Category Archives: Allegiant - Page 2

Allegiant Is in a Class by Itself

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

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

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.