Allegiant Travel Company
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Item 1. Business
Overview
We are a leisure travel company focused on providing travel and leisure services and products to residents of under-served cities in the United States. Our vision is to be the leading airline in the communities we serve, offering reliable, nonstop travel at unbeatable value. We were founded in 1997 and, in conjunction with our initial public offering in 2006, we incorporated in the state of Nevada. Our unique business model provides diversified revenue streams from various travel services and product offerings which distinguish us from other travel companies. We operate a low-cost, low utilization passenger airline marketed primarily to leisure travelers in under-served cities, allowing us to sell air transportation both on a stand-alone basis and bundled with the sale of air-related and third party services and products. In addition, we provide air transportation under fixed fee flight arrangements. Our developed nation-wide route network, pricing philosophy, direct distribution, award-winning loyalty programs, advertising, and product offerings built around relationships with premier leisure companies, are all intended to appeal to leisure travelers and make it attractive for them to purchase air travel and related services and products from us.
Below is a brief description of the travel services and products we provide to our airline customers:
Scheduled service air transportation. We provide scheduled air transportation on limited-frequency, nonstop flights predominantly between under-served cities and popular leisure destinations. As of February 1, 2026, we were selling travel on 578 routes to 126 cities. Of these routes, 433 of them are unique city pairs which do not have any current nonstop competition with other airlines. As of February 1, 2026, our operating fleet consisted of 16 Boeing 737 series aircraft and 106 Airbus A320 series aircraft. In this document, references to "Airbus A320 series aircraft" are intended to describe both Airbus A319 and A320 aircraft.
Ancillary air-related products and services. We provide unbundled air-related services and products in conjunction with air transportation for an additional cost to customers. These optional air-related services and products include larger seats, baggage fees, advance seat assignments, our own travel protection product, change fees, use of our call center for purchases, priority boarding, a customer convenience fee, food and beverage purchases on board, and other air-related services. We also offer certain bundles of air-ancillary products where customers can choose popular combinations of these products at a discounted price to the combined individual prices. The revenue from ancillary air-related products and services is reflected in the passenger revenue income statement line item, along with scheduled service air transportation revenue and travel point redemptions from our co-brand Allegiant credit card and our non-card loyalty program.
Third party products and services. We offer third party travel products such as hotel rooms, rental cars, and travel insurance from a third party insurer for sale to our passengers. The marketing component of revenue related to our co-brand Allegiant credit card is also included in this category.
Fixed fee contract air transportation. We provide air transportation through fixed fee agreements and charter service on a year-round and ad hoc basis.
Proposed Acquisition of Sun Country Airlines
On January 11, 2026, we announced that we plan to acquire Sun Country Airlines Holdings, Inc. (“Sun Country”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, each existing share of Sun Country common stock will be converted into the right to receive (i) $4.10 in cash, without interest and (ii) 0.1557 shares of our common stock.
The Merger Agreement provides that, immediately following the effective date of the proposed acquisition of Sun Country, we will increase the size of our board of directors by three members, which will be comprised of three directors designated by Sun Country, one of whom will be Jude Bricker, the president and chief executive officer of Sun Country, and two of whom will be current members of Sun Country’s board of directors who are reasonably acceptable to our nominating and governance committee.
Completion of the proposed acquisition of Sun Country is subject to the satisfaction or waiver of certain closing conditions, including, among other things that (1) our stockholders approve the issuance of shares of our common stock pursuant to the Merger Agreement, and the Sun Country stockholders approve the Merger Agreement, (2) the waiting period applicable to the closing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) (and any customary timing agreement with any governmental entity to toll, stay or extend such waiting period, or to delay or not to consummate the mergers) will have expired or been terminated, (3) all consents, registrations, notices, waivers, exemptions, approvals, confirmations, clearances, permits, certificates, orders and authorizations required to be obtained from, or delivered to, as applicable, the U.S. Federal Aviation Administration (“FAA”), the U.S. Department of Transportation (“DOT”) and the U.S. Department of Homeland Security (“DHS”), including the Transportation Security Administration ("TSA"), in connection with the closing will have been obtained or delivered, as applicable, (4) there will be no law in effect, whether preliminary, temporary or permanent, which makes the proposed transaction illegal or prohibits or otherwise prevents the closing, (5) the registration statement to be filed by us with the Securities and Exchange Commission (the “SEC”) pursuant to the Merger Agreement, will have become effective in accordance with the provisions of the Securities Act of 1933, as amended, and no stop order
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suspending the effectiveness of the registration statement will have been issued by the SEC and remain in effect and no proceeding to that effect will have been commenced or threatened unless subsequently withdrawn; and (6) the shares of our common stock to be issued in the proposed acquisition of Sun Country will have been authorized and approved for listing on Nasdaq.
We and Sun Country each make certain customary representations, warranties and covenants, as applicable, in the Merger Agreement, including, among others, covenants regarding the conduct of our respective businesses during the pendency of the transactions contemplated by the Merger Agreement.
In addition, we and Sun Country have agreed, among other things, that we will not (1) solicit alternative transactions, (2) participate in or facilitate any discussions or negotiations relating to alternative transactions, (3) furnish any non-public information in connection with alternative transactions or (4) enter into any agreement relating to alternative transactions, except under limited circumstances described in the Merger Agreement. However, in certain circumstances, we or Sun Country may terminate the Merger Agreement to enter into a definitive agreement for a superior proposal as specified in the Merger Agreement.
The Merger Agreement contains certain customary termination rights for us and Sun Country, including, without limitation, a right for either party to terminate if the proposed acquisition of Sun Country is not consummated on or before January 11, 2027, subject to certain extensions if needed to obtain required regulatory approvals, or if a required stockholder approval is not obtained. If the Merger Agreement is terminated under certain circumstances relating to a change of recommendation by our board or by our entry into a definitive agreement for a superior proposal, we will be required to pay Sun Country a termination fee of $52,230,000. Conversely, if the Merger Agreement is terminated under certain circumstances relating to a change of recommendation by the Sun Country board or by Sun Country’s entry into a definitive agreement for a superior proposal, Sun Country will be required to pay us a termination fee of $33,020,000. In addition, we will be required to pay Sun Country a termination fee of $30,000,000 if the Merger Agreement is terminated under certain circumstances relating to the failure of the parties to obtain the expiration or termination of the waiting period under the HSR Act (“HSR Clearance”), or if there is a final, non-appealable law or order prohibiting the consummation of the transactions relating to HSR Clearance.
If the Merger Agreement is terminated under certain circumstances in which a required stockholder approval is not obtained, either party may be required to reimburse the other party’s expenses up to $11,000,000. The Merger Agreement also provides the methodology by which certain expenses will be borne.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to full text of the Merger Agreement, which has previously been filed with the SEC.
Allegiant ONE
We continue to sharpen our focus on our strength - our unique airline and seeking to return to historical margins. We fly so the one person who couldn't travel, could. Our vision is to be the leading airline in the communities we serve, offering reliable, nonstop travel at an unbeatable value. We have coined our Company strategy as "Allegiant ONE" which currently includes the following Company goals:
•maintaining our foundation of providing affordably accessible all-nonstop air travel while refining and strengthening our air travel product
•expanding our already broad domestic network as we have identified more than 1,400 incremental routes of which more than 75 percent currently have no nonstop service
•earning the right to grow by seeking to restore historical margins and strengthening our balance sheet
•taking advantage of the foundational technology we now have in place to leverage and embrace advancing technology (such as AI) to offer increased value to our customers and be able to scale more productively
•increasing peak period service to 1,000 daily departures over time as we earn the right to grow
•achieving at least 15 percent of new revenue from sources other than capacity growth
•seeking to offer (subject to government approval) transborder international scheduled service
•utilizing our customer data to offer personalized and more attractive product offerings
•transforming our eCommerce strategy to create a frictionless experience for our customers and drive increased air ancillary and third party products revenue generation
•expanding our award-winning co-brand credit card program and our non-card loyalty program
•revisiting our marketing strategy to be more surgical and measured
In our pursuit of Allegiant ONE, on January 11, 2026, we entered into an agreement to acquire Sun Country Airlines Holdings, Inc. ("Sun Country"), subject to shareholder approval and required regulatory review. The proposed transaction is anticipated to close in the second half of 2026. We expect this combination to support our Allegiant ONE objectives by broadening our network and improving our ability to flex capacity in response to market and demand conditions. We believe Sun Country's route network and operations are complementary to ours and will support our ability to expand year-round scheduled service, charter, and cargo capabilities while offering customers more destinations and more frequent service. We believe the combined organization will support long-term strategy growth and investment, consistent with our commitment to providing affordable leisure travel and creating long-term value for our shareholders.
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Also in pursuit of Allegiant ONE, and consistent with our strategy to focus on the airline as our core business, we completed the sale of Sunseeker Resort at Charlotte Harbor (the "Resort" or "Sunseeker Resort") on September 4, 2025.
Our principal executive offices are located at 1201 N. Town Center Drive, Las Vegas, Nevada 89144. Our telephone number is (702) 851-7300. Our website address is allegiantair.com. We have not incorporated by reference into this annual report the information on our website and investors should not consider it to be a part of this document. Our website address is included in this document for reference only. Our annual report, quarterly reports, current reports and amendments to those reports are made available free of charge through the investor relations section on our website as soon as reasonably practicable after electronically filed with or furnished to the SEC.
Unique Business Model
We have developed a unique business model that primarily focuses on leisure travelers in under-served cities. The business model has evolved as our experienced management team has looked differently at the traditional way business has been conducted in the airline and travel industries. Our focus on the leisure customer allows us to eliminate the significant costs associated with serving a wide variety of customers and to concentrate our product appeal on a customer base which is under-served by traditional airlines. We have consciously developed a business model which distinguishes us from the traditional airline approach:
| Traditional Airline Approach | Allegiant Approach | |||||||||||
| Customer Base: | Business and leisure | Leisure | ||||||||||
| Network: | Primarily large and mid-sized markets | Almost all routes serve small/medium-sized under-served markets | ||||||||||
| Flight Connections: | Nonstop or connect through hubs | All nonstop | ||||||||||
| Competition: | High | Low | ||||||||||
| Schedule: | Uniform throughout the week | Low frequency/variable capacity | ||||||||||
| Distribution: | Sell through various intermediaries | Sell directly to travelers | ||||||||||
| Fare Strategy: | High base fares/low ancillary revenue | Low base fares/high ancillary revenue | ||||||||||
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis presents factors that had a material effect on our results of operations during the three months ended March 31, 2026 and 2025. Also discussed is our financial position as of March 31, 2026 and December 31, 2025. You should read this discussion in conjunction with our unaudited consolidated financial statements, including the notes thereto, appearing elsewhere in this Form 10-Q and our consolidated financial statements appearing in our annual report on Form 10-K for the year ended December 31, 2025. This discussion and analysis contains forward-looking statements. Please refer to the section below entitled “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.
First Quarter 2026 Review
First quarter 2026 highlights include:
•Signed the Merger Agreement to acquire Sun Country and received the necessary regulatory approvals to close the Merger
•Record first quarter total operating revenue of $732.4 million, up 9.6 percent year-over-year when excluding prior year Sunseeker results
•Fixed fee revenue of $18.1 million, up 11.5 percent year-over-year
•Total revenue per available seat mile (TRASM) up 16.4 percent year-over-year
•Airline-only operating cost per available seat mile (CASM), excluding fuel and special charges of 8.64 ¢, up 7.1 percent year-over-year
•System capacity down 5.9 percent year-over-year
•Available seat miles per gallon of fuel of 86.7, up 1.2 percent year-over-year
•$39.3 million in total cobrand credit card remuneration received, up 8.9 percent year-over-year
AIRCRAFT
The following table sets forth the aircraft in service and operated by us as of the dates indicated:
| March 31, 2026 | December 31, 2025 | |||||||||
Airbus A320(1) | 78 | 79 | ||||||||
Airbus A319(2) | 28 | 28 | ||||||||
| Boeing 737-8200 | 17 | 16 | ||||||||
| Total | 123 | 123 | ||||||||
(1)Includes 23 aircraft under finance lease and 9 aircraft under operating lease as of March 31, 2026 and December 31, 2025. Excludes two aircraft under operating lease as of March 31, 2026 and three aircraft under operating lease as of December 31, 2025, which were removed from service pending redelivery.
(2)Excludes three aircraft under operating lease that were removed from service pending redelivery as of December 31, 2025.
As of March 31, 2026, we are party to forward purchase agreements for 33 aircraft with deliveries expected between 2026 and 2028.
Due to the heavy maintenance needs on certain aging Airbus airframes and capacity constraints at the maintenance, repair, and overhaul contractors, we identified aging airframes for early retirement to coincide with the delivery schedule for our 737 MAX aircraft provided in an amendment to our Boeing purchase agreement signed in September 2023. As of March 31, 2026, 16 airframes have been retired, with eight additional retirements scheduled between May 2026 and January 2027. The accelerated depreciation resulting from the revised estimated useful life of these aircraft is recorded as a special charge in the consolidated financial statements, including $1.3 million recognized in first quarter 2026. The engines from these aircraft will be retained for future overhaul cost mitigation and may be sold on an opportunistic basis if we determine the engine has no better economic use in our operating fleet.
NETWORK
As of March 31, 2026, we were selling 576 routes versus 577 as of the same date in 2025. Network growth in the future will continue to be affected by high fuel prices, the timing of aircraft deliveries, aircraft in heavy maintenance, airport construction and disruption, trends in domestic, leisure air travel demand and other factors such as macroeconomic conditions and geopolitical unrest. We have identified over 1,400 incremental domestic nonstop routes as opportunities for future network growth, of which over 75 percent currently have no non-stop service. Our total active number of origination cities and leisure destinations were 91 and 35, respectively, as of March 31, 2026.
Our unique model is predicated around expanding and contracting capacity to meet seasonal leisure travel demands.
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TRENDS
Proposed Acquisition of Sun Country Airlines
In January 2026, we entered into an agreement to acquire Sun Country Airlines, subject to satisfaction of customary closing conditions, including each company's receipt of shareholder approval and regulatory reviews and approvals (please see Note 11 to the consolidated financial statements included in this report).
We believe the proposed transaction aligns with our long-term strategic objectives and is expected to enhance our network breadth, operational flexibility, and ability to respond to demand shifts, while supporting scheduled service, charter and cargo operations of both airlines. Integration planning activities are underway, while both companies continue to operate independently and maintain normal business operations. We now expect the closing of the transaction to occur as early as May 13, 2026, following shareholder approval at special meetings scheduled to be held by both companies on May 8, 2026. There are several risks associated with the completion of the proposed transaction, as well as risks related to future operations if the transaction is completed, and future results of operations may be affected by regulatory outcomes, integration considerations, transaction-related costs, and other factors.
Aircraft Fuel
The cost of fuel, including refining costs and applicable crack spreads, remains volatile, and are influenced by numerous economic and geopolitical factors beyond our control or prediction, including geopolitical conflict and war. The recent escalation of hostilities in the Middle East has significantly impacted the market prices of products that are derived from crude oil. Our first quarter fuel expense was $180.2 million, or $3.04 per gallon, which is 16.5 percent higher than the $2.61 we paid in first quarter 2025. As the geopolitical unrest in the Middle East began in late February, the volatility only impacted our results for approximately one month of the quarter. However, as this situation persists, we may continue to see significant increases in fuel costs that will materially impact our overall cost structure, operating results and profitability. We have not used financial derivative products to hedge against fuel price volatility, nor do we have any plans to do so in the future.
Demand Environment
Although air travel demand in the first part of 2026 has been strong, demand could be impacted in the future by macroeconomic, geopolitical, and airline industry events as it has in the past. In first quarter 2026, we strategically reduced off-peak day of week capacity and, in turn, increased peak day ASMs on fewer total aircraft year-over year. This contributed to a 3.9 percentage point increase in load factor on a 5.9 percentage decrease in capacity. We expect to continue to manage our peak period utilization as the demand environment allows.
Boeing Agreement
We have signed an agreement and amendments with Boeing to purchase 50 newly manufactured 737 MAX aircraft with options to purchase up to an additional 80 737 MAX aircraft. We have taken delivery of 17 MAX aircraft from this order and all of these aircraft are currently in revenue service. We believe this new aircraft purchase is complementary with our low-cost strategy based on our intent to retain ownership of the aircraft, the longer useful life for depreciation purposes, and expected fuel savings and operational reliability from the use of these new aircraft.
There continues to be regulatory focus on increasing quality control standards at Boeing and its suppliers with the aim of stabilizing aircraft production. These factors and the requirements for Boeing to obtain routine and necessary regulatory approvals could delay deliveries to us beyond management's current expectations. We currently expect ten more aircraft to be delivered to us in the last nine months of 2026. Delays in aircraft deliveries could impact our ability to schedule additional growth when the demand environment allows.
Union Negotiations
The collective bargaining agreement with our pilots has been amendable since 2021. We and the International Brotherhood of Teamsters ("IBT") jointly requested the mediation services of the National Mediation Board in January 2023 to assist with the negotiations. The mediation process with the NMB is continuing. At this time, the announced acquisition of Sun Country has not changed the mediation process.
Separately from the ongoing collective bargaining agreement negotiations, to address retention and pilot pay issues and increase pilot staffing levels, effective in May 2023, we began accruing a retention bonus, with IBT's agreement, for pilots who continue employment with us until a new labor agreement is approved. The amount being accrued is 35 percent of current hourly pay rates, except for our first year first officers for whom the percentage is 82 percent, in each case, calculated at a minimum of 85 pay credit hours per month. Our implementation of the retention bonus has allowed us to effectively increase pay rates for our pilot team members (by way of the accrual of the retention bonus), add pilots through hiring and significantly slow attrition.
For the three months ended March 31, 2026, we recorded estimated pilot retention bonus accruals of $20.1 million, bringing the total accrual to $256.0 million as of March 31, 2026, including the related payroll taxes. The bonus will be paid to all pilots remaining employed with us after ratification of a new collective bargaining agreement.
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RESULTS OF OPERATIONS
Comparison of three months ended March 31, 2026 to three months ended March 31, 2025
Operating Revenue
| Three Months Ended March 31, | Percent Change | |||||||||||||||
| Operating Revenues (in thousands) | 2026 | 2025 | YoY | |||||||||||||
| Passenger | $ | 671,799 | $ | 616,750 | 8.9 | % | ||||||||||
| Third party products | 42,335 | 35,203 | 20.3 | |||||||||||||
| Fixed fee contracts | 18,123 | 16,252 | 11.5 | |||||||||||||
| Resort and other | 175 | 30,869 | NM | |||||||||||||
| Total operating revenues | $ | 732,432 | $ | 699,074 | 4.8 | |||||||||||
NM Not meaningful
Passenger revenue. Passenger revenue increased $55.0 million or 8.9 percent compared to first quarter 2025. The increase was primarily driven by strong leisure demand, which resulted in a 19.8 percent increase in average scheduled service base fare and a 3.9 percentage point improvement in scheduled service load factor, on a 5.9 percent decrease in scheduled service capacity.
Third party products revenue. Third party products revenue for first quarter 2026 increased $7.1 million or 20.3 percent compared to first quarter 2025. The increase was primarily attributable to a $5.1 million increase in the marketing component of co-brand revenue, a $1.7 million increase in rental car revenue, and a $1.3 million increase in revenue from the sales of a third party travel insurance product. These increases were offset by a $0.6 million decrease in third party hotel revenue as the result of a decrease in the number of room nights sold.
Fixed fee contract revenue. Fixed fee contract revenue increased $1.9 million or 11.5 percent in first quarter 2026. The increase was driven by a 5.5 percent increase in fixed fee departures and a 5.7 percent increase in revenue per departure, reflecting continued strength in sports flying during March Madness.
Resort and other revenue. Resort and other revenues decreased compared to the prior-year period as we sold Sunseeker Resort on September 4, 2025.
Operating Expenses
The following table presents airline only operating unit costs on a per available seat mile (ASM) basis, defined as Operating CASM, for the indicated periods. Excluding fuel on a per ASM basis provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors beyond our control. We also show Operating CASM excluding fuel costs and special charges. Excluding fuel costs and special charges allows management and investors to better compare our airline unit costs with those of other airlines.
| Three Months Ended March 31, | Percent Change | |||||||||||||||||||||||||
| Airline Unitized costs (in cents) | 2026 | 2025 | YoY | |||||||||||||||||||||||
| Salaries and benefits | 4.25 | ¢ | 4.04 | ¢ | 5.2 | % | ||||||||||||||||||||
| Aircraft fuel | 3.51 | 3.05 | 15.1 | |||||||||||||||||||||||
| Station operations | 1.49 | 1.35 | 10.4 | |||||||||||||||||||||||
| Depreciation and amortization | 1.13 | 1.10 | 2.7 | |||||||||||||||||||||||
| Maintenance and repairs | 0.69 | 0.64 | 7.8 | |||||||||||||||||||||||
| Sales and marketing | 0.55 | 0.43 | 27.9 | |||||||||||||||||||||||
| Aircraft lease rentals | 0.15 | 0.11 | 36.4 | |||||||||||||||||||||||
| Other | 0.39 | 0.40 | (2.5) | |||||||||||||||||||||||
| Special charges | 0.54 | 0.02 | NM | |||||||||||||||||||||||
| Airline operating CASM | 12.70 | ¢ | 11.14 | ¢ | 14.0 | |||||||||||||||||||||
| Airline operating CASM, excluding fuel | 9.18 | ¢ | 8.09 | ¢ | 13.5 | |||||||||||||||||||||
| Airline operating CASM, excluding fuel and special charges | 8.64 | ¢ | 8.07 | ¢ | 7.1 | |||||||||||||||||||||
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Airline operating CASM, excluding fuel and special charges. Airline operating CASM, excluding fuel and special charges, increased 7.1 percent to 8.64 ¢ in first quarter 2026 from 8.07 ¢ in first quarter 2025. The CASM-ex increase was primarily driven by a 5.9 percent decrease in capacity compared to the prior year quarter, which resulted in higher unit costs across nearly all expense categories. CASM-ex increases were also driven by year-over-year expense increases in the expense categories described below.
Salaries and benefits expense. Airline salaries and benefits expense decreased by $2.3 million or 1.0 percent compared to first quarter 2025. Our 2025 organizational restructuring initiatives resulted in a decrease of 6.5 percent in the number of full-time equivalent employees, the savings from which were offset by increases in flight crew wages resulting from increases in average tenure. As noted above, this expense on a per ASM basis increased as a result of the reduction in capacity from the prior year quarter.
Salaries and benefits expense in first quarter 2025 included $11.1 million from Sunseeker Resort, which was sold on September 4, 2025.
Aircraft fuel expense. Aircraft fuel expense increased $13.9 million or 8.4 percent, during first quarter 2026 compared to the same period in 2025, driven by a 16.5 percent increase in average fuel cost per gallon resulting from the ongoing hostilities in the Middle East. This increase was partially offset by a 7.0 percent decrease in fuel gallons consumed on a 5.9 percent reduction in capacity. So long as these market disruptions continue, we expect even greater cost impact from higher fuel costs in the future as the significant fuel cost increase in first quarter 2026 only affected the last month of the quarter.
Station operations expense. Station operations expense increased $3.0 million or 4.1 percent, compared to first quarter 2025. The increase was primarily driven by increases in building rent, airport and landing fees, and other station-related services reflecting higher rates and costs across multiple stations and the net addition of four new stations over the course of 2025.
Depreciation and amortization expense. Airline depreciation and amortization expense decreased $1.8 million or 3.0 percent compared to first quarter 2025. The decrease was driven by lower depreciation and amortization costs associated with the retirement of seven Airbus airframes and the sale of certain engines associated with the Airbus fleet since the beginning of 2025. These decreases were partially offset by aircraft depreciation from nine additional 737 MAX aircraft placed into service since the prior year period.
Depreciation and amortization expense in first quarter 2025 included $3.6 million from Sunseeker Resort, which was sold on September 4, 2025.
Maintenance and repairs expense. Maintenance and repairs expense remained flat compared to the prior year quarter and increased 7.8 percent on a per ASM basis primarily as a result of the lower number of ASMs flown. Costs incurred to prepare aircraft for return from operating leases and a higher volume of rotable repairs were offset by fewer other maintenance events resulting from a 5.0 percent reduction in departures.
Sales and marketing expense. Airline sales and marketing expense increased $4.8 million or 20.7 percent compared to first quarter 2025 due to a non-recurring item related to our credit card agreement that offset expenses in first quarter 2025 and higher credit card processing fees associated with a $55.0 million year-over-year increase in passenger revenue.
Sales and marketing expense in first quarter 2025 included $1.7 million from Sunseeker Resort, which was sold on September 4, 2025.
Aircraft lease rentals. Aircraft lease rental expense increased $1.5 million compared to first quarter 2025. The increase is attributable to estimated lease return costs we accrued for certain aircraft on operating leases related to redeliveries in 2026 and future years, offset by lower lease expense from leased aircraft that were redelivered during fourth quarter 2025 and first quarter 2026.
Other operating expense. Airline other operating expenses decreased by $2.1 million or 9.7 percent during first quarter 2026 compared to the prior year quarter. The decrease was driven primarily by gains on the sale of assets, which resulted in a $2.4 million greater offset to expense in first quarter 2026 compared to first quarter 2025.
Other operating expense in first quarter 2025 included $13.1 million from Sunseeker Resort, which was sold on September 4, 2025.
Special charges. The Airline recorded special charges of $27.8 million in first quarter 2026, compared to $1.4 million in first quarter 2025. Special charges in 2026 consisted of $10.0 million of accelerated amortization related to software identified for redevelopment, $9.6 million of costs related to the proposed acquisition of Sun Country Airlines, and a $7.0 million allowance for credit losses on a third party note receivable.
Special charges in first quarter 2025 (a negative amount in the quarter) reflected insurance recoveries from damages related to weather events that occurred at Sunseeker Resort between 2022 and 2024.
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Interest Expense and Income
Interest expense, net of interest income and capitalized interest, decreased $6.1 million or 27.5 percent, compared to first quarter 2025. The decrease was primarily driven by an $8.1 million reduction in interest expense, reflecting lower average outstanding debt balances and lower variable interest rates year over year. In addition, first quarter 2025 included a $3.4 million loss on debt extinguishment related to the early repayment of the Sunseeker construction loan. This decrease was partially offset by a $2.2 million decrease in capitalized interest attributable to lower average pre-delivery deposit balances, and a $3.2 million decrease in interest income due to lower yields on invested cash balances.
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Comparative Airline-Only Operating Statistics
The following tables set forth our airline operating statistics for the three-month periods indicated:
| Three Months Ended March 31, | Percent Change (1) | ||||||||||||||||||||||||
| 2026 | 2025 | YoY | |||||||||||||||||||||||
| Airline operating statistics (unaudited): | |||||||||||||||||||||||||
| Total system statistics: | |||||||||||||||||||||||||
| Passengers | 4,428,463 | 4,451,306 | (0.5) | % | |||||||||||||||||||||
| Available seat miles (ASMs) (thousands) | 5,130,542 | 5,451,584 | (5.9) | ||||||||||||||||||||||
Airline operating expense per ASM (CASM) (cents) | 12.70 | ¢ | 11.14 | ¢ | 14.0 | ||||||||||||||||||||
| Fuel expense per ASM (cents) | 3.51 | ¢ | 3.05 | ¢ | 15.1 | ||||||||||||||||||||
| Airline special charges per ASM (cents) | 0.54 | ¢ | 0.02 | ¢ | NM | ||||||||||||||||||||
Airline operating CASM, excluding fuel and special charges (cents) | 8.64 | ¢ | 8.07 | ¢ | 7.1 | ||||||||||||||||||||
| Departures | 31,570 | 33,235 | (5.0) | ||||||||||||||||||||||
| Block hours | 78,823 | 83,871 | (6.0) | ||||||||||||||||||||||
| Average stage length (miles) | 919 | 935 | (1.7) | ||||||||||||||||||||||
| Average number of operating aircraft during period | 122.4 | 125.1 | (2.2) | ||||||||||||||||||||||
| Average block hours per aircraft per day | 7.2 | 7.5 | (4.0) | ||||||||||||||||||||||
| Full-time equivalent employees at end of period | 5,666 | 6,057 | (6.5) | ||||||||||||||||||||||
| Fuel gallons consumed (thousands) | 59,200 | 63,636 | (7.0) | ||||||||||||||||||||||
| ASMs per gallon of fuel | 86.7 | 85.7 | 1.2 | ||||||||||||||||||||||
| Average fuel cost per gallon | $ | 3.04 | $ | 2.61 | 16.5 | ||||||||||||||||||||
| Scheduled service statistics: | |||||||||||||||||||||||
| Passengers | 4,398,107 | 4,420,811 | (0.5) | ||||||||||||||||||||
| Revenue passenger miles (RPMs) (thousands) | 4,210,895 | 4,271,328 | (1.4) | ||||||||||||||||||||
| Available seat miles (ASMs) (thousands) | 4,991,560 | 5,305,191 | (5.9) | ||||||||||||||||||||
| Load factor | 84.4 | % | 80.5 | % | 3.9 | ||||||||||||||||||
| Departures | 30,472 | 32,133 | (5.2) | ||||||||||||||||||||
| Block hours | 76,497 | 81,414 | (6.0) | ||||||||||||||||||||
| Average seats per departure | 176.2 | 175.0 | 0.7 | ||||||||||||||||||||
Yield (cents) (2) | 8.53 | ¢ | 7.06 | ¢ | 20.8 | ||||||||||||||||||
Total passenger revenue per ASM (TRASM) (cents)(3) | 14.31 | ¢ | 12.29 | ¢ | 16.4 | ||||||||||||||||||
Average fare - scheduled service(4) | $ | 81.66 | $ | 68.19 | 19.8 | ||||||||||||||||||
Average fare - air-related charges(4) | $ | 71.09 | $ | 71.32 | (0.3) | ||||||||||||||||||
| Average fare - third party products | $ | 9.63 | $ | 7.96 | 21.0 | ||||||||||||||||||
| Average fare - total | $ | 162.37 | $ | 147.47 | 10.1 | ||||||||||||||||||
| Average stage length (miles) | 926 | 941 | (1.6) | ||||||||||||||||||||
| Fuel gallons consumed (thousands) | 57,542 | 61,826 | (6.9) | ||||||||||||||||||||
| Average fuel cost per gallon | $ | 3.03 | $ | 2.63 | 15.2 | ||||||||||||||||||
| Percent of sales via website and mobile app during period | 91.5 | % | 92.5 | % | (1.0) | ||||||||||||||||||
| Other data: | |||||||||||||||||||||||
| Rental car days sold | 364,765 | 360,890 | 1.1 | ||||||||||||||||||||
| Hotel room nights sold | 19,407 | 39,940 | (51.4) | ||||||||||||||||||||
(1)Except load factor and percent of sales through website and mobile app during period, which are presented as a percentage point change.
(2)Defined as scheduled service revenue divided by revenue passenger miles.
(3)Various components of this measure do not have a direct correlation to ASMs. This measure is provided on a per ASM basis so as to facilitate comparison with airlines reporting revenues on a per ASM basis.
(4)Reflects division of passenger revenue between scheduled service (base fare) and air-related charges in our booking path.
22
LIQUIDITY AND CAPITAL RESOURCES
Current liquidity
Cash, cash equivalents and investment securities (short-term and long-term) increased to $933.6 million as of March 31, 2026, from $838.5 million at December 31, 2025. Investment securities represent highly liquid marketable securities which are available-for-sale.
As of March 31, 2026, we had $250.0 million of undrawn capacity under revolving credit facilities and $25.1 million in undrawn borrowing capacity under aircraft financing facilities. The latter facility has now been fully drawn.
Restricted cash represents escrowed funds under fixed fee contracts and cash collateral against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties. Under our fixed fee flying contracts, we require our customers to prepay for flights to be provided by us. The prepayments are escrowed until the flight is completed and are recorded as restricted cash with a corresponding amount reflected as air traffic liability.
Our operating cash flows and long-term debt borrowings have allowed us to invest in our fleet renewal. Future capital needs are primarily for the acquisition of additional aircraft, including our existing aircraft commitments, and for the proposed acquisition of Sun Country and related expenditures.
Our share repurchase authority at March 31, 2026 is $64.7 million. We did not repurchase any shares on the open market during first quarter 2026. We have indefinitely suspended our quarterly cash dividend in anticipation of upcoming capital needs related to our fleet investments.
We believe we have more than adequate liquidity resources through our cash, cash equivalent and short-term investment balances, existing aircraft financing facilities, our undrawn capacity under existing credit facilities, operating cash flows and anticipated access to liquidity, to meet our current contractual obligations and remain in compliance with the debt covenants in our existing financing agreements for the next 12 months. We will continue to consider raising funds through debt financing as needed to fund capital expenditures and refinance our corporate debt in advance of its maturity.
Debt
Our debt and finance lease obligations balance, without reduction for related issuance costs, was $1.8 billion as of March 31, 2026 and December 31, 2025. Net debt (total debt less unrestricted cash, cash equivalents, and investments) totaled $0.9 billion as of March 31, 2026, representing a reduction of $102.9 million compared to December 31, 2025.
During the three months ended March 31, 2026, we borrowed $20.5 million secured by aircraft related assets.
As of March 31, 2026, approximately 59.4 percent of our debt and finance lease obligations is fixed-rate.
Sources and Uses of Cash
Operating Activities
During the three months ended March 31, 2026, and 2025, we generated cash flows from operations of $268.1 million and $191.4 million respectively.
Our operating cash flows are impacted by the following factors:
Advance Ticket Sales. Tickets for air travel are typically purchased in advance of the travel date. When we receive a cash payment at the time of booking, we record the cash received as deferred revenue in air traffic liability. When the flight is flown, we recognize the liability from air traffic liability into revenue. Due to the seasonal nature of our operations, our air traffic liability balances will fluctuate in line with our peak flying seasons.
Salaries and Benefits. Salaries and benefits expense represents our single largest expense and has increased considerably in recent years. Cash payments for our salaries and benefits expense are typically made in the period that they are incurred with the exception of our pilot retention bonus, which will be paid to all pilots after ratification of a new collective bargaining agreement. For the quarters ended March 31, 2026 and 2025, we recognized, within the accrued liabilities line item in our balance sheet, approximately $20.1 million and $22.7 million, respectively, of expense related to the pilot retention bonus, including related payroll taxes.
23
Fuel. Fuel is our second largest expense. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. During the three months ended March 31, 2026, we decreased our year over year flying capacity by 5.9 percent, which led to an 7.0 percent decrease in fuel gallons consumed when compared to the same period in 2025. However, this decrease was offset by a 16.5% increase in average fuel cost per gallon over the same period, stemming from the Iranian conflict beginning on February 28, 2026. We expect to continue to see material increases in fuel costs while these circumstances persist.
Investing Activities
Investments. We hold various financial assets and will strategically purchase and sell these assets based on operational cash needs. During the three months ended March 31, 2026, we had $17.4 million of net investment maturities (net cash inflows) compared to $73.3 million of net investment purchases (net cash outflows) during the same period in 2025.
Capital Expenditures. Capital expenditures for the three months ended March 31, 2026 and 2025 were $177.8 million and $74.5 million, respectively. In December 2021, we committed to purchase 50 Boeing 737 MAX aircraft, of which we began to receive delivery in September 2024. During the three months ended March 31, 2026, we took delivery of one aircraft and made pre-delivery payments on certain of the remaining 33 aircraft under firm commitment.
Financing Activities
Long-Term Debt and Finance Leases. Cash used in financing activities for the three months ended March 31, 2026 was $9.0 million, compared to $69.0 million during the same period in 2025. During first quarter 2026, we made regularly scheduled principal payments of $29.4 million on our debt and finance lease obligations and received $20.5 million of proceeds from a draw on our PDP facility. During the three months ended March 31, 2025, we made $280.6 million of principal repayments on our debt and finance leases, largely related to prepayments of the Sunseeker construction loan and a PDP financing facility and received proceeds from the issuance of aircraft financing debt totalling $224.5 million.
24
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this quarterly report on Form 10-Q, and in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” that are based on our management’s beliefs and assumptions, and on information currently available to our management. Forward-looking statements include our statements regarding the acquisition of Sun Country, the number of contracted aircraft to be placed in service in the future, the timing of aircraft deliveries and retirements, as well as other information concerning future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe," "expect," "anticipate," "intend," "plan," "estimate," “project,” “hope” or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements generally may be found in our periodic reports filed with the Securities and Exchange Commission at www.sec.gov. These risk factors include, without limitation, the impact of regulatory reviews of, and production limits on, The Boeing Company on our aircraft delivery schedule, an accident involving, or problems with, our aircraft, public perception of our safety, our reliance on our automated systems, our reliance on Boeing to deliver aircraft under contract to us on a timely basis, risk of breach of security of personal data, volatility of fuel costs, labor issues and costs, the ability to obtain regulatory approvals as needed in connection with our fleet and network, the effect of economic conditions on leisure travel, debt covenants and balances, the impact of government regulations on the airline industry, the ability to finance aircraft to be acquired, the ability to obtain necessary government approvals to prepare to offer international service from our markets, terrorist attacks, risks inherent to airlines, our competitive environment, our reliance on third parties who provide facilities or services to us, the impact of the possible loss of key personnel, economic and other conditions in markets in which we operate, increases in maintenance costs and availability of outside maintenance contractors to perform needed work on our aircraft on a timely basis and at acceptable rates, cyclical and seasonal fluctuations in our operating results and the perceived acceptability of our environmental, social and governance efforts, the occurrence of any event, change or other circumstance that could give rise to the right of one or both of us or Sun Country to terminate the definitive merger agreement for the Sun Country acquisition; the risk that potential legal proceedings may be instituted against us or Sun Country and result in significant costs of defense, indemnification or liability; the possibility that the Sun Country acquisition does not close when expected or at all because required stockholder approvals or other conditions to closing are not received or satisfied on a timely basis or at all (and the risk that regulatory approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction); the risk that the combined company will not realize expected benefits, cost savings, accretion, synergies and/or growth from the Sun Country acquisition or that any of the foregoing may take longer to realize or be more costly to achieve than expected; disruption to the parties' businesses as a result of the announcement and pendency of the Sun Country acquisition; the costs associated with the anticipated length of time of the pendency of the Sun Country acquisition, including the restrictions contained in the definitive merger agreement on the ability of each of Sun Country and us to operate our respective businesses outside the ordinary course consistent with past practice during the pendency of the Sun Country acquisition; the diversion of our and Sun Country's respective management teams' attention and time from ongoing business operations and opportunities on acquisition-related matters; the risk that the integration of Sun Country's operations will be materially delayed or will be more costly or difficult than expected or that we are otherwise unable to successfully integrate Sun Country's businesses into our businesses; the possibility that the Sun Country acquisition may be more expensive to complete than anticipated, including as a result of unexpected factors or events; reputational risk and potential adverse reactions of our or Sun Country's customers, suppliers, employees, labor unions or other business partners, including those resulting from the announcement or completion of the Sun Country acquisition; and the dilution caused by our issuance of additional shares of common stock in connection with the consummation of the Sun Country acquisition.
Any forward-looking statements are based on information available to us today and we undertake no obligation to publicly update any forward-looking statements, whether as a result of future events, new information or otherwise.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There were no material changes to our critical accounting estimates during the three months ended March 31, 2026. For information regarding our critical accounting policies and estimates, see disclosures in the Consolidated Financial Statements and accompanying notes contained in our 2025 Form 10-K, and in Note 1 of Notes to Consolidated Financial Statements (unaudited) in this Form 10-Q.
25
Next expected filings
- ~2026-08-06 10-Q expected by 2026-08-09 (in 43 days)
- ~2026-11-06 10-Q expected by 2026-11-09 (in 135 days)
- ~2027-02-26 10-K expected by 2027-02-28 (in 247 days)
- ~2027-05-06 10-Q expected by 2027-05-09 (in 316 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-06-10 8-K Other Events; Financial Statements and Exhibits
- 2026-06-09 8-K Regulation FD Disclosure; Other Events; Financial Statements and Exhibits
- 2026-05-15 DEF 14A Proxy Statement
- 2026-05-13 8-K Completion of Acquisition/Disposition; Officer/Director Change; Bylaws/Articles Amended; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-05-13 S-8 Employee Benefit Plan Registration
- 2026-05-06 10-Q Quarterly Report
- 2026-04-30 8-K Earnings Release; Material Financial Obligation; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-04-28 8-K Other Events
- 2026-04-20 8-K Other Events; Financial Statements and Exhibits
- 2026-04-15 8-K Other Events; Financial Statements and Exhibits
- 2026-03-27 S-4 Registration (Merger)
- 2026-03-26 10-K/A Annual Report (Amended)
- 2026-03-16 8-K Other Events; Financial Statements and Exhibits
- 2026-02-26 10-K Annual Report
- 2026-02-04 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits