According to the International Air Transport Association (IATA), the insatiable demand for air travel we saw last year has persisted in 2023. And the trend shows no signs of slowing, with the global industry inching closer to pre-pandemic levels each month.

With that in mind, I'll compare two ultra-low-cost carriers and determine which airline stock makes a better buy in today's market.

The case for Allegiant Travel

After generating its most revenue ever last year, Allegiant Travel (ALGT -3.02%) enjoyed persistent demand for its low fares and nonstop flights.

The Las Vegas-based airline's Q4 2022 revenue total of $612 million marked a 23% year-over-year increase, and a 33% increase over Q4 of pre-pandemic 2019. Allegiant Chief Financial Officer Robert Neal referred to "the sustained strong demand environment" as a primary Q4 revenue driver. Net income for the quarter finished at $52.5 million.

Yield performance during the fourth quarter also contributed to strong Q4 results for Allegiant, particularly in December. Chief Revenue Officer Drew Wells cited yield performance as a "major upside catalyst" for Q4, and total revenue per seat mile (TRASM) hit a new record during the period. In fact, fourth-quarter TRASM ended the quarter 20% higher than the same period in 2019.

Although 2022 posed myriad challenges for Allegiant Travel, from omicron variant outbreaks to labor constraints and weather issues, the company ultimately delivered $2.3 billion in revenue for the year. This new all-time annual revenue record also eclipsed Allegiant's previous record from 2019 by 25%.

During the Q4 earnings call in early February, Wells suggested that Q1 results would produce 1% year-over-year revenue growth, that Q2 and Q3 would be "a bit higher," and that Q4 would show high-single-digit growth. Finishing 2022 with a completion factor (percentage of completed flights) of 99.5%, Allegiant Travel is well positioned for the current robust demand environment.

The case for Sun Country Airlines

Also generating record-high revenue in 2022, Sun Country Airlines (SNCY 6.45%) saw growth across its scheduled service, charter, and cargo segments last quarter.

The Minneapolis-based airline brought in Q4 revenue of $227 million, toward the upper end of company guidance and a 32% year-over-year improvement. With an adjusted operating margin of 7%, Sun Country delivered $7.3 million in net income for the quarter, a marked increase from 2021's fourth-quarter loss of $1 million.

In another fourth-quarter highlight, system block hours (the total number of hours from a flight's initial taxi to being docked at the destination) rose 37% above 2019 levels. The completion factor reached as high as 99.6% last December, and scheduled service TRASM climbed 27.3% year over year. 

Despite contending with limited crew and aircraft availability, Sun Country carried in record revenue of $894 million last year, a 44% increase from 2021. Its 2022 total fare average of $175.29 and a load factor of 83.5% marked Sun Country's "highest full-year result since 2018," according to chief financial officer Dave Davis.

Looking ahead, Sun Country anticipates last year's demand strength to carry into 2023. For Q1, strong bookings and unit revenue are both expected, with total revenue projected to hit $280-$290 million. If expectations are met, it would mark a 24%-28% improvement year over year.

Which airline stock is a better buy?

To determine which stock is a better buy in today's market, I've compared their price-to-sales ratios (P/S), price-to-book ratios (P/B), and financial-debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratios.

Metric Allegiant Travel Sun Country Airlines
Market cap $1.73 billion $1.05 billion
Price-to-sales ratio 0.75 1.25
Price-to-book ratio 1.42 2.13
Financial debt to EBITDA (annual) 6.28 2.57

Data source: Ycharts.

Although Allegiant Travel sports better (lower) P/S and P/B ratios, it also has a substantially larger financial-debt-to-EBITDA ratio. 

Since the debt to EBITDA ratio is used to estimate how many years into the future it will take for a company to pay off its debt liabilities (based on net debt and EBITDA remaining constant), we can see that Allegiant would likely take several years more than Sun Country to pay off its debt.

That being said, if Allegiant can improve profitability over time and pay down its debt more quickly than expected, its stock should reflect that recovery. I personally think Allegiant Travel presents the better stock to buy right now.