Allegiant Travel Co. (ALGT) said that it is taking a $43.2 million write-down on the value of its Boeing 757 aircraft fleet. The charge will occur in the fourth quarter of 2014.
"This non-cash impairment charge resulted from a recent review of the value of the Company's Boeing 757 assets," stated Maurice J. Gallagher Jr., Chairman and CEO of Allegiant Travel Company.
Based on its review, Allegiant Travel concluded that the estimated future cash flows for its six 757-200 series aircraft, spare engine and parts pool did not support the net book values on its balance sheet. This decision reflects the Company's view that its 757 fleet will be held for a period less than their current expected useful lives, which is currently seven years or through 2021.
In addition, residual values for 757 aircraft will be reduced from $6 million to $3 million based what the company believes is a permanent decline in the used 757 market. The Company will continue to operate 757 aircraft on longer-haul routes, including Hawaii, in the near term.
With this write down, the company expects fourth quarter CASM ex fuel to increase between 40 and 41 percent versus last year. Prior to the charge, the fourth quarter was trending towards the lower end of the range provided on October 22, 2014.
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