Category Archives: Allegiant

Nah, Alaska Airlines Doesn’t Really Want to Serve Paine Field Outside Seattle

Alaska Airlines put out a press release yesterday that included a proposed schedule for flights from the airport, located about 40 miles north of Sea-Tac. They say they would initially serve Vegas, Honolulu, Maui and Portland, eventually adding Phoenix, LA and San Diego.

The announcement was interesting, primarily because it’s pretty clear that Alaska does not actually want to serve the airport. As they note in the release, there’s currently no passenger terminal there, so that would have to be built.

And if we read closely, they say they’re happy at Sea-Tac, but:

“If one or more other airlines begin operations at Paine Field, we would commence service alongside these carriers. Submitting a schedule with the FAA along with a request for authorization to serve Paine is a necessary step in the process.”

In other words, if Allegiant were to start serving Paine Field, we will go after them.

It’s worth noting here that the cities they say they’ll serve – Honolulu, Maui, Portland and Vegas – are exactly the same cities Allegiant flies from a small airport in Bellingham, north of Seattle.

In short? Alaska likely put the announcement out to show Allegiant that if they plan on starting operations at Paine Field, they’ll be there right beside them.

Allegiant Cancels Monterey – Honolulu Before Launch

Allegiant has announced that they are canceling their planned weekly Monterey-Honolulu service a month before its scheduled launch due to low demand.

An airport official said he thought that loads were in the 20-30% range, which isn’t even close to what the airline needed to make the weekly 757 service work. After the demise of Aloha and ATA a few years back, Bay Area service to Hawaii dropped significantly, but in recent years Hawaiian and Alaska have beefed up flights to the area, and I would guess the significant number of options from San Francisco, Oakland and San Jose made it difficult for a once-weekly service from Monterey to be successful.

Allegiant will still serve Honolulu from Stockton and Fresno.

Allegiant (and Spirit, for that matter) are both known for killing service they don’t think is working very quickly. While legacy airlines tend to be more patient, letting their markets develop, since Allegiant is serving third-tier cities, there are plenty of other airports that may be able to handle weekly Honolulu service.

Monday News Roundup

I’m on vacation this week with the family (Southern California – United in coach. Only two things to note are that flying with 6 year olds is infinitely better when they have iPads, and flying on former Continental planes is infinitely better now that they’ve started to reconfigure them with Economy Plus section), so my posts will likely be a bit limited this week. Unless I’m driving my family crazy (likely scenario), in which case I’ll lock myself in a room and write.

- A Florida woman is suing El Al because the airline moved her to a seat in the back of the plane after an Ultra-Orthodox gentleman refused to sit next to her. Not sure why the airline didn’t move the gentleman passenger. She’s suing because her original seat was on the aisle, which she had requested for some unspecified medical reason, and the non-religious seat she was moved to was not on the aisle. She is requesting $12,500.

- Allegiant is charging most customers $4 extra each way for using credit cards. When you search for fares on their website, they now display the price for debit cards. If you want to use a credit card, they charge the additional four bucks. Allegiant runs a fantastic operation, and they’ve been extremely profitable quarter after quarter. Most impressively, though, is that they’ve managed to avoid the public thrashing by customers that Spirit Airlines seems to face on a daily basis. I’m not sure why we don’t hear the vitriol for Allegiant that we hear for Spirit, considering they have similar ancillary fees in place.

Allegiant to Add 19 A319s to Their Fleet

I was just about to write about Allegiant picking up 10 A319s from Cebu Pacific and 9 from Easyjet, but then Cranky beat me to it, and let’s be honest, I’m WAY lazier than he is. Look – he’s got graphics and whatnot in there. I can’t compete. So, in short:

- They’re grabbing these planes because, well, they can and no one else wants them.
- Their operating costs are lower than the MD-80s they typically fly around (nearly 10% cheaper).
- A319 will allow for greater range and flexibility than the MD-80s

Sure, adding more plane types adds to the complexity of the operation, but their costs are much lower, and the aircraft were available. Allegiant runs a tight ship (in my mind they are, with Spirit and US Airways, the best run airline in the US). What was that? Yes, Allegiant, Spirit and US Airways. Who else has run a consistently great business in the airline industry. OK, Southwest. Fine. Throw them in there, too. But look at the stock returns from Allegiant, Spirit and US Airways vs Southwest and see who is kicking some butt (answer: Allegiant, Spirit and US Airways). You don’t have to fly them, but you do have to respect their operational focus.

Allegiant Announces Hawaii Routes to Launch in June

A few years back Aloha and ATA went out of business, and the word on the street was that you simply could not make money flying a leisure airline from the West Coast to Hawaii. As they closed up shop, and capacity came out of the market, it was assumed that no airline would ever come in and fill those routes, since they would never be money-makers.

That sounds kinda funny now. Hawaiian has beefed up its West Coast operation considerably. Alaska, too, has launched service to Hawaii from the West Coast, including nonstops from Oakland and San Jose today.

And today brings word that airline nerds everywhere (?) have been waiting for: Allegiant has announced its inaugural service to Hawaii. Beginning June 29th, the airline brings nonstop service from Fresno and Las Vegas to Honolulu, with fares starting at $174. Before everyone freaks out about what a stupid move this is, Fresno service is once a week. Vegas is 3x a week. True – Hawaiian does fly nonstop from Honolulu to Vegas, fares are generally around $700. Vegas can likely handle 3 additional flights a week at half the price.

The market makes sense for Allegiant, as they make so much of their revenue from ancillary revenues — and God knows that the Hawaiian market is ripe for hotel packages and tours. Plus, it’s a grand total of 4 flights a week. If Hawaii doesn’t work from those cities, I’m sure they’ll try once-weekly service from Stockton, Bellingham or one of the other small cities they’ve made work.

Allegiant’s management has done an amazing job running that airline, and while I would typically be really nervous about a carrier making such a big shift in strategy, they’re entering Hawaii in such a small way (and they’re so nimble about closing down routes) that I give them a chance.

Allegiant to Charge for Carry On Bags

(Via Airline Reporter)

Allegiant will reportedly implement a fee to carry a bag on to their flights beginning today, matching Spirit Airlines’ carry on policy. The fee (which is not yet live on their site) will reportedly be $15-$30 if you book in advance (depending on the route) or $35 if you pay at the airport.

This shouldn’t be much of a surprise as the airline has said they’ve been considering the fee, and I’m certain they’ve been salivating as they’ve seen Spirit Airlines’ extremely impressive ancillary fee revenue. Considering Allegiant and Spirit are the two most profitable airlines in the US, passengers are complaining about ancillary charges but paying them anyway.

Spirit Takes a Page from the Allegiant Playbook

Spirit Airlines is trying a bit of a different strategy:  taking a page out of the Allegiant playbook, they have announced new service from tertiary cities to Ft Lauderdale and Myrtle Beach beginning next January.  Spirit will roll out flights from Plattsburgh (NY), Latrobe (PA), Niagara Falls, Charleston (WV) and Dallas (OK, not a tertiary city) to FLL and roughly the same cities (swapping Washington DC for Dallas) to Myrtle Beach.

Although Allegiant serves Plattsburgh – FLL, they will stay out of their way, only offering overlapping flights on Saturdays.  Latrobe, Niagara Falls and Charleston are all new service, though not daily (Dallas is double-daily).  Spirit’s domestic service to FLL has typically been daily, so this 4x/week service to small cities is likely a test to see if they can mimic that Allegiant strategy.  Given Spirit’s strong ancillary revenues (and propensity to pull out of cities that don’t work immediately), I bet we’ll see them expand using this strategy over the coming years.

Alaska Airlines Announces Nonstop Service from Bellingham to Honolulu – Preemptive Strike to Allegiant?

Alaska Airlines announced that it will begin daily service in January from Bellingham, Washington, to Honolulu, the first time the airport between Seattle and Vancouver has had nonstop service to the islands.

This wouldn’t have really piqued my interest, except that with Allegiant has purchased 757s that they intend to use to Hawaii, and since they already serve 8 destinations from Bellingham, it wouldn’t be crazy to think they’d use the airport to launch the new service.  And given Allegiant’s historical desire to stay away from competition on its routes, Alaska may be trying to lock up the airport before Allegiant announces anything.  In which case it wouldn’t be shocking to hear that Long Beach would be the first Hawaiian destination Allegiant announces.

If You Don’t Like What Spirit Is Doing, You Should Have Been Hating Allegiant for a While Now

To wrap up Spirit Airlines week here at the OTR, I wanted to point out the role that executives make in how customers perceive airlines.  Case in point, Spirit and Allegiant.

Would you complain constantly about an airline that offers a miserable 30″ seat pitch on its rather old planes, features seats that do not recline, charges you $11 to reserve a middle seat, charges $5 for priority boarding, charges $35 for a gate-checked bag, and makes you pay for water?  Probably, right?  But Allegiant does all that (and more) but has legions of fans that keep their planes more than 90% full quarter-after-quarter.  Spirit Airlines has implemented similar policies, and each time they do, they are met with derision and scorn. Why is that?

I think the answer is two-fold:

1) Spirit’s executives have kept a high profile in the media, making a big deal out of each fee as a way of suggesting that fees are keeping their fares very low.  Yet each time they do, media and customers freak out (this is not suggesting that they lose customers; on the contrary, they have grown considerably over time).  Spirit has simply taken the approach that any publicity (and in their case, it is nearly exclusively negative) is good publicity.  And…

2) Allegiant offers services to cities where not only to customers have no other choice, their customers are absolutely thrilled that nonstop service is offered to leisure destinations.  The fine folks in Bismarck, North Dakota, and Bozeman, Montana, are just happy to not fly through a hub (or happy have service at all).  Allegiant has portrayed itself as a way for people in these cities to enjoy more time on vacation and less time traveling, while paying a pretty low fare.  That message has generated an enormous amount of goodwill, causing customers to accept the very same policies that have caused people to complain nonstop about Spirit.

Neither method is correct, and I do think that Spirit’s execs have flaunted their policies on purpose, keeping the airline’s name in the news and generating an impressive amount of awareness for their airline.  You can hate them, but don’t hate them for the same policies that Allegiant implements without passenger complaint.

(I’ve mentioned before, though, that Allegiant is probably the best-run airline in the US, and among the best-run airlines in the world.  Through the economic downturn they have continued to be profitable and grow – quarter after quarter – while making an impressive number of smart decisions.)

2009 OTR Airline of the Year: Allegiant Air

Whew, has 2009 been a tough one for airlines. Globally, carriers are expected to lose $11 billion this year, with US airlines contributing about $2.5 billion worth of those losses.  Mainline carriers saw 10-15% drops in year-over-year Revenue per Available Seat Mile, and back in June US Airways reported a nearly 30% drop in year-over-year yields (roughly – the average fare paid).  Add the that a 5-7% decrease in capacity, and it would look like 2009 was the year that airlines tried to shrink themselves into a $2.5 billion loss.

Except Allegiant.  The Las Vegas-based low fare carrier continued its tradition of posting ridiculously good numbers, even as every analyst out there assumed that people would stop flying to Las Vegas altogether.  Wrong.  Allegiant diversified, flying to Phoenix and several cities in Florida, generally avoiding any competition by flying a few days a week to cities with little air service.  For $69 or so people in third-tier cities could go to a sun destination without having to change planes.  There is a lot to be said for that, even in a down economy.

During the first 3 quarters of 2009, Allegiant posted a $65 million profit on $423 million in revenue.  Their operating margin was more than 24%.  While their average fares dropped from the first quarter ($74 in Q1 vs $67 in Q3), ancillary revenues only dropped from $34 to $32 per ticket.  Yes, they derive about 1/3 of their ticket revenue from ancillary charges.  They decreased operating expenses nearly 30% year-over-year in an operation that was already lean, allowing them to post strong profits even when average fares were dropping.

Their decision to purchase MD-80s on the used market for several million dollars each, rather than investing billions in new planes is brilliant, allowing them to keep utilization pretty low and still print money.  Sure, when fuel costs increase they get hit because of their less efficient aircraft, but it is offset by their ability to manage their cashflows by buying planes outright.

Their strategy seems obvious:  do what you do well and avoid doing anything else.  I was concerned when they moved away from their Vegas strategy to diversify a bit, but it turns out to be a great move in light of decreasing travel to Vegas during the recession.  They were able to translate their strategy to a handful of new markets, offering service to small cities and selling hotel rooms, attractions, and onboard services to keep revenues at a profitable level, even as fares decreased.

Bravo to yet another year well done at Allegiant.

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