Category Archives: Allegiant

Allegiant Announces Hawaii Routes to Launch in June

Posted by on April 10, 2012 1 comment

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

Posted by on April 3, 2012 No comments

(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

Posted by on October 29, 2010 4 comments

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?

Posted by on August 2, 2010 No comments

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

Posted by on April 23, 2010 No comments

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

Posted by on December 21, 2009 No comments

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.

Allegiant Is in a Class by Itself

Posted by on August 4, 2009 No comments

Considering everything that is going on (and even if we were in a boom time, frankly), Allegiant posted another great quarter last week (you can see details here – thanks Centre for Pacific Aviation).  Compare this to the pathetic results posted elsewhere:

Revenue up 12%, Operating Costs down 13%, a nearly $24 million profit on $148 million in revenue.  $.107 RASM, $.075 CASM (revenues vs. costs per available seat mile).  Those are extremely impressive.

Those who don’t follow Allegiant mock them for their old MD-80s and penchant for flying to 3rd and 4th-tier cities.  Ha ha, the joke is on you.  Sure, 9 flights a day from New York to London is far sexier than flying 3x a week from McAllen to Las Vegas.  But who cares – they’re running a travel products company, not an airline.

What do I mean?  They fly in the face of every convention.  No connecting flights.  Few cities have daily service, let alone multiple flights a day.  30% of their operating revenue comes from ancillary products.  If roughly 1/3 of your revenue does not come from fares, you’re really a travel product seller.  Which is what they are.  In addition to the assorted fees you’ll pay when you fly, they sell a significant number of hotel rooms and event tickets in the leisure markets they serve.

Their own nearly all of their fleet of older MD-80s, and they can acquire them for about $4 million.  Yes, when fuel prices are sky-high that has a bit of an impact.  But the good FAR outweighs the bad, as it gives them enormous flexibility to keep utilization low and take aircraft out of service if they can’t be used profitably.  That last piece is important, because no airline is as flexible as Allegiant – if a route isn’t working, they’ll drop the service and try something else.  They can do this in part because they aren’t making extremely costly lease payments on new aircraft.

They also made the decision to diversify from their Las Vegas focus about two years ago.  This coincided nicely with the drop in business to Vegas.  While 37 of their 105 routes went to Vegas at the end of 2007, now its 41 out of 134.

This isn’t exactly a model for other airlines, but it’s amazing to see a company run an airline as efficiently as they do.

Allegiant Posts Q1 Earnings – It’s Like They’re in a Different Industry

Posted by on April 20, 2009 No comments

Allegiant posted strong financial results for the first quarter, earning $1.37 per share in a miserable demand environment.  I don’t usually talk about financials here, but if you care about this stuff, it’s worth reading their release (which I linked to above).  A few highlights:

They bring in $34 in anciallary revenue for each passenger on top of the $74 average fare (though that average fare is down $12.50 from last year’s Q1 average fare).  Their planes fly 90% full, and they have a 31% operating margin.  Their cash reserves actually grew $61 million over the year.

Sure, they’re facing the same fare pressures as everyone else.  But they’ve stayed out of the way of competition, and developed an ancillary revenue stream that continues to grow.  They can buy MD-80 aircraft for next-to-nothing.  And while that was hurting them a bit when fuel was expensive, it doesn’t hurt them at all anymore.  

Great job all around.

(BTW – I used to own ALGT shares.  I don’t anymore).

Allegiant to Launch Base at LAX

Posted by on February 19, 2009 No comments

For those of us who care about Allegiant (and there are a few of us), I think there was a bit of surprise when the airline announced that it would open up a base at LAX (even though Cranky reported this a little while back).

Allegiant has built an extremely profitable and well-run airline flying from out of the way locales to Las Vegas, Phoenix, Tampa and a handful of other sun destinations. They have roughly zero competition on any of their routes and about 1/3 of their revenue comes from ancillary products like hotel rooms and show tickets. They may not fly to Tokyo, but they are probably the best-run airline in the US by a wide margin, if only because they have a strategy and have executed on it brilliantly.

The LA announcement, then, is interesting because it is a deviation from what has worked for them. Yes, LA is warm much of the year. But it is not the sun/fun destination that has worked for them in the past. I’m hardly going to second-guess these guys, because they haven’t done much wrong, but I have the ever-so-slightest fear that LA could be the shark-jumping moment that all the Allegiant nay-sayers have been waiting for.

Then again, Allegiant is very, very quick to dump routes that don’t work. So it’s entirely possible that they’re outta there by August anyway.