What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-02-27 compared with 2022-03-01 · 127 added, 121 removed, 184 unchanged (57% of the section changed)

6 unchanged sentences

The COVID-19 outbreak spread throughout the world.

In March 2020, the President of the United States declared a national emergency.

The COVID-19 pandemic has materially and adversely affected passenger demand and bookings for air travel, thereby materially and adversely affecting operating income and cash flows from operations.

The COVID-19 pandemic materially and adversely affected passenger demand and bookings for air travel, thereby materially and adversely affecting operating income and cash flows from operations.

As a result, we incurred a net loss of $184.1 million in 2020, our first net loss since 2002.

The extent of the impact of the COVID-19 pandemic on our business and our financial and operational performance will depend on future developments, including the duration, spread, severity and recurrences of the COVID-19 or similar viruses;

The extent of any future impact of the COVID-19 pandemic on our business and our financial and operational performance will depend on future developments, including the duration, spread, severity and recurrences of the COVID-19 or similar viruses;

the possible imposition of testing requirements before domestic travel;

2 unchanged sentences

the extent of the impact of the COVID-19 pandemic on overall demand for air travel;

and our access to capital during the pandemic, all of which are highly uncertain and cannot be predicted.

and our access to capital during the affected periods, all of which are highly uncertain and cannot be predicted.

The COVID-19 pandemic has caused public health officials to recommend precautions to mitigate the spread of the virus.

4 unchanged sentences

We could also be materially adversely affected if we are unable to effectively maintain a suitably skilled and sized workforce, address employment-related matters, or maintain satisfactory relations with our employees or our employees’ labor representatives.

Particularly during December 2021 and January 2022, widespread positive COVID tests resulted in flight crew absences which have caused us to cancel numerous flights.

Particularly during December 2021 and January 2022, widespread positive COVID tests resulted in flight crew absences which caused us to cancel numerous flights.

These cancellations resulted in unusually high irregular operations costs as we compensate passengers on company-cancelled flights for inconvenience suffered in addition to the ticket price.

2 unchanged sentences

We expect we will continue to incur COVID-19 related costs as we sanitize airplanes and implement additional hygiene-related protocol to airplanes, and take other action to limit infection among our employees and passengers.

The COVID-19 pandemic continues to rapidly evolve.

The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change.

Many attractions in the leisure destinations we serve, such as Walt Disney World in Orlando, Florida and Las Vegas hotels, temporarily closed during the pandemic, and many of these have reopened with restrictions in place, which have and will continue to impact travel to these destinations.

We have entered into agreements with the U.S.

Treasury with respect to funding support pursuant to the Payroll Support Programs;

pursuant to which we have agreed to certain restrictions on how we operate our business and use our cash and which could limit our ability to take actions that we otherwise might have determined to be in the best interests of our company and our shareholders.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was signed into law.

The CARES Act provides liquidity in the form of grants and loans to air carriers, such as to us.

Additional benefits were made available to us under a section of the Consolidated Appropriations Act, 2021 (the “PSP Extension Act”) enacted in December 2020 and the American Rescue Plan Act enacted in March 2021 ("PSP3").

In April 2020, January 2021 and April 2021, we reached agreements with the Treasury with respect to funding support pursuant to the Payroll Support Programs under the CARES Act, the PSP Extension Act and PSP3.

Pursuant to these agreements, we have agreed to certain restrictions on our business and operations, including the following:

We are prohibited from repurchasing our common stock and from paying cash dividends on our common stock until October 1, 2022;

We must place certain restrictions on certain higher-paid employee and executive pay, including limiting pay increases and severance pay or other benefits upon terminations, until April 1, 2023;

Until March 1, 2022, we must comply with any requirement issued by the DOT that we maintain certain scheduled air transportation service as DOT deems necessary to ensure services to any point served by us before March 1, 2020.

These restrictions may require that we take, or limit taking, actions that we believe to be in the best interests of our company and our shareholders.

For example, the restrictions could require that we change certain of our business practices, risk our ability to retain key personnel, and expose us to additional costs (including increased compliance costs).

As COVID-19 infection rates and protective measures continue to evolve, the ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change.

Many attractions in the leisure destinations we serve, such as Walt Disney World in Orlando, Florida and Las Vegas hotels, temporarily closed during the pandemic.

Any recurrence of these closures will adversely impact travel to these destinations.

Risks Related to Allegiant

Increases in fuel prices or unavailability of fuel would harm our business and profitability.

Fuel costs constituted approximately 36.9 percent of our total operating expenses in 2022 and the average cost per gallon increased by 73.5 percent in 2022 over 2021.

Significant increases in fuel costs have negatively affected our operating results in the past, and future fuel cost volatility could materially affect our financial condition and results of operations.

Both the cost and availability of aircraft fuel are subject to many economic and political factors and events occurring throughout the world over which we have no control.

Meteorological events may also result in short-term disruptions in the fuel supply.

Aircraft fuel availability is also subject to periods of market surplus and shortage, and is affected by demand for heating oil, gasoline, and other petroleum products.

Due to the effect of these events on the price and availability of aircraft fuel, our ability to control this cost is limited, and the price and future availability of fuel cannot be predicted with any degree of certainty.

Due to the high percentage of our operating costs represented by fuel, a relatively small increase in the price of fuel could have a significantly negative impact on our operating costs.

A fuel supply shortage or higher fuel prices could result in reduction of our service during the period affected.

We have made a business decision not to purchase financial derivatives to hedge against increases in the cost of fuel.

This decision may make our operating results more vulnerable to the impact of fuel price increases.

Increased labor costs could result from industry conditions and could be impacted by labor-related disruptions.

Labor costs constituted approximately 25.0 percent of our total operating costs in 2022, our second largest expense line item.

Labor costs are generally rising and it has become more difficult to find suitable candidates in the current economic environment.

Further, we have four employee groups (pilots, flight attendants, flight dispatchers and maintenance technicians) which have elected union representation.

These groups represent approximately 64.6 percent of our employees.

In 2016, we reached a collective bargaining agreement with the International Brotherhood of Teamsters, representing our pilots.

The pilot agreement is now amendable and the parties, after negotiations for several months, have jointly sought mediation through the National Mediation Board.

Pilot pay scales have increased significantly in the industry and we expect our next contract with this work group to reflect industry competitive rates which will be significantly higher than our current pilot rates.

An agreement with the Transport Workers Union for the flight attendant group was approved in 2017 and became amendable in 2022.

We are also in the process of negotiating a new labor agreement with this group.

We also have agreements with the International Brotherhood of Teamsters for the flight dispatchers which was approved in May 2019 and for maintenance technicians which was approved in October 2021.

These agreements will increase our costs over their respective five-year contract terms.

Future union contracts with these, or other, work groups could put additional pressure on our labor costs.

If we are unable to reach agreement on the terms of collective bargaining agreements in the future, or we experience wide-spread employee dissatisfaction, attrition in these work groups, difficulty in hiring sufficient personnel or work slow downs or stoppages could have an adverse effect on our operations and future results.

The inability to attract and retain qualified flight crew and other airline personnel could limit our growth plans and operations and adversely affect our business and results of operations.

We compete against other U.S.

airlines for pilots, aircraft maintenance technicians and other labor.

Recently, there has been a scarcity of pilots for hire, more pilots in the industry are approaching mandatory retirement age and there is significant competition to hire new pilots.

Attrition beyond normal levels or the inability to attract new pilots could negatively impact our growth, operations and results of operations.

The scarcity of pilots and opportunities at other carriers could encourage our captains and first officers to leave our airline, exacerbating the challenge to maintain sufficient numbers of pilots to fly our published schedule and to grow our network.

The lack of a new collective bargaining agreement with our pilots’ union (now in negotiation) could also contribute to attrition and serve as an impediment to our being able to hire and maintain sufficient numbers of pilots.

Additionally, the airline industry, including our third party vendors, has experienced and may continue to experience challenges in hiring and retaining other labor positions, such as aircraft maintenance technicians, ground handling and customer service agents, and flight attendants.

Our and our vendors' inability to attract and retain personnel for these positions could negatively impact our results of operations and growth plans.

Additionally, we may be required to increase our wage and benefit packages, or pay increased rates to our vendors, to retain these positions.

This would result in increased overall costs and may adversely impact our results of operations.

Our reputation and financial results could be harmed in the event of an accident or restrictions affecting aircraft in our fleet.

As of February 14, 2022, our operating fleet consists exclusively of 110 Airbus A320 series aircraft, of which all but 13 were acquired used.

As of February 1, 2023, our operating fleet consists of 122 Airbus A320 series aircraft, of which all but 13 were acquired used.

Our aircraft range from 4 to 25 years from their manufacture date at February 1, 2023, with an average age of 14.8 years.

6 unchanged sentences

Our business could also be significantly harmed if the public avoids flying our aircraft due to an adverse perception of the aircraft we utilize because of safety concerns or other problems, whether real or perceived, or in the event of an accident involving these aircraft.

A breach in the security of personal or credit card data could severely damage our reputation, cause considerable additional costs and result in regulatory penalties.

A breach in the security of personal information, breach in credit card data, or system disruptions caused by security breaches or cyberattacks – including attacks on those parties we do business with – could harm our ability to conduct our operations and could have a material adverse effect on our financial position or results of operations.

We receive, retain, and transmit certain personal information about our customers.

Our on-line operations also rely on the secure transmission of this customer data.

We use third party systems, software, and tools in order to protect the customer data we obtain through the course of our business.

Although we use these security measures to protect this customer information, a compromise of our physical or network security systems through a cyber-security attack would create the risk that our customers’ personal information might be obtained by unauthorized persons.

A compromise in our security systems could adversely affect our reputation, which could impact customers' willingness to do business with us using credit or debit cards, disrupt operations, and could also result in litigation or the imposition of penalties.

In addition, it could be costly to remediate.

The way businesses handle customer data is subject to increasing legislation and regulation typically intended to protect the privacy of customer data received, retained, and transmitted.

Additionally, our online operations rely on the secure transmission of customer data.

We use third party systems, integrated software, and advanced cyber security tools in order to protect the customer data we obtain through the course of our business.

Although we use a variety of security techniques to protect customer information, a compromise of our physical or network security systems through a cyberattack would create the risk that customers’ personal information might be obtained by unauthorized persons.

In addition, such security related events could be widely publicized and could adversely affect our reputation with our customers, vendors and stockholders, could harm our competitive position particularly with respect to our ecommerce operations, and could thereby materially adversely affect our operations, revenues, results of operations and financial position.

Consequences could include litigation, other legal actions against us, and/or the imposition of penalties, fines, fees or liabilities.

We currently are self insured against these risks.

Moreover, a security compromise or ransomware event could require us to devote significant management resources to address the problems created by the issue and to expend significant additional resources to further upgrade the security measures we employ to guard personal and confidential information against cyberattacks and other attempts to access or otherwise compromise such information and could result in a disruption of our operations, particularly our digital operations.

The way organizations handle customer data is subject to increasing legislation and regulation, typically intended to protect the privacy of customer data received, retained, and transmitted.

We could be adversely affected if we fail to comply with existing rules or practices, or if legislation or regulations are expanded to require changes in our business practices.

9 unchanged sentences

Any disruption to these systems could result in the loss of important data and revenue, increase in expenses, and harm to our business.

Increases in fuel prices or unavailability of fuel would harm our business and profitability.

Fuel costs constituted approximately 30.5 percent of our total operating expenses in 2021 and the average cost per gallon increased by 45.3 percent in 2021 over 2020 and has continued to increase in first quarter 2022.