On Tuesday, Allegiant Travel Company (NASDAQ: NASDAQ: ALGT ) announced a $412 million financing commitment from BNP Paribas (OTC: BNPQY ) and Jackson Square (NYSE: SQ ) Aviation (JSA) for the acquisition of seven Airbus A320 and four Boeing (NYSE: BA ) 737 MAX aircraft. The Las Vegas-based ultra-low-cost carrier currently operates an all-Airbus fleet, but the new deal will introduce Boeing 737 MAX models to its lineup.
Robert Neal, Allegiant's senior vice president and chief financial officer, expressed satisfaction with the innovative finance deal that combines banking and lessor capital. He noted that the framework provides the airline with robust liquidity to support foundational investments in their fleet. The transaction taps into young A320 CEO aircraft and serves as the inaugural financing for Boeing 737 MAX equipment.
According to InvestingPro data, Allegiant's market cap stands at a substantial $1330M USD, with an adjusted P/E ratio of 8.41 for Q2 2023. The company's revenue for the same period was a robust $2505.37M USD, marking a growth of 20.09%. These figures underscore Allegiant's financial strength, which is further bolstered by this new finance deal.
On September 29, Allegiant drew down $196 million from the financing package, with the remainder set to be drawn in line with initial 737 MAX deliveries. The deal secures Allegiant's aircraft financing needs into the second quarter of 2024, providing healthy liquidity at an attractive cost in today's market.
InvestingPro Tips suggest that Allegiant operates with a significant debt burden and is quickly burning through cash. Yet, the company's net income is expected to grow this year, and analysts predict the company will be profitable. This indicates that despite the challenges, Allegiant's financial outlook remains positive.
Neal also highlighted the instrumental role of BNP Paribas in Allegiant's growth over a decade-long relationship. He expressed excitement about welcoming Jackson Square Aviation as a new partner in making air travel more affordable and accessible to leisure travelers.
BNP Paribas described the deal as an innovative and first-of-its-kind financing solution that allows Allegiant to maximize value while having more structural flexibility to manage its aircraft fleet.
Allegiant has agreed to purchase up to 130 Boeing 737-7 and 737-8-200 models in a multi-year deal, marking Boeing's first deal with an ultra-low-cost carrier in the United States. The new 737 MAX additions will afford the airline flexibility, environmental benefits, and new customer features.
Allegiant currently operates a fleet of 127 Airbus A319s and A320s, with plans to grow its fleet to more than 200 aircraft over the next five years. Despite a slight delay in the delivery of its first two Max jets, Allegiant's capacity plans for 2023 remain unaffected. The carrier is still expecting to take its first Max aircraft at the end of 2023 and to begin operating the type early next year. For more insights such as these, consider exploring the 13 additional tips available on InvestingPro.
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