Allegiant Air, the US low-cost airline, is facing significant financial challenges following the devastating impact of Hurricane Helene on the Charlotte Harbor Sunseeker Resort. In a recent note to investors, CEO Gregory Anderson revealed that the airline reported a loss of $36 million on revenue of $562 million in the third quarter of 2024. Those numbers fell short of Wall Street’s expectations and raise questions about the company’s future strategy.
The impact of Hurricane Helene, which left resort operations with an estimated $2 million in damages, comes at a bad time for Allegiant Air. The third quarter is traditionally considered the airline’s weakest seasonally, and Sunseeker’s current load factor Resorts was at an alarming 31%. Anderson acknowledged in his statement that Hurricanes Helene and Milton significantly impacted operations, resulting in a loss of $2.05 per share. Despite these difficulties, the airline managed to achieve a positive operating margin, indicating the company’s resilience.
Strategic considerations and future outlook
The resort’s financial difficulties are not new. Sunseeker, which opened in 2017, has struggled from the start with construction delays and financial losses due to COVID-19 and inflation. Before Hurricane Helene, Allegiant had already suffered a loss of nearly $1 million in the first quarter of 2024, due in part to an $8.8 million operating loss at Sunseeker Resort. These ongoing problems have led analysts to consider the possible sale of the resort to ease financial burdens. However, CEO Anderson indicated that all options are on the table, including selling or selling shares of the resort.
Amid these uncertainties, COO Micah Richins expressed optimism about the upcoming holiday season. He reported that fourth-quarter bookings had been successfully rescheduled until after the holidays and highlighted that business travelers who needed accommodations during the recovery period were likely to plan longer stays. This could potentially have a positive impact on the resort’s finances.
Revenue sources and market strategy
Despite operational challenges, Allegiant Air generated operating income of $562.2 million in the third quarter. This figure represents a slight decrease of 0.6% compared to the previous year. Nevertheless, the airline recorded an increase in ancillary revenue per passenger of 3.1% to $74.02, due to the introduction of new products and services that the company has introduced.
In addition to the strategic review of the resort, Allegiant has retained a consulting firm to maximize the value of the Sunseeker Resort. The airline plans to further stabilize demand for its services while responding to current market developments.
Hurricane Helene further strained Allegiant Air’s already strained financial situation. With losses in an already weak quarter and the ongoing uncertainty surrounding the Sunseeker Resort, the airline is faced with crucial strategic decisions. Whether Allegiant Air ultimately calls into question the future of the resort or makes further investments in its restoration will be seen in the coming months. However, the upcoming holiday season could play a crucial role in stabilizing the financial situation.
