UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
_____________________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 1, 2021
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| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||||||||||||||||||||
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Registrant’s telephone number, including area code: (702 ) 851-7300
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Common stock, par value $0.001 | ALGT | NASDAQ Stock Market | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as in Rule 405 of the Securities Act of 1933 (Section 17 CFR §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (Section 17 CFR §240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Section 7 Regulation FD
Item 7.01 Regulation FD
On December 1, 2021, Allegiant Travel Company (the “Company”) and Viva Aerobus issued a joint press release announcing a commercial alliance being pursued by the Company and Viva Aerobus and a filing for antitrust immunity with the U.S. Department of Transportation. Additional information concerning the proposed alliance is included in the Investor Deck filed as Exhibit 99.2 to this Form 8-K.
The information in Section 7 of this Current Report on Form 8-K and the Exhibits filed herewith is furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. As such, this information shall not be incorporated by reference into any of the Company’s reports or other filings made with the Securities and Exchange Commission.
Forward-Looking Statements: Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, statements in the Exhibits to this Form 8-K that are not historical facts are forward-looking statements. These forward-looking statements are only estimates or predictions based on our management's beliefs and assumptions and on information currently available to our management. Forward-looking statements include our statements regarding the proposed alliance, the services to be provided and the economic benefits that may be realized, as well as other information concerning future results of operations, business strategies, competitive position, industry environment, and potential growth opportunities. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe," "expect," "anticipate," "intend," "plan," "estimate," “project”, “hope” or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements generally may be found in our periodic reports filed with the Securities and Exchange Commission at www.sec.gov. These risk factors include, without limitation, the impact and duration of the COVID-19 pandemic on airline travel and the economy, an accident involving, or problems with, our aircraft, public perception of our safety, our reliance on our automated systems, risk of breach of security of personal data, volatility of fuel costs, labor issues and costs, the ability to obtain regulatory approvals as needed , the effect of economic conditions on leisure travel, terrorist attacks, risks inherent to airlines, our competitive environment, our reliance on third parties who provide facilities or services to us, the possible loss of key personnel, economic and other conditions in markets in which we operate, governmental regulation and cyclical and seasonal fluctuations in our operating results. Specific risk factors impacting the Allegiant – Viva commercial alliance include the ability to obtain required government approvals on a timely basis, the ability to provide international service to Allegiant cities not currently offering international service, reliance on Viva Aerobus to provide air service on the announced routes to be served by them, the ability to establish the necessary systems to support the commercial alliance in a timely manner and customer acceptance of the new service offerings.
Any forward-looking statements are based on information available to us today and we undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.
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Section 9 Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
a.Not applicable.
b.Not applicable.
c.Not applicable.
d.Exhibits
| Exhibit No. | Description of Document | ||||
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Allegiant Travel Company has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: December 1, 2021 | ALLEGIANT TRAVEL COMPANY | ||||||||||
| By: | /s/ Gregory C. Anderson | ||||||||||
| Name: | Gregory C. Anderson | ||||||||||
| Title: | Chief Financial Officer | ||||||||||
EXHIBIT INDEX
| Exhibit No. | Description of Document | ||||
ALLEGIANT, VIVA AEROBUS ANNOUNCE FIRST-OF-ITS-KIND COMMERCIAL ALLIANCE AGREEMENT Fully-Integrated Alliance Between ULCCs Expected To Bring More Nonstop Flights, Lower Fares for Leisure Travel Between the U.S. and Mexico LAS VEGAS. December 1, 2021 – Allegiant (NASDAQ: ALGT) and Viva Aerobus today announced plans for a fully-integrated Commercial Alliance Agreement, designed to dramatically expand options for nonstop leisure air travel between the United States and Mexico, while lowering fares to make travel more accessible and affordable for residents of both nations. The alliance is not only the first such venture for Las Vegas-based Allegiant and Viva Aerobus, but is also first-of-its-kind in the airline industry between two ultra low cost carriers (ULCCs). Allegiant and Viva Aerobus have submitted a joint application to the U.S. Department of Transportation (DOT) requesting approval of and antitrust immunity for the alliance. Allegiant will also make an equity investment of $50 million in Viva Aerobus, and Allegiant Chairman and Chief Executive Officer Maurice J. Gallagher, Jr. is expected to join the Viva Aerobus Board of Directors. The transactions are also subject to clearance by the Mexican Federal Economic Competition Commission. Combining the unique product offerings, networks and market experience of two of the world’s fastest- growing ULCCs, the alliance will achieve important public benefits that neither Allegiant nor Viva Aerobus could provide independently. “Allegiant and Viva Aerobus operating together will be a tremendous win for consumers seeking affordable, nonstop travel between the U.S. and Mexico, and will create rippling economic benefits for hospitality sector business across both nations,” said Allegiant’s Gallagher. “This groundbreaking alliance should reduce fares, stimulate traffic, and ultimately link many new transborder cities with nonstop service. In short, it will bring meaningful ULCC competition to the U.S.-Mexico market for the first time in history.” “The U.S. – Mexico market is currently the largest international air travel market in the world; during the pandemic it has outperformed any other market due to a strong leisure and VFR (Visiting Friends & Relatives) recovery where both Viva Aerobus and Allegiant have excelled,” said Juan Carlos Zuazua, chief executive officer, Viva Aerobus. “This unique ULCC alliance will create new non-stop connectivity and more competition, strengthening the immense Hispanic VFR market and offering amazing holiday get- aways for residents of both nations.” The only U.S.-based airline focused entirely on leisure travel, Allegiant currently offers nonstop service to more than 130 cities across the country. It does not currently serve Mexico. Monterrey-based Viva Aerobus offers extensive intra-Mexico service, as well as nonstop flights from Mexico to key destinations
in the U.S. and Latin America. The Alliance Agreement will afford Allegiant the opportunity to broaden its travel offerings to include new world-class vacation destinations such as Cancun, Los Cabos and Puerto Vallarta, Mexico. At the same time, Viva Aerobus will have access to Allegiant’s distribution network and point-of-sale process, growing its U.S. customer base. The alliance will also enable Viva Aerobus to add routes in the United States - particularly underserved or untapped-to-Mexico markets where Allegiant has a significant presence such as Las Vegas and several cities in Florida -- very popular destinations for Mexican tourists. A fully-integrated and immunized alliance will afford Allegiant and Viva Aerobus coordination across all areas of airline operations - including code-sharing, scheduling, marketing, information systems and loyalty programs, providing seamless access and benefits for customers of both airlines. The alliance is anticipated to add new transborder routes and nonstop competition where currently only connecting service is available. More than 250 new potential route opportunities have been identified as part of the DOT application, though specific routes targeted for service will be announced at a later date, following the application’s approval. Allegiant and Viva Aerobus currently expect to offer flights under the alliance beginning in the first quarter of 2023, pending governmental approval of the application. Per national requirements, Allegiant and Viva Aerobus will in parallel file for alliance approval with regulatory authorities in Mexico, including with the Mexican Federal Economic Competition Commission. Barclays, Goldman Sachs and White & Case acted as financial and legal advisors for Viva Aerobus. WilmerHale and Garofalo Goerlich Hainbach, PC, acted as legal advisors for Allegiant. ***** Allegiant – Together We FlyTM Las Vegas-based Allegiant (NASDAQ: ALGT) is an integrated travel company with an airline at its heart, focused on connecting customers with the people, places and experiences that matter most. Since 1999, Allegiant Air has linked travelers in small-to-medium cities to world-class vacation destinations with all-nonstop flights and industry- low average fares. Today, Allegiant's all-Airbus fleet serves communities across the nation, with base airfares less than half the cost of the average domestic roundtrip ticket. For more information, visit us at Allegiant.com. Media information, including photos, is available at http://gofly.us/iiFa303wrtF About Viva Aerobus Viva Aerobus is Mexico’s ultra-low-cost airline. It started operations in 2006 and today it operates the youngest Latin American fleet with 52 Airbus: 40 Airbus A320 and 12 Airbus A321. With a clear vision to give all people the opportunity to fly, Viva Aerobus has democratized the airline industry with the lowest fares in Mexico and the lowest cost structure in America, making their flights the best value offer. For more information please visit: www.vivaaerobus.com/en ### Media Contacts: Allegiant Phone: 702-800-2020 Email: mediarelations@allegiantair.com
Viva Aerobus Walfred Castro, Corporate Communication Director, Viva Aerobus : walfred.castro@vivaaerobus.com Tarssis Dessavre, Account executive for Viva Aerobus of PRoa Structura - tdo@proa.structura.com.mx – Mobile. +52 1 55 2751 1709 Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, statements in this press release that are not historical facts are forward-looking statements. These forward-looking statements are only estimates or predictions based on our management's beliefs and assumptions and on information currently available to our management. Any forward-looking statements are based on information available to us today and we undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.
1 First ULCC Metal Neutral Commercial Alliance – Investor Deck Dec. 1, 2021
2 Executive summary The Opportunity: • Stimulating travel by US nationals to world class Mexican beaches by leveraging Viva’s and Allegiant’s low-cost operating structures with Allegiant’s premium distribution arm • Spread ULCC savings to more consumers – Allowing Allegiant to enter markets it otherwise could not, like Mexico City The Geography: • Mexican beaches: world’s great travel bargain – Agreement provides lower risk investment for Allegiant to other international markets (Despite three previous applications for international/Mexican service, Allegiant never prioritized its implementation) • Opportunity to stimulate demand for Mexican nationals to travel to US leisure destinations • Seasonality – domestic Mexico travel trend is counter-cyclical travel to Allegiant domestic US demand The Partners: • Alignment of cultures: Both Chairman founders and largest shareholders driving complementary “owners” culture among leadership • Both airlines focused in ULCC space and are leaders during pandemic and beyond in respective jurisdictions The Structure: • Full “merger” of transborder flying between the two ULCC parties with 8 working groups to manage the transborder alliance • Agreement pro consumer, greatly enhancing public benefit The Potential (economics): • Significant accretion for both entities – win/win The Investment (equity): • Strategic investment by Allegiant into Viva, expected to strengthen relationship
3 Allegiant and Viva Aerobus synergies drive strong customer benefits • Training & simulator facilities • Consolidated materials/services purchases to reduce cost • Airport fees/contracts cost reduction for VB @ US stations • Enhanced utilization of aircraft and overhead on off-peak times Cost Synergies Revenue Synergies Operational Synergies • Allegiant’s commercial experience in the US leisure market • Allegiant’s U.S. distribution at higher unit revenue • Viva Aerobus’ knowledge and business relationships with existing Mexican resorts and tour operators • Upwards of 300 non-stop route ideas, a majority on routes with no existing non-stop service • “Metal Neutral” flying with similar cost structures allow significant operational synergies • Sharing of resources and facilities across both sides of the border: • Customer call centers • Crew training • Maintenance • Viva Aerobus’ bus network for last mile
4 Leisure destinations within narrowbody range 5 25 45 65 85 105 125 145 N on -s to p ro ut es Orlando Phoenix Tampa Miami Southwest Florida Cancun San Juan Los Cabos Puerto Vallarta Punta Cana San Jose Santo Domingo Allegiant already serves the largest leisure destinations Aruba Hawaii Bubble size based on O&D PPDEW FY2019 Cancun Los Cabos Puerto Vallarta San Juan San Jose Aruba Punta Cana Santo Domingo Nassau Hawaii Sabre O&D Market Intelligence, Schedules Non-Stop Routes To Leisure Destinations From US 2004-2021
5 Market opportunity ~25M leisure US pax per year ~ 31m Pax MEX-USA (2019) ~30% ~20% ~50% • Mexican nationals Visiting Friends and Relatives (VFR); as well as Mexican passengers flying to the US for business and leisure. • The market where VivaAerobus and other Mexican airlines compete US Passengers flying to Mexico for business purposes. US passengers flying for leisure to Mexican beaches like Cancun or Los Cabos. The market where VivaAerobus and other Mexican airlines compete. These passengers generally fly on US legacy airlines THE OPPORTUNITY: A market exclusively served by US carriers via hubs but with a huge point to point potential for ULCC’s. 25% 21% 16% 11% 8% 7% 6% 5% 2% 1% 0% Capacity Share 2021
6 Non-stop markets without ULCC service Cancun Puerto Vallarta Los Cabos Bubble size based on O&D PPDEW FY2019 Bubble size based on O&D PPDEW FY2019 Bubble size based on O&D PPDEW FY2019 Source: Schedules. Sabre O&D Market Intelligence Note: Includes all Allegiant airports as of FY2021 within 1,900mi range. Many route opportunities would require additional customs federal inspection facilities 83 Allegiant airports 76 no non-stop service 7 non-stop but non-ULCC (FY 2021 metro basis) 90 Allegiant airports 82 no non-stop service 8 non-stop but non-ULCC (FY 2021 metro basis) 91 Allegiant airports 81 no non-stop service 10 non-stop but non-ULCC (FY 2021 metro basis)
7 Agreement structure Key Terms Details Joint Venture Scope • Scheduled service on all non-stop routes between the US and Mexico • Connecting flights beyond US/Mexico • Public charter coordination on all points between US and Mexico (private charters excluded) Management • JV Executive Committee – 4 executive leaders from each JV partner – meet 2x annually • 8 Other committees – Network, Marketing, Stations/Ops, IT, CELT, Revenue Management, Fleet, Finance & Accounting, to meet 4x annually to review, plan and coordinate Exclusivity • Exclusive partners – neither partner will request government approval for or implement a separate JV, alliance, or codeshare involving service between Mexico and the US while the JV is in effect • The parties may jointly decide to add an additional JV partner only on the condition of both parties’ approval Commercial Cooperation/Coordination • Fully integrated alliance – marketing, sales, revenue management, network, IT, reciprocal codeshare • Complete “Metal neutrality” • Co-ground handling and co-located at airports where applicable • Joint branding where applicable • Reciprocity on loyalty and Frequent Flyer Program (FFP) benefits – loyalty points coordination Revenue/Profit share • 50/50 profit sharing on all “new” JV routes – controllable variable costs covered dollar for dollar for operating carrier, revenue above cost split equally • Incremental profit share on “existing” routes to US/Mexico points at established 2021 baseline Network Governance • By mutual consent – coordination between network and revenue management teams • Restrictions on unilateral network decisions for points between the US and Mexico Timing • JV to be implemented no later than 30 days after receipt of all government and regulatory approvals including antitrust immunity – joint network plan and flights for sale within the following 90 days Term • Indefinitely and for a minimum period of at least fifteen years with one-year cancellation window with payment penalty upon change of control
8 Alliance profit share Revenue Direct Expenses ~40% of Revenue Remainder Revenue Less Direct ~60% of Revenue Viva Aerobus Share Allegiant Share 50% of Remainder 50% of Remainder
9 Together we do more Finance Working Group Network Working Group Revenue Working Group Marketing Working Group Stations/ Ops Working Group IT Working Group CELT Working Group Fleet Working Group Executive Working Group • Experienced and well-connected partners in Mexico helps insulate risk • Alignments of cultures; Strong and complementary management teams on both sides • Both Allegiant and VIVA are ULCCs based in the US and Mexico, respectfully, and both well positioned to thrive in post-pandemic world
10 Viva Aerobus and Allegiant’s complementary seasonality Source: Schedules 40% 50% 60% 70% 80% 90% 100% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Complementary •Q1 strongest quarter for beach traffic, but weakest for Viva •Opportunity to maximize flying on Saturday - an off-peak day for Allegiant, particularly on the US West Coast, but a peak day in Mexican beach markets Departures as % of Peak Month 2019
11 Alliance with ATI* will enhance Allegiant’s ability to provide consumer benefits 1. Current Plan Entry Plan (none) 2. Allegiant Only Network (No Alliance) +20 Years 3. Alliance Network (ATI Approval) Call Out: CUN – SBN Not easily routable for G4 No out & back No aircraft or crew base Viva could operate it easily Allegiant has a strong Point of Sale in SBN CUN Non-Stop City Pairs Example *ATI Antitrust Immunity
12 Allegiant’s lower costs at US airports and the ability to connect with Allegiant’s network will enable Allegiant and Viva to launch thin routes from mid-size Mexican cities to US leisure destinations. Expected benefits to Viva • Lower ground handling cost • Lower fuel contracts • Lower airport / gates costs • Connecting with other US destinations New routes from midsize Mexican cities to leisure destinations in the US
13 Allegiant and Viva together will be a far more effective competitor 22% 22% 17% 11% 6% 5% 5% 5% 3% 3% 1% Transborder Market Distribution 2021: O&D Passengers OTHER (SY,VW) Potential Transborder Market Distribution With Allegiant/Viva Aerobus Alliance OTHER (SY,VW) 21% 21% 16% 11% 10% 5% 5% 4% 3% 3% 1% Sources: O&D Sabre (Market Intelligence). Potential Transborder Market Distribution assumes 2026 network with 88 transborder routes and on average 16 A/C lines dedicated to Alliance flying
14 Alliance expected to produce strong financial growth and create jobs Incremental Aircraft Lines due to Alliance 2023E - 2026E – Transborder Flights 100 312 668 858 956 2023E 2024E 2025E 2026E 2027E Job Growth at Allegiant and Viva due to Alliance 2023E-2027E Source: Internal Financial Model 2 5 12 16 18 0 2 4 6 8 10 12 14 16 18 20 2023E 2024E 2025E 2026E 2027E A ll ia n c e A /C L in e s
15 Alliance (JV) and equity investment will add value Revenue for Allegiant-operated flights in JV JV profit sharing settlements in other revenue Expenses for Allegiant-operated flights in JV •$50 million equity stake in Viva – comparable to similar stakes by Delta/United/American in JV partners •Board seat on Viva board to be held by Maury Gallagher pending Mexican governmental approval
16 Asset light hotel management potential opportunities Source: Mexico Secretariat of Tourism 23,910 30,706 5,952 8,581 5,065 6,931 34,927 46,217 2010 2020 Available Rooms in Cancun by Hotel Category 2010 and 2020 Stars or lower Stars Stars Hotels within 40mins from CUN ~456 hotels/resorts Resorts size range from 500 to 2,500 rooms New resorts opening in ‘22 6 resorts & 2,800 rooms Average length of stay 5 days (5 stars resorts)
17 Expected timeline – subject to regulatory approval Jul 2022 Aug 2022 Sep 2022 Oct 2022 Nov 2022 Dec 2022 Jan 2023 Feb 2023 Mar 2023 ATI is approved Allegiant & Viva start coordinating Selling new and existing transborder inventory Alliance flights start operating External events outside of Allegiant and Vivaaerobus control could delay the expected timeline. These events include pandemic-related concerns, market performance, and Mexico's successful resolution of IASA's audit.