Oh well it's a nice story anyhow ;) although we've covered most of it on these virtual pages already.- Even as many leisure travelers are cutting spending because of the bad economy, discount carrier Allegiant Airlines is adding new routes. Most traditional U.S. airlines, including low-fare carriers, posted losses in 2008 and are reducing their flights, but not Allegiant, a unit of Las Vegas-based Allegiant Travel Co. Based on its 11.1% operating margin, it was the most profitable U.S. airline last year. And on Wednesday, it plans to announce it will add Los Angeles to its roster of holiday destinations that can be reached nonstop from small U.S. cities.
- Allegiant has announced 25 new routes since August and plans to increase its capacity 21% in the second quarter, not including the buildup of service to Los Angeles International Airport from a dozen communities it already serves. The airline carried 3.9 million scheduled passengers last year, up 29% from 2007, and flies its planes about 90% full.
- Allegiant has targeted more than 60 communities such as Elmira, N.Y.; Peoria, Ill; Fargo, N.D.; and Bellingham, Wash., that lack abundant, inexpensive air service. It concentrates on carrying travelers from these sites to destinations including Las Vegas; St. Petersburg, Fla.; and Phoenix on nonstop flights, gaining a monopoly on the routes and avoiding competition with larger airlines.
- Allegiant has very low costs, no unionized workers and almost no debt. It flies 41 used MD-80 airplanes that cost $4 million rather than new planes that would cost 10 times as much. The company schedules flights only as often as it can fill up its 150-seat planes. Many routes are served only two or four times a week. And when demand falls for seasonal reasons, Allegiant reduces the frequency or temporarily withdraws from a route. It also tweaks its prices week to week.
- Allegiant isn't immune to the economy's troubles. The company expects to have to cut $4 to $7 from its average fare in the current quarter, compared with the 2008 first quarter.
- But its fuel cost per passenger is down sharply because of the decline in oil prices since last summer's peak. Allegiant says its fuel expense fell 36% in the fourth quarter from the previous quarter. And its revenue keeps growing from its fees for checked bags, food, and the hotel and rental-car offerings it packages with its tickets. Those charges currently add up to almost $33 on top of the average one-way ticket price of $83.
- Mark Roberts of Off Wall Street Consulting Group Inc. is among those who believe Allegiant is bound to lose altitude, and he gives the stock a sell rating. "Leisure travel is dropping," he says. "If leisure traffic drops and fuel goes up, then these guys are toast."
- But other analysts are bullish. Allegiant's "industry-leading margins and returns, even when fuel prices were at a high, are a testament to the strength of the model," William Greene, a Morgan Stanley analyst, said in a recent note. "In fact, with margins again exceeding 20% in the fourth quarter, we look for [the company] to ramp growth higher."
[Jan 27: Allegiant Travel Continues to Execute; Buyback Announced]
[Jan 7: Allegiant Travel December Traffic]
[Jan 5: Beginning Allegiant Travel] (old portfolio)
Long Allegiant Travel in fund; no personal position
1 comments:
One look at the 'track record' of the Off Wall Street Consulting Group as provided on their website gives me comfort as an ALGT shareholder that they have no idea about this company. "If leisure traffic drops and fuel goes up, then these guys are toast.". Wrong guys. ALGT will quickly exit any markets if they see traffic dropping. They will not allow themselves to become toast.
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