IIIS Discussion Paper

Total Page:16

File Type:pdf, Size:1020Kb

IIIS Discussion Paper IIIS Discussion Paper No.433 / August 2013 Fuel Hedging, Operational Hedging and Risk Exposure– Evidence from the Global Airline Industry August 2013 Britta Berghöfer School of Business, Trinity College Dublin 2, Ireland Lufthansa Aviation Center, Airportring, 60546 Frankfurt / Main, Germany [email protected] Brian Lucey (Corresponding Author) School of Business Trinity College Dublin 2 Ireland Institute for International Integration Studies (IIIS), The Sutherland Centre, Level 6, Arts Building, Trinity College Dublin 2 Ireland Glasgow Business School, Glasgow Caledonian University, Cowcaddens Rd, Glasgow, Lanarkshire G4 0BA, United Kingdom Faculty of Economics University of Ljubljana Kardeljeva ploscad 17 Ljubljana, 1000 , Slovenia [email protected] IIIS Discussion Paper No. 433 Fuel Hedging, Operational Hedging and Risk Exposure– Evidence from the Global Airline Industry August 2013 Britta Berghöfer School of Business, Trinity College Dublin 2, Ireland Lufthansa Aviation Center, Airportring, 60546 Frankfurt / Main, Germany [email protected] Brian Lucey (Corresponding Author) School of Business Trinity College Dublin 2 Ireland Institute for International Integration Studies (IIIS), The Sutherland Centre, Level 6, Arts Building, Trinity College Dublin 2 Ireland Glasgow Business School, Glasgow Caledonian University, Cowcaddens Rd, Glasgow, Lanarkshire G4 0BA, United Kingdom Faculty of Economics University of Ljubljana Kardeljeva ploscad 17 Ljubljana, 1000 , Slovenia [email protected] Disclaimer Any opinions expressed here are those of the author(s) and not those of the IIIS. All works posted here are owned and copyrighted by the author(s). Papers may only be downloaded for personal use only. Fuel Hedging, Operational Hedging and Risk Exposure– Evidence from the Global Airline Industry August 2013 Britta Berghöfer School of Business, Trinity College Dublin 2, Ireland Lufthansa Aviation Center, Airportring, 60546 Frankfurt / Main, Germany [email protected] Brian Lucey (Corresponding Author) School of Business Trinity College Dublin 2 Ireland Institute for International Integration Studies (IIIS), The Sutherland Centre, Level 6, Arts Building, Trinity College Dublin 2 Ireland Glasgow Business School, Glasgow Caledonian University, Cowcaddens Rd, Glasgow, Lanarkshire G4 0BA, United Kingdom Faculty of Economics University of Ljubljana Kardeljeva ploscad 17 Ljubljana, 1000 , Slovenia [email protected] Keywords: Airline, hedging, operational hedging, financial hedging JEL Codes: G32, L93 ABSTRACT The aviation industry is characterized by low profit margins and a constant struggle with skyrocketing fuel costs. Financial and operational hedging strategies serve aviation managers as a tool to counteract high and volatile fuel prices. While most research on fuel hedging has concentrated on the U.S. airline market, this paper is the first study to include airlines from Asia and Europe. We analyze 64 airlines over 10 years and find that Asian carriers are more negatively exposed than European airlines but less exposed than North American airlines. In contrast to Treanor, Simkins, Rogers and Carter (2012), this study finds less significant negative exposure coefficients among U.S. carriers. Using a fixed effects model we reject the hypothesis that financial hedging decreases risk exposure. One possibility is that the decreased volatility in jet fuel prices over the past few years has perhaps made airlines less exposed to fuel prices and hence, financial hedging less effective. However, operational hedging, defined by two proxies for fleet diversity, reduces exposure significantly. A one percent increase in fleet diversity, calculated with a dispersion index using different aircraft types, reduces the risk exposure coefficient by 2.99 percent. On the other hand, fleet diversity, calculated with different aircraft families, reduces exposure by 1.45 percent. Thus, aviation managers have to balance the fleet diversity between operational flexibility and entailed costs. 1. INTRODUCTION The airline industry has always been characterized by low profit margins. Decreasing airfares due to increasing competition have made air travel a commodity market (Button, Costa, Costa and Cruz, 2011; Carter, Rogers and Simkins, 2004). Deregulation in the world airline industry has led to greater competition since the 1980s (Oum and Yu, 1998). Especially the deregulation of the aviation sector in Europe has supported the intense growth of low-cost carriers (LCC). Traditional airlines in particular suffer from losing market shares to LCCs (Civil Aviation Authority, 2006). Besides increased competition, high and volatile fuel prices challenge airlines further. Fuel accounted for 33 percent of average operating costs in 2012, for 22 percent in 2005 and for 13 percent in 2001 (IATA1, 2012a). The overall fuel bill amounted to 177 billion U.S. dollars (USD) in 2011 (IATA, 2012b). Delta Air Lines, for example, reports fuel expenses of 36 percent of total operating costs in 2012 (Delta Air Lines, 2013). Even the golf-carrier Emirates with its supposed easy access to oil declared fuel costs of 34 percent (Emirates, 2012). In addition to the cost level, fuel price volatility and a large crack spread with the underlying commodity crude oil add to the airlines’ fuel problems (IATA, 2012b). However, the exposure to market pressure prevents airlines from raising ticket fares in response to the high kerosene prices (Carter et al., 2004). Button et al. (2011), analyzing the Portuguese airline market show that full cost recovery is impossible in the current competitive situation. As airlines are unable to increase ticket prices they put their efforts on hedging activities.2 Airlines started to employ fuel hedging as a risk management strategy in the late 1980s. Before, mostly currency derivatives to counteract exchange rate fluctuations were used (Morrell and Swan, 2006). Under the assumption of the famous Modigliani and Miller Proposition 1 (1958) debt policy and consequently risk management are extraneous for investors under perfect market conditions as investors can diversify on their own. Nevertheless, due to existing market imperfections (Deshmukh and Vogt, 2005) research results suggest hedging does make sense under different conditions and in fact, might add to firm value. Companies can hedge by either using financial derivatives or by altering real option decisions (operational hedging) (Smith and Stulz, 1985). Firms generally use financial and operational hedging complementary (e.g. Kim, Mathur and Nam, 2006; Treanor, 2008). Real options may include fleet diversity, fleet fuel-efficiency and optimized fleet assignment (Morrell and Swan, 2006; Naumann, Suhl and Friedemann, 2012; Treanor, 2008; Treanor, 2012; Treanor, Rogers, Carter and Simkins, 2012a). The purpose of this paper is to uncover the determinants of airline commodity exposure. Exposure, in general, can be defined as the sensitivity of firm value to changes of the underlying financial risk (Jorion, 1990). Although various research papers have been published regarding the use of derivatives within the aviation industry, the author suggests that a further study could add to the existing body of knowledge. There are certain gaps in previous research which can serve as a valuable starting point for further research. Prior 1 IATA stands for International Air Transport Association, the largest trade association representing 240 airlines worldwide. 2 Obviously, not only passenger airlines are exposed to fuel prices and use financial derivatives but also cargo carriers and the military aviation industry encounter commodity exposure. Nevertheless, the limited information available on military operations inhibits a more detailed analysis of this sector. Cargo airlines are mostly part of a larger airline group, e.g. Deutsche Lufthansa, and are thus included in the analysis. Atlas Air is the only pure cargo carrier analyzed in this paper. 1 empirical research on jet fuel hedging has concentrated on the U.S. market. While the author acknowledges the difficulty of obtaining data outside the U.S., she suggests that it is important to examine data from other countries. In 1999, Rao points out that European airlines hedge more actively than American airlines. While analyzing the cost competitiveness of 22 major worldwide airlines, Oum and Yu (1995, 1998) uncover that Asian carriers are more cost competitive than American and European airlines. American airlines in turn have a better cost position than European carriers. Cobs and Wolf (2004) also point to differing hedging strategies among LCC and value carriers. Therefore, the author will focus on differences in commodity exposure between Asian, European and North American carriers3 as well as differences between LCC and premium airlines in the period of 2002-2012. So far, to our knowedge, no empirical research has dealt with regional or business model differences. A fixed effects regression model using panel data should estimate the effectiveness of operational and financial hedging. Lastly, based on statistically established results, this paper will provide managerial implications on how to reduce airline risk exposure.4 2. PREVIOUS RESEARCH 2.1. Airline fuel and fuel contracts Bessembinder (1991, p. 519) defines hedges as “contracts that reduce an agent's risk”. Therefore, hedging is part of the overall corporate risk management strategy (Batt, 2009; Nance, Smith and Smithson, 1993). Hentschel and Kothari (2001) further distinguish between hedging, which reduces return volatility, and
Recommended publications
  • JANUARY European Parliament Vote on Airport Charges (15 January)
    REVIEW www.airtransportnews.aero JANUARY European Parliament vote on airport charges (15 January) he European Parliament concluded its first reading on a proposed Directive on airport charges, initially the Directive will only incentivise conflicts between airlines and airports, resulting in uncertainty over infra - adopted by the European Commission a year ago. ACI EUROPE is appreciative of the European Parlia - structure investments and potentially delaying much needed capacity development. Olivier Jankovec added: T ment’s work to improve the proposal of the European Commission, but considers that serious concerns "That the Directive is silent on the need for airports to be incentivised to invest in time for the new facilities regarding fundamental issues remain. These include risking costly and damaging over-regulation as well as com - to match demand, is puzzling. It shows that the Directive not only remains imbalanced in favour of airlines but promising the ability of European airports to finance much needed infrastructure and capacity development. also fails to reflect that the interests of the airlines and that of the travelling public are not the same." Whilst the European Commission proposed to apply the Directive to all airports with more than 1 million pas - Responding to the vote of the European Parliament on Airport Charges, IACA is extremely disappointed that an sengers per year, the European Parliament increased this figure to 5 million, leaving States still free to apply opportunity to address the unbalanced relationship between the fully deregulated airline sector and their mo - the Directive to airports below this threshold. As most European airports now operate in a highly competitive nopolistic service provider (airports) has been missed.
    [Show full text]
  • ABX Holdings, Inc. 145 Hunter Drive, Wilmington, Ohio 45177
    ABX Holdings, Inc. 145 Hunter Drive, Wilmington, Ohio 45177 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 13, 2008 Notice is hereby given that the 2008 annual meeting of the stockholders of ABX Holdings, Inc., a Delaware corporation (the “Company”), has been called and will be held on May 13, 2008, at 11:00 a.m., local time, at the Roberts Convention Centre, 188 Roberts Road, Wilmington, Ohio, for the following purposes: 1. To elect two directors to the Board of Directors each for a term of three years. 2. To consider and vote on a proposal to amend the Company’s Certificate of Incorporation to change the name of the Company from ABX Holdings, Inc. to “Air Transport Services Group, Inc.” 3. To ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm of the Company for fiscal year 2008. 4. To consider and vote on a stockholder proposal. 5. To attend to such other business as may properly come before the meeting and any adjournments thereof. The foregoing matters are described in more detail in the Proxy Statement that is attached to this notice. At the meeting, we will also report on the Company’s 2007 business results and other matters of interest to stockholders. Only holders of record, as of the close of business on March 17, 2008, of shares of common stock of the Company will be entitled to notice of and to vote at the meeting and any adjournments thereof. By Order of the Board of Directors Wilmington, Ohio W.
    [Show full text]
  • Amadeus Yearbook of Ancillary Revenue by Ideaworks
    Issued 29 August 2012 The Amadeus Yearbook of Ancillary Revenue by IdeaWorks Table of Contents 2012 Amadeus Yearbook of Ancillary Revenue ................................................................................... 4 Europe and Russia ............................................................................................................................... 17 The Americas........................................................................................................................................ 28 Asia and the South Pacific ................................................................................................................. 52 Middle East and Africa ........................................................................................................................ 63 Currency Exchange Rates Used for the Worldwide Statistics .................................................. 67 Disclosure to Readers of this Report IdeaWorks makes every effort to ensure the quality of the information in this report. Before relying on the information, you should obtain any appropriate professional advice relevant to your particular circumstances. IdeaWorks cannot guarantee, and assumes no legal liability or responsibility for, the accuracy, currency or completeness of the information. The views expressed in the report are the views of the author, and do not represent the official view of Amadeus. Issued by IdeaWorksCompany.com LLC Shorewood, Wisconsin, USA www.IdeaWorksCompany.com The free distribution of this report
    [Show full text]
  • List of Section 13F Securities
    List of Section 13F Securities 1st Quarter FY 2004 Copyright (c) 2004 American Bankers Association. CUSIP Numbers and descriptions are used with permission by Standard & Poors CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. All rights reserved. No redistribution without permission from Standard & Poors CUSIP Service Bureau. Standard & Poors CUSIP Service Bureau does not guarantee the accuracy or completeness of the CUSIP Numbers and standard descriptions included herein and neither the American Bankers Association nor Standard & Poor's CUSIP Service Bureau shall be responsible for any errors, omissions or damages arising out of the use of such information. U.S. Securities and Exchange Commission OFFICIAL LIST OF SECTION 13(f) SECURITIES USER INFORMATION SHEET General This list of “Section 13(f) securities” as defined by Rule 13f-1(c) [17 CFR 240.13f-1(c)] is made available to the public pursuant to Section13 (f) (3) of the Securities Exchange Act of 1934 [15 USC 78m(f) (3)]. It is made available for use in the preparation of reports filed with the Securities and Exhange Commission pursuant to Rule 13f-1 [17 CFR 240.13f-1] under Section 13(f) of the Securities Exchange Act of 1934. An updated list is published on a quarterly basis. This list is current as of March 15, 2004, and may be relied on by institutional investment managers filing Form 13F reports for the calendar quarter ending March 31, 2004. Institutional investment managers should report holdings--number of shares and fair market value--as of the last day of the calendar quarter as required by Section 13(f)(1) and Rule 13f-1 thereunder.
    [Show full text]
  • Insper Instituto De Ensino E Pesquisa Leonardo Francisco Sant'ana
    Insper Instituto de Ensino e Pesquisa Faculdade de Economia e Administração Leonardo Francisco Sant’Ana Júnior FUSÕES E AQUISIÇÕES NO SETOR AÉREO São Paulo 2011 1 Leonardo Francisco Sant’Ana Júnior Fusões e aquisições no setor aéreo Monografia apresentada ao curso de Ciências Econômicas, como requisito para a obtenção do Grau de Bacharel I do Insper Instituto de Ensino e Pesquisa. Orientadora: Prof.ª Maria Cristina N. Gramani – Insper São Paulo 2011 2 Sant’ Ana, Leonardo Francisco Jr. Fusões e aquisições no setor aéreo / Leonardo Francisco Sant’ Ana Júnior. – São Paulo: Insper, 2011. 37 f. Monografia: Faculdade de Economia e Administração. Insper Instituto de Ensino e Pesquisa. Orientadora: Prof.ª Maria Cristina N. Gramani 1.Fusões e aquisições 2. Análise Envoltória de dados 3. Setor aéreo 3 Leonardo Francisco Sant’ Ana Júnior Fusões e aquisições no setor aéreo Monografia apresentada à Faculdade de Economia do Insper, como parte dos requisitos para conclusão do curso de graduação em Economia. EXAMINADORES ___________________________________________________________________ ________ Prof.ª Maria Cristina N. Gramani Orientadora ___________________________________________________________________ ________ Prof. Eduardo de Carvalho Andrade Examinador ________ Prof. Henrique Machado Barros Examinador 4 Agradecimentos Aos professores, à minha orientadora, aos amigos e colegas de faculdade e do trabalho e ao pessoal da biblioteca. 5 Dedicatória Dedico este trabalho a Deus, aos meus pais que sem a ajuda deles nada conseguiria, à minha namorada que me dá a força e o carinho necessário no meu dia-a-dia e aos meus amigos que sempre estão por perto pra compartilhar os momentos da minha vida. 6 Resumo Sant’ Ana, Leonardo Francisco Júnior.
    [Show full text]
  • 2020 Annual Report
    2020 Annual Report DĂLJϮϬϮϭ ĞĂƌůůĞŐŝĂŶƚ^ŚĂƌĞŚŽůĚĞƌ͗ ϮϬϮϬŝƐĂLJĞĂƌǁĞǁŝůůƌĞŵĞŵďĞƌĨŽƌƚŚĞƌĞƐƚŽĨŽƵƌůŝǀĞƐʹǁŚĂƚĂĚŝĨĨĞƌĞŶĐĞĂLJĞĂƌŵĂŬĞƐ͘KƵƌϮϬϭϵ ƐŚĂƌĞŚŽůĚĞƌůĞƚƚĞƌƚĂůŬĞĚĂďŽƵƚĂŶŽƚŚĞƌLJĞĂƌŽĨƌĞĐŽƌĚĞĂƌŶŝŶŐƐŝŶϮϬϭϴʹϲϱƋƵĂƌƚĞƌƐŝŶĂƌŽǁĂƚƚŚĂƚ ƚŝŵĞĂŶĚĂŐĂŝŶůĞĂĚŝŶŐƚŚĞŝŶĚƵƐƚƌLJŝŶŽƉĞƌĂƚŝŶŐŵĂƌŐŝŶƐŝŶϮϬϭϴ͘/ƚǁĂƐĂLJĞĂƌŽĨƚƌĂŶƐŝƚŝŽŶƚŽŽƵƌĂůůͲ ŝƌďƵƐĨůĞĞƚĂŶĚůĞĚƚŽĂŶĞǀĞŶďĞƚƚĞƌLJĞĂƌʹĂϱϬƉĞƌĐĞŶƚŝŶĐƌĞĂƐĞŝŶŽƉĞƌĂƚŝŶŐ ĞĂƌŶŝŶŐƐĨƌŽŵΨϮϰϯ ŵŝůůŝŽŶƚŽΨϯϲϰŵŝůůŝŽŶŝŶϮϬϭϵ͕ĂŶŽƚŚĞƌLJĞĂƌŽĨŝŶĚƵƐƚƌLJůĞĂĚŝŶŐŽƉĞƌĂƚŝŶŐŵĂƌŐŝŶƐĂƚϮϬƉĞƌĐĞŶƚ͘ ƵƚǀĞƌLJƋƵŝĐŬůLJƚŚŝƐůĞƚƚĞƌůĂƐƚLJĞĂƌƚƵƌŶĞĚƚŽƚŚĞƚŽƉŝĐĚŽŵŝŶĂƚŝŶŐƚŚĞǁŽƌůĚ͕ĐĞƌƚĂŝŶůLJŽƵƌǁŽƌůĚʹƚŚĞ ƉĂŶĚĞŵŝĐ͘&ĂƐƚĨŽƌǁĂƌĚĂůŵŽƐƚĂLJĞĂƌƚŽƉƌŝůϮϬϮϭĂŶĚǁĞĂƌĞƐƚŝůůĨŽĐƵƐĞĚŽŶƚŚŝƐǁŽƌůĚƉŚĞŶŽŵĞŶŽŶ ĂŶĚƚŚĞĞĨĨŽƌƚƐƚŽĞŵĞƌŐĞĨƌŽŵƚŚŝƐŶŝŐŚƚŵĂƌĞ͘ŽǀŝĚͲϭϵŚĂƐďĞĞŶƚŚĞŵŽƐƚŝŶƐŝĚŝŽƵƐŽĨĚŝƐĞĂƐĞƐ͘ ǀŝƌƵƐŝƐƚŚĞŵŽƐƚďĂƐŝĐŽĨĐƌĞĂƚƵƌĞƐʹƐŝŵƉůĞŝŶ ŝƚƐƐƚƌƵĐƚƵƌĞ͕ŵĂĚĞŽĨƚŚĞŵŽƐƚďĂƐŝĐŽĨĞůĞŵĞŶƚƐ͕ ƉĞƉƚŝĚĞƐ͕ƉƌŽƚĞŝŶƐĂŶĚƚŚĞďƵŝůĚŝŶŐďůŽĐŬƐŽĨZEĂŶĚE͘dŚŝƐƉĂƌƚŝĐƵůĂƌƐƚƌĂŝŶŚĂƐďĞĞŶƚŚĞŵŽƐƚ ǀŝƌƵůĞŶƚŽĨƚŚĞƌĞĐĞŶƚŐƌŽƵƉʹĞdžƚƌĞŵĞůLJĐŽŶƚĂŐŝŽƵƐ͕ĂĨĨĞĐƚŝŶŐŝƚƐŚŽƐƚŝŶĂŵLJƌŝĂĚŽĨǁĂLJƐ͘^ŽŵĞŶĞǀĞƌ ŬŶŽǁƚŚĞLJŚĂǀĞŚĂĚŝƚǁŚŝůĞƐŽŵĞĚŝĞĨƌŽŵŝƚƐĞĨĨĞĐƚƐ͘/ƚƐDͬKŝƐĨĞĂƌ͘&ĞĂƌŽĨĐŽŶƚƌĂĐƚŝŶŐƚŚĞĚŝƐĞĂƐĞŝƐ ƵŶŝǀĞƌƐĂůʹĂůůƉĂƌƚƐŽĨƚŚĞǁŽƌůĚǁŝĚĞ͘tĞŝŵĂŐŝŶĞƚŚĞǁŽƌƐƚʹĚĞĂƚŚLJĞƚƚŚĞǀĂƐƚŵĂũŽƌŝƚLJĂƌĞŶŽƚ ĂĨĨĞĐƚĞĚŵŽƌĞƚŚĂŶĂŵŝŶŽƌďŽƵƚǁŝƚŚƚŚĞĨůƵ͘tŽƌůĚǁŝĚĞ͕ϭϱϵŵŝůůŝŽŶŚĂǀĞĐŽŶƚƌĂĐƚĞĚƚŚĞĚŝƐĞĂƐĞǁŝƚŚ ϯ͘ϯŵŝůůŝŽŶĚĞĂƚŚƐʹĂϮƉĞƌĐĞŶƚŵŽƌƚĂůŝƚLJƌĂƚĞƉƌŝŵĂƌŝůLJŝŶŽƵƌŽůĚĞƌƉŽƉƵůĂƚŝŽŶ͕ŵĂŶLJŽĨǁŚŽŵŚĂĚ ĐŽŵƉůŝĐĂƚŝŽŶƐĂƐƐŽĐŝĂƚĞĚǁŝƚŚƚŚĞŝƌƉĂƐƐŝŶŐ͘ dŚŝƐƉĂƐƚLJĞĂƌǁĞŚĂǀĞƐƵĨĨĞƌĞĚƚŚƌŽƵŐŚĂǀĂƐƚŝŶƚĞƌƌƵƉƚŝŽŶŝŶŽƵƌĚĂŝůLJůŝǀĞƐʹǁĞŚĂǀĞƐƚŽƉƉĞĚƐĞĞŝŶŐ ƉĞŽƉůĞ͕ŚĂǀĞƐƚŽƉƉĞĚŐĂƚŚĞƌŝŶŐŝŶƉƵďůŝĐƉůĂĐĞƐ͕ĐŽŶŐƌĞŐĂƚŝŶŐǁŝƚŚŽƵƌĨƌŝĞŶĚƐ͕ŽƵƌŶĞŝŐŚďŽƌƐ͘tŚĂƚ ƵƐĞĚƚŽďĞĂ͚ǀĞƌLJƐŽĐŝĂďůĞ͛ƐƉĞĐŝĞƐďĞĐĂŵĞŚĞƌŵŝƚƐ͘&ĞĂƌďƌĞĚŝƐŽůĂƚŝŽŶ͕ŶŽŶͲĐŽŶƚĂĐƚ͘WŽůŝƚŝĐŝĂŶƐ
    [Show full text]
  • Securities and Exchange Commission Form 10-K
    SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 Or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission File Number 001-33166 Allegiant Travel Company (Exact Name of Registrant as Specified in Its Charter) Nevada 20-4745737 (State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.) 1201 North Town Center Drive Las Vegas, Nevada 89144 (Address of Principal Executive Offices) (Zip Code) Registrant’s Telephone Number, Including Area Code: (702) 851-7300 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $0.001 Par Value Nasdaq Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
    [Show full text]
  • UNITED STATES SECURITIES and EXCHANGE COMMISSION Washington, D.C
    UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2006 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-33166 ALLEGIANT TRAVEL COMPANY (Exact Name of Registrant as Specified in Its Charter) Nevada 20-4745737 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 3291 N. Buffalo, Suite B-9 Las Vegas, Nevada 89129 (Address of Principal Executive Offices) (Zip Code) Registrant’s telephone number, including area code: (702) 851-7300 (Former name or former address, if changed since last report.) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $.001 par value per share Nasdaq Global Market Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
    [Show full text]
  • Capitalization Rate Study 2008
    CAPITALIZATION RATE STUDY For CENTRALLY ASSESSED PROPERTIES As of January 1, 2008 UTAH STATE TAX COMMISSION PROPERTY TAX DIVISION CAPITALIZATION RATE STUDY SUMMARIES UTAH STATE TAX COMMISSION PROPERTY TAX DIVISION Utah State Tax Commission 2008 Capitalization Rate Study Equity Percent Yield Common Rate Equity Airlines - Major 19.70% 75% 25% 38.50% Airlines - Secondary 13.85% 55% 45% 39.46% .Airlines................................... ...-.... ...Secondary................ with Southwest 13.61% 50.0% 50% 39.00% Airlines - Frei 11 .28% 5% 95% 36.35% .............................................................. ............................................................... ............................................................... ............................................................... Electric Utilities 11 .11% 40% 60% 33.83% Natural Gas Utilities 11 .08% 30% 70% 35 .05% ...................................................................................................... ...................................................................................................... ...................................................................................................... ...................................................................................................... Natural Gas Pipelines 10.99% 25% 75% 32.58% ..................................................... ...................................................................................................... ........................................................................................................
    [Show full text]
  • 2017 Annual Report
    ANNUAL 2017 REPORT May 2018 Dear Allegiant Shareholder: Allegiant’s net income in 2017 was $194.9 million or $12.07 per share on our 16.1 million average shares outstanding during the year. We had the 2nd highest operating margin in the industry, just over 17 percent (excluding the one-time write down of the MD80s). We increased revenues 10.3 percent to $1.5 billion. During the past 61 quarters of consecutive profitability, including first quarter 2018, our cumulative net income has been $1.2 billion. Our earnings per share in 2006 (we held our IPO in December of 2006) was $.52. The past two years (2016 and 2017) we have averaged $12.57 per share annually or almost a 25-fold increase in EPS. We are proud of our achievements as a public company during these past eleven years. These impressive results were built on our core fundamentals – safety, simplicity, cost discipline and flexibility. We are in the final stages of converting to an all Airbus fleet. In 2018 we will add 30 Airbus aircraft to our certificate, retiring the final MD80 by year end. Our Sunseeker concept was developed during this past year. John Redmond, our president, saw an opportunity in Port Charlotte, Florida and assembled a 23-acre site during the first half of the year and began planning a destination resort during the second half. You can see a terrific representation of this planned, world class destination @SunseekerResorts.com. We look forward to seeing this project come together in the next two years, providing an excellent leisure destination product offering for our customers.
    [Show full text]
  • Ost of Capital Study Air Transport
    Washington State Department of Revenue Cost of Capital Study Appendix C 2007 Assessment Year Industry: Air Transport - Major Passenger Reference Equity: (Appendix C) Yield Capitalization Page CAPM - ex post - Ibbotson Rm 13.5% 5 CAPM - ex ante 12.6% 6 Dividend Growth Models Value Line, based on Dividends Growth NMF 9 Value Line, based on Earnings Growth NMF 10 Standard & Poors, based on Earnings Growth NMF 11 Yield Equity Component 13.0% Debt: Debt Rate 8.0% 12 Industry Market Capital Structure Equity 30% x 13.0% = 3.9% 3 Operating Leases 45% x 8.0% = 3.6% 3 Debt Before adjustment for Debt Tax Shield 25% x 8.0% = 2.0% 3 Subtotal Financing portion of structure 5.6% Marginal Tax Rate 35% (1-.35) X 5.6% = 3.6% 7.5% WACC=(Ke*Equity%)+(Kd*Debt%)*(1-Marginal Tax Rate) Weighted Average Cost of Capital: 7.5% 04/13/2007 2007 Cost of Capital Study -- Air Transport - Major Passenger 1 Washington State Department of Revenue Support for Guideline Companies Air Transport - Major Passenger 2007 Assessment Year Industry Overall P/E Div'd Company Name Ticker Beta Ratio Yield RF Airnet Systems* ANS 0.60 NMF nil MP AirTran Hldgs Inc* AAI 1.35 27.3 nil MP Alaska Air Group Inc ALK 1.35 9.6 nil MP AMR Corporation Delaware AMR 2.60 9.1 nil MP Continental Airlines Inc CAL 2.40 8.6 nil MP Express Jet XJT 1.20 4.9 nil MF Fedex Corporation FDX 1.05 16.9 0.3% RP Frontier Airlines Incorporated* FRNT 1.85 nmf nil MP JetBlue Airways JBLU 1.05 41.1 nil MP Mesa Air Group* MESA 1.55 13.7 nil RP Midwest Air Group MEH 1.35 43.8 nil RP Republic Airways Holdings, Inc.
    [Show full text]
  • 2008 Annual Report
    May, 2009 Dear Shareholder, Your company is doing well! Not many shareholder letters this year can open with such a statement. We finished the year on a terrific note, generating a 23% operating margin in the fourth quarter– the highest in the company’s history and $.88 per share of earnings – over half of the company’s $1.73 total for 2008. Indeed, we led the industry in operating margin during the year and were the only company to post profits in every quarter in 2008. The fourth quarter’s earnings have set the stage for what we think will be an excellent year in 2009 in spite of substantial headwinds from the current economy. The combination of our lower costs (particularly from fuel) and reasonable, predictable revenues provide us with excellent prospects in the coming twelve months. Since last year’s letter we have been on a roller coaster ride – first fuel and then the current recession. At this time last year we were experiencing an unprecedented increase in fuel prices. We entered 2008 with the price per barrel of fuel at just over $90. By mid-July the price had reached its peak at $147 per barrel – an escalation exceeding 60% in just over six months. This stunning increase caused our monthly average cost per gallon to peak at $3.77 in July. Fuel expense in the second quarter of last year was 55% of revenues, versus 40% during the same period in 2007. As we have stated many times, our primary corporate goal is profitability. Given the rapid increases in the cost of fuel, the only reasonable option available in the first half of 2008 was to slow our planned growth and reduce capacity by flying our existing aircraft less.
    [Show full text]