Allegiant Travel Company Annual Report 2009

FY2009 Annual Report · Allegiant Travel Company

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Allegiant Air - 2009 Annual Report Cover - FLAT SIZE: 16.5x10.75” - no bleed - b/w - APRIL10

May 2010

Dear Shareholder,

2009 was a record year for your company. We finished the year with an industry leading 21.9% operating
margin, generating $558M of top line revenue and $121M of operating profits. We earned $3.76 per share, a
$2.03 increase from 2008’s $1.73 per share.

Highlights
In spite of the weakness in the 2009 economy, we were able to increase revenues almost 11% to $558
million despite our selling fare for our scheduled service declining over 17%. We grew on all fronts –
passengers up 24%, ASMs up 23%, Departures up 22% and aircraft in service up 8 additional units or 21% to
46.

Perhaps most important during the year, we demonstrated the resiliency of our ancillary revenues. Total
ancillary revenues increased 42% from 2008 to $163 million. We saw a $3.65 increase per scheduled
passenger in ancillary revenues in 2009 to $33.07 compared to 2008’s $29. We lead the industry in
ancillary revenues – they represented 32% of our scheduled service revenues in 2009.

The rest of the industry has discovered the benefits of this differentiated revenue stream. Many have
followed our lead and charge for bags and other services. They have discovered that customers value
certain services and are willing to pay for them. Indeed the benefit of charging for bags has a two-fold
benefit, raising revenue and lowering costs because of fewer bags, fewer damaged and lost bags and less
labor because of the reduced numbers.

Different Is Good
We enjoy being different. We consciously set out to build a different business. Yes we use aircraft and are
categorized as an airline. However, our different approach, a leisure focus, small cities, limited frequencies
and inexpensive aircraft have all been developed with the understanding that different was key to our
success. We have now been doing this for over 8 years. We just celebrated our eighth anniversary in
Colorado Springs, our seventh anniversary in Wichita, our sixth anniversary in Peoria and continue to hit
similar milestones in many more cities just like these. We have proven the model works, is sustainable and
has growth potential.

Another Volatile Year
There have been many challenges during the past 24 months. We believe strongly in facing facts – and
accepting what the market offers. With fuel costs rising 58% by the middle of 2008 and our selling fare
revenues dropping 28% by the middle of 2009, challenges were everywhere. Dramatic increases in costs,
as in late 2007 and 2008 required reductions in capacity allowing increases in fares to offset rising costs.
We were one of the first US carriers to announce capacity reductions during this period. The economic
problems of the first half of 2009 presented other problems. Fortunately the drop in revenues was more
than offset by the drop in the cost of fuel. As a result we felt we could aggressively add capacity during the
second (25% year over year) and third (43% year over year) quarters of 2009. Our performance in each
quarter was a company record – 25.5% and 16.5% operating margins, respectively. In fact in 2009 we
made money in September for the first time in the Company’s history. Flexibility and responsiveness are
badges we wear proudly.

Maximize Profits
We have structured the company to maximize profitable revenues. With our inexpensive, owned fleet of
aircraft we focus our efforts on operating when we can get both good loads and good yields. One without
the other is not a good outcome. We are continually adjusting our schedule to achieve this end, not only

seasonally such as the fall in Florida, but also within a month like December where the first two weeks are
scheduled lightly and the last two weeks have 42% more flights, on average, per day.

We only averaged 6.3 hours per day per aircraft in 2009 (up slightly from 6.1 hours in 2008, but down from
6.7 hours in 2007). We have had never exceeded 7 hours per day. The company is built around this lower
level of utilization, particularly our personnel. We have averaged 35 team members per aircraft for many
years (the lowest in the industry – the next closest is more than 60). We believe this is an optimum level of
personnel and associated activity to maximize profits. Higher utilization would require more personnel –
pilots, flight attendants, maintenance personnel, etc. The increased personnel would require us to fly more
to keep them properly utilized. In certain periods there would be increased profits. But the losses in the
weaker periods would more than offset the good month’s efforts. We understand our model, what makes
it work and we remain disciplined!

Growth/Competition
As we write this, we are currently selling service on 138 routes from 57 small cities to 11 leisure
destinations. We have direct competition on only 10 of these routes. Over the years we have consciously
built our system to minimize competition. The key component is to offer service to underserved markets
with the amount of capacity the market will bear. We are one of the only service providers whose offerings
are based on flights per week versus flights per day. As a result, we are able to look at markets otherwise
too small to attract service or a competitive response once we enter the market.

Our approach has allowed us to build a national footprint with service to virtually every part of the country.
The benefit of this geographical diversity is it insulates us to a great degree from future competition. To
attack our system in a substantial manner would require a major undertaking by someone with substantial
resources. Moreover, our control of our automation system, the highest level of ancillary revenues in the
industry as well as third party revenues such as hotel, rental cars and other leisure oriented products
provide a multi-faceted revenue stream that would be hard to match for someone interested in emulating
our model.

Below is a summary of the number of markets served from our larger leisure destinations:

Destination Markets
39
Las Vegas
30
Orlando
20
Phoenix
20
St Pete
11
So Cal
18
Other

2Q10 Departures
35.0%
23.4%
13.0%
13.2%
5.9%
9.5%

Y/Y Change Departures

.2%
-6.9%
28.9%
-7.6%
56.3%
6.1%

Profit diversity is just as important as the revenue diversity shown in the above chart. To generate a 21%
operating margin most of the routes must be substantially profitable. In 2009 only 6% of our departures
resulted in losses (fully allocated). Over 70% of our routes representing 86% or our departures had double
digit profit margins.

Returns
As we have indicated in past letters, we are focused on profits first and foremost. As an organization, our
culture is focused on this approach and we believe it guarantees a win for all concerned: customers, team
members and shareholders. The past 6 quarters (including Q1 2010) have all had double digit operating
margins with 4 of the 6 above 20%. These results have raised the bar for our future performance. Clearly
the volatility of energy prices will affect short term results. As we write this, the upward pressure on
energy prices as the economy continues to improve is evident. We have seen a 48% increase in our cost
per gallon of jet fuel in the past year (Q1 2009 to Q1 2010). Volatility has become the watchword during

the past two years – be it fuel or the economy. We have demonstrated quick responses to these sudden
changes in the macro environment, adjusting capacity accordingly and going forward we will continue this
aggressive approach to seek to maximize returns.

The results from these efforts have produced one of the best return profiles despite some of the most
difficult of times in all of business history and the best by a margin in the airline sector in the U.S. In 2009
we earned $3.6M of operating income (before amortization and depreciation) per aircraft in service. This
return approximates the cost for us to put a new MD80 aircraft in service. Other key measurements for
2009 include a Return on Equity of 29% and a Debt to Equity ratio of 16%.

During these most difficult of times, since the end of 2007, we have increased shareholder equity 39% to
just short of $300M, decreased our debt 37% to $46M from $72M and increased our unrestricted cash 35%
to $231M. As a result, we have one of the strongest balance sheets in the industry.

We are focused on maintaining these strong metrics. In today’s difficult financial environment, having a
strong, cash rich balance sheet provides us with exceptional flexibility.

Proper Balance
We have been successful, in our opinion, by focusing on the critical elements of success. First and
foremost, build an organization that is profitable. This is the preeminent measure in business. Strong
results allow the organization to look after its critical stakeholders – customers, team members and
shareholders. All must be catered to create long term success. Our customers continue to think well of
our service. Our reviews of how we are perceived, what they think of us and how they like our offerings
are north of 90%. Having said that, we do not deceive ourselves about the price of our service – it is the
critical variable in our relationship.

We have provided good returns for our shareholders, increasing earnings per share since our public debut
in December 2006. We are mindful that the trust shareholders have placed in us to guard their investment
and to increase it over time is fragile and easily lost.

Lastly, our team members are critical to our success. Once again they have performed exceptionally well in
the past year. We are now 1800 strong. Many have been here a number of years and are the reason, in
large measure, for our successes during the past decade. Their support of the company, their willingness to
take care of the customer and their dedication to operating a safe, reliable, fun and leisure-focused
company have been critical to our success.

We look for more successes with all of our stakeholders in the coming years.

Maurice J. Gallagher, Jr.
Chairman of the Board
Chief Executive Officer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)

(cid:1) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

(cid:2) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number 001-33166
ALLEGIANT TRAVEL COMPANY
(Exact Name of Registrant as Specified in Its Charter)

Nevada
(State or Other Jurisdiction of
Incorporation or Organization)

8360 S. Durango Drive,
Las Vegas, Nevada
(Address of Principal Executive Offices)

20-4745737
(I.R.S. Employer
Identification No.)

89113
(Zip Code)

Registrant’s telephone number, including area code: (702) 851-7300

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Common Stock, $.001 par value per share

Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:

None
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes (cid:1) No (cid:2)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes (cid:2) No (cid:1)

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 (cid:1) No (cid:2)

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 (§229.405 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 (cid:2) No (cid:2)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not

contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:2)

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 the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ and ‘‘smaller reporting company’’ in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer (cid:2)

Smaller reporting company (cid:2)

Accelerated filer (cid:1)

Non-accelerated filer (cid:2)
(Do not check if a smaller
reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:2) No (cid:1)

The aggregate market value of common equity held by non-affiliates of the registrant as of June 30, 2009, was approximately
$605,000,000 computed by reference to the closing price at which the common stock was sold on the Nasdaq Global Select Market on
that date. This figure has been calculated by excluding shares owned beneficially by directors and executive officers as a group from
total outstanding shares solely for the purpose of this response.

The number of shares of the registrant’s Common Stock outstanding as of the close of business on March 1, 2010 was 19,909,655.

Portions of the Proxy Statement to be used in connection with the solicitation of proxies to be voted at the registrant’s annual

meeting to be held on June 8, 2010, and to be filed with the Commission subsequent to the date hereof, are incorporated by reference
into Part III of this Report on Form 10-K.

DOCUMENTS INCORPORATED BY REFERENCE

EXHIBIT INDEX IS LOCATED ON PAGE 82

ALLEGIANT TRAVEL COMPANY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2009

Item

TABLE OF CONTENTS

PART I

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1A Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1B Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management’s Discussion and Analysis of Financial Condition and Results of Operations .

7A Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . .

Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .

9A Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9B Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Directors, Executive Officers, and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . .

Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . .

Principal Accountant’s Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Page

Item 1. Business

Business Overview

PART I

We are a leisure travel company focused on residents of small cities in the United States. We
operate a low-cost passenger airline marketed to leisure travelers in small cities, 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 route network, pricing philosophy, advertising and diversified product offering 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 from us.

Our business model provides for diversified revenue streams, which we believe distinguishes us

from other U.S. airlines and travel companies:

(cid:127) Scheduled service revenue consists of air fare from our limited frequency nonstop flights between

our small city markets and our leisure destinations.

(cid:127) Fixed fee contract revenue consists largely of fixed fee flying agreements with affiliates of Harrah’s

Entertainment Inc. that provide for a predictable revenue stream. We also provide charter
service on a seasonal and ad hoc basis for other customers.

(cid:127) Ancillary revenue is generated from air-related charges and third party products. Air-related
charges are generated through fees for use of our website to purchase tickets, checked bags,
advance seat assignments, priority boarding and other services provided in conjunction with our
scheduled air service. We also generate revenue from the sale of third party products such as
hotel rooms, ground transportation (rental cars and hotel shuttle products) and attraction and
show tickets. We recognize our ancillary revenue net of amounts paid to service providers, travel
agent commissions and credit card processing fees.

Our strategy is to develop the leisure travel market in small cities by providing nonstop low fare

scheduled service to leisure destinations at low prices. We currently provide service to Las Vegas,
Nevada, Orlando, Florida, Phoenix, Arizona, Tampa/St. Petersburg, Florida, Los Angeles, California
and Ft. Lauderdale, Florida. We also currently provide limited service to other leisure destinations of
Punta Gorda, Florida, San Diego, California, Palm Springs, California and the San Francisco Bay Area,
California, along with seasonal service to Myrtle Beach, South Carolina.

Our business strategy has evolved as our experienced management team has looked differently at
the traditional way business has been conducted in the airline and travel industry. We have consciously
developed a different business model:

Traditional Airline Approach

Allegiant Approach

(cid:127) Focus on business traveler
(cid:127) Provide high frequency service
(cid:127) Use smaller aircraft to provide connecting
service from smaller markets through hubs

(cid:127) Focus on leisure traveler
(cid:127) Provide low frequency service from small cities
(cid:127) Use larger jet aircraft to provide nonstop service
from small cities direct to leisure destinations

(cid:127) Sell through various intermediaries

(cid:127) Sell only directly to travelers without

(cid:127) Offer flight connections
(cid:127) Use frequent flyer programs and code-share
arrangements to increase passenger traffic

participation in global distribution systems

(cid:127) No connecting flights offered
(cid:127) Do not use frequent flyer programs or

code-share arrangements

Our Competitive Strengths

We have developed a unique business model that focuses on leisure travelers in small cities. We
believe the following strengths allow us to maintain a competitive advantage in the markets we serve:

Focus on Transporting Travelers From Small Cities to Leisure Destinations. As of February 15, 2010,

we provide nonstop low fare scheduled air service from 57 small cities (including seasonal service)
primarily to the leisure destinations of Las Vegas, Nevada, Orlando, Florida, Phoenix, Arizona, Tampa/
St. Petersburg, Florida, Los Angeles, California and Ft. Lauderdale, Florida. Generally, when we enter
a new market, there is no existing nonstop service to our leisure destinations. We believe this nonstop
service, along with our low prices and premier leisure company relationships, makes it attractive for
leisure travelers to purchase air travel and related services from us.

By focusing on small cities, we believe we avoid the intense competition presently seen in high

traffic domestic air corridors. In our typical small city market, travelers faced high airfares and
cumbersome connections or long drives to major airports to reach our leisure destinations before we
started providing service. As of February 15, 2010, we are the only carrier providing nonstop service on
all but eight of our 136 routes. Based on published data from the U.S. Department of Transportation
(‘‘DOT’’), we believe the initiation of our service stimulates demand as there has been a substantial
increase in traffic after we have begun service on new routes. We believe our market strategy has had
the benefit of not appearing hostile to either legacy carriers, whose historical focus has been connecting
small cities to business markets, or traditional low cost carriers or LCCs, which have tended to focus
more on larger markets than the small city markets we serve.

Low Operating Costs. We believe low costs are essential to competitive success in the airline
industry. Our operating expense per passenger was $81.77 and $104.25 in 2009 and 2008, respectively.
Excluding the cost of fuel, our operating expense per passenger was $50.80 for 2009 and $50.83 for
2008.

Our low operating costs are the result of our focus on the following:

(cid:127) Cost-Driven Schedule. We design our flight schedule to concentrate our aircraft each night in our
crew bases. This concentration allows us to better utilize personnel, airport facilities, aircraft,
spare parts inventories, and other assets. We can do this because we believe leisure travelers are
generally less concerned about departure and arrival times than business travelers. Therefore, we
are able to schedule flights at times that enable us to reduce our costs.

(cid:127) Low Aircraft Ownership Costs. We believe we properly balance low aircraft ownership costs and
low operating costs to minimize our total costs. As of February 1, 2010, our operating fleet
consists of 46 MD-80 series aircraft and we have made commitments to acquire another 15
MD-80 aircraft we expect to be introduced into service by the end of 2011. MD-80 aircraft are
substantially less expensive to acquire than A320 and B737 aircraft and have been highly reliable
aircraft.

(cid:127) Highly Productive Workforce. We believe we have one of the most productive workforces in the

U.S. airline industry with approximately 34 full-time equivalent employees per operating aircraft
as of February 1, 2010. We believe this compares favorably with the same ratio for other airlines
based on recent publicly available industry data for other airlines. Our high level of employee
productivity is created by fleet commonality, fewer unproductive labor work rules, cost-driven
scheduling, and the effective use of automation and part-time employees. We benefit from a
motivated, enthusiastic workforce committed to high standards of friendly and reliable service.
We invest a significant amount of time and resources into carefully developing our training
practices and selecting individuals to join our team who share our focus on ingenuity and
continuous improvement. We conduct ongoing training programs to incorporate industry best

practices and encourage strong and open communication channels among all of the members of
our team so we can continue to improve the quality of the services we provide.

(cid:127) Simple Product. We believe offering a simple product is critical to achieving low operating costs.
As such, we sell only nonstop flights; we do not code-share or interline with other carriers; we
have a single class cabin; we do not provide any free catered items—everything on board is for
sale; we do not overbook our flights; we do not provide cargo or mail services; and we do not
offer other perks such as airport lounges.

(cid:127) Low Distribution Costs. Our nontraditional approach results in very low distribution costs. We do
not sell our product through outside sales channels and, as such, avoid the fees charged by travel
web sites (such as Expedia, Orbitz or Travelocity) and the traditional global distribution systems
(‘‘GDS’’) (such as Sabre or Worldspan). Our customers can only purchase travel at our airport
ticket counters or, for a fee, through our telephone reservation center or website. We actively
encourage sales on our website. This is the least expensive form of distribution and accounted
for 86.3% of our scheduled service revenue during 2009. We believe our percentage of website
sales is among the highest in the U.S. airline industry. Further, we are 100% ticketless, which
saves printing, postage, and back-office processing expenses.

Strong Ancillary Revenues. We earn ancillary revenue in conjunction with the sale of scheduled air
service which represents a significant percentage of our total operating revenue. Our ancillary revenues
have grown from $65.0 million in 2007, to $114.6 million in 2008, and $162.7 million in 2009,
representing 18.0%, 22.7% and 29.2% of total operating revenues, respectively. On a per scheduled
service passenger basis, our ancillary revenues increased from $21.53 per scheduled service passenger in
2007 to $29.43 in 2008 and $33.07 in 2009. We believe ancillary revenue will continue to be a key
component in our total average fare and we have proven during 2009 we can sustain high ancillary
revenue per passenger levels in a difficult revenue environment.

Capacity Management. We actively manage our capacity in our routes to match the supply of seats
to the demand existing in a given market, considering any seasonal shifts in demand that may exist. We
believe our ability to quickly adjust capacity allows us to operate profitably throughout a changing
environment. For example, as a result of the dramatic fuel price increase in late 2007 and the first
three quarters of 2008, we reduced capacity with the elimination of some of our long-haul flights and
made substantial frequency variations in other markets. These adjustments enabled us to achieve
profitability in each quarter of 2008 despite the large losses incurred in the industry. We believe we can
adjust appropriately our capacity to achieve a desired level of profitability during 2010 if industry base
airfare levels increase closer to historical amounts and fuel prices remain stable. In addition, we believe
our low cost aircraft facilitate our ability to adjust service levels quickly and maintain profitability
during difficult economic times.

Strong Financial Position. We have a strong financial position with significant cash balances. On

December 31, 2009, we had $231.5 million of unrestricted cash, cash equivalents and short-term
investments. As of December 31, 2009, our total debt was $45.8 million and our debt to total
capitalization ratio was 13.6%. We also have a history of growing profitably, having generated net
income in 25 of the last 28 quarters. We believe our strong financial position allows us to have greater
financial flexibility to grow the business and weather sudden industry disruptions.

Proven Management Team. We have a strong management team comprised of experienced and
motivated individuals. Our management team is led by Maurice J. Gallagher, Jr. and Andrew C. Levy,
each of whom has an extensive background in the airline industry. Mr. Gallagher was the president of
WestAir Holdings, Inc. and built WestAir into one of the largest regional airlines in the U.S. prior to
its sale in 1992 to Mesa Air Group. He was also one of the founders of ValuJet, Inc., which is known
today as AirTran Holdings, Inc. Mr. Levy was a former manager of ValuJet where he quickly advanced
into roles of increasing responsibility and later worked for an airline investment and advisory firm.

Our Business Strategy

To continue the growth of our business and increase our profitability, our strategy will be to

continue to offer a single class of air travel service at low fares, while maintaining high quality
standards, keeping our operating costs low and pursuing ways to make our operations more efficient.
We intend to grow by adding flights on existing routes, entering additional small cities, connecting our
existing small cities to more of our leisure destinations, providing service to more leisure destinations
and expanding our relationships with premier leisure companies.

The following are the key elements of our strategy:

Capitalize on Significant Growth Opportunities in Transporting Travelers from Small Cities to Leisure
Destinations. We believe small cities represent a large untapped market, especially for leisure travel.
We believe small city travelers have limited options to leisure destinations as existing carriers are
generally focused on connecting the small city ‘‘spokes’’ to their business hubs. We aim to become the
premier travel brand for leisure travelers in the small cities served by us.

Since the beginning of 2004, we have expanded our scheduled air service from six to 57 small cities

as of February 15, 2010, including seasonal service. These 57 small cities have an aggregate population
in excess of 50 million people within a 50-mile radius of the airports in those cities. In most of these
cities, we provide service to more than one of our leisure destinations. We expect to grow our service
to leisure destinations by adding frequency from some existing small city markets and initiating service
from additional small cities. We believe our business model would be suitable for approximately 100
small cities in the U.S., Canada and Mexico.

We also believe there are several other major leisure destinations that share many of the same
characteristics as Las Vegas, Orlando, Phoenix, Tampa/St. Petersburg, Los Angeles and Ft. Lauderdale.
These potential markets include Hawaii, several other popular vacation destinations in the U.S.
(including the possible expansion of our current limited service to destinations such as Punta Gorda,
Florida and San Diego, California), Mexico and the Caribbean.

Develop New Sources of Revenue. We have identified three key areas where we have built and

believe we can grow our ancillary revenues:

(cid:127) Unbundling the Traditional Airline Product. We believe most leisure travelers are concerned

primarily with purchasing air travel for the least expensive price. As such, we have created new
sources of revenue by charging fees for services many U.S. airlines historically bundled in their
product offering. We believe by offering a simple base product at an attractive low fare we can
drive demand and generate incremental revenue as customers pay additional amounts for
conveniences they value. For example, we do not offer complimentary advance seat assignments;
however, any customer can purchase advance seat assignments for a small incremental cost. We
also sell snacks and beverages on board the aircraft so our customers can pay for only the items
they value. We aim to continue to increase ancillary revenue by further unbundling our air travel
product.

(cid:127) Expand and Add Partnerships with Premier Leisure Companies. We currently work with many

premier leisure companies in our leisure destinations that provide ancillary products and services
we sell to our customers. For example, we have contracts with Harrah’s Entertainment and
MGM MIRAGE, among others, that allow us to provide hotel rooms sold in packages to our
customers. During 2009, we generated revenue from the sale of more than 500,000 hotel rooms.
By expanding our existing relationships and seeking additional partnerships with premier leisure
companies, we believe we can increase the number of products and services offered to our
customers and generate more ancillary revenue. In 2010, we began an initiative to emphasize
and focus on revenue growth from third party products. We believe our efforts to enhance

software capabilities and provide additional offerings, along with our loyal customer base could
result in meaningful long-term revenue growth.

(cid:127) Leverage Direct Relationships With Our Customers. Since approximately 86% (during 2006

through 2009) of our scheduled service revenue is purchased directly through our website, we
are able to establish direct relationships with our customers by capturing their email addresses
for our database. This information provides us multiple opportunities to market products and
services, including at the time they purchase their travel, between the time they purchase and
initiate their travel, and after they have completed their travel. In addition, we market products
and services to our customers during the flight. We believe the breadth of options we can offer
them allows us to provide a ‘‘one-stop’’ shopping solution to enhance their travel experience.

Continue to Focus on Reducing Our Operating Costs. We intend to continue to focus on reducing

our costs to remain one of the lowest cost airlines in the world, which we believe is instrumental to
increasing profitability. We expect to drive operational efficiency and reduce costs in part by growing
our network. We will expand our network by increasing the frequency of our flights in existing small
city markets, expanding the number of small cities we serve, and increasing the number of leisure
destinations, all of which permits us to increase the utilization of our employees and assets, spreading
our fixed costs over a larger number of departures and passengers.

Minimize Fixed Costs to Increase Strategic Flexibility. We believe our low aircraft ownership costs

and the lower costs associated with our small city market strategy provide us with a lower level of fixed
costs than other U.S. airlines. We believe our low level of fixed costs provides us with added flexibility
in scheduling our services and controlling our profitability. For example, with lower fixed costs we are
better able to quickly adjust capacity to suit market, fuel or economic conditions, enter or exit markets
and match the size and utilization of our fleet to limit unprofitable flying and increase profitability.

Routes and Schedules

Our current scheduled air service predominantly consists of limited frequency, nonstop flights into
Las Vegas, Orlando, Phoenix, Tampa/St. Petersburg, Los Angeles and Ft. Lauderdale from small cities
(including seasonal service) across the continental United States. As of February 15, 2010, we offered
scheduled service from 57 small cities on 136 routes in 35 states. We believe our route network
expansion has provided us geographic diversity with which provides protection from competitive
influences in the markets we serve and continued growth in our customer base.

We attempt to match the frequency of flights with market demand. We rarely have daily flights in
our markets, nor do we generally offer multiple flights per day. In most cases, we offer several flights
per week in each of our markets. We regularly adjust frequency in our markets as demand warrants.

In addition, we temporarily suspend flying some of our Florida and Phoenix, Arizona routes for

varying periods (depending on the route) between the middle of August and the beginning of
November as leisure demand to these destinations tends to be quite weak during this time. We
schedule crew training, aircraft maintenance and additional charter flying to coincide with these
periods. We also fly on a seasonal basis routes to Myrtle Beach, South Carolina during the summer
months when demand is stronger.

We generally begin our route selection process by identifying markets in which there is no nonstop

service to our leisure destinations, which have a large enough population in the airport’s catchment
area to support at least two weekly flights, and which are typically no more than eight hours round-trip
flight time from the destination. The eight hour limit permits one flight crew to perform the mission,
avoiding costly crew overnight expenses and increasing crew utilization and efficiency. We then study
publicly available data from the DOT showing the historical number of passengers, capacity, and
average fares over time in the identified markets. We also study general demographic information

about the population base for the targeted market area to assist in our determination whether we
believe a service from a particular market would likely be successful.

We forecast the level of demand in a particular market that will result from the introduction of
our service as well as our judgment of the likely competitive response of other airlines. We focus on
markets where competitors are unlikely to initiate service and we prioritize routes that can be started at
low marginal crew and ground operations costs.

Once a market is classified as attractive, we begin a rigorous analysis of the costs of providing

service to that market. The major costs under consideration would be the initial and ongoing
advertising costs to gain and maintain name recognition, airport charges, ground handling and fuel
costs. The demand for nonstop air service in our markets often gives us leverage to attract financial
support from the cities and airports we serve in the form of shared advertising costs or abatement or
reduction of airport fees.

Our fixed fee flying predominately consists of flying under an agreement with Harrah’s

Entertainment Inc. with one aircraft based in Tunica, Mississippi and two aircraft in Laughlin, Nevada.
Tunica also utilizes one aircraft three days a week from our Florida scheduled service operations to
support its fixed fee flying. We are a participant in the Civil Reserve Air Fleet (‘‘CRAF’’) which allows
us to bid on and be awarded peacetime airlift contracts with the military. During periods when aircraft
are not utilized for scheduled service flying, we typically seek out additional charter service and ad hoc
flying.

Safety and Security

We believe we provide a safe and healthy working environment for our employees. We are

committed to an accident prevention program which includes the identification and correction of
hazards and the training of employees in safe work practices. We strive to comply with or exceed health
and safety regulation standards. In pursuing these goals, we maintain an active aviation safety program
and all company personnel are expected to participate in the program and take an active role in the
identification, reduction and elimination of hazards.

Our ongoing focus on safety relies on hiring good people, training them to proper standards, and
providing them with the tools and equipment they require so they can perform their job functions in a
safe and efficient manner. Safety in the workplace targets five areas of our operation: flight operations,
maintenance, in-flight, dispatch, and station operations. We maintain a formal internal evaluation
program which focuses on these operational areas. In the maintenance area, we maintain an active
Continuing Analysis and Surveillance Program. All operational areas support an active event and
hazard reporting program. In the flight operations department, we maintain an active Operational
Performance Enhancement Committee and a Flight Standards Board comprised of management and
check airmen. The station operations area conducts safety meetings and completes a safety checklist at
all locations on a monthly basis. Maintenance bases, dispatch and in-flight also perform documented
periodic evaluations of various functions and documentation within their areas to ensure compliance
with company policies and regulatory requirements.

The Transportation Security Administration (‘‘TSA’’) is charged with aviation security for both
airlines and airports. We maintain active, open lines of communication with the TSA at all of our
locations to ensure proper standards for security of our personnel, customers, equipment and facilities
are exercised throughout the operation.

Sales and Distribution

We sell air transportation that may be packaged, at the passenger’s discretion, with other products
such as hotels, rental cars, and tickets to popular tourist attractions in our leisure destinations. We have

chosen to maintain full control over our inventory and only distribute our product through our website,
our call center, or at our airport ticket counters. We do not sell through Expedia, Travelocity, Orbitz or
any other internet travel agencies nor is our product displayed and sold through the global distribution
systems which include Sabre, Galileo, Worldspan and Amadeus. This distribution strategy results in
reduced expenses by avoiding the fees associated with the use of GDS distribution points and also
permits us to develop and maintain a direct relationship with our customers. The direct relationship
enables us to engage continuously in communications with our customers which we believe will result in
substantial benefits over time.

In March 2009, we completed an acquisition of the operating software we have used since our
inception. This will provide us more control over our automation. We are focused on the development
of our software and have made further hardware and database platform purchases to provide us with
the necessary capacity to continue our growth. The hardware and database upgrades will allow for
additional offerings of web based products. We believe our control over the development will enable us
to provide our customers with products unique to us, will further differentiate us in the travel industry
and will expand our customers’ travel experience.

In 2010, we have begun a Company initiative to emphasize and focus on revenue growth from
third party products. We do not anticipate significant short-term revenue growth. We believe our efforts
to enhance software capabilities and provide additional product offerings, along with our loyal customer
base could result in meaningful revenue growth.

We market our services through advertising and promotions in newspapers, magazines, television
and radio and through targeted public relations and promotional efforts in our small city markets. We
currently advertise in more than 400 print circulations. We also rely on public relations and
word-of-mouth to promote our brand. We generally run special promotions in coordination with the
inauguration of service into new markets. Starting approximately 60 days before the launch of a new
route, we undertake a major advertising campaign in the target market and local media attention
frequently focuses on the introduction of our new service.

We have a database of more than one million email addresses from past customers and visitors to

our website, and use blast emails to communicate special offers to this group. The heaviest
concentration of air-only sales occurs in the period 30 to 60 days before departure, and occurs 30 to
90 days before departure for air-hotel package sales. We commonly use email promotions directed
toward the customers in our database as a vehicle for selling unsold seats in the period two to three
weeks before departure.

All of our bookings must be made on our website, through our call center or at our airport ticket

counters, even if booked through travel agents. The percentage of our scheduled service bookings on
our website has exceeded 85% in each of the last four years. This distribution mix creates significant
cost savings for us and enables us to continue to build loyalty with our customers through increased
interaction with them.

Pricing, Revenue Management and Ancillary Revenue

Our low fares are designed to stimulate demand from price-sensitive leisure travelers who might
not have traveled to our leisure destinations due to the expense and inconvenience involved prior to
our initiation of non-stop service. Our fare structure generally comprises six ‘‘buckets,’’ with prices
generally increasing as the number of days prior to travel decreases. Prices in the highest bucket are
typically less than three times the prices in the lowest bucket. All our fares are one-way and
non-refundable, although they may be changed for a $50 charge per segment. Customers may avoid
change fees by buying our travel protection product (Trip-Flex) at the time of purchase.

We try to maximize the overall revenue of our flights by watching inherent demand on a given
route on any given day and managing the number of seats we offer for sale in these six ‘‘buckets’’. The
number of seats offered at each fare is established through a continual process of forecasting,
optimization and competitive analysis. Generally, past booking history and seasonal trends are used to
forecast anticipated demand. These historical forecasts are combined with current bookings, upcoming
events, competitive pressures and other factors to establish a mix of fares designed to maximize
revenue. This ability to accurately adjust prices based on fluctuating demand patterns allows us to
balance loads and capture more revenue from existing capacity. We believe effective yield management
has contributed to our strong financial operating performance and is a key to our continued success.

Ancillary revenue is derived from third party products and air-related charges associated with the

trip of our customer. Air-related charges include fees for using our reservation center or website to
purchase air travel; checked bags and overweight bags; unlimited changes to reservations (our Trip-Flex
product); seat selection; priority boarding; and several other aspects of air travel. Pricing of certain
air-related charges such as our customer convenience fee and booking fee is based on an established
fixed price. Other air-related charges such as baggage fees and priority boarding fees are adjusted
market to market based on customer demand to seek to increase revenue potential.

Along with our air-related charges, the sale of third party products is the other component of our
ancillary revenue. We offer our customers the opportunity to purchase hotels, rental cars, show tickets,
night club packages and other attractions packaged with air travel. Our third party offerings are
available to customers based on our agreements with various premier travel and leisure companies. As
of February 1, 2010, we have agreements to offer rooms from approximately 330 hotels and tickets to
over 40 attractions in our leisure destinations. In addition, we have an exclusive agreement with one
rental car operator for the sale of rental cars packaged with air travel at all of our major leisure
destinations and most of our other leisure destinations. Pricing of attractions, shows and tours are
based on a net-pricing model. Each product can be adjusted market to market based on customer
demand and take rate.

Competition

The airline industry is highly competitive. Passenger demand and fare levels have historically been

influenced by, among other things, the general state of the economy, international events, industry
capacity and pricing actions taken by other airlines. The principal competitive factors in the airline
industry are fare pricing, customer service, routes served, flight schedules, types of aircraft, safety
record and reputation, code-sharing relationships and frequent flyer programs.

Our competitors and potential competitors include legacy airlines, LCCs, regional airlines and new

entrant airlines. Many of these airlines are larger, have significantly greater financial resources and
serve more routes than we do. In a limited number of cases, competitors have chosen to add service,
reduce their fares or both, in some of our markets following our entry. In a few cases, other airlines
have entered after we have developed a market.

We believe a key to our initial and long-term success is that we seek to offer customers in our
markets a better alternative for airline travel. We offer a simple, affordable product with excellent
customer service and reliability using clean and comfortable aircraft. We sell only nonstop flights. We
do not require Saturday night stays or the purchase of round-trip travel. We do not overbook our
flights. We understand that our leisure customer only has a limited number of vacation days and relies
on us to get them to their destination and back in a timely manner.

Our 150-seat MD-80 aircraft, with an average seat pitch of 31 to 32 inches, offer a comfortable
alternative to the 37 to 86 seat regional jets that secondary market travelers are accustomed to flying as
part of the hub and spoke networks of the legacy carriers. Additionally, we believe the MD-80’s
three-by-two seating configuration is well liked by the traveling public because 80% of all seats are

window or aisle seats. We adhere to the successful model pioneered by Southwest by offering a single
class of service; however, unlike Southwest, we offer assigned seating at the airport. We also offer
advance seat assignments and priority boarding for a fee which depends on the route served and
location of the seat on the aircraft.

Our small city strategy has reduced the intensity of competition we might otherwise face. We are

the only scheduled carrier in five of the small city airports we serve as of February 1, 2010, the only
domestic scheduled carrier operating out of the Orlando Sanford International Airport, the only
scheduled carrier operating out of Phoenix-Mesa Gateway Airport in Phoenix, and one of only three
carriers serving the St. Petersburg-Clearwater International Airport. Virtually all U.S. airlines serve Las
Vegas, Orlando, Phoenix, Tampa/St. Petersburg, Los Angeles and Ft. Lauderdale and could become
more competitive in the future.

As of February 1, 2010, we face direct competition on only eight of our 136 routes. We compete
with AirTran on four routes into Orlando. We face competition with US Airways on one route to Las
Vegas (Fresno); however, most of the flights US Airways operates in that market use smaller regional
jet aircraft. We also compete with United Express turboprops in the Fresno to Las Vegas route and the
Eugene to San Francisco Bay Area route. In addition, we compete with Horizon Air turboprops on one
route to Los Angeles (Medford) and with Alaska Airlines on one route to Las Vegas (Bellingham).

Indirectly, we compete with Southwest, US Airways, AirTran, Delta and other carriers that provide

nonstop service to our leisure destinations from airports near our small city markets. For example, we
fly to Bellingham, Washington, which is a two-hour drive from Seattle-Tacoma International Airport,
where travelers can access nonstop service to Las Vegas on Alaska Airlines, Southwest or US Airways.
We also face indirect competition from legacy carriers offering hub-and-spoke connections to our
markets. For example, travelers can travel to Las Vegas from Peoria on United, American or
Northwest, although all of these legacy carriers currently utilize regional aircraft to access their hubs
and then mainline jets to access Las Vegas. Legacy carriers offering these segments with connecting
flights and use of regional aircraft, tend to charge higher and restrictive fares. In addition, these
alternatives to our direct flight service have a much longer elapsed time of travel.

We also face indirect competition from automobile travel in our short-haul flights, primarily to our

Florida leisure destinations. We believe our low cost pricing model, customer service, and the
convenience of air transportation help us compete favorably against automobile travel.

In our fixed fee operations, we compete with the aircraft of other scheduled airlines as well as with
independent passenger charter airlines such as Xtra. We also compete with aircraft owned or controlled
by large tour companies. The basis of competition in the fixed fee market is cost, equipment
capabilities, service and reputation.

People

We believe our growth potential and the achievement of our corporate goals are directly linked to

our ability to attract and retain some of the best professionals available in the airline business.
Full-time equivalent employees at February 1, 2010 consisted of 302 pilots, 359 flight attendants, 309
airport operations personnel, 231 mechanics, 118 reservation agents, and 218 management and other
personnel. As of February 1, 2010, we employed 1,328 full-time and 406 part-time employees, which we
consider to be 1,537 full-time equivalent employees.

We place great emphasis on the selection and training of enthusiastic employees with potential to

add value to our business and who we believe fit in with and contribute to our business culture. The
recruiting and training process begins with an evaluation and screening process, followed by multiple
interviews and experience verification. We provide extensive training intended to meet all Federal

Aviation Administration (‘‘FAA’’) requirements for security, safety and operations for our pilots, flight
attendants and customer service agents.

To help retain talented and highly motivated employees, we offer competitive compensation
packages as well as affordable health and retirement savings options. We offer medical, dental and
401(k) plans to full-time employees. Other salaried benefits include paid time off, as well as
supplemental life insurance and long-term disability. We do not have a defined benefit pension plan for
any employees. We review our compensation packages on a regular basis in an effort to ensure that we
remain competitive and are able to hire and retain the best people possible.

In addition to offering competitive compensation and benefits, we take a number of steps to make

our company an attractive place to work and build a career such as maintaining various employee
recognition programs and consistently communicating our vision and mission statement to our
employees. We believe creating a great place for our people to work motivates them to treat our
customers beyond their expectations.

We have never experienced an organized work stoppage, strike or labor dispute. We currently do

not have any labor unions. We have in-house pilot and flight attendant associations with whom we have
negotiated mutually satisfactory arrangements for pay increases. We meet with these associations on a
regular basis to address relevant issues and matters of concern.

In February 2010, we agreed with our in-house pilot association on a new compensation and
benefits arrangement for our pilots. The terms of the arrangement will become effective in May 2010,
will become amendable in November 2013 and include base pay scale variability based on profitability.
The base pay scale is determined twice a year based on a rolling twelve month operating margin
ranging up to and above 20%.

Aircraft and Fleet

Our operating fleet of 46 aircraft consists of 28 MD-83, four MD-87, eight MD-82 aircraft, and six
MD-88 aircraft as of February 1, 2010. We generally utilize our 130-seat aircraft (MD-87) for our fixed
fee flying and our 150-seat aircraft (MD-82/83/88) for our scheduled service. As of February 1, 2010,
we own 40 of our aircraft—17 are owned free and clear, and 23 are owned subject to financing
scheduled to be fully paid over the next four years. An additional two aircraft are subject to capital
leases under which we expect to take ownership within the next three years. We lease the remaining
four aircraft under operating leases which expire through 2014.

In the fourth quarter of 2009, we entered into purchase agreements for 20 MD-80 series aircraft

We believe conditions in the market for high quality used MD-80 class aircraft are favorable for

buyers and believe there is ample availability of suitable aircraft to permit growth well beyond the
aircraft recently contracted for. However, MD-80 series aircraft and Pratt & Whitney JT8D-200 series
engines are no longer manufactured. This could cause a shortage of additional suitable aircraft, engines
or spare parts over the long term. If the FAA adopts regulations to limit the age of aircraft in the U.S.,
we may need to seek replacement of our current aircraft fleet sooner than anticipated. From time to
time, we consider the acquisition of a newer aircraft type to replace our existing fleet or to expand our
operations. Before making any decision to acquire a newer aircraft type, we carefully evaluate its effect
on our cost structure and the potential additional revenue to be generated.

Our aircraft range from 14 to 24 years old with an average age of 20.4 years as of February 1,
2010. As of February 1, 2010, the average number of cycles on our fleet was approximately 29,700
cycles and the highest number of cycles on any of our aircraft was approximately 47,000. A cycle is
defined as one take-off and landing and is a measure often used by regulators in determining the
applicability of aging aircraft requirements. We historically operate approximately 1000 cycles per
aircraft per year.

Maintenance

We have an FAA-approved maintenance program, which is administered by our maintenance
department headquartered in Las Vegas. Consistent with our core value of safety, all mechanics and
avionics specialists employed by us have appropriate training and experience and hold required licenses
issued by the FAA. We provide them with comprehensive training and maintain our aircraft and
associated maintenance records in accordance with FAA regulations. The maintenance performed on
our aircraft can be divided into three general categories: line maintenance, heavy maintenance, and
component and engine overhaul and repair. Scheduled line maintenance is generally performed by our
personnel. We contract with outside organizations to provide heavy maintenance and component and
engine overhaul and repair. We have chosen not to invest in facilities or equipment to perform our own
heavy maintenance, engine overhaul or component work. Our management closely supervises all
maintenance functions performed by our personnel and contractors employed by us, and by outside
organizations. We closely supervise the outsourced work performed by our heavy maintenance and
engine overhaul contractors.

Line maintenance consists of routine daily and weekly scheduled maintenance checks on our
aircraft, including pre-flight, daily, weekly and overnight checks and any diagnostics and routine repairs.
We perform this work at our maintenance bases in Las Vegas, Orlando (at both Orlando International
Airport where we opened a base in February 2010 and Orlando Sanford International Airport),
Phoenix, Tampa/St. Petersburg, Los Angeles, Ft. Lauderdale, Bellingham (Washington), Tunica
(Mississippi), and Laughlin (Nevada) with the Laughlin and Tunica bases supporting our fixed fee flying
services. In addition, we have announced we will establish a new operational aircraft base at Grand
Rapids, Michigan, one of our small cities, in April 2010. For unscheduled requirements that arise away
from our maintenance bases, we subcontract our line maintenance to outside organizations under
customary industry terms.

Heavy maintenance checks consist of more complex inspections and servicing of the aircraft that
cannot be accomplished during an overnight visit. These checks occur approximately every 18 months
on each aircraft and can range in duration from two to six weeks, depending on the magnitude of the
work prescribed in the particular check. In December 2009, we entered into a contract with AAR
Corp., one of the largest maintenance, repair and overhaul facilities, to perform airframe heavy
maintenance checks through the end of 2015. We also utilize AAR Corp., along with Flight Star,
another FAA approved airframe heavy maintenance vendor, for induction services to ready newly
acquired aircraft to enter our operating fleet.

Component and engine overhaul and repair involves sending certain parts, such as engines, landing

gear and avionics, to FAA-approved maintenance repair stations for repair and overhaul. We presently
utilize Pratt & Whitney controlled Christchurch Engine Centre and TIMCO Aviation Services, Inc. for
overhaul and repair of our engines on a non-exclusive basis.

We also have a non-exclusive general terms agreement with Avioserv for the consignment of

engine parts.

In addition to the maintenance contractors we presently utilize, we believe there are sufficient

qualified alternative providers of maintenance services that we can use to satisfy our ongoing
maintenance needs.

Aircraft Fuel

Fuel is our largest operating expense. The cost of fuel is volatile, as it is subject to many economic

and geopolitical factors we can neither control nor predict. Significant increases in fuel costs could
materially affect our operating results and profitability. We do not currently use financial derivative
products to hedge our exposure to jet fuel price volatility.

In an effort to reduce our fuel costs, we have sought to become involved at an earlier stage in the

fuel distribution channels. In this regard, we formed a wholly-owned subsidiary which entered into a
limited liability company operating agreement with an affiliate of Orlando Sanford International
Airport to engage in contract fueling transactions for the provision of aviation fuel to airline users at
that airport. In addition, we have invested in fuel storage units and fuel transportation facilities
involved in the fuel distribution process. These efforts could result in the creation of additional joint
ventures to further our involvement in the fuel distribution process. By reason of these activities, we
could potentially incur material liabilities, including possible environmental liabilities, to which we
would not otherwise be subject.

Government Regulation

We are subject to regulation by the DOT, FAA and other governmental agencies.

DOT. The DOT primarily regulates economic issues affecting air transportation such as

certification and fitness of carriers, insurance requirements, consumer protection, competitive practices
and statistical reporting. The DOT also regulates requirements for accommodation of passengers with
disabilities. The DOT has the authority to investigate and institute proceedings to enforce its
regulations and may assess civil penalties, suspend or revoke operating authority and seek criminal
sanctions. DOT also has authority to restrict or prohibit a carrier’s cessation of service to a particular
community if such cessation would leave the community without scheduled airline service.

We hold a DOT certificate of public convenience and necessity authorizing us to engage in:

(i) scheduled air transportation of passengers, property and mail within the United States, its territories
and possessions and between the United States and all countries that maintain a liberal aviation trade
relationship with the United States (known as ‘‘open skies’’ countries), and (ii) charter air
transportation of passengers, property and mail on a domestic and international basis.

FAA. The FAA primarily regulates flight operations and safety, including matters such as
airworthiness and maintenance requirements for aircraft, pilot, mechanic, dispatcher and flight
attendant training and certification, flight and duty time limitations and air traffic control. The FAA
requires each commercial airline to obtain and hold an FAA air carrier certificate. This certificate, in
combination with operations specifications issued to the airline by the FAA, authorizes the airline to
operate at specific airports using aircraft certificated by the FAA. We have and maintain in effect FAA
certificates of airworthiness for all of our aircraft, and we hold the necessary FAA authority to fly to all
of the cities we currently serve. Like all U.S. certificated carriers, providing scheduled service to certain
destinations may require governmental authorization. The FAA has the authority to investigate all
matters within its purview and to modify, suspend or revoke our authority to provide air transportation,
or to modify, suspend or revoke FAA licenses issued to individual personnel, for failure to comply with
FAA regulations. The FAA can assess civil penalties for such failures and institute proceedings for the
collection of monetary fines after notice and hearing. The FAA also has authority to seek criminal
sanctions. The FAA can suspend or revoke our authority to provide air transportation on an emergency
basis, without notice and hearing, if, in the FAA’s judgment, safety requires such action. A legal right to
an independent, expedited review of such FAA action exists. Emergency suspensions or revocations
have been upheld with few exceptions. The FAA monitors our compliance with maintenance, flight
operations and safety regulations on an ongoing basis, maintains a continuous working relationship with

our operations and maintenance management personnel, and performs frequent spot inspections of our
aircraft, employees and records.

The FAA also has the authority to promulgate rules and regulations and issue maintenance

directives and other mandatory orders relating to, among other things, inspection, repair and
modification of aircraft and engines, increased security precautions, aircraft equipment requirements,
noise abatement, mandatory removal and replacement of aircraft parts and components, mandatory
retirement of aircraft and operational requirements and procedures. Such rules, regulations and
directives are normally issued with the opportunity to comment, however, they may be issued without
advance notice or opportunity for comment if, in the FAA’s judgment, safety requires such action.

We believe we are operating in compliance with applicable DOT and FAA regulations,
interpretations and policies and we hold all necessary operating and airworthiness authorizations,
certificates and licenses.

Security. Within the United States, civil aviation security functions, including review and approval
of the content and implementation of air carriers’ security programs, passenger and baggage screening,
cargo security measures, airport security, assessment and distribution of intelligence, threat response,
and security research and development are the responsibility of the TSA of the Department of
Homeland Security. The TSA has enforcement powers similar to DOT’s and FAA’s described above. It
also has the authority to issue regulations, including in cases of emergency, the authority to do so
without advance notice, including issuance of a grounding order as occurred on September 11, 2001.

Environmental. We are subject to various federal, state and local laws and regulations relating to

the protection of the environment and affecting matters such as aircraft engine emissions, aircraft noise
emissions, and the discharge or disposal of materials and chemicals, which laws and regulations are
administered by numerous state and federal agencies. These agencies have enforcement powers similar
to DOT’s and FAA’s described above. In addition, we may be required to conduct an environmental
review of the effects projected from the addition of service at airports.

Federal law recognizes the right of airport operators with special noise problems to implement

local noise abatement procedures so long as those procedures do not interfere unreasonably with
interstate and foreign commerce and the national air transportation system. These restrictions can
include limiting nighttime operations, directing specific aircraft operational procedures during takeoff
and initial climb, and limiting the overall number of flights at an airport. None of the airports we serve
currently restricts the number of flights or hours of operation, although it is possible one or more of
such airports may do so in the future with or without advance notice.

Foreign Ownership. To maintain our DOT and FAA certificates, our airline operating subsidiary
and we (as the airline’s holding company) must qualify continuously as a citizen of the United States
within the meaning of U.S. aeronautical laws and regulations. This means we must be under the actual
control of U.S. citizens and we must satisfy certain other requirements, including that our president and
at least two-thirds of our board of directors and other managing officers must be U.S. citizens, and that
not more than 25% of our voting stock may be owned or controlled by non-U.S. citizens. The amount
of non-voting stock that may be owned or controlled by non-U.S. citizens is strictly limited as well. We
believe we are in compliance with these ownership and control criteria.

Other Regulations. Air carriers are subject to certain provisions of federal laws and regulations

governing communications because of their extensive use of radio and other communication facilities,
and are required to obtain an aeronautical radio license from the Federal Communications Commission
(‘‘FCC’’). To the extent we are subject to FCC requirements, we will continue to comply with those
requirements.

The quality of water used for drinking and hand-washing aboard aircraft is subject to regulation by

the Environmental Protection Agency (‘‘EPA’’). To the extent we are subject to EPA requirements, we
will continue to comply with those requirements.

We are responsible for collection and remittance of federally imposed and federally approved taxes

and fees applicable to air transportation passengers. We believe we are in compliance with these
requirements, and we will continue to comply with them.

Our operations may become subject to additional federal requirements in the future under certain
circumstances. For example, our labor relations are covered under Title II of the Railway Labor Act of
1926, as amended, and are subject to the jurisdiction of the National Mediation Board. During a period
of past fuel scarcity, air carrier access to jet fuel was subject to allocation regulations promulgated by
the Department of Energy.

We are also subject to state and local laws, regulations and ordinances at locations where we

operate and to the rules and regulations of various local authorities that operate airports we serve.
None of the airports in the small cities in which we operate have slot control, gate availability or
curfews that pose meaningful limitations on our operations. However, some small city airports have
short runways that require us to operate some flights at less than full capacity.

International air transportation, whether provided on a scheduled or charter basis, is subject to the

laws, rules and regulations of the foreign countries to, from and over which the international flights
operate. Foreign laws, rules and regulations governing air transportation are generally similar, in
principle, to the regulatory scheme of the United States as described above, although in some cases
foreign requirements are comparatively less onerous and in others, more onerous. We must comply
with the laws, rules and regulations of each country to, from or over which we operate. International
flights are also subject to U.S. Customs and Border Protection, Immigration and Agriculture
requirements and the requirements of equivalent foreign governmental agencies.

Future Regulation. Congress, the DOT, the FAA, the EPA and other governmental agencies have
under consideration, and in the future may consider and adopt, new laws, regulations, interpretations
and policies regarding a wide variety of matters that could affect, directly or indirectly, our operations,
ownership and profitability. We cannot predict what other matters might be considered in the future by
the FAA, the DOT, the EPA, other agencies or Congress, nor can we judge what impact, if any, the
implementation of any of these proposals or changes might have on our business.

Civil Reserve Air Fleet.

In February 2009 we received approval to become a participant in the Civil
Reserve Air Fleet (CRAF) Program which affords the U.S. Department of Defense the right to charter
our aircraft during national emergencies when the need for military airlift exceeds the capability of
available military resources. During the Persian Gulf War of 1990-91 and on other occasions, CRAF
carriers were required to permit the military to use their aircraft in this manner. As a result of our
CRAF approval, we are eligible to bid on and be awarded peacetime airlift contracts with the military.
We have been awarded several contracts since we obtained our approval in February 2009.

Insurance

We maintain insurance policies we believe are of types customary in the industry and as required
by the DOT and in amounts we believe are adequate to protect us against material loss. The policies
principally provide coverage for public liability, passenger liability, baggage and cargo liability, property
damage, including coverages for loss or damage to our flight equipment and workers’ compensation
insurance. There is no assurance, however, that the amount of insurance we carry will be sufficient to
protect us from material loss.

General Information

Our principal executive offices are located at 8360 South Durango Drive, Las Vegas, Nevada
89113. Our telephone number is (702) 851-7300. Our website addresses are http://www.allegiantair.com
and http://www.allegianttravelcompany.com. We have not incorporated by reference into this annual
report the information on our websites and you should not consider it to be a part of this document.
Our website addresses are 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
our website at ir.allegiantair.com, as soon as reasonably practicable after electronically filed with or
furnished to the Securities and Exchange Commission (‘‘SEC’’).

Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. Investors should carefully consider
the risks described below before making an investment decision. Our business, financial condition or results
of operations could be materially and adversely affected by any of these risks. The trading price of our
common stock could decline due to any of these risks, and investors may lose all or part of their investment.

Risks Related to Allegiant

Increases in fuel prices or unavailability of fuel would harm our business and profitability.

Fuel costs constitute a significant portion of our total operating expenses, representing

approximately 38% during 2009 and 51% during 2008. Although we experienced a reduction in the
average cost per gallon to $1.76 during 2009, down from $2.98 during 2008, our average cost per gallon
increased sequentially each quarter of 2009 and costs remain higher than long-term historical averages.
The cost of fuel cannot be predicted with any degree of certainty and further fuel cost volatility could
significantly affect our future results of operations. Significant increases in fuel costs have negatively
affected our operating results in the past and future price increases could harm our financial condition
and results of operations.

Aircraft fuel availability is also subject to periods of market surplus and shortage and is affected by

demand for heating oil, gasoline and other petroleum products. Because of the effect of these events
on the price and availability of aircraft fuel, the price and future availability of fuel cannot be predicted
with any degree of certainty. A fuel supply shortage or higher fuel prices could result in curtailment of
our service.

Current negative economic conditions may adversely affect travel from our small city markets to our
leisure destinations.

The U.S. economy continues to be impacted by high unemployment and other factors which may

reduce the wealth and tighten spending of consumers. Leisure travel is aligned with discretionary
spending and it is uncertain to what extent these economic conditions will affect consumers and leisure
travel. These conditions could impact demand for airline travel in our small city markets or to our
leisure destinations.

Our reputation and financial results could be harmed in the event of an accident or new regulations
affecting our aircraft or other MD-80 aircraft.

An accident or incident involving one of our aircraft, even if fully insured, could cause a public
perception that we are less safe or reliable than other airlines, which would harm our business. Because
we are smaller than most airlines, an accident would likely adversely affect us to a greater degree than
a larger, more established airline.

Additionally, our dependence on this single type of aircraft and engine for all of our flights makes
us particularly vulnerable to any problems that might be associated with, or aging aircraft requirements
affecting, this aircraft type or these engines. Our business would be significantly harmed if a mechanical
problem with the MD-80 series aircraft or the Pratt & Whitney JT8D-200 series engine were
discovered causing our aircraft to be grounded while any such problem is being corrected, assuming it
could be corrected at all. The Federal Aviation Administration (‘‘FAA’’) could also suspend or restrict
the use of our aircraft in the event of any actual or perceived mechanical problems, whether involving
our aircraft or another U.S. or foreign airline’s aircraft, while it conducts its own investigation. Our
business would also be significantly harmed if the public avoids flying our aircraft due to an adverse
perception of the MD-80 series aircraft or the Pratt & Whitney JT8D-200 series engine because of
safety concerns or other problems, whether real or perceived, or in the event of an accident involving
an MD-80 aircraft.

We rely heavily on automated systems to operate our business and any failure of these systems could
harm our business.

We depend on automated systems to operate our business, including our computerized airline
reservation system, our telecommunication systems, our website and other automated systems. Any
failure by us to handle our automation needs could negatively affect our Internet sales and customer
service and result in increased costs.

Our website and reservation system must be able to accommodate a high volume of traffic and

deliver important flight information. Substantial or repeated website, reservations system or
telecommunication systems failures could reduce the attractiveness of our services. Any disruption in
these systems could result in the loss of important data, loss of revenue, increase our expenses and
generally harm our business.

In the processing of our customer transactions, we receive and store credit card and other
identifiable personal data. This data is increasingly subject to legislation and regulation typically
intended to protect the privacy of personal data that is collected, processed and transmitted. We could
be adversely affected if legislation or regulations are expanded to require changes in our business
practices in ways that negatively affect our business, financial condition and results of operations. As
privacy and data protection become more sensitive issues, we may also become exposed to potential
liability. These and other privacy developments are difficult to anticipate and could adversely affect our
business, financial condition and results of operations.

Our maintenance costs will increase as our fleet ages.

Our aircraft range from 14 to 24 years old, with an average age of 20.4 years as of February 2010.

In general, the cost to maintain aircraft increases as they age and exceeds the cost to maintain new
aircraft. FAA regulations require additional and enhanced maintenance inspections for older aircraft.
These regulations include Aging Aircraft Airworthiness Directives, which typically increase as an
aircraft ages and vary by aircraft or engine type depending on the unique characteristics of each aircraft
and/or engine.

In addition, we may be required to comply with any future aging aircraft issues, law changes,
regulations or airworthiness directives. We cannot assure you our maintenance costs will not exceed our
expectations.

We believe our aircraft are and will continue to be mechanically reliable. We cannot assure you
our aircraft will continue to be sufficiently reliable over longer periods of time. Furthermore, given the
age of our fleet, any public perception that our aircraft are less than completely reliable could have an
adverse effect on our bookings and profitability.

We may be subject to unionization which could increase our labor costs.

Unlike most airlines, we have a non-union workforce. If our employees unionize, it could result in
demands that may increase our operating expenses and adversely affect our profitability. Our pilots and
flight attendants have formed in-house associations to negotiate matters of concern with us. Although
we have negotiated mutually acceptable arrangements with our pilots and flight attendants, our costs
could be adversely affected by the cumulative results of discussions with employee groups in the future.

Our business is heavily dependent on the attractiveness of our leisure destinations and a reduction in
demand for air travel to these markets could harm our business.

Almost all of our scheduled flights and announced service have Las Vegas, Orlando, Phoenix,
Tampa/St. Petersburg, Los Angeles or Ft. Lauderdale as either their destination or origin. Our business
could be harmed by any circumstances causing a reduction in demand for air transportation to one or
more of these markets, such as adverse changes in local economic conditions, negative public
perception of the particular city, significant price increases, or the impact of future terrorist attacks.

Our business could be harmed if we lose the services of our key personnel.

Our business depends upon the efforts of our chief executive officer, Maurice J. Gallagher, Jr., our

president and chief financial officer, Andrew C. Levy, and a small number of management and
operating personnel. We do not currently maintain key-man life insurance on Mr. Gallagher or
Mr. Levy. We may have difficulty replacing management or other key personnel who leave and,
therefore, the loss of the services of any of these individuals could harm our business.

If our credit card processing company were to require significant holdbacks for processing credit card
transactions for the purchase of air travel and other services, our cash flow would be adversely
affected.

Credit card companies sometimes require holdbacks when future air travel and other future

services are purchased through credit card transactions. We rely on a single credit card processing
company at this time. As virtually all of our scheduled service and ancillary revenue is paid with credit
cards and our credit card processing agreement does not require a significant holdback, our cash flow
would suffer in the event the terms of our current agreement were changed or terminated. Although
we believe we would be able to secure a replacement credit card processing agreement if our current
agreement is terminated, the terms of any new agreement may not be as favorable to us. These cash
flow issues could be exacerbated during periods of rapid growth as we would be incurring additional
costs associated with our growth, but our receipt of these revenues would be delayed.

Risks Associated with the Airline and Travel Industry

The airline industry is highly competitive and future competition in our small city markets could harm
our business.

The airline industry is highly competitive. The small cities we serve on a scheduled basis have
traditionally attracted considerably less attention from our potential competitors than larger markets,
and in most of our markets, we are the only provider of nonstop service to our leisure destinations. It
is possible other airlines will begin to provide nonstop services to and from these markets or otherwise
target these markets. An increase in the amount of direct or indirect competition could harm our
business.

A future act of terrorism, the threat of such acts or escalation of U.S. military involvement overseas
could adversely affect our industry.

Even if not directed at the airline industry, a future act of terrorism, the threat of such acts or
escalation of U.S. military involvement overseas could have an adverse effect on the airline industry. In
the event of a terrorist attack, the industry would likely experience significantly reduced demand for
travel services. These actions, or consequences resulting from these actions, would likely harm our
business and the airline and travel industry.

Changes in government regulations imposing additional requirements and restrictions on our
operations could increase our operating costs.

Airlines are subject to extensive regulatory and legal compliance requirements, both domestically
and internationally, that involve significant costs. In the last several years, the FAA has issued a number
of directives and other regulations relating to the maintenance and operation of aircraft, including rules
regarding assumed average passenger weight, that have required us to make significant expenditures.
FAA requirements cover, among other things, retirement of older aircraft, security measures, collision
avoidance systems, airborne windshear avoidance systems, noise abatement, weight and payload limits,
and increased inspection and maintenance procedures to be conducted on aging aircraft. The cost of
complying with the laws, rules and regulations in the future cannot be predicted and could significantly
increase our costs of doing business.

Climate change legislation has been introduced in the U.S. Congress, including a proposal to
require transportation fuel producers and importers to acquire allowances sufficient to offset the
emissions resulting from combustion of their fuels. We cannot predict if this or any similar legislation
will pass the Congress or, if passed and enacted into law, how it would specifically apply to the airline
industry. In addition, the Administrator of the Environmental Protection Agency (EPA) recently issued
an announcement concluding that current and projected concentrations of greenhouse gases in the
atmosphere threaten the public health and welfare. Although legal challenges and legislative proposals
are expected, the finding could ultimately result in EPA regulation of commercial aircraft emissions.
These developments and any additional legislation or regulations addressing climate change are likely
to increase the costs of doing business as an airline in the future and the increases could be material.
Increased costs will adversely affect our profitability if we are unable to pass the costs on to our
customers.

In April 2006, the FAA indicated it intends to issue regulations limiting the age of aircraft that
may be flown in the U.S. The announcement did not indicate the maximum age that would be allowed,
the effective date of the regulation or any grandfathering provisions. More recently, the FAA
announced its intention to update its crewmember flight, duty and rest regulations based on fatigue
science, with public comment on proposed rules expected to be invited in spring 2010. These
regulations, if and when implemented, could have a material effect on our future operations.

Airlines are often affected by factors beyond their control, including air traffic congestion, weather
conditions, increased security measures and the outbreak of disease, any of which could harm our
operating results and financial condition.

Like other airlines, we are subject to delays caused by factors beyond our control, including air
traffic congestion at airports and en route, adverse weather conditions, increased security measures and
the outbreak of disease. Delays frustrate passengers and increase costs, which in turn could affect
profitability. During periods of fog, snow, rain, storms or other adverse weather conditions, flights may
be cancelled or significantly delayed. Cancellations or delays due to weather conditions, traffic control
problems and breaches in security could harm our operating results and financial condition. An
outbreak of a disease that affects travel behavior, such as severe acute respiratory syndrome (SARS) or

H1N1 virus (swine flu), could have a material adverse impact on the airline industry. Any general
reduction in airline passenger traffic as a result of an outbreak of disease or other travel advisories
could dampen demand for our services even if not applicable to our markets. Resulting decreases in
passenger volume would harm our load factors, could increase our cost per passenger and adversely
affect our profitability.

Risks Related to Our Stock Price

The market price of our common stock may be volatile, which could cause the value of an investment
in our stock to decline.

The market price of our common stock may fluctuate substantially due to a variety of factors,

many of which are beyond our control, including:

(cid:127) announcements concerning our competitors, the airline industry or the economy in general

(cid:127) strategic actions by us or our competitors, such as acquisitions or restructurings

(cid:127) media reports and publications about the safety of our aircraft or the aircraft type we operate

(cid:127) new regulatory pronouncements and changes in regulatory guidelines

(cid:127) announcements concerning our business strategy, such as the introduction of a new aircraft type

(cid:127) general and industry-specific economic conditions

(cid:127) changes in financial estimates or recommendations by securities analysts

(cid:127) sales of our common stock or other actions by investors with significant shareholdings

(cid:127) general market conditions.

The stock markets in general have experienced substantial volatility that has often been unrelated

to the operating performance of particular companies. These types of broad market fluctuations may
adversely affect the trading price of our common stock.

In the past, stockholders have sometimes instituted securities class action litigation against
companies following periods of volatility in the market price of their securities. Any similar litigation
against us could result in substantial costs, divert management’s attention and resources, and harm our
business or results of operations.

Other companies may have difficulty acquiring us, even if doing so would benefit our stockholders, due
to provisions under our corporate charter, bylaws and option plans, as well as Nevada law.

Provisions in our articles of incorporation, our bylaws, and under Nevada law could make it more

difficult for other companies to acquire us, even if doing so would benefit our stockholders. Our
articles of incorporation and bylaws contain the following provisions, among others, which may inhibit
an acquisition of our company by a third party:

(cid:127) advance notification procedures for matters to be brought before stockholder meetings

(cid:127) a limitation on who may call stockholder meetings

(cid:127) the ability of our board of directors to issue up to 5,000,000 shares of preferred stock without a

stockholder vote.

We are also subject to provisions of Nevada law that prohibit us from engaging in any business

combination with any ‘‘interested stockholder,’’ meaning generally that a stockholder who beneficially
owns more than 10% of our stock cannot acquire us for a period of time after the date this person

became an interested stockholder, unless various conditions are met, such as approval of the
transaction by our board of directors.

Under U.S. laws and the regulations of the DOT, U.S. citizens must effectively control us. As a
result, our president and at least two-thirds of our board of directors must be U.S. citizens and not
more than 25% of our voting stock may be owned by non-U.S. citizens (although subject to DOT
approval, the percent of foreign economic ownership may be as high as 49%). Any of these restrictions
could have the effect of delaying or preventing a change in control.

Our corporate charter and bylaws include provisions limiting voting by non-U.S. citizens.

To comply with restrictions imposed by federal law on foreign ownership of U.S. airlines, our
articles of incorporation and bylaws restrict voting of shares of our capital stock by non-U.S. citizens.
The restrictions imposed by federal law currently require no more than 25% of our stock be voted,
directly or indirectly, by persons who are not U.S. citizens, and that our president and at least
two-thirds of the members of our board of directors be U.S. citizens. Our bylaws provide no shares of
our capital stock may be voted by or at the direction of non-U.S. citizens unless such shares are
registered on a separate stock record, which we refer to as the foreign stock record. Our bylaws further
provide no shares of our capital stock will be registered on the foreign stock record if the amount so
registered would exceed the foreign ownership restrictions imposed by federal law. Registration on the
foreign stock record is made in chronological order based on the date we receive a written request for
registration. Non-U.S. citizens will be able to own and vote shares of our common stock only if the
combined ownership by all non-U.S. citizens does not violate these requirements.

The value of our common stock may be negatively affected by additional issuances of common stock or
preferred stock by us and general market factors.

Future issuances or sales of our common stock or convertible preferred stock by us will likely be
dilutive to our existing common stockholders. Future issuances or sales of common or preferred stock
by us, or the availability of such stock for future issue or sale, could have a negative impact on the
price of our common stock prevailing from time to time. Sales of substantial amounts of our common
stock in the public or private market, a perception in the market that such sales could occur, or the
issuance of securities exercisable or convertible into our common stock, could also adversely affect the
prevailing price of our common stock.

Substantial sales of our common stock could cause our stock price to fall.

If our existing stockholders sell a large number of shares of our common stock or the public

market perceives existing stockholders might sell shares of common stock, the market price of our
common stock could decline significantly. All of our outstanding shares are either freely tradable,
without restriction, in the public market or eligible for sale in the public market at various times,
subject, in some cases, to volume limitations under Rule 144 of the Securities Act of 1933, as amended.

We cannot predict whether future sales of our common stock or the availability of our common
stock for sale will adversely affect the market price for our common stock or our ability to raise capital
by offering equity securities.

Item 1B. Unresolved Staff Comments

Not Applicable.

Item 2. Properties

Aircraft

As of December 31, 2009, our total operating fleet consisted of 46 MD-80 aircraft. The following

table summarizes our total fleet as of December 31, 2009:

Aircraft Type

Leased Owned(a)

Total

Seating
Capacity
(per aircraft)

Average Age
in Years

4
MD-88/82/83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MD-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38
4

42
4

150
130

20.3
21.8

20.4

(a) Aircraft owned includes two aircraft subject to capital leases.

As of December 31, 2009, we own 40 of our aircraft—17 are owned free and clear, and 23 are
owned subject to financing scheduled to be fully paid over the next three years. An additional two
aircraft are subject to capital leases under which we expect to take ownership within the next four
years. We lease the remaining four aircraft under operating leases which expire through 2014. As of
December 31, 2009, our entire fleet of 46 aircraft is in operating service.

Ground Facilities

We lease facilities at each of our leisure destinations and several of the other airports we serve.
Our leases for our terminal passenger services facilities, which include ticket counter and gate space,
and operations support areas, generally have terms of less than two years in duration and can generally
be terminated with a 30 to 60 day notice. We have also entered into use agreements at each of the
airports we serve that provide for non-exclusive use of runways, taxiways and other facilities. Landing
fees under these agreements are based on the number of landings and weight of the aircraft.

We have operational bases at airports at each of the major leisure destinations we serve and also
at Bellingham International Airport, where we serve routes to Las Vegas, Phoenix, Los Angeles, and
three other leisure destinations. We have established an operational base in Orlando International
Airport in February 2010 in addition to our existing base at the Orlando Sanford International Airport.
Routes into Orlando, Florida from ten of our small cities will be shifted from Orlando Sanford
International Airport to Orlando International Airport by March 2010 utilizing this new operational
base. In addition, we have announced we will establish a new operational base at Grand Rapids,
Michigan in April 2010. We currently provide service from Grand Rapids to five of our major leisure
destinations, with seasonal service to Myrtle Beach, South Carolina beginning when the operational
base opens in April 2010.

We use leased facilities at our operational bases to perform line maintenance, overnight parking of

aircraft, and other operations support. We lease additional space in cargo areas at the McCarran
International Airport and Orlando Sanford International Airport for our main line maintenance

operations. We also lease additional warehouse space in Las Vegas for aircraft parts and supplies
warehouse. The following table below details the airport locations we utilize as operational bases:

Airport

McCarran International Airport
Orlando Sanford International Airport
Orlando International Airport (base opened February 2010)
Phoenix-Mesa Gateway Airport
Los Angeles International Airport
St. Petersburg-Clearwater International Airport
Ft. Lauderdale-Hollywood International Airport
Bellingham International Airport
Gerald R. Ford International Airport (base opening April 2010)
Tunica Airport
Laughlin Bullhead International Airport

Location

Las Vegas, Nevada
Orlando, Florida
Orlando, Florida
Mesa, Arizona
Los Angeles, California
St. Petersburg, Florida
Ft. Lauderdale, Florida
Bellingham, Washington
Grand Rapids, Michigan
Tunica, Mississippi
Bullhead City, Nevada

The Phoenix-Mesa Gateway Airport completed an expansion of its existing terminal in 2009 using

the proceeds of a $3.0 million loan provided by us in 2008. Further expansion has begun, with
construction on additional space in the terminal expected to be completed in the fourth quarter of
2010. With completion of this additional expansion project, we believe we will have access to sufficient
gate space to accommodate several years of growth at this airport. The Bellingham International
Airport is exploring the possibility of an expansion project which we also believe will allow for sufficient
gate space for long-term growth. We believe we have sufficient access to gate space for current and
future operations at all other airports we serve.

Our primary corporate offices are located in Las Vegas, where we lease approximately 65,000
square feet of space under a lease that expires in April 2019. We also lease approximately 10,000
square feet of office space in a building adjacent to our corporate offices which is utilized for training
and other corporate purposes. The corporate office lease has two five-year renewal options, but we
have the right to terminate the lease after the seventh year in April 2015 and the right to purchase the
building from the landlord after the third year of the lease in April 2011. We are also responsible for
our share of common area maintenance charges. In both leases, the landlord is a limited liability
company in which certain of our officers and directors own significant interests as non-controlling
members.

Item 3. Legal Proceedings

We are subject to certain legal and administrative actions we consider routine to our business
activities. We believe the ultimate outcome of any pending legal or administrative matters will not have
a material adverse effect on our financial position, liquidity or results of operations.

Item 4. Reserved

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases

PART II

of Equity Securities

Market for our common stock

Our common stock is quoted on the Nasdaq Global Select Market. On March 1, 2010, the last sale

price of our common stock was $53.00 per share. The following table sets forth the range of high and
low sale prices for our common stock for the periods indicated.

Period

2009

1st Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2nd Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3rd Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4th Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2008

High

Low

$48.98
$57.52
$47.45
$48.99

$32.46
$28.93
$35.94
$49.06

$32.07
$33.20
$37.21
$34.88

$19.97
$18.52
$15.89
$23.52

As of February 1, 2010, there were approximately 216 holders of record of our common stock. We

believe that a substantially larger number of beneficial owners hold shares of our common stock in
depository or nominee form.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information regarding options, stock appreciation rights (‘‘SARs’’),

warrants or other rights to acquire equity securities under our equity compensation plans as of
December 31, 2009:

Number of Securities to be
Issued upon Exercise of
Outstanding Options, SARs,
Warrants and Rights

Weighted-Average
Exercise Price of
Outstanding
Options, SARs,

Number of Securities
Remaining Available for
Future Issuance under

Warrants and Rights Equity Compensation Plans

Equity compensation plans

approved by security holders(a) .

745,000

Equity compensation plans not

approved by security holders(b) .
Total . . . . . . . . . . . . . . . . . . . . . .

162,500
907,500

$32.07

$ 4.40
$27.12

1,628,742

N/A
1,628,742

(a) The shares shown as being issuable under equity compensation plans approved by our security

holders excludes restricted stock awards issued. In addition to the above, there are 42,076 shares of
nonvested restricted stock as of December 31, 2009.

(b) The shares shown as being issuable under equity compensation plans not approved by our security
holders consist of warrants granted to the placement agent in our private placement completed in
May 2005.

Dividend Policy

We have not declared or paid any dividends since our public offering in 2006. Future payments of

cash dividends, if any, will depend on our financial condition, results of operations, cash from
operations, business conditions, capital requirements and other factors deemed relevant to our Board
of Directors.

Our Repurchases of Equity Securities

The following table reflects our repurchases of our common stock during the fourth quarter of
2009. All stock repurchases during this period were made from employees who received restricted stock
grants. All stock repurchases were made at the election of each employee pursuant to an offer to
repurchase by us. In each case, the shares repurchased constituted either the full amount of vested
shares or the portion of vested shares necessary to satisfy withholding tax requirements.

ISSUER PURCHASES OF EQUITY SECURITIES

Period

Total Number of
Shares
Purchased

Average Price
Paid per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs

Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Plans or
Programs(1)

October 2009 . . . . . . . . . . . . . .
November 2009 . . . . . . . . . . . . .
December 2009 . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . .

1,495
None
20,989

22,484

$38.90
N/A
$41.60

$41.42

None
None
None

None

$10,593,057
$10,593,057
$10,593,057

$10,593,057

(1) Represents the remaining dollar value of open market purchases of the Company’s common stock

which was authorized by the Board of Directors under a share repurchase program. On
January 29, 2010, the Board of Directors increased this remaining authority to $25.0 million.

During 2009, our Board of Directors authorized up to $35.0 million of stock repurchases in the

market. During the first three quarters of 2009, we repurchased 637,902 shares for a total of
$24.4 million. We did not make any open market stock repurchases during the fourth quarter of 2009.

Stock Price Performance Graph

The following graph compares the cumulative total stockholder return on our common stock with

the cumulative total return on the Nasdaq Composite Index and the AMEX Airline Index for the
period beginning on December 8, 2006 (the date our common stock was first traded) and ending on
the last day of 2009. The graph assumes an investment of $100 in our stock and the two indices,
respectively, on December 8, 2006, and further assumes the reinvestment of all dividends. The
December 8, 2006 stock price used for our stock is the initial public offering price. Stock price
performance, presented for the period from December 8, 2006 to December 31, 2009, is not necessarily
indicative of future results.

Allegiant Travel Company

Nasdaq Composite Index

AMEX Airline Index

300

200

100

08-Dec-2006

31-Dec-2006

31-Dec-2007

31-Dec-2008

31-Dec-2009

3MAR201015063482

12/08/06

12/31/06

12/31/07

12/31/08

12/31/09

ALGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nasdaq Composite Index . . . . . . . . . . . . . . . . . . . .
AMEX Airline Index . . . . . . . . . . . . . . . . . . . . . . .

$100.00
$100.00
$100.00

$155.89
$ 99.09
$ 99.23

$178.56
$108.82
$ 58.39

$269.83
$ 64.70
$ 41.30

$262.06
$ 93.10
$ 57.54

The stock price performance graph shall not be deemed incorporated by reference by any general

statement incorporating by reference this annual report on Form 10-K into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that we
specifically incorporate this information by reference, and shall not otherwise be deemed filed under
such Acts.

Item 6. Selected Financial Data

The following financial information for each of the five years ended December 31, 2009, has been
derived from our consolidated financial statements. You should read the selected consolidated financial
data set forth below along with ‘‘Management’s Discussion and Analysis of Financial Condition and
Results of Operations’’ and our consolidated financial statements and related notes. Certain
presentation changes and reclassifications have been made to prior year consolidated financial
information to conform to 2009 classifications. In particular, the consolidated statement of income data
below reflects the separate presentation within operating revenue of the ancillary revenue categories of
air-related charges and third party products.

STATEMENT OF INCOME DATA:
Operating revenue:

Scheduled service revenue . . . . . . . . . . . . . . . . . . . .
Ancillary revenue:

Air-related charges . . . . . . . . . . . . . . . . . . . . . . .
Third party products . . . . . . . . . . . . . . . . . . . . . .
Total ancillary revenue . . . . . . . . . . . . . . . . . . .
Fixed fee contract revenue . . . . . . . . . . . . . . . . . . . .
Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating revenue . . . . . . . . . . . . . . . . . . . . . . .

Operating expenses:

Aircraft fuel
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salary and benefits . . . . . . . . . . . . . . . . . . . . . . . . .
Station operations . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance and repairs . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . .
Aircraft lease rentals
. . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other (income) expense:

Loss (gain) on fuel derivatives, net . . . . . . . . . . . . . .
. . .
Loss (earnings) from unconsolidated affiliates, net
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other (income) expense . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . .

Provision for income taxes:

Recognition of net deferred tax liabilities upon

C-corporation conversion . . . . . . . . . . . . . . . . . . .
Tax provision, current year . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the year ended December 31,

2009

2008

2007

2006

2005

(in thousands, except per share data)

$346,222

$330,969

$258,943

$178,349

$ 90,664

143,001
19,715
162,716
43,162
5,840
557,940

165,000
90,006
53,993
52,938
16,458
1,926
29,638
25,728
435,687
122,253

—
84
—
(2,474)
4,079
1,689
120,564

95,490
19,106
114,596
52,499
5,948
504,012

229,640
72,007
43,476
41,465
14,361
2,815
23,489
20,911
448,164
55,848

48,333
16,694
65,027
35,339
1,264
360,573

152,149
55,593
33,724
25,764
12,803
3,004
15,992
17,484
316,513
44,060

19,950
9,912
29,862
33,716
1,423
243,350

101,561
37,453
24,866
19,482
9,293
5,102
10,584
12,456
220,797
22,553

6,655
4,539
11,194
30,642
—
132,500

52,568
23,090
14,090
9,022
5,625
4,987
5,088
9,529
123,999
8,501

11
(96)
—
(4,730)
5,411
596
55,252

(2,613)
(457)
63
(9,161)
5,523
(6,645)
50,705

4,193
—
—
(2,973)
5,517
6,737
15,816

(612)
—
—
(1,225)
3,009
1,172
7,329

—
44,233
$ 76,331

—
19,845
$ 35,407

—
19,196
$ 31,509

$
$

3.82
3.76

$
$

1.75
1.73

$
$

1.56
1.53

6,425
651
8,740

1.23
0.52

$
$

—
37
7,292

1.11
0.56

$
$

(1) The number of weighted average diluted shares outstanding for purposes of calculating 2005 earnings per
share includes our redeemable convertible preferred shares as if converted on a one-for-one basis into
common shares. The dilutive effect of common stock subject to outstanding options and warrants to purchase
shares of common stock for 2005 is not material. The dilutive effect of common stock subject to unvested
restricted stock for 2006 is not material.

OTHER FINANCIAL DATA:
Operating income . . . . . . . . . . . . . . . . . . . . .
Operating margin % . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in):

For the year ended December 31,

2009

2008

2007

2006

2005

(dollars in thousands)

$122,253

$ 55,848

$ 44,060

$ 22,553

8,501

21.9%

11.1%

12.2%

9.3%

6.4%

Operating activities . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . .

$131,674
(97,213)
(41,375)

$ 71,632
(100,505)
(18,243)

$ 73,947
(68,927)
8,976

$ 34,746
(1,607)
75,875

$ 44,027
(47,706)
23,369

2009

2008

2007

2006

2005

As of December 31,

(in thousands)

BALANCE SHEET DATA:
Cash, cash equivalents and short-term

investments . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt (including capital leases) . . . .
Redeemable convertible preferred shares . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . .

$231,470
499,639
45,807
—
292,023

$ 174,788
423,976
64,725
—
233,921

$171,379
405,425
72,146
—
210,331

$136,081
305,726
72,765
—
153,471

$ 53,325
170,083
59,747
39,540
14,607

Operating statistics (unaudited):

2009

2008

2007

2006

2005

For the year ended December 31,

Total system statistics:
Passengers . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
Revenue passenger miles (RPMs) (thousands)
Available seat miles (ASMs) (thousands) . . . . . .
Load factor . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating revenue per ASM (RASM)* (cents) . .
Operating expense per ASM (CASM) (cents) . . .
Fuel expense per ASM (cents) . . . . . . . . . . . . .
Operating CASM, excluding fuel (cents)
. . . . . .
Operating expense per passenger . . . . . . . . . . .
Fuel expense per passenger . . . . . . . . . . . . . . .
Operating expense per passenger, excluding fuel .
Departures . . . . . . . . . . . . . . . . . . . . . . . . . .
Block hours . . . . . . . . . . . . . . . . . . . . . . . . . .
Average stage length (miles)
. . . . . . . . . . . . . .
Average number of operating aircraft during

period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total aircraft in service at end of period . . . . . . .
Average departures per aircraft per day . . . . . . .
Average block hours per aircraft per day . . . . . .
Full-time equivalent employees at end of period .
Fuel gallons consumed (thousands) . . . . . . . . . .
Average fuel cost per gallon . . . . . . . . . . . . . . .
Scheduled service statistics:
Passengers . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .
Revenue passenger miles (RPMs) (thousands)
Available seat miles (ASMs) (thousands) . . . . . .
Load factor . . . . . . . . . . . . . . . . . . . . . . . . . .
Departures . . . . . . . . . . . . . . . . . . . . . . . . . .
Average passengers per departure . . . . . . . . . . .
Block hours . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield (cents) . . . . . . . . . . . . . . . . . . . . . . . . .
Scheduled service revenue per ASM (cents) . . . .
Total ancillary revenue per ASM* (cents) . . . . . .
Total revenue per ASM (TRASM)* (cents) . . . . .
Average fare—scheduled service . . . . . . . . . . . .
Average fare—ancillary . . . . . . . . . . . . . . . . . .
Average fare—total . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Average stage length (miles)
Fuel gallons consumed (thousands) . . . . . . . . . .
Average fuel cost per gallon . . . . . . . . . . . . . . .
Percent of sales through website during period . .

5,328,436
4,762,410
5,449,363

4,298,748
3,863,497
4,442,463

3,264,506
3,140,927
3,865,337

2,179,367
2,251,341
2,871,071

1,199,547
1,295,633
1,674,376

87.4%
10.24
8.00
3.03
4.97
81.77
30.97
50.80
43,795
98,760
836

42.7
46
2.81
6.3
1,569
93,521
1.76

$
$
$

87.0%
11.35
10.09
5.17
4.92
104.25
53.42
50.83
35,839
81,390
836

36.4
38
2.69
6.1
1,348
76,972
2.98

$
$
$

81.3%
9.33
8.19
3.94
4.25
96.96
46.61
50.35
28,788
68,488
906

27.8
32
2.83
6.7
1,180
66,035
2.30

$
$
$

78.4%
8.48
7.69
3.54
4.15
101.31
46.60
54.71
20,074
50,584
966

20.8
24
2.64
6.7
846
47,984
2.12

$
$
$

77.4%
7.91
7.41
3.14
4.27
103.37
43.82
59.55
11,646
29,472
977

13.3
17
2.39
6.0
596
28,172
1.87

$
$
$

4,919,826
4,477,119
4,950,954

3,894,968
3,495,956
3,886,696

3,017,843
2,844,358
3,423,783

1,940,456
1,996,559
2,474,285

969,393
1,029,625
1,294,064

90.4%

37,115
133
87,939
7.73
6.99
3.29
10.28
70.38
33.07
103.45
891
83,047
1.90
86.3%

$
$
$

89.9%

29,548
132
70,239
9.47
8.51
2.95
11.46
84.97
29.43
114.40
882
66,291
3.22
86.4%

$
$
$

83.1%

25,088
120
60,607
9.10
7.56
1.90
9.46
85.80
21.53
107.33
923
57,772
2.40
86.6%

$
$
$

80.7%

16,634
117
43,391
8.93
7.21
1.26
8.47
91.91
16.11
108.02
1,006
40,879
2.22
85.9%

$
$
$

79.6%
8,388
116
22,465
8.81
7.01
0.87
7.87
93.53
11.55
105.07
1,045
21,362
1.96
81.0%

$
$
$

Various components of these measures do not have a direct correlation to ASMs. These figures are provided
on a per ASM basis so as to facilitate comparisons with airlines reporting revenues on a per ASM basis.

The following terms used in this section and elsewhere in this annual report have the meanings

indicated below:

‘‘Available seat miles’’ or ‘‘ASMs’’ represents the number of seats available for passengers

multiplied by the number of miles the seats are flown.

‘‘Average fuel cost per gallon’’ represents total aircraft fuel expense for our total system or in
scheduled service divided by the total number of fuel gallons consumed in our total system or in
scheduled service, as applicable.

‘‘Average stage length’’ represents the average number of miles flown per flight.

‘‘Load factor’’ represents the percentage of aircraft seating capacity that is actually utilized

(revenue passenger miles divided by available seat miles).

‘‘Operating expense per ASM’’ or ‘‘CASM’’ represents operating expenses divided by available seat

miles.

‘‘Operating CASM, excluding fuel’’ represents operating expenses, less aircraft fuel, divided by
available seat miles. Although Operating CASM, excluding fuel is not a calculation based on generally
accepted accounting principles and should not be considered as an alternative to Operating Expenses as
an indicator of our financial performance, 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 and therefore are beyond our control.

‘‘Operating revenue per ASM’’ or ‘‘RASM’’ represents operating revenue divided by available seat

miles.

‘‘Revenue passengers’’ represents the total number of passengers flown on all flight segments.

‘‘Revenue passenger miles’’ or ‘‘RPMs’’ represents the number of miles flown by revenue passengers.

‘‘Yield’’ represents scheduled service revenue divided by scheduled service revenue passenger miles.

Item 7. 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 years ended December 31, 2009, 2008 and 2007. Also discussed is our financial
position as of December 31, 2009 and 2008. You should read this discussion in conjunction with our
consolidated financial statements, including the notes thereto, appearing elsewhere in this annual report.
This discussion and analysis contains forward- looking statements. Please refer to the section 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. The focus of our business is a low-cost passenger airline

marketed to leisure travelers in small cities. 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.

2009 Results

During 2009, we achieved a Company record 21.9% operating margin, to earn net income of
$76.3 million on operating revenues of $557.9 million. We achieved these operating results despite a
17.2% decrease in scheduled service revenue per passenger year-over-year, and while significantly
expanding our route network, with system departure growth of 22.2% and system available seat miles
(‘‘ASMs’’) growth of 22.7%. Our revenues increased year-over-year as our growth in passengers carried
and an increase in ancillary revenue per passenger more than offset the effect of base fare reductions.

The U.S. economy continues to be impacted by the financial crisis which began in 2008. A

significant reduction in air fares was felt by the airline industry as a result of the effects of these
economic conditions on consumer spending and air travel demand. While our average base fare fell
during 2009 as we reduced fares to stimulate air travel demand, our ancillary revenue per passenger
grew 12.4%, compared to the prior year, from $29.43 to $33.07. Our efforts to stimulate air travel
demand were successful as our scheduled service load factor for 2009 was 90.4%, and even improved
on the 89.9% scheduled service load factor we achieved in 2008. We believe our ancillary revenue per
passenger and our ability to maintain high load factors during this difficult revenue environment,
especially during a period of substantial capacity growth, were key contributors to our financial results
for 2009.

The reduction in crude oil prices in 2009 compared to their peak reached during the third quarter

2008 was also a major factor contributing to our increased profitability. Our average fuel cost per
gallon decreased from $2.98 in 2008 to $1.76 in 2009 as fuel cost was highly volatile during these years.
The average cost per gallon reached a record high of $3.52 in the second quarter of 2008, before
retracting to a low of $1.47 in the first quarter of 2009, and increased through 2009 to $2.07 in the
fourth quarter of 2009. We believe we continue to be positioned to manage to profitability through
periods of fuel cost volatility in the future. During 2009, our $50.80 operating expense per passenger,
excluding fuel, remained consistent with 2008 and 2007 levels of $50.83 and $50.35, respectively. We

maintained this operating expense per passenger, excluding fuel, despite higher maintenance and
repairs expense during the year.

Fleet

During 2009, we placed eight aircraft into service which increased our operating fleet to 46 aircraft

at December 31, 2009. Five of these aircraft were previously leased to a third party and were returned
to us off lease during the year, two were under separate operating leases we entered into in February
2009 and the final one was purchased for cash in January 2009. The following table sets forth the
number and type of aircraft in service and operated by us at the dates indicated:

MD82/83/88s . . . . . . . . . . . . . . . . . . . . . . . . . .
MD87s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38
4

4
0

42
4

32
4

2
0

34
4

24
4

4
0

28
4

December 31, 2009

December 31, 2008

December 31, 2007

Own(a) Lease Total Own(a) Lease Total Own(a) Lease Total

(a) Aircraft owned includes aircraft subject to capital leases as follows: December 31, 2009—2;

December 31, 2008—2; December 31, 2007—5.

In the fourth quarter of 2009, we entered into purchase agreements for 20 MD-80 series aircraft

for delivery in the first three quarters of 2010. The aircraft include 15 MD-82/83 aircraft which we
expect to place into service by the end of 2011. The remaining five aircraft are MD-87 aircraft which
we expect to use as a source of spare engines and spare parts. We believe these additional aircraft will
provide for our planned growth through 2012 at a low fixed cost, and will also provide further flexibility
to manage capacity in our route network.

Network

As of December 31, 2009, we offered scheduled service from 58 small cities on 136 routes

primarily into our major leisure destinations. We expanded our route network during 2009 with a new
major leisure destination, additional routes to our existing major leisure destinations and network
changes involving leisure destinations served on a limited basis. In April 2009, we initiated service into
our sixth major leisure destination, Los Angeles, with eleven routes being served as of December 31,
2009. During the first half of 2009, we initiated limited service to the new leisure destination of Punta
Gorda, Florida and seasonal service to the new leisure destination of Myrtle Beach, South Carolina,
with service on two routes to each of these new destinations. We also initiated service in June 2009 to
the San Francisco Bay area from Eugene, Oregon, a route that consists of an existing small city and an
existing leisure destination we serve on a limited basis. We believe the continued expansion of our
route network has provided us geographic diversity with further protection from competitive influences

in the markets we serve and continued growth in our customer base. The following shows the number
of destinations and small cities served as of the dates indicated:

Major leisure destinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other leisure destinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Small cities served . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total cities served . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Routes to Las Vegas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Routes to Orlando . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Routes to Phoenix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Routes to Tampa Bay/St. Petersburg . . . . . . . . . . . . . . . . . . . . . .
Routes to Los Angeles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Routes to Ft. Lauderdale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other routes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of December 31,

2009

2008

2007

6
5
58

40
31
20
20
11
5
9

5
4
57

39
29
15
20
0
6
4

5
2
51

37
27
13
14
0
12
2

Total routes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

136

113

105

Trends and Uncertainties

During 2009, aircraft fuel expense declined 28.1% compared to 2008, but continues to represent a
significant portion of our overall operating expenses. Although we experienced a reduction in fuel costs
in 2009, average cost per gallon was $1.47 in the first quarter in 2009, and increased sequentially each
quarter throughout the year, finishing at $2.07 for the fourth quarter of 2009. 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.

In March 2009, Allegiant Information Systems, Inc., a newly formed wholly owned subsidiary,
completed a merger with the organization which owned the exclusive rights to the travel applications of
the software operating system we have used since our inception. The acquisition of the software
through the merger has provided us more control over the development of our automation into the
future. In addition, we have made further hardware and database platform purchases to provide us with
the necessary capacity to continue our growth. The hardware and database upgrades are intended to
facilitate additional offerings of web based products. We believe our control over the development will
enable us to provide our customers with products unique to us, further differentiate us in the travel
industry, and expand our customers’ travel experience. In 2010 we have begun an initiative to
emphasize and focus on revenue growth from third party products, but we do not anticipate significant
short-term revenue growth. We believe our efforts to enhance software capabilities and provide
additional product offerings, along with our loyal customer base, could result in meaningful long-term
revenue growth in this area of our business.

In February 2010, we established an operational base at Orlando International Airport. Routes

into Orlando, Florida from ten of our small cities will be shifted from Orlando Sanford International
Airport to Orlando International Airport by March 2010. In addition, we announced we will establish a
new operational base at Grand Rapids, Michigan in April 2010. The aircraft base in Grand Rapids will
be our second small city base. We believe basing aircraft in a small city gives us cost effective
scheduling options to facilitate service to destinations where bases are currently not in place. We
currently serve routes from Grand Rapids to five of our major leisure destinations, with seasonal
service to Myrtle Beach, South Carolina scheduled to begin in April 2010. Our seasonal service to

Myrtle Beach from two other small cities proved to be successful in 2009 and we have scheduled
expansion of this service during 2010 as part of our capacity growth for the summer season.

As discussed above, we entered into agreements for the purchase of 20 MD-80 series aircraft for
delivery in the first three quarters of 2010. We expect to place 15 of these aircraft into service by the
end of 2011 and believe these aircraft will support our future growth plans. In addition, we will utilize
five of these aircraft for spare engines and rotable parts. We benefited from the current market
conditions of MD-80 aircraft during 2009 with the purchase of ten aircraft we have used for spare
engines and rotable parts. We believe the use of engines and rotable parts from acquired aircraft for
part-out has provided us a cost effective way of servicing our operating fleet. In most situations, the use
of spare engines and rotable parts is less expensive than performing maintenance and repairs of existing
rotable parts.

In March 2010, we entered into a purchase contract for six Boeing 757 aircraft with delivery dates
from 2010 to 2012. These aircraft will provide us the ability to serve longer haul markets, including the
expectation to serve Hawaii after we receive regulatory approval for extended over water operations.
We currently expect two of these aircraft to enter operating service in fourth quarter 2010 with the
remaining four aircraft to be added to our operating fleet in 2011 and 2012.

As a result of the recent rise in jet fuel prices and the current weak revenue environment, we
expect moderate growth for 2010. Our capacity growth will largely be attributable to new routes being
added to our network, utilization of our new aircraft bases and an increase in seasonal flying. We
believe this is our best approach to maintain profitability and, as we have in the past, we expect to
continue to quickly adjust capacity up or down as appropriate to react to significant changes in industry
fare levels and the economy.

Our Operating Revenue

Our operating revenue comprises of both air travel on a stand-alone basis and bundled with hotels,

rental cars and other travel-related services. We believe our diversified revenue streams distinguish us
from other U.S. airlines and other travel companies.

(cid:127) Scheduled service revenue. Scheduled service revenue consists of air fare for nonstop flights

between our small city markets and our leisure destinations.

(cid:127) Fixed fee contract revenue. Our fixed fee contract revenue consists largely of fixed flying

agreements with affiliates of Harrah’s Entertainment Inc. that provide for a predictable revenue
stream. We also provide charter service on a seasonal and ad hoc basis to other customers.

(cid:127) Ancillary revenue. Our ancillary revenue is generated from air-related charges and third party
products. Air-related revenue is generated through charges for use of our website to purchase
tickets, checked bags, advance seat assignments, priority boarding and other services provided in
conjunction with our scheduled air service. We also generate revenue from third party products
through 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. We recognize our ancillary revenues net of amounts paid to wholesale providers,
travel agent commissions and credit card processing fees.

(cid:127) Other revenue. Other revenue is generated from aircraft and flight equipment leased to third

parties.

Seasonality. Our business is seasonal in nature with traffic demand historically being weaker in
the third quarter and stronger in the first quarter. Our operating revenue is largely driven by perceived
product value, advertising and promotional activities and can be adversely impacted during periods with
reduced leisure travel spending, such as the back-to-school season.

Our Operating Expenses

A brief description of the items included in our operating expense line items follows.

Aircraft fuel expense. Aircraft fuel expense includes the cost of aircraft fuel, fuel taxes, into plane

fees and airport fuel flowage, storage or through-put fees. Under the majority of our fixed fee
contracts, amounts we receive to reimburse us for fuel costs are netted against fuel expense.

Salary and benefits expense. Salary and benefits expense includes wages, salaries, and employee
bonuses, sales commissions for in-flight personnel, as well as expenses associated with employee benefit
plans and employer payroll taxes.

Station operations expense. Station operations expense includes the fees charged by airports for

the use or lease of airport facilities and fees charged by third party vendors for ground handling
services, commissary expenses and other related services such as deicing of aircraft.

Maintenance and repairs expense. Maintenance and repairs expense includes all parts, materials

and spares required to maintain our aircraft. Also included are fees for repairs performed by third
party vendors.

Sales and marketing expense. Sales and marketing expense includes all advertising, promotional

expenses, travel agent commissions and credit card discount fees associated with the sale of scheduled
service and air-related charges.

Aircraft lease rentals expense. Aircraft lease rentals expense consists of the cost of leasing aircraft
under operating leases with third parties. Also included are maintenance deposits when not considered
part of maintenance and repair expense as discussed under ‘‘Critical Accounting Policies and
Estimates’’ below.

Depreciation and amortization expense. Depreciation and amortization expense includes the

depreciation of all fixed assets, including aircraft that we own and amortization of aircraft that we
operate under capital leases.

Other expense. Other expense includes the cost of passenger liability insurance, aircraft hull

insurance and all other insurance policies except for employee welfare insurance. Additionally, this
expense includes the loss on aircraft and other equipment disposals, travel and training expenses for
crews and ground personnel, facility lease expenses, professional fees, personal property taxes and all
other administrative and operational overhead expenses not included in other line items above.

RESULTS OF OPERATIONS

The table below presents our operating expenses as a percentage of operating revenue for the last

three fiscal years.

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

Aircraft fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salary and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Station operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance and repairs . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aircraft lease rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2009

2008

2007

100.0% 100.0% 100.0%

29.6
16.1
9.7
9.5
2.9
0.3
5.3
4.6

45.6
14.3
8.6
8.2
2.8
0.6
4.7
4.1

42.2
15.4
9.4
7.1
3.6
0.8
4.4
4.9

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

78.1% 88.9% 87.8%

2009 Compared to 2008

We recorded total operating revenue of $557.9 million, income from operations of $122.2 million

and net income of $76.3 million for 2009. By comparison, in 2008, we recorded total operating revenue
of $504.0 million, income from operations of $55.8 million and net income of $35.4 million. We
achieved a 21.9% operating margin for 2009 with system growth in departures of 22.2% and ASMs of
22.7%, despite a reduction in scheduled service revenue of $14.60 per passenger year-over-year.

Operating Revenue

Our operating revenue increased 10.7% to $557.9 million in 2009 from $504.0 million in 2008
primarily due to a 49.8% increase in ancillary revenue from air-related charges and a 4.6% increase in
scheduled service revenue, partially offset by a 17.8% decrease in fixed fee contract revenue. The
ancillary revenue from air-related charges and scheduled service revenue increases were primarily
driven by a 26.3% increase in the number of scheduled service passengers.

System ASMs increased by 22.7%, as a result of, a 22.2% increase in system departures. Operating

revenue per ASM (‘‘RASM’’) decreased by 9.8% from 11.35 cents during 2008 to 10.24 cents during
2009. The decrease was mainly attributable to a 17.2% reduction in our scheduled service average base
fare offset by an increase in ancillary revenue per passenger. We decreased scheduled service base fares
to maintain load factor in the face of industry wide lower fares and adverse economic conditions.

Scheduled service revenue. Scheduled service revenue increased 4.6% to $346.2 million for 2009,

from $331.0 million in 2008. The increase was a result of a 26.3% increase in the number of scheduled
service passengers offset by a decrease in the scheduled service average base fare of $14.60 from $84.97
in 2008 to $70.37 in 2009. Passenger growth was driven primarily as a result of a 25.6% increase in
departures from 29,548 to 37,115 in 2009. Significant contributors to the departure growth were the
addition of 1,699 departures attributable to our new service to Los Angeles not operated in 2008 and
an increase of 1,637 departures from route expansion to our Phoenix market. We offered service into
Phoenix on 20 routes at December 31, 2009 compared to 15 routes at December 31, 2008. Remaining
departure growth is a result of increased frequency of flying to our other major leisure destinations and
departures to new limited service destinations. Our route network consisted of 136 routes at
December 31, 2009, an increase from 113 routes at December 31, 2008.

Ancillary revenue. Ancillary revenue increased 42.0% to $162.7 million in 2009 up from
$114.6 million in 2008, driven by a 26.3% increase in scheduled service passengers and a 12.4%
increase in ancillary revenue per scheduled passenger from $29.43 to $33.07. The following table details
ancillary revenue per scheduled service passenger from air-related charges and third party products:

Year Ended
December 31,

2009

2008

% Change

Air-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third party products . . . . . . . . . . . . . . . . . . . . . . . . . .

$29.06
4.01

$24.52
4.91

18.5%
(18.3)%

Total ancillary revenue per scheduled service

passenger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$33.07

$29.43

12.4%

On a per-passenger basis, 87.8% and 83.3%, of our total ancillary revenues consist of air-related
charges for 2009 and 2008, respectively. The increase in air-related charges per-passenger was primarily
attributable to higher baggage fees as we increased fees to comparable industry levels, an increase in
our customer convenience fee, and the effect of a full year of our priority boarding product rolled out
in October 2008. We increased our customer convenience fee from $11.50 to $13.50 in January 2009
and to $14.00 in July 2009. Third party products declined on a per passenger basis (but increased

slightly in absolute terms) due to Las Vegas contributing a smaller percentage of our total passengers.
Our third party products revenue per passenger for Las Vegas is higher than our other destinations due
to large volume of hotel rooms we sell in Las Vegas.

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:

Year Ended
December 31,

(in thousands)

2009

2008

% Change

Gross ancillary revenue—third party . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs(a) . . . . . . . . . . . . . . . . . . . . . . . .

$ 73,188
(50,014)
(3,459)

$ 72,982
0.3%
(50,143) (cid:3)0.3%
(7.3)%
(3,733)

Ancillary revenue—third party products . . . . . . . . . .

$ 19,715

$ 19,106

As percent of gross ancillary revenue—third party . . . .

26.9%

26.2%

3.2%

0.7pp

(a) Includes credit card fees and travel agency commissions

During 2009, we generated gross revenue of $73.2 million from third party products, which

resulted in net revenue of $19.7 million. The majority of the gross revenue was generated from the sale
of over 500,000 hotel room nights at our leisure destinations packaged to our customers with scheduled
air service.

Fixed fee contract revenue. Fixed fee contract revenue decreased 17.8% to $43.2 million during

2009 from $52.5 million for 2008 as we had 9,636 block hours of fixed fee flying in 2009 compared to
10,181 in 2008. The decrease is primarily due to a decline in block hours flown under the Harrah’s
fixed fee agreement partially offset by a 21.5% increase in other fixed fee flying programs for 2009.
Reduction in the Harrah’s fixed fee revenues was also attributable to the impact of a new contract
which went into effect January 1, 2009. Under the new Harrah’s contract, Harrah’s reimburses us for
the entire amount of fuel costs incurred. The per-block hour rate we charge Harrah’s is therefore
reduced from the rate we charged under the previous Harrah’s contracts under which we had been
responsible for a portion of the fuel expenses. The Harrah’s Reno program was closed in November
2009 with the Laughlin program expected to increase by similar amount of flying previously operated
from Reno. New fixed fee flying for 2009 included agreements for the Cuban Family Charter Program,
which began in June 2009, flying under an agreement with Beau Rivage Resorts, Inc., and fixed fee
flying for the Department of Defense which began in April 2009. The Cuban Family Charter Program
fixed fee flying was permanently ceased in October 2009 and the agreement with Beau Rivage
Resorts, Inc. ended in December 2009.

Other revenue. We generated other revenue of $5.8 million and $5.9 million during 2009 and 2008,

respectively. The revenue was primarily generated as a result of our April 2008 purchase of six MD-80
aircraft and three engines on lease to another airline. The six purchased aircraft have since been
returned to us, with all of these aircraft having been placed in service as of December 31, 2009. With
the return of all of these aircraft, we are not presently generating significant other revenue. While we
do not regularly seek to lease aircraft or engines to third parties, the economics of acquiring these
particular aircraft and engines close to the end of their existing leases to third parties were attractive
and we may in the future engage in similar leasing activities.

Operating Expenses

Despite a significant increase in departures, our operating expenses decreased by 2.8% to

$435.7 million in 2009 compared to $448.2 million in 2008 as the reduction in fuel expense more than
offset expense increases in other line items resulting from increased service and other factors.

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.

Year ended
December 31,

2009

2008

Percentage
Change

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aircraft fuel
Salaries and benefits . . . . . . . . . . . . . . . . . . . . . . . . .
Station operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance and repairs . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . .
Aircraft lease rentals . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating expense per passenger . . . . . . . . . . . . . . . .
Operating expense per passenger, excluding fuel . . . . .

$30.98
16.89
10.13
9.93
3.09
0.36
5.56
4.83

$81.77
$50.80

$ 53.43
16.75
10.11
9.65
3.34
0.65
5.46
4.86

$104.25
$ 50.83

(42.0)%
0.8
0.2
2.9
(7.5)
(44.6)
1.8
(0.6)

(21.6)%
(0.5)%

Our per-passenger costs decreased 21.6% primarily due to a 42.0% decrease in fuel expense per
passenger as a result of a 24.0% increase in the number of system passengers and a 40.9% reduction in
system average cost per gallon for 2009 compared to 2008.

The following table presents unit costs, defined as Operating expense per ASM (‘‘CASM’’), for the
indicated periods. The table also presents Operating CASM, excluding fuel, which represents operating
expenses, less aircraft fuel expense, divided by available seat miles. As on a per passenger basis,
excluding fuel on an ASM basis provides management and investors the ability to measure and monitor
our cost performance absent fuel price volatility.

We do not believe CASM is the most appropriate measure by which to evaluate our cost
management due to the evolving nature of our route network, our aggressive approach to managing
capacity (i.e., ASMs) on a seasonal basis, and the changing utilization of our fleet which results in some
of our expenses being more fixed as opposed to varying directly with ASM production. We provide this

table as a convenience because we recognize that CASM is widely used to compare costs in the airline
industry.

Aircraft fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salary and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Station operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance and repairs . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aircraft lease rentals . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expense per ASM (CASM) . . . . . . . . . . . . . .
CASM, excluding fuel . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended
December 31,

2009

2008

3.04¢
1.65
0.99
0.97
0.30
0.04
0.54
0.47
8.00¢
4.97¢

5.17¢
1.62
0.98
0.93
0.32
0.06
0.53
0.48
10.09¢

4.92¢

Percentage
Change

(41.2)%
1.9
1.0
4.3
(6.3)
(33.3)
1.9
(2.1)
(20.7)%
1.0%

Aircraft fuel expense. Despite our significant year-over-year expansion of service, aircraft fuel
expense decreased 28.1% to $165.0 million for 2009, down from $229.6 million for 2008, driven by a
40.9% decrease in the system average cost per gallon to $1.76 from $2.98. System gallons consumed
increased to 93.5 million from 77.0 million attributable to our 22.2% system departure growth.

Salary and benefits expense. Salary and benefits expense increased 25.0% to $90.0 million for 2009

up from $72.0 million for 2008 mainly as a result of a significant increase in accrued employee bonus
expense and an increase in the number of full-time equivalent employees. The increase in accrued
employee bonus expense was driven by the significant year-over-year increase in operating income. We
employed approximately 1,569 full-time equivalent employees at December 31, 2009 compared to 1,348
at December 31, 2008, a 16.4% increase in line with our fleet growth from an average number of
aircraft in service of 36.4 in 2008 to 42.7 in 2009. Excluding accrued employee bonus expense, stock
compensation expense and other incentives, our salary and benefits expense per average full-time
equivalent employee increased by only 2.8% year-over-year.

Station operations expense. Station operations expense increased 24.2% to $54.0 million in 2009

compared to $43.5 million in 2008 principally attributable to the impact of increased scheduled service
departures of 25.6%. Our station operations expense on a per-departure basis increased by only 1.6%
year-over-year.

Maintenance and repairs expense. Maintenance and repairs expense increased 27.7%, to
$52.9 million for 2009 up from $41.5 million for 2008 as the average number of aircraft in service
increased 17.3% from 36.4 in 2008 to 42.7 in 2009. The increase is primarily attributable to scheduled
heavy aircraft maintenance checks performed and impact of the growth in our fleet on the repair of
rotable aircraft parts for 2009 compared to 2008, a non-recurring inventory adjustment related to
low-value usage expendables during the first quarter of 2009, offset by a decrease in the engine
maintenance expense from less expensive engine maintenance events. In comparison with the prior
year, our scheduled heavy aircraft maintenance checks increased both in the number of events and
average expense per event, with percentage increases of 47.6% and 28.0%, respectively. Our average
maintenance and repairs expense per aircraft per month increased 8.9% from approximately $95,000 in
2008 to approximately $103,000 in 2009. The timing of maintenance events may cause our maintenance
and repairs expense to vary significantly from period to period.

Sales and marketing expense. Sales and marketing expense increased 14.6% to $16.5 million in
2009 compared to $14.4 million in 2008 as a result of advertising expenses associated with entrance into

new markets including the new major leisure destination of Los Angeles which launched service in May
2009.

Aircraft lease rentals expense. Aircraft lease rentals expense decreased by 31.6% to $1.9 million in
2009 down from $2.8 million in 2008. In each of 2009 and 2008, we had four aircraft under operating
lease agreements. In 2009, the average expense per aircraft was lower due to the purchase in 2008 of
two aircraft under lease being replaced by two less expensive aircraft which we began leasing in 2009.

Depreciation and amortization expense. Depreciation and amortization expense increased to
$29.6 million for 2009 from $23.5 million for 2008, an increase of 26.2%, as the number of aircraft
owned (including those leased to a third party) or subject to capital lease, increased from 36 as of
December 31, 2008 to 42 as of December 31, 2009. The increase was attributable to the impact of
lowering the depreciable lives of our engines at the beginning of 2009 and additional depreciation
related to non-aircraft equipment purchases during 2009.

Other expense. Other expense increased 23.0% to $25.7 million for 2009 compared to
$20.9 million for 2008. The increase is due to an increase of $2.7 million in losses attributable to
dispositions of engines and a reduction in the value of engines we hold on consignment. Another
contributing factor to the increase is from other expenses associated with our growth, such as rent for
our Company headquarters and aircraft insurance.

Other (Income) Expense

Other (income) expense increased, from a net other expense of $0.6 million for 2008, to a net
other expense of $1.7 million for 2009. The increased expense is primarily attributable to a reduction of
interest income earned on cash balances in 2009 compared to the same period of 2008 partially offset
by a reduction in interest expense due to lower debt balances.

Income Tax Expense

Our effective income tax rate was 36.7% for 2009 compared to 35.9% for 2008. The higher
effective tax rate for 2009 was largely due to the geographic mix from our flying and the impact this
had on the state income tax portion of the tax provision. While we expect our tax rate to be fairly
consistent in the near term, it will tend to vary depending on recurring items such as the amount of
income we earn in each state and the state tax rate applicable to such income. Discrete items particular
to a given year may also affect our tax rates.

2008 Compared to 2007

We recorded total operating revenue of $504.0 million, income from operations of $55.8 million
and net income of $35.4 million for 2008. By comparison, in 2007, we recorded total operating revenue
of $360.6 million, income from operations of $44.1 million and net income of $31.5 million.

Operating Revenue

Our operating revenue increased 39.8% to $504.0 million in 2008 from $360.6 million in 2007 due
to increases in scheduled service, fixed fee contract, ancillary and other revenue. The 39.8% increase in
operating revenue outpaced a 31.7% increase in total system passengers, indicating our success in
increasing revenue per passenger from 2007 to 2008. The increase in system passengers was in turn
driven by a 24.5% increase in system departures and an increase in system load factor from 81.3% to
87.0%.

ASMs increased by a more modest 14.9% as the increase in departures was offset by a 7.8%

decline in average stage length. RASM increased by 21.7%, as we successfully grew revenue,
particularly ancillary revenue, faster than capacity in 2008.

Scheduled service revenue. Scheduled service revenue increased 27.8% to $331.0 million in 2008

from $258.9 million in 2007 driven by a 29.1% increase in the number of scheduled service passengers
carried and a 1.0% reduction in scheduled service air fare per passenger. Scheduled service air fare per
passenger declined only 1.0% despite a 4.3% reduction in scheduled average stage length from 2007 to
2008. Scheduled service passenger growth was driven by a 17.8% increase in scheduled service
departures and a 6.8 percentage point increase in scheduled service load factor to 89.9%. Departure
growth in 2008 was driven in part by the full-year effect of our newly established major leisure
destinations of Phoenix and Ft. Lauderdale in late 2007, as well as service increases in our other bases.

Fixed fee contract revenue. Fixed fee contract revenue increased 48.5% to $52.5 million in 2008 up
from $35.4 million in 2007 as we had 10,181 block hours of fixed fee flying in 2008 compared to 7,069
in 2007. The substantial increase in fixed fee contract revenue was primarily due to additional flying
under a contract with a third Harrah’s Entertainment, Inc. subsidiary that started in January 2008 and
under a contract with MLT Vacations which began in May 2008 and ended in October 2008, neither of
which were in place in the prior year. Block hours for fixed fee flying under Harrah’s contract
increased 58.3%, from 4,862 hours during 2007 to 7,696 hours during 2008. These new contracts more
than offset the loss of revenue from our contract with Apple Vacations West which ended in April
2007.

Ancillary revenue. Ancillary revenue increased 76.4% to $114.6 million in 2008 up from

$65.0 million in 2007, driven by a 29.1% increase in scheduled service passengers and a 36.7% increase
in ancillary revenue per scheduled passenger from $21.53 to $29.43. The increase in ancillary revenue
per scheduled passenger was due to the sale of several new products and higher prices charged for
certain existing products. For instance, the adoption of checked baggage fees by almost all of the larger
airlines in the United States facilitated the increase in our baggage fees to comparable levels. The
following table details ancillary revenue per scheduled service passenger from air-related charges and
third party products:

Year Ended
December 31,

2008

2007

% Change

Air-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third party products . . . . . . . . . . . . . . . . . . . . . . . . . .

$24.52
4.91

$16.01
5.52

53.2%
(11.1)%

Total ancillary revenue per scheduled service

passenger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$29.43

$21.53

36.7%

The following table details the calculation of ancillary revenue from third party products.

Year Ended
December 31,

(in thousands)

2008

2007

% Change

Gross ancillary revenue—third party . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs(a) . . . . . . . . . . . . . . . . . . . . . . . .

$ 72,982
(50,143)
(3,733)

$ 68,443
(47,926)
(3,823)

6.6%
4.6%
(2.4)%

Ancillary revenue—third party products . . . . . . . . . .

$ 19,106

$ 16,694

14.4%

As percent of gross ancillary revenue—third party . . . .

26.2%

24.4% 1.8pp

(a) Includes credit card fees and travel agency commissions

During 2008, we generated gross revenue of $73.0 million from third party products, which

resulted in net revenue of $19.1 million. The majority of the gross revenue was generated from the sale
of over 400,000 hotel room nights at our leisure destinations packaged to our customers with scheduled
air service.

Other revenue. We generated other revenue of $5.9 million during 2008 as a result of the purchase

of six MD-80 aircraft and three engines on lease to another airline early in the year. Two of these
aircraft were returned to us under the terms of the lease in the fourth quarter of 2008 and one of these
was placed in service by the end of 2008. We generated other revenue of $1.3 million in 2007 due to
the purchase of eight engines on lease to another airline. We received these engines in the fourth
quarter of 2007 under the terms of the lease.

Operating Expenses

Our operating expenses increased by 41.6% to $448.2 million in 2008 compared to $316.5 million

in 2007. The following table presents Operating expense per passenger for the indicated periods.

Year ended
December 31,

2008

2007

Percentage
Change

Aircraft fuel
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries and benefits . . . . . . . . . . . . . . . . . . . . . . . . .
Station operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance and repairs . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . .
Aircraft lease rentals . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating expense per passenger . . . . . . . . . . . . . . . .
Operating expense per passenger, excluding fuel . . . . .

$ 53.43
16.75
10.11
9.65
3.34
0.65
5.46
4.86

$104.25
$ 50.82

$46.61
17.03
10.33
7.89
3.92
0.92
4.90
5.36

$96.96
$50.35

14.6%
(1.6)
(2.1)
22.3
(14.8)
(29.3)
11.4
(9.3)

7.5%
1.0%

Our per-passenger costs increased at a substantially slower pace than our overall expenses due to a
31.7% increase in the number of system passengers carried in 2008 as compared with 2007, significantly
above the increase in system departures of 24.5%.

The following table presents unit costs, defined as Operating expense per ASM (‘‘CASM’’) and

Operating CASM, excluding fuel, for the indicated periods.

Year Ended
December 31,

2008

2007

5.17¢ 3.94¢
1.44
1.62
0.87
0.98
0.67
0.93
0.33
0.32
0.08
0.06
0.53
0.41
0.45
0.48
10.09¢ 8.19¢
4.92¢ 4.25¢

Percentage
Change

31.2%
12.5
12.6
38.8
(3.0)
(25.0)
29.3
6.6
23.2%
15.8%

Aircraft fuel expense. Aircraft fuel expense increased 50.9% to $229.6 million in 2008, up from

$152.1 million in 2007, driven by a substantial increase in the average cost per gallon to $2.98 during
2008 from $2.30 in 2007, coupled with a 16.6% increase in gallons consumed to 77.0 million from
66.0 million. The increase in gallons consumed was in-line with the increase in system departures of
24.5% and the reduction in average stage length of 7.8% for the year. Beginning in 2008, we started
taking significant steps to conserve fuel which includes taxi-ing with one engine and ensuring flights
were flown at more fuel efficient speeds.

Salary and benefits expense. Salary and benefits expense increased 29.5% to $72.0 million in 2008
up from $55.6 million in 2007, driven by a 14.2% increase in full-time equivalent employees to support
a 30.9% increase in our average fleet from 27.8 during 2007 to 36.4 aircraft during 2008. We employed
approximately 1,348 full-time equivalent employees at December 31, 2008, compared to 1,180 full-time
equivalent employees at December 31, 2007. In addition, our monthly average salary and benefit
expense per full-time equivalent increased to $4,206 during 2008 compared to $3,827 during 2007.

Station operations expense. Station operations expense increased 28.9% to $43.5 million in 2008

compared to $33.7 million in 2007 driven by increased system departures of 24.5%. Station operations
expense per departure increased only 3.6% in 2008 compared to 2007 despite much fuller aircraft, as
reflected in a 5.7 percentage point increase in system load factor from 81.7% in 2007 to 87.0% in 2008.
The modest increase in station operations expense per departure occurred despite a significant increase
in the proportion of fixed-fee flying for 2008, which generally has a higher station operations expense
per departure. During 2008, 16.0% of total system departures were fixed fee flying, compared to 11.4%
during 2007.

Maintenance and repairs expense. Maintenance and repairs expense increased 60.9% to

$41.5 million in 2008 compared to $25.8 million in 2007. The percentage increase in expense greatly
exceeded the 30.9% increase in the average number of aircraft in our fleet from 27.8 in 2007 to 36.4 in
2008. Among the main reasons for significantly increased maintenance costs were an increase in repair
costs of rotable parts, increased engine maintenance events, and an increase in scheduled heavy
maintenance checks from 18 in 2007 to 21 in 2008. The timing and type of maintenance events may
cause our maintenance and repairs expense to vary significantly from period to period and this
occurred from 2007 to 2008, as each maintenance event that happened to be required during 2008 was
more costly, on average, than those of 2007.

Sales and marketing expense. Sales and marketing expense increased 12.2% to $14.4 million in
2008 compared to $12.8 million in 2007, driven primarily by an increase in credit card discount fees
associated with the 37.5% increase in scheduled service and ancillary revenue.

Aircraft lease rentals expense. Aircraft lease rentals expense decreased slightly to $2.8 million in
2008 from $3.0 million in 2007. The average number of aircraft under operating leases during 2008 was
comparable to the average for 2007. In July 2008, we purchased for cash two MD-80 aircraft that had
been operated under operating leases which reduced the total number of aircraft under operating
leases to two as of December 31, 2008.

Depreciation and amortization expense. Depreciation and amortization expense was $23.5 million in

2008 compared to $16.0 million in 2007, an increase of 46.9%, in-line with the increase in the number
of aircraft owned and subject to capital leases which increased from 28 at December 31, 2007 to 41 at
December 31, 2008. The number of aircraft at December 31, 2008 included aircraft on lease to a third
party at the time of acquisition.

Other expense. Other expense increased by 19.6% to $20.9 million in 2008 compared to

$17.5 million in 2007 due mainly to increased aviation insurance (as our fleet increased in size), higher
loss from engine dispositions, and increased rent associated with our new Company headquarters
building.

Other (Income) Expense

Other (income) expense changed from a net other income of $6.6 million in 2007 to a net other

expense of $0.6 million in 2008. This change is primarily attributable to two factors: (1) a gain on fuel
derivatives of $2.6 million in 2007 compared to a minimal loss on our few remaining fuel derivatives in
2008 and (2) a reduction in interest income earned on cash balances from $9.2 million in 2007 to
$4.7 million as a result of lower prevailing interest rates.

Income Tax Expense

Our effective income tax rate was 35.9% for 2008 compared to 37.9% in 2007. The lower effective

tax rate for 2008 was largely attributable to the year-over-year geographic mix of our flying and the
impact this had on the state income tax portion of the tax provision.

LIQUIDITY AND CAPITAL RESOURCES

During 2009, our primary source of funds was cash generated by our operations. Our operating
cash flows have allowed us to maintain a high level of liquidity while growing our fleet and meeting our
short term obligations. Our future needs for capital are generally for the purchase of additional
aircraft. To meet future capital needs, we expect to continue to use operating cash flows. As we have
done in the past, we also would consider raising funds through debt financing if terms are acceptable.
However, access to financing is not required for us to meet our future capital obligations.

In the fourth quarter of 2009, we entered into purchase agreements for 20 MD-80 series aircraft
for delivery in the first three quarters of 2010. We anticipate funding the purchase of these aircraft with
available cash assets.

Current Liquidity

Our total cash, including cash and cash equivalents, restricted cash and short-term investments,

totaled $249.3 million, $190.8 million and $186.8 million at December 31, 2009, 2008 and 2007,
respectively. Restricted cash represents credit card deposits, escrowed funds under our fixed fee flying
contracts, and cash collateral against letters of credit required by hotel partners for guaranteed room
availability, airports and certain other parties. Short-term investments represent marketable securities
which are available-for-sale. During 2009 and 2008, our restricted cash balances increased by
$1.8 million and $0.6 million, respectively, as a result of an increase in the number of letters of credit
and higher amounts on a number of existing letters of credit issued to our hotel vendors and some
airports.

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. Prepayments are recorded as
restricted cash and a corresponding amount is recorded as air traffic liability.

Sources and Uses of Cash

Operating activities. During 2009, our operating activities provided $131.7 million of cash

compared to $71.6 million during 2008. The cash flows provided by operations for 2009 were primarily
the result of $76.3 million of net income and a $21.6 million increase in air traffic liability, which
results from passenger bookings for future travel. During 2008, net income was $35.4 million and air
traffic liability declined from the previous year. The cash flows provided from these items in 2009 were
partially offset by $9.9 million of cash used for the prepayment of hotel rooms.

Investing activities. Cash used in investing activities during 2009 was $97.2 million compared to
$100.5 million used in 2008. Cash used in investing activities for both years reflected the purchase of
MD-80 aircraft, expenditures required for the induction of owned aircraft to enter our operating fleet
and the purchase of rotable and other parts. During 2009, we spent $31.7 million primarily for 11

aircraft, ten of which are to be used as a source of spare engines and parts. During 2008, we spent
$54.1 million primarily on 15 aircraft, two of which were previously under operating leases, five of
which were previously under capital leases, six aircraft purchased free and clear, and two other aircraft
purchased with partial financing. The six aircraft purchased free and clear were acquired in April 2008
while sub-leased to a third party. The aircraft were returned to us gradually over 2008 and 2009, with
the majority of the induction costs related to these six aircraft incurred during 2009 when five aircraft
entered our operating fleet. We also used cash in the purchase of available-for-sale investments, net of
proceeds from sales and maturities, of $64.1 million in 2009 compared to $50.0 million in 2008.

Financing activities. We used $41.4 million of cash in financing activities during 2009 compared to
$18.2 million used in 2008. Cash used in financing activities for 2009 consisted of $25.9 million to make
principal payments on our debt obligations and $25.4 million to repurchase shares of our common
stock. These outflows were partially offset by proceeds of $7.0 million attributable to a loan agreement
secured by two previously unencumbered aircraft. During 2008, we used $16.7 million to repurchase
shares of our common stock and $29.8 million to retire capital lease obligations for five aircraft and
make other debt principal payments. These uses of cash were partially offset by $25.6 million obtained
from the financing of ten aircraft.

Debt

Of the 42 aircraft (46 total aircraft in operating fleet) we own as of December 31, 2009, we had

secured debt financing on 23 aircraft, capital lease financing on two aircraft, with the remaining 17
aircraft owned free and clear. During 2009, we received proceeds of $7.0 million through the issuance
of notes payable secured by two aircraft. We have remaining debt obligations of $42.3 million in notes
as of December 31, 2009. The outstanding notes are secured by 23 aircraft and are scheduled to
mature between 2010 and 2014. The equipment notes bear interest at fixed rates between 6.0% and
8.5% with principal and interest payable monthly. Each note is secured by a first mortgage on the
aircraft to which it relates.

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

The following table discloses aggregate information about our contractual cash obligations as of

December 31, 2009 and the periods in which payments are due (in thousands):

Long-term debt obligations(1) . . . . . . . . . . . . . . $ 46,013
3,700
Capital lease obligations . . . . . . . . . . . . . . . . . .
27,760
Operating lease obligations(2) . . . . . . . . . . . . . .
30,869
Aircraft purchase obligations(3) . . . . . . . . . . . . .

Total

Less than
1 year

$23,576
2,220
4,974
30,869

$21,606
1,480
11,696
—

Total future payments on contractual obligations . $108,342

$61,639

$34,782

$ 831
—
5,043
—

$5,874

1-3 years

3 to 5 years

More than
5 years

$ —
—
6,047
—

$6,047

(1) Long-term debt obligations include scheduled interest payments.

(2) Operating lease obligations include aircraft operating leases and leases of office space and airport
station property. In 2010 we expect to take ownership of two MD-80 aircraft under operating
leases for which we exercised purchase options.

(3) Aircraft purchase obligations include purchase agreements entered into during the fourth quarter

of 2009 for 20 aircraft. We expect to place 15 of these aircraft into service by the end of 2011, with
five aircraft to be used for spare engines and rotable parts.

OFF-BALANCE SHEET ARRANGEMENTS

We have obligations for aircraft that are classified as operating leases and therefore are not
reflected on our balance sheet. As of December 31, 2009, we operated four of our aircraft under
operating lease agreements. The operating leases for two aircraft have terms extending through
November 2012 and include the option to purchase in the fourth quarter of 2010, which we exercised in
February 2010. The operating leases for the other two aircraft have terms extending through June 2014.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations is based upon our
consolidated financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amount of assets and liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities at the date of our financial
statements. Note 2 to our Consolidated Financial Statements provides a detailed discussion of our
significant accounting policies.

Critical accounting policies are defined as those policies that reflect significant judgments about
matters that are inherently uncertain. These estimates and judgments affect the reported amount of
assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at
the date of our financial statements. Our actual results may differ from these estimates under different
assumptions or conditions. We believe our critical accounting policies are limited to those described
below.

Revenue Recognition. Scheduled service revenue consists of passenger revenue involving limited
frequency nonstop flights between our leisure destinations and small cities recognized when the travel-
related service or transportation is provided or when the itinerary expires unused. Nonrefundable
scheduled itineraries expire on the date of the intended flight, unless the date is extended by
notification from the customer in advance. Itineraries sold for transportation, but not yet used, as well
as unexpired credits, are included in air traffic liability.

Various taxes and fees assessed on the sale of tickets to end customers are collected by us as an
agent and remitted to taxing authorities. These taxes and fees have been presented on a net basis in
our consolidated statements of income and recorded as a liability until remitted to the appropriate
taxing authority.

Fixed fee contract revenue consists largely of long-term agreements to provide charter service on a

seasonal and ad hoc basis to affiliates of Harrah’s Entertainment Inc., Department of Defense
(‘‘DOD’’) and others. Fixed fee contract revenue is recognized when the transportation is provided.

Ancillary revenue consists of passenger revenue from air-related charges and third party products.
Air-related charges include optional services provided to passengers such as the use of our website to
purchase scheduled service transportation, advance seat assignments, priority boarding, unlimited
changes to nonrefundable itineraries and other services. Revenues from air-related charges are
recognized when the transportation is provided if the product is not deemed independent of the
scheduled service. Revenues from change fees for charges imposed on passengers for making changes
to nonrefundable itineraries are recognized as they occur. Ancillary revenue is also generated from
third party products such as the sale of hotel rooms, rental cars, ticket attractions and other items.
Revenues from the sale of third party products are recognized at the time the product is utilized, such
as the time a purchased hotel room is occupied. The amount of revenues attributed to each element of
a bundled sale involving air-related charges and third party products in addition to airfare is
determined in accordance with accounting standards for revenue arrangements with multiple
deliverables. The sale of ancillary revenue products is recorded net of amounts paid to wholesale

providers, travel agent commissions and credit card processing fees in accordance with revenue
reporting accounting standards.

Effective October 1, 2009, we adopted an accounting convention for the recognition of revenue
from our travel protection product (Trip-Flex) for unlimited changes to nonrefundable itineraries. The
adoption of this accounting convention results in recognition of the related revenue at the time the
transportation is provided, a change from the previously used accounting convention for the recognition
of revenue at the time of purchase. We concluded for 2007, 2008 and the interim periods of 2009, that
the difference between the application of these accounting conventions is not material to the results of
operations, the applicable individual elements of our financial statements or our financial position.

Other revenue is generated from leased out aircraft and flight equipment and other miscellaneous

sources. Lease revenue is recognized on a straight-line basis over the lease term.

Accounting for Long-Lived Assets. When appropriate, we evaluate our long-lived assets for

impairment. We record impairment losses on long-lived assets used in operations when events or
circumstances indicate that the assets may be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the net book value of those assets. In making these
determinations, we utilize certain assumptions, including, but not limited to: (i) estimated fair market
value of the assets; and (ii) estimated future cash flows expected to be generated by these assets, which
are based on additional assumptions such as asset utilization, length of service the asset will be used in
our operations, and estimated salvage values.

Aircraft maintenance and repair costs. We account for maintenance activities under the direct
expense method. Under this method, maintenance and repair costs for owned and leased aircraft,
including major overhaul maintenance costs, are charged to operating expenses as incurred. As a lessee,
we may be required under provisions of our lease agreements to make payments to the lessor in
advance of the performance of major maintenance activities. These payments of maintenance deposits
are calculated based on a performance measure, such as flight hours or cycles, and are available for
reimbursement to us upon the completion of the maintenance of the leased aircraft. Guidance on
accounting for maintenance deposits requires these payments to be accounted for as an asset until
reimbursed for incurred maintenance costs or until it is determined that any portion of the estimated
total of the deposit is less than probable of being returned. In addition, payments of maintenance
deposits that are not ‘‘substantially and contractually related to the maintenance of the leased asset’’
are expensed as incurred. Maintenance deposits totaled $2.0 million and $1.1 million as of
December 31, 2009 and 2008, respectively. Under our existing aircraft lease agreements with purchase
options, if we exercise the option to purchase the aircraft and there are excess maintenance deposit
balances upon the exercise of the purchase option, any excess amounts are applied to the purchase
price as an additional down payment.

Fuel Derivatives.

In accordance with derivative instruments accounting standards, we have not

historically qualified for hedge accounting. Therefore, we have accounted for unrealized changes in fair
value of fuel derivative contracts in ‘‘Other (income) expense’’ of our consolidated statements of
income. See Item 8—Financial Statements and Supplementary Data—Notes to Consolidated Financial
Statements—Note 10—Financial Instruments and Risk Management for more information on financial
derivative instruments.

Short-term Investments. We maintain a liquid portfolio of investments that are available for

current operations and to satisfy on-going obligations. We have classified our short-term investments as
‘‘available for sale’’ and accordingly, unrealized gains or losses are reported as a component of
comprehensive income in stockholders’ equity.

Share-based compensation. We have issued common stock, restricted stock, stock options and stock
appreciation rights (‘‘SARs’’) to executives and employees pursuant to our long-term incentive plan and

warrants to the placement agent involved in our May 2005 issuance of redeemable convertible
preferred shares. For the years ended December 31, 2009, 2008 and 2007, we recorded $3.1 million,
$1.7 million and $1.0 million, respectively, of compensation expense in the consolidated statements of
income related to stock options, SARs and restricted stock.

We recognize stock-based compensation expense over the requisite service period using a fair value
approach. Determining the fair value requires judgment, and we use the Black-Scholes valuation model
for equity instruments issued. Significant judgment is required to establish the assumptions to be used
in the Black- Scholes valuation model. These assumptions are for the volatility of our common stock,
estimated term over which our stock options and SARs will be outstanding, and interest rate to be
applied. Expected volatilities are based on the historical volatilities from publicly traded airline
companies of our peer group due to our lack of historical information. Expected term represents the
weighted average time between the option’s grant date and its exercise date. We used the simplified
method from accounting guidance for companies with a limited trading history, to estimate the
expected term on 2009 and 2008 award grants. We used our best estimate and comparisons to industry
peers on 2007 award grants. The risk-free interest rate for periods equal to the expected term of the
stock option is based on a blended historical rate using Federal Reserve rates for U.S. Treasury
securities.

In December 2006, we issued 100,000 restricted shares under our long-term incentive plan, which
were allocated as of the date of our initial public offering among our employees at the manager level
or below. As required by stock-based compensation accounting standards, the fair value of the shares at
the date of issuance was based on our initial offering price, and was expensed ratably over the
three-year vesting period. The total compensation expense from this restricted share grant was $18.00
per share for a total expense of $1.8 million recognized over a three-year period. As of December 31,
2009, there are no unvested shares related to this grant. We have used our closing share price on the
grant date as the fair value for all subsequent issuances of restricted stock.

RECENT ACCOUNTING PRONOUNCEMENTS

See related disclosure at ‘‘Item 8—Financial Statements and Supplementary Data—Notes to

Consolidated Financial Statements—Note 2—Summary of Significant Accounting Policies.’’

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this annual report on Form 10-K, and in this 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 the information concerning our possible or
assumed future results of operations, business strategies, financing plans, competitive position, industry
environment, potential growth opportunities, future service to be provided and 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’’ 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 may be
found in Item 1A of this annual report on Form 10-K and generally may be found in our periodic
reports and registration statements filed with the Securities and Exchange Commission at www.sec.gov.
These risk factors include, without limitation, increases in fuel prices, the effect of the economic
downturn on leisure travel, terrorist attacks, risks inherent to airlines, demand for air services to our
leisure destinations from the markets served by us, our ability to implement our growth strategy, our

dependence on our leisure destination markets, our ability to add, renew or replace gate leases, the
competitive environment, problems with our aircraft, dependence on fixed fee customers, our reliance
on our automated systems, economic and other conditions in markets in which we operate,
governmental regulation, our ability to obtain regulatory approvals, increases in maintenance costs and
cyclical and seasonal fluctuations in our operating results.

Any forward-looking statements are based on information available to us today and we undertake
no obligation to update publicly any forward-looking statements, whether as a result of future events,
new information or otherwise.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are subject to certain market risks, including commodity prices (specifically, aircraft fuel). The

adverse effects of changes in these markets could pose a potential loss as discussed below. The
sensitivity analysis does not consider the effects that such adverse changes may have on overall
economic activity, nor does it consider additional actions we may take to mitigate our exposure to such
changes. Actual results may differ. See the Notes to the consolidated financial statements for a
description of our financial accounting policies and additional information.

Aircraft Fuel

Our results of operations can be significantly impacted by changes in the price and availability of

aircraft fuel. Aircraft fuel expense for the years ended December 31, 2009 and 2008 represented
approximately 37.9% and 51.2% of our operating expenses, respectively. Increases in fuel prices or a
shortage of supply could have a material effect on our operations and operating results. Based on our
2009 fuel consumption, a hypothetical ten percent increase in the average price per gallon of aircraft
fuel would have increased fuel expense by approximately $16.4 million for the year ended
December 31, 2009. While we do not currently hedge fuel price risk, prior to 2008, we entered into
forward contracts or other financial products to reduce our exposure to fuel price volatility. As of
December 31, 2009, we had no fuel derivative contracts outstanding.

Interest Rates

We have market risk associated with changing interest rates due to the short-term nature of our

invested cash, which totaled $90.2 million, and short term investments of $141.2 million at
December 31, 2009. We invest available cash in money market funds, certificates of deposit, investment
grade commercial paper and other highly rated financial instruments. Because of the short-term nature
of these investments, the returns earned closely parallel short-term floating interest rates. A
hypothetical 100 basis point change in interest rates for the years ended December 31, 2009 and 2008,
would have affected interest income from cash and investments by $0.2 million and $0.5 million,
respectively.

Our long-term debt consists of fixed rate notes payable and capital lease arrangements. A

hypothetical 100 basis point change in market interest rates as of December 31, 2009, would not have a
material effect on the fair value of our fixed rate debt instruments. Also, a hypothetical 100 basis point
change in market rates would not materially impact our earnings or cash flow associated with our
fixed-rate debt.

Item 8. Financial Statements and Supplementary Data

The following consolidated financial statements as of December 31, 2009 and 2008 and for each of

the three years in the period ended December 31, 2009 are included below.

Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity and Comprehensive Income . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . .

50
52
53
54
56
58

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of
Allegiant Travel Company

We have audited the accompanying consolidated balance sheets of Allegiant Travel Company and

subsidiaries (the ‘‘Company’’) as of December 31, 2009 and 2008, and the related consolidated
statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the
three years in the period ended December 31, 2009. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects,

the financial position of the Company as of December 31, 2009 and 2008, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2009, in
conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Allegiant Travel Company’s internal control over
financial reporting as of December 31, 2009, based on criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 8, 2010, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Las Vegas, Nevada
March 8, 2010

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of
Allegiant Travel Company

We have audited Allegiant Travel Company and subsidiaries’ (the ‘‘Company’’) internal control

over financial reporting as of December 31, 2009, based on criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Allegiant Travel Company and subsidiaries’ management is
responsible for maintaining effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained
in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or

detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

In our opinion, Allegiant Travel Company and subsidiaries maintained, in all material respects,

effective internal control over financial reporting as of December 31, 2009, based on the COSO
criteria.

We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of the Company as of December 31,
2009 and 2008, and the related consolidated statements of income, stockholders’ equity and
consolidated income, and cash flows for each of the three years in the period ended December 31,
2009 and our report dated March 8, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Las Vegas, Nevada
March 8, 2010

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands, except for share amounts)

December 31,
2009

December 31,
2008

Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowance for doubtful accounts of $— at

$ 90,239
17,841
141,231

$ 97,153
16,032
77,635

December 31, 2009 and December 31, 2008 . . . . . . . . . . . . . . . . . . . . .

7,476

5,575

Expendable parts, supplies and fuel, net of allowance for obsolescence of

$659 and $539 at December 31, 2009 and December 31, 2008,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Investment in and advances to unconsolidated affiliates, net
Deposits and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,673
19,432
269
2,712

289,873
204,533
1,353
3,880

7,005
9,261
111
1,645

214,417
205,751
711
3,097

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$499,639

$423,976

Current liabilities:

Current maturities of notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current maturities of capital lease obligations . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Air traffic liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 21,297
2,041
20,990
23,699
90,554

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

158,581

Long-term debt and other long-term liabilities:

Notes payable, net of current maturities . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligations, net of current maturities . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21,027
1,442
26,566

$ 23,435
1,903
17,461
19,232
68,997

131,028

35,904
3,483
19,640

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

207,616

190,055

Stockholders’ equity:

Common stock, par value $.001, 100,000,000 shares authorized;

21,088,633 and 20,917,477 shares issued; 19,850,090 and 20,339,646
shares outstanding, as of December 31, 2009 and December 31, 2008,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treasury stock, at cost, 1,238,543 and 577,831 shares at December 31,

2009 and December 31, 2008, respectively . . . . . . . . . . . . . . . . . . . . .
Additional paid in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(42,149)
171,887
92
162,172

(16,713)
164,206
566
85,841

233,921

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

292,023

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .

$499,639

$423,976

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

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except for share amounts)

Year Ended December 31,

2009

2008

2007

OPERATING REVENUE:

Scheduled service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ancillary revenue:

Air-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third party products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total ancillary revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed fee contract revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$346,222

$330,969

$258,943

143,001
19,715

162,716
43,162
5,840

95,490
19,106

114,596
52,499
5,948

48,333
16,694

65,027
35,339
1,264

Total operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

557,940

504,012

360,573

OPERATING EXPENSES:

Aircraft fuel
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salary and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Station operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance and repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aircraft lease rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

165,000
90,006
53,993
52,938
16,458
1,926
29,638
25,728

229,640
72,007
43,476
41,465
14,361
2,815
23,489
20,911

152,149
55,593
33,724
25,764
12,803
3,004
15,992
17,484

Total operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

435,687

448,164

316,513

OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

122,253

55,848

44,060

OTHER (INCOME) EXPENSE:

Loss (gain) on fuel derivatives, net . . . . . . . . . . . . . . . . . . . . . . . .
Loss (earnings) from unconsolidated affiliates, net . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other (income) expense . . . . . . . . . . . . . . . . . . . . . . . . .

—
84
—
(2,474)
4,079

1,689

INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . .
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . .

120,564
44,233

11
(96)
—
(4,730)
5,411

596

55,252
19,845

(2,613)
(457)
63
(9,161)
5,523

(6,645)

50,705
19,196

NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 76,331

$ 35,407

$ 31,509

Earnings Per Share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.82

3.76

1.75

1.73

1.56

1.53

Weighted average shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,982
20,278

20,289
20,500

20,243
20,529

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

ALLEGIANT TRAVEL COMPANY

(in thousands)

Common Stock

Par
Shares Value

APIC

Accumulated
Other
Comprehensive
Income

Deferred
Compensation—
Restricted
Stock

Retained
Earnings

Less:
Treasury
Shares

Total

5
4

Balance at December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,796
Reclassification of deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from secondary public offering, net of offering expenses . . . . . . . . . . . . . . .
Stock compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions to members
Issuance of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercises of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from stock option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares repurchased and retired by the Company . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancellation of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income:

$20
— —
748
1
— —
— —
22 —
204 —
— —
(20) —
(12) —
— —

Unrealized gain on short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— —
— —
— —

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,738
Stock compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercises of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from stock option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancellation of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares repurchased by the Company and held as treasury shares . . . . . . . . . . . . . . . .
Comprehensive income:

21
— —
7 —
175 —
— —
(3) —
— —

Unrealized gain on short-term investments, net of tax . . . . . . . . . . . . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— —
— —
— —

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$136,159
(1,800)
22,265
1,006
—
—
764
2,139
(647)
—
(23)

—
—
—

159,863
1,702
—
1,040
1,602
—
—

—
(1)
—

4
—
—
—
—
—
—
—
—
—
—

14
(5)
—

13
—
—
—
—
—
—

553

—

Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,917

164,206

566

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

$(1,800)
1,800
—
—
—
—
—
—
—
—
—

—
—
—

—
—
—
—
—
—
—

—
—
—

—

$ 19,088 $

—
—
—
(163)
—
—
—
—
—
—

—
—
31,509

— $153,471
—
—
— 22,266
1,006
—
(163)
—
—
—
—
764
2,139
—
(647)
—
—
—
(23)
—
—
—
14
—
—
(5)
— 31,509

31,518

— 210,331
50,434
1,702
—
—
—
—
—
1,040
—
—
1,602
—
—
—
—
—
(16,713)
— (16,713)

—
—
35,407

553
—
—
(1)
— 35,407

35,959

85,841

(16,713) 233,921

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (Continued)

ALLEGIANT TRAVEL COMPANY

(in thousands)

Common Stock

Accumulated
Other
Comprehensive
Income

Deferred
Compensation—
Restricted
Stock

Retained
Earnings

Less:
Treasury
Shares

Total

Par
Shares Value

5
5

Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,917
Stock compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of unregistered shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercises of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from stock option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancellation of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares repurchased by the Company and held as treasury shares . . . . . . . . . . . . . . . .
Comprehensive income:

21
— —
33 —
42 —
99 —
— —
(2) —
— —
— —

Unrealized loss on short-term investments, net of tax . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— —
— —

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

APIC

164,206
3,109
—
1,648
1,742
1,157
—
25
—

566
—
—
—
—
—
—
—
—

—
—

(474)
—

—
—
—
—
—
—
—
—
—

—
—

85,841
—
—
—
—
—
—
—
—
—
—
—
—
—
(80)
— (25,356)

(16,713) 233,921
3,109
—
1,648
1,742
1,157
—
(55)
(25,356)

—
76,331

—
(474)
— 76,331

75,857

Balance at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,089

$21

$171,887

$ 92

$ —

$162,172 $(42,149) $292,023

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

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

OPERATING ACTIVITIES:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by

operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on aircraft and other equipment disposals . . . . . . . . . . . . . . . . . . .
Provision for obsolescence of expendable parts, supplies and fuel
. . . . . .
Stock compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from stock option exercises . . . . . . . . . . . . . . . . . . .
Changes in certain assets and liabilities:

Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivable from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expendable parts, supplies and fuel
. . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Air traffic liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended December 31,

2009

2008

2007

$ 76,331

$ 35,407

$ 31,509

29,638
4,898
120
3,109
6,768
(1,157)

(1,809)
(1,901)
—
—
(3,788)
(10,171)
(1,067)
4,686
4,460
21,557

23,489
2,184
165
1,702
5,908
(1,602)

(611)
3,509
6,228
—
(626)
(1,993)
(93)
(2,239)
6,058
(5,854)

15,992
540
318
1,006
7,309
(2,139)

(4,212)
(3,334)
(6,228)
1,414
(3,115)
(6,556)
2,911
6,032
2,926
29,574

73,947

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . .

131,674

71,632

INVESTING ACTIVITIES:

Purchase of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale and maturities of short-term investments . . . . . . . . . .
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of property and equipment . . . . . . . . . . . . . . . . . . .
Investment in unconsolidated affiliates, net . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in lease and equipment deposits . . . . . . . . . . . . . . .

(124,434)
60,364
(31,663)
—
(642)
(838)

(101,753)
51,781
(54,119)
1,065
1,265
1,256

(27,110)
5,788
(42,132)
570
(1,976)
(4,067)

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . .

(97,213)

(100,505)

(68,927)

FINANCING ACTIVITIES:

Proceeds from issuance of common stock, net . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of notes payable . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from stock option exercises . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on notes payable . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on related party notes payable . . . . . . . . . . . . . . . . .
Principal payments on capital lease obligations . . . . . . . . . . . . . . . . . . .

—
7,000
1,157
1,742
(25,356)
(24,015)
—
(1,903)

—
25,625
1,602
1,040
(16,714)
(17,331)
—
(12,465)

22,265
—
2,139
764
(647)
(9,961)
(891)
(4,693)

Net cash (used in) provided by financing activities . . . . . . . . . . . . . .

(41,375)

(18,243)

8,976

Net change in cash and cash equivalents
. . . . . . . . . . . . . . . . . . . . . . . . . .
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . .

(6,914)
97,153

(47,116)
144,269

13,996
130,273

CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . .

$ 90,239

$ 97,153

$144,269

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

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in thousands)

Year ended December 31,

2009

2008

2007

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash Transactions:

Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,292

Income taxes paid, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 36,952

4,975

3,709

4,623

$ 16,685

Non-Cash Transactions:

Note payable issued for aircraft and equipment . . . . . . . . . . . . . . . . . . .

Acquisition of aircraft under capital lease . . . . . . . . . . . . . . . . . . . . . . .

Common stock issued for software operating system . . . . . . . . . . . . . . .

— $

7,200

— $

— $ 7,726

1,648

— $

—

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

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

1. Organization and Business of Company

Allegiant Travel Company is a leisure travel company focused on transporting travelers in small
cities to leisure destinations such as Las Vegas, Nevada, Orlando, Florida, Phoenix, Arizona, Tampa/
St. Petersburg, Florida, Los Angeles, California and Ft. Lauderdale, Florida. The Company operates a
low-cost passenger airline marketed primarily to leisure travelers in small cities, allowing it to sell air
travel both on a stand-alone basis and bundled with hotel rooms, rental cars and other travel related
services. The Company also provides charter air service under long-term contracts as well as on a
seasonal and ad-hoc basis. Because scheduled and chartered air services have similar operating margins,
economic characteristics, ‘‘production processes’’ involving check-in, baggage handling and flight
services which target the same class of customers and are subject to the same regulatory environment,
the Company believes it operates in one reportable segment. Additionally, the Company does not
separately track expenses for the scheduled and chartered air services.

In 2004, Allegiant Air, Inc., a California corporation, merged into Allegiant Air LLC, a newly
formed Nevada limited liability company. The purpose of the transaction was to change the form of the
business from a corporation to a limited liability company and to change the state of incorporation to
Nevada. By virtue of the merger, all of the operations, assets and liabilities of Allegiant Air, Inc. were
transferred to Allegiant Air LLC. The merger was accounted for as a transfer of assets and liabilities
among entities under common control and accordingly was recorded at historical cost. The
management and ownership did not change as a result of this merger.

In 2005, Allegiant Travel Company LLC and Allegiant Vacations LLC were formed as Nevada
limited liability companies. Allegiant Travel Company LLC was designated to serve as the holding
company for Allegiant Air LLC and Allegiant Vacations LLC. To effectuate this, all outstanding shares
of Allegiant Air LLC were exchanged for shares of Allegiant Travel Company LLC and thereafter
Allegiant Air LLC and Allegiant Vacations LLC became wholly owned subsidiaries of Allegiant Travel
Company LLC.

AFH, Inc., a Nevada corporation, was formed in August 2006 and is a wholly owned subsidiary of
Allegiant Travel Company. AFH, Inc. was formed to address fuel purchasing and storage opportunities.
SFB Fueling LLC is a 50% owned subsidiary of AFH, Inc. accounted for under the equity method.
SFB Fueling LLC, a joint venture agreement with Orlando Sanford International, Inc. (‘‘OSI’’), began
operations in January 2007 to handle certain fuel operations at the Orlando Sanford International
Airport.

On December 13, 2006, the Company completed the initial public offering of its common stock.
The Company issued 5,750,000 shares at $18.00 per share resulting in net proceeds of approximately
$94,500. Prior to the completion of its initial public offering in December 2006, the Company converted
from a Nevada limited liability company to a Nevada corporation. In connection with the conversion,
the outstanding common shares and preferred shares in the limited liability company were exchanged
for shares of common stock in the Company pursuant to the terms of a merger agreement with
Allegiant Travel Company, LLC. The reorganization did not affect the Company’s operations, which it
continued to conduct through its operating subsidiaries.

Allegiant Information Systems, Inc. was formed in March 2009 and is a wholly owned subsidiary of

Allegiant Travel Company. Allegiant Information Systems, Inc. was formed in conjunction with the

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

1. Organization and Business of Company (Continued)

merger with an organization that owned the exclusive rights to the travel applications of the software
operating system the Company has used since its inception. Allegiant Information Systems, Inc. is
responsible for the continued maintenance and development of the acquired software operating system.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of Allegiant Travel
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.

Certain presentation changes and reclassifications have been made to the prior year’s financial
statements to conform to 2009 classifications. These classifications had no effect on the previously
reported net income. In particular, the Company’s consolidated statements of income reflect additional
detail presented within operating revenue of the ancillary revenue categories of air-related charges and
third party products.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted

in the United States requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Due to the prospective nature of these
estimates, actual results could differ from those estimates.

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents include investments and interest bearing instruments with maturities of

three months or less at the date of acquisition. Such investments are carried at cost which approximates
market value. Restricted cash represents credit card deposits, escrowed funds under fixed fee flying
contracts and cash collateral against letters of credit required by hotel properties for guaranteed room
availability, airports and certain other parties.

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

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

2. Summary of Significant Accounting Policies (Continued)

as a component of accumulated comprehensive income in stockholders’ equity. Short-term investments
consisted of the following:

As of December 31, 2009

As of December 31, 2008

Gross
Unrealized

Cost

Gains (Losses) Market Value

Cost

Gains (Losses) Market Value

Debt securities issued by states
of the United States and
political subdivisions of the
states . . . . . . . . . . . . . . . . . . $ 76,599 $ 44

$(21)

$ 76,622

$ — $ — $—

$ —

Debt securities issued by the

U.S. Treasury and other U.S.
government corporations and
agencies . . . . . . . . . . . . . . . .

64,477

132

—

64,609

77,069

568

(2)

77,635

Total

. . . . . . . . . . . . . . . . . . . . $141,076 $176

$(21)

$141,231

$77,069 $568

$(2)

$77,635

The cost of marketable securities sold is determined by the specific identification method with any

realized gains or losses reflected in income. The Company recognized $307 of realized gains for the
year ended December 31, 2008 and no realized gains or losses for the years ended December 31, 2009
and 2007.

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 December 31, 2009:

Maturities

Year 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years 2011 through 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years 2015 through 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$139,493
1,583
—
—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$141,076

Expendable Parts, Supplies and Fuel

Expendable parts, supplies and fuel inventories are valued at cost using the first-in, first-out

method. An allowance for obsolescence has been recorded based upon historical results and
management’s expectations of future operations. Such inventories are charged to expense as they are
used in operations.

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

2. Summary of Significant Accounting Policies (Continued)

Software capitalization

The Company capitalizes certain costs related to the development of internal use software during

the application development stages of projects. The Company amortizes these costs using the
straight-line method over the estimated useful life of three years. The Company began the
capitalization of these certain costs during 2009. These costs have not been material during the period
of these financial statements. Costs incurred during the preliminary and post-implementation stages of
software development are expensed as incurred.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method to

their estimated residual values over their estimated useful lives as follows:

Aircraft and engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rotable parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . .

3-10 years
7 years
3-7 years

Aircraft and engines have an estimated average residual value of 17.3% of original cost; other

property and equipment are assumed to have no residual value.

Aircraft under capital lease arrangements are depreciated over the shorter of the useful life of the

aircraft or remaining lease term. Depreciation for these aircraft is included in depreciation and
amortization expense in the Company’s consolidated statements of income.

Investment in unconsolidated affiliates

The Company uses the equity method to account for AFH Inc.’s, a wholly-owned subsidiary,
investment in a fuel joint venture. AFH, Inc. entered into a 50% interest in a joint venture agreement
with OSI to handle certain fuel operations for the Orlando Sanford International Airport. The joint
venture, SFB Fueling LLC, which began operations in January 2007, is responsible for the purchase and
transport of jet fuel to a fuel farm facility owned and operated by OSI, and for the sale of jet fuel to
air carriers. In addition, AFH, Inc. is responsible for the administrative functions for the joint venture.
The Company’s proportionate allocation of net income or loss from this investment and an investment
in an aviation services company are reported in the Company’s consolidated statements of income in
other (income) expense, with an adjustment to the recorded investment in the Company’s consolidated
balance sheet. These investments treated under the equity method are not material to the financial
position or results of operations of the Company.

Capitalized Interest

Interest attributable to funds used to finance the refurbishment of aircraft prior to revenue service

is capitalized as an additional cost of the related asset provided the refurbishment is extensive or
requires an extended period of time to complete, generally longer than 90 days. Interest is capitalized

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

2. Summary of Significant Accounting Policies (Continued)

at the Company’s average interest rate on long-term debt and ceases when the asset is ready for
service. The Company had no capitalized interest during 2009, 2008 and 2007.

Measurement of Impairment of Long-Lived Assets

The Company records impairment losses on long-lived assets used in operations, consisting

principally of property and equipment, when events or changes in circumstances indicate, in
management’s judgment, that the assets might be impaired and the undiscounted cash flows estimated
to be generated by those assets are less than the carrying amount of those assets. Cash flow estimates
are based on historical results adjusted to reflect the Company’s best estimate of future market and
operating conditions. The net carrying value of assets not recoverable is reduced to fair value if lower
than carrying value. Estimates of fair value represent the Company’s best estimate based on industry
trends, recent transactions involving sales of similar assets and, if necessary, estimates of future
discounted cash flows. The Company had no impairment losses on long-lived assets used in operations
for the years ended December 31, 2009, 2008 and 2007.

Revenue Recognition

Scheduled service revenue consists of passenger revenue involving limited frequency nonstop flights

between our leisure destinations and small cities recognized when the travel-related service or
transportation is provided or when the itinerary expires unused. Nonrefundable scheduled itineraries
expire on the date of the intended flight, unless the date is extended by notification from the customer
in advance. Itineraries sold for transportation, but not yet used, as well as unexpired credits, are
included in air traffic liability.

Various taxes and fees assessed on the sale of tickets to end customers are collected by the
Company as an agent and remitted to taxing authorities. These taxes and fees have been presented on
a net basis in the Company’s consolidated statements of income and recorded as a liability until
remitted to the appropriate taxing authority.

Fixed fee contract revenue consists largely of long-term agreements to provide charter service on a

Ancillary revenue consists of passenger revenue from air-related charges and third party products.

Air-related charges include optional services provided to passengers such as the use of its website to
purchase scheduled service transportation, advance seat assignments, priority boarding, unlimited
changes to nonrefundable itineraries and other services. Revenues from air-related charges are
recognized when the transportation is provided if the product is not deemed independent of the
scheduled service. Revenues from change fees for charges imposed on passengers for making changes
to nonrefundable itineraries are recognized as they occur. Ancillary revenue is also generated from
third party products such as the sale of hotel rooms, rental cars, ticket attractions and other items.
Revenues from the sale of third party products are recognized at the time the product is utilized, such
as the time a purchased hotel room is occupied. The amount of revenues attributed to each element of
a bundled sale involving air-related charges and third party products in addition to airfare is

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

2. Summary of Significant Accounting Policies (Continued)

determined in accordance with accounting standards for revenue arrangements with multiple
deliverables. The sale of third party products are recorded net of amounts paid to wholesale providers,
travel agent commissions and credit card processing fees in accordance with revenue reporting
accounting standards.

Effective October 1, 2009, the Company adopted an accounting convention for the recognition of

revenue from its travel protection product (Trip-Flex) for unlimited changes to nonrefundable
itineraries. The adoption of this accounting convention resulted in recognition of the related revenue at
the time the transportation is provided, a change from the previously used accounting convention for
the recognition of revenue at the time of purchase. The Company concluded for 2007, 2008 and the
interim periods of 2009, that the difference between the application of these accounting conventions is
not material to the results of operations, the applicable individual elements of the Company’s financial
statements or the financial position of the Company.

Other revenue is generated from leased out aircraft and flight equipment and other miscellaneous

sources. Lease revenue is recognized on a straight-line basis over the lease term.

Financial Instruments

In accordance with derivative instruments accounting standards, the Company has not historically
qualified for hedge accounting. Therefore, the Company has accounted for unrealized changes in fair
value of fuel derivative contracts as a part of ‘‘Other (income) expense’’ in its consolidated statements
of income. See Note 10—Financial Instruments and Risk Management for more information on
financial derivative instruments.

Maintenance and Repair Costs

Aircraft maintenance and repair costs. The Company accounts for maintenance activities under the
direct expense method. Under this method, maintenance and repair costs for owned and leased aircraft,
including major overhaul maintenance costs, are charged to operating expenses as incurred. As a lessee,
the Company may be required under provisions of the Company’s lease agreements to make payments
to the lessor in advance of the performance of major maintenance activities. These payments of
maintenance deposits are calculated based on a performance measure, such as flight hours or cycles,
and are available for reimbursement to the Company upon the completion of the maintenance of the
leased aircraft. Guidance on accounting for maintenance deposits requires these payments to be
accounted for as an asset until reimbursed for incurred maintenance costs or until it is determined that
any portion of the estimated total of the deposit is less than probable of being returned. In addition,
payments of maintenance deposits that are not ‘‘substantially and contractually related to the
maintenance of the leased asset’’ are expensed as incurred. Maintenance deposits totaled $2.0 million
and $1.1 million as of December 31, 2009 and 2008, respectively. Under the Company’s existing aircraft
lease agreements with purchase options, if the Company exercises the option to purchase the aircraft
and there are excess maintenance deposit balances at the exercise date of the purchase option, any
excess amounts are applied to the purchase price as an additional down payment.

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

2. Summary of Significant Accounting Policies (Continued)

Advertising Costs

Advertising costs are charged to expense in the period incurred. Advertising expense was $6,456,

$4,849 and $4,948 for the years ended December 31, 2009, 2008 and 2007, respectively.

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 and dollars in thousands):

Year Ended December 31,

2009

2008

2007

Numerator:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$76,331

$35,407

$31,509

Denominator:
Weighted-average shares outstanding . . . . . . . . . . . . .
Weighted-average effect of dilutive securities:

Employee stock options . . . . . . . . . . . . . . . . . . . . .
Stock purchase warrants . . . . . . . . . . . . . . . . . . . . .
Restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock appreciation rights . . . . . . . . . . . . . . . . . . . .

19,982

20,289

20,243

125
145
14
12

61
138
12
—

117
140
29
—

Adjusted weighted-average shares outstanding, diluted .

20,278

20,500

20,529

Net income per share, basic . . . . . . . . . . . . . . . . . . . .

Net income per share, diluted . . . . . . . . . . . . . . . . . .

3.82

3.76

1.75

1.73

1.56

1.53

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with accounting standards
which require the compensation cost relating to share-based payment transactions be recognized in the
Company’s consolidated statements of income. The cost is measured at the grant date, based on the
calculated fair value of the award using the Black- Scholes option pricing model for stock options and
stock appreciation rights (‘‘SARs’’), and based on the closing share price of the Company’s stock on the
grant date for restricted stock awards. The cost is recognized as an expense over the employee’s
requisite service period (the vesting period of the equity award). The vesting period of its equity awards
are generally three years. The Company’s stock-based employee compensation plan is more fully
discussed in Note 11—Employee Benefit Plans.

Income Taxes

The Company’s provision for income taxes is based on estimated effective annual income tax rates.
The provision differs from income taxes currently payable because certain items of income and expense
are recognized in different periods for financial statement purposes than for tax return purposes. A
valuation allowance for net deferred tax assets is provided unless realizability is judged by the Company

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

2. Summary of Significant Accounting Policies (Continued)

to be more likely than not. The Company has determined that all of its deferred tax assets are more
likely than not to be realized. The Company determines the net current and non-current deferred tax
assets or liabilities separately for federal, state, and other local jurisdictions.

The Company’s income tax returns are subject to examination by the Internal Revenue Service
(‘‘IRS’’) and other tax authorities in the locations where the Company operates. The Company assesses
potentially unfavorable outcomes of such examinations based on the criteria set forth in uncertain tax
position accounting standards. The accounting standards prescribe a minimum recognition threshold a
tax position is required to meet before being recognized in the financial statements.

Accounting standards for income taxes, utilize a two-step approach for evaluating tax positions.
Recognition (Step I) occurs when the Company concludes that a tax position, based on its technical
merits, is more likely than not to be sustained upon examination. Measurement (Step II) is only
addressed if the position is deemed to be more likely than not to be sustained. Under Step II, the tax
benefit is measured as the largest amount of benefit that is more likely than not to be realized upon
settlement. Accounting for income taxes standards generally identify the term ‘‘more likely than not’’ to
represent the likelihood of occurrence to be greater than 50%.

The tax positions failing to qualify for initial recognition, are to be recognized in the first
subsequent interim period that they meet the ‘‘more likely than not’’ standard. If it is subsequently
determined that a previously recognized tax position no longer meets the ‘‘more likely than not’’
standard, it is required that the tax position be derecognized. Accounting for income taxes standards
specifically prohibit the use of a valuation allowance as a substitute for derecognition of tax positions.
As applicable, the Company will recognize accrued penalties and interest related to unrecognized tax
benefits in the provision for income taxes. During the years ended December 31, 2009, 2008 and 2007,
the Company recognized no amounts for interest or penalties related to unrecognized tax benefits.

Accumulated 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.

Newly Issued Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards
Update No. 2009-01, ‘‘Generally Accepted Accounting Principles’’ (ASC Topic 105) which establishes
the FASB Accounting Standards Codification (the ‘‘Codification’’) as the single source of authoritative
nongovernmental U.S. generally accepted accounting principles (‘‘GAAP’’). All existing accounting
standards are superseded. All other accounting guidance not included in the Codification will be
considered non-authoritative. The Codification also includes all relevant Securities and Exchange
Commission (‘‘SEC’’) guidance organized using the same topical structure in separate sections within
the Codification. Following the Codification, the FASB will not issue new standards in the form of
Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue
Accounting Standards Updates (‘‘ASU’’) which will serve to update the Codification, provide
background information about the guidance and provide the basis for conclusions on the changes to the

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

2. Summary of Significant Accounting Policies (Continued)

Codification. The Codification is not intended to change GAAP, but it will change the way GAAP is
organized and presented. The Codification is effective for the Company’s third quarter 2009 interim
consolidated financial statements and the principal impact on the Company’s consolidated financial
statements is limited to having all future references to authoritative accounting literature referenced in
accordance with the Codification. The Company uses a plain English approach in reference to
accounting standards contained in the Codification. The Company has also included in certain
disclosures the Codification cross-reference alongside the references to the standards issued and
adopted prior to the adoption of the Codification.

In June 2009, the FASB issued Statement of Financial Accounting Standards (‘‘SFAS’’) No. 167,

‘‘Amendments to FASB Interpretation No. 46(R)’’ (ASC Topic 810). The guidance is intended to
improve financial reporting by providing additional guidance to companies involved with variable
interest entities and by requiring additional disclosures about a company’s involvement in variable
interest entities. This guidance is effective for interim and annual periods ending after November 15,
2009. Adoption of the new accounting guidance has not had a material effect on the Company’s
consolidated financial statements.

In June 2009, the FASB issued SFAS No. 166, ‘‘Accounting for Transfers of Financial Assets’’ (ASC

Topic 860) which requires more information about transfers of financial assets in situations where
companies have continuing exposure to the risk related to transferred financial assets. It eliminates the
concept of a qualifying special purpose entity, changes the requirements for derecognizing financial
assets, and requires additional disclosure. This guidance is effective for interim and annual periods
ending after November 15, 2009. Adoption of the new accounting guidance has not had a material
effect on the Company’s consolidated financial statements.

In September 2009, the 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. The
Company does not expect the new guidance to have a material impact 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 will require (a) an entity to disclose
separately the amounts of significant transfers in and out of Levels 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 require disclosures about the valuation techniques and inputs
used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

2. Summary of Significant Accounting Policies (Continued)

and Level 3 inputs. Certain provisions with new disclosures and clarifications of existing disclosures of
the guidance are effective for interim and reporting periods beginning after December 15, 2009.
Certain provisions for new disclosures are effective for fiscal years beginning after December 15, 2010.
The Company does not expect the adoption of the guidance to have a material impact on its
consolidated financial statements.

3. Property and Equipment

At December 31, 2009, the Company’s fleet consisted of 46 MD-80 aircraft with all aircraft in

revenue service. The Company owns 42 of these aircraft, including two subject to capital leases, with
the remaining four subject to operating lease agreements. At December 31, 2008, the Company’s fleet
consisted of 43 MD-80 series aircraft, 38 of which were in revenue service.

Property and equipment consist of the following:

Flight equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ground property and equipment . . . . . . . . . . . . . . . . . . . . . .

$273,680
15,573

$250,791
11,381

Total property and equipment . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation and amortization . . . . . . . . . . .

289,253
(84,720)

262,172
(56,421)

Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . .

$204,533

$205,751

As of December 31,

2009

2008

Depreciation and amortization expense for the years ended December 31, 2009, 2008 and 2007 was

$29,638, $23,489 and $15,992, respectively.

4. Accrued Liabilities

Accrued liabilities consist of the following:

As of December 31,

2009

2008

Aircraft lease rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

593
99
12,891
418
4,141
5,557

48
163
7,849
2,970
4,411
3,791

Total accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$23,699

$19,232

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

5. Long-Term Debt

Long-term debt, including capital lease obligations, consists of the following:

As of December 31,

2009

2008

Notes payable, secured by aircraft, interest at 8%, due at

varying dates through December 2010 . . . . . . . . . . . . . . . . .

$ 3,212

$ 10,803

Notes payable, secured by aircraft, interest at 8.5%, due

November 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,070

11,698

Notes payable, secured by aircraft, interest at 6%, due

April 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,969

15,234

Notes payable, secured by aircraft, interest at 6%, due at

varying dates through February 2011 . . . . . . . . . . . . . . . . . .

5,599

10,364

Notes payable, secured by aircraft, interest at 6.8%, due

June 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,242

6,697

Notes payable, secured by aircraft, interest at 8%, due

June 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,811

4,507

Notes payable, secured by aircraft, interest at 6.95%, due

June 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,409
12
3,483

—
36
5,386

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term debt
Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45,807
(23,338)

64,725
(25,338)

Long-term debt, net of current maturities . . . . . . . . . . . . . . . .

$ 22,469

$ 39,387

In June 2009, the Company borrowed $7,000 under a loan agreement secured by two

unencumbered aircraft. The notes payable issued under the loan agreement bear interest at 6.95% per
annum and are payable in monthly installments through June 2014.

Maturities of long-term debt and capital lease obligations, as of December 31, 2009, for the next

five years and thereafter, in aggregate, are: 2010—$23,338; 2011—$17,055; 2012—$3,065; 2013—$1,547;
2014—$802 and none thereafter.

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

6. Capital and Operating Lease Obligations

Capital Leases

As of December 31, 2009, the Company was party to two lease agreements for aircraft which are

classified as capital leases under provisions contained in lease accounting standards. The amounts
applicable to capital leases included in property and equipment were:

Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,726
(1,238)

$7,726
(472)

Aircraft, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,488

$7,254

As of December 31,

2009

2008

Operating Leases

As of December 31, 2009, the Company was party to operating lease agreements for four aircraft,

two with terms extending through November 2012 and two with terms extending through June 2014.
The two operating lease agreements which extend through November 2012 include purchase options.
The Company exercised the purchase options in February 2010 and expects to take ownership of the
aircraft in November 2010.

Additionally, the Company leases office facilities, airport and terminal facilities and office

equipment under operating lease arrangements with terms extending through 2019. The office facilities
under lease include approximately 65,000 square feet of space for the Company’s primary corporate
offices. The lease has two five-year renewal options, but the Company has the right to terminate after
the seventh year of the lease in April 2015 and the right to purchase the building from the landlord
after the third year of the lease in April 2011. The initial base rental is approximately $1,528 per year
and is subject to escalation. The Company is also responsible for its share of common area
maintenance charges.

Airport and terminal facility leases are entered into with a number of local governments and other

third parties. These lease arrangements have a variety of terms and conditions. Leasehold
improvements made at these facilities are not material.

Total rental expense charged to operations for aircraft and non-aircraft operating leases for the

years ended December 31, 2009, 2008 and 2007 was $8,204, $7,373 and $6,147, respectively.

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

6. Capital and Operating Lease Obligations (Continued)

At December 31, 2009, scheduled future minimum lease payments under operating leases with
initial or remaining noncancelable lease terms in excess of one year and amounts due under capital
lease arrangements are as follows:

Capital Leases Operating Leases

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: amount representing interest

. . . . . . . . . . . . . .

Present value of future payments . . . . . . . . . . . . . . . .
Less: current obligations . . . . . . . . . . . . . . . . . . . . . .

2,220
1,480
—
—
—
—

3,700

217

3,483
2,041

Long-term obligations . . . . . . . . . . . . . . . . . . . . . . . .

$1,442

4,974
4,494
4,180
3,022
2,623
8,467

$27,760

7. 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 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 December 31, 2009, 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 including money market funds, debt
securities issued by U.S. Treasury and other U.S. government corporations and agencies. Cash
equivalents have maturities of three months or less, while the short-term investments have maturities of
greater than three months. These assets are classified within Level 1 or Level 2 because the Company
values these assets using quoted market prices or alternative pricing sources and models utilizing
market observable inputs.

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

7. Fair Value Measurements (Continued)

The table below presents the Company’s assets measured at fair value on a recurring basis as of

December 31, 2009 (in thousands):

Description

Cash equivalents
. . . . . .
Short-term investments . .

12/31/2009

$ 85,091
141,231

Total assets . . . . . . . . . .

$226,322

Fair Value Measurements at Reporting Date Using

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

$17,951
—

$17,951

$ 67,140
141,231

$208,371

$—
—

$—

8. Income Taxes

The Company is subject to income taxation in the United States and various state jurisdictions in

which it operates. In accordance with income tax reporting accounting standards, the Company
recognizes tax benefits or expense on the temporary differences between the financial reporting and tax
bases of its assets and liabilities.

The components of the provision (benefit) for income taxes are as follows:

Year Ended December 31,

2009

2008

2007

Current:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$35,905
1,613

$13,326
606

$10,903
1,150

Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37,518

13,932

12,053

Deferred:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,195
520

6,715

6,060
(147)

5,913

6,192
951

7,143

Total income tax provision . . . . . . . . . . . . . . . . . . . . .

$44,233

$19,845

$19,196

The Company recorded $1,157, $1,602 and $2,139 as an increase to contributed capital for certain

tax benefits from employee share-based compensation for the years ended December 31, 2009, 2008
and 2007, respectively.

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

8. Income Taxes (Continued)

Reconciliations of the statutory income tax rate and the Company’s effective tax rate for 2009,

2008, and 2007 are as follows:

Year Ended December 31,

2009

2008

2007

Statutory federal rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of federal income tax benefit . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35.0% 35.0% 35.0%
2.7%
0.7%
1.6%
0.2%
0.2%
0.1%

Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36.7% 35.9% 37.9%

The major components of the Company’s net deferred tax assets and liabilities are as follows:

At December 31,
2009

At December 31,
2008

Assets

Liabilities

Assets

Liabilities

Current:

Accrued vacation . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . .
State taxes . . . . . . . . . . . . . . . . . . . . . . . .
Accrued property taxes . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 540
—
886
452
704

— $ 517
—
346
393
201

(2,313)
—
—
—

Total current . . . . . . . . . . . . . . . . . . . . . .

2,582

(2,313)

1,457

—
(1,346)
—
—
—

(1,346)

Noncurrent:

Depreciation . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total noncurrent

. . . . . . . . . . . . . . . . . . .

— (28,382)

— (21,000)
—

— 1,149
137
74

—

(28,382)

1,360

(21,000)

1,049
699
68

1,816

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,398

$(30,695) $2,817

$(22,346)

The Company paid corporate income taxes, net of refunds, of $36,952, $4,623 and $16,685 in 2009,

2008 and 2007, respectively.

For the year ended December 31, 2009, the Company did not have any material unrecognized tax
benefits and there was no material effect on the Company’s financial condition or results of operation
from the application of accounting standards for uncertain tax positions. The Company estimates that
the unrecognized tax benefit will not change significantly 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 is no significant interest or penalties accrued at December 31,
2009.

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

8. Income Taxes (Continued)

The Company (or its predecessor entities) is no longer subject to U.S. Federal income tax
examinations for years before 2004. Various state and local tax returns remain open to examination.
The Company believes that any potential assessment would be immaterial.

9. Related Party Transactions

The Company had notes payable to its Chief Executive Officer totaling $891 as of December 31,

2006. This debt was repaid in full in January 2007.

As the Company’s predecessor was a limited liability company, the members were taxed on the

income earned by the Company until the reorganization into a corporation. The Company made
distributions to its members to enable them to pay their respective income taxes. These distributions
are reflected in the statements of cash flows and statements of stockholders’ equity. The Company
received $1,414 from its members for the year ended December 31, 2007 as a result of the true-up of
tax payments in connection with the reorganization.

The building in which the Company maintains its headquarters is under a lease agreement with a

limited liability company in which the Chief Executive Officer, two Directors and one other former
officer own significant interests as non-controlling members. In June 2008, additional office space was
obtained by the Company in the leased building through an amendment to the existing lease agreement
with the landlord. The amended lease agreement has a ten year term with base rental at $1,528 per
year. In June 2008, the Company entered into a lease agreement for office space to be used as its
training facility which is located in a building adjacent to the location of the Company’s headquarters.
The second building is also owned by a limited liability company in which the Chief Executive Officer,
two other Directors and one other former officer own significant interests as non-controlling members.
The lease agreement on the office space in the second building has a ten year term with base rental
beginning at $158 per year.

10. Financial Instruments and Risk Management

Fuel Price Risk Management

Airline operations are inherently dependent upon energy, and are therefore impacted by changes

in jet fuel prices. Aircraft fuel expense represented approximately 37.9%, 51.2% and 48.1% of the
Company’s operating expenses for the years ended December 31, 2009, 2008 and 2007, respectively.

Prior to 2008, the Company entered into financial derivative contracts to manage a portion of its

risk to fuel price volatility. These financial derivative instruments were not purchased nor held for
trading purposes. The Company suspended this hedging strategy in 2007 and the last contract settled in
January 2008. The Company does not have any derivative instruments as of December 31, 2009.

The Company’s fuel hedging program and the financial derivative instruments purchased pursuant
to this program did not qualify for hedge accounting under authoritative guidance. Therefore, changes
in the fair value of such derivative contracts, which amounted to a loss of $11 for the year ended
December 31, 2008 and a gain of $2,613 in the year ended December 31, 2007, were recorded as a
‘‘Loss (gain) on fuel derivatives, net’’ within other (income) expense in the accompanying consolidated

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

10. Financial Instruments and Risk Management (Continued)

statements of income. These amounts include both realized gains and losses and mark-to-market
adjustments of the fair value of the derivative instruments at the end of each period. There were no
losses or gains from the change in fair value on derivative contracts during 2009.

Debt

The Company’s debt with a carrying value of $42,324 and $59,339 as of December 31, 2009 and
2008, respectively, approximates fair value. These fair value estimates were based on the discounted
amount of future cash flows using the Company’s current incremental rate of borrowing for similar
liabilities.

Other Financial Instruments

The carrying amounts of cash, cash equivalents, restricted cash, accounts receivable and accounts

payable approximate fair value due to their short term nature.

11. Employee Benefit Plans

401(k) Plan

The Company has a defined contribution plan covering substantially all eligible employees. Under

the Plan, employees may contribute up to 18% of their eligible annual compensation with the Company
matching up to 3% of eligible employee wages. Employees generally vest in matching contributions
ratably over five years. The Company recognized expense under this plan of $908, $748 and $542 for
the years ended December 31, 2009, 2008 and 2007, respectively.

Stock-based employee compensation

In 2006, the Board of Directors adopted, and the stockholders approved, a Long-Term Incentive
Plan (the ‘‘2006 Plan’’) and reserved 3,000,000 shares of common stock for the Company to grant stock
options, restricted stock, SARs and other stock-based awards to certain officers, directors, employees,
and consultants of the Company. The 2006 Plan is administered by the Company’s compensation
committee of the Board of Directors. Upon the merger of Allegiant Travel Company, LLC into
Allegiant Travel Company (a Nevada corporation) immediately prior to the Company’s initial public
offering, all outstanding stock options under the previously adopted share option program (the ‘‘Share
Option Program’’) were transferred to the 2006 Plan. In addition, no further option grants may be
made under the Share Option Program. The transferred options continue to be governed by their
existing terms, unless the compensation committee elects to extend one or more features of the 2006
Plan to those options. The shares of common stock reserved for issuance of stock-based awards under
the 2006 Plan include the 500,000 shares that were transferred from the Share Option Program.

For the years ended December 31, 2009, 2008 and 2007, the Company recorded $3,109, $1,702 and
$1,006, respectively, of compensation expense in the consolidated statements of income related to stock
options, SARs and restricted stock. As of December 31, 2009, there was $4,896 of unrecognized
compensation cost related to nonvested stock options and SARs, net of estimated forfeitures of 2.0%.

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

11. Employee Benefit Plans (Continued)

As of December 31, 2009 there was $1,232 of unrecognized compensation cost, net of estimated
forfeitures of 5.0%, related to nonvested restricted stock. The cost is expected to be recognized over a
weighted-average period of 2.88 years for both nonvested stock options and SARs and nonvested
restricted stock.

Stock options and SARs

The fair value of stock options and SARs granted was estimated as of the grant date using the
Black-Scholes option-pricing model with assumptions noted in the table below. Expected volatilities are
based on the historical volatilities from publicly traded airline companies of the Company’s peer group
due to the Company’s lack of historical information. Expected term represents the weighted average
time between the option’s grant date and its exercise date. The Company used the simplified method
from accounting guidance for companies with a limited trading history, to estimate the expected term
on 2009 and 2008 award grants. The Company used its best estimate and comparisons to industry peers
on 2007 award grants. The risk-free interest rate for periods equal to the expected term of the stock
option is based on a blended historical rate using Federal Reserve rates for U.S. Treasury securities.
The contractual term of the Company’s stock option and SAR awards granted, range from five to ten
years.

2009

2008

2007

Weighted-average volatility . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

42.34% 32.79% 32.80%
3.5
3.5
1.33% 2.56% 4.30%
—

—

A summary of option activity under the 2006 Plan as of December 31, 2009, and changes during

the year then ended is presented below:

Outstanding at January 1, 2009 . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . .

Weighted
Average
Remaining
Contractual
Life (Years)

Aggregate
Intrinsic
Value

Weighted
Average
Exercise
Price

$22.88
$38.38
$17.68
$23.40

Options

451,001
416,500
(98,501)
(24,000)

Outstanding at December 31, 2009 . . .

745,000

$32.07

4.31

$11,251,790

Fully vested and expected to vest at

December 31, 2009 . . . . . . . . . . . . .

731,600

$32.08

Exercisable at December 31, 2009 . . . .

95,500

$26.83

4.31

5.36

$11,039,844

$ 1,942,365

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

11. Employee Benefit Plans (Continued)

The weighted average fair value of options granted during the years ended December 31, 2009,
2008, and 2007 was $12.44, $5.80 and $13.52, respectively. During the years ended December 31, 2009,
2008 and 2007, the total intrinsic value of options exercised was $2,917, $4,330 and $5,763, respectively.
Cash received from option exercises for the years ended December 31, 2009, 2008 and 2007, was
$1,742, $1,040 and $764, respectively. The actual tax benefit realized for the tax deductions from these
option exercises totaled $1,067, $1,568 and $2,145, respectively.

Restricted stock awards

A summary of the status of the Company’s nonvested restricted stock grants during the year ended

December 31, 2009 is presented below:

Nonvested at January 1, 2009 . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49,261
32,926
(38,390)
(1,721)

Nonvested at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . .

42,076

Weighted
Average
Grant Date
Fair Value

$22.45
$38.31
$21.02
$24.07

$36.09

The weighted average grant date fair value of restricted stock grants during the years ended
December 31, 2009, 2008 and 2007 was $38.31, $22.43 and $30.91, respectively. The total fair value of
restricted stock vested during the year ended December 31, 2009, 2008 and 2007, was $1,605, $1,382
and $959, respectively. The actual tax benefit realized from the tax deductions from the restricted stock
vested totaled $587, $500 and $357, respectively.

12. Stockholders’ Equity

In May 2005, in connection with an issuance of preferred shares prior to our initial public offering
of common shares, a placement agent was issued 162,500 warrants to acquire the Company’s common
shares at $4.40 per share as part of the consideration for services provided. These warrants are
exercisable through May 5, 2010. As of December 31, 2009, all 162,500 warrants were outstanding.

In second quarter 2007, the Company sold 748,214 shares in a secondary public offering. The
Company received approximately $22,300 in net proceeds from the sale of its shares in this offering.

In January 2009, the Company’s Board of Directors authorized a share repurchase program to

acquire through open market purchases up to $25,000 of the Company’s common stock. The
repurchase program replaced a similar program the Board of Directors authorized in January 2008
which expired. In July 2009, the Board of Directors authorized the Company to purchase up to an
additional $10,000 of the Company’s common stock under the Company’s existing repurchase program.
As a result, a total of $35,000 was authorized for stock repurchases under the authority granted in
2009. During 2009, the Company repurchased 637,902 shares under the program at an average cost of

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

12. Stockholders’ Equity (Continued)

$38.26 per share for a total expenditure of $24,407. During 2008, under the expired program, the
Company repurchased 553,700 shares through open market purchases at an average cost of $28.55 per
share for a total expenditure of $15,809.

In March 2009, Allegiant Information Systems, Inc., a wholly owned subsidiary of the Company,

completed a plan of merger with an organization that owned the exclusive rights to the travel
applications of the software operating system the Company has used since its inception. In
consideration for the acquisition, the Company issued 41,450 shares of its unregistered common stock.

In May 2009, the Company completed a secondary offering for the sale of shares from certain

existing stockholders. The Company did not sell any shares in this underwritten offering.

13. Quarterly Financial Data (Unaudited)

Quarterly results of operations for the years ended December 31, 2009 and 2008 are summarized

below.

2009

March 31

June 30

September 30

December 31

Operating revenues . . . . . . . . . . .
Operating income . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . .
Earnings per share
Basic . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . .

2008

$142,119
44,478
28,162

$147,987
37,784
23,852

$133,105
21,940
13,776

$134,729
18,051
10,541

1.39
1.37

1.19
1.17

0.69
0.68

0.53
0.52

$133,140
14,364
9,672

$131,558
4,675
2,646

$116,886
8,117
4,890

$122,428
28,692
18,199

0.47
0.47

0.13
0.13

0.24
0.24

0.90
0.88

The sum of the quarterly earnings per share amounts does not equal the annual amount reported

since per share amounts are computed independently for each quarter and for the full year based on
respective weighted-average common shares outstanding and other dilutive potential common shares.

14. Commitments and Contingencies

The Company is subject to certain legal and administrative actions which management considers

routine to its business activities. Management believes after consultation with legal counsel, the
ultimate outcome of any pending legal matters will not have a material adverse impact on the
Company’s financial position, liquidity or results of operations.

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2009, 2008 and 2007

(Dollars in thousands except share and per share amounts)

14. Commitments and Contingencies (Continued)

The Company entered into purchase agreements for 20 MD-80 aircraft during the fourth quarter

of 2009. The Company expects to place 15 of the aircraft into service by the end of 2011, with five
aircraft to be used for spare engines and rotable parts. The contractual obligations under these
purchase agreements total $30,869 to be paid during 2010 upon delivery of the aircraft.

15. Subsequent Events

As of December 31, 2009, the remaining authority under the existing repurchase program to
acquire the Company’s common stock through open market purchases was $10,593. On January 29,
2010, the Board of Directors increased this remaining authority to $25,000.

In February 2010, the Company exercised purchase options on two MD-80 aircraft under operating

lease through November 2012. The Company expects to take ownership of the aircraft in November
2010.

In March 2010, the Company entered into a purchase contract for six Boeing 757 aircraft with

delivery dates from 2010 to 2012. These aircraft will provide the Company the ability to serve longer
haul markets, including the expectation to serve Hawaii after the Company receives regulatory approval
for extended over water operations. The Company currently expects two of these aircraft to enter
operating service in fourth quarter 2010 with the remaining four aircraft to be added to the Company’s
operating fleet in 2011 and 2012. The Company expects to spend approximately $75,000 to $90,000 on
the acquisition of these aircraft which consists of the purchase price and induction costs to prepare the
aircraft for service.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation of disclosure controls and procedures. As of the end of the period covered by this

report, under the supervision and with the participation of our management, including our chief
executive officer (‘‘CEO’’) and chief financial officer (‘‘CFO’’), we evaluated the design and operation
of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended, or the ‘‘Exchange Act’’). Based on this evaluation, our
management, including our CEO and CFO, has concluded that our disclosure controls and procedures
are designed, and are effective, to give reasonable assurance that the information we are required to
disclose is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms. Based upon this evaluation, the CEO and CFO concluded that our disclosure
controls and procedures are effective in providing reasonable assurance that information required to be
disclosed in our reports filed with or submitted to the SEC under the Exchange Act is accumulated and
communicated to management, including the CEO and CFO, as appropriate to allow timely decisions
regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting. Our management is

responsible for establishing and maintaining adequate internal control over financial reporting, as
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of our assets;

provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and

provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect on the financial
statements.

The effectiveness of our or any system of controls and procedures is subject to certain limitations,

including the exercise of judgment in designing, implementing and evaluating the controls and
procedures, the assumptions used in identifying the likelihood of future events, and the inability to
eliminate misconduct completely. Our management, including our CEO and CFO, does not expect that
our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A
control system, no matter how well designed and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design of a control system
must reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if
any, within our company have been detected.

Our management has assessed the effectiveness of our internal control over financial reporting as

of December 31, 2009. In making this assessment, our management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (‘‘COSO’’) in Internal Control-
Integrated Framework. Based on our assessment, management has concluded that, as of December 31,
2009, our internal control over financial reporting was effective based on those criteria.

Ernst & Young, LLP, the independent registered public accounting firm who audited our
consolidated financial statements included in this Form 10-K, has issued a report on the Company’s
internal control over financial reporting, which is included herein.

Changes in internal controls. There were no changes in our internal control over financial
reporting that occurred during the fourth quarter of our year ended December 31, 2009, that have
materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

Item 9B. Other Information

Not applicable.

Item 10. Directors, Executive Officers, and Corporate Governance

PART III

The information required by this Item is incorporated herein by reference to the data under the
headings ‘‘ELECTION OF DIRECTORS,’’ ‘‘EXECUTIVE OFFICERS’’ and ‘‘Section 16(a) Beneficial
Ownership Reporting Compliance’’ in the Proxy Statement to be used in connection with the
solicitation of proxies for our annual meeting of stockholders to be held June 8, 2010, which Proxy
Statement is to be filed with the Commission.

Item 11. Executive Compensation

The information required by this Item is incorporated herein by reference to the data under the

headings ‘‘EXECUTIVE COMPENSATION’’ and ‘‘REPORT OF THE COMPENSATION
COMMITTEE’’ in the Proxy Statement to be used in connection with the solicitation of proxies for our
annual meeting of stockholders to be held June 8, 2010, which Proxy Statement is to be filed with the
Commission.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

The information required by this Item is incorporated herein by reference to the data under the
heading ‘‘STOCK OWNERSHIP’’ in the Proxy Statement to be used in connection with the solicitation
of proxies for our annual meeting of stockholders to be held June 8, 2010, which Proxy Statement is to
be filed with the Commission. The information required by this item with respect to securities
authorized for issuance under our equity compensation plans is included in Part II, Item 5 of this
Annual Report on Form 10-K.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated herein by reference to the data under the
heading ‘‘RELATED PARTY TRANSACTIONS’’ and ‘‘Director Independence’’ in the Proxy Statement
to be used in connection with the solicitation of proxies for our annual meeting of stockholders to be
held June 8, 2010, which Proxy Statement is to be filed with the Commission.

Item 14. Principal Accountant’s Fees and Services

The information required by this Item is incorporated herein by reference to the data under the
heading ‘‘PRINCIPAL ACCOUNTANT FEES AND SERVICES’’ in the Proxy Statement to be used in
connection with the solicitation of proxies for our annual meeting of stockholders to be held June 8,
2010, which Proxy Statement is to be filed with the Commission.

Item 15. Exhibits and Financial Statement Schedules

PART IV

1. Financial Statements and Supplementary Data. The following consolidated financial

statements of the Company are included in Item 8 of this report:

Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity and Comprehensive Income . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50
52
53
54
56
58

2. Financial Statement Schedules. Schedules are not submitted because they are not
required or are not applicable, or the required information is shown in the
consolidated financial statements or notes thereto.

3. Exhibits. The Exhibits listed below are filed or incorporated by reference as part of
this Form 10-K. Where so indicated by footnote, exhibits which were previously
filed are incorporated by reference.

Exhibit
Number

Description

3.1* Articles of Incorporation of Allegiant Travel Company.
3.2

Bylaws of Allegiant Travel Company (incorporated by reference to Exhibit 3.2 to the
Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, filed with the
Commission on November 9, 2009).
Specimen Stock Certificate (incorporated by reference to Exhibit 3.3 to the Form 8-A filed
with the Commission on November 22, 2006).

3.3

10.1* Form of Tax Indemnification Agreement between Allegiant Travel Company and members of

10.2

10.3

10.4

Allegiant Travel Company, LLC.
2006 Long-Term Incentive Plan, as amended on July 19, 2009.(1) (Incorporated by reference
to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended September 30,
2009, filed with the Commission on November 9, 2009.)
Form of Stock Option Agreement used for officers of the Company.(1) (Incorporated by
reference to Exhibit 10.3 to the Annual Report on Form 10-K for the year ended
December 31, 2008, filed with the Commission on March 3, 2009).
Form of Restricted Stock Agreement used for Directors of the Company.(1) (Incorporated by
reference to Exhibit 10.4 to the Annual Report on Form 10-K for the year ended
December 31, 2008, filed with the Commission on March 3, 2009).

10.5* Allegiant Air 401(k) Retirement Plan.(1)
10.6* Form of Indemnification Agreement.
10.7* Airport Operating Permit between Allegiant Air, Inc. and Clark County Department of

Aviation dated April 14, 2003.

10.8* Memorandum of Understanding between Allegiant Air, LLC and Sanford Airport Authority

dated March 4, 2005.

10.9* Maintenance General Terms Agreement dated March 2006 between Allegiant Air, LLC and

10.10

10.11

10.12

American Airlines, Inc.(2)
Lease dated May 1, 2007, between Allegiant Air, LLC and Windmill Durango Office, LLC
(incorporated by reference to Exhibit 10.22 to the Form S-1 registration statement filed with
the Commission on May 16, 2007).
Terminalling Agreement between AFH, Inc. and Kinder Morgan Liquids Terminals, LLC
(incorporated by reference to Exhibit 10.23 to the Post-Effective Amendment No. 1 to
Form S-1 registration statement filed with the Commission on June 25, 2007).
Shipper’s Agreement between AFH, Inc. and Central Florida Pipeline, LLC (incorporated by
reference to Exhibit 10.24 to the Post-Effective Amendment No. 1 to Form S-1 registration
statement filed with the Commission on June 25, 2007).

10.13 Master Loan Agreement dated as of April 11, 2008 between Bank of Nevada and Allegiant

Air, LLC(3) (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q
for the quarter ended June 30, 2008, filed with the Commission on August 8, 2008)
10.14 Amendment to Lease dated as of June 23, 2008 between Windmill Durango Office, LLC and

Allegiant Air, LLC. (Incorporated by reference to Exhibit 10.17 to the Annual Report on
Form 10-K for the year ended December 31, 2008, filed with the Commission on March 3,
2009.)
Lease dated June 23, 2008 between Windmill Durango Office II, LLC and Allegiant Air, LLC.
(Incorporated by reference to Exhibit 10.18 to the Annual Report on Form 10-K for the year
ended December 31, 2008, filed with the Commission on March 3, 2009.)

10.15

Exhibit
Number

Description

10.16 Air Transportation Charter Agreement dated as of October 31, 2008 between Harrah’s

Operating Company, Inc. and Allegiant Air, LLC.(2) (Incorporated by reference to
Exhibit 10.19 to the Annual Report on Form 10-K for the year ended December 31, 2008,
filed with the Commission on March 3, 2009.)

10.17 Agreement and Plan of Merger dated as of March 15, 2009, by and among the Company,
Allegiant Information Systems, Inc., RPW Consolidated Information Systems Incorporated
and Robert P. Wilson, III. (Incorporated by reference to Exhibit 10.1 to the Quarterly Report
on Form 10-Q for the quarter ended March 31, 2009 filed with the Commission on May 4,
2009.)
Perpetual Software License Agreement dated as of March 15, 2009, among CMS
Solutions, Inc., RPW Consolidated Information Systems Incorporated and Mitchell Allee.
(Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the
quarter ended March 31, 2009 filed with the Commission on May 4, 2009.)

10.18

10.19 Addendum to Lease between Windmill Durango Office II, LLC and Allegiant Air, LLC

signed on June 17, 2009. (Incorporated by reference to Exhibit 10.1 to the Quarterly Report
on Form 10-Q for the quarter ended June 30, 2009 filed with the Commission on August 7,
2009.)

10.20 Amendment No. 1 to Air Transportation Charter Agreement dated April 30, 2009, between

Allegiant Air, LLC and Harrah’s Operating Company, Inc.(3)

10.21 Amendment No. 2 to Air Transportation Agreement Charter Agreement dated November 6,

10.22

2009 between Allegiant Air, LLC and Harrah’s Operating Company, Inc.(3)
Employment Agreement dated as of October 16, 2009, between the Company and Andrew C.
Levy.(1)

10.23 Restricted Stock Agreement dated October 16, 2009 between the Company and Andrew C.

10.24

Levy.(1)
Stock Appreciation Rights Agreement dated October 16, 2009, between the Company and
Andrew C. Levy.(1)

10.25 Aircraft Sale and Purchase Agreement dated as of December 30, 2009 between the Company

and Scandinavian Airlines System, Denmark—Norway—Sweden.(3)
List of Subsidiaries
Consent of Ernst & Young LLP.
Powers of Attorney (on signature page)

21.1
23.1
24.1
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

Section 1350 Certifications

Incorporated by reference to Exhibits filed with Registration Statement #333-134145 filed by
Allegiant Travel Company with the Commission and amendments thereto.

(1) Management contract or compensation plan or agreement required to be filed as an Exhibit to this

Report on Form 10-K pursuant to Item 15(b) of Form 10-K.

(2) Portions of the indicated document have been omitted pursuant to the grant of confidential

treatment and the documents indicated have been filed separately with the Commission as
required by Rule 406 under the Securities Act of 1933, as amended, or Rule 24b-2 of the
Securities Exchange Act of 1934, as amended.

(3) Portions of the indicated document have been omitted pursuant to a request for confidential

treatment and the document indicated has been filed separately with the Commission as required
by Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the

registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Las Vegas, State of Nevada on March 8, 2010.

Signatures

ALLEGIANT TRAVEL COMPANY

By:

/s/ ANDREW C. LEVY

ANDREW C. LEVY
President and Chief Financial Officer

POWERS OF ATTORNEY

Each person whose signature appears below hereby appoints Andrew C. Levy and Maurice J.

Gallagher, Jr., as his true and lawful attorneys-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all
amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and
all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact
and agents full power and authority to perform each and every act and thing appropriate or necessary
to be done, as fully and for all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully
do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed

below by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.

Signature

Title

Date

/s/ MAURICE J. GALLAGHER, JR.

Maurice J. Gallagher, Jr.

Chief Executive Officer and Director
(Principal Executive Officer)

/s/ ANDREW C. LEVY

Andrew C. Levy

President and Chief Financial Officer
(Principal Financial Officer)

March 8, 2010

/s/ SCOTT SHELDON

Principal Accounting Officer

March 8, 2010

Scott Sheldon

/s/ GARY ELLMER

Director

March 8, 2010

Gary Ellmer

Montie Brewer

Timothy P. Flynn

Director

/s/ CHARLES W. POLLARD

Director

Charles W. Pollard

/s/ JOHN REDMOND

Director

John Redmond

March

, 2010

March

, 2010

March 8, 2010

The following exhibits are filed as part of this report.

Exhibit
Number

Description

10.20 Amendment No. 1 to Air Transportation Charter Agreement dated April 30, 2009, between

Allegiant Air, LLC and Harrah’s Operating Company, Inc.(1)

10.21 Amendment No. 2 to Air Transportation Agreement Charter Agreement dated November 6,

2009 between Allegiant Air, LLC and Harrah’s Operating Company, Inc.(1)

10.22

Employment Agreement dated as of October 16, 2009, between the Company and Andrew C.
Levy.(2)

10.23 Restricted Stock Agreement dated October 16, 2009 between the Company and Andrew C.

Levy.(2)

10.24

Stock Appreciation Rights Agreement dated October 16, 2009, between the Company and
Andrew C. Levy.(2)

10.25 Aircraft Sale and Purchase Agreement dated as of December 30, 2009 between the Company

and Scandinavian Airlines System, Denmark—Norway—Sweden.(1)

21.1

23.1

24.1

List of Subsidiaries

Consent of Ernst & Young LLP, independent registered public accounting firm

Power of Attorney (included on signature page hereto).

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

Section 1350 Certifications

(1) Portions of the indicated document have been omitted pursuant to a request for confidential

treatment and the document indicated has been filed separately with the Commission as required
by Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

(2) Management contract or compensation plan or agreement required to be filed as an Exhibit to this

Report on Form 10-K pursuant to Item 15(b) of Form 10-K.

Allegiant Air - 2009 Annual Report Cover - FLAT SIZE: 16.5x10.75” - no bleed - b/w - APRIL10