Jan 23rd, 2018

Allegiant: Perhaps A New Way to Travel?

Posted in Aviation News

Allegiant, a new way to travel.  At least that is the conclusion that I have arrived at.  For those that have not used this Ultra Low Cost Carrier (ULCC), aka inexpensive airline, let me explain how it works.

But, before I get into the technical details, let me share my own personal experience.  I first flew Allegiant from Cincinnati to Phoenix in October of 2015.  My son was going for a college visit, so I looked for the most affordable rate I could find, Allegiant won.  I flew the airline and was not happy.  There are a number of reasons why.

First of all, they seemed to charge for everything.  For example, I purchased a ticket online and then the website wanted to charge me for a seat!  What am I supposed to do, fly on the airplane without a seat!  How can you have a ticket, but not a seat?  They charged for bags, including carry-ons!  Once I got in the seat I purchased, I found out that it did not recline.  It also had less legroom than a sardine can.  When the beverage cart came by, they charged for water!  When they sent me a survey after the trip, I vented about being, “nickel and dimed to death”.   My attitude changed later, which I will explain below.

Allegiant’s Business Model

So what is Allegiant all about and what is their business model?  Allegiant likes to operate aircraft from smaller cities (e.g. Toledo, Ohio) to popular vacation spots like Phoenix, Los Angeles and cities in Florida, such as Orlando.  This allows individuals who would not normally fly to get a discount ticket to an attractive destination.  In the past these individuals would either: drive to the destination (aka road trip), drive to a major city and then fly, or the most common alternative, not go at all.  As a result, they are tapping into a new market.  That is Allegiant’s niche.

They are not targeting business travelers or families going on specific vacations.  They leave those individuals to the major airlines.  They are targeting leisure passengers who have discretion on how they travel.

One of their keys to success is their scheduling.  You can fly from Cincinnati to Phoenix or vice versa, but only on Mondays and Friday.  One can see why business travelers do not rely on Allegiant.  They offer flight to Ft. Myers every day of the week during peak season (e.g. Spring Break in March), but maybe not in September.  In other words, they offer more flights at busy travel times and less flights at non-busy times.

Another of their keys is to fly from some less popular airports near major cities.  For example, they use Punta Gorda in Florida, which is about 40 minutes from popular Ft. Myers.  They use Bellingham, Washington instead of SEATAC in Seattle.  This is a popular technique pioneered by Southwest Airlines.

Additionally, they buy older jets and use them when they need them.  Buying a used jet is like buying a used car.  If you can find a good one, you avoid all of the depreciation costs accrued during the first few years of ownership.  If you don’t owe a lot for your planes, you can afford to have them sit on the ground in non-peak seasons.  They also use a limited number of aircraft: MD-80s, Airbus 320s and the Airbus 319 (all the photos in the blog) that I flew on this past weekend.  Aviation Week Network published a more complete explanation of the business model that I recommend for further reading:  http://aviationweek.com/commercial-aviation/allegiant-prospers-ulcc-business-model

De-Planing in Phoenix and Cincinnati (weather difference in January?)

Finally (and I like this one the best from the human perspective).  They schedule their crew to fly out and backs and return home every evening.  A crew may have the Phoenix to Cincinnati flight, turn around and flight back and the day is done.  They may do Cincinnati to Orlando, to Ft. Lauderdale, to Cincinnati.  By having their crew return home each evening they save substantial amounts on food and lodging costs for the crews.  They also avoid the trouble that can occur with a bored crew on the road.  Finally, it strengthens families to have a spouse home each evening.  It makes for happier crew members as well.

A New Perspective

So why did I changed my tune?  First of all, I now better understand what I am getting into.  When I returned to Phoenix this past weekend, I paid around $55 outbound and $62 inbound.  I paid $50 for my luggage.  I learned that if you do not select a seat and pay for it, they still give you a seat, they just chose it for you.  So the whole trip cost me around $170.  I knew that my seat would not recline (less maintenance costs for them) and that I would have my knees rammed into the seat in front of me.  The remedy: I just got up every hour and walked up and down a wide and tall aisle.  I knew I would buy no food or water, so I was well hydrated and fed in advance.  However, I was plenty hungry for the Double-Double waiting for me at In-n-Out Burger upon landing.

So why was I happier this second time using Allegiant?  Because I knew what to expect and figured it was worth it for $170.

Speaking of dollars.  Allegiant’s business model has proven to be a profitable one.  They made a 216 million dollar profit in 2016 (http://atwonline.com/airline-financials/allegiant-air-posts-220-million-2016-net-profit). Through 2017, they recorded their 60th consecutive quarter of making a profit.  That is fifteen years of straight profit (including the Great Recession years of 2008-2011).  Few airlines can boast that streak.

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