Allegiant Air

Allegiant’s latest round of Hawaii flights reflects its network strategy

Allegiant Air’s latest round of Hawaiian routes is more representative of the carrier’s historical service patterns rather than the Las Vegas-Honolulu route debuting in the initial roll-out during Jun-2012. While launching its first flights to Hawaii from Las Vegas was driven more by operational considerations, the second batch of flights Allegiant is introducing in November are small markets that are largely shielded from legacy competition.

After a lengthy process to obtain ETOPS, Allegiant now has all the requisite approvals to inaugurate service to Honolulu in June from Fresno, California and Las Vegas, Nevada with 223-seat Boeing 757s, a new fleet type for the carrier. Beginning in Nov-2012 the carrier is introducing flights from Eugene in Oregon and Santa Maria and Stockton in California to Honolulu. Other new service includes flights from Bellingham, Washington to Honolulu and Maui.

The protracted ETOPS approval created marketing obstacles for Allegiant in launching its highly-anticipated flights to Hawaii.

Allegiant Air to enter Hawaii market in June with Honolulu flights to Fresno and Las Vegas

Allegiant Air on 29-Jun-2012 will realise its ambition for Hawaii services with the launch of thrice-weekly services to Honolulu from its Las Vegas hub and then weekly Fresno-Honolulu service on 30-Jun-2012, both on 757-200s, according to schedules filed in global distribution systems. Allegiant first announced in 2010 its intentions to serve Hawaii, but has been involved in a protracted effort to acquire aircraft with the range to make the flight and also regulatory approval for ETOPS operations. Allegiant in Mar-2012 had reaffirmed its commitment to launch Hawaiian services in Jun-2012 and will just barely achieve that, launching a month into the popular northern hemisphere summer season.

US carriers push for national airline policy as red tape, tax burdens threaten to crush their plans

Costly new regulations imposed by the US government designed to protect consumers and a spate of looming new taxes have galvanised the country’s airlines to launch a full-scale campaign to communicate the urgency surrounding the need to create a national airline policy. The stakes are incredibly high as some of the proposed taxes could hike the industry’s costs by USD36 billion over the next decade, and the heavy hand of government regulation ushers in new rules that could also add billions of dollars in compliance expenses for US carriers that are working tirelessly to prove their nascent profitability has staying power.

US industry trade group Airlines For America (A4A) started its campaign to convince government of the necessity for a national airline policy in late 2011 as the administration of US President Barack Obama proposed a USD100 tax on every flight and a tripling of the security taxes over a five year period.

Allegiant faces pivotal year as it seizes on AirTran cuts and works toward Hawaii launch

Allegiant Air has entered 2012 poised to capitalise on markets AirTran Airways is exiting following its sale to Southwest Airlines. On some levels Allegiant has benefitted from the capacity reductions fostered by consolidation among US carriers as the combined airlines exit underperforming markets. But as the new opportunities arise for Allegiant, it faces challenges in launching its long-awaited Hawaii services as the timeline to gain government approval for the operations remains a moving target.

The company is not shy about its plans to backfill some markets AirTran is exiting as part of a network overhaul by Southwest. Allegiant executives have stressed that as Southwest continues to digest the AirTran schedule, it creates opportunities for the airline to enter small markets that Southwest has concluded are unviable in the combined AirTran-Southwest network.

Allegiant posts 27% drop in earnings in 35th consecutive profitable quarter

Following everyone else in the industry, Allegiant reported falling profits on rising revenues as it posted a 27.9% decline in profits to USD9.5 million on a 17% increase in operating revenues to USD191.5 million. Net as a percent of total operating revenue dropped three points to 5%.

Its EBITDA margin, still healthy at 14.4%, was down 2.9 points while its operating margin was down 3.2 points to 8.7%. 

CEO Maurice Gallagher reported revenues continuing to perform well on most metrics in the quarter, which were up 15% or more year on year.

Allegiant will be one of the bidders for the slots being made available from the US Airways-Delta slot swap but has not expressed interest at this stage in the Washington National slots.

US airlines to report increasing revenue and strong demand

The distressing economic news this summer made September important in signaling how the US airline industry is performance. Judging from the early operational reports and 3Q2011 guidance issued, traffic and demand are defying the gloom offered by Wall Street and Washington. Indeed, air travel demand is expected to remain strong, which bodes well for the industry's bottom line given the fact capacity continues to tighten.

Still, US airlines are not sanguine about the state of the industry, with most not only pulling capacity in the fourth quarter but signaling the same for 2012 when a number of carriers will be taking delivery of new aircraft but keeping capacity flat. That capacity discipline, in evidence since early Spring when fuel continued its climb, meant the USD6-10 fare hike imposed in mid-September stuck and will likely segue into future hikes as demand remains strong on increasingly tight capacity. For now the hike applies to last minute tickets.