The nation’s cheapest, ancillary revenue friendly airline, Allegiant Air, reported a profit of $13.8 million this past quarter, making them the nation’s most profitable airline for this quarter. In a period of weak demand for air travel, Allegiant successfully boasts higher profit margins than any other carrier in the United States.
What are they doing right? (see post) Nothing’s changed drastically. The Las Vegas based company continues to make money from food, beverage, and souvenir sales. More importantly, the carrier makes money off of vacation packages, hotels, and car rentals. “We’ve taken a focused approach on selling something more than air travel,” CFO Andrew Levy told USA Today.
The competition – there virtually isn’t any. Allegiant serves 70+ cities, and only faces competition on five of their 140+ routes. The airline doesn’t fly to/from big airports, rather they are known for going ‘nowhere to nowhere,’ as most of Allegiant’s route map consists of small airports – many border major cities.
Smaller airports pay off for Allegiant, as small typically means cheaper to operate out of. Additionally, smaller airports generally have fewer delays. However, some airport managers have complained that Allegiant is too ancillary revenue based – in some situations, the carrier discontinued routes, despite high load factors, if flights were not making enough on hotel / rental car / vacation bookings.
Allegiant has orders for 16 (early 2009 data) McDonnell Douglas MD-83s, expanding its fleet (as of April 2009) of 43 aircraft. While most airlines are dumping MD-80 series aircraft due to fuel consumption costs, Allegiant is buying them. The airline owns a majority of their aircraft, reducing costs, as the carrier does not need to pay off leases. The planes cost roughly $4 million, a tiny fraction of what most airlines pay for aircraft.
They’ve found a niche, and it’s paying off well. Quarter after quarter, the airline continues to be profitable. No, you may not see their commercials, but they might be in your hometown. As long as the airline continues to wisely and skillfully manage its routes, Allegiant will continue to grow and build on its success.
