Allegiant Travel Company (ALGT), owner of Allegiant Air, stock is down over 13% in 2018 and has fallen over 17% in the last six months. The company has come under increased pressure by shareholders in recent days, with a shareholder suing the company over its “dangerous business model.”
The shareholder, Charlotte Woolery, claims that the company has exposed investors to significant financial liability.
Woolery filed her lawsuit in Nevada’s Clark County court and claims that the company’s CEO, Maurice Gallagher Jr., pushed a business model that is responsible for the closure of ValuJet. She claims that the company has tried to increase their bottom line by devaluing the safety of crew members and staff. She also claims that the company has neglected their training and maintenance required. She claims that the move has led the company to lose value.
Investigations into the company’s operations by the Tampa Bay Times has found that Allegiant is four times more likely to suffer from mechanical issues compared to its peers.
Investors have also filed a class action lawsuit, and several additional lawsuits by customers, over the company’s wrongful termination of a pilot for allegedly following proper safety protocol.
Woolery has also accused the company’s vice president Scott Sheldon and president John Redmond of making as much as $50.3 million in insider trading between 2015 and 2018.
Allegiant has had their November traffic numbers released today, offering mixed results to investors. The company posted a rise in traffic due to high demand for air travel, but traffic growth declined as load factor factored into the equation.
The company’s revenue passenger miles rose 10.1% year-over-year, and system capacity expanded by 12.2%. The percentage of passengers that filled seats shrunk by 1.5 basis points to jut 80%, leaving several seats and opportunity to make money on the table.
Fuel costs per gallon averaged $2.39, and the company’s passenger count rose 11.1% in November.
High debt levels remain a concern for the airline, restricting expansion options. Fuel remains a major cost contributor despite oil prices falling, and analysts suggest that the company’s fuel costs will continue to stifle bottom-line growth in the final quarter of the year.
The company’s October figures also show solid growth, with load factor rising. Revenue passenger miles rose 5.2% year-over-year, while system capacity rose 4.6%. Passenger count also rose 5.9% in October, while the company paid fuel costs of $2.56 per gallon.
Fuel costs will remain a major concern for the company going in 2019.
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