Allegiant Air

Allegiant Air
Allegiant Air Logo.svg
IATA ICAO Callsign
G4 AAY ALLEGIANT
Founded January 1997; 21 years ago (1997-01) (as WestJet Express)[1]
Commenced operations June 1998 (1998-06)[1]
Operating bases
Fleet size 100[2]
Destinations 177
Company slogan Travel Is Our Deal
Parent company Allegiant Travel Co.
Traded as NASDAQALGT
S&P 600 Component
Headquarters Summerlin, Nevada
Key people Maurice J. Gallagher Jr. (Chairman and CEO)
Revenue IncreaseUS$1.50 billion (FY 2017)[3]
Operating income DecreaseUS$227.2 million (FY 2017)
Net income DecreaseUS$194.9 million (FY 2017)
Total assets
Total equity IncreaseUS$547.9 million (FY 2017)
Employees 4,000
Website www.allegiantair.com

Allegiant Air (usually shortened to Allegiant and stylized as allegiant) is an American low-cost airline that operates scheduled and charter flights. The 14th largest commercial airline in the US, it is wholly owned by Allegiant Travel Company, a publicly traded company with 3,700 employees and over $2.6 billion USD market capitalization.[4] The corporate headquarters are in Summerlin, Nevada, a suburb of Las Vegas.[5]

History

Early years (1997-2000)

Allegiant Air was founded in January 1997 by Mitch Allee (owner, CEO), Jim Patterson (president) and Dave Beadle (chief pilot), under the name WestJet Express.[1] After losing a trademark dispute with West Jet Air Center of Rapid City, South Dakota and recognizing the name's similarity to WestJet Airlines of Canada, the airline adopted the name Allegiant Air and received FAA and DOT certification for scheduled and charter domestic operations on June 19, 1998. The airline also has authority for charter service to Canada and Mexico.

Scheduled service began on October 15, 1998, between Las Vegas and the airline's original hub in Fresno, California, at the Fresno Yosemite International Airport, with Douglas DC-9-21 and McDonnell Douglas DC-9-51 jetliners. During the second half of 1999, the airline was operating nonstop flights between Fresno and Las Vegas, Burbank and Lake Tahoe, and Las Vegas and Lake Tahoe as well as flying one-stop direct service between Fresno and Lake Tahoe via Las Vegas.[6] Shortly after WinAir Airlines closed in 1999, Allegiant Air opened a small hub in Long Beach, CA (LGB) and in 2000 was operating nonstop flights to Fresno and Las Vegas in addition to Fresno-Las Vegas nonstop service.[7] Later in 2000, Allegiant continued to expand and was operating the only nonstop jet service between Lake Tahoe Airport from Long Beach in addition to operating new flights into Portland, Oregon and Reno with Portland-Reno and Reno-Fresno nonstops and direct one-stop service between Portland and Fresno via Reno.[8] However, Allegiant was unable to bring in enough revenue to cover its costs and on December 13, 2000, it filed for Chapter 11 bankruptcy protection.

Restructuring (2001-02)

Allegiant Air logo used from 2003 to 2010
An Allegiant Air McDonnell Douglas MD-83 wearing the old livery

The bankruptcy allowed Maurice J. Gallagher Jr., one of the airline's major creditors, to gain control of the business. A veteran leader of low-cost airlines, Gallagher had worked with WestAir and as CEO of ValuJet Airlines; his tenure included the Flight 592 tragedy. In June 2001, Gallagher restructured Allegiant to a low-cost model, focusing on smaller markets that larger airlines did not serve with mainline aircraft. Now chief executive officer and chairman, he moved the headquarters and operations to Las Vegas.

In March 2002, Allegiant exited bankruptcy and entered into a long-term contract with Harrah's to provide charter services to its casinos in Laughlin and Reno, Nevada. At the same time, the airline acquired its first McDonnell Douglas MD-80 jetliner. From 2002 through 2004, the airline developed its scheduled-service business model. By 2004, Allegiant was flying from 13 small cities to Las Vegas offering bundled air and hotel packages.

Expansion (2006-08)

In November 2006, Allegiant 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 October 25, 2007, the airline opened a fourth focus city and operations base at Phoenix-Mesa Gateway Airport in Mesa, Arizona, connecting 13 cities already served by Allegiant and one new city to the Phoenix metropolitan area.[9] The airport announced a 10,000-square-foot (930 m2) expansion in August 2008, which increased the number of gates from two to four and allowed Allegiant to triple the number of flights from Phoenix. The expansion was funded by a loan from Allegiant which will be repaid by passenger fees.[10]

On November 14, 2007, Allegiant opened its fifth focus city and operations base at Fort Lauderdale-Hollywood International Airport, connecting other Allegiant cities to South Florida.

In January 2008, Allegiant opened its sixth base at Washington's Bellingham International Airport. The airline bases two McDonnell Douglas MD-80 aircraft in Bellingham as part of the expansion.[11] Routes served exclusively from Bellingham include Las Vegas, Palm Springs, San Diego, San Francisco and Phoenix. Expansion in Bellingham has been largely driven by its proximity to Greater Vancouver, British Columbia.

2010s

On July 1, 2010 Allegiant returned to Long Beach Airport (LGB) in Long Beach, California having previously served LGB with DC-9 jets with nonstop flights to Las Vegas (LAS) and Lake Tahoe (TVL) in 2000.[12][13] The airline also intended to fly from Bellingham International Airport and Stockton several times a week; however, there is no service at present flown between these two cities although Allegiant continues to serve Stockton with flights to Las Vegas, Phoenix/Mesa and San Diego.[14]

In February 2010, Allegiant opened its ninth base at Grand Rapids' Gerald R. Ford International Airport in Michigan. The airline based two McDonnell Douglas MD-80 aircraft in Grand Rapids, but ended their airport's status as a hub in 2011. The airline continues to fly out of Grand Rapids in a reduced capacity.[15]

In March 2010, Allegiant purchased six used Boeing 757-200 jetliners as part of plans to begin flights to Hawaii, with deliveries from early 2010 to the fourth quarter of 2011.[16] It gained the approval for type with the FAA in July 2011,[17] and then worked with the FAA to obtain the appropriate ETOPS rating in order to be able to serve Hawaii. Allegiant no longer operates nonstop service to Honolulu from Las Vegas.[18]

In November 2011, Allegiant closed its Long Beach facility and consolidated all Los Angeles area flights at Los Angeles International (LAX).

In 2014, Cincinnati became Allegiant's largest O&D (Origination & Destination) city, with over 11 destinations and 40 weekly departures. This has grown to 17 destinations and 63 weekly flights as of summer 2017.

In summer 2015, a rash of midair breakdowns drew federal scrutiny. "Before the night was finished on June 25, 2015, five Allegiant flights had been interrupted in four hours, all because different planes had failed in midair," reported the Tampa Bay Times.[19] Since October 2015, the Federal Aviation Authority has kept Allegiant under close supervision.[20][21][22] In July 2015, Allegiant Air announced bases would be established at the Asheville Regional Airport and Cincinnati/Northern Kentucky International Airport, becoming the first base at a non-vacation destination.[]

In August 2017, Allegiant announced a new base would be established at the Indianapolis International Airport. The base is set to begin operations in early 2018. In February 2018, Allegiant also announced a new base would be established at the Destin-Fort Walton Beach Airport. In June 2018, Allegiant added another base at McGhee Tyson Airport in Knoxville, Tennessee.

Corporate affairs

Headquarters

The corporate headquarters are in Summerlin, Nevada, a master-planned community in suburban Las Vegas, Nevada.[5]

Business model

Allegiant aims primarily to serve leisure travelers, particularly those in colder northern climates, going to warm-weather tourist destinations such as Punta Gorda, Tampa Bay, Las Vegas, Orlando, Los Angeles and Phoenix.[23] It also serves smaller destinations that see few direct flights by major carriers. Many of the airline's markets, such as Peoria, Illinois, are served only by commuter service requiring a connection at an airline hub.[24] In October 2009, Allegiant had competition on just five of its 136 routes.[25]

Although it does not fly to Canada, Allegiant advertises extensively there and flies from about a dozen small airports near the Canada-US border. Many of its customers at airports such as Bellingham, Washington (BLI), Niagara Falls, New York (IAG), Ogdensburg, New York (OGS), Grand Forks, North Dakota (GFK) and Plattsburgh, New York (PBG) are Canadians, who can save money by flying from U.S. airports.[26]

To keep ticket prices relatively low, Allegiant offers a lower frequency of flights and no amenities such as frequent flier points or on-board entertainment.[24][27]

It prefers to use smaller/secondary airports where landing fees cost less, such as Orlando Sanford International Airport. At Phoenix-Mesa Gateway Airport, Allegiant is now the only carrier. However, since 2015, Allegiant has been growing at major airports, such as Cincinnati, Memphis, Raleigh/Durham, Indianapolis, and San Antonio.

Allegiant already flies into many major airports, including McCarran International (Las Vegas) and Fort Lauderdale-Hollywood International Airport. In June 2013, Allegiant deviated from this strategy with plans to compete with Southwest Airlines by offering direct flights between Las Vegas and Austin, a medium hub served by 10 carriers with non-stop routes to over 40 destinations. The airline also flies less frequently compared to the major airlines, operating routes two or three times per week. That requires fewer crews and allows less time-pressured aircraft maintenance.

In February 2011, Allegiant proposed to sell two types of tickets to passengers: advance tickets at a fixed higher rate and time-of-departure tickets that cost less but may have fees added based on the price of aviation fuel.[28] In 2012, the U.S. Department of Transportation banned the practice as part of wider regulations that also require taxes and fees to be included in airfares. Allegiant, along with Spirit Airlines and Southwest Airlines, sued the DOT to overturn these new rules. The United States Court of Appeals for the District of Columbia Circuit ruled in favor of the DOT on 24 July 2012[29] and the US Supreme Court denied certiorari on 1 April 2013.[30]

Ancillary revenue

Like Ryanair, the low-cost airline founded by the Ryan family of Ireland, who also have invested in Allegiant, the airline seeks ancillary revenue to supplement ticket revenue.[31] These ancillary fees include those for checking luggage, carrying on luggage (other than a small personal item), buying food and drinks on board, obtaining advance seat assignments, and more.[24][32][33] Allegiant CEO Maurice Gallagher said in 2009, "We collect $110 from you at the end of your trip. If I tried to charge you $110 up front, you wouldn't pay it. But if I sell you a $75 ticket and you self-select the rest, you will."[34]

Allegiant also earns commissions by offering hotel rooms, car rentals and admission to tourist attractions on its website. It sells package vacations under the brand name Allegiant Vacations. The company has arrangements with 34 hotels in Las Vegas and 21 in the Orlando and Daytona Beach, Florida, areas. In 2008, the airline sold 400,000 hotel room nights.[34] Commissions on hotel and rental car packages are up to one-third of the airline's revenue.[32][34]

In 2009, ancillary revenues were $33.35 per passenger.[35]

Charter flights

Allegiant's air charter operation contributed 7% of its revenue in 2009.[36]

In March 2011, Allegiant took over charter service to Wendover Airport for Peppermill Casinos, Inc. to shuttle customers to Peppermill's three casinos in West Wendover, Nevada; the Montego Bay Resort, the Rainbow Wendover and the Peppermill Wendover.[37] Allegiant based one 150-seat, MD-80 series jet aircraft in Wendover and more than 20 employees, including maintenance, flight crews and stations personnel.[38]

Allegiant also transports firefighters for the United States Forest Service as well as college basketball teams.[36] Allegiant had a contract to supply charter flights from Miami to four cities in Cuba beginning June 2009. One aircraft was committed to the contract.[36] The contract was for fixed-fee flying, meaning all the airline was required to do was provide the dry aircraft and the flight crew. The contractor was responsible for all other costs including fuel. However, Allegiant ended this service in August 2009.[39]

The company had charter contracts with Caesars Entertainment to ferry customers to Caesars casino properties through Reno-Tahoe International Airport, Laughlin/Bullhead International Airport and Tunica Municipal Airport.[40] These contracts ended in December 2012 when Caesars Entertainment signed a new contract with Republic Airways to provide the charter service to Caesars properties in Atlantic City, New Jersey, Tunica, Mississippi and Laughlin, Nevada.[41]

Costs

The airline tends to offer lower fares, which requires strict cost control.[24] Part of the airline's lower cost structure includes operation of McDonnell Douglas MD-80 jets, which the airline can purchase and refurbish for as little as $4 million.[32] While the aircraft are less fuel-efficient than newer planes, Allegiant was able to purchase used MD-80s outright for one-tenth the cost of a new Boeing 737 although Allegiant has subsequently purchased used Boeing 757-200s, Airbus A319s and Airbus A320s.[31] (the 757s were acquired for its Hawaii service while the Airbus jets are beginning to replace MD-80 aircraft). Given the low cost of ownership, Allegiant is able to operate its aircraft less (seven flight hours per day on average versus 13 hours per day at JetBlue Airways), which helps keep labor costs lower.[31] Overall, Allegiant operates with 35 full-time workers per plane compared to more than 50 at other carriers. Allegiant schedules their crew members so that they always return to their domicile at the end of the day, thus avoiding the need for hotel rooms which can be a costly expense for airlines.[32]

The airline seeks to maintain a low permanent operating cost at the airport.[42] 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.[31][43]

Allegiant maintains control over pricing by offering flights exclusively through its website, which also sells these ancillary products. It has no toll-free phone number and does not use Internet travel agencies.[24]

Criticism

Business model

Allegiant Air's business model is considered to be similar to that of the airline Valujet. Both airlines have had high numbers of emergency landings, and both bought second, third, or even fourth hand aircraft. As a result, they both flew the oldest commercial aircraft fleet in the United States at the time. Eventually, Valujet's reputation was tarnished after a number of accidents, including the crash of ValuJet Flight 592, and it merged with AirTran in 1997.[44]

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 responded that the market was immediately unprofitable and starting service there was a poor decision; flights were reported to be 80% full.[42] Allegiant's flights average 90% full.[34]

The United States Department of Transportation cited the airline in 2009 for not including the "convenience fee" in the initial price quote on the website.[25]

Worker's right to organize

Flight attendants at the carrier voted to organize their workgroup under the Transport Workers Union of America in December 2010, citing scheduling concerns among other issues in their work rules and the airline's pilots elected to vote on whether to join the International Brotherhood of Teamsters in July 2012.[45] In August 2012, the pilots voted to organize and joined the Teamsters.[46] Allegiant's chairman and CEO, Maurice J. Gallagher Jr., has been critical of the unionization of airline employees, and has stated, "Unionization is one of those things that clogs the arteries and makes you less quick and not as nimble as you need to be on top of your game... In this industry and others that are heavily unionized, you ultimately end up with bankruptcy as the primary driver."[45]

Safety concerns

Allegiant Air has been closely monitored by the FAA due to many emergency landings and aborted takeoffs.[47]ABC interviewed a former Allegiant mechanic, who said "Dedicated steps were not being performed with maintenance manuals or even with general practices, before an aircraft is released."[48] Many of these incidents have involved Allegiant's MD80 aircraft, which are expected to be replaced by Airbus A320 family aircraft. 46 of the 86 aircraft have made emergency landings, all of which were on MD-80's.[49] In March 2016 an Allegiant Air Airbus A320 was forced to make an emergency landing at Jacksonville.[50]

In December 2015, the FAA issued a letter of correction due to an incident where an Allegiant aircraft attempted to fly to an airport that was within an air space restriction. The pilots flying the aircraft then declared a fuel emergency stating, "Yeah, listen, we're bingo (empty) fuel here in about probably three to four minutes and I got to come in and land." The pilots were scolded by the airport's tower who said, "Your company ... should have been aware of this for a number of months," regarding the airspace restrictions which would have prevented flight to the airport. The pilots flying the aircraft were, at the time, the airline's vice president of flight operations and its director of flight safety. [51]

In May 2016, the FAA confirmed that Allegiant was under investigation.[52] On August 17, 2016, Allegiant Flight 436 aborted its take-off from McCarran International Airport, Las Vegas, Nevada due to an uncommanded early rotation at about 120 knots (220 km/h) indicated airspeed. An investigation by the FAA found that maintenance procedures had not been followed by Allegiant's maintenance provider, AAR Air Services Inc. This resulted in a nut becoming detached from an elevator boost cylinder. The aircraft had made 216 flights in an unairworthy condition. The FAA investigation revealed two similar occurrences. The FAA intends to prosecute over each offense.[53] The result of the 2016 FAA audit was to give the airline a clean bill of health.[]

A November 2016 analysis by the Tampa Bay Times noted that Allegiant's planes were four times more likely to have in-flight failures than other major US airlines.[54]

A 60 Minutes report by CBS News in 2018 continued to investigate the issues first raised by the Tampa Bay Times.[55] Public records cited in the investigation found that the airline had more than 100 serious mechanical incidents between January 1, 2016 and October 31, 2017, including "mid-air engine failures, smoke and fumes in the cabin, rapid descents, flight control malfunctions, hydraulic leaks and aborted takeoffs."[55] Other public records further revealed that Allegiant aircraft, on average, were nearly three and a half times more likely to have mid-air breakdowns than American, United, Delta, JetBlue and Spirit.[55]

One incident highlighted in the report was the termination of Captain Jason Kinzer, who was fired from Allegiant after he safely landed an aircraft during an emergency situation. Kinzer was operating Allegiant flight 864 on June 8, 2015 from St. Petersburg, FL to Hagerstown, MD. Minutes into the flight, the cabin of the MD-80 jetliner began to fill with smoke, which led Kinzer to declare an emergency and return to St. Petersburg. Once on the ground, fire crews confirmed smoke was coming from one of the engines. At that point, Kinzer ordered the plane to evacuate, but was instructed by an unidentified voice to "hold off." It would take 22 seconds and prompting from controllers before the voice identified itself as another fire crew. By that time, the evacuation had already begun. Six weeks later, the airline fired Kinzer, calling the evacuation "entirely unwarranted" and cited him for not "striving to preserve the company's assets". Kinzer filed a wrongful termination lawsuit against Allegiant, which is scheduled to be tried in May 2018.[55]

Teamsters Union Local 1224, which represents Allegiant pilots, told 60 Minutes that Allegiant has instructed pilots to "think twice before declaring costly emergencies" and that the airline's maintenance department "tries to talk pilots out of reporting problems with their aircraft to avoid delays and keep the planes moving."[55]

Destinations

As of March 2017, Allegiant offers service to 177 destinations throughout the United States, mostly to smaller non-hub regional airports and all usually only a few times each week. It chooses its routes after calculating expected costs and revenue and adds or ends service to particular destinations as demand warrants.

The airline bases aircraft in Asheville, Bellingham, Cincinnati, Fort Lauderdale, Fort Walton Beach, Indianapolis, Las Vegas, Knoxville, Los Angeles, Oakland, Orlando/Sanford, Phoenix-Mesa, Pittsburgh, Punta Gorda, and St. Petersburg/Clearwater.

Top markets

Top airports with scheduled Allegiant service (monthly, March 2018)[56]
Rank Airport Passengers Departures
1 Orlando/Sanford, Florida 149,196 1,019
2 St. Petersburg/Clearwater, Florida 113,573 767
3 Las Vegas, Nevada 110,566 785
4 Punta Gorda/Fort Myers, Florida 94,795 615
5 Phoenix/Mesa, Arizona 86,874 612
6 Cincinnati, Ohio 51,671 324
7 Fort Lauderdale, Florida 44,380 294
8 Indianapolis, Indiana 29,468 194
9 Bellingham, Washington 23,561 162
10 Grand Rapids, Michigan 20,294 127

Fleet

Current fleet

Allegiant Air Airbus A320-200

As of July 16, 2018, the Allegiant fleet consists of the following aircraft:[57]

Aircraft In service Orders Passengers Notes
Y+ Y Total
Airbus A319-100 31 6 18 138 156
Airbus A320-200 42 10 18 159 177
168 186
McDonnell Douglas MD-83 25 15 151 166 To be replaced with Airbus A320 family aircraft.
Last flights scheduled for November 28, 2018.[58]
McDonnell Douglas MD-88 2
Total 100 16

Fleet development

A now retired Allegiant Air Boeing 757-200 at Los Angeles International Airport

Allegiant Air once was the only U.S.-based carrier to have operated all five subtypes of the MD-80 series. On January 4, 2010, the SAS Group sold 18 surplus MD-80 series aircraft, built in the 1980s, to Allegiant Travel Company.[59]

In April 2010, Allegiant purchased six Boeing 757-200 aircraft from Thomson Airways for flights to Hawaii with the delivery of the first two in the following months. In September 2011, Allegiant Air introduced the 757 into service from their main hub in Las Vegas. Allegiant later began using the ETOPS configured 757s for service to Hawaii.[60]Fresno and Las Vegas were the inaugural destinations with nonstop service to Honolulu, Hawaii. Nonstop service to Honolulu was then added from Bellingham, Boise, Eugene, Phoenix (via Mesa Gateway Airport), Santa Maria, Spokane and Stockton.[61] Nonstop service to Hawaii was also planned from Monterey, CA but was not actually operated. Allegiant then began to reduce its Hawaii service after determining that the extensive and costly maintenance check - which happens about every six years and costs upwards of $1 million - would not be efficient on the aircraft they flew to Hawaii.[62]

In September 2010, Allegiant began to reconfigure their MD-80 fleet from 150 seats to 166 seats per plane. The project would involve removing galleys from the planes to add the 16 additional seats. All of the MD-80 conversions were completed by the end of September 2013.[63][64]

In July 2012, Allegiant announced the future addition of the Airbus A319-100 aircraft to its fleet. The aircraft are used and formerly belonged to easyJet and Cebu Pacific. All of them are high-density A319s, fitted with four overwing exits, allowing 156 seats. Two former easyJet aircraft entered service in 2013, with another in 2014 and an additional six in 2015.[65] In December 2012, Allegiant cancelled the agreement with Cebu Pacific citing an inability to agree on economic provisions.[66] On May 1, 2013, Allegiant purchased another A319 aircraft previously operated by easyJet that would enter service in the third quarter of 2013.[67] On February 23, 2015, Allegiant purchased six more A319s from Cebu Pacific.[68]

In 2013, Allegiant acquired nine Airbus A320-200 aircraft from Spanish flag carrier Iberia.[69][70] Seven of the A320s were delivered in 2013 and were used for growth into new markets, including destinations in Mexico and the Rocky Mountains, as well as airfields such as Charlottesville and Shenandoah Valley in Virginia and Trenton, New Jersey.[66] On February 24, 2015, Allegiant announced the purchase of 2 additional A320s from Philippine Airlines which entered into service in 2015.[71] Later in 2015, the airline announced a firm order for an Airbus A320 direct from Airbus, the first time it has purchased new aircraft from the supplier.[72]

In May 2017, Allegiant Air took delivery of its first brand-new A320. Allegiant took delivery of ten new A320s in 2017 and is scheduled to accept two in 2018. All new aircraft will be painted in Allegiant's new livery at the time it is delivered. Older Airbus aircraft will be repainted during their C-checks.[73] The new Airbus aircraft will have fuel-efficient sharklets. The new A320s seat 186 passengers, an increase of the 177 seats that are found in the rest of the Allegiant A320 fleet. To fit the additional nine seats, Allegiant opted for the Airbus Space-Flex V2 Lavatory. [74]

On October 31, 2017, the final 757 was retired from service, leaving Allegiant with two fleet types. All remaining MD-80s are scheduled to be retired by November 2018.[58]

Livery

Allegiant Air's livery features a bright sunburst design on the tail, emphasizing the airline's "sun" destinations. The livery was created for the airline by Tiami Designs, Atlanta, Georgia.[75]

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External links

Media related to Allegiant Air at Wikimedia Commons


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