Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis presents factors that had a material effect on our results of operations during the years ended December 31, 2024 and 2023. Unless otherwise expressly stated, for discussion and analysis of 2023 and a comparison of our 2023 results to 2022 results, please refer to our Annual Report on Form 10-K for the year ended December 31, 2023, under Part II Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Also discussed is our financial position as of December 31, 2024 and 2023. Investors should read this discussion in conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this annual report. This discussion and analysis contains forward-looking statements. Please refer to the section entitled “Disclosure Regarding Forward-Looking Statements” at the beginning of this annual report on Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements.
37
2024 Highlights
• Took delivery of our first four newly manufactured Boeing 737 MAX aircraft and inducted them into service with promising early performance
• Total operating revenue of $2.5 billion, up 0.1 percent year-over-year
• Record total average ancillary fare of $75.83 per passenger, up 4.0 percent from 2023
• Average third party products fare was $8.48 per passenger, up 29.1 percent year-over-year
• Restored utilization to near 2019 levels during the peak December 2024 holiday period
• Ancillary revenue increased as a result of progress on commercial initiatives such as Allegiant Extra, third party travel insurance and restoration of a third bundle of ancillary products
• Recorded $80.7 million in fixed fee revenue, up 17.7 percent compared to the prior year's Company record breaking high
• $134.7 million in total co-brand credit card remuneration, up 12.7 percent from the prior year
• As of December 31, 2024, we had approximately 545,000 total Allegiant Allways Rewards Visa cardholders
• Ended 2024 with approximately 18 million total active Allways Rewards members
• In April 2024, ratified a new five-year agreement with the Transport Workers Union of America, AFL-CIO Local 577, representing Allegiant's flight attendants
◦ Agreement includes wage increases, certain quality-of-life improvements and a ratification bonus
• Published the 2023 Sustainability Report reaffirming the Company's sustainability goals
• Ranked third on the American Customer Satisfaction Index for Airlines, moving up from seventh in 2023
• Named best low-cost carrier in North America by Skytrax, the international air transport rating organization
• Named the number one Best Airline Credit Card for the sixth consecutive year and Best Frequent Flyer program in USA TODAY's 10Best 2024 Readers' Choice Awards
• Ranked number 4 among major US carriers in the Wall Street Journal's "The Best and Worst Airlines of 2024"
• Announced 44 new nonstop routes during the fourth quarter, tying the record for the largest expansion in Company history, including three new cities, of which 39 routes had no prior nonstop service
• Gregory Anderson assumed the role of chief executive officer and president in September 2024
• Completed our first full year of operations of Sunseeker Resort and engaged experienced hospitality advisors to pursue strategic alternatives with potential partners
38
AIRCRAFT
Operating Fleet
The following table sets forth the number and type of aircraft in service and operated by us as of the dates indicated. All of the aircraft in our fleet as of December 31, 2024 are owned by us except as indicated in the footnotes to the table:
As of December 31,
2024 2023 2022
A320 (1)(2)
87 92 86
A319 (3)
34 34 35
737-8200 4 — —
Total 125 126 121
(1) Does not include one aircraft of which we have taken delivery as of December 31, 2023 and which was not in service as of that date.
(2) Includes 23 aircraft under finance lease and 13 aircraft under operating lease as of December 31, 2024 and December 31, 2023, and 20 aircraft under finance lease and 13 aircraft under operating lease as of December 31, 2022.
(3) Includes four aircraft under operating lease as of December 31, 2024, December 31, 2023, and December 31, 2022.
As of December 31, 2024, we are party to forward purchase agreements for 46 aircraft with nine deliveries expected in 2025, approximately 14 in 2026 and the remainder in 2027. The timing of these deliveries is based on management's best estimates and differs from the contract in place. Refer to Part I - Item 2 . Properties for further detail regarding our aircraft fleet.
39
NETWORK
We manage capacity and route expansion through optimization of our flight schedule to, among other things, better match demand in certain markets. We continually adjust our network through the addition of new markets and routes, adjusting the frequencies into existing markets, and exiting under-performing markets, as we seek to achieve and maintain profitability on each route we serve.
We paused network growth in 2023 and 2024 due to flight crew constraints and aircraft delivery delays among other factors. We aim to achieve meaningful growth with greater utilization of our fleet. In November 2024, we announced 44 new routes and three new cities beginning in 2025 as we begin to pursue network growth in 2025 and after.
As of February 1, 2025, and including service announcements through that date, we were selling seats on 577 routes serving 122 cities in 42 states.
The following table shows the number of leisure destinations and cities served as of the dates indicated (includes cities served seasonally):
As of December 31,
2024 2023 2022
Leisure destinations 34 33 32
Origination cities 87 91 93
Total cities 121 124 125
Total routes 541 544 572
40
TRENDS
Aircraft Fuel
The cost of fuel is volatile, as it is subject to many economic and geopolitical factors we can neither control nor predict. Significant increases in fuel costs could materially affect our operating results and profitability. We have not sought to use financial derivative products to hedge our exposure to fuel price volatility, nor do we have any plans to do so in the future.
Increasing Utilization
We are in the midst of an initiative to increase aircraft utilization back to 2019 levels by adding service to our schedule in our most profitable peak periods. By way of example, our aircraft utilization rate was 9.8 hours per aircraft per day in July 2019 compared to 7.7 hours per aircraft per day in July 2024. During the December 2024 holiday period, we matched our daily utilization from the corresponding period in 2019 and expect to continue the momentum to achieve this goal during our busiest periods of March, June and July 2025. However, this effort is subject to various risks, some of which may not be under our control.
Boeing Agreement
We have signed an agreement and amendments with Boeing to purchase 50 newly manufactured 737 MAX aircraft with options to purchase up to an additional 80 737 MAX aircraft. We took delivery of four MAX aircraft in 2024, with the aircraft entering revenue service before the end of the year. We believe this new aircraft purchase is complementary with our low-cost strategy based on our intent to retain ownership of the aircraft, the longer useful life for depreciation purposes, and expected fuel savings and operational reliability from the use of these new aircraft.
In the interest of increased quality control at Boeing and its suppliers, the FAA has indicated aircraft production rates will be capped until they are satisfied with Boeing's quality practices. These factors, other delays in Boeing obtaining needed regulatory approvals, and other factors impacting Boeing could delay deliveries to us even further than management's current expectations. Although the contract provides for more deliveries, at this time, we currently expect nine aircraft to be delivered to us in 2025. Further delays in aircraft deliveries will impact our ability to schedule additional growth in late 2025 and beyond.
New Reservation System
During 2023, we converted to the Navitaire reservation system to replace our legacy home-grown system. While we expect incremental passenger revenue once this system is fully implemented, we suffered some per passenger air ancillary revenue degradation (in the area of bundled ancillary products in particular) as certain functionality was unavailable during the transition. We restored functionality around our third bundled product offering in late 2024 and will continue to devote resources to the transition issues. We currently expect to regain all the lost per passenger revenue and begin to achieve some of the expected incremental per passenger revenue in 2026.
Union Negotiations
The collective bargaining agreement with our pilots has been amendable since 2021. We and the International Brotherhood of Teamsters jointly requested the mediation services of the National Mediation Board in January 2023 to assist with the negotiations. The mediation process with the NMB is continuing.
Separately from the ongoing collective bargaining agreement negotiations, to address retention and pilot pay issues and increase pilot staffing levels, effective in May 2023, we began accruing a retention bonus, with IBT's agreement, for pilots who continue employment with us until a new labor agreement is approved. The amount being accrued is 35 percent of current hourly pay rates, except for our first year first officers for whom the percentage is 82 percent, in each case, calculated at a minimum of 85 pay credit hours per month. Our implementation of the retention bonus has allowed us to effectively increase pay rates for our pilot team members (by way of the accrual of the retention bonus), add pilots through hiring and significantly slow attrition.
For the year ended December 31, 2024, we recorded estimated pilot retention bonus accruals of $91.5 million bringing the total accrual to $146.1 million at year end, including the related payroll taxes. The bonus will be paid to all pilots remaining employed with us after ratification of a new collective bargaining agreement.
Network Expansion
We have identified more than 1,400 incremental routes as opportunities for future network growth, with approximately 77 percent of these additional routes having no current nonstop service. Our ability to add significant numbers of new routes has been constrained in recent years by flight crew staffing, high fuel costs, economic conditions and other factors. During 2025 and future periods, we expect to add meaningful capacity growth with greater utilization of our fleet (and, in particular, during peak demand periods) and with projected growth of the fleet after 2025.
41
Sunseeker Resort
Sunseeker Resort at Charlotte Harbor opened in December 2023. As with many new hotels or resorts, Sunseeker's booking and occupancy rates are lower than more established properties. In addition, occupancy during 2024 was compromised by three major hurricanes impacting the area in summer and fall 2024. Sunseeker incurred significant operating losses in its first year of operations in 2024. Although we are seeing improvement in recent months, we expect losses to continue in 2025. Our customer reviews continue to be positive and we hope to build on that favorable customer sentiment to achieve better financial performance of the Resort in the future. We have hired experienced advisors to begin a process to seek a capital partner to purchase the Resort or an interest in the Resort. In the meantime, we have engaged experienced hospitality advisors to identify areas for improvement in an effort to optimize the value of this asset and evaluate strategic alternatives with potential partners. These efforts are subject to many uncertainties and may not be successful.
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 submitted a joint application to the DOT requesting approval of, and antitrust immunity for, the alliance. The DOT's review of our application is currently suspended pending the outcome of diplomatic engagement on broader treaty issues and, as a result, the timing of commencement of this service is uncertain as it will depend on when or if the DOT will ultimately approve the grant of antitrust immunity.
42
Our Operating Expenses
A brief description of the items included in our operating expense line items follows.
Salaries and benefits expense includes wages, salaries, employee bonuses and pilot retention bonus accruals, as well as expenses associated with employee benefit plans, stock compensation expense related to equity grants, and employer payroll taxes. The CARES Act employee retention tax credit was recorded as an offset to salaries and benefits expense in 2022.
Aircraft fuel expense includes the cost of aircraft fuel, fuel taxes, into plane fees and airport fuel flowage, storage or through-put fees.
Station operations expense includes the fees charged by airports for the use or lease of airport facilities and fees charged by third party vendors for ground handling services, commissary expenses, and other related services. Station operations expense also includes most of our irregular operations costs.
Depreciation and amortization expense includes the depreciation of all owned fixed assets, including aircraft and engines, Sunseeker Resort assets, and assets recorded in connection with finance leases. Also included is the amortization of heavy maintenance expenses on our aircraft and engines, which are capitalized under the deferral method of accounting and amortized as a component of depreciation and amortization expense over the estimated period until the next scheduled major maintenance event.
Maintenance and repairs expense includes all parts, materials and spares required to maintain our aircraft. Also included are fees for repairs performed by third party vendors.
Sales and marketing expense includes all advertising, promotional expenses, sponsorships, travel agent commissions, debit and credit card processing fees associated with the sale of scheduled service and air-related ancillary charges, costs related to advertising and marketing for Sunseeker Resort, and credit card processing fees for Resort bookings.
Aircraft lease rentals expense consists of the cost of leasing aircraft under operating leases with third parties as well as the cost for sub-service which may be utilized in order to accommodate passengers in the event of operational disruption.
Other expense includes travel and training expenses for crews and ground personnel, facility lease expenses, professional fees, personal property taxes, information technology consulting, other expenses for Sunseeker Resort, the cost of passenger liability insurance, aircraft hull insurance and all other insurance policies, excluding employee welfare insurance. Additionally, this expense includes gain and loss on disposals of aircraft and other equipment, and all other administrative and operational overhead expenses not included in other line items above.
Special charges include charges taken in 2024 for a bonus paid to flight attendants upon ratification of a new collective bargaining agreement, costs related to an organizational restructuring of certain administrative personnel, and an impairment charge taken on Sunseeker Resort and the related Aileron Golf Course. Other special charges in 2024, 2023, and 2022 relate to accelerated retirements of 21 airframes for early retirement to coincide with planned 737 MAX aircraft deliveries and losses incurred by Sunseeker from the impact of hurricanes and other weather related events, net of insurance recoveries.
43
RESULTS OF OPERATIONS
2024 compared to 2023
Operating Revenue
Year Ended December 31, Percent Change
Operating Revenues (in thousands) 2024 2023 YoY
Passenger $ 2,217,059 $ 2,324,397 (4.6) %
Third party products 142,128 112,579 26.2
Fixed fee contracts 80,660 68,548 17.7
Resort and other 72,742 4,333 NM
Total operating revenues $ 2,512,589 $ 2,509,857 0.1
NM - not meaningful
Passenger revenue. Passenger revenue decreased 4.6 percent in 2024 compared to 2023 related to a 2.2 percent decrease in scheduled service passengers on a slight increase in capacity and a 6.3 percent decrease in scheduled service base fares which more than offset a 1.5 percent increase in air-related ancillary revenue per passenger.
Third party products revenue. Third party products revenue increased $29.5 million, or 26.2 percent, in 2024 compared to 2023. The increase was driven by a $21.1 million increase in marketing revenue from our co-brand credit card and $10.1 million from a travel insurance offering introduced during 2024, partially offset by declines in revenues from sales of hotel rooms and rental cars.
Fixed fee contract revenue. Fixed fee contract revenue increased 17.7 percent in 2024 compared to 2023 as the result of an 18.3 percent increase in fixed fee departures. Increased fixed fee flying was primarily driven by military charters, which increased by 34.4 percent compared to the prior year.
Resort and other revenue. Resort and other revenue increased $68.4 million in 2024 compared to 2023, primarily as the result of the opening of Sunseeker Resort in December 2023. Resort revenue was $71.8 million in 2024 compared to $2.9 million in 2023.
Operating Expenses
The following table presents airline only operating unit costs on a per ASM basis, defined as Operating CASM, for the indicated periods. Excluding fuel on a per ASM basis provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors beyond our control. Excluding special charges allows management and investors to better compare our airline unit costs with those of other airlines.
Year Ended December 31, Percent Change
Airline Unitized Costs (in cents) 2024 2023 YoY
Salaries and benefits 4.06 ¢ 3.58 ¢ 13.4 %
Aircraft fuel 3.31 3.71 (10.8)
Station operations 1.44 1.37 5.1
Depreciation and amortization 1.22 1.18 3.4
Maintenance and repairs 0.66 0.66 —
Sales and marketing 0.52 0.58 (10.3)
Aircraft lease rentals 0.12 0.13 (7.7)
Other 0.54 0.62 (12.9)
Special charges 0.24 0.19 26.3
Airline operating CASM 12.11 ¢ 12.02 ¢ 0.7
Airline operating CASM, excluding fuel 8.80 ¢ 8.31 ¢ 5.9
Airline operating CASM, excluding fuel and special charges 8.56 ¢ 8.12 ¢ 5.4
44
Airline operating CASM, excluding fuel and airline special charges. Airline operating CASM, excluding fuel and airline special charges, increased by 5.4 percent to 8.56 ¢ for 2024 compared to 8.12 ¢ in 2023. The CASM-ex increase is primarily attributable to a 13.4 percent increase in airline salaries and benefits expense on a per ASM basis (for the reasons described in the expense line item discussion below). This increase was on relatively flat capacity as during 2024 we continued to incur significant labor costs for pilots trained to fly our Boeing 737 MAX aircraft while the aircraft deliveries were delayed.
Aircraft fuel expense. Aircraft fuel expense decreased $68.1 million, or 9.8 percent, in 2024 compared to 2023. The decrease was primarily driven by a 10.7 percent decrease in average fuel cost per gallon, offset by a 1.0 percent increase in gallons consumed on a 1.1 percent increase in total system ASMs.
Salaries and benefits expense. Airline salaries and benefits expense increased $98.2 million, or 14.6 percent, in 2024 compared to 2023. During 2024, we continued to incur significant labor costs for pilots trained to fly our Boeing 737 MAX aircraft while the aircraft deliveries were delayed, which contributed to a 6.2 percent increase in airline full-time equivalent employees ("FTEs"). Other factors contributing to the increase included pilot retention bonuses that we began to accrue in May 2023, for which there was a full year of accrual in 2024 versus only eight months in 2023, and increases in crew pay including increased pay rates under a new collective bargaining agreement with our flight attendants.
Salaries and benefits expense at Sunseeker Resort increased by $33.8 million due to a full year of operations in 2024 compared to a partial year in 2023.
Station operations expense. Station operations expense increased $16.3 million, or 6.3 percent, in 2024 compared to 2023. This increase was primarily driven by a $6.2 million increase in building rent stemming primarily from base expansions and a $4.6 million increase in passenger compensation attributable in large part to the CrowdStrike outage in July 2024. Increases in airport and landing fees on a 0.9 percent increase in departures also contributed to the change.
Depreciation and amortization expense. Airline depreciation and amortization expense increased $10.9 million, or 4.9 percent, in 2024 compared to 2023 as the result of increases in deferred heavy maintenance amortization as well as increases in capitalized software amortization resulting from the airline's implementation of new enterprise resource planning ("ERP") systems including SAP, Navitaire, and Trax during 2023 and 2024.
Sunseeker Resort depreciation and amortization increased by $24.2 million in 2024 compared to 2023 as the result of only a partial year of expense in 2023 due to the Resort opening in December 2023.
Maintenance and repairs expense. Maintenance and repairs expense increased by $1.6 million or 1.3 percent in 2024 compared to 2023, which remained flat on a per ASM basis.
Sales and marketing expense. Airline sales and marketing expense decreased by $9.2 million or 8.5 percent in 2024 compared to 2023 primarily as the result of the discontinuation of a marketing agreement in 2024 and a fee incurred for transitioning our co-brand credit card to a new payment network in 2023 that was not present in 2024. Credit card processing fees also decreased in line with a 4.6 percent decrease in passenger revenue compared to 2023.
Sunseeker Resort sales and marketing expense increased by $908.0 thousand or 14.7 percent in 2024 compared to 2023 as the result of increased marketing efforts after the Resort's opening.
Other operating expense. Airline other operating expense decreased by $15.4 million or 13.1 percent in 2024 compared to 2023 as the result of gains on opportunistic sales of spare flight equipment, which decrease was partially offset by increases in software licenses, crew travel, and property taxes.
Sunseeker Resort other operating expense increased $32.3 million in 2024 compared to 2023 as the result of only a partial year of expense in 2023 due to the opening of the Resort in December 2023. The increase at the Resort includes $14.1 million related to insurance and property taxes and $8.3 million in food and beverage cost of sales, with other general and administrative expenses driving the remaining change.
Special charges. Airline special charges were $45.3 million in 2024 compared to $35.1 million in 2023. 2024 airline special charges included $31.1 million of accelerated depreciation on airframes identified for early retirement, compared to $35.1 million in 2023. 2024 airline special charges also included a $10.8 million ratification bonus related to the new collective bargaining agreement with our flight attendants and a $3.4 million organizational restructuring charge.
Sunseeker Resort special charges in 2024 primarily consist of a $321.8 million impairment charge on the long-lived assets of the Resort recorded in fourth quarter 2024. Other special charges in both 2024 and 2023 relate to hurricane damages and other weather-related events, offset by insurance recoveries during the period. Refer to Note 15 in the consolidated financial statements for additional information regarding the impairment charge.
45
Income tax expense . We recorded a $68.2 million tax benefit in 2024 compared to a $41.5 million tax expense during 2023. The effective tax rates for 2024 and 2023 differed from the statutory federal income tax rate of 21.0 percent primarily due to state income taxes, executive compensation, and the impact of ASU 2016-09 related to share-based compensation.
2023 compared to 2022
The comparison of our 2023 results to 2022 results is included in our Annual Report on Form 10-K for the year ended December 31, 2023, under Part II Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
Airline Operating Statistics
The following table shows the airline operating statistics for the last three years.
For the Year Ended December 31,
Airline operating statistics (unaudited):
2024 2023 2022
Total system statistics:
Passengers 16,982,836 17,342,236 16,796,544
Available seat miles (ASMs) (thousands) 18,984,711 18,772,110 18,419,045
Airline operating expense per ASM (CASM) (cents) 12.11 ¢ 12.02 ¢ 11.75 ¢
Fuel expense per ASM (cents) 3.31 ¢ 3.71 ¢ 4.42 ¢
Airline special charges per ASM (cents) 0.24 ¢ 0.19 ¢ — ¢
Airline operating CASM, excluding fuel and special charges (cents) 8.80 ¢ 8.31 ¢ 7.33 ¢
Departures 121,580 120,525 118,069
Block hours 288,407 285,453 278,792
Average stage length (miles) 887 882 884
Average number of operating aircraft during period 124.7 125.2 114.2
Average block hours per aircraft per day 6.3 6.2 6.7
Full-time equivalent employees at end of period 5,991 5,643 5,306
Fuel gallons consumed (thousands) 227,345 224,996 218,606
ASMs per gallon of fuel 83.5 83.4 84.3
Average fuel cost per gallon $ 2.76 $ 3.09 $ 3.73
Scheduled service statistics:
Passengers 16,765,283 17,143,870 16,630,138
Revenue passenger miles (RPMs) (thousands) 15,303,737 15,639,329 15,224,346
Available seat miles (ASMs) (thousands) 18,314,867 18,208,820 17,909,190
Load factor 83.6 % 85.9 % 85.0 %
Departures 116,441 116,044 114,066
Block hours 277,626 276,313 270,516
Average seats per departure 176.0 176.3 175.7
Yield (cents) (1)
7.11 ¢ 7.59 ¢ 7.31 ¢
Total passenger revenue per ASM (TRASM) (cents) (2)
12.88 ¢ 13.38 ¢ 12.50 ¢
Average fare - scheduled service (3)
$ 64.89 $ 69.25 $ 66.88
Average fare - air-related charges (3)
$ 67.35 $ 66.33 $ 61.67
Average fare - third party products $ 8.48 $ 6.57 $ 6.07
Average fare - total $ 140.72 $ 142.15 $ 134.62
Average stage length (miles) 893 888 890
Fuel gallons consumed (thousands) 219,061 218,129 212,466
Average fuel cost per gallon $ 2.76 $ 3.09 $ 3.72
Percent of sales through website during period 93.6 % 95.8 % 96.0 %
Other Data:
Rental car days sold 1,306,775 1,377,710 1,447,708
Hotel room nights sold 196,605 249,933 282,854
(1) Defined as scheduled service revenue divided by revenue passenger miles
(2) Various components of this measure do not have a direct correlation to ASMs. These figures are provided on a per ASM basis so as to facilitate comparisons with airlines reporting revenues on a per ASM basis.
(3) Reflects division of passenger revenue between scheduled service and air-related charges in our booking path.
46
The following terms used in this section and elsewhere in this annual report have the meanings indicated below:
“ Available seat miles ” or “ ASMs ” represents the number of seats available for passengers multiplied by the number of miles the seats are flown.
“ Average fuel cost per gallon ” represents total aircraft fuel expense for our total system or scheduled service (as applicable) divided by the total number of fuel gallons consumed in our total system or scheduled service.
“ Average stage length ” represents the average number of miles flown per flight.
“Block hours” represents the number of hours during which the aircraft is in revenue service, measured from the time of gate departure until the time of gate arrival at the destination.
“ Load factor ” represents the percentage of aircraft seating capacity utilized (revenue passenger miles divided by available seat miles).
“Airline o perating expense per ASM ” or “ CASM ” represents airline only operating expenses excluding Sunseeker divided by total system available seat miles.
“Airline o perating CASM, excluding fuel and special charges ” represents airline only operating expenses excluding Sunseeker, less aircraft fuel expense and special charges, divided by total system available seat miles. This statistic provides management and investors the ability to measure and monitor our airline cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors and therefore are beyond our control.
“ Passengers ” represents the total number of passengers flown on all flight segments.
“ Revenue passenger miles ” or “RPMs” represents the number of miles flown by revenue passengers.
“Total passenger revenue per ASM” or “TRASM” represents total passenger revenue divided by scheduled service available seat miles.
47
LIQUIDITY AND CAPITAL RESOURCES
Current liquidity
Cash, cash equivalents and investment securities (short-term and long-term) decreased to $832.9 million at December 31, 2024, from $870.7 million at December 31, 2023. Investment securities represent highly liquid marketable securities which are available-for-sale.
As of December 31, 2024, we had $275.0 million of undrawn capacity under revolving credit facilities plus another $25.1 million of undrawn capacity under a PDP financing facility and $218.5 million under prearranged aircraft financing facilities.
Restricted cash represents escrowed funds under fixed fee contracts, escrowed project funds and cash collateral against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties. Under our fixed fee flying contracts, we require our customers to prepay for flights to be provided by us. The prepayments are escrowed and are recorded as restricted cash with a corresponding amount reflected as air traffic liability until the flight is completed.
We reinstituted a regular cash dividend in third quarter 2023 at an annual rate of $2.40 per share, payable quarterly. The quarterly cash dividend was subsequently suspended in July 2024 for an indefinite period of time. We resumed our share repurchases in fourth quarter 2022 but we did not repurchase any shares on the open market during 2024. We had $75.7 million of unused authority at December 31, 2024.
We believe we have more than adequate liquidity resources through our cash, cash equivalent and short term investment balances, financing commitments, our undrawn capacity under existing credit facilities, operating cash flows and anticipated access to liquidity, to meet our current contractual obligations and remain in compliance with the debt covenants in our existing financing agreements for the next 12 months. We will continue to consider raising funds through debt financing to finance aircraft purchases and also on an opportunistic basis.
Debt
Our debt and finance lease obligations balance, without reduction for related issuance costs, decreased from $2.28 billion as of December 31, 2023 to $2.08 billion as of December 31, 2024. During 2024, we borrowed $387.0 million at variable rates. Additionally, we made principal payments of $585.5 million, including a partial prepayment of $250.0 million of principal of our Sunseeker construction loan. As of December 31, 2024, we had $275.0 million undrawn and available under our revolving credit facilities.
Sources and Uses of Cash
Operating Activities. Operating cash inflows are primarily derived from providing air transportation and related ancillary products and services to customers. During 2024, our operating activities provided $338.5 million of cash compared to $423.1 million during 2023. This change was primarily attributable to a $109.3 million decrease in airline operating income as well as a full-year operating loss from Sunseeker Resort compared to 2023 with offsets for changes in individual current asset and liability items.
Investing Activities. Cash provided by investing activities was $5.6 million during 2024 compared to cash used of $721.9 million in 2023. During 2024, cash outflows for purchases of property and equipment decreased by $535.3 million, which includes a $307.1 million decrease in cash paid for aircraft pre-delivery deposits and a $235.7 million reduction in construction costs for Sunseeker Resort. Also contributing to the change were a $110.6 million increase in proceeds from maturities of investment securities, net of purchases, a $59.6 million increase in proceeds from sales of flight equipment, and $50.0 million in proceeds from the repayment of a loan receivable.
Financing Activities. Cash used in financing activities for 2024 was $201.3 million, compared to cash provided by financing activities of $212.9 million in 2023. The change was primarily the result of a $104.7 million increase in principal payments on long term debt and finance lease obligations and a decrease of $255.6 million in proceeds from issuance of debt and finance leases. The remaining change relates to an $84.0 million decrease in Sunseeker construction financing disbursements, which are the proceeds of Sunseeker insurance recoveries disbursed to us.
48
OFF-BALANCE SHEET ARRANGEMENTS, COMMITMENTS AND CONTRACTUAL OBLIGATIONS
The following table discloses aggregate information about our contractual cash obligations and off-balance sheet arrangements as of December 31, 2024 and the periods in which payments are due:
Contractual obligations (in thousands) Less than 1 year 2-3 years 4-5 years More than 5 years Total
Long-term debt obligations (1)
$ 539,160 $ 957,638 $ 227,054 $ 289,067 $ 2,012,919
Finance lease obligations 51,408 102,216 170,304 231,772 555,700
Operating lease obligations 24,532 25,584 20,024 32,590 102,730
Aircraft acquisition obligations (2)
399,895 1,178,214 — — 1,578,109
Total future payments under contractual obligations $ 1,014,995 $ 2,263,652 $ 417,382 $ 553,429 $ 4,249,458
(1) Long-term debt obligations (including variable interest entities) include scheduled interest payments, using applicable reference rates as of December 31, 2024, and exclude debt issuance costs.
(2) Includes aircraft and engine acquisition obligations under existing purchase agreements based on our current expectations of aircraft deliveries (which differs from the contractual provisions). These amounts are not reflected on our balance sheet.
49
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements based on events and transactions occurring during the periods reported. Note 2 to our Consolidated Financial Statements provides a detailed discussion of our significant accounting policies.
Critical accounting policies are defined as those policies that reflect significant judgments about matters that are inherently uncertain. Our actual results may differ from these estimates under different assumptions or conditions. We believe our critical accounting policies are limited to those described below.
Allways Rewards ® Credit Card Program
Under the Allegiant co-brand credit card arrangement, points are sold and consideration is received under an agreement which expires in 2031. Under this arrangement, we identified the following deliverables: travel points to be awarded (the travel component), use of our brand and access to our member lists, and certain other advertising and marketing elements (collectively the marketing component). Each of these deliverables is accounted for separately and allocation of the consideration from the agreement is determined based on the relative selling price of each deliverable. We applied a level of management judgment and estimation in determining the best estimate of selling price for each deliverable by considering multiple inputs and methods including, but not limited to, the redemption value of points awarded, discounted cash flows, brand value, volume discounts, published selling prices, number of points to be awarded and number of points expected to be redeemed.
Revenue from the travel component is deferred based on its relative selling price and is recognized into revenue when the points are redeemed by cardholders and the related service is provided. Revenue from the marketing component is considered earned in the period in which points are sold and is therefore recognized into third party products revenue in the same period.
Accounting for Long-Lived Assets
We record impairment losses on long-lived assets used in operations, consisting principally of property and equipment, when events or changes in circumstances indicate, in management’s judgment, that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. In making these determinations, we exercise judgment in making certain assumptions, including, but not limited to: (i) estimated fair value of the assets; and (ii) estimated future cash flows expected to be generated by those assets which are based on additional assumptions such as (but not limited to) the overall effect of trends in the airline and hospitality industries and the economy, asset utilization, average fare, block hours, fuel costs, fixed fee contracts, average daily rates, occupancy, cost of goods sold, group bookings, reserve for capital replacement, length of service the asset will be used in operations, and estimated salvage values.
In estimating the fair value of Sunseeker Resort using a discounted cash flow model, we have primarily relied upon current and projected future market information and input from other industry sources and third party experts in developing projections of growth rates, occupancy, average daily rates, operating costs, the discount rate, and the terminal capitalization rate. Subsequent revisions to these estimates could be caused by changing market conditions in the region, hospitality industry, the economy, weather and related events and other factors.
In estimating the useful lives and residual values of our aircraft, we have primarily relied upon actual experience with the same or similar aircraft types, current and projected future market information, and input from other industry sources. Subsequent revisions to these estimates could be caused by changing market prices of our aircraft, changes in utilization of the aircraft, and other fleet events.
50
RECENT ACCOUNTING PRONOUNCEMENTS
See related disclosure in Note 2 to our Consolidated Financial Statements.
51