Allegiant Travel Company, the parent company of Allegiant Air, announced today it will immediately cease activity on non-airline projects including construction of its Sunseeker Resort in Florida as it anticipates capacity cuts to rise to 35% during April and May.
The Las Vegas-based leisure carrier had previously cut airline capacity for April and May by 15% and expects those cuts to deepen to 30%-35% “with additional reductions to come” as travel declines amid the coronavirus pandemic, Allegiant chief executive Maurice Gallagher states.
“As a domestic airline with a unique business model serving primarily leisure travelers, we were better positioned than most to withstand the early impact of COVID-19 on travel,” Gallagher says. “But this is a situation which is changing daily, and we are focused on taking proactive steps to protect the health and safety of our customers and team members.”
In addition to halting non-airline projects, including construction, Allegiant says closing its family entertainment centers in Michigan and Utah will preserve cash and encourage social distancing to prevent the spread of coronavirus.
Allegiant ended 2019 with $1.4 billion in debt and $473 million in cash and investments, so it faces greater pressure than some other airlines to reduce expenses during the travel downturn. The company says it has halted “non-essential capital expenditures and discretionary spending across the company”, and frozen hiring for non-essential positions. Gallagher and Allegiant’s president John Redmond do not draw salary, but the company says its other executives will take a 50% salary reduction.
Allegiant in June closed a five-year $213 million loan, secured by 23 Airbus aircraft, for general corporate purposes including repayment of debt. The airline says today “avenues for additional borrowing will be explored”.
“Stock buyback and dividend activity will also be suspended,” the company says. “This set of initiatives could defer as much as $300 million in planned cash outlay for 2020.”