre-delivery payment (PDP) financing facility .

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

The scheduled service routes we are selling as of February 1, 2023 are summarized below (includes 571 routes we are currently serving, and two new announced routes on which will begin service in 2023):

Routes to Orlando 67

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Routes to Destin 32

Routes to Los Angeles 42

Routes to Sarasota 29

Other routes 226

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Marketing and Distribution

Core to Allegiant’s business model is our direct-to-consumer distribution.

Core to Allegiant’s business model is our direct-to-customer distribution.

In lieu of the GDS distribution points used by most airlines, allegiant.com is our primary distribution method.

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

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

Our 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.

Our direct-to-customer distribution method also enables us to gather valuable customer data.

In addition to helping us better understand our customers, we utilize data like customer email addresses to market our products and services in a cost-effective way.

In addition to helping us better understand our customers, we utilize data such as customer email to market our products and services in a cost-effective way.

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

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.

To this end, we are working to strengthen customer engagement, while affording a more elastic, reliable information technology 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 traditional advertising, including radio, television as well as digital advertising.

Enhanced data and analytics are being streamlined into our digital advertising system to build more targeted campaigns driving efficiency in our digital media spend.

We can more surgically match our digital advertising dollars and the impressions they drive with the web users who are most likely to book their travel for the routes, to better optimize load and yield.

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

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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.

Our co-branded credit card 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.

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Passenger demand and fare levels have historically been influenced by, among other things, the general state of the economy, international events, fuel prices, industry capacity, and pricing actions taken by other airlines.

The principal competitive factors in the airline industry are price, schedule, customer service, routes served, types of aircraft, safety record and reputation, code-sharing relationships, and frequent flyer or loyalty programs.

The principal competitive factors in the airline industry are price, nonstop flights, schedule, customer service, routes served, types of aircraft, safety record and reputation, code-sharing relationships, and frequent flyer or loyalty programs.

Our competitors include legacy airlines, low cost carriers ("LCCs"), ultra-low cost carriers ("ULCC"), regional airlines, new entrant airlines, and other forms of transportation to a much lesser extent.

Many of the airlines are larger, have significantly greater financial resources, are better known, and have more established reputations than us.

In a limited number of cases, following our entry into a market, competitors have chosen to add service, reduce their fares, or both.

The legacy airlines are larger, have significantly greater financial resources, are better known, and have more established reputations than us.

In a limited number of cases, following our

entry into a market, competitors have chosen to add service, reduce their fares, or both.

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

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As of February 1, 2023, we face mainline competition on approximately 22 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.

We overlap with Southwest Airlines on 73 routes, Frontier Airlines on 38 routes, Spirit Airlines on 32 routes, American Airlines on 19 routes, Delta Airlines on 13 routes, Breeze Airways on 14 routes, United Airlines on nine routes, JetBlue Airlines on six routes, Sun Country Airlines on five routes and Alaska Airlines on three routes.

In many cases, we face competition from more than one other airline on the same route, resulting in a total of 124 competitive routes as of that date.

These 124 routes represent 22 percent of the total number of routes we are serving as of February 1, 2023.

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

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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:

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

– 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

These topics were addressed in our inaugural ESG report.

– Develop inaugural ESG report referencing the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) frameworks, which was issued in December 2022.

– Provide ongoing carbon emissions reporting of Scope 1, 2 and 3 greenhouse gas (GHG) emissions using Schneider Electric’s EcoStruxureTM Resource Advisor, the initial reporting having been included in our inaugural ESG report.

– Establish ESG targets and environmental target achievement plans.

We issued our inaugural sustainability report during 2022.

This comprehensive report outlines our disclosures pertaining to material topics identified by key stakeholders.

To determine material topics, a materiality assessment was conducted.

This assessment benchmarked material ESG topics across our industry, global reporting frameworks and third-party rating and ranking methodologies.

We then engaged with more than 400 stakeholders including customers, employees, suppliers, shareholders and community partners.

Based on survey and interview results, we identified the following topics as material to Allegiant:

– Environmental:

Emissions, Energy, Waste and Hazardous Materials

Product Quality and Safety, Accident and Safety Management, Human Rights, Benefits and Work-Life Balance, Non-Discrimination, Employee Health and Safety, Employment, Diversity, Equity and Inclusion, Employee Training and Development, Labor Management, Local Job Creation, Response to COVID

– Governance:

Business Ethics and Integrity, Anti-Corruption, Competitive Behavior, Data Security, Customer Privacy

These material topics will guide the development of our ESG targets and annual ESG reports, including the inaugural ESG report published in December 2022.

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.

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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.

Agreed to purchase 50 Boeing 737MAX aircraft, which are expected to burn up to 20 percent less fuel on a per passenger basis compared to certain of the older Airbus A320 Series aircraft in our fleet, with the option to purchase an additional 50 Boeing 737MAX aircraft.

Provided in-kind travel for Make-A-Wish kids and their families, and continued offering free office space in our Las Vegas headquarters to the nonprofit’s Southern Nevada Chapter.

Gifted hundreds of flight vouchers to local

elementary and high school teachers in partnership with The Smith Center for the Performing Arts’ The Heart of Education Awards program.

Opened three new aircraft bases, creating approximately 350 new jobs.

Separated the roles of the board and chief executive officer to uphold board independence.

Established the chief experience officer role to further foster a positive experience for customers and team members.

Implemented a new talent management system to improve tracking of diversity, equity, and inclusion recruitment efforts.

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

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.

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 2018.

Throughout this transition period and continuing through 2022, 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.

During 2022, we consumed 219 million gallons of fuel averaging 84.3 available seat miles (ASMs) per gallon of fuel, a 34 percent improvement when compared to 2012.

Our agreement with Boeing and CFM International to purchase 50 Boeing 737MAX aircraft powered by LEAP 1-B engines, with deliveries beginning before the end of 2023, will provide us with new aircraft and more environmentally friendly engines.

This aircraft is expected to burn up to 20 percent less fuel on a per passenger basis as compared to certain of the older Airbus A320 aircraft in our fleet.

As of December 31, 2022, 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 Airbus aircraft in addition to our Boeing 737 order.

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

As we grow the fleet over the next several years, the preference will be to continue adding 180-seat Sharklet-equipped Airbus aircraft in addition to our Boeing 737MAX order.

We expect to continue to see modest improvements in fuel efficiency due to further upgauging and greater use of Sharklet wingtips where possible.

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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• Trial of several electric ground handling equipment

• Optimization of the amount of contingency and dispatch fuel

• Deployment of process to find optimal winds aloft while inflight

In addition to the above initiatives, the Fuel Steering Committee is currently researching sustainable aviation fuel to see if this could be a viable option on some of our routes.

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 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.

We are a low utilization air carrier focusing on leisure travel.

We seek to closely match our available capacity with demand trends in providing only nonstop service from under-served cities to leisure destinations.

For example, in 2022 during our peak demand period in July, we averaged 8.2 system block hours per aircraft per day while in September, we averaged only 4.7 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 2022, we consumed roughly 14.0 gallons of fuel per thousand revenue passenger miles compared with an Industry average of 16.0 gallons per thousand revenue passenger miles, or 12.8 percent more efficient on a revenue passenger mile basis.

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.

We offer all nonstop flights, directly from 125 cities as of February 1, 2023, 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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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.

Our largely variable cost structure allows us to adjust 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.

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

We employ experienced staff dedicated to cybersecurity 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.

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.

Protecting business data and our customers’ privacy is critical to our continued operations and we intend to continue investing resources in cyber security accordingly.

As of December 31, 2022, we employed 5,315 full-time equivalent employees.

Full-time equivalent employees consisted of approximately 1,100 pilots, 1,750 flight attendants, 500 airport operations personnel, 550 maintenance personnel, 200 reservation agents, 50 flight dispatchers, and 1,150 management and other personnel.

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

Under this act, if direct negotiations do not result in an agreement, either party may request the National Mediation Board ("NMB") to appoint a federal mediator.

If no agreement is reached in these mediated discussions, the NMB may offer binding arbitration to the parties.

If either party rejects binding arbitration, a “cooling off” period begins.

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 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.

We have not previously experienced any work interruptions or stoppages from our non-unionized or unionized employee groups.

Four groups of our employees – pilots, flight attendants, dispatchers, and maintenance technicians – are represented by labor organizations pursuant to the Railway Labor Act (“RLA”).

Those unions have negotiated separate collective bargaining agreements (“CBAs”) with us covering the rates of pay, rules, and working conditions that apply to those employees.

The CBAs covering our dispatchers and maintenance technicians both have five-year terms and do not become amendable until 2024 and 2026, respectively.

The CBAs covering our pilots and flight attendants became amendable in 2021 and 2022, respectively, and we are currently engaged in collective bargaining with the respective representatives of those employees for successor agreements.

Under the RLA, if direct negotiations do not result in an agreement, either party may request the National Mediation Board ("NMB") to appoint a federal mediator to assist the parties with their negotiations.

If no agreement is reached in these mediated discussions, the NMB must proffer binding arbitration to the parties.

If either party rejects binding arbitration, the RLA imposes a “cooling off” period and allows for the President of the United States to create an emergency board to investigate the dispute and issue recommendations for reaching a settlement.

Only after this process has been exhausted may either party resort to self-help, such as a work stoppage by the union and its members.

In January 2023, we and the union that represents our pilots jointly requested the appointment of a mediator through the NMB.

The NMB has appointed a mediator and the parties are participating in mediated negotiations.

To date, we have not experienced any work interruptions or stoppages from our non-unionized or unionized employee groups.

System Implementations

Beginning in 2021, we have made significant investments to replace certain core proprietary systems with more advanced and integrated third party software solutions.

We have selected SAP as our accounting system, Trax as our Maintenance, Repair, and Overhaul (MRO) system, Navitaire as our passenger service system, and Navblue as our operations control and crew management systems.

We are transitioning to new systems in other areas as well.

SAP's accounting system is expected to simplify our financial operations, enabling real-time data access and improved financial reporting.

Trax's MRO system is expected to provide enhanced maintenance, repair, and overhaul operations, streamlining aircraft maintenance schedules and reducing associated costs.

Navitaire’ s passenger service system is expected to improve the way the airline manages customer interactions, reservations, and allows for dynamically priced ancillary products.

Navitaire is also expected to facilitate the initiation and operation of our joint alliance with VivaAerobus.

Navblue’s operations control and crew management system are expected to provide an integrated platform for managing flight schedules and crew assignments, enhancing our operational efficiency.

We expect that we will have spent more than $50.0 million in total to complete all of these system implementations.

We currently expect to switch over to SAP, Trax and Navitaire in 2023 with the Navblue cutover projected in 2024.

Human Capital

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Above all else, safety is our number one core value, along with achievement, flexibility, innovation, bias for action, teamwork, transparency and accountability, and outcome-based values that define our human capital mission.

We have long supported Diversity, Equity and Inclusion and operate a Diversity & Inclusivity Council made up of company leadership, and facilitate multiple company-wide network groups to inspire a more inclusive culture while giving a dedicated focus to our recruiting processes to continue driving diverse hiring.

We have long supported Diversity, Equity and Inclusion and operate a Diversity & Inclusivity Council made up of company leadership, and facilitate more than ten company-wide network groups to inspire a more inclusive culture while giving a dedicated focus to our recruiting processes to continue driving diverse hiring.

Our total rewards philosophy is based around building a culture of high performance.

We utilize competitive base salaries, discretionary performance-based bonuses, profit sharing and equity as attraction and retention tools for our team members.

We utilize competitive base salaries, discretionary performance-based bonuses, spot rewards, profit sharing, and equity as attraction and retention tools for our team members.

As of December 31, 2022, we had approximately 5,315 team members (including both full-time and part-time employees), of whom approximately 65 percent are in front line positions such as flight crew, mechanics or airport personnel.

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 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.

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.

Our human capital focus has been externally recognized through Allegiant’s placement on Newsweek's America's Greatest Workplaces for Diversity 2023, Forbes top 500 Midsize Employers in 2023.

In addition, we received recognition in 2022 from Military Friendly as a "Top 10 Military Spouse Employer" and a "Silver Level Military Friendly Employer".

We were also recognized as a "Certified Most Loved Workplace" by Best Practice Institute, a Partner of Newsweek Magazine.

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.

To kick off 2023, we celebrated a special milestone welcoming our 2000th wish kid on board an Allegiant flight.

This in-kind flight program provides Make-A-Wish with a valuable service at no cost to the organization or the wish families.

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 this effort, we have provided no-cost supply flights and volunteer transport to support Red Cross hurricane recovery efforts in Florida and Puerto Rico.

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

In the wake of Hurricane Ian in 2022, Allegiant made a $100,000 donation to the organization to help restore critical resources in the community.

In addition, we sponsored a month-long nationwide blood drive to further support relief efforts.

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.

We also provide $40,000 worth of 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.

Aircraft Maintenance

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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, 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.

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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.

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.

VivaAerobus Alliance

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

We and VivaAerobus 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.

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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.

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

In addition, we have made an investment of $50.0 million in VivaAerobus, and our Executive Chairman and Chairman of the Board 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.

is expected to join the VivaAerobus board of directors.

Non-Airline Initiatives

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.

We are developing Sunseeker Resort in Southwest Florida.

When completed, the Resort will feature approximately 500 hotel rooms, more than 180 suites, 55,000 square feet of meeting and conference space, 20 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, Aileron (formerly known as Kingsway 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 and was suspended in March 2020 so that we could conserve liquidity during the pandemic.

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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.

Although the Resort suffered damage from Hurricane Ian and construction was delayed as a result, we expect to open the Resort in late 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.

We will no longer pursue this business line.

Other travel and leisure initiatives

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

We expect the Sunseeker insurance to cover all damage incurred from Hurricane Ian.

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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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.

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

doing business as VivaAerobus (“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 (as well as Allegiant, Viva, and their respective employees) 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.

Although the DOT process has progressed substantially and is continuing, there is no assurance when or whether 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.

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

We 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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This certificate, in combination with operation specifications issued to the airline by the FAA, authorizes the airline to operate at specific airports using aircraft certificated by the FAA.

We have and maintain in effect FAA certificates of airworthiness for all of our aircraft, and we hold the necessary FAA authority to fly to all of the cities we currently serve.

We have and maintain in effect FAA certificates of airworthiness for all our aircraft, and we hold the necessary FAA authority to fly to all the cities we currently serve.

Like all U.S.

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

We have satisfactorily responded to any and all findings on all Certificate Holder Evaluation Process and other inspections conducted.

We have satisfactorily responded to all findings on all Certificate Holder Evaluation Process and other inspections conducted.

Within the United States, civil aviation security functions, including review and approval of the content and implementation of air carriers’ security programs, passenger and baggage screening, cargo security measures, airport security, assessment and distribution of intelligence, threat response, and security research and development are the responsibility of the Transportation Security Administration (“TSA”) of the Department of Homeland Security.

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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.

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

public transportation networks, including at airports and onboard commercial aircraft which were applicable during the pandemic.

Aviation Taxes and Fees .

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These fees do not need to be reauthorized, although their amounts may be revised periodically.

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.

Particularly since FAA reauthorization expires September 30, 2023, during the current year 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.

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.

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

Environmental.

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In 2016 the U.S.

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.

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

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.

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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.

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.

Similarly, in December 2022, the EPA adopted particulate matter emission standards and test procedures for newly-designed aircraft, with immediate effect, and for in-production aircraft, effective 2028.

These new standards and procedures harmonize with ICAO requirements.

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

We anticipate that in 2023 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.

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.

According to a September 2021 White House announcement, civil aviation accounts for 11 percent of emissions by the U.S.

transportation sector as a whole.

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.

The FAA has announced a U.S.

aviation sector goal of net-zero GHG emissions by 2050, consistent with the broader federal objective of achieving net-zero GHG emissions economy-wide by 2050.

We cannot predict whether these or similar initiatives will lead to legislation that will pass the Congress or, if enacted into law, how it 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.

These restrictions can include limiting nighttime operations, directing specific aircraft operational procedures during takeoff and initial climb, and limiting the overall number of flights at an airport.

None of the airports we serve currently imposes restrictions on the number of flights or hours of operation that have a meaningful impact on our operations.

None of the airports we serve currently impose such restrictions on the number of flights or hours of operation that have a meaningful impact on our operations.

It is possible one or more such airports may impose additional future restrictions with or without advance notice, which may impact our operations.

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To the extent we are subject to EPA requirements, we intend to continue to comply with those requirements.

Working conditions of cabin crewmembers while onboard aircraft are subject to regulation by the Occupational Safety and Health Administration ("OSHA") of the Department of Labor.

Working conditions of cabin crew members while onboard aircraft are subject to regulation by the Occupational Safety and Health Administration ("OSHA") of the Department of Labor.

To the extent we are subject to OSHA requirements, we intend to continue to comply with those requirements.

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We are also subject to state and local laws, regulations, and ordinances at locations where we operate and to the rules and regulations of various local authorities that operate the airports we serve.

None of the airports in the cities in which we operate have slot control, gate availability, or curfews that pose meaningful limitations on our operations.

However, some airports we serve have short runways that require us to operate some flights at less than full capacity.

Of the more than 120 airports we serve, not more than 20 percent have curfews or gate limitations that meaningfully impact our operations at those airports.

Also, some airports we serve have short runways that require us to operate some flights at less than full capacity.

International air transportation, whether provided on a scheduled or charter basis, is subject to the laws, rules, regulations, and licensing requirements of the foreign countries to, from, and over which the international flights operate.

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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.

Our proposed U.S.-Mexico alliance with Viva, described above, received approval by Mexico’s Federal Economic Competition Commission (COFECE) in October 2022 for a six-month period, with a six-month extension available.

International flights are also subject to U.S.

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What changed 10-K

Item 1. Business