The US airline industry has been hard hit by the recession, but one of the industry’s few bright spots is landing – and taking off – this week at Los Angeles International Airport.
Allegiant Air, a low-cost airline that offers flights among major U.S. cities and small domestic markets, will begin its unusual service with 13 routes to destinations such as Billings, Mont.; Des Moines, Iowa; and Fargo, N.D.
Owned by Allegiant Travel Co. of Las Vegas, the 12-year-old airline has been profitable for 25 straight quarters amid huge losses by established carriers. Even discount carriers such as Southwest Airlines are barely breaking even.
“Allegiant is not the next Southwest Airlines in the sense that they will steadily grow and become one of the largest airlines in America,” said Hubert Horan, a Phoenix-based independent aviation consultant. “(But) they’ve identified a niche market that can support profitable growth, and unlike other airlines, they’re not going to pursue markets where they can’t make money.”
Allegiant Air, which serves 70 destinations nationwide, has some of the lowest fare prices in the industry, with an average one-way ticket costing about $70. Flights from LAX to Grand Junction, Colo., are as low as $79. A flight from LAX to Wichita, Kan., is $119.
Allegiant manages to keep its fares low through minimal overhead, with a key element of that a novel flight structure. Instead of operating out of hubs that offer connecting flights from different cities, Allegiant only offers simple direct flights between eight “focus cities” and smaller rural destinations.
Those focus cities include tourist destinations such as Las Vegas; Orlando, Fla.; and now Los Angeles. The smaller destinations are cities such as Billings, Mont., that don’t have many direct flights to major U.S. destinations. Thus its focus is on leisure, not business, travelers.
“Our goal is to go after residents in small-town America who want to travel to a world-class destination and see something different, at an affordable price,” said Ponder Harrison, Allegiant’s managing director.
Still, an L.A. resident could travel cheaply to another major market even without the ability to take a connecting flight, provided the traveler was willing to fly to a smaller nearby city and rent a car to drive the rest of the way.
The airline also cuts costs by operating MD-80 jets, manufactured in the 1980s and ’90s. The aircraft are less fuel efficient than newer planes, but Allegiant is able to purchase them used for as little as one-tenth the cost of a new Boeing 737, a backbone of discount airlines such as Southwest. The worldwide slowdown in air travel has created a glut of such used planes.
The company also boasts that its small airfield operations allow it to enter markets quickly where it projects it can make a profit. On the flip side, it can shutter operations with little notice, a tactic that has drawn criticism from some airports. However, that strategy helped keep its flights 90 percent full last quarter.
“The low-cost carriers have the agility to better shift operations or make changes than a larger airline carrier,” said Mo Garfinkle, president of GCW Consulting, an aviation consulting firm based in Washington, D.C. “That saves them money.”
Parent Allegiant Travel reported a net income of $28.2 million for the first quarter, a nearly 200 percent increase over last year’s quarterly numbers. Revenues were up about 7 percent to $142 million.