Allegiant Sets $8 EPS Target, Citing 737 MAX Gains and Sun Country Merger Plan

Allegiant Travel Company (ALGT) concluded 2025 with strong financial results. The airline reported record fourth-quarter revenue of $656 million, a 7.6% increase year-over-year. Full-year revenue also reached a record, topping $2.5 billion, up 4.3% from 2024. The Allegiant Q4 2025 Earnings call highlighted a focus on profitability and strategic growth.

Airline segment net income for the quarter was $50.1 million. This delivered $2.72 per share, exceeding the company’s prior midpoint guidance of $2.00. The adjusted operating margin was 12.9% in the period, placing it among industry leaders. This was achieved despite a 10.5% capacity growth.

Financial Performance and 2026 Outlook

Allegiant introduced its ALGT 2026 Guidance with a conservative demand outlook. The company projects adjusted earnings per share of at least $8.00. This represents an approximate 60% increase over the full-year 2025 airline-only EPS of $5.07. Management expects a 13.5% adjusted operating margin in the first quarter.

Capacity growth, measured by available seat miles (ASM), is projected to decline 0.5% for the full year. This is primarily due to the timing of new aircraft deliveries. The Allegiant capacity outlook is part of a "discipline-first approach." Management expects unit revenue growth to outpace adjusted unit cost increases. This reinforces margin expansion ambitions.

Airline unit costs CASM ex (Cost per available seat mile excluding fuel) improved by 3.4% year-over-year in the fourth quarter. Full-year nonfuel unit costs were down 6.1%. Management anticipates full-year CASM ex will be down versus 2024, despite the modest pressure from flat capacity.

Strategic Initiatives and Fleet Modernization

The integration of the new Boeing 737 MAX aircraft is a key driver for future efficiency. The Allegiant 737 MAX Integration is performing well. The new aircraft deliver roughly a 20% fuel burn advantage compared to the older Airbus A320 family models. The fleet ended 2025 with 123 aircraft. This included sixteen Boeing 737 MAX and 107 Airbus A320 family aircraft.

Technology modernization was a major milestone. The shift to a modern technology stack enables improved customer experience and operational agility. This was evident during recent winter storms. The new system helped mitigate a $2 million revenue impact.

Commercial and Operational Strength

Strong demand continued into January, described as "exceptional" by the Chief Commercial Officer. Allegiant’s model is purpose-built for the leisure demand environment. The airline maintained a 99.9% controllable completion rate. This earned it the top Wall Street Journal ranking for lowest cancellation rate and fewest mishandled bags, demonstrating strong airline operational reliability.

The co-brand credit card program remains a significant ancillary revenue source. Allegiant received approximately $140 million in remuneration. New card acquisition was up double digits for four of the last five months. Management is in constructive talks with Bank of America. They aim to boost remuneration above the recent 5% level. They target an increase of another two to three percentage points for the co-brand credit card program.

Merger and Balance Sheet Strength

The proposed Sun Country acquisition is positioned as a structural lever for the next phase of growth. The transaction is expected to close in 2026. Integration planning is ongoing. The deal highlights aligned technology and minimal network overlap. Synergies are not yet factored into the 2026 guidance.

Allegiant focused on strengthening its financial position. Allegiant debt reduction lowered total debt to just under $1.8 billion. This is down from $2.1 billion in the prior quarter. Net leverage improved to 2.3 times. Total available liquidity was $1.1 billion. This included $250 million in an undrawn revolving credit facility. This provides flexibility for planned aircraft purchases and merger-related outlays. Capital expenditures for 2026 are estimated at $750 million. This is driven by eleven expected Boeing 737 MAX deliveries.

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