Allegiant Travel (ALGT -0.33%) closed out 2022 with its highest revenue ever -- eclipsing its previous annual revenue record by 25%. While 2022 proved to be a challenging year for the ultra-low-cost carrier, Allegiant's low fares and nonstop flights remained in high demand.

Taking Allegiant's recent performance and future outlook into account, here's why I think this airline stock could really take off over the long term. 

All-time high revenue in 2022

Fourth-quarter operating revenue came in at $612 million, a 23% increase over the same period in 2021 and a 33% increase over the same period in pre-pandemic 2019. During the Q4 earnings call, CFO Robert Neal cited "the sustained strong demand environment" as a major catalyst, along with operational improvements and more favorable fuel costs.

Chief Revenue Officer Drew Wells noted that "yield performance in the quarter was the major upside catalyst, particularly in December." Total revenue per available seat mile (TRASM) reached its highest quarterly level in company history during Q4 -- 20% higher than Q4 2019.

Things improved for Allegiant as 2022 progressed, with Q4 showing the most stability according to Wells. A robust Q4 helped contribute to the airline's all-time high $2.3 billion in revenue in 2022. "Easily the best number in company history," Wells boasted, 2022's revenue record jumped 25% higher than Allegiant's previous record from 2019. 

Completion factor, or the percentage of flights that arrived as scheduled, improved 2% from the first half of the year to the second, ending at 99.5%. CEO John Redmond affirmed that the current "robust demand environment" shows no signs of slowing, and claimed that Allegiant's momentum will carry into 2023.

Headwinds are easing

2022 presented unique challenges to the airline industry, from omicron variant spikes and labor constraints to hurricanes and winter storms. Despite the difficult year, signs of recovery are emerging for Allegiant Travel.

For example, fuel expenses, crew costs, lost revenue, and customer compensation all added up to a significant financial impact of $100 million during the first half of 2022. However, Allegiant only endured a $30 million impact in the second half of 2022. 

President Gregory Anderson attributed the improvements to Allegiant's increased operating margin during the second half of the year. Q4's better-than-expected adjusted operating margin reached 16% out of an estimated 8%, thanks in part to a 2% stronger completion factor.

The news keeps getting better for Allegiant

Looking ahead, Allegiant plans to build off its successes from the latter part of 2022. Wells expects to see 1% year-over-year growth in the current quarter, with the second and third quarters "a bit higher," and a high-single-digit growth rate in the fourth quarter.

Also worth mentioning, 1% growth in the current quarter would still mark a 20% improvement over the first quarter of 2019. Wells also expressed being "extremely encouraged" by spring break travel outlook. 

According to Chief Marketing Officer Scott DeAngelo, "the news keeps getting better for Allegiant." He reported that a survey of Allegiant's loyal frequent-flyer base, which drives a majority of the company's revenue, revealed current economic considerations will have "no impact" on their flying behavior.

DeAngelo added that Allegiant continues to convert customers from competitors like Southwest Airlines in "record numbers."

Can Allegiant stock continue its ascent?

Although Allegiant stock still trades more than 62% down from its highs of March 2021, it has also recovered 61% from its lows of late last year, up 46% this year to date. Considering Allegiant Travel is posting record revenue while achieving a better-than-expected operating margin, I think it's only a matter of time before that record revenue translates into record profits.

On the other hand, while demand has persisted in the face of the current slowed economy, further economic contraction or another major interruption (like COVID) could flatten or even reverse Allegiant's momentum. Investors should be aware that regardless of management's intentions, there are macroeconomic and other forces outside of company control.

In the long run, the stock should ultimately reflect the company's successes. For these reasons, I think Allegiant stock makes a solid buy in today's market -- provided the airline remains on its current flight path.