Allegiant Air is an American low-cost airline owned by Allegiant Travel Co. (NASDAQ: ALGT) headquartered in Enterprise, unincorporated Clark County, Nevada, United States. The airline operates scheduled and charter flights from focus cities at Las Vegas's McCarran International Airport, Orlando Sanford International Airport, St. Petersburg-Clearwater International Airport, Phoenix-Mesa Gateway Airport, Fort Lauderdale-Hollywood International Airport, Bellingham International Airport, and at Los Angeles International Airport. On February 1, 2010, Orlando International Airport will become Allegiant's newest focus city. Eventually, the Orlando/Sanford flights will be transferred to MCO. The airline also offers vacation packages through its Allegiant Vacations affiliate. Allegiant Travel Co. is a public company with 980 employees and 700 millon USD market capitalization.
History
Allegiant Air was founded in 1997 under the name WestJet Express . After a trademark dispute with West Jet Air Center of Rapid City, South Dakota, and with the name's similarity to WestJet Airlines of Calgary, Alberta, the airline adopted the name Allegiant Air and received its operating certificate for scheduled and charter domestic operations in 1998. The airline also has authority for charter service to Canada and Mexico. Wholly owned by Allegiant Travel, the airline now has over 1,300 employees.
Scheduled service began on October 15, 1999, between Las Vegas and the airline's initial hub in Fresno, California, with Douglas DC-9-21 and DC-9-51 aircraft. Shortly after the shutdown of WinAir Airlines, Allegiant Air opened a hub in Long Beach, California, mirroring WinAir's network. The airline was unable to bring in enough revenue to cover its costs and filed for Chapter 11 bankruptcy protection on December 13, 2000.
In June 2001, Maurice J. Gallagher, Jr. joined the airline and soon became its President and Chief Executive Officer. Having formerly worked with WestAir and ValuJet Airlines, Gallagher led the airline's transformation into its present form, moving the base to Las Vegas and focusing on smaller markets that larger airlines did not serve with mainline aircraft. From 2001, they have grown from 2 destinations to over 50 from Las Vegas, Orlando/Sanford, Florida, and St Petersburg, Florida
On November 20, 2006, Allegiant Air announced that it had filed a registration statement with the Securities and Exchange Commission in anticipation of a planned initial public offering of its Common Stock. It is listed on the NASDAQ Stock Market under the ticker symbol "ALGT".
On July 31, 2007, the airline announced plans to open a fourth focus city and operations base at Phoenix-Mesa Gateway Airport in Mesa, Arizona, connecting the Phoenix metropolitan area to 13 destinations already served by Allegiant and one new destination. The airline began service out of their new focus city on October 25, 2007. The airport announced a 10,000-square-foot (930 m 2 ) expansion in August 2008 which will increase the number of gates from two to four and allow Allegiant to triple the number of flights from Phoenix. The expansion will be funded by a loan from Allegiant which will be repaid by passenger fees.
On August 1, 2007, Allegiant also announced plans to open their fifth focus city and make an operations base at Fort Lauderdale-Hollywood International Airport, connecting the South Florida area to destinations already served by Allegiant. The airline began service in this focus city November 14, 2007.
On January 29, 2008, Allegiant opened their sixth base at Washington's Bellingham International Airport. The airline is basing two McDonnell Douglas MD-80 aircraft in Bellingham as part of the expansion. Routes served exclusively from Bellingham include Las Vegas, Reno, Palm Springs, San Diego, San Francisco, and Phoenix. Expansion in Bellingham has been largely driven by its proximity to Vancouver, Canada.
Along with Southwest Airlines, the airline was the only major United States airline to make a profit in the first quarter of the oil-driven economic crisis of 2008.
On September 16, 2008, the airline announced the addition of Lexington, Blue Grass Airport for non-stop service to Orlando-Sanford and Tampa-St. Petersburg commencing November 2008. The next day, Allegiant announced the addition of Hagerstown Regional Airport for non-stop service to Orlando-Sanford commencing November 14, 2008.
Business model
Allegiant Air operates a business model that focuses on:
- Flights to airports which have limited or no service from mainline carriers
- Attracting leisure passengers traveling to seasonal warm-weather destinations
- Generating ancillary revenues in addition to ticket revenue
- Maintaining low operational costs
Markets
Allegiant Air targets small cities with limited passenger airline service. Many of the airline's markets, such as Peoria, Illinois, and Allentown, Pennsylvania, are served only by commuter service requiring a connection at an airline hub. Allegiant, as of October 2009, has competition on only five of its 136 routes.
Other Allegiant destinations are secondary airports that are close to large metropolitan areas. For instance, Allegiant is the only carrier operating at Phoenix-Mesa Gateway Airport.
Routes
The airline's focus is on leisure travelers, particularly those in colder northern climates, going to warm-weather tourist destinations such as Las Vegas, Orlando, or Phoenix. The airline offers a lower frequency of flights and no amenities such as frequent flier points or on-board entertainment. As a result, Allegiant carries few business passengers.
Revenues
The airline, which attracted investment from the Ryan family of Ireland, owners of Ryanair, follows a similar model which seeks ancillary revenue in addition to ticket revenue. Allegiant earns ancillary revenue through sales of food, beverages, and souvenirs on board as well as charges for checking luggage and advance seat assignments. The airline also offers hotels, cars, show tickets, and tour packages on its website, which generates commissions. As of October 2009, the St. Petersburg Times reported that ancillary revenues were $33.35 per passenger. The total contribution of hotel and rental car packages is up to 30% of the airline's revenue.
Charter information
Allegiant also operates air charters which contribute 7% of its revenue. The company has two contracts with Harrah's Entertainment with two aircraft based in Reno, Nevada, and Laughlin, Nevada to ferry customers to Harrah's casinos. Additionally, Allegiant has two aircraft based in Tunica, Mississippi to support a charter contract to transport gaming customers to Harrah's casinos including Tunica and New Orleans. They also transport firefighters for the United States Forest Service and college basketball players and staff.
Allegiant had a contract to supply charter flights from Miami to four cities in Cuba. Flights began in June 2009. One aircraft was committed to the contract. The contract was for fixed-fee flying, meaning all they have to do is provide the dry aircraft and the flight crew. The contractor is responsible for all other costs including fuel. Allegiant ended this service in August 2009.
Costs
The airline tends to offer lower fares, which requires strict cost control. Part of the airline's lower cost structure includes operation of MD-80 jets, which the airline can purchase and refurbush for as little as $4 million. While the aircraft are less fuel-efficient than newer planes, Allegiant is able to purchase them outright for one-tenth the cost of a new Boeing 737. Given the low cost of ownership, Allegiant is able to fly the planes less (seven hours per day versus 13 hours per day at JetBlue), which helps keep labor costs lower. Overall, Allegiant operates with 35 full-time workers per plane compared to more than 50 at other carriers.
The airline does not accept subsidies from cities seeking service, but still seeks to maintain a low permanent operating cost at the airport. Allegiant rents ticket counters on an hourly basis and in Chattanooga, Tennessee, and Springfield, Missouri, many duties are handled by airport employees contracted to Allegiant.
The cost of ticket sales is reduced by selling tickets on its website and at airport ticket counters. The toll-free number was eliminated and Allegiant does not utilize internet travel agencies.
Criticism of the business model
Some airport officials have criticized Allegiant for shutting down routes or leaving markets quickly if they are not immediately profitable. In Kinston, North Carolina, the airport authority invested $60,000 for advertising Allegiant's routes and asserted that the load factor was 90% or better. However, they contend that the airline left the market when it did not earn enough ancillary revenue after only one year. In Columbia, South Carolina, the carrier departed after only two months as loads began to weaken from new legacy airline competition. Allegiant returned to Columbia in February 2009, but has since pulled out again as of late 2009.
The airport director in Worcester, Massachusetts, felt that Allegiant reneged on a commitment to serve the airport for five years given the use of federal grants to assist its startup. However, the airline replied that the market was immediately unprofitable and starting service there was a poor decision.
The US Department of Transp
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