May 2, 2014
IME
Allegiant Travel Company
Ticker: ALGT
Recommendation: Outperform
Current Price: $116.85
Implied Price: $134.96
Investment Thesis

Key Statistics
52 Week Price Range
50-Day M oving Average
Estimated Beta
M arket Capitalization (thousands)
3-Year Revenue CAGR
$115.10-$123.32 
$112.58
0.70
$2,156,670
Diluted Shares Outstanding
18,600
Average Volume (3-M onth)
139,705
Institutional Ownership
81.10%
Insider Ownership
Competition on only 23 of Allegiant’s 225 routes is a significant
competitive advantage and provides the airline with price flexibility

Large legacy carriers are abandoning unprofitable routes from smaller
airports, allowing Allegiant to capitalize on the decrease in competition

Initiatives to increase ancillary products will grow revenue and result in
margin improvement.

The repeal of the Wright Amendment from Texas will provide opportunities
for Allegiant to further expand routes
13.61%
Trading Statistics
Allegiant’s strict adherence to the low-cost carrier model provides route
flexibility and opportunity to stimulate demand with low fares which will
continue to deliver consistent profitability and strong cash flows
Four-Year Stock Chart
$140.00
400,000,000
$120.00
350,000,000
21%
300,000,000
$100.00
EV/EBITDA (LTM )
9.6x
250,000,000
$80.00
200,000,000
Margins and Ratios
$60.00
150,000,000
EBITDA M argin (LTM )
Net M argin (LTM )
Debt to Enterprise Value
22.49%
9.21%
0.12
$40.00
100,000,000
$20.00
50,000,000
$0.00
Apr-10 Sep-10 Feb-11
0
Jul-11
Volume
Dec-11 May-12 Oct-12 Mar-13 Aug-13 Jan-14
Adjusted Close
50-Day Avg
200-Day Avg
Covering Analysts: Sam Bush and Tyler Markgraff
Email: samb@uoregon.edu
tmarkgra@uoregon.edu
1
University of Oregon Investment Group
University of Oregon Investment Group
Business Overview
Figure 1: 2013 Revenue Breakdown
Fixed-Fee
Contract
17,462
Other
2,483
Ancillary
324,887
Scheduled
Service
651,318
Allegiant Travel Company was founded in 1997 under the name WestJet Express
and is headquartered in Las Vegas. WestJet Express eventually changed the name
to Allegiant Travel Company and went public in 2006. The company is geared
toward providing travel services and products to underserved areas within the
United States. Allegiant takes a unique approach to the travel industry by offering
a variety of services and products resulting in a diversified revenue stream. The
largest source of revenue comes from Allegiant’s low-cost passenger airline. The
company leverages the airline services and offers travel bundles for hotels and
rental cars, in addition to stand alone vacation planning. Revenues are also
generated from fixed-fee contract flying arrangements. Lastly, the smallest
portion of Allegiant’s revenue is earned through leasing of products and
equipment to other airlines.
Scheduled Service Air Transportation
Source: ALGT 10-K
Figure 2: Scheduled Service Revenue Growth
In 2013, over 65% of Allegiant’s revenue was earned through scheduled service
air transportation segment which is the traditional airline service. Allegiant
provides service for 225 routes in 99 cities throughout the United States. Most of
these destinations are small regional airports because many legacy carriers are
moving away from these destinations due to lack of profit. Allegiant’s size and
business model allows the company to profit from flights in these markets. In
order to mitigate costs, Allegiant has ten base ground facilities located throughout
the United States. To further improve profits, Allegiant limits the sale of tickets
through third parties like Expedia and Travelocity.
1,400,000
Air-Related Ancillary Products and Services
Revenue ($ thousands)
1,200,000
Allegiant offers customers the option to package air-related services and products
in combination with the air-fare purchase. Customers can purchase checked bags,
advance seat assignments, travel protection, priority boarding along with a
number of other products.
1,000,000
800,000
600,000
400,000
200,000
Third-Party Ancillary Products and Services
0
Source: UOIG Spreads
Third-party companies partner with Allegiant to offer customers products such as
hotel rooms, rental cars, shuttle transportation along with various ticketed
attractions such as shows.
Fixed-Fee Contract Air Transportation
Allegiant provides air transportation through fixed-fee arrangements and charter
services to customers on a year-round and ad-hoc basis.
Figure 3: Ancillary Revenue Growth
Other Services
Allegiant generates a small portion of revenue by leasing aircraft and flight
equipment to third parties.
900,000
Revenue ($ thousands)
800,000
700,000
Industry
600,000
500,000
400,000
300,000
Overview
200,000
There are three main factors on which companies in the airline industry can differ:
low-cost carriers (LCCs) and legacy carriers, point-to-point or hub-and-spoke,
and choice of aircraft. Legacy carriers are the larger well known carriers like
United, American, and Delta. These carriers usually have higher fare prices and
extra benefits for customers. LCCs tend to charge customers for any additional
services, have low fares, higher flight frequencies, and shorter point-to-point
100,000
0
Source: UOIG Spreads
UOIG 2
University of Oregon Investment Group
Figure 4: Corporate Profit Forecast
flights. With smaller overhead costs and lower fares, LCCs have the ability to
generate significant profits through ancillary revenue, which have little to no cost
associated with them. In the past ten years, LCCs have been gaining market share
rapidly.
30%
25%
Airlines also are able to differentiate their business model by flying point-to-point
or using the hub-and-spoke model. The point-to-point strategy has flights from
one destination to another, without having a central hub that is flown to first. In
order to remain profitable, companies adopting this model must ensure that flights
are especially full and must manage the costs of having crews at many airports.
The hub-and spoke model is the opposite of the previous model and typically
legacy carriers have a few central hubs from which they fly larger routes.
20%
15%
Growth
10%
5%
0%
(5%)
(10%)
(15%)
(20%)
Source: IBISWorld
The final differentiating element for airlines is the choice of aircraft. Carriers
choose to buy or rent planes and decide on the size and age of the planes. Airlines
must correctly project demand to ensure the planes are being used most efficiently
otherwise fuel is wasted on flights that have too many available seats, and not
enough customers. There has also been a trend of airlines flying fewer types of
planes in an attempt to reduce maintenance costs.
Macroeconomic Environment
Figure 5: Oil Price Forecast
The airline industry is highly volatile and heavily dependent upon a number of
uncontrollable factors, resulting in a relatively unstable operating environment.
These factors include the following:
$3.50
Corporate Profit
The dependency on corporate profit tends to vary between legacy airlines and
smaller, regional and “no-frills” airlines. When corporate profit is on the rise,
legacy airlines tend to experience an increase in demand because these airlines
serve business customers whereas regional airlines tend to not experience the
same level of benefit. As corporate profit increases in 2014, the airline industry is
expected to benefit as a whole.
$3.00
$/Gallon
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
Source: Fact Set
Figure 6: US Per Capita Disposable Income Forecast
5.0%
4.0%
Growth
3.0%
2.0%
1.0%
0.0%
(1.0%)
Price of Oil
The cost of oil is the greatest expense for companies in the airline industry and as
a result, the fluctuating price of oil has a large impact on margins. Transportation
costs make oil more expensive at regional airports. As a result, large legacy
airlines are scheduling fewer flights from such locations. Allegiant doesn’t use
financial instruments to hedge their exposure to oil. To mitigate costs, Allegiant
has a wholly-owned entity that is entered into an operating agreement with the
Orlando Sanford Airport to engage in contract fueling transactions for airlines at
that airport.
Disposable Income/Consumer Sentiment
The airline industry is especially sensitive to changes in consumer discretionary
income. While Allegiant is exposed to this risk, the company provides the lowest
cost flights, providing some downside protection. Still, the company is somewhat
sensitive to changes in discretionary income because the target market is the
leisure traveler. Similar to disposable income, airlines are affected significantly
by consumer sentiment. When consumer confidence is low, consumers tend to
have a bleaker outlook toward the state of the economy and markets. The fear of
a market correction results in a decrease in consumer spending. As disposable
income is forecasted to slightly increase throughout 2014, consumer confidence
should follow and airlines such as Allegiant will benefit.
(2.0%)
Source: IBISWorld
UOIG 3
University of Oregon Investment Group
Legacy vs. Low Cost Carriers (LCC)
Within the airline industry there are two primary business models: the legacy
carrier and the low-cost carrier.
Figure 7: Hub and Spoke Model
Legacy Carriers
Legacy carriers include the largest airlines such as United, American Airlines and
Delta. These companies typically utilize a hub-and-spoke model which helps
reduce the number of routes needed to serve the network. This model uses a
central hub that many flights fly into. Customers will fly to these hubs and then
catch a connection to their final destination. Hub-and-spoke models are subject to
congestion and delays due to the codependency of flights.
Spoke
Spoke
Hub
Spoke
Aside from the route model, legacy carriers tend to have higher fares and extra
benefits for customers. These benefits include frequent flyer miles and airport
lounges. A large majority of carriers in the industry follow this model and this is
typically what consumers are accustomed to. The higher fares typically cover
luggage fees, in-flight meals and snacks in addition to media content. Lastly,
legacy carriers are more susceptible to economic downturns due to their higher
costs.
Spoke
Source: JP Morgan
Low-Cost Carriers (LCC)
After the recession there was a shift towards the low-cost carrier model. Existing
airlines began charging baggage-fees and for additional on-board services. Lowcost carriers are able to charge extremely low fares because the airlines charge for
extra services. Beyond low fares, LCC’s are characterized by elevated load
factors, point-to-point operating models and only economy class seating, all in an
effort to improve margins. LCCs typically have only a few types of aircrafts in
order to reduce maintenance costs. Flying from smaller airports helps reduce gate
leasing costs and LCC’s pay their employees significantly less than legacy
carriers, allowing them to achieve greater margins at smaller airports.
Figure 8: LCC Seat Share of Market
Percent of Seats
30%
20%
10%
To maximize profitability, airlines must consider their choice of aircraft in
addition to how the aircraft is financed. In order to determine the type of aircraft,
carriers must identify a couple of characteristics including flight length, passenger
demand and airport infrastructure. If airlines select too small of aircraft they are
likely to experience extreme load factors and lost revenue whereas too much
capacity will lead to additional fuel costs. Airlines must weigh the costs and
benefits of having a different fleet to serve different routes, and the additional
maintenance costs associated with a diversified fleet. Turbo-prop airplanes tend
to serve shorter routes better as they are more fuel efficient, but fly at a lower
speed, whereas jets are quicker, but less fuel efficient.
0%
Source: JP Morgan
With respect to acquiring aircraft fleet, carriers have a number of options. Leasing
aircraft leaves the downside risk of value depreciation on the books of the lender.
On the other hand, more established airlines can experience lower costs by buying
the plane if the capital exists and flying it the full life-span. Within the industry
there are three different types of leasing: wet lease, damp lease and dry lease.
Figure 9: Allegiant Aircraft Ownership
80
5
70
Aircraft Owned
50
3
40
2
30
20
Aircraft Leased
4
60
Wet Lease: In a wet lease the lessor provides the lessee with the aircraft, crew,
maintenance and insurance. In this arrangement the lessee provides fuel and
airport expenses and other duties. Code share agreements are considered a type of
wet lease.
1
10
0
0
Damp Lease: A damp lease occurs when the air carrier provides less than the
entire aircraft crew.
Source: ALGT 10-K
UOIG 4
University of Oregon Investment Group
Dry Lease: The dry lease is an arrangement in which an aircraft financing
company provides the lessee an aircraft without the insurance, crew, ground staff
and maintenance.
Figure 10: Available Seat Miles Growth
Industry Operating Metrics
16,000,000
Due to the fact the airline industry operates in a different manner and faces
unusual characteristics, industry specific operating metrics are used as a measure
of operational efficiency. Below are certain industry metrics used to evaluate the
profitability and efficiency of a carrier.
14,000,000
12,000,000
ASM
10,000,000
8,000,000
Available Seat Miles (ASM): The number of seats available for passengers
multiplied by the number of miles the seats are flown.
6,000,000
4,000,000
2,000,000
Average Stage Length: The average number of miles flown per flight.
0
Source: UOIG Spreads
Block Hour: The moment the aircraft pushes back from the departure gate until
the moment the flight arrives at the arrival gate following its landing, including
all taxi time.
Load Factor: The percentage of aircraft seating capacity that is actually utilized
(revenue passenger miles divided by available seat miles)
Figure 11: Load Factor Projections
Passenger Revenue per Available Seat Mile (PRASM): This is a measurement
of passenger unit revenue and is found by the product of load factor and yield.
92%
Operating Revenue per ASM (RASM): Operating revenue divided by available
seat miles.
Load Factor
91%
90%
Revenue Passenger Miles (RPM): The number of passenger miles flown for
revenue.
89%
Total Revenue per ASM (TRASM): This is total service scheduled service
revenue and total ancillary revenue divided by available seat miles.
88%
87%
Yield: This represents scheduled service revenue divided by scheduled service
revenue passenger miles.
Source: UOIG Spreads
Figure 12: Revenue Passenger Miles Growth
14,000,000
12,000,000
While the airline industry has always been competitive, significant consolidation
within the past decade has resulted in greater competition. Delta Airlines merged
with Northwest Airlines and most recently US Airways merged with American
airlines, resulting in a concentration of market share among a few large players.
To maintain market position, airlines are focused in the profitability of each
individual route.
Airlines typically compete on price, frequency, capacity, route offerings, loyalty
programs, service quality, safety record and reputation. . While airlines strive to
provide the best service they also try to offer customers the lowest fare possible.
Airlines, specifically LCCs, draw in customers with rock-bottom pricing and then
tack on additional fares unbeknownst to the customer. The price competition
aspect is even more important in a down-economy when consumers are not as
willing to pay a ticket premium for the frills. Lastly, the strongest competitive
advantage that an airline can have is exclusive coverage of a route. With exclusive
coverage of a route comes much less competition and the opportunity to raise
prices as needed.
10,000,000
RSM
Industry Structure & Competition
8,000,000
6,000,000
4,000,000
2,000,000
0
Source: UOIG Spreads
UOIG 5
University of Oregon Investment Group
Strategic Positioning
Unique Business Model
Figure 13: Yield Growth
Allegiant’s unique business model helps them succeed in a competitive market.
While traditional airlines focus on a large pool of customers from leisure to
business, Allegiant solely targets leisure customers. By doing so Allegiant is able
to eliminate a large portion of costs traditionally associated with running an
airline. Traditional airlines provide high frequency services and utilize a variety
of aircrafts while Allegiant provides low frequency service from smaller cities
without connecting flights, all while using one aircraft model to serve the needs
of their target customer. These characteristics and unique business model allow
Allegiant to capitalize on underserved markets where they have a competitive
advantage over legacy airlines due to their fleet, operating model, and cost
structure.
12.00
8.00
6.00
4.00
2.00
0.00
Leisure Customers in Small Cities
Allegiant views this particular group of customers as severely underserved.
Typically, these customers have to drive long distances to reach larger airports.
With Allegiant’s LCC model and exclusive coverage of routes, Allegiant accesses
a market that was previously untapped.
Source: UOIG Spreads
Figure 14: Legacy v. LCC Employees per Aircraft
116
125
94
100
Employees
Yield (cents)
10.00
75
62
65
66
67
67
74
48
50
29
Capacity Management
Allegiant aggressively manages the seat capacity to best possibly match demand.
The company matches utilization of aircraft with seasonal demand to best cut
costs and maximize load factor and RPMs. The company also does not offer
flights every day of the week from every location but instead offers low-frequency
flights in periods of low demand to maintain profitability through high fuel prices
and economic downturns. Allegiant’s load factor remains significantly above
industry averages.
32
25
Aircraft Selection
Similar to how Southwest Airlines structures their fleet, Allegiant operates
primarily similar types of aircrafts. Operating similar aircraft reduces the number
of spare parts and engines required which cuts costs. Contrary to the majority of
airlines, Allegiant does not fly new airplanes. The company purchases only used
aircrafts, typically around 10 years from the manufacture date, at a second-owner
value. Although this choice may result in higher maintenance and fuel costs,
Allegiant has proven that the benefits of purchasing aircraft at a significant
discount, more than offsets the extra fuel and maintenance costs.
0
Source: JP Morgan
Figure 15: Allegiant Products Offering
Product
Seat Selection
Priority Boarding
Trip Flex
Cancellations
Food & Beverage
Pet-in-Cabin
Electronic Carrier Usage Charge
Call Center Booking Fee
Boarding Pass Printing
Carry-On Bag
Oversized Personal Items
Gate Checked Bags
Source: ALGT Website
Price
$0-$80
$4-$12
$8-$40
$75
$2-$13
$100
$10
$15
$5
$10-$75
$50-$75
$0-$75
Ancillary Product Offerings
Allegiant “unbundles” the transportation service provided to the customer,
enabling the airline to stimulate demand with attractive low fares. Capturing
customers with fares lower than competitors then allows Allegiant to derive
ancillary revenue from each customer to propel top-line growth. To a lesser
extent, Allegiant also offers certain third-party products such as hotel and car
rentals to customers who wish to book a bundled vacation. While the most vital
part of the LCC model, it is also subject to a lot of criticism by customers.
Customers accustomed to the legacy model are displeased with the additional
fees. To help mitigate the dissatisfaction, Allegiant makes it a priority to educate
customers about the fees so customers are not surprised when they reach the
airport.
Exclusive Route Coverage
Serving less common destinations allows Allegiant to avoid competition with
legacy carriers and reduces costs associated with leasing airport gates that are in
high demand. Flying in and out of smaller, secondary airports costs less than
UOIG 6
University of Oregon Investment Group
Figure 16: Typical Ancillary Product Offerings
Seat
Choice
Rental
Cars
Preferred
Boarding
Hotel &
Vacation
Bundles
Onboard
Catering
Ancillary
Revenues
Fast
Track
Security
Onboard
Internet
typical large airports such as PHX. Allegiant provides service on 225 routes
between 86 small cities and over ten leisure destinations while serving almost 40
states. Included in the leisure destinations are Las Vegas, Orlando, Phoenix, Los
Angeles and numerous locations in Hawaii. In addition to regularly scheduled
routes, Allegiant also operates certain routes on a seasonal basis, providing
flexibility and allowing the company to capture seasonal demand and increase
revenue while not offering services during the slower months. The
geographically-diversified network allows protection for Allegiant from
economic pressures and depressions.
In terms of competition, Allegiant only faces competition on 23 of their 225 routes
which is a significant advantage. Allegiant primarily competes with Southwest,
Frontier and Hawaiian airlines while Spirit, United and American all face very
little competition on Allegiant’s routes.
Business Growth Strategies
Frequent
Flyer
Program
Onboard
Media
Expanding to New Markets
Checked
baggage
Onboard
Shopping
Source: JP Morgan
Figure 17: LCC Characteristics
Low-Cost Airline Characteristics
Standardized Fleet
Removing Non-Essential Features
Use of Secondary Airports
Rapid Turnaround
Online Ticket Sales
Online Check-In
Imposing Baggage Fees
Staff Plays Multiple Roles
Charge for All Services
Fly Point-to-Point
Carry Very Little Extra Fuel
Source: Google
Figure 18: Operational Bases
Airport
Location
McCarran International
Las Vegas, NV
Orlando Sanford International
Orlando, FL
Phoenix-Mesa Gateway
Mesa, AZ
St. Petersburg-Clearwater InternationalSt. Petersburg, FL
Ft. Lauderdale-Hollywood
Ft. Lauderdale, FL
Oakland International
Oakland, CA
Punta Gorda
Punta Gorda, FL
Honolulu International
Honolulu, HI
Bellingham International
Bellingham, WA
Wendover
Wendover, NV
Allegiant expects to serve 12 more destinations in the summer of 2014, and the
total number is expected to grow even more. The Wright Amendment has opened
up a number of destinations in Texas that Allegiant plans to offer service to. Prior,
the Wright Amendment limited the number of non-stop flights to and from Texas
by requiring flights to first go through a neighboring state. Management has
suggested that they have a long list of potential destinations, including Mexico.
This expansion will help grow the profile of the company, and is in line with their
business strategy to serve leisure travelers.
Ancillary Product Offerings
Beyond the airline business, Allegiant is considered a “travel company”. The
company sells vacation bundles, hotels, and rental cars. Management has, and
continues to focus on growing this business because it provides the greatest
margins. Allegiant has contracts with over 525 hotels and casino resort properties
throughout the United States and also an agreement with Enterprise Holdings,
allowing them rent vehicles to their airline customers. The synergy between the
airline and the travel services is expected to help Allegiant grow revenue and
expand margins.
Efficient Scheduling
In order for Allegiant to stay profitable, flights must be filled. While most legacy
carriers have a load factor around 82%, Allegiant’s load factor is closer to 90%.
Most carriers will move to a market, and stay even if they are unprofitable at first.
Allegiant quickly enters and exits markets based on profitability. The company
also will enter certain markets only for the season that there is demand. While can
result in shaky relationships with airports, it is one of the main reasons Allegiant
has been profitable. Currently Allegiant is implementing more data systems to
help increase the efficiency of their scheduling.
Operational Flexibility
One of the strongest assets that Allegiant possess is the company’s flexibility
within new markets. When larger airlines leave smaller cities due to diminishing
profits and large costs, Allegiant quickly capitalizes on the vacant spot. While this
may seem counterintuitive at first, the LCC model Allegiant utilizes allows the
company to operate with lower costs and higher margins. Once in the new market,
Allegiant contracts out all ground-workers and creates clauses that allow the
airline to leave any market without incremental costs. It typically takes less than
Source: SEC
UOIG 7
University of Oregon Investment Group
30 days to completely exit a market and this unique aspect has assisted Allegiant
in posting forty-five straight profitable quarters.
70
3,500
60
3,000
50
2,500
40
2,000
30
1,500
1,000
20
500
10
0
Management and Employee Relations
Net Income ($ thousands)
80
4,000
Maurice J. Gallagher, Jr. – Chairman and Chief Executive
Officer
Maurice Gallagher became the majority owner and joined the board of directors
in 2001. Beginning 2003 Mr. Gallagher was named CEO and in 2006 was
designated as Chairman of the Board. Prior to his involvement in Allegiant Travel
Co. Mr. Gallagher worked in the investment community and heavily in Mpower
Communications, a telecommunications company Mr. Gallagher founded. Earlier
in his career Mr. Gallagher was heavily involved in ValuJet Airlines, the
predecessor of AirTran Holdings, and WestAir, a commuter airline.
0
Maurice Gallagher
Andrew Levy
Scott Sheldon
Andrew C. Levy – President and Chief Operating Officer
Source: SEC
Beginning in 2001 Andrew Levy served as an officer of Allegiant and in 2009
took over the role of President. Prior to serving as President, Mr. Levy was the
Managing Director and Chief Financial Officer of the company. Earlier in his
career Mr. Levy was involved in Mpower, a telecommunications company
founded by Maurice Gallagher, Chairman and CEO. In addition, Mr. Levy has
worked in a number of aviation investment companies and within the operations
area for ValuJet Airlines.
1,000,000
4,000,000
900,000
3,500,000
800,000
700,000
3,000,000
600,000
2,500,000
500,000
2,000,000
400,000
1,500,000
300,000
1,000,000
200,000
500,000
100,000
-
-
Maurice Gallagher
Andrew Levy
Scott Sheldon – Chief Financial Officer
Revenue ($ thousands)
Total Compensation ($ thousands)
Figure 20: Executive Compensation vs. Revenue
4,500,000
Scott Sheldon was appointed to the Chief Financial Officer position and Senior
Vice President in 2010. Prior to his CFO position Mr. Sheldon held various roles
within the accounting department at Allegiant. Mr. Sheldon’s current roles
include overseeing all accounting, tax and financial reporting in addition to
insurance and risk management. Prior to working at Allegiant Mr. Sheldon
worked in the audit industry.
Management Guidance
Scott Sheldon
Due to the fact Allegiant is a fairly small company management does not
consistently provide guidance on a number of factors. During the past earnings
call management stated that CASM is expected to increase between three to five
percent along with CASM ex fuel to increase five and seven percent. Further,
salaries and wages are expected to increase to support growth and higher
maintenance expenses due to more aircraft checks and higher aircraft lease rental
expense due to sub-service arrangements.
Source: SEC
Figure 21: Executive Compensation vs. EBITDA
4,500,000
200,000
4,000,000
180,000
Recent News
160,000
3,500,000
140,000
3,000,000
120,000
2,500,000
100,000
2,000,000
80,000
1,500,000
60,000
1,000,000
40,000
500,000
20,000
-
-
Maurice Gallagher
Andrew Levy
Scott Sheldon
EBITDA ($ thousands)
Total Compensation ($ thousands)
Total Compensation ($ thousands)
Figure 19: Executive Compensation vs. Earnings
4,500
“How the FAA Found One Airline a New Product Line”
Bloomberg BusinessWeek – April 4, 2014
In order to get the new routes to Hawaii approved by the FAA, Allegiant had to
add larger seats to airplanes to provide pilots with adequate rest. As a result,
Allegiant introduced new “Giant Seats” that the company sells for $50 to $90 per
flight on flights where pilots are not required to rest. As a result of the LCC
structure, Allegiant capitalizes on any opportunity to offer customers additional
ancillary products.
Source: SEC
UOIG 8
University of Oregon Investment Group
“How Tiny Airports Get Taxpayers to Help Lure New Flights”
Figure 22: Number of Routes
Allegiant recently announced a dozen new flights to smaller, secondary airports
across the nation. Last year the U.S. Department of Transportation awarded grants
to smaller airports to help smaller suburbs deal with underserved markets that
force customers to pay overly expensive fares. This grant will help guarantee
airlines receive a certain amount of revenue for the new route in addition to
covering parts of the airport rental costs. This provides Allegiant with a lucrative
opportunity to further expand routes in accordance with their business model
while receiving cost support from the grants. In addition, Allegiant has the
opportunity to pull out of markets where traffic is not meeting expectations,
providing even more flexibility.
250
200
Number of Routes
Bloomberg BusinessWeek – March 11, 2014
150
100
50
0
Source: ALGT 10-K
Figure 23: Ancillary Revenue Growth
25%
“Allegiant Travel Company Announces New $100 Million Share
Repurchase Authorization”
Thomson Reuters – February 28, 2014
Late February the board of Allegiant announced a new $100 million share
repurchase program. The old repurchase program was depleted and as a sign of
growing confidence in the cash generation ability of the LCC business model,
Allegiant will continue to repurchase shares and use future cash to purchase
aircraft.
Growth (%)
20%
Catalysts
15%
Upside
10%
5%

0%

Source: UOIG Spreads



Figure 24: Salary & Benefits Expense

Salary and Benefits ($ thousands)
350,000
Expansion to new markets, such as Mexico, provides an excellent
opportunity for growth and promoting the Allegiant brand
Adding new ancillary products will continue to boost revenue and create
higher margins
The relative unknown name gives Allegiant the opportunity to expand
brand recognition
Schedule and operational flexibility allows Allegiant the chance to only
fly on days that are profitable
As larger legacy airlines continue to pull out of smaller, less profitable
routes Allegiant has new opportunities with little or no competition
Government subsidies for smaller airports to help attract new airlines
will help mitigate costs associated with airport rental and add on new
revenue
300,000
Downside
250,000
200,000

150,000

100,000
50,000

0

Source: UOIG Spreads
Operating an older fleet allows Allegiant to save on costs associated with
acquiring aircraft but may result in unforeseen maintenance costs
Similar to other airlines, Allegiant pays their pilots and flight attendants
significantly less of a salary which has forced employees to leave the
industry in search of a higher wage
Labor negotiations may not end successfully and result in a strike or
walkout by employees
Negative criticisms from customers who are unfamiliar with the low-cost
carrier structure can spread quickly, diminishing brand equity
UOIG 9
University of Oregon Investment Group

Figure 25: ASCI Score Complaint Index
80
75
Due to the fact fuel is one of the largest costs associated with running an
airline, fluctuations in fuel costs can significantly affect margins and
profitability
Comparable Analysis
70
In order to determine the best companies for the comparable analysis, a large pool
was initially selected. This pool included all airlines, regardless of operating
model, in addition to companies that operate in industries that Allegiant is
associated with. Companies were first screened based on industry, size, capital
structure, growth rates and geographic regions. Spirit Airlines, Expedia,
Southwest Airlines, Las Vegas Sands Corporation, and Alaska Airlines are chosen
as comparable companies to Allegiant.
65
60
55
U.S. Airways
American
Airlines
Delta Air Lines
Southwest
Airlines
JetBlue
Source: USA Today
Spirit Airlines (50%)
Spirit Airlines, Inc. provides low-fare airline services. It operates approximately
250 daily flights to 50 destinations in the United States, Caribbean, and Latin
America. Spirit Airlines, Inc. was founded in 1964 and is headquartered in
Miramar, Florida. – Yahoo! Finance
Figure 26: ALGT vs. SAVE Price
$125
$60
$100
$30
$50
$25
$15
$0
$0
ALGT
SAVE
Source: FactSet
Figure 27: ALGT vs LUV EV/EBITDA
10.0x
9.0x
8.0x
7.0x
SAVE
ALGT
$45
$75
In 2013, Spirit generated just over $1.6 billion in revenue. Spirit has a fleet of 54
Airbus’s with an average age of 5.1 years. Spirit is given a weighting of 50% due
to their extremely similar business model to Allegiant. While EBITDA is
expected to grow at a greater rate, Spirit and Allegiant have similar revenue
growth rates, operational structure, and risk exposure.
Expedia (20%)
Expedia, Inc., together with its subsidiaries, operates as an online travel company
in the United States and internationally. It provides travel products and services
to leisure and corporate travelers. In addition, the company provides various
media and advertising offerings to travel and non-travel advertisers. Expedia was
founded in 1996 and is headquartered in Bellevue, Washington.
– Yahoo!
Finance
Expedia offers deals with a number or airlines, hotel properties, cruise lines, car
rental companies, and travel service companies. The company generates revenue
through advertisements on websites as well. Expedia is given a weighting of 20%
because revenue is generated in a similar manner to Allegiant’s ancillary revenue,
making Expedia a similarly risky company. In addition, Expedia and the services
offered will be subject to the same macroeconomic a fluctuation due to the fact
the target market is identical. Significant weighting is a result of very similar
EBITDA and EPS growth rates to Allegiant.
6.0x
Southwest Airlines (10%)
5.0x
4.0x
3.0x
2.0x
1.0x
0.0x
ALGT
LUV
Southwest Airlines Co. operates passenger airlines that provide scheduled air
transportation services in the United States. It serves 97 destinations in 41 states,
the District of Columbia, and the Commonwealth of Puerto Rico, as well as 6
near-international countries, including Mexico, Jamaica, The Bahamas, Aruba,
Dominican Republic, and Bermuda. The company was founded in 1967 and is
headquartered in Dallas, Texas. – Yahoo! Finance
Source: FactSet
UOIG 10
University of Oregon Investment Group
Figure 28: ALGT vs. LVS Price
$140
$120
Southwest is the largest low cost carrier with over $18 billion in revenue in 2013.
Southwest mainly services domestic locations, with a few select international
sites. The company has a similar business model to Allegiant and this is why only
a 10% weighting was assigned. This company was not weighted more due to the
size, growth rates and capital structure. Southwest is significantly levered, and has
a market capitalization of over $16 billion. As a larger airline, face more
competition from larger legacy airlines.
$100
Las Vegas Sands (10%)
Price
$80
$60
$40
$20
$0
Allegiant Air
Las Vegas Sands
Source: FactSet
Figure 29: ALGT vs. ALK Price
$140
$120
$100
Las Vegas Sands Corp. develops, owns, and operates integrated resorts in Asia
and the United States. The company owns and operates The Venetian Macao
Resort Hotel, Sands Cotai Central, the Four Seasons Hotel Macao, the Plaza
Casino, and the Sands Macao in Macau, the People’s Republic of China. The
company’s integrated resorts comprise accommodations, gaming, entertainment
and retail facilities, convention and exhibition facilities, celebrity chef restaurants,
and other amenities. Las Vegas Sands Corp. was founded in 1988 and is based in
Las Vegas, Nevada. – Yahoo! Finance
Similar to Expedia, Las Vegas Sands operates a large number of leisure properties
and resorts. While Las Vegas Sands is not an airline, the company works with the
same target market as Allegiant and are subject to similar macroeconomic changes
that will impact the airline industry. The company was chosen as a comparable
primarily due to sales and EBITDA growth, but not weighted heavily due to the
fact Las Vegas Sands is not within the airline industry.
Price
$80
Alaska Air (10%)
$60
$40
Alaska Air Group, Inc., through its subsidiaries, provides passengers and cargo
air transportation services in the United States. The company operates through
Alaska Mainline and Alaska Regional segments. It serves approximately 100
cities in Alaska, the Lower 48, Hawaii, Canada and Mexico. The company was
founded in 1932 and is based in Seattle, Washington. – Yahoo! Finance
$20
$0
Allegiant Travel
Alaska Air
Source: FactSet
Alaska Air is not as much of a discount airline as Spirit or Southwest but is still a
quality comparable company. While growth rates do not match up exactly with
Allegiant, the company is similar in size and has a similar business model.
Different capital structure and growth rates contribute to the 10% weighting.
Figure 30: Allegiant Revenue Growth
Discounted Cash Flow Analysis
2,500,000
Revenue ($ thousands)
2,000,000
Revenue Model
Due to the fact the airline industry is highly competitive, there are a large number
operating statistics that drive revenue. The most basic measure of all statistics is
available seat miles, or ASM. The majority of the time all other operating statistics
are a function of ASM. Therefore, to most accurately project revenue a number
of regressions were run to project future ASM numbers. Multi-variable
regressions were run against a number of items in order to accurately project
expenses. The most statistically significant variables are U.S. GDP, the Consumer
Confidence Index, corporate profit and domestic trips by U.S. residents. The
forecasted data for each of these variables is projected through 2020.
1,500,000
1,000,000
500,000
0
Source: UOIG Spreads
Discounted Cash Flow
All of the discounted cash flow line items flow in from the three statement model.
UOIG 11
University of Oregon Investment Group
Three Statement
Figure 31: Stations Operations Expense
Station Operations ($ thousands)
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
Statement of Cash Flows
Working capital items are used to project a number of items of the statement of
cash flows. All other items are projected as a percentage of revenue
20,000
0
Balance Sheet
Items on the balance sheet are projected as a percentage of revenue and days
outstanding based on historical averages along with any applicable management
guidance provided.
Source: UOIG Spreads
Figure 32: Maintenance & Repairs Expense
Beta
The beta for Allegiant is derived through a number of regressions ran against the
S&P 500 in addition to a number of Hamada and Vasicek betas. Regressions are
run against the S&P 500 for the 1-year, 3-year and 5-year time frames with a daily,
weekly and monthly beta for each of the three time frames. Due to low trade
volumes on a daily basis, the weekly regressions are weighted more than daily
regressions. A weighted-average of the betas is used to arrive at a final beta of
0.88.
250,000
Maintenance & Repairs ($ thousands)
Income Statement
The airline industry measures a significant portion of their operating costs on a
per ASM basis. As a result, salary and benefits, station operations and
maintenance and repairs are projected on an ASM basis. Most of these costs are
expected to stay somewhat consistent at historical levels. In 2014 management
has suggested that capital expenditures will be significantly cut because they are
not planning on buying a large amount of new planes. As a result, aircraft lease
costs are expected to increase significantly. Aircraft fuel cost is projected using
futures prices on jet fuel. This is used to project price of fuel expense per ASM.
200,000
150,000
100,000
Cost of Debt
50,000
The cost of debt is derived from the debt outstanding and the respective rates,
arriving at a cost of debt of 4.56%. The majority of debt held by Allegiant is in
the form of notes payable that are secured by aircrafts, helping achieve a lower
interest rate. On April 14, 2014, Allegiant pre-paid a $125 million secured term
loan originally scheduled to mature in March 2017. Refinancing this more
expensive debt will now allow Allegiant to provide flexibility and maintain fleet
growth.
0
Source: UOIG Spreads
Figure 33: ALGT Beta
Allegiant Travel Co.
1 Year Daily
1 Year Weekly
3 Year Daily
3 Year Weekly
5 Year Daily
5 Year Weekly
3-Year Daily Hamada
1-Year Daily Hamada
1-Year Daily Vasicek
3-Year Daily Vasicek
5-Year Weekly Vasicek
Final ALGT Beta
Beta
0.92
0.36
0.77
0.54
0.85
0.48
1.23
1.24
1.18
1.02
1.21
SE
0.16
0.38
0.06
0.13
0.05
0.12
-
Risk-Free Rate
Weighting
5.00%
0.00%
30.00%
25.00%
25.00%
15.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.70
To determine the risk-free rate the yield on the 10-year Treasury bill is used. For
the terminal risk-free rate, the yield on the 30-Year Treasury bill is used.
Terminal Growth Rate
In accordance with the group standards a 3.00% terminal growth rate is applied
to the cash flow in the terminal year. In addition, an intermediate growth rate was
used to trend cash flows down toward 3.00%.
Source: UOIG Spreads
UOIG 12
University of Oregon Investment Group
Leveraged Buyout (LBO) Analysis
Figure 34: Leverage Statistics
Assessing Buyout Targets
12.0x
When screening for potential buyout targets a number of factors were taken into
consideration. During the initial screening, strong candidates for the LBO analysis
included the following characteristics:
10.0x
8.0x




6.0x
4.0x
2.0x
0.0x
Senior Secured Debt / EBITDA
Senior Debt / EBITDA
Strong Cash Flow Generation.
Leading Market Position
Growth Opportunities
Large Asset Base
While the airline industry has undergone significant consolidation, Allegiant was
still a viable candidate in terms of strong characteristics but the likelihood of an
LBO occurring in the volatile airline industry is not very likely.
Total Debt / EBITDA
Source: UOIG Spreads
Leverage
The industry average for a leveraged buyout financing mixture is typically 30%
equity/70% debt and this LBO is right in line with that average having about 65%
debt and 35% equity. Typically private equity firms find the right debt/equity mix
and relatively quick investment horizon to hit a 20% Internal Rate of Return
(IRR), the rate that must be applied to the cash flows from the investment to
generate a NPV of zero. The IRR is largely influenced by factors including
purchase price, debt/equity mix along with the exit multiple and year. With a
lower equity investment and more leverage, a firm can easily raise the IRR. As an
industry rule of thumb, private equity firms typically do not buy out companies
with more than 7x EBITDA in debt. If a private equity firm attempts to take out
more than 7x EBITDA in debt, it is very difficult to exit the investment within the
typical five-year investment horizon with industry-average levels of debt.
Figure 35: DCF vs. LBO Revenue Projections
2,500,000
Revenue ($ thousands)
2,000,000
1,500,000
1,000,000
500,000
When determining the source of funds for the purchase of Allegiant debt included
two term loans for a combined value of $1.4 billion and senior subordinated notes
for $350 million along with a $150 million credit revolver that was not drawn
upon. Using the forward LIBOR curve and a LIBOR floor the debt was priced
according to industry averages.
0
DCF Revenue
LBO Revenue
Source: UOIG Spreads
LBO Implementation
Figure 36: DCF vs. LBO Operating Income
450,000
25%
400,000
20%
300,000
15%
250,000
200,000
10%
150,000
100,000
5%
50,000
0
0%
DCF Operating Income
LBO Operating Income
DCF Operating Margin
LBO Operating Margin
Margin
Dollars ($ thousands)
350,000
In order to derive a valuation from the LBO all three financial statements were
modeled and projected forward. The income statement was recreated through
EBIT and new line items were created for the interest expense on each piece of
debt which flows through to income. A primary characteristic of the LBO process
is cutting certain expenses to help generate additional cash flow for debt servicing.
In order to continue to find cash for debt on top of what was being produced by
operations and investing, station operations and salaries were all dropped slightly.
With respect to the balance sheet, accounts receivable were decreased in an effort
to collect from customers quicker while simultaneously increasing accounts
payable to help delay the cash outflows. As a result of the dropped expenses,
revenue in turn is cut in the LBO model to reflect that decrease.
To determine the purchase price the undervaluation from the discounted cash flow
analysis was used as the premium over the current price. From that purchase price,
the entry Debt/EBITDA multiple was 7.6x, which is toward the higher end of the
industry average. At the entry the EV/EBITDA multiple was 11.9x as with the
exit multiple remaining the same at 11.9x.
Source: UOIG Spreads
UOIG 13
University of Oregon Investment Group
LBO Decision
Figure 37: DCF vs. LBO Net Income
250,000
12%
10%
8%
150,000
6%
100,000
4%
50,000
2%
0
Maring
Dollars ($ thousands)
200,000
When determining the final implied price for the valuation the LBO was not
weighted. While Allegiant does hold a number of attractive LBO characteristics
in and of themselves, the airline industry is not the ideal industry for an LBO.
Excessive volatility due to mainly uncontrollable factors makes for an unstable
environment which would add significant risk to a sponsor’s investment. In
addition, the entry multiple of 11.9x EBITDA was quite high in terms of historical
averages, further invalidating the LBO implied price. Lastly, private equity firms
look for multiple expansion during their investment to maximize returns and if
the entry multiple is 11.9x EBITDA, that leaves very little room for expansion.
Recommendation
0%
DCF Net Income
LBO Net Income
DCF Net Margin
LBO Net Margin
Source: UOIG Spreads
Figure 38: Final Price Target
Method
Final Price Target
Price Objective
Discounted Cash Flow
Comparables Analysis
Leverage Buyout
$134.19
$135.74
$108.65
Price Target
Current Price
Undervalued
Weighting
50%
50%
0%
$134.96
$115.95
16.40%
Allegiant Travel Company has a unique business model that protects them from
larger, better financed legacy carriers. The company’s ability to profit while
facing little, if not any, competition on routes gives them a unique position in the
market that will propel their future growth. In addition, Allegiant has plenty of
room to expand, operational flexibility and a strong financial position letting the
company continue to tap unserved markets. Given a 50% weighting on the
discounted cash flow analysis, a 50% weighting on the comparables analysis and
no weighting on the LBO analysis, a final price target of $134.96 is reached. Give
an undervaluation of 16.40%, Allegiant is assigned a rating of outperform.
Source: UOIG Spreads
UOIG 14
University of Oregon Investment Group
May 2, 2014
Appendix 1 – Forward Comparables Analysis
Forward Comparables Analysis
ALGT
($ in thousands)
Stock Characteristics
Current Price
Beta
Max
$115.95
1.66
Min
$23.49
0.70
Median
Weight Avg.
$72.46
$61.88
0.97
1.05
Size
Short-Term Debt
Long-Term Debt
Cash and Cash Equivalent
Non-Controlling Interest
Preferred Stock
Diluted Basic Shares
Market Capitalization
Enterprise Value
629,000.0
9,760,000.0
3,607,000.0
1,835,000.0
0.0
813,000.0
62,161,980.0
70,149,980.0
0.0
0.0
1,372.0
0.0
0.0
18,600.0
2,156,670.0
2,028,671.6
19,000.0
1,249,000.0
1,342,000.0
0.0
0.0
129,000.0
9,347,340.0
11,073,368.0
Growth Expectations
% Revenue Growth 2014E
% Revenue Growth 2015E
% EBITDA Growth 2014E
% EBITDA Growth 2015E
% EPS Growth 2014E
% EPS Growth 2015E
17.5%
26.6%
34.6%
27.8%
30.9%
24.9%
2.9%
4.0%
14.3%
9.4%
16.5%
11.8%
Profitability Margins
Gross Margin
EBIT Margin
EBITDA Margin
Net Margin
78.2%
28.1%
34.6%
19.1%
Credit Metrics
Interest Expense
Debt/EV
Leverage Ratio
Interest Coverage Ratio
Operating Results
Revenue
EBIT
EBITDA
Net Income
Capital Expenditures
Multiples
EV/Revenue
EV/EBIT
EV/EBITDA
EV/(EBITDA-Capex)
Market Cap/Net Income = P/E
Price/Earnings/Growth = PEG
SAVE
Allegiant Travel Spirit Airlines,
Inc.
Co.
EXPE
LUV
LVS
ALK
Expedia Inc.
Southwest
Airlines, Co.
Las Vegas
Sands Corp.
Alaska Air
Group
$115.95
0.70
50.00%
$56.03
0.92
20.00%
$72.46
0.86
10.00%
$23.49
0.97
10.00%
$76.46
1.54
10.00%
$93.77
1.66
84,100.0
1,564,000.0
1,075,874.4
279,180.0
0.0
220,680.9
12,424,906.4
13,276,312.0
20,000.0
214,000.0
362,000.0
1.6
0.0
18,600.0
2,156,670.0
2,028,671.6
19,000.0
0.0
531,000.0
0.0
0.0
73,000.0
4,090,190.0
3,578,190.0
0.0
1,249,000.0
1,372.0
478,400.0
0.0
129,000.0
9,347,340.0
11,073,368.0
629,000.0
2,628,000.0
3,152,000.0
0.0
0.0
702,008.7
16,490,058.2
16,595,058.2
0.0
9,760,000.0
3,607,000.0
1,835,000.0
0.0
813,000.0
62,161,980.0
70,149,980.0
117,000.0
754,000.0
1,342,000.0
0.0
0.0
68,800.3
6,451,395.5
5,980,395.5
16.5%
8.2%
18.5%
10.8%
24.8%
15.4%
14.3%
17.5%
25.8%
19.5%
22.1%
20.1%
15.5%
14.9%
26.9%
10.6%
16.5%
18.0%
17.5%
26.6%
34.6%
27.8%
20.7%
24.9%
16.7%
12.2%
14.9%
13.2%
18.4%
17.1%
3.0%
4.0%
14.3%
9.6%
24.8%
15.4%
16.5%
8.2%
22.5%
10.8%
30.9%
14.7%
2.9%
5.4%
18.5%
9.4%
25.4%
11.8%
0.0%
9.6%
14.5%
5.4%
0.0%
14.6%
20.3%
9.4%
15.6%
16.2%
21.5%
10.7%
0.0%
18.2%
24.7%
11.5%
0.0%
17.6%
21.8%
11.0%
78.2%
10.7%
18.1%
9.4%
0.0%
9.6%
14.5%
5.4%
0.0%
28.1%
34.6%
19.1%
0.0%
14.6%
20.3%
8.8%
259,000.0
0.2x
1.8x
29.9x
0.0x
0.0x
12.2x
83,000.0
0.1x
1.2x
21.2x
59,900.0
0.1x
0.6x
8.9x
9,493.0
0.1x
0.8x
29.9x
0.0x
0.0x
83,000.0
0.1x
1.2x
12.2x
126,000.0
0.2x
1.2x
21.0x
259,000.0
0.1x
1.8x
21.4x
48,000.0
0.1x
0.8x
22.4x
$18,238,000.0
4,501,000.0
5,552,000.0
3,067,000.0
1,806,000.0
$1,150,896.3
209,089.3
284,187.0
131,853.5
202,000.0
$5,568,000.0
776,000.0
1,076,000.0
522,000.0
537,000.0
$6,044,200.0
992,000.0
1,341,400.0
662,600.0
553,300.0
$1,150,896.3
209,089.3
284,187.0
131,853.5
213,814.9
$1,944,000.0
342,000.0
424,000.0
214,000.0
202,000.0
$5,568,000.0
593,000.0
1,010,000.0
522,000.0
319,000.0
$18,238,000.0
1,747,000.0
2,646,000.0
978,000.0
1,542,000.0
$16,041,000.0
4,501,000.0
5,552,000.0
3,067,000.0
1,806,000.0
$5,307,000.0
776,000.0
1,076,000.0
467,000.0
537,000.0
4.37x
18.67x
12.64x
28.83x
21.98x
4.57x
0.46x
6.80x
2.97x
(5.65x)
7.97x
(0.86x)
1.13x
11.05x
6.27x
13.03x
16.95x
0.54x
1.96x
12.25x
8.86x
15.75x
18.23x
0.84x
1.76x
9.70x
7.14x
28.83x
16.36x
0.99x
1.84x
10.46x
8.44x
16.12x
19.11x
0.92x
1.99x
18.67x
10.96x
16.03x
17.91x
0.97x
0.91x
9.50x
6.27x
15.03x
16.86x
0.68x
4.37x
15.59x
12.64x
18.73x
20.27x
0.66x
1.13x
7.71x
5.56x
11.10x
13.81x
0.54x
Multiple
EV/Revenue
EV/EBIT
EV/EBITDA
Market Cap/Net Income = P/E
Price/Earnings/Growth = PEG
Price Target
Current Price
Undervalued
Implied Price
$128.10
$144.53
$142.23
$129.25
$110.50
$135.74
115.95
17.07%
-
Weight
0.00%
0.00%
50.00%
50.00%
0.00%
UOIG 15
University of Oregon Investment Group
May 2, 2014
Appendix 2 – Discounted Cash Flows Analysis
Discounted Cash Flow Analysis
($ in thousands)
Revenue
Total Revenue
% YoY Growth
Operating Expenses
Aircraft Fuel
% Revenue
Salary and Benefits
% Revenue
Station Operations
% Revenue
Maintenance and Repairs
% Revenue
Sales and Marketing
% Revenue
Aircraft Lease Rentals
% Revenue
Depreciation and Amortization
% Revenue
Other Expenses
% Revenue
Earnings Before Interest & Taxes
% Revenue
Earnings from Unconsolidated Affiliates, net
% Revenue
Net Interest (Income)
% Revenue
Interest Expense
% Revenue
Earnings Before Taxes
% Revenue
Less Taxes (Benefits)
Tax Rate
Net Income
Net Margin
Add Back: Depreciation and Amortization
Add Back: Interest Expense*(1-Tax Rate)
Operating Cash Flow
% Revenue
Current Assets
% Revenue
Current Liabilities
% Revenue
Net Working Capital
% Revenue
Change in Working Capital
Capital Expenditures
% Revenue
Acquisitions
% Revenue
Unlevered Free Cash Flow
Discounted Free Cash Flow
EBITDA
EBITDA Margin
EBITDA Growth
2009A
2010A
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
2019E
2020E
557,940.0
10.7%
663,641.0
18.9%
779,117.0
17.4%
908,719.0
16.6%
996,150.0
9.6%
1,150,896.3
15.5%
1,322,582.1
14.9%
1,516,016.6
14.6%
1,687,549.4
11.3%
1,840,871.0
9.1%
1,985,704.2
7.9%
2,138,149.4
7.7%
165,000.0
29.6%
90,006.0
16.1%
53,993.0
9.7%
52,938.0
9.5%
16,458.0
2.9%
1,926.0
0.3%
29,638.0
5.3%
25,728.0
4.6%
$122,253.0
21.9%
84.0
0.0%
(2,474.0)
(.44%)
4,079.0
0.7%
120,564.0
21.6%
44,233.0
36.7%
$76,331.0
13.7%
29,638.0
2,582.5
$108,551.5
19.5%
199,634.0
35.8%
158,581.0
28.4%
$41,053.0
7.4%
31,663.0
5.7%
0.00%
$76,888.5
243,671.0
36.7%
108,000.0
16.3%
62,620.0
9.4%
60,579.0
9.1%
17,062.0
2.6%
1,721.0
0.3%
34,965.0
5.3%
30,367.0
4.6%
$104,656.0
15.8%
(14.0)
0.0%
(1,184.0)
(.18%)
2,522.0
0.4%
103,332.0
15.6%
37,630.0
36.4%
$65,702.0
9.9%
34,965.0
1,603.6
$102,270.6
15.4%
103,305.0
15.6%
166,367.0
25.1%
($63,062.0)
-9.5%
($104,115.0)
98,499.0
14.8%
0.00%
$107,886.6
330,657.0
42.4%
119,856.0
15.4%
66,709.0
8.6%
81,228.0
10.4%
19,905.0
2.6%
1,101.0
0.1%
41,975.0
5.4%
32,242.0
4.1%
$85,444.0
11.0%
(9.0)
0.0%
(1,236.0)
(.16%)
7,175.0
0.9%
79,514.0
10.2%
30,116.0
37.9%
$49,398.0
6.3%
41,975.0
4,457.5
$95,830.5
12.3%
225,621.0
29.0%
177,505.0
22.8%
$48,116.0
6.2%
$111,178.0
86,582.0
11.1%
0.00%
($101,929.5)
378,195.0
41.6%
133,295.0
14.7%
78,357.0
8.6%
73,897.0
8.1%
19,222.0
2.1%
0.0
0.0%
57,503.0
6.3%
35,946.0
4.0%
$132,304.0
14.6%
(99.0)
0.0%
(983.0)
(.11%)
8,739.0
1.0%
124,647.0
13.7%
46,233.0
37.1%
$78,414.0
8.6%
57,503.0
5,497.6
$141,414.6
15.6%
325,710.0
35.8%
210,546.0
23.2%
$115,164.0
12.7%
$67,048.0
105,084.0
11.6%
0.00%
($30,717.4)
385,558.0
38.7%
158,627.0
15.9%
78,231.0
7.9%
72,818.0
7.3%
21,678.0
2.2%
9,227.0
0.9%
69,264.0
7.0%
46,010.0
4.6%
$154,737.0
15.5%
(393.0)
0.0%
(1,043.0)
(.10%)
9,493.0
1.0%
146,680.0
14.7%
54,901.0
37.4%
$91,779.0
9.2%
69,264.0
5,939.9
$166,982.9
16.8%
332,210.0
33.3%
290,651.0
29.2%
$41,559.0
4.2%
($73,605.0)
177,516.0
17.8%
0.00%
$63,071.9
398,719.5
34.6%
173,356.3
15.1%
86,678.1
7.5%
121,349.4
10.5%
30,337.4
2.6%
17,263.4
1.5%
75,097.7
6.5%
39,005.2
3.4%
$209,089.3
18.2%
3.0
0.0%
(205.0)
(.02%)
0.0%
209,291.3
18.2%
77,437.8
37.0%
$131,853.5
11.5%
75,097.7
$206,951.2
18.0%
367,226.5
31.9%
262,619.8
22.8%
$104,606.6
9.1%
$63,047.6
77,685.5
6.8%
0.00%
$66,218.1
62,360.8
441,519.7
33.4%
206,290.9
15.6%
98,233.7
7.4%
137,527.2
10.4%
39,293.5
3.0%
26,451.6
2.0%
88,450.2
6.7%
58,940.2
4.5%
$225,874.9
17.1%
0.0%
0.0%
0.0%
225,874.9
17.1%
83,573.7
37.0%
$142,301.2
10.8%
88,450.2
$230,751.4
17.4%
421,626.7
31.9%
280,914.2
21.2%
$140,712.6
10.6%
$36,105.9
92,580.7
7.0%
0.00%
$102,064.7
90,520.3
483,813.2
31.9%
231,303.1
15.3%
121,158.7
8.0%
165,216.5
10.9%
44,057.7
2.9%
30,320.3
2.0%
104,416.2
6.9%
77,101.0
5.1%
$258,629.8
17.1%
0.0%
0.0%
0.0%
258,629.8
17.1%
95,693.0
37.0%
$162,936.8
10.7%
104,416.2
$267,353.0
17.6%
481,300.9
31.7%
330,591.0
21.8%
$150,710.0
9.9%
$9,997.4
113,701.2
7.5%
0.00%
$143,654.3
119,984.2
530,294.9
31.4%
242,765.0
14.4%
145,659.0
8.6%
182,073.8
10.8%
48,553.0
2.9%
33,751.0
2.0%
123,128.7
7.3%
84,967.8
5.0%
$296,356.2
17.6%
0.0%
0.0%
0.0%
296,356.2
17.6%
109,651.8
37.0%
$186,704.4
11.1%
123,128.7
$309,833.1
18.4%
557,902.0
33.1%
417,059.7
24.7%
$140,842.3
8.3%
($9,867.6)
126,566.2
7.5%
0.00%
$193,134.5
151,914.9
583,780.2
31.7%
260,731.9
14.2%
156,439.2
8.5%
195,548.9
10.6%
52,146.4
2.8%
36,817.4
2.0%
145,182.7
7.9%
104,292.8
5.7%
$305,931.5
16.6%
0.0%
0.0%
0.0%
305,931.5
16.6%
113,194.6
37.0%
$192,736.8
10.5%
145,182.7
$337,919.6
18.4%
613,592.9
33.3%
450,610.4
24.5%
$162,982.4
8.9%
$22,140.1
156,474.0
8.5%
0.00%
$159,305.4
118,006.6
643,292.8
32.4%
276,527.3
13.9%
179,742.7
9.1%
221,221.8
11.1%
55,305.5
2.8%
39,714.1
2.0%
171,454.3
8.6%
110,610.9
5.6%
$287,834.9
14.5%
0.0%
0.0%
0.0%
287,834.9
14.5%
106,498.9
37.0%
$181,336.0
9.1%
171,454.3
$352,790.3
17.8%
666,362.6
33.6%
439,686.9
22.1%
$226,675.7
11.4%
$63,693.2
183,677.6
9.3%
0.00%
$105,419.4
73,541.3
710,273.5
33.2%
292,732.3
13.7%
190,276.0
8.9%
252,335.2
11.8%
43,909.8
2.1%
32,072.2
1.5%
202,304.3
9.5%
87,819.7
4.1%
$326,426.3
15.3%
0.0%
0.0%
0.0%
326,426.3
15.3%
120,777.7
37.0%
$205,648.6
9.6%
202,304.3
$407,952.9
19.1%
741,000.4
34.7%
448,443.7
21.0%
$292,556.7
13.7%
$65,881.0
213,814.9
10.0%
0.00%
$128,257.0
84,261.1
151,891.0
27.2%
91.5%
139,621.0
21.0%
(8.1%)
127,419.0
16.4%
(8.7%)
189,807.0
20.9%
49.0%
224,001.0
22.5%
18.0%
284,187.0
24.7%
26.9%
314,325.1
23.8%
10.6%
363,046.0
23.9%
15.5%
419,484.8
24.9%
15.5%
451,114.2
24.5%
7.5%
459,289.2
23.1%
1.8%
528,730.7
24.7%
15.1%
UOIG 16
University of Oregon Investment Group
May 2, 2014
Appendix 3 – Discounted Cash Flows Analysis Revenue Model
Average Seat Miles (ASM)
($ thousands)
ASM
% Growth
2009A
4,950,954.0
27.4%
2010A
5,742,014.0
16.0%
2011A
5,797,753.0
1.0%
2012A
6,954,408.0
20.0%
2013A
7,892,896.0
13.5%
2014E
8,667,814.5
9.8%
2015E
9,823,374.9
13.3%
2016E
11,014,431.5
12.1%
2017E
12,138,252.3
10.2%
2018E
13,036,596.0
7.4%
2019E
13,826,363.5
6.1%
2020E
14,636,613.1
5.9%
Scheduled Service Revenue
($ thousands)
ASM
Load Factor
% Growth
Revenue Passenger Miles (RPM)
% Growth
Yield (cents)
% Growth
Total Scheduled Service Revenue
% Growth
% of Total Revenue
2009A
4,950,954.0
90.4%
0.56%
4,477,119.0
28.07%
7.73
(18.4%)
346,222.0
4.6%
62.1%
2010A
5,742,014.0
90.8%
.4%
5,211,663.0
16.4%
8.21
6.2%
427,825.0
23.6%
64.5%
2011A
5,797,753.0
91.7%
1.0%
5,314,976.0
2.0%
9.69
18.0%
514,984.0
20.4%
66.1%
2012A
6,954,408.0
89.4%
(2.5%)
6,220,320.0
17.0%
9.42
(2.8%)
586,036.0
13.8%
64.5%
2013A
7,892,896.0
88.9%
(.6%)
7,015,108.0
12.8%
9.28
(1.5%)
651,318.0
11.1%
65.4%
2014E
8,667,814.5
89.5%
.6%
7,755,165.6
10.5%
9.76
5.2%
756,925.7
16.2%
65.8%
2015E
9,823,374.9
90.2%
.8%
8,859,367.5
14.2%
9.70
(.6%)
859,358.6
13.5%
65.0%
2016E
11,014,431.5
90.5%
.3%
9,963,341.5
12.5%
9.80
1.0%
976,407.5
13.6%
64.4%
2017E
12,138,252.3
89.8%
(.8%)
10,897,568.4
9.4%
9.83
.3%
1,071,231.0
9.7%
63.5%
2018E
13,036,596.0
89.9%
.2%
11,721,646.2
7.6%
9.85
.2%
1,154,582.1
7.8%
62.7%
2019E
13,826,363.5
90.0%
.1%
12,444,184.6
6.2%
9.90
.5%
1,231,974.3
6.7%
62.0%
2020E
14,636,613.1
90.2%
.3%
13,206,369.7
6.1%
9.95
.5%
1,314,033.8
6.7%
61.5%
Ancillary
($ thousands)
ASM
Ancillary Revenue per ASM
% Growth
Ancillary Revenue
% Growth
% of Total Revenue
2009A
4,950,954.0
3.29
11.5%
162,716.0
42.0%
29.2%
2010A
5,742,014.0
3.38
2.7%
194,006.0
19.2%
29.2%
2011A
5,797,753.0
3.62
7.1%
209,994.0
8.2%
27.0%
2012A
6,954,408.0
3.90
7.7%
271,560.0
29.3%
29.9%
2013A
7,892,896.0
4.12
5.6%
324,887.0
19.6%
32.6%
2014E
8,667,814.5
4.31
4.6%
373,661.7
15.0%
32.5%
2015E
9,823,374.9
4.50
4.5%
442,533.4
18.4%
33.5%
2016E
11,014,431.5
4.71
4.5%
518,517.8
17.2%
34.2%
2017E
12,138,252.3
4.90
4.1%
594,851.4
14.7%
35.2%
2018E
13,036,596.0
5.10
4.0%
664,431.0
11.7%
36.1%
2019E
13,826,363.5
5.29
3.8%
731,460.7
10.1%
36.8%
2020E
14,636,613.1
5.48
3.5%
801,427.0
9.6%
37.5%
Fixed-Fee Contract Revenue
($ thousands)
Fixed-Fee Contract Revenue
% Growth
% of Total Revenue
2009A
43,162.0
(17.79%)
7.7%
2010A
40,576.0
(5.99%)
6.1%
2011A
43,690.0
7.67%
5.6%
2012A
42,905.0
(1.80%)
4.7%
2013A
17,462.0
(59.30%)
1.8%
2014E
17,811.3
2.00%
1.5%
2015E
18,167.5
2.00%
1.4%
2016E
18,530.9
2.00%
1.2%
2017E
18,901.5
2.00%
1.1%
2018E
19,279.5
2.00%
1.0%
2019E
19,665.1
2.00%
1.0%
2020E
20,058.4
2.00%
.9%
Other Revenue
($ thousands)
Other Revenue
% Growth
% of Total Revenue
2009A
5,840.0
(1.8%)
1.0%
2010A
1,234.0
(78.9%)
.2%
2011A
10,449.0
746.8%
1.3%
2012A
8,218.0
(21.4%)
.9%
2013A
2,483.0
(69.8%)
.2%
2014E
2,497.5
.6%
.2%
2015E
2,522.5
1.0%
.2%
2016E
2,560.4
1.5%
.2%
2017E
2,565.5
.2%
.2%
2018E
2,578.3
.5%
.1%
2019E
2,604.1
1.0%
.1%
2020E
2,630.1
1.0%
.1%
Total Revenue
($ thousands)
Scheduled Service Revenue
% Growth
Ancillary Revenue
% Growth
Fixed-Fee Contract Revenue
% Growth
Other Revenue
% Growth
Total Revenue
% Growth
2009A
346,222.0
4.6%
162,716.0
42.0%
43,162.0
(17.8%)
5,840.0
(1.8%)
557,940.0
10.7%
2010A
427,825.0
23.6%
194,006.0
19.2%
40,576.0
(6.0%)
1,234.0
(78.9%)
663,641.0
18.9%
2011A
514,984.0
20.4%
209,994.0
8.2%
43,690.0
7.7%
10,449.0
746.8%
779,117.0
17.4%
2012A
586,036.0
13.8%
271,560.0
29.3%
42,905.0
(1.8%)
8,218.0
(21.4%)
908,719.0
16.6%
2013A
651,318.0
11.1%
324,887.0
19.6%
17,462.0
(59.3%)
2,483.0
(69.8%)
996,150.0
9.6%
2014E
756,925.7
16.2%
373,661.7
15.0%
17,811.3
2.0%
2,497.5
.6%
1,150,896.3
15.5%
2015E
859,358.6
13.5%
442,533.4
18.4%
18,167.5
2.0%
2,522.5
1.0%
1,322,582.1
14.9%
2016E
976,407.5
13.6%
518,517.8
17.2%
18,530.9
2.0%
2,560.4
1.5%
1,516,016.6
14.6%
2017E
1,071,231.0
9.7%
594,851.4
14.7%
18,901.5
2.0%
2,565.5
.2%
1,687,549.4
11.3%
2018E
1,154,582.1
7.8%
664,431.0
11.7%
19,279.5
2.0%
2,578.3
.5%
1,840,871.0
9.1%
2019E
1,231,974.3
6.7%
731,460.7
10.1%
19,665.1
2.0%
2,604.1
1.0%
1,985,704.2
7.9%
2020E
1,314,033.8
6.7%
801,427.0
9.6%
20,058.4
2.0%
2,630.1
1.0%
2,138,149.4
7.7%
UOIG 17
University of Oregon Investment Group
May 2, 2014
Appendix 4 – Discounted Cash Flows Analysis Income Statement
Income Statement
($ in thousands)
OPERATING REVENUE
Scheduled Service Revenue
Ancillary Revenue
Fixed-Fee Contract Revenue
Other Revenue
Total Operating Revenue
OPERATING EXPENSES
Aircraft Fuel
Aircraft Fuel Expense per ASM
Salary and Benefits
Salary per ASM
Station Operations
Station Operations per ASM
Maintenance and Repairs
Maintenance and Repairs per ASM
Sales and Marketing
Sales and Marketing per ASM
Aircraft Lease Rentals
Depreciation and Amortization
Other
Other Expense per ASM
Total Operating Expenses
OPERATING INCOME
OTHER (INCOME)/EXPENSE
Earnings from Unconsolidated Affiliates, net
Interest Expense (Income)
Total Other (Income)/Expense
INCOME BEFORE INCOME TAXES
PROVISION FOR INCOME TAXES
Tax Rate
NET INCOME
2009A
2010A
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
2019E
2020E
346,222.0
162,716.0
43,162.0
5,840.0
557,940.0
427,825.0
194,006.0
40,576.0
1,234.0
663,641.0
514,984.0
209,994.0
43,690.0
10,449.0
779,117.0
586,036.0
271,560.0
42,905.0
8,218.0
908,719.0
651,318.0
324,887.0
17,462.0
2,483.0
996,150.0
756,925.7
373,661.7
17,811.3
2,497.5
1,150,896.3
859,358.6
442,533.4
18,167.5
2,522.5
1,322,582.1
976,407.5
518,517.8
18,530.9
2,560.4
1,516,016.6
1,071,231.0
594,851.4
18,901.5
2,565.5
1,687,549.4
1,154,582.1
664,431.0
19,279.5
2,578.3
1,840,871.0
1,231,974.3
731,460.7
19,665.1
2,604.1
1,985,704.2
1,314,033.8
801,427.0
20,058.4
2,630.1
2,138,149.4
165,000.0
3.3
90,006.0
1.8
53,993.0
1.1
52,938.0
1.1
16,458.0
0.3
1,926.0
29,638.0
25,728.0
0.5
435,687.0
122,253.0
243,671.0
4.2
108,000.0
1.9
62,620.0
1.1
60,579.0
1.1
17,062.0
0.3
1,721.0
34,965.0
30,367.0
0.5
558,985.0
104,656.0
330,657.0
5.7
119,856.0
2.1
66,709.0
1.2
81,228.0
1.4
19,905.0
0.3
1,101.0
41,975.0
32,242.0
0.5
693,673.0
85,444.0
378,195.0
5.4
133,295.0
1.9
78,357.0
1.1
73,897.0
1.1
19,222.0
0.3
0.0
57,503.0
35,946.0
0.5
776,415.0
132,304.0
385,558.0
4.9
158,627.0
2.0
78,231.0
1.0
72,818.0
0.9
21,678.0
0.3
9,227.0
69,264.0
46,010.0
0.6
841,413.0
154,737.0
398,719.5
4.6
173,356.3
2.0
86,678.1
1.0
121,349.4
1.4
30,337.4
0.4
17,263.4
75,097.7
39,005.2
0.5
941,806.9
209,089.3
441,519.7
4.5
206,290.9
2.1
98,233.7
1.0
137,527.2
1.4
39,293.5
0.4
26,451.6
88,450.2
58,940.2
0.6
1,096,707.2
225,874.9
483,813.2
4.4
231,303.1
2.1
121,158.7
1.1
165,216.5
1.5
44,057.7
0.4
30,320.3
104,416.2
77,101.0
0.7
1,257,386.7
258,629.8
530,294.9
4.4
242,765.0
2.0
145,659.0
1.2
182,073.8
1.5
48,553.0
0.4
33,751.0
123,128.7
84,967.8
0.7
1,391,193.2
296,356.2
583,780.2
4.5
260,731.9
2.0
156,439.2
1.2
195,548.9
1.5
52,146.4
0.4
36,817.4
145,182.7
104,292.8
0.8
1,534,939.5
305,931.5
643,292.8
4.7
276,527.3
2.0
179,742.7
1.3
221,221.8
1.6
55,305.5
0.4
39,714.1
171,454.3
110,610.9
0.8
1,697,869.3
287,834.9
710,273.5
4.9
292,732.3
2.0
190,276.0
1.3
252,335.2
1.7
43,909.8
0.3
32,072.2
202,304.3
87,819.7
0.6
1,811,723.0
326,426.3
84.0
1605.00
1,689.0
120,564.0
44,233.0
36.7%
76,331.0
(14.0)
1338.00
1,324.0
103,332.0
37,630.0
36.4%
65,702.0
(99.0)
7756.00
7,657.0
124,647.0
46,233.0
37.1%
78,414.0
(393.0)
8450.00
8,057.0
146,680.0
54,901.0
37.4%
91,779.0
3.0
(205.0)
(202.0)
209,291.3
77,437.8
37.0%
131,853.5
225,874.9
83,573.7
37.0%
142,301.2
258,629.8
95,693.0
37.0%
162,936.8
296,356.2
109,651.8
37.0%
186,704.4
305,931.5
113,194.6
37.0%
192,736.8
287,834.9
106,498.9
37.0%
181,336.0
326,426.3
120,777.7
37.0%
205,648.6
(9.0)
5939.00
5,930.0
79,514.0
30,116.0
37.9%
49,398.0
UOIG 18
University of Oregon Investment Group
May 2, 2014
Appendix 5 – Discounted Cash Flows Analysis Statement of Cash Flows
Statement of Cash Flows
($ in thousands)
OPERATING ACTIVITIES
Net Income
Net Adjustments to Reconcile Net Income to Net Cash
Depreciation and Amortization
Loss on Aircraft/Equipment Disposals
Provision for Obsolescence of Expendable Parts, Supplies, Fuel
Amortization of Deferred Financing Costs and Original Issue Discount
Stock-Based Compensation Expense
Deferred Income Taxes
Excess Tax Benefits from Stock-Based Compensation
Changes in Assets and Liabilities:
Restricted Cash
Accounts Receivable
Expendable Parts, Supplies and Fuel
Prepaid Expenses
Other Current Assets
Accounts Payable
Accrued Liabilites
Air Traffic Liability
Net Cash Provided by Operating Activities
INVESTING ACTIVITIES
Change in Investment Securities
Capital Expenditures, including pre-delivery deposits
Interest During Aircraft Refurbishment
Proceeds from Sale of PP&E
Investment in Consolidated Affiliates, net
Change in Deposits and Other Assets
Net Cash Used in Investing Activities
FINANCING ACTIVITIES
Cash Dividends Paid to Shareholders
Excess Tax Benefits from Stock-Based Compensation
Proceeds from Exercise of Stock Options, Stock-Settled SARs and Warrants
Change in Total Debt
Repurchase of Common Stock
Payments for Other Financing Activities
Payments for Sale of Ownership Interest in Subsidiary
Net Cash Provided by (Used In) Financing Activities
Net Change in Cash and Cash Equivalents
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD
2009A
2010A
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
2019E
2020E
76,331.0
65,702.0
49,398.0
78,414.0
91,779.0
131,853.5
142,301.2
162,936.8
186,704.4
192,736.8
181,336.0
205,648.6
29,638.0
4,898.0
120.0
3,109.0
6,768.0
(1,157.0)
34,965.0
2,878.0
(489.0)
4,437.0
(737.0)
(821.0)
41,975.0
4,794.0
225.0
411.0
4,735.0
13,977.0
(409.0)
57,503.0
4,084.0
480.0
579.0
4,069.0
6,362.0
(2,724.0)
69,264.0
8,000.0
827.0
612.0
9,818.0
(1,945.0)
(1,689.0)
75,097.7
7,010.3
984.0
845.7
9,284.3
9,384.8
(2,376.9)
88,450.2
6,612.9
1,117.2
471.5
9,768.0
8,584.3
(3,039.6)
104,416.2
7,580.1
1,464.6
544.6
10,014.5
9,671.7
(351,895.0)
123,128.7
8,437.7
1,392.6
629.2
11,245.7
8,576.6
(4,396.2)
145,182.7
9,204.4
1,501.0
676.7
18,282.3
7,666.1
(4,846.2)
171,454.3
9,928.5
1,601.6
688.9
14,408.4
7,241.7
(4,544.7)
202,304.3
10,690.7
1,708.2
793.1
16,825.3
7,622.3
(6,140.4)
(1,809.0)
(1,901.0)
(3,788.0)
(10,171.0)
(1,067.0)
4,686.0
4,460.0
21,557.0
131,674.0
(3,446.0)
(376.0)
(2,221.0)
(17,231.0)
195.0
4,590.0
(333.0)
10,843.0
97,956.0
5,801.0
(5,014.0)
(1,381.0)
(790.0)
(3,337.0)
3,065.0
(910.0)
17,371.0
129,500.0
5,290.0
(5,769.0)
(4,373.0)
490.0
286.0
891.0
2,044.0
29,146.0
176,193.0
(640.0)
1,778.0
(1,823.0)
(8,526.0)
3,124.0
3,140.0
3,695.0
19,474.0
196,276.0
(3,855.2)
(2,061.8)
(2,296.6)
(3,965.7)
2,239.1
6,374.3
5,246.4
233,763.9
(2,146.1)
(3,728.1)
(1,190.5)
(6,131.0)
2,219.5
14,338.8
12,527.1
270,155.4
(2,417.9)
(3,727.6)
(464.3)
(6,640.2)
2,110.2
9,671.7
27,080.8
(29,653.7)
(6,363.0)
(3,446.5)
(1,349.4)
(7,398.7)
1,430.0
8,576.6
40,890.1
368,057.8
(4,140.7)
(3,213.7)
613.0
(10,619.0)
1,410.1
(1,538.3)
41,407.0
394,322.0
(5,295.9)
(2,871.1)
(611.2)
(10,761.9)
1,515.4
5,524.6
3,316.3
372,930.9
(8,013.2)
(3,635.2)
(1,840.7)
(9,368.1)
552.7
3,576.6
1,485.3
422,209.6
(64,070.0)
(31,663.0)
(642.0)
(838.0)
(97,213.0)
104,130.0
(98,499.0)
483.0
(630.0)
1,298.0
6,782.0
(131,803.0)
(86,582.0)
(405.0)
951.0
3.0
9,613.0
(208,223.0)
(94,426.0)
(105,084.0)
(498.0)
1,613.0
(27.0)
(10,405.0)
(208,827.0)
(26,249.0)
(177,516.0)
(123.0)
471.0
352.0
10,233.0
(192,832.0)
(34,338.1)
(77,685.5)
(820.0)
(112,843.6)
(49,898.6)
(92,580.7)
33.1
1,716.9
(140,729.4)
(53,533.4)
(113,701.2)
33.8
1,934.3
(165,266.5)
(73,834.7)
(126,566.2)
34.4
2,873.0
(197,493.5)
(46,430.4)
(156,474.0)
35.1
375.6
(202,493.7)
(31,778.7)
(183,677.6)
35.8
1,448.3
(213,972.2)
(51,964.5)
(213,814.9)
36.5
1,524.5
(264,218.5)
1,157.0
1,742.0
7,000.0
(25,356.0)
(25,918.0)
(14,942.0)
821.0
3,872.0
14,000.0
(53,764.0)
(31,671.0)
(81,684.0)
23,054.0
90,239.0
113,293.0
409.0
1,834.0
139,000.0
(1,922.0)
(23,562.0)
115,759.0
37,036.0
113,293.0
150,329.0
(38,602.0)
2,724.0
7,542.0
13,981.0
(4,994.0)
(9,629.0)
(150.0)
(29,128.0)
(61,762.0)
150,740.0
88,978.0
1,689.0
2,083.0
106,000.0
(83,607.0)
(23,467.0)
1,400.0
4,098.0
7,542.0
89,557.0
97,099.0
(41,787.0)
2,376.9
2,083.0
(65,167.0)
(9,284.3)
(29,491.7)
(141,270.1)
(20,349.9)
97,099.0
76,749.1
3,039.6
2,083.0
19,462.1
(9,768.0)
(33,320.5)
(18,503.9)
110,922.2
76,749.1
187,671.3
(57,045.6)
351,895.0
2,083.0
29,232.5
(10,014.5)
(35,637.4)
280,513.0
85,592.8
187,671.3
273,264.1
4,396.2
2,083.0
33,863.3
(11,245.7)
(40,848.9)
(11,752.0)
158,812.3
273,264.1
432,076.4
(84,454.8)
4,846.2
2,083.0
18,977.6
(18,282.3)
(50,851.1)
(127,681.3)
64,147.0
432,076.4
496,223.3
4,544.7
2,083.0
4,905.0
(14,408.4)
(46,087.2)
(48,962.9)
109,995.9
496,223.3
606,219.2
(96,924.8)
6,140.4
2,083.0
41,664.9
(16,825.3)
(52,047.6)
(115,909.5)
42,081.6
606,219.2
648,300.8
(41,375.0)
(6,914.0)
97,153.0
90,239.0
UOIG 19
University of Oregon Investment Group
May 2, 2014
Appendix 6 – Discounted Cash Flows Analysis Balance Sheet
Balance Sheet
($ in thousands)
ASSETS
Current Assets:
Cash and Cash Equivalents
Restricted Cash
Short-Term Investments
Accounts Receivable
Expendable Parts, Supplies and Fuel, net of Obsolescence Allowance
Prepaid Expenses
Deferred Income Taxes
Other Current Assets
Total Current Assets
Plant, Property and Equipment
Restricted Cash, net of Current Position
Long-Term Investments
Investments in and Advances to Unconsolidated Affiliates, net
Deposits and Other Assets
Total Assets
LIABILITIES
Current Liabilites:
Current Maturities of Long-Term Debt
Accounts Payable
Accrued Liabilites
Air Traffic Liability
Total Current Liabilites
Long-Term Debt and Other Long-Term Liabilites:
Long-Term Debt, net of Current Maturities
Deferred Income Taxes
Total Liabilities
STOCKHOLDERS EQUITY
Common Stock, par value $.001
Treasury Stock, at cost
Additional Paid-In Capital
Accumulated Other Comprehensive Loss, net
Retained Earnings
Total Allegiant Travel Company Stockholders' Equity
Non-Controlling Interest
Total Equity
Total Liabilities and Stockholders' Equity
2009A
2010A
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
2019E
2020E
90,239.0
17,841.0
141,231.0
7,476.0
10,673.0
19,432.0
269.0
2,712.0
289,873.0
113,293.0
19,787.0
35,695.0
7,852.0
13,383.0
24,071.0
2,517.0
216,598.0
150,740.0
13,986.0
154,779.0
12,866.0
14,539.0
24,861.0
13.0
4,577.0
376,361.0
89,557.0
10,046.0
239,139.0
18,635.0
18,432.0
24,371.0
796.0
14,291.0
415,267.0
97,711.0
10,531.0
253,378.0
16,857.0
19,428.0
26,643.0
4,206.0
1,167.0
429,921.0
77,361.1
14,386.2
276,215.1
18,918.8
21,724.6
30,608.7
4,206.0
1,167.0
444,587.6
188,283.3
16,532.3
317,419.7
22,647.0
22,915.1
36,739.7
4,206.0
1,167.0
609,910.0
273,876.1
18,950.2
363,844.0
26,374.5
23,379.4
43,379.8
4,206.0
1,167.0
755,177.0
432,688.4
25,313.2
421,887.3
29,821.1
24,728.8
50,778.6
4,206.0
1,167.0
990,590.4
496,835.3
29,453.9
460,217.7
33,034.8
24,115.8
61,397.6
4,206.0
1,167.0
1,110,428.2
606,831.2
34,749.8
493,447.5
35,905.9
24,727.0
72,159.4
4,206.0
1,167.0
1,273,193.8
648,912.8
42,763.0
545,228.1
39,541.1
26,567.6
81,527.5
4,206.0
1,167.0
1,389,913.2
204,533.0
1,353.0
3,880.0
499,639.0
267,298.0
1,500.0
1,305.0
1,983.0
12,582.0
501,266.0
307,842.0
1,500.0
14,007.0
1,980.0
5,053.0
706,743.0
351,204.0
150.0
24,030.0
2,007.0
5,536.0
798,194.0
451,584.0
305.0
36,037.0
1,655.0
10,689.0
930,191.0
454,171.8
305.0
47,538.0
1,655.0
11,509.0
959,766.4
458,302.3
305.0
56,232.0
1,688.1
13,225.8
1,139,663.3
467,587.4
305.0
63,341.1
1,721.9
15,160.2
1,303,292.5
471,024.9
305.0
79,132.4
1,756.3
18,033.1
1,560,842.1
482,316.2
305.0
87,232.3
1,791.4
18,408.7
1,700,481.9
494,539.6
305.0
85,781.3
1,827.3
19,857.0
1,875,504.0
506,050.2
305.0
85,965.2
1,863.8
21,381.5
2,005,478.9
23,338.0
20,990.0
23,699.0
90,554.0
158,581.0
16,532.0
13,965.0
34,473.0
101,397.0
166,367.0
7,885.0
16,756.0
34,096.0
118,768.0
177,505.0
11,623.0
14,533.0
36,476.0
147,914.0
210,546.0
20,237.0
15,823.0
87,203.0
167,388.0
290,651.0
20,133.0
18,062.1
51,790.3
172,634.4
262,619.8
9,342.0
20,281.6
66,129.1
185,161.5
280,914.2
20,156.0
22,391.8
75,800.8
212,242.3
330,591.0
55,728.0
23,821.8
84,377.5
253,132.4
417,059.7
48,000.0
25,231.9
82,839.2
294,539.4
450,610.4
26,720.2
26,747.3
88,363.8
297,855.6
439,686.9
29,862.4
27,299.9
91,940.4
299,340.9
448,443.7
22,469.0
26,566.0
207,616.0
11,604.0
25,560.0
203,531.0
138,184.0
39,550.0
355,239.0
139,229.0
46,695.0
396,470.0
214,063.0
48,160.0
552,874.0
149,000.0
57,544.8
469,164.6
179,253.1
66,129.1
526,296.3
197,671.6
75,800.8
604,063.4
195,962.9
84,377.5
697,400.1
222,668.5
92,043.5
765,322.5
248,853.3
99,285.2
787,825.4
287,376.0
106,907.5
842,727.1
21.0
(42,149.0)
171,887.0
92.0
162,172.0
292,023.0
21.0
(95,913.0)
180,704.0
(9.0)
212,932.0
297,735.0
292,023.0
499,639.0
297,735.0
501,266.0
22.0
(97,835.0)
187,013.0
(26.0)
262,330.0
351,504.0
351,504.0
706,743.0
22.0
(102,829.0)
201,012.0
(69.0)
302,325.0
400,461.0
1,263.0
401,724.0
798,194.0
22.0
(186,291.0)
209,213.0
(12.0)
352,811.0
375,743.0
1,574.0
377,317.0
930,191.0
22.0
(195,575.3)
209,213.0
(12.0)
475,380.1
489,027.8
1,574.0
490,601.8
959,766.4
22.0
(205,343.3)
209,213.0
(12.0)
607,913.2
611,792.9
1,574.0
613,366.9
1,139,663.3
22.0
(215,357.8)
209,213.0
(12.0)
703,789.9
697,655.2
1,574.0
699,229.2
1,303,292.5
22.0
(226,603.5)
209,213.0
(12.0)
879,248.6
861,868.0
1,574.0
863,442.0
1,560,842.1
22.0
(244,885.9)
209,213.0
(12.0)
969,248.3
933,585.4
1,574.0
935,159.4
1,700,481.9
22.0
(259,294.3)
209,213.0
(12.0)
1,136,175.8
1,086,104.5
1,574.0
1,087,678.5
1,875,504.0
22.0
(276,119.6)
209,213.0
(12.0)
1,228,074.3
1,161,177.7
1,574.0
1,162,751.7
2,005,478.9
UOIG 20
University of Oregon Investment Group
May 2, 2014
Appendix 7 – Discounted Cash Flow Analysis Assumptions
Tax Rate
Risk Free Rate
Beta
Market Risk Premium
% Equity
% Debt
Cost of Debt
CAPM
WACC
Terminal Risk Free Rate
Terminal CAPM
Terminal WACC
Method
Discounted Free Cash Flow Assumptions
37.00% Terminal Growth Rate
2.65% Terminal Value
0.70
5.75%
87.19%
12.81%
4.56%
6.67%
6.19%
3.60%
7.62%
3.00%
4,528,571
PV of Terminal Value
Sum of PV Free Cash Flows
Firm Value
Total Debt
Cash & Cash Equivalents
Market Capitalization
Fully Diluted Shares
Implied Price
Current Price
1,876,060
940,803
2,816,863
317,238
97,711
2,499,625
18,628
$134.19
$115.95
7.01% Undervalued
Final Price Target
Price Objective
Discounted Cash Flow
Comparables Analysis
Leverage Buyout
$134.19
$135.74
$108.65
Price Target
Current Price
Undervalued
15.73%
Weighting
50%
50%
0%
$134.96
$115.95
16.40%
UOIG 21
University of Oregon Investment Group
May 2, 2014
Appendix 8 – Leveraged Buyout Analysis Assumptions
Purchase Price Assumptions
52-Week High
52-Week Low
Current Price
Fully Diluted Shares
Market Capitalization
Plus: Total Debt
Plus: Preferred Shares
Plus: Noncontrolling Interest
Less: Cash & Cash Equivalents
Enterprise Value
Purchase Premium
Total Purchase Price
Entry EV/EBITDA Multiple
$118.33
$81.19
$115.95
18,627.9
$2,159,901.1
154,600.0
1,574.0
18,011.0
$2,298,064.1
16%
$2,674,930.7
11.9x
Sources of Funds
Revolving Credit Facility
Term Loan A
Term Loan B
Senior Subordinated Note
Equity Contribution
Cash on Hand
Total Sources of Funds
Uses of Funds
Equity Purchase Price
Repay Existing Debt
Financing Fees
Other Fees and Expenses
Cash on Hand
Total Uses of Funds
900,000
500,000
350,000
990,742
18,011
$2,758,753.3
Fees
1.75%
1.75%
1.75%
2.25%
Rate
L + 4.00%
L + 4.50%
L + 6.00%
10.00%
2,520,331
154,600
32,375
33,437
18,011
$2,758,753.3
Tenor (years)
5
7
7
8
Maturity Date
4/21/2019
4/21/2021
4/21/2021
4/21/2022
IRR - Assuming Exit in 2020
Enterprise
Value
$2,458,928.5
$2,527,870.5
$2,596,812.4
$2,674,907.6
$2,734,696.2
$2,803,638.2
$2,872,580.1
Equity
Premium
Contribution on Shares
30.4%
7.0%
32.3%
10.0%
34.0%
13.0%
35.7%
16.0%
37.3%
19.0%
38.8%
22.0%
40.2%
25.0%
11.0x
30.8%
29.2%
27.7%
26.4%
25.2%
24.0%
22.9%
11.3x
31.4%
29.8%
28.3%
26.9%
25.7%
24.6%
23.5%
Exit Multiple
11.6x
11.9x
31.9%
32.5%
30.3%
30.8%
28.8%
29.4%
27.5%
28.0%
26.2%
26.7%
25.1%
25.6%
24.0%
24.5%
12.2x
33.0%
31.4%
29.9%
28.5%
27.3%
26.1%
25.0%
UOIG 22
12.5x
33.5%
31.9%
30.4%
29.0%
27.7%
26.6%
25.5%
12.8x
34.0%
32.4%
30.9%
29.5%
28.2%
27.1%
26.0%
University of Oregon Investment Group
May 2, 2014
Appendix 9 – Leveraged Buyout Analysis Transaction Summary
Amount
Revolving Credit Facility
Term Loan A
Term Loan B
Senior Subordinated Notes
Equity Contribution
Cash on Hand
Total Sources
900,000.0
500,000.0
350,000.0
990,742.3
18,011.0
2,758,753.3
Sources of Funds
% of Total
Multiple of EBITDA
Sources
12/31/2013
Cumulative
0%
0.0x
0.0x
33%
4.0x
14.3x
18%
2.2x
22.2x
13%
1.6x
27.7x
36%
4.4x
27.7x
1%
0.1x
27.7x
100%
12.3x
27.7x
Transaction Summary
Uses of Funds
Pricing
L + 4.00%
L + 4.50%
L + 6.00%
10.00%
Purchase ALGT Equity
Repay Existing Debt
Tender/Call Premiums
Financing Fees
Other Fees/Expenses
Total Uses
Amount
2,520,330.7
154,600.0
17,171.0
840.0
65,811.6
$2,758,753.3
% of Total
Sources
91%
6%
1%
0%
2%
100%
Purchase Price
Offer Price per Share
Fully Diluted Shares
Equity Purchase Price
Plus: Existing Net Debt
Enterprise Value
Transaction Multiples
Enterprise Value/Sales
2014E
1,129,812.4
2013A
996,150.0
Enterprise Value/EBITDA
2014E
269,288.6
2013A
224,001.0
$2,520,330.7
154,600
$2,674,930.7
2.4x
2.7x
9.9x
11.9x
Calculation of Exit EV and Equity Value
2020E EBITDA
518,969.4
Exit EBITDA Multiple
11.9x
Enterprise Value at Exit
$6,175,736.1
Less: Net Debt
Revolving Credit Facility
Term Loan A
Term Loan B
300,973.7
Senior Subordinated Debt
350,000.0
Total Debt
650,973.7
Less: Cash & Cash Equivalents
0.0
Net Debt
650,973.7
Equity Value at Exit
$5,524,762.4
Summary Financial Data
Sales
% Growth
EBITDA
% Growth
EBIT
% Growth
Capital Expenditures
% Sales
Cash Interest Expense
Total Interest Expense
2009A
557,940.0
10.7%
151,891.0
91.5%
122,253.0
118.9%
31,663.0
5.7%
-
2010A
663,641.0
18.9%
139,621.0
(8.1%)
104,656.0
(14.4%)
98,499.0
14.8%
-
Historical Period
2011A
779,117.0
17.4%
127,419.0
(8.7%)
85,444.0
(18.4%)
86,582.0
11.1%
-
2012A
908,719.0
16.6%
189,807.0
49.0%
132,304.0
54.8%
105,084.0
11.6%
-
2013A
996,150.0
9.6%
224,001.0
18.0%
154,737.0
17.0%
177,516.0
17.8%
-
2014E
1,129,812.4
13.4%
269,288.6
20.2%
205,871.6
33.0%
56,490.6
5.0%
129,840.0
134,465.0
2015E
1,292,642.2
14.4%
326,590.5
21.3%
255,616.7
24.2%
64,632.1
5.0%
126,571.3
131,196.3
269,288.6
129,840.0
26,420.4
56,490.6
107,079.1
(50,541.6)
(50,541.6)
326,590.5
126,571.3
46,035.6
64,632.1
84,184.4
5,167.2
(45,374.4)
Free Cash Flow
EBITDA
Less: Cash Interest Expense
Plus: Interest Income
Less: Income Taxes
Less: Capital Expenditures
Less: Increase in NWC
Free Cash Flow
Cumulative Free Cash Flow
Capitalization
Cash
Revolving Credit Facitlity
Term Loan A
Term Loan B
Total Senior Secured Debt
852,187.8
495,000.0
1,347,187.8
Senior Subordinated Bonds
Total Debt
Shareholders' Equity
Total Capitalization
Credit Statistics
EBITDA / Cash Interest Expense
(EBITDA - Capex) / Cash Interest Expense
EBITDA / Total Interest Expense
(EBITDA - Capex) / Total Interest Expense
Senior Secured Debt / EBITDA
Senior Debt / EBITDA
Total Debt / EBITDA
Net Debt / EBITDA
Projection Period
2016E
2017E
1,464,484.6
1,632,814.1
13.3%
11.5%
388,477.1
446,438.9
18.9%
14.9%
308,155.4
356,766.0
20.6%
15.8%
73,224.2
81,640.7
5.0%
5.0%
119,882.7
117,915.4
124,507.7
122,540.4
2018E
1,775,073.5
8.7%
481,974.4
8.0%
384,253.5
7.7%
88,753.7
5.0%
111,989.0
116,614.0
2019E
1,905,355.5
7.3%
496,157.3
2.9%
391,117.4
1.8%
95,267.8
5.0%
98,551.4
103,176.4
2020E
2,039,920.9
7.1%
518,969.4
4.6%
406,469.4
3.9%
101,996.1
5.0%
85,698.6
90,323.6
388,477.1
119,882.7
67,949.7
73,224.2
56,694.8
70,725.7
25,351.2
446,438.9
117,915.4
86,663.5
81,640.7
17,413.1
142,806.2
168,157.4
481,974.4
111,989.0
99,026.6
88,753.7
(13,778.6)
195,983.7
364,141.1
496,157.3
98,551.4
106,538.2
95,267.8
5,793.1
190,006.8
554,148.0
518,969.4
85,698.6
116,973.9
101,996.1
25,414.4
188,886.5
743,034.4
747,378.3
490,000.0
1,237,378.3
596,246.7
485,000.0
1,081,246.7
403,456.0
480,000.0
883,456.0
195,988.3
475,000.0
670,988.3
25,245.6
470,000.0
495,245.6
300,973.7
300,973.7
350,000.0
1,697,187.8
350,000.0
1,587,378.3
350,000.0
1,431,246.7
350,000.0
1,233,456.0
350,000.0
1,020,988.3
350,000.0
845,245.6
350,000.0
650,973.7
984,280.8
2,681,468.6
1,062,665.7
2,650,044.1
1,178,363.8
2,609,610.5
1,325,925.9
2,559,382.0
1,494,538.8
2,515,527.1
1,675,941.7
2,521,187.2
1,875,113.5
2,526,087.2
2.1x
1.6x
2.0x
1.6x
2.6x
2.1x
2.5x
2.0x
5.0x
11.3x
6.3x
6.3x
3.8x
8.6x
4.9x
4.9x
3.2x
2.6x
3.1x
2.5x
2.8x
6.5x
UOIG
3.7x 23
3.7x
3.8x
3.1x
3.6x
3.0x
4.3x
3.5x
4.1x
3.4x
5.0x
4.1x
4.8x
3.9x
6.1x
4.9x
5.7x
4.6x
2.0x
4.7x
2.8x
2.8x
1.4x
3.5x
2.1x
2.1x
1.0x
2.7x
1.7x
1.7x
0.6x
1.8x
1.3x
1.3x
University of Oregon Investment Group
May 2, 2014
Appendix 10 – Leveraged Buyout Analysis Revenue Model
Average Seat Miles (ASM)
($ thousands)
2009A
2010A
2011A
2012A
2013A
ASM
4,950,954.0
5,742,014.0
5,797,753.0
6,954,408.0
7,892,896.0
8,667,814.5
9,823,374.9
11,014,431.5
12,138,252.3
13,036,596.0
13,826,363.5
14,636,613.1
27.4%
16.0%
1.0%
20.0%
13.5%
9.8%
13.3%
12.1%
10.2%
7.4%
6.1%
5.9%
% Growth
2014E
2015E
2016E
2017E
2018E
2019E
2020E
Scheduled Service Revenue
($ thousands)
2009A
2010A
2011A
2012A
2013A
ASM
4,950,954.0
5,742,014.0
5,797,753.0
6,954,408.0
7,892,896.0
8,667,814.5
9,823,374.9
11,014,431.5
12,138,252.3
13,036,596.0
13,826,363.5
14,636,613.1
Load Factor
90.4%
90.8%
91.7%
89.4%
88.9%
89.0%
88.5%
88.0%
87.8%
87.5%
87.3%
87.0%
% Growth
0.56%
.4%
1.0%
(2.5%)
(.6%)
.6%
.8%
.3%
(.8%)
.2%
.1%
.3%
4,477,119.0
5,211,663.0
5,314,976.0
6,220,320.0
7,015,108.0
7,714,354.9
8,693,686.8
9,692,699.7
10,651,316.4
11,407,021.5
12,063,502.1
12,733,853.4
28.07%
16.4%
2.0%
17.0%
12.8%
10.5%
14.2%
12.5%
9.4%
7.6%
6.2%
6.1%
7.73
8.21
9.69
9.42
9.28
9.50
9.50
9.50
9.50
9.50
9.50
9.50
(18.4%)
6.2%
18.0%
(2.8%)
(1.5%)
5.1%
(7.7%)
8.9%
.3%
.2%
.5%
.5%
346,222.0
427,825.0
514,984.0
586,036.0
651,318.0
732,863.7
825,900.2
920,806.5
1,011,875.1
1,083,667.0
1,146,032.7
1,209,716.1
4.6%
23.6%
20.4%
13.8%
11.1%
12.5%
12.7%
11.5%
9.9%
7.1%
5.8%
5.6%
62.1%
64.5%
66.1%
64.5%
65.4%
64.9%
63.9%
62.9%
62.0%
61.0%
60.1%
59.3%
Revenue Passenger Miles (RPM)
% Growth
Yield (cents)
% Growth
Total Scheduled Service Revenue
% Growth
% of Total Revenue
2014E
2015E
2016E
2017E
2018E
2019E
2020E
Ancillary
($ thousands)
2009A
2010A
2011A
2012A
2013A
ASM
4,950,954.0
5,742,014.0
5,797,753.0
6,954,408.0
7,892,896.0
Ancillary Revenue per ASM
% Growth
Ancillary Revenue
2014E
2015E
8,667,814.5
2016E
9,823,374.9
2017E
11,014,431.5
2018E
12,138,252.3
2019E
13,036,596.0
2020E
13,826,363.5
14,636,613.1
3.29
3.38
3.62
3.90
4.12
4.34
4.54
4.74
4.94
5.14
5.33
5.52
11.5%
2.7%
7.1%
7.7%
5.6%
5.5%
4.5%
4.5%
4.1%
4.0%
3.8%
3.5%
807,703.1
162,716.0
194,006.0
209,994.0
271,560.0
324,887.0
376,588.0
445,998.9
522,578.4
599,509.8
669,634.3
737,188.9
% Growth
42.0%
19.2%
8.2%
29.3%
19.6%
15.9%
18.4%
17.2%
14.7%
11.7%
10.1%
9.6%
% of Total Revenue
29.2%
29.2%
27.0%
29.9%
32.6%
33.3%
34.5%
35.7%
36.7%
37.7%
38.7%
39.6%
Fixed-Fee Contract Revenue
($ thousands)
2009A
2010A
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
2019E
2020E
Fixed-Fee Contract Revenue
43,162.0
40,576.0
43,690.0
42,905.0
17,462.0
17,863.2
18,220.5
18,539.3
18,863.7
19,193.9
19,529.8
19,871.5
% Growth
(17.79%)
(5.99%)
7.67%
(1.80%)
(59.30%)
2.30%
2.00%
1.75%
1.75%
1.75%
1.75%
1.75%
7.7%
6.1%
5.6%
4.7%
1.8%
1.6%
1.4%
1.3%
1.2%
1.1%
1.0%
1.0%
% of Total Revenue
Other Revenue
($ thousands)
Other Revenue
% Growth
2009A
2010A
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
2019E
2020E
5,840.0
1,234.0
10,449.0
8,218.0
2,483.0
2,497.5
2,522.5
2,560.4
2,565.5
2,578.3
2,604.1
2,630.1
(1.8%)
(78.9%)
746.8%
(21.4%)
(69.8%)
.6%
1.0%
1.5%
.2%
.5%
1.0%
1.0%
1.0%
.2%
1.3%
.9%
.2%
.2%
.2%
.2%
.2%
.1%
.1%
.1%
2017E
2018E
2019E
2020E
920,806.5
1,011,875.1
1,083,667.0
1,146,032.7
1,209,716.1
% of Total Revenue
Total Revenue
($ thousands)
Scheduled Service Revenue
% Growth
Ancillary Revenue
% Growth
Fixed-Fee Contract Revenue
2009A
2010A
346,222.0
427,825.0
2011A
2012A
514,984.0
586,036.0
2013A
2014E
651,318.0
2015E
732,863.7
2016E
825,900.2
4.6%
23.6%
20.4%
13.8%
11.1%
12.5%
12.7%
11.5%
9.9%
7.1%
5.8%
5.6%
162,716.0
194,006.0
209,994.0
271,560.0
324,887.0
376,588.0
445,998.9
522,578.4
599,509.8
669,634.3
737,188.9
807,703.1
42.0%
19.2%
8.2%
29.3%
19.6%
15.9%
18.4%
17.2%
14.7%
11.7%
10.1%
9.6%
43,162.0
40,576.0
43,690.0
42,905.0
17,462.0
17,863.2
18,220.5
18,539.3
18,863.7
19,193.9
19,529.8
19,871.5
% Growth
(17.8%)
(6.0%)
7.7%
(1.8%)
(59.3%)
2.3%
2.0%
1.8%
1.8%
1.8%
1.8%
1.8%
Other Revenue
5,840.0
1,234.0
10,449.0
8,218.0
2,483.0
2,497.5
2,522.5
2,560.4
2,565.5
2,578.3
2,604.1
2,630.1
% Growth
Total Revenue
% Growth
(1.8%)
(78.9%)
746.8%
(21.4%)
(69.8%)
.6%
1.0%
1.5%
.2%
.5%
1.0%
1.0%
557,940.0
663,641.0
779,117.0
908,719.0
996,150.0
1,129,812.7
1,292,642.5
1,464,484.9
1,632,814.4
1,775,073.7
1,905,355.6
2,039,921.0
10.7%
18.9%
17.4%
16.6%
9.6%
13.4%
14.4%
13.3%
11.5%
8.7%
7.3%
7.1%
UOIG 24
University of Oregon Investment Group
May 2, 2014
Appendix 11 – Leveraged Buyout Analysis Debt Schedule
Debt Schedule
($ in thousands)
Forward LIBOR Curve
LIBOR FLOOR
Cash Flow from Operating Activities
Cash Flow from Investing Activities
Other Cash Outflows
Cash Available for Debt Repayment
Total Mandatory Repayments
Cash from Balance Sheet
Cash Available for Optional Debt Repayment
Revolving Credit Facility
Revolving Credit Facility Size
Spread
LIBOR Floor
Term (Years)
Commitment Fee
2014E
0.23%
1.50%
2015E
0.44%
1.50%
109,303
(56,491)
$52,812.2
50,000
$2,812.2
2016E
1.50%
1.50%
174,442
(64,632)
$109,809.5
90,219
$19,590.7
2017E
2.19%
1.50%
229,356
(73,224)
$156,131.6
102,159
$53,972.5
2018E
3.03%
1.50%
279,431
(81,641)
$197,790.7
106,362
$91,428.7
2019E
3.43%
1.50%
301,221
(88,754)
$212,467.7
85,691
$126,776.5
2020E
3.67%
1.50%
271,011
(95,268)
$175,742.7
44,198
$131,545.1
296,268
(101,996)
$194,271.9
8,787
$185,485.0
$150,000.0
2.50%
1.50%
5.00
0.50%
Beginning Balance
Drawdown/(Repayment)
Ending Balance
-
-
-
-
-
-
-
Interest Rate
Interest Expense
Commitment Fee
Administrative Agent Fee
4.00%
4.00%
4.00%
4.69%
5.53%
5.93%
6.17%
750.0
90.0
750.0
90.0
750.0
90.0
750.0
90.0
750.0
90.0
750.0
90.0
750.0
90.0
Term Loan A Facility
Term Loan Size
Spread
LIBOR Floor
Term (Years)
$900,000.0
4.50%
1.50%
7.00
Beginning Balance
Mandatory Repayments
Optional Repayments
Ending Balance
$900,000.0
45,000.0
2,812.2
$852,187.8
$852,187.8
85,218.8
19,590.7
$747,378.3
$747,378.3
97,159.2
53,972.5
$596,246.7
$596,246.7
101,361.9
91,428.7
$403,456.0
$403,456.0
80,691.2
126,776.5
$195,988.3
$195,988.3
39,197.7
131,545.1
$25,245.6
$25,245.6
3,786.8
21,458.8
$0.0
6.00%
54,000.0
5.00%
6.00%
51,131.3
10.00%
6.00%
44,842.7
13.00%
6.69%
39,911.0
17.00%
7.53%
30,391.5
20.00%
7.93%
15,542.5
20.00%
8.17%
2,062.4
15.00%
Interest Rate
Interest Expense
Amortization
UOIG 25
University of Oregon Investment Group
May 2, 2014
Appendix 12 – Leveraged Buyout Analysis Debt Schedule
Term Loan B Facility
Term Loan Size
Spread
LIBOR Floor
Term (Years)
Repayment Schedule
$500,000.0
6.50%
1.50%
8.00
1.00%
Beginning Balance
Mandatory Repayments
Optional Repayments
Ending Balance
$500,000.0
5,000.0
$495,000.0
$495,000.0
5,000.0
$490,000.0
$490,000.0
5,000.0
$485,000.0
$485,000.0
5,000.0
$480,000.0
$480,000.0
5,000.0
$475,000.0
$475,000.0
5,000.0
$470,000.0
$470,000.0
5,000.0
164,026.3
$300,973.7
8.00%
40,000.0
8.00%
39,600.0
8.00%
39,200.0
8.69%
42,164.4
9.53%
45,757.4
9.93%
47,168.9
10.17%
47,796.2
Interest Rate
Interest Expense
Senior Subordinated Notes
Senior Subordinated Size
Coupon
Term
$350,000.0
10.00%
8.00
Beginning Balance
Ending Balance
$350,000.0
$350,000.0
$350,000.0
$350,000.0
$350,000.0
$350,000.0
$350,000.0
$350,000.0
$350,000.0
$350,000.0
$350,000.0
$350,000.0
$350,000.0
$350,000.0
10.00%
35,000.0
10.00%
35,000.0
10.00%
35,000.0
10.00%
35,000.0
10.00%
35,000.0
10.00%
35,000.0
10.00%
35,000.0
Interest Rate
Interest Expense
UOIG 26
University of Oregon Investment Group
May 2, 2014
Appendix 13 – Leveraged Buyout Analysis Income Statement
Income Statement
($ in thousands)
OPERATING REVENUE
Scheduled Service Revenue
Ancillary Revenue
Fixed-Fee Contract Revenue
Other Revenue
Total Operating Revenue
OPERATING EXPENSES
Aircraft Fuel
Salary and Benefits
Station Operations
Maintenance and Repairs
Sales and Marketing
Aircraft Lease Rentals
Depreciation and Amortization
Other
Total Operating Expenses
EBIT
EBIT Margin
INTEREST EXPENSE
Revolving Credit Facility
Term Loan A
Term Loan B
Subordinated Note
Commitment Fee
Administrative Agent Fee
Advisory Fee
Existing Debt
Cash Interest Expense
Amorization of Deferred Financing Fees
Total Interest Expense
Interest Income
Net Interest Expense (Income)
2009A
2010A
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
2019E
2020E
346,222.0
162,716.0
43,162.0
5,840.0
557,940
427,825.0
194,006.0
40,576.0
1,234.0
663,641
514,984.0
209,994.0
43,690.0
10,449.0
779,117
586,036.0
271,560.0
42,905.0
8,218.0
908,719
651,318.0
324,887.0
17,462.0
2,483.0
996,150
732,863.7
376,588.0
17,863.2
2,497.5
1,129,812
825,900.2
445,998.9
18,220.5
2,522.5
1,292,642
920,806.5
522,578.4
18,539.3
2,560.4
1,464,485
1,011,875.1
599,509.8
18,863.7
2,565.5
1,632,814
1,083,667.0
669,634.3
19,193.9
2,578.3
1,775,073
1,146,032.7
737,188.9
19,529.8
2,604.1
1,905,355
1,209,716.1
807,703.1
19,871.5
2,630.1
2,039,921
165,000.0
90,006.0
53,993.0
52,938.0
16,458.0
1,926.0
29,638.0
25,728.0
435,687.0
122,253.0
21.9%
243,671.0
108,000.0
62,620.0
60,579.0
17,062.0
1,721.0
34,965.0
30,367.0
558,985.0
104,656.0
15.8%
330,657.0
119,856.0
66,709.0
81,228.0
19,905.0
1,101.0
41,975.0
32,242.0
693,673.0
85,444.0
11.0%
378,195.0
133,295.0
78,357.0
73,897.0
19,222.0
0.0
57,503.0
35,946.0
776,415.0
132,304.0
14.6%
385,558.0
158,627.0
78,231.0
72,818.0
21,678.0
9,227.0
69,264.0
46,010.0
841,413.0
154,737.0
15.5%
418,435.3
173,356.3
86,678.1
104,013.8
23,403.1
11,298.1
63,417.0
43,339.1
923,940.8
205,871.6
18.2%
463,351.9
196,467.5
98,233.7
117,880.5
26,523.1
19,389.6
70,973.8
44,205.2
1,037,025.4
255,616.7
19.8%
507,736.8
220,288.6
110,144.3
132,173.2
29,739.0
26,360.7
80,321.6
49,564.9
1,156,329.1
308,155.4
21.0%
556,516.9
242,765.0
121,382.5
145,659.0
32,773.3
32,656.3
89,672.9
54,622.1
1,276,048.1
356,766.0
21.8%
612,646.9
260,731.9
130,366.0
156,439.2
35,198.8
39,051.6
97,721.0
58,664.7
1,390,820.0
384,253.5
21.6%
675,102.3
290,353.6
138,263.6
165,916.4
37,331.2
40,012.5
105,039.9
62,218.6
1,514,238.1
391,117.4
20.5%
745,395.0
307,368.9
146,366.1
175,639.4
39,518.9
40,798.4
112,500.0
65,864.8
1,633,451.5
406,469.4
19.9%
54,000.0
40,000.0
35,000.0
750.0
90.0
51,131.3
39,600.0
35,000.0
750.0
90.0
44,842.7
39,200.0
35,000.0
750.0
90.0
39,911.0
42,164.4
35,000.0
750.0
90.0
30,391.5
45,757.4
35,000.0
750.0
90.0
15,542.5
47,168.9
35,000.0
750.0
90.0
2,062.4
47,796.2
35,000.0
750.0
90.0
-
-
-
-
-
1,605.0
1,605.0
1,605.0
1,605.0
1,338.0
1,338.0
1,338.0
1,338.0
5,939.0
5,939.0
5,939.0
5,939.0
7,756.0
7,756.0
7,756.0
7,756.0
8,450.0
8,450.0
8,450.0
8,450.0
129,840.0
4,625.0
134,465.0
134,465.0
126,571.3
4,625.0
131,196.3
131196.3
119,882.7
4,625.0
124,507.7
124507.7
117,915.4
4,625.0
122,540.4
122540.4
111,989.0
4,625.0
116,614.0
116614.0
98,551.4
4,625.0
103,176.4
103176.4
85,698.6
4,625.0
90,323.6
90323.6
Earnings Before Taxes
Income Tax Expense
Tax Rate
NET INCOME
Net Margin
120,648.0
44,233.0
36.7%
76,415.0
13.70%
103,318.0
37,630.0
36.4%
65,688.0
9.90%
79,505.0
30,116.0
37.9%
49,389.0
6.34%
124,548.0
46,233.0
37.1%
78,315.0
8.62%
146,287.0
54,901.0
37.5%
91,386.0
9.17%
71,406.6
26,420
37%
44,986.1
3.98%
124,420.4
46,036
37%
78,384.9
6.06%
183,647.7
67,950
37%
115,698.1
7.90%
234,225.6
86,663
37%
147,562.1
9.04%
267,639.5
99,027
37%
168,612.9
9.50%
287,941.0
106,538
37%
181,402.8
9.52%
316,145.8
116,974
37%
199,171.8
9.76%
EBITDA
EBITDA Margin
151,891.0
27.2%
139,621.0
21.0%
127,419.0
16.4%
189,807.0
20.9%
224,001.0
22.5%
269,288.6
23.8%
326,590.5
25.3%
388,477.1
26.5%
446,438.9
27.3%
481,974.4
27.2%
496,157.3
26.0%
518,969.4
25.4%
UOIG 27
University of Oregon Investment Group
May 2, 2014
Appendix 14 – Leveraged Buyout Analysis Statement of Cash Flows
Statement of Cash Flows
($ in thousands)
OPERATING ACTIVITIES
Net Income
Net Adjustments to Reconcile Net Income to Net Cash
Depreciation and Amortization
Loss on Aircraft/Equipment Disposals
Provision for Obsolescence of Expendable Parts, Supplies, Fuel
Amortization of Deferred Financing Costs and Original Issue Discount
Stock-Based Compensation Expense
Deferred Income Taxes
Excess Tax Benefits from Stock-Based Compensation
Changes in Assets and Liabilities:
Restricted Cash
Accounts Receivable
Expendable Parts, Supplies and Fuel
Prepaid Expenses
Other Current Assets
Accounts Payable
Accrued Liabilites
Air Traffic Liability
Net Cash Provided by Operating Activities
INVESTING ACTIVITIES
Change in Investment Securities
Capital Expenditures, including pre-delivery deposits
Interest During Aircraft Refurbishment
Proceeds from Sale of PP&E
Investment in Consolidated Affiliates, net
Change in Deposits and Other Assets
Net Cash Used in Investing Activities
FINANCING ACTIVITIES
Cash Dividends Paid to Shareholders
Excess Tax Benefits from Stock-Based Compensation
Proceeds from Exercise of Stock Options, Stock-Settled SARs and Warrants
Proceeds from Debt Issuance
Repayment of Borrowings
Purchase of Common Stock
Payments for Other Financing Activities
Principal Payments on Long-Term Debt and Capital Lease Obligations
Payments for Deferred Financing Costs
Payments for Sale of Ownership Interest in Subsidiary
Equity Contribution
Bank borrowing financing fee
Net Cash Used in Financing Activities
Net Change in Cash and Cash Equivalents
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD
2009A
2010A
2011A
2012A
2013A
2014E
2015E
2016E
2017E
2018E
2019E
2020E
76,331.0
65,702.0
49,398.0
78,414.0
91,779.0
44,986.1
78,384.9
115,698.1
147,562.1
168,612.9
181,402.8
199,171.8
29,638.0
4,898.0
120.0
3,109.0
6,768.0
(1,157.0)
34,965.0
2,878.0
(489.0)
4,437.0
(737.0)
(821.0)
41,975.0
4,794.0
225.0
411.0
4,735.0
13,977.0
(409.0)
57,503.0
4,084.0
480.0
579.0
4,069.0
6,362.0
(2,724.0)
69,264.0
8,000.0
827.0
612.0
9,818.0
(1,945.0)
(1,689.0)
63,417.0
1,434.6
4,625.0
-
70,973.8
1,680.4
4,625.0
-
80,321.6
1,903.8
4,625.0
-
89,672.9
2,122.7
4,625.0
-
97,721.0
2,307.6
4,625.0
-
105,039.9
2,477.0
4,625.0
-
112,500.0
2,651.9
4,625.0
-
(1,809.0)
(1,901.0)
(3,788.0)
(10,171.0)
(1,067.0)
4,686.0
4,460.0
21,557.0
131,674.1
(3,446.0)
(376.0)
(2,221.0)
(17,231.0)
195.0
4,590.0
(333.0)
10,843.0
97,956.0
5,801.0
(5,014.0)
(1,381.0)
(790.0)
(3,337.0)
3,065.0
(910.0)
17,371.0
129,911.1
5,290.0
(5,769.0)
(4,373.0)
490.0
286.0
891.0
2,044.0
29,146.0
176,772.1
(640.0)
1,778.0
(1,823.0)
(8,526.0)
3,124.0
3,140.0
3,695.0
19,474.0
196,888.1
(828.6)
(1,715.3)
(3,168.3)
(1,602.3)
(1,602.3)
1,896.4
11,074.6
(9,214.2)
109,302.9
(1,674.8)
(2,676.7)
(3,256.6)
(4,070.7)
(4,070.7)
3,589.3
8,141.5
22,796.2
174,441.6
(1,765.9)
(1,821.7)
(3,436.8)
(634.8)
(634.8)
2,451.4
8,592.1
24,057.9
229,355.9
(1,728.8)
(2,651.8)
(3,366.6)
(3,787.4)
(3,787.4)
2,460.0
8,416.5
39,894.3
279,431.4
(1,458.5)
(1,025.3)
(2,845.2)
(3,200.8)
(3,200.8)
2,358.3
(1,762.4)
39,089.6
301,221.4
(1,334.0)
(1,963.2)
(2,605.6)
(2,931.3)
(2,931.3)
2,536.0
3,957.3
(17,262.0)
271,010.5
(1,377.5)
(2,027.7)
(2,691.3)
(3,027.7)
(3,027.7)
2,449.6
3,881.0
(16,859.5)
296,267.9
(64,070.0)
(31,663.0)
(642.0)
(838.0)
(97,213.0)
104,130.0
(98,499.0)
483.0
(630.0)
1,298.0
6,782.0
(131,803.0)
(86,582.0)
(405.0)
951.0
3.0
9,613.0
(208,223.0)
(94,426.0)
(105,084.0)
(498.0)
1,613.0
(27.0)
(10,405.0)
(208,827.0)
(26,249.0)
(177,516.0)
(123.0)
471.0
352.0
10,233.0
(192,832.0)
(56,490.6)
(56,490.6)
(64,632.1)
(64,632.1)
(73,224.2)
(73,224.2)
(81,640.7)
(81,640.7)
(88,753.7)
(88,753.7)
(95,267.8)
(95,267.8)
(101,996.1)
(101,996.1)
1,157.0
1,742.0
7,000.0
(25,356.0)
(25,918.0)
(25,918.0)
-
(14,942.0)
821.0
3,872.0
14,000.0
(53,764.0)
(31,671.0)
(31,671.0)
-
409.0
1,834.0
139,000.0
(1,922.0)
(23,562.0)
(21,151.0)
(2,411.0)
-
(38,602.0)
2,724.0
7,542.0
13,981.0
(4,994.0)
(9,629.0)
(9,321.0)
(308.0)
(150.0)
-
1,689.0
2,083.0
106,000.0
(83,607.0)
(23,467.0)
(22,656.0)
(811.0)
1,400.0
-
(109,809.5)
-
(156,131.6)
-
(197,790.7)
-
(212,467.7)
-
(175,742.7)
-
(194,271.9)
-
(113,355.0)
(8,617.0)
90,239.0
81,622.0
92,197.0
13,885.1
113,293.0
127,178.1
(38,757.0)
(70,811.9)
150,740.0
79,928.1
(19,369.0)
(15,312.9)
89,557.0
74,244.1
1,750,000.0
(207,412.2)
(2,520,330.7)
957,305.7
(32,375.0)
(52,812.2)
-
(109,809.5)
0.0
-
(156,131.6)
-
(197,790.7)
-
(212,467.7)
-
(175,742.7)
-
(194,271.9)
-
(67,293.0)
(32,831.9)
97,153.0
64,321.1
UOIG 28
University of Oregon Investment Group
May 2, 2014
Appendix 15 – Leveraged Buyout Analysis Balance Sheet
Balance Sheet
($ in thousands)
Cash and Cash Equivalents
Restricted Cash
Short-Term Investments
Accounts Receivable
Expendable Parts, Supplies and Fuel, net of Obsolescence Allowance
Prepaid Expenses
Deferred Income Taxes
Other Current Assets
Total Current Assets
Adjustments
2009A
90,239.0
17,841.0
141,231.0
7,476.0
10,673.0
19,432.0
269.0
2,712.0
289,873.0
2010A
113,293.0
19,787.0
35,695.0
7,852.0
13,383.0
24,071.0
2,517.0
216,598.0
2011A
150,740.0
13,986.0
154,779.0
12,866.0
14,539.0
24,861.0
13.0
4,577.0
376,361.0
2012A
89,557.0
10,046.0
239,139.0
18,635.0
18,432.0
24,371.0
796.0
14,291.0
415,267.0
2013A
18,011.0
10,531.0
253,378.0
16,857.0
19,428.0
26,643.0
4,206.0
1,167.0
350,221.0
Plant, Property and Equipment
Restricted Cash, net of Current Position
Long-Term Investments
Investments in and Advances to Unconsolidated Affiliates, net
Deposits and Other Assets
Goodwill
Deferred Financing Fees
Total Assets
204,533.0
1,353.0
3,880.0
499,639.0
267,298.0
1,500.0
1,305.0
1,983.0
12,582.0
501,266.0
307,842.0
1,500.0
14,007.0
1,980.0
5,053.0
706,743.0
351,204.0
150.0
24,030.0
2,007.0
5,536.0
798,194.0
451,584.0
305.0
36,037.0
1,655.0
10,689.0
850,491.0
Current Maturities of Long-Term Debt
Accounts Payable
Accrued Liabilites
Air Traffic Liability
Total Current Liabilites
23,338.0
20,990.0
23,699.0
90,554.0
135,243.0
16,532.0
13,965.0
34,473.0
101,397.0
149,835.0
7,885.0
16,756.0
34,096.0
118,768.0
169,620.0
11,623.0
14,533.0
36,476.0
147,914.0
198,923.0
20,237.0
15,823.0
45,416.0
167,388.0
228,627.0
Deferred Income Taxes
Existing Debt
Revolving Line of Credit
Term Loan A
Term Loan B
Subordinated Note
Total Liabilities
26,566.0
45,807.0
207,616.0
25,560.0
28,136.0
203,531.0
39,550.0
146,069.0
355,239.0
46,695.0
150,852.0
396,470.0
48,160.0
154,600.0
431,387.0
Shareholders' Equity
Common Stock, par value $.001
Treasury Stock, at cost
Additional Paid-In Capital
Accumulated Other Comprehensive Loss, net
Retained Earnings
Non-Controlling Interest
Total Shareholder's Equity
21.0
(42,149.0)
171,887.0
92.0
162,172.0
292,023.0
21.0
(95,913.0)
180,704.0
(9.0)
212,932.0
297,735.0
22.0
(97,835.0)
187,013.0
(26.0)
262,330.0
351,504.0
22.0
(102,829.0)
201,012.0
(69.0)
302,325.0
1,263.0
401,724.0
22.0
(186,291.0)
209,213.0
(12.0)
394,598.0
1,574.0
419,104.0
Total Liabilities & Shareholders' Equity
499,639.0
501,266.0
706,743.0
798,194.0
850,491.0
+
18,011.0
2,101,203.6
32,375.0
20,237.0
154,600.0
900,000.0
500,000.0
350,000.0
939,271.6
22.0
(186,291.0)
209,213.0
(12.0)
394,598.0
1,574.0
Pro Forma
2013
2014E
2015E
2016E
2017E
2018E
2019E
2020E
10,531.0
253,378.0
16,857.0
19,428.0
26,643.0
4,206.0
1,167.0
332,210.0
11,298.1
253,378.0
18,572.3
22,596.3
28,245.3
4,206.0
1,167.0
339,463.0
0.0
12,926.4
253,378.0
21,248.9
25,852.8
32,316.1
4,206.0
1,167.0
351,095.2
(0.0)
14,644.8
253,378.0
23,070.6
29,289.7
32,950.9
4,206.0
1,167.0
358,707.1
0.0
16,328.1
253,378.0
25,722.4
32,656.3
36,738.3
4,206.0
1,167.0
370,196.2
0.0
17,750.7
253,378.0
26,747.7
35,501.5
39,939.2
4,206.0
1,167.0
378,690.1
0.0
19,053.6
253,378.0
28,710.8
38,107.1
42,870.5
4,206.0
1,167.0
387,493.0
0.0
20,399.2
253,378.0
30,738.5
40,798.4
45,898.2
4,206.0
1,167.0
396,585.4
451,584.0
305.0
36,037.0
1,655.0
10,689.0
2,101,203.6
32,375.0
2,966,058.6
444,657.6
366.4
36,037.0
1,655.0
6,231.8
2,101,203.6
32,375.0
2,961,989.4
438,315.9
413.0
36,037.0
1,655.0
8,622.1
2,101,203.6
27,750.0
2,965,091.8
431,218.5
460.4
36,037.0
1,655.0
7,353.1
2,101,203.6
23,125.0
2,959,759.7
423,186.4
505.9
36,037.0
1,655.0
9,017.8
2,101,203.6
18,500.0
2,960,301.9
414,219.1
541.8
36,037.0
1,655.0
9,911.1
2,101,203.6
13,875.0
2,956,132.7
404,447.0
573.0
36,037.0
1,655.0
10,365.5
2,101,203.6
9,250.0
2,951,024.1
393,943.0
604.9
36,037.0
1,655.0
10,741.3
2,101,203.6
4,625.0
2,945,395.1
15,823.0
45,416.0
167,388.0
228,627.0
17,719.4
56,490.6
158,173.8
232,383.8
21,308.7
64,632.1
180,969.9
266,910.8
23,760.2
73,224.2
205,027.9
302,012.3
26,220.2
81,640.7
244,922.2
352,783.0
28,578.5
79,878.3
284,011.8
392,468.6
31,114.5
83,835.6
266,749.8
381,699.9
33,564.1
87,716.6
249,890.3
371,171.0
48,160.0
900,000.0
500,000.0
350,000.0
2,026,787.0
48,160.0
852,187.8
495,000.0
350,000.0
1,977,731.6
48,160.0
747,378.3
490,000.0
350,000.0
1,902,449.1
48,160.0
596,246.7
485,000.0
350,000.0
1,781,419.0
48,160.0
403,456.0
480,000.0
350,000.0
1,634,399.1
48,160.0
195,988.3
475,000.0
350,000.0
1,461,616.9
48,160.0
25,245.6
470,000.0
350,000.0
1,275,105.5
48,160.0
300,973.7
350,000.0
1,070,304.7
939,271.6
939,271.6
939,271.6
44,986.1
984,257.8
939,271.6
123,371.0
1,062,642.6
939,271.6
239,069.1
1,178,340.7
939,271.6
386,631.2
1,325,902.9
939,271.6
555,244.1
1,494,515.7
939,271.6
736,646.9
1,675,918.6
939,271.6
935,818.8
1,875,090.4
2,966,058.6
2,961,989.4
2,965,091.8
2,959,759.7
2,960,301.9
2,956,132.7
2,951,024.1
2,945,395.1
UOIG 29
University of Oregon Investment Group
May 2, 2014
Appendix 16 – Airline Industry Metrics
Regional/LCC Airline Industry Comparable Metrics
Industry Metrics
Available Seat Miles (ASM) (millions)
Load Factor (%)
Revenue Passenger Miles (RPM) (millions)
Yield (cents)
Revenue (millions)
Passenger Revenue per Available Seat Mile (PRASM) (cents)
Operating Revenue per ASM (RASM) (cents)
Operating Expense per ASM (CASM) (cents)
Operating CASM, excluding Fuel (cents)
Industry Margins
EBITDA Margin
EBITDAR Margin
EBITDAR Leverage
Coverage Ratios
Net Debt/EBITDA
Total Debt/EBITDA
LT Debt/EBITDA
FCF/Total Debt
CFO/Total Debt
Industry Valuation Multiples
EV/EBITDAR
Industry Margins
EBITDA Margin
EBITDAR Margin
EBITDAR Leverage
Coverage Ratios
Net Debt/EBITDA
Total Debt/EBITDA
LT Debt/EBITDA
FCF/Total Debt
CFO/Total Debt
Industry Valuation Multiples
EV/EBITDAR
LUV
SAVE
RYAAY
Southwest
Airlines, Co.
Spirit Airlines,
Inc.
Ryanair
Holdings plc.
SKYW
ALK
HA
SkyWest Inc.
Alaska Air
Group
Hawaiian
Holdings Inc.
Minimum
7,892.9
80.1%
7,015.1
6.4
996.2
6.8
6.8
7.2
3.2
Maximum
130,344.0
88.9%
104,348.0
16.0
17,699.0
12.8
12.8
12.8
8.5
Mean
44,942.0
83.7%
36,796.6
12.1
5,120.5
10.3
10.3
10.4
6.7
Median
33,672.0
82.0%
28,833.0
13.8
3,298.0
11.6
11.6
10.3
7.7
7,892.9
88.9%
7,015.1
9.3
996.2
8.2
8.2
10.3
5.6
130,344.0
80.1%
104,348.0
16.0
17,699.0
12.8
12.8
12.6
8.2
13,861.0
86.6%
12,001.0
13.8
1,654.0
8.4
11.9
9.9
5.9
72,830.0
82.0%
59,866.0
6.4
4,884.0
6.8
6.8
7.2
3.2
39,208.0
81.2%
31,835.0
10.2
3,298.0
11.9
8.3
8.2
7.7
33,672.0
85.6%
28,833.0
14.8
5,156.0
12.7
12.7
12.8
8.5
16,786.0
81.5%
13,678.0
14.2
2,156.0
11.6
11.6
12.1
7.9
11.8%
13.7%
0.1x
22.6%
23.5%
3.8x
18.4%
20.0%
1.4x
20.3%
21.5%
1.0x
22.5%
23.4%
1.0x
14.5%
13.7%
1.2x
21.8%
21.5%
0.1x
22.6%
23.5%
3.8x
15.4%
21.9%
0.5x
20.3%
21.0%
0.8x
11.8%
14.7%
2.5x
(1.6x)
0.1x
0.0x
(0.1x)
0.2x
2.0x
3.9x
3.6x
9.4x
10.5x
0.1x
2.0x
1.8x
1.5x
2.0x
(0.2x)
1.4x
1.1x
0.2x
0.8x
(0.6x)
1.0x
1.0x
0.1x
0.8x
(0.2x)
1.4x
1.1x
0.4x
0.9x
(1.6x)
0.1x
0.0x
9.4x
10.5x
(0.1x)
3.3x
2.9x
0.2x
0.3x
2.0x
3.7x
3.2x
0.1x
0.2x
(0.5x)
0.9x
0.8x
0.5x
1.1x
1.8x
3.9x
3.6x
(0.1x)
0.3x
2.1x
13.2x
7.4x
6.8x
8.7x
6.8x
11.9x
13.2x
2.1x
5.5x
3.5x
Legacy Airline Industry Comparable Metrics
Industry Metrics
Available Seat Miles (ASM) (millions)
Load Factor (%)
Revenue Passenger Miles (RPM) (millions)
Yield (cents)
Revenue (millions)
Passenger Revenue per Available Seat Mile (PRASM) (cents)
Operating Revenue per ASM (RASM) (cents)
Operating Expense per ASM (CASM) (cents)
Operating CASM, excluding Fuel (cents)
ALGT
Allegiant Travel
Co.
ALGT
AAL
DAL
American
Allegiant Travel Airlines Group, Delta Airlines
Co.
Inc.
Inc.
JBLU
JetBlue
Airways Corp.
UAL
United
Continental
Holdings, Inc.
Minimum
5,441.0
82.5%
7,015.1
9.3
996.2
8.2
8.2
10.3
5.6
Maximum
245,354.0
88.9%
205,167.0
16.9
38,279.0
14.2
15.3
18.2
11.9
Mean
131,953.6
84.5%
116,376.8
14.5
21,660.2
12.2
12.6
14.0
8.9
Median
168,340.0
83.7%
138,878.0
16.1
25,812.0
13.4
13.5
14.8
9.9
7,892.9
88.9%
7,015.1
9.3
996.2
8.2
8.2
10.3
5.6
168,340.0
82.5%
138,878.0
16.2
25,812.0
13.4
15.3
18.2
11.9
232,740.0
83.8%
194,988.0
16.9
37,773.0
14.2
14.2
14.8
9.9
5,441.0
83.7%
35,836.0
13.9
5,441.0
11.6
11.6
11.7
7.3
245,354.0
83.6%
205,167.0
16.1
38,279.0
13.5
13.5
15.1
10.1
10.5%
11.4%
1.0x
22.5%
23.4%
6.1x
15.4%
15.6%
3.2x
14.6%
14.3%
2.8x
22.5%
23.4%
1.0x
13.7%
14.32%
6.1x
15.5%
13.35%
2.2x
14.6%
15.57%
3.6x
10.5%
11.43%
2.8x
(0.6x)
1.0x
1.0x
(0.1x)
0.0x
4.2x
7.7x
7.2x
0.2x
0.8x
2.1x
3.8x
3.4x
0.0x
0.3x
2.1x
3.6x
3.2x
0.0x
0.2x
(0.6x)
1.0x
1.0x
0.1x
0.8x
4.2x
7.7x
7.2x
(0.1x)
0.0x
1.5x
2.3x
2.0x
0.2x
0.4x
3.4x
4.3x
3.6x
0.0x
0.2x
2.1x
3.6x
3.2x
(0.1x)
0.1x
5.5x
8.7x
6.6x
6.0x
8.7x
5.5x
7.4x
6.0x
5.5x
UOIG 30
University of Oregon Investment Group
May 2, 2014
134
Implied Price
Terminal Growth Rate
2.00%
2.50%
3.00%
3.50%
4.00%
0
0.50
0.60
0.70
0.80
0.90
149.30
129.26
113.32
100.36
89.64
265.89
207.64
168.91
141.33
120.72
0.50
0.60
0.70
0.80
0.90
219.33
178.29
149.08
127.26
110.37
134.19
27.00%
32.00%
37.00%
42.00%
47.00%
Implied Price
Terminal Growth Rate
2.25%
2.25%
3.00%
3.75%
115.94
115.94
131.88
155.01
116.82
116.82
133.02
156.61
117.71
117.71
134.19
158.23
118.62
118.62
135.37
159.89
119.53
119.53
136.57
161.58
134
Implied Price
Terminal Growth Rate
2.25%
2.25%
3.00%
3.75%
4.19%
5.19%
6.19%
7.19%
8.19%
124.05
120.74
117.71
114.95
112.41
124.05
120.74
117.71
114.95
112.41
140.53
137.21
134.19
131.42
128.89
164.57
161.26
158.23
155.47
152.93
Undervalued/(Overvalued)
Terminal Growth Rate
2.25%
2.25%
3.00%
3.75%
196.04%
116.98%
69.58%
38.04%
15.58%
0
27.00%
32.00%
37.00%
42.00%
47.00%
Undervalued/(Overvalued)
Terminal Growth Rate
2.3%
2.3%
3.0%
3.8%
-0.01%
-0.01%
13.73%
33.69%
0.75%
0.75%
14.72%
35.06%
1.52%
1.52%
15.73%
36.47%
2.30%
2.30%
16.75%
37.90%
3.09%
3.09%
17.78%
39.35%
4.5%
65.27%
67.40%
69.58%
71.81%
74.09%
4.50%
0
Undervalued/(Overvalued)
Terminal Growth Rate
2.25%
2.25%
3.00%
3.75%
4.50%
202.97
199.65
196.63
193.86
191.32
4.19%
5.19%
6.19%
7.19%
8.19%
4.50%
191.63
194.10
196.63
199.21
201.86
35.49%
16.46%
1.52%
(10.49%)
(20.36%)
35.49%
16.46%
1.52%
(10.49%)
(20.36%)
6.99%
4.13%
1.52%
(0.87%)
(3.05%)
UOIG 31
6.99%
4.13%
1.52%
(0.87%)
(3.05%)
62.34%
35.65%
15.73%
0.31%
(11.96%)
4.50%
107.02%
65.28%
36.47%
15.42%
(0.61%)
Adjusted Beta
188.24
157.29
134.19
116.31
102.08
Tax Rate
166.00
141.53
122.60
107.54
95.30
WACC
WACC
Tax Rate
Adjusted Beta
Appendix 17 – Sensitivity Analysis
21.20%
18.34%
15.73%
13.34%
11.16%
41.93%
39.08%
36.47%
34.08%
31.89%
75.05%
72.19%
69.58%
67.19%
65.01%
University of Oregon Investment Group
May 2, 2014
Appendix 18 – Regression Tables
Summary Statistics
R Square
Adjusted R Square
Standard Error
Observations
Intercept
US GDP
Consumer Confidence Index
Corporate Profit
Coefficients Standard Error
-3610.22
987.92
38.60
10.71
-6.47
1.01
4.72
1.86
t Stat
-3.65
3.61
-6.38
2.53
P-value
0.0107
0.0113
0.0007
0.0445
0.97
0.96
67.51
10
Regression
Residual
Total
df
3
6
9
ANOVA Table
SS
MS
1028730.23 342910.08
27349.37
4558.23
1056079.60
Appendix 19 - Sources
Allegiant Investor Relations
Allegiant Travel Company Website
Bloomberg Business Week
Deutsche Bank Research Report
FactSet
IBISWorld
Investment Banking Valuations (Rosenbaum)
JP Morgan Airline Primer
SEC.gov
Seeking Alpha
Wikipedia
UOIG 32
F
75.23
Significance F
3.76E-05