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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the transition period from               to            

Commission File Number 001-33166

Allegiant Travel Company

(Exact Name of Registrant as Specified in Its Charter)

Registrant’s Telephone Number, Including Area Code: (702) 851-7300

(Former name, former address and former fiscal year if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

The number of shares of the registrant’s common stock outstanding as of the close of business on August 1, 2010 was 19,692,970.

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Allegiant Travel Company

Form 10-Q

June 30, 2010

INDEX

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PART 1. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

ALLEGIANT TRAVEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ALLEGIANT TRAVEL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in thousands, except for per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ALLEGIANT TRAVEL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited, in thousands, except share and per share amounts)

Note 1 — Summary of Significant Accounting Policies

Basis of Presentation:  The accompanying unaudited condensed consolidated financial statements include the accounts of Allegiant Travel Company (the “Company”) and its wholly owned operating subsidiaries.  Investments in affiliates in which ownership interest ranges from 20 to 50 percent and provides the Company the ability to exercise significant influence over operating and financial policies are accounted for under the equity method.  All intercompany balances and transactions have been eliminated.

These unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which management believes are necessary to present fairly the financial position, results of operations, and cash flows of the Company for the respective periods presented. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto included in the annual report of the Company on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

The interim results reflected in the unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for other interim periods or for the full year.

Comprehensive Income:  Comprehensive income is comprised of changes in the fair value of short-term investments and marketable securities deemed to be available-for-sale by management.

Reclassifications:  Certain reclassifications have been made to the prior period’s financial statements to conform to 2010 classifications.  These reclassifications had no effect on the previously reported net income.  In particular, the Company’s condensed consolidated statements of income reflect additional detail presented within operating revenue of the ancillary revenue categories of air-related charges and third party products.

Note 2 — Newly Issued Accounting Pronouncements

In September 2009, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues Task Force Issue No. 08-01, “Revenue Arrangements with Multiple Deliverables” (“EITF 08-1”). EITF 08-1 updates the current guidance pertaining to multiple-element revenue arrangements included in ASC Topic 605 and changes the allocation methods used in determining how to account for multiple payment streams. It also results in the ability to separately account for more deliverables and potentially less revenue deferrals.  This accounting standard is effective for new revenue arrangements entered into by the Company after January 1, 2011.  The Company is currently evaluating the requirements of this pronouncement and has not yet determined the impact and likely timing of such impact that this standard will have on its consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06, “Fair Value Measurements Disclosures,” which amends Subtopic 820-10 of the FASB Accounting Standards Codification to require new disclosures for fair value measurements and provides clarification for existing disclosure requirements. More specifically, this update requires (a) an entity to disclose separately the amounts of significant transfers in and out of Level 1 and 2 fair value measurements and to describe the reasons for the transfers; and (b) information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). This update clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value, and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The Company adopted the additional disclosure requirements which became effective for interim and annual reporting periods beginning after December 15, 2009.  Certain provisions, which contain disclosures regarding information about purchases, sales, issuances and settlements in the Level 3 reconciliation, will be effective for the Company beginning in the quarter ended March 31, 2011.

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Note 3 — Income Taxes

For the three and six months ended June 30, 2010, the Company did not have any material unrecognized tax benefits.  The Company estimates that no significant unrecognized tax benefits will be recorded within the next twelve months.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.  There was no significant accrued interest at June 30, 2010.  No penalties were incurred or accrued at June 30, 2010.

Note 4 — Stockholders’ Equity

In January 2010, the Board of Directors increased to $25,000 the remaining authority under the Company’s existing share repurchase program (share repurchase program approved in January 2009) to acquire the Company’s stock through open market purchases.  During the six months ended June 30, 2010, the Company repurchased 252,648 shares through open market purchases at an average cost of $51.98 per share for a total expenditure of $13,133.   During the six months ended June 30, 2009, the Company repurchased 465,525 shares at an average cost of $37.79 per share for a total expenditure of $17,594.  During the three months ended June 30, 2010, the Company repurchased 197,046 shares at an average cost of $52.18 per share for a total expenditure of $10,281.  During the three months ended June 30, 2009, the Company repurchased 255,350 shares at an average cost of $41.25 per share for a total expenditure of $10,533.  As of June 30, 2010, the Company had a total of $11,867 in unused stock repurchase authority remaining under the plan.

On April 26, 2010, our Board of Directors declared a one-time cash dividend of $0.75 per share on our outstanding common stock payable to stockholders of record on May 14, 2010.  On June 1, 2010, the Company paid cash dividends of $14,942 to these stockholders.

On May 3, 2010, 162,500 shares of our common stock were issued through the exercise of warrants.  These warrants were issued to a placement agent in connection with the private placement of equity in 2005.  The Company received $715 in proceeds from the exercise of these warrants.

Note 5 — Earnings Per Share

The following table sets forth the computation of net income per share, on a basic and diluted basis for the periods indicated (shares in table below in thousands):

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Note 6 — Long-Term Debt

The carrying value of the Company’s debt approximates fair value.  Long-term debt, including capital lease obligations, consists of the following:

Note 7 — Short-term investments

The Company’s investments in marketable debt and equity securities are classified as available for sale and are reported at fair market value with the net unrealized gain or (loss) reported as a component of accumulated comprehensive income in stockholders’ equity. Short-term investments consisted of the following:

The cost of marketable securities sold is determined by the specific identification method with any realized gains or losses reflected in income.  The Company had no realized gains or losses during the three and six months ended June 30, 2010 and 2009.

The Company believes that the unrealized losses related to debt securities are not other-than-temporary.  Debt securities in an unrealized loss position related primarily to investments in municipal bonds.

Short-term investments had the following maturities as of June 30, 2010:

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Note 8 — Fair Value Measurements

Fair value measurements accounting standards define fair value, establish a consistent framework for measuring fair value, and require disclosures for each major asset and liability category and class of investment measured at fair value on either a recurring or a nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy is established in accounting standards. The hierarchy prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of June 30, 2010, the Company held cash equivalents and short-term investments that are required to be measured at fair value on a recurring basis. Cash equivalents and short-term investments consist of short-term, highly liquid, income-producing investments.  Cash equivalents have maturities of three months or less, while the short-term investments have maturities of greater than three months. The Company uses the market approach valuation technique to determine fair value for these cash equivalents and short-term investments.  The assets classified as Level 1 consist of money market funds for which original cost approximates fair value.  The assets classified as Level 2 consist of municipal debt securities and U.S. government corporation and agency debt securities which are valued using quoted market prices or alternative pricing sources including transactions involving identical or comparable assets and models utilizing market observable inputs.

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Assets measured at fair value on a recurring basis at June 30, 2010 and December 31, 2009 were as follows (in thousands):

There were no significant transfers between Level 1 and Level 2 assets for the three month periods ended June 30, 2010 and 2009.

Note 9 — Commitments and Contingencies

The Company is subject to certain legal and administrative actions it considers routine to its business activities. The Company believes the ultimate outcome of any pending legal or administrative matters will not have a material adverse impact on its financial position, liquidity or results of operations.

The Company entered into purchase agreements for 20 MD-80 aircraft during the fourth quarter of 2009.  As of June 30, 2010, the Company has placed five of these aircraft into revenue service, with four being placed during the second quarter of 2010.  The Company expects to place 10 of the remaining aircraft into revenue service to support growth during 2011 and 2012, with the remaining five aircraft to be used for spare engines and rotable parts.  As of June 30, 2010, the remaining contractual obligations under these purchase agreements total $10,211 to be paid during 2010 upon delivery of the remaining aircraft.

In February 2010, the Company exercised purchase options on two aircraft under operating leases and expects to take ownership of these aircraft in October 2010.  As of June 30, 2010, the contractual obligations under the purchase option total $7,500 to be paid during 2010 upon delivery of the aircraft.  Maintenance reserve deposits paid during the lease term and security deposits will be applied to the purchase price to reduce these contractual obligations.  As a result of the exercise of these purchase options, the Company’s total future payments on operating lease obligations will be reduced by $708 in 2010, $1,416 in 2011 and $1,180 in 2012.

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In March 2010, the Company entered into a purchase contract for six Boeing 757 aircraft with delivery dates from 2010 to 2011.  The Company expects these aircraft to be added to the Company’s operating fleet in 2011 and 2012.  As of June 30, 2010, the remaining contractual obligations under the purchase agreement will be paid upon delivery of the aircraft, with $9,775 to be paid during 2010 and $29,325 to be paid during 2011.

Note 10 — Subsequent Events

On July 23, 2010, the Board of Directors increased the remaining authority under the existing repurchase program to acquire the Company’s common stock through open market purchases by an additional $25,000.  During July 2010, the Company repurchased 261,000 shares through open market purchases under its existing share repurchase program at an average cost of $44.15 per share for a total expenditure of $11,523.  As of July 31, 2010, the Company had a total of $25,346 in unused stock repurchase authority remaining under the plan.

In July 2010, the Company took delivery of two MD-80 aircraft to be used in revenue service and one MD-80 aircraft to be used for spare parts.  The Company made cash payments of $2,050 for these aircraft under existing purchase agreements.

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 and six month periods ended June 30, 2010 and 2009.  Also discussed is our financial position as of June 30, 2010 and December 31, 2009. You should read this discussion in conjunction with our unaudited condensed 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, 2009.  This discussion and analysis contains forward-looking statements. Please refer to the section below entitled “Special Note About Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

We are a leisure travel company focused on residents of small cities in the United States.  We operate a low-cost passenger airline allowing us to sell air travel both on a stand-alone basis and bundled with hotel rooms, rental cars and other travel related services.  Our business model emphasizes low operating costs, diversified revenue sources, and the transport of passengers from small cities to leisure destinations.  Our route network, pricing philosophy, product offering and advertising are all intended to appeal to leisure travelers and make it attractive for them to purchase air travel and related services from us.

We provide limited frequency nonstop scheduled service to leisure destinations. We provide service primarily to Las Vegas (Nevada), Orlando (Florida), Phoenix (Arizona), Tampa/St. Petersburg (Florida), Los Angeles (California) and Ft. Lauderdale (Florida), six of the most popular leisure destinations in the United States, along with limited service to other leisure destinations.

We fly charter (“fixed fee”) services under long-term contracts (primarily for Harrah’s Entertainment Inc.) and on an on-demand “ad-hoc” basis.

Second quarter 2010 results

During the second quarter of 2010, we earned net income of $17.6 million on operating revenues of $168.4 million and achieved a 16.7% operating margin.  We achieved these results despite a 48.7% increase in fuel expense driven by an increase in our system average fuel cost per gallon from $1.66 for the second quarter of 2009 to $2.28 for the same period of 2010.  We grew our operating revenues primarily as a result of an increase in our scheduled service average fare from $65.16 for the second quarter of 2009 to $73.15 for the same period in 2010 as well as a 6.7% increase in scheduled service passengers.  The increases in third party products contributed to our ancillary revenue per passenger growth of 6.9% to $34.48 in ancillary revenue per passenger, up from $32.27 during the same period in 2009.  In addition, our operating revenue increase was in part driven by our scheduled service passenger growth of 6.7%.

Operating expenses increased 27.3% on a year-over-year basis mainly driven by the 37.3% increase in fuel cost per gallon, and an 8.4% increase in gallons consumed.  Our operating expenses per passenger, excluding fuel increased 9.1% from $46.38 for the second quarter of 2009 to $50.61 during the same period of 2010 largely due to a 5.0% increase in system average stage length and a 4.3% decrease in aircraft utilization.

We reached a company milestone during the quarter with the introduction of our 50th aircraft into our operating fleet.  We also took delivery of six MD-80 aircraft under the purchase agreements we entered into in the fourth quarter of 2009.

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During the quarter, we entered into an amendment of an agreement with one of our key Las Vegas hotel partners for access to hotel rooms for sale.  Under the amendment, we prepaid $25.0 million in exchange for discounted room rates and commitments on inventory levels available for sale by us.  Over the term of the agreement, we are not required to purchase any amount of rooms.  The agreement is not exclusive in nature and allows us to be repaid any unused portion of the prepayment upon termination or expiration of the agreement.  We believe this to be an opportunistic agreement supportive of our continued emphasis and focus on revenue growth from third party products.

In April 2010, we opened our new operational base in Grand Rapids, Michigan.  The aircraft base in Grand Rapids is our second small city base with the other in Bellingham, Washington.  We believe basing aircraft in a small city provides us with additional scheduling options including better departure times and the ability to facilitate service to destinations where bases are currently not in place.  We also re-started our seasonal service to Myrtle Beach, South Carolina in April 2010.  Our seasonal service to Myrtle Beach from two small cities proved to be successful in 2009 and we have expanded our scheduled service this year to six small cities from April through September.

Fleet

During the second quarter of 2010, we placed four MD-80 aircraft into service along with the permanent withdrawal of one MD-80 (130-seat MD-87), which increased our operating fleet to 50 aircraft at June 30, 2010.  The following table sets forth the number and type of aircraft in service and operated by us at the dates indicated:

Network

As of June 30, 2010, we offered scheduled service from 58 small cities on 143 routes primarily into our six major leisure destinations.  Changes in our route network during the second quarter of 2010 included the expansion of our seasonal service to Myrtle Beach, South Carolina and five new routes to our major leisure destinations.  We began our seasonal service to Myrtle Beach in April 2010 with four new routes in addition to the two routes which we began to serve during the second quarter of 2009.  The five new routes to our major leisure destinations include three routes to Los Angeles, one route to Phoenix and one route to Las Vegas.  The following shows the number of destinations and small cities served as of the dates indicated:

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Trends and Uncertainties

The weak U.S. economy continues to impact our scheduled service base fare.  Although scheduled service base fare increased from $69.54 in the first half of 2009 to $77.11 in the first half of 2010, the average base fare declined from first quarter 2010 to second quarter 2010.  Our ability to increase base fares in the future will depend on strengthening of demand which will in turn, depend on the recovery of the economy.

Aircraft fuel expense in the second quarter of 2010 represented 44.4%, or $62.2 million of our overall operating expense.  Our average total system fuel cost per gallon increased 37.3% to $2.28 during the second quarter of 2010 compared to $1.66 for the same period of 2009.  Sequentially, average fuel cost per gallon has increased each quarter since the fourth quarter of 2008.  Fuel availability is subject to periods of market surplus and shortage and is affected by demand for heating oil, gasoline and other petroleum products.  The cost of fuel cannot be predicted with any degree of certainty and further fuel cost volatility will most likely have a significant impact on our future results of operations.

Net ancillary revenue from third party products for the three months ended June 30, 2010 was $7.2 million, up 32.9% from the same period in 2009.  The amount of ancillary revenue from the sale of third party products equaled 25.7% of our income before taxes.  The increase in ancillary revenue from third party products was driven by a 28.1% increase in our gross ancillary revenue from third party products as well as an improvement in our gross margins from 26.7% to 27.7%.  Our third party ancillary revenue per passenger increased to $4.87 for the second quarter of 2010, up 24.5% from the same period in 2009.  We believe our continued efforts to enhance software capabilities and provide additional product offerings could result in meaningful revenue growth.

The recent rise in our fuel cost per gallon exceeded the recovery in unit revenues.  As a result of this outpacing of our fuel expenses compared to our unit revenue improvement, we plan to slow growth in the short-term to seek to put upward pressure on our yields.  The reduced growth during the second half of 2010 will be focused on the addition of new routes, primarily by taking existing small cities into existing destinations, which we believe to be an effective and profitable method for growth.  We expect to introduce our 51st MD-80 aircraft along with two 757 aircraft into our operating fleet during 2010 and continue to take delivery of aircraft from our existing MD-80 and 757 purchase agreements, with nine aircraft expected to be in storage by the end of the year.  The aircraft under these purchase agreements will provide for our future growth into 2011 and 2012 and having available additional aircraft will provide flexibility for the pace and timing of this long-term growth.  As we have in the past, we will continue to quickly adjust and adapt our business in response to changing economic conditions and new opportunities to achieve desirable margins.

RESULTS OF OPERATIONS

Comparison of three months ended June 30, 2010 to three months ended June 30, 2009

The table below presents our operating expenses as a percentage of operating revenue for the periods indicated:

We recorded total operating revenue of $168.4 million, income from operations of $28.1 million and net income of $17.6 million for the three months ended June 30, 2010.  By comparison, for the same period in 2009, we recorded total operating revenue of $148.0 million, income from operations of $37.8 million and net income of $23.9 million.  We achieved a 16.7% operating margin for the second quarter of 2010 driven by our increase in scheduled service total average fare of $10.20 per passenger year-over-year, offset by a 37.3% increase in system average fuel cost per gallon from $1.66 for the second quarter of 2010 to $2.28 for the same period in 2010.

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Operating Revenue

Our operating revenue increased 13.8% to $168.4 million in the three months ended June 30, 2010 from $148.0 million for the same period in 2009 primarily due to a 19.8% increase in scheduled service revenue and a 14.0% increase in ancillary revenue.  The scheduled service revenue and ancillary revenue increases were primarily driven by a 12.3% increase in the scheduled service base fare, along with a 6.7% increase in the number of scheduled service passengers.

System available seat miles (“ASMs”) increased by 8.9% as a result of a 5.0% increase in system average stage length and a 3.7% increase in departures.  We managed an increase in system operating revenue per ASM (“RASM”) of 4.4% as a result of a year-over-year increase in scheduled service total average fare from $97.43 to $107.63, offset, in part, by the effect of a longer stage length.

Scheduled service revenue.  Scheduled service revenue increased 19.8% to $107.5 million for the three months ended June 30, 2010, up from $89.7 million in the same period of 2009.  The increase was a result of a 10.5% increase in scheduled service total average fare, from $97.43 to $107.63, along with a 6.7% increase in the number of scheduled service passengers.  Passenger growth was primarily a result of a 4.9% year-over-year increase in departures attributable to increased routes and the benefit of a full quarter of flying to Los Angeles, which began service in May 2009.  The departure growth was also a result of further route expansion to our Phoenix market, and the effects of our route expansion to Myrtle Beach, which began seasonal service in April 2010.  We increased our routes to Myrtle Beach from two routes during the second quarter in 2009 to six routes for the same period in 2010.   A one percentage point increase in load factor also contributed to our growth in a number of passengers.

Ancillary revenue.  Ancillary revenue increased 14.0% to $50.7 million for the three months ended June 30, 2010 up from $44.4 million in the same period of 2009, driven by a 6.9% increase in ancillary revenue per scheduled passenger from $32.27 to $34.48 and a 6.7% increase in scheduled service passengers.  The following table details ancillary revenue per scheduled service passenger from air-related charges and third party products:

On a per-passenger basis, 85.9% and 87.9% of our total ancillary revenue consists of air-related charges for the second quarters of 2010 and 2009, respectively.  The increase in air-related charges per-passenger was primarily attributable to higher baggage fees and booking fees in the comparable periods.  We increased baggage fees, which currently range between $15 and $30 per checked bag, depending on the flight segment, to comparable industry levels.  Third party products increased on a per passenger basis primarily as a result of increased margin and sale of more hotel rooms compared to the same period in the prior year.

The following table details the calculation of ancillary revenue from third party products. Third party products consist of revenue from the sale of hotel rooms, ground transportation (rental cars and hotel shuttle products), attraction and show tickets and fees we receive from other merchants selling products through our website:

(a)   Includes credit card fees and travel agency commissions

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Fixed fee contract revenue.  Fixed fee contract revenue increased 4.4% to $9.9 million for the three months ended June 30, 2010 compared to $9.5 million in the same period of 2009.  The increase in fixed fee contract revenue was primarily due to increased block hours flown under our fixed fee flying agreement with Harrah’s from 1,744 during the second quarter of 2009 to 1,959 for the same period of 2010.  For the periods presented, the change in mix of our other fixed fee flying programs and ad-hoc flying had minimal impact on our fixed fee contract revenue.

Other revenue.  We generated other revenue of $0.3 million in the second quarter of 2010 compared to $4.4 million in the same period of 2009 primarily from flight equipment leased to third parties.  We recognized $3.7 million in supplemental rents during the second quarter of 2009 as a result of maintenance deposits on three leased aircraft where reimbursements for future maintenance events were not deemed probable.

Operating Expenses

Our operating expenses increased 27.3% to $140.3 million during the three months ended June 30, 2010 from $110.2 million in the same period of 2009 largely due to a 48.7% increase in our fuel expense and increases in the number of flights and passengers.

We primarily evaluate our expense management by comparing our costs per passenger across different periods which enable us to assess trends in each expense category. The following table presents Operating expense per passenger for the indicated periods (“per-passenger costs”). The table also presents Operating expense per passenger, excluding fuel, which represents operating expenses, less aircraft fuel expense, divided by the number of passengers carried. This statistic 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.