Every week, Allegiant Air President John Redmond gets a call from someone interested in talking turkey about the stalled Sunseeker resort.
“I probably get a call a week regarding what the art of the possible is,” Redmond told investment analysts Wednesday on the second quarter shareholder earnings call.
Chief Financial Officer Gregory Anderson also revealed to shareholders that Allegiant has agreed to a $20 million settlement with its financial backers on the Sunseeker project, TPG Sixth Street Partners. The deal, which is not final, requires Allegiant to pay the investors $20 million to end the contract for building Sunseeker. It also releases Allegiant from a commitment to invest another $150 million in the project and to finish by December 2021.
The Sunseeker resort stands now on Charlotte Harbor’s northern shore as a multi-story cement skeleton. Six 110-foot cranes stand idle along U.S. 41 and were said to be scheduled for removal this month. Allegiant halted construction in March at the 22-acre site after the coronavirus pandemic caused the air travel market to crash. Air travel was going great in June for Allegiant, executives told shareholder analysts, only to drop back after a few weeks as the pandemic roared out of control in many states.
Allegiant is faring better than other airlines, executives said, because they don’t cater to business or international travelers. Plus Allegiant’s lean and flexible schedule — often two flights a week to and from a particular destination — allows it to adapt to the current environment, executives have said.
The settlement with Sixth Street both adds and detracts from Allegiant’s current dilemma of reducing its burn through cash every day. The good news is those losses are about half what was anticipated, Anderson said, but it’s still not sustainable. A federal bailout of $650 million has helped Punta Gorda’s only airline to keep planes in the air and staff employed. Still, the airline is planning to cut 220 positions nationwide after Oct. 1 when the federal financing deal times out.
On each of these calls, analysts have pressured Allegiant about Sunseeker, which is an unprecedented foray of an airline into the hotel-resort industry. First the questions were about how Sunseeker was going to work financially. Now, the questions are about what are they going to do with the half-finished resort.
“Is there a time line if you’re kind of taking a strategic alternative to spin it off versus if you want to kind of continue with the start of the construction again? When do those decisions need to be made?” asked Savanthi Syth of the Raymond James firm.
Executives stuck to the script, which was no commitment to move forward for up to 18 months. Allegiant has also said it could be willing to sell the project, partner or continue on its own.
“We don’t have any restrictions on anything,” Redmond said. “We’re open to having any and all dialogue.”
An analyst pressured them to say what kind of offer they would accept and whether they want to maintain some control.
“Oh gosh ... there’s still zero opportunities other than the occasional call,” Chairman Maury Gallagher said.
“We kind of lose some negotiating leverage if we talked about what price we had to accept over the earnings call,” Redmond said.
Gallagher said he would like to see Allegiant participate, because Redmond is so good at hotel projects. His previous work was in Las Vegas hotels.
Gallagher also sung the praises of Florida’s west coast as a money-making opportunity.
“Of all the area’s in this country, it probably is among the strongest, because the people going there are older and they have money and they’re less affected by this (economic fallout), and that’s going to continue,” he said. “We certainly want to stay involved in some fashion to feed ourselves and continue to enhance third-party revenues.”
Redmond insisted Sunseeker is not costing the airline as it sits idle, even though there are construction workers still on site shutting down the project.
“There’s just a handful of people that are still remaining, all working on significant pay cuts,” he said.