ALLEGIANT
bus planes that are either in service or purchased, putting the company a step closer to meeting a self-imposed goal of having 90 to 100 new and used Airbus planes by mid-2019 while retiring its fleet of older MD80s.
“The MD80 served us well since our coming-out party in 2002, but it’s time to move on,” Allegiant Chairman and CEO Maurice Gallagher said Friday morning during a call with investors. “We’ve known for some time that we’ve had to make this transition.”
For the quarter that ended June 30, Allegiant reported a net income of $60.8 million, a 12 percent increase from 2015, and $3.68 a share, on revenue of $344.9 million. That compares with net income of $54.3 million, $3.18 a share, on revenue of $322.1 million for the same quarter a year earlier.
Jude Bricker, Allegiant’s chief operating officer, said the company suffered “higher than expected cancellations” during the summer, which may affect third-quarter results by roughly 1 percent.
Gallagher briefly discussed the first union contract reached with pilots represented by Teamsters Local 1224, following more than three years of negotiations. The five-year labor pact goes into effect Monday, offering an immediate 31 percent pay raise along with improved medical benefits, scheduling procedures and retirement plans.
“First-time labor agreements are essentially very difficult and time-consuming, taking years to complete, and that was the case in our situation,” Gallagher said. “Our pilots’ ratification of this five-year contract reflects the endorsement of the offer we put in front of them.”
The earnings call was held one day after Allegiant announced six new routes and service to two new cities, including nonstop flights set to begin in October from Las Vegas to in Oakland, California, and Kansas City, Missouri. Allegiant will start new service from Newark, New Jersey, to airports in Orlando, Tampa and Punta Gorda, Florida, by November, while nonstop flights will start in December between Orlando and San Juan, Puerto Rico.
Company executives also said they plan to send a response within 60 days to an audit by the Federal Aviation Administration that found Allegiant’s crew members did not consistently follow procedures, ramp personnel did not correctly complete forms and passengers were observed with excessive carry-on bags.
The FAA said that the issues were “minor” and Allegiant will not face penalties or enforcement action.
“We and the FAA are partners in our efforts to offer safe air travel to customers and team members. It’s job one,” Gallagher said, adding that Allegiant is “committed to a high level of safety.”
WASHINGTON — A surprisingly lackluster economy last quarter served as a reminder of how choppy the pace of growth has been since the Great Recession ended seven years ago. Businesses pared their stockpiling and investment through the spring. But consumers — the heart of the U.S. economy — kept spending.
Most economists foresee faster, if still modest, growth the rest of this year.
The Commerce Department’s report Friday showed that gross domestic product — the broadest gauge of the economy — grew by only 1.2 percent in the April-June quarter. That was far weaker than the forecasts of most analysts, who had expected growth of twice that pace in a bounce-back from a slump at the start of the year.
A statement by the Federal Reserve this week had led many economists to conclude that a strengthening economy would lead the Fed to resume raising rates as soon as September. But after Friday’s tepid GDP report, many said a September rate hike was now probably off the table.
“The GDP data have significantly reduced the chances of a near-term rate hike,” said Paul Ashworth, chief economist at Capital Economics. Ashworth predicts only one interest rate increase this year, in December.
The biggest factor for the shortfall in GDP growth last quarter was that businesses reduced their restocking by the most since 2011. That pullback in stockpiling subtracted 1.2 percentage points from annualized growth in the AprilJune quarter — more than economists had expected. It was the fifth straight quarter in which weak inventory building has dampened the economy’s growth.
But most analysts say the efforts by businesses to adjust their stockpiles to more closely match their sales is probably ending and will be followed by increased restocking, which would deliver a boost to GDP in coming quarters.
“Businesses have overdone the inventory reductions, and that is likely to reverse in the third quarter, which will help growth,” said Nariman Behravesh, chief economist at IHS Global Insight.
Behravesh predicted GDP will accelerate to an annual growth rate of around 2.5 percent in the second half of the year. Even with that rebound, growth for the full year would amount to a sluggish 1.5 percent. It would be the slowest pace since the recession ended.
For 2015, revisions issued Friday showed the economy grew 2.6 percent, more than its previous estimate of 2.4 percent.
Economists are counting on the consumer sector, which accounts for about 70 percent of economic activity, to remain solid in the second
NEW YORK — Stocks ended slightly higher Friday, helped by better-thanexpected quarterly results from Google’s parent Alphabet and retailer Amazon and a modest recovery in oil prices.
But the gains were held back by disappointing results from Exxon Mobil and news out of the Bank of Japan, which did not announce as much stimulus as many had hoped.
The Dow Jones industrial average closed down 24.11 points, or 0.1 percent, to 18,432.24.
Exxon reported its smallest quarterly profit in 17 years, well below what analysts were looking for, due to the continuing weakness in oil prices. Its major competitor, Chevron, fared slightly better. While earnings dropped sharply from a year ago, Chevron’s results still beat analysts’ expectations.
Exxon fell $1.25, or 1.4 percent, to $88.95. Chevron climbed 69 cents, or 0.7 percent, to $102.48 after being down earlier in the day.
Broader market indicators ended higher. The Standard & Poor’s 500 index rose 3.54 points, or 0.2 percent, to 2,173.60 and the Nasdaq composite increased 7.15 points, or 0.1 percent, to 5,162.13.
Wall Street is finishing its busiest week of corporate earnings, which was dominated by mostly strong results from technology companies.
So far, corporate profits appear to be coming well ahead of what were very low expectations. Earnings in the S&P 500 so far are down 2.4 percent from a year ago, which is better than the 5.2 percent decline expected when earnings season started, according to S&P Global Market Intelligence.
“Expectations were exceptionally low for the second quarter. While consumers goods and technology has been better than expected, the energy sector continues to show challenges,” said Kate Moore, chief equity strategist for BlackRock. half of the year, boosted by continued job gains.
For the April-June quarter, consumer spending did not disappoint: It grew at a healthy annual rate of 4.2 percent, the fastest increase in more than a year and more than twice the first-quarter rate.
Last quarter’s overall GDP growth of 1.2 percent followed an even weaker pace of 0.8 percent in the first quarter. The fourth quarter of 2015 was also subpar, with GDP expanding just 0.9 percent.
Trade was a slight positive in the second quarter: It added 0.2 percentage point to growth, which may signify that export sales have stabilized after a slide resulting from global weakness and a strong dollar, which makes U.S. goods costlier overseas.
In the spring, the government sector contracted at an annual rate of 0.9 percent, led by weakness in state and local spending.
Business investment declined for a third straight quarter as the energy sector cut further in response to low oil prices. Analysts say these reductions may finally be tapering off, allowing investment to start rising again in the second half.
Housing construction, which had been a bright spot, shrank at an annual rate of 6.1 percent last quarter. But economists said this likely reflected a warmer winter, which brought forward building activity that normally would have occurred in spring.