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Allegiant Purchases 2 More MD-83s For Cash  
User currently offlineFATFlyer From United States of America, joined May 2001, 5793 posts, RR: 15
Posted (4 years 8 months 2 weeks 3 days 21 hours ago) and read 9758 times:

Allegiant revealed today that it has purchased 2 more MD-83s for all cash.

The aircraft are to enter service with Allegiant in the 1st quarter of 2010.

http://biz.yahoo.com/e/091117/algt8-k.html

I understand that there is a MD-87 being retired in the 1st quarter so this purchase is a fleet net increase of 1 aircraft to start 2010. G4's current guidance is to grow by 6 aircraft in 2010.

No word on the source of these 2 aircraft, has anyone heard?

[Edited 2009-11-17 13:16:12 by srbmod]


"Travel is fatal to prejudice, bigotry, and narrow-mindedness." - Mark Twain
33 replies: All unread, showing first 25:
 
User currently offlineBMI727 From United States of America, joined Feb 2009, 15719 posts, RR: 26
Reply 1, posted (4 years 8 months 2 weeks 3 days 18 hours ago) and read 9435 times:

Good move for Allegiant. I hope that their success contines, since they seem to be one of the smartest run airlines out there.

Quoting FATFlyer (Thread starter):
understand that there is a MD-87 being retired in the 1st quarter

Aren't the MD-87s used almost exclusively for charters anyway?



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineThegreatRDU From United States of America, joined Mar 2006, 2310 posts, RR: 4
Reply 2, posted (4 years 8 months 2 weeks 3 days 11 hours ago) and read 8988 times:



Quoting BMI727 (Reply 1):
Good move for Allegiant. I hope that their success contines, since they seem to be one of the smartest run airlines out there.

And the fact that they are growing within their niche unlike others.....



Our Returning Champion
User currently offlineAn225 From Israel, joined May 2005, 190 posts, RR: 0
Reply 3, posted (4 years 8 months 2 weeks 3 days 7 hours ago) and read 8701 times:

Why would an airline these days decides to EXPAND their MD-80 fleet and not choose a better fuel economics aircraft?

An225


User currently offlineSirtoby From Germany, joined Nov 2007, 369 posts, RR: 22
Reply 4, posted (4 years 8 months 2 weeks 3 days 7 hours ago) and read 8687 times:

Quoting An225 (Reply 3):
Why would an airline these days decides to EXPAND their MD-80 fleet and not choose a better fuel economics aircraft?

Because their business model is heavily based on low capital costs. MD-80's are sold for less than a handful of million US-$. Compare that to a brandnew 737-700 for SWA, which goes over the table for something in the range of 30-40 million $.

[Edited 2009-11-18 01:26:35 by sirtoby]

User currently offlineSkyWestFan From United States of America, joined Apr 2004, 179 posts, RR: 4
Reply 5, posted (4 years 8 months 2 weeks 3 days 5 hours ago) and read 8302 times:

I can't access the article. Does it say where they are getting these birds from?


Fiji. Its like sex - but better.
User currently offlineRFields5421 From United States of America, joined Jul 2007, 7607 posts, RR: 32
Reply 6, posted (4 years 8 months 2 weeks 3 days 3 hours ago) and read 7754 times:

It is not a news article - it is a SEC 8-K filing about an activity by a publicly traded company. It does not include any other details such as price or source of the planes.

User currently offlineRbgso From United States of America, joined Jun 2006, 587 posts, RR: 0
Reply 7, posted (4 years 8 months 2 weeks 3 days 2 hours ago) and read 7559 times:



Quoting An225 (Reply 3):
Why would an airline these days decides to EXPAND their MD-80 fleet and not choose a better fuel economics aircraft?

Their fleet utilization number is not very high, consequently it pays for them to buy reliable aircraft cheap that may not be the most efficient. Now if they were flying their planes 12 hours a day, 7 days a week, then fuel consuption would obviously be a bigger part of their cost structure.

If you had to make only one or two trips a day, would you rather buy a 10 year old Toyota Corrolla for $3,000 that gets 35 MPG, or spend $25,000 on a new Prius that gets 45 MPG? You'd have to drive a heck of a lot of miles to justify the Prius.


User currently offlineF9Animal From United States of America, joined Dec 2004, 5001 posts, RR: 28
Reply 8, posted (4 years 8 months 2 weeks 3 days 1 hour ago) and read 7162 times:



Quoting An225 (Reply 3):
Why would an airline these days decides to EXPAND their MD-80 fleet and not choose a better fuel economics aircraft?

An225

I know G4 is looking at future fleet replacement aircraft. However, why mess with a good thing right now? Plus, keep in mind that they continue to pump out profits, even when the economy was at the bottom. Allegiant is very healthy, and I am sure they have hedged their fuel (could someone verify)?

When fuel dropped big time, I am sure plenty of airlines joined on the hedge wagon.



I Am A Different Animal!!
User currently offlineBMI727 From United States of America, joined Feb 2009, 15719 posts, RR: 26
Reply 9, posted (4 years 8 months 2 weeks 3 days 1 hour ago) and read 7098 times:



Quoting An225 (Reply 3):
Why would an airline these days decides to EXPAND their MD-80 fleet and not choose a better fuel economics aircraft?

Because they can buy them for really cheap. G4 gets its planes so cheaply in fact, that they can leave have lower utilization than pretty much every other airline and still make money. And the money that they save will buy an awful lot of fuel.

Quoting Rbgso (Reply 7):
If you had to make only one or two trips a day, would you rather buy a 10 year old Toyota Corrolla for $3,000 that gets 35 MPG, or spend $25,000 on a new Prius that gets 45 MPG? You'd have to drive a heck of a lot of miles to justify the Prius.

But buying a 737 won't make a political statement. A Prius, however, has a pro-liberal bumper sticker available as a dealer installed option.  duck 



Why do Aerospace Engineering students have to turn things in on time?
User currently offlineFATFlyer From United States of America, joined May 2001, 5793 posts, RR: 15
Reply 10, posted (4 years 8 months 2 weeks 3 days ago) and read 6546 times:



Quoting F9Animal (Reply 8):
Allegiant is very healthy, and I am sure they have hedged their fuel (could someone verify)?

Allegiant quit fuel hedging about 2 or 3 years ago.

They instead "hedge" by adjusting their schedule. When fuel prices went up they reduced frequency, stage lengths, etc.



"Travel is fatal to prejudice, bigotry, and narrow-mindedness." - Mark Twain
User currently offlinePanais From Cyprus, joined May 2008, 462 posts, RR: 0
Reply 11, posted (4 years 8 months 2 days 8 hours ago) and read 5313 times:

Is there something unique to the MD-8x?

Can this be done with the A320s or the B737s?


User currently offlineLonghornmaniac From United States of America, joined Jun 2005, 3278 posts, RR: 45
Reply 12, posted (4 years 8 months 2 days 8 hours ago) and read 5272 times:

AFAIK, the MD-8X series can be found a lot more cheaply than either the A320 or the 737s (possibly not true with the 737 classics), which fits right in with G4's business model, mentioned previously.

Someone feel free to correct me.

Cheers,
Cameron


User currently offlineFATFlyer From United States of America, joined May 2001, 5793 posts, RR: 15
Reply 13, posted (4 years 8 months 2 days 1 hour ago) and read 4991 times:



Quoting Longhornmaniac (Reply 12):
AFAIK, the MD-8X series can be found a lot more cheaply than either the A320 or the 737s (possibly not true with the 737 classics), which fits right in with G4's business model, mentioned previously.

You are correct.

Allegiant says their cost to acquire and put an aircraft in service is only $3 million to $4 million. You cannot find the A320 or 737 for that price.

With no debt on most aircraft (a few they financed because of very good terms) Allegiant does not need to worry about earning money to cover loans or leases. That allows them to fly the aircraft only when a route is profitable and park them when routes don't make money.

Allegiant only has utilization of about 6 block hours per day. Most airlines are much, much higher.



"Travel is fatal to prejudice, bigotry, and narrow-mindedness." - Mark Twain
User currently offlineSANFan From United States of America, joined Aug 2006, 5367 posts, RR: 12
Reply 14, posted (4 years 8 months 1 day 22 hours ago) and read 4768 times:

So 'Flyer, any rumors around about the intended use of the new birds? Any talk of a new destination or will they just be adding some capacity at current hubs? (They seem to be getting into it with FL down in Florida right now; maybe that will occupy them for several months...?)

bb


User currently offlineERAUgrad02 From United States of America, joined Nov 2005, 1227 posts, RR: 0
Reply 15, posted (4 years 8 months 1 day 14 hours ago) and read 4464 times:

I can possibly see them doing a mix of more effecient B737-300/-400's. Would be nice and at the same time they could update thev paint scheme. Someone wanna get to work to put a G4 paint scheme on a 737?...lol.

Desmond in ILM,



Desmond MacRae in ILM
User currently offlineFATFlyer From United States of America, joined May 2001, 5793 posts, RR: 15
Reply 16, posted (4 years 8 months 1 day 10 hours ago) and read 4295 times:



Quoting SANFan (Reply 14):
So 'Flyer, any rumors around about the intended use of the new birds? Any talk of a new destination or will they just be adding some capacity at current hubs? (They seem to be getting into it with FL down in Florida right now; maybe that will occupy them for several months...?)

Lots of rumors around but personally I think the Florida move is going to be the main focus for the next few months.



"Travel is fatal to prejudice, bigotry, and narrow-mindedness." - Mark Twain
User currently offlinePanais From Cyprus, joined May 2008, 462 posts, RR: 0
Reply 17, posted (4 years 8 months 1 day 1 hour ago) and read 4117 times:



Quoting FATFlyer (Reply 13):
Allegiant says their cost to acquire and put an aircraft in service is only $3 million to $4 million. You cannot find the A320 or 737 for that price.

CY is selling 4 of its A320s at $5.6 million each. They were build from 1989 to 1992.

A guesstimate is that it might cost another $2m to put in service, so the $3 million to $4 million for the MDs looks nice for the an aircraft of the same age and capacity.


User currently offlinePilotpip From United States of America, joined Sep 2003, 3149 posts, RR: 11
Reply 18, posted (4 years 8 months 12 hours ago) and read 3858 times:



Quoting ERAUgrad02 (Reply 15):
I can possibly see them doing a mix of more effecient B737-300/-400's. Would be nice and at the same time they could update thev paint scheme. Someone wanna get to work to put a G4 paint scheme on a 737?...lol.

Now you're getting away from what makes them profitable. 737s would mean more parts to stock, more training for ground crews, mechanics, pilots, FAs. It's also hard to find 737s in good shape that aren't nearing the end of their life.



DMI
User currently offlineWjcandee From United States of America, joined Jun 2000, 5130 posts, RR: 22
Reply 19, posted (4 years 8 months 9 hours ago) and read 3743 times:

For some reason, a.net discussions on the MD80-series aircraft always seem to begin and end with fuel-efficiency.

In the case of an airline like Allegiant, one obvious issue for them is that their business model depends upon higher-than-average load factors and minimizing flying on days and at times of the day that their primarily-leisure customers aren't traveling. This is only viable if their fixed costs are particularly low.

As many a.netters know, total cost of an operation is divided into fixed costs -- that is, costs that don't change regardless of how much you fly -- and variable costs, which are the costs that vary depending upon how much you fly, often in a pretty linear way. Fixed costs are often characterize as "capital costs", or the basic cost of an asset, like an aircraft. Variable costs include fuel, crew, etc.

There are ways to vary this. A power-by-the-hour lease calls for you to pay a certain number of dollars per hour that you fly an aircraft, so it doesn't cost you if it isn't flying, but the underlying economics are unfortunately immutable -- *someone* is still having to finance the investment in the aircraft -- so that PBTH leases are dramatically more expensive per hour than a straight lease would be in a period of more-typical utilization. In the end, this really becomes a way of shifting market risk, i.e. that you will not be able to fully-utilize your asset, or at least that you won't be able to use the asset as much as you had hoped or expected.

In Allegiant's case, they definitely don't want to be flying every day and at all hours. So, their model depends upon them minimizing their capital costs, and, in their current model, they maximize their revenue by paying more in fuel but less per hour-actually-used for the underlying capital cost of the asset. Given that aircraft prices on the used market depend in very large part on how much the aircraft will cost to operate *assuming "normal"amounts of uitilization* as compared to another aircraft (and fuel is a big component of that cost), the best deals are necessarily going to be found in aircraft that are less fuel-efficient. In other words, the very reason you can get a good-condition MD80 relatively-cheaply these days is precisely because it's less fuel-efficient than many other aircraft.

But that isn't the whole story, and the rest rarely seems to be discussed on a.net. If I just wanted a cheap, good, aircraft, I could look at a 727 or even a DC8. These have other penalties in operating costs (extra crewmember, for example), but, still, they are quite viable in really-low-utilization operations like some cargo lines (as long as fuel remains in a certain range; when it gets to a particularly-high level, of course, that changes).

The reason that the MD80 beats these other models include factors like parts and maintenance availability, but the big one that I don't often see discussed is dispatch reliability. Properly-maintained (and American maintains Allegiant's MD80s), the MD80 is still a very-reliable aircraft, and it's also one that is by design usually-easy to get back into service. With so many of them still flying, and the expertise and service experience still abundant, if the thing goes tech in some of the less-populous locations that are Allegiant's bread-and-butter, it isn't going to take long to get it back into the air. I think that has to be a significant factor in that airline's affinity for the aircraft, and one that I don't think gets discussed enough.

At some point, Allegiant may be flying a larger portion of its fleet at a more-typical utilization level, and it then may be a balancing game (well, in this business it is *always* a balancing game) as to when and whether to consider a small fleet of aircraft that maximize the return from an operation that has a larger or growing component of daily flights. If you look at the cargo carriers, a company like FedEx or UPS has a fleet mix that includes new, lower-operating-cost aircraft assigned to routes that involve high utilization and older-model aircraft assigned to routes where they are going to sit at the non-hub airport for 22 hours a day. You have to have a sizeable enough slice of each type of flying in order to make it economic to have a separate fleet for high-utilization flying, and it is an open question whether that will ever be the case with Allegiant, but I think it's a more-likely route to newer aircraft for them than any other in the short-term. It's just hard to see what else in the marketplace besides the MD80 would work for them, taking into account all these factors, at least for quite a few more years, if they continue their current utilization patterns.

Allegiant is financially-successful because its managers focus obsessively on wringing value from every nickel they spend, while providing a product of enough quality, consistency and reliability to appeal to a significant niche of vacation travelers. It is frankly fun to watch.


User currently offlineFATFlyer From United States of America, joined May 2001, 5793 posts, RR: 15
Reply 20, posted (4 years 7 months 4 weeks 1 day 22 hours ago) and read 3532 times:



Quoting Wjcandee (Reply 19):

That is a very nice explanation of the fleet and business model. Good job.

One thing I would add on the variable cost side is nearly all flights return to a /destination city every night. That eliminates costs to overnight crews/aircraft at the spoke. Its one of the benefits of focusing on leisure travel, less demand for a 6am departure out of the spoke to make a meeting.

For a crew member living in the same city as the base, say Las Vegas, that scheduling also means they get to go home to the family and sleep in their own bed.



"Travel is fatal to prejudice, bigotry, and narrow-mindedness." - Mark Twain
User currently offlineMrSkyGuy From United States of America, joined Aug 2008, 1214 posts, RR: 3
Reply 21, posted (4 years 7 months 4 weeks 1 day 22 hours ago) and read 3478 times:

And from an avionics side (which apart from fuel, headcount, and rotables makes one of the largest expenses an airline has to deal with on a continuing basis), Allegiant is flying the bare minimum required. Some aircraft (such as the AeroMexico MD-80s) arrived in Allegiant's fleet with some of the best equipment available (T2CAS, for example) but other aircraft arrived with TCAS2 and are still flying that variation. Until the regulatory agencies flip the switch and require carriers to fly the latest versions of any specific LRU, Allegiant will happily fly what its got.

Allegiant doesn't buy it unless they absolutely need it. From a cost perspective, that's not a bad philosophy.. but not all things are equal in the total scheme of things.  Smile



"The strength of the turbulence is directly proportional to the temperature of your coffee." -- Gunter's 2nd Law of Air
User currently offlineWjcandee From United States of America, joined Jun 2000, 5130 posts, RR: 22
Reply 22, posted (4 years 7 months 4 weeks 1 day 21 hours ago) and read 3434 times:

One question from a human-factors safety perspective is what happens when you are using different warning systems with different characteristics in the same aircraft flown by the same pilot group.

A simple example: one benefit of T2CAS is a dramatic reduction in nuisance warnings on the TAWS side. A person responds instinctively to a warning based upon his experience. Systems with a lot of nuisance warnings get handled one way; systems without get handled another way. The potential is significant that a pilot who is accustomed to one system will respond less-immediately to a valid T2CAS/TAWS warning, with potentially-unpleasant results (think something similar to the situationally-disoriented AA crew in Cali.)

Of course, this kind of stuff is usually blown off until someone has a bad day, then people are shocked -- shocked! -- that this hasn't been addressed before.


User currently offlineJHCRJ700 From United States of America, joined Oct 2009, 377 posts, RR: 0
Reply 23, posted (4 years 7 months 4 weeks 1 day 21 hours ago) and read 3432 times:

Good for them. Its great that they paid cash. That goes to show that there are still some smart people out there. The Wallstreet Journal did a good article about Allegiant about a year ago I think. It explained their business model very well.


RUSH
User currently offlineMrSkyGuy From United States of America, joined Aug 2008, 1214 posts, RR: 3
Reply 24, posted (4 years 7 months 4 weeks 1 day 21 hours ago) and read 3416 times:



Quoting Wjcandee (Reply 22):
One question from a human-factors safety perspective is what happens when you are using different warning systems with different characteristics in the same aircraft flown by the same pilot group.

Reality is, yes, there's definitely a human-factors hit in the difference between flying an aircraft with basic (say, Honeywell TAWS) versus the ACSS/Thales T2CAS.. but Allegiant doesn't care. Perhaps I should rephrase that.. Allegiant probably *DOES* care but, caring would require the investment of significant funds to retrofit the fleet to a T2CAS standard. Personally, I think the benefits vastly outweigh the cons, but Allegiant would likely only perform such a retrofit if they A) didn't have to pay for it all at once and B) got it at a severly discounted price. Oh and C) were forced to retrofit to at least the TCAS2000 standard (T2CAS uses TCAS2000 + advanced TAWS in one unit).



"The strength of the turbulence is directly proportional to the temperature of your coffee." -- Gunter's 2nd Law of Air
25 Wjcandee : Boy, I hate to say it, but...What airline can we think of that (a) Had these same guys in its executive suite; (b) used the same aircraft acquisition
26 Aesma : Which seems even stranger from abroad : Americans and fuel-efficiency don't go together, usually.
27 PlanesNTrains : Interesting observation. Thank you for the posts in this thread. Seriously? There is really a correlation in [your] mind between my driving habits an
28 MrSkyGuy : Class act. Oh, that's "American" for: The French and good manners don't go together, usually. I agree with PlanesNTrains, that's a good post. All it
29 Post contains images Wjcandee : You guys make me blush.    Seriously, I always appreciate it when folks read my posts! I would add that one lesson that these guys plainly learned w
30 Aesma : I don't care what you drive, it was not a personal attack, but I'm sorry if it looked like one. However the statistics show that the average American
31 BMI727 : Why should it? Our fuel is relatively cheap and our environmental idiots are relatively quiet. Which isn't a problem since as far as I know, the Fren
32 Aesma : Environment is a big factor, and we'll talk again about "idiots" in 20 years, but it's not the only factor. How many wars are needed to secure your f
33 BMI727 : Why should anyone care how much fuel we use since we are the ones paying for it? I think that DL said a few days ago that their MD-88s are actually c
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