Allegiant Travel Company ALGT is scheduled to report its first-quarter earnings on May 3.
The Las Vegas-based company’s domestic booking volumes have softened, creating revenue risk, according to BofA Securities.
The Allegiant Travel Analyst: Andrew Didora downgraded the rating for Allegiant Travel from Neutral to Underperform, while raising the price target from $95 to $75.
The Allegiant Travel Thesis: The company’s lower-than-market pilot compensation caused high attrition in the environment of wage inflation, Didora said in the downgrade note.
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“Staffing shortages are coupled with ongoing labor contract negotiations, and we forecast 2H23 unit costs ex-fuel +17.5%,” Didora wrote.
“While ALGT intends to continue to acquire A320s in the secondary market, we see the shift to the 737 MAX as an operationally complex one as fleet integration will require extensive flight crew training at significant expense while temporarily reducing productivity, and needing to hire pilots in a tight pilot labor market,” he added.
ALGT Price Action: Shares of Allegiant Travel have added a whopping 50.33% year to date, versus the S&P 500’s 9%.
Image: Courtesy of Allegiant Travel