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Allegiant's Future With Fuel Prces  
User currently offlinepietpaflsun From United States of America, joined Jan 2004, 106 posts, RR: 0
Posted (3 years 6 months 3 weeks 1 day 10 hours ago) and read 2824 times:

With crude oil over $100.00 and so many uncertainties can Allegiant weather these kind of price increases with their large fleet of mad dogs. The travel indrusty is starting to announce cuts in proposed capacity increases for the upcoming summer travel season. I believe we'll start seeing some shakeouts in the industry very soon.


Run with the dogs, get the fleas
16 replies: All unread, jump to last
 
User currently offlinesmoot4208 From United States of America, joined Jan 2010, 1307 posts, RR: 11
Reply 1, posted (3 years 6 months 3 weeks 1 day 10 hours ago) and read 2781 times:

Quoting pietpaflsun (Thread starter):
With crude oil over $100.00 and so many uncertainties can Allegiant weather these kind of price increases with their large fleet of mad dogs. The travel indrusty is starting to announce cuts in proposed capacity increases for the upcoming summer travel season. I believe we'll start seeing some shakeouts in the industry very soon.

Wasn't G4 the only airline to make money in 2008 when oil peaked at $150?

G4 can defuse some of their costs because people are purchasing vacation packages


User currently offlineFlying_727 From United States of America, joined Jun 1999, 435 posts, RR: 5
Reply 2, posted (3 years 6 months 3 weeks 1 day 10 hours ago) and read 2775 times:

Here are a couple of intersting articles on the subject. Allegiant wants to implement "fuel hedging" (my term) airfares. I'm not sure the DOT will agree to this, I'll need to analyze it further.

Paid
User currently offlineFlighty From United States of America, joined Apr 2007, 8541 posts, RR: 2
Reply 3, posted (3 years 6 months 3 weeks 1 day 9 hours ago) and read 2742 times:

Quoting smoot4208 (Reply 1):
Wasn't G4 the only airline to make money in 2008 when oil peaked at $150?

Yes. Allegiant is spectacularly well suited to high oil prices. They are not a frequency based airline.


User currently offlineLAXintl From United States of America, joined May 2000, 25381 posts, RR: 49
Reply 4, posted (3 years 6 months 3 weeks 1 day 9 hours ago) and read 2727 times:

They could also do what they did last time. Reduce average stage lengths in their network, and prune longer flying.


From the desert to the sea, to all of Southern California
User currently offlineFATFlyer From United States of America, joined May 2001, 5804 posts, RR: 14
Reply 5, posted (3 years 6 months 3 weeks 1 day 9 hours ago) and read 2599 times:

Since Allegiant's fleet is mainly debt free they would have no problem trimming the schedule down. They can adjust the flying to a profitable level much easier than other airlines.


"Travel is fatal to prejudice, bigotry, and narrow-mindedness." - Mark Twain
User currently offlineGSPSPOT From United States of America, joined Sep 2003, 3037 posts, RR: 2
Reply 6, posted (3 years 6 months 3 weeks 1 day 9 hours ago) and read 2593 times:

Quoting LAXintl (Reply 4):
They could also do what they did last time. Reduce average stage lengths in their network, and prune longer flying.

I thought longer flights were more cost-effective (who knows where I heard that)?



Finally made it to an airline mecca!
User currently offlineLAXintl From United States of America, joined May 2000, 25381 posts, RR: 49
Reply 7, posted (3 years 6 months 3 weeks 1 day 8 hours ago) and read 2491 times:

Quoting GSPSPOT (Reply 6):
I thought longer flights were more cost-effective (who knows where I heard that)?

Longer stage lengths are more susceptible to the effects of fuel cost.

From 2008:

To try to outrun fuel costs, Allegiant cut long-haul routes from Illinois and Indiana to Fort Lauderdale, Fla., and added routes from California to Las Vegas. The changes helped lower average stage length, the distance of any given flight, from 924 to 894 miles. As a result, the airline was able to increase departures by 36 percent and fuel costs by 29 percent.
http://www.lvrj.com/business/25845879.html

From SEC filling in 2008 -
Slide #8
Responding to High Fuel: Las Vegas Case Study
o We primarily cut long-haul routes while adding short haul flying, meaning the average flight now absorbs fewer aircraft hours.


Slide #18
Goal: Regain Margins, Resume Growth
o Eliminate under performing long-haul routes
o Reduce frequency on other long-haul routes
o Added short-haul routes & short-haul frequencies
http://apps.shareholder.com/sec/view...x?companyid=ALGT&docid=6260237

Southwest Airlines similarly dumped some longer flying including transcons during the fuel run up, to refocus on shorter city-pairs.

[Edited 2011-03-01 19:39:16]


From the desert to the sea, to all of Southern California
User currently offlineLV From United States of America, joined Jun 2001, 2005 posts, RR: 0
Reply 8, posted (3 years 6 months 3 weeks 1 day 7 hours ago) and read 2431 times:

seems they are contracting out ground handling at LAS now.

User currently offlinelucky777 From , joined Dec 1969, posts, RR:
Reply 9, posted (3 years 6 months 3 weeks 1 day 7 hours ago) and read 2387 times:

When you contract out nearly all of your work and pay peanuts to the few actual employees you actually call your own you can do amazing things. Allegiant is essentially Menzies with wings.

User currently offlineatcsundevil From United States of America, joined Mar 2010, 1205 posts, RR: 2
Reply 10, posted (3 years 6 months 3 weeks 1 day 3 hours ago) and read 2177 times:

Quoting LV (Reply 8):

I seem to remember a LCC from the 90s that outsourced a little too much, and that didn't turn out so well! I'm not asserting G4 is the next ValuJet, I think they're on a much higher level than that, but outsourcing carries a lot of negatives that don't necessarily outweigh the benefit of saving money, particularly when it comes to customer service and QA. I've loved seeing G4's growth out of IWA over the past 4 years and I'd really hate to see something bad happen to them, but they really need to be careful with cost cutting and outsourcing.

I agree with above comments that they will not only weather the high cost of oil, but they will thrive under these conditions....other carriers will jack up fares and cut frequencies, but G4 operates an optimal operation for low cost/high revenue. Owning their birds (for the most part) and their ancillary revenue combined with serving under-served markets to popular vacation spots is really a winning combo. Very much a niche market, but I know that they've been very surprised by the amount of Phoenix-origin traffic leaving IWA, particularly since they hardly do any advertising to speak of around here. Point is: They manage to offer a service at a cost that no other carrier in its current form or size will be able to compete for several years, regardless of oil prices.


User currently offlineKarlB737 From United States of America, joined Mar 2004, 3105 posts, RR: 10
Reply 11, posted (3 years 6 months 3 weeks 16 hours ago) and read 1908 times:

Quoting pietpaflsun (Thread starter):
With crude oil over $100.00 and so many uncertainties can Allegiant weather these kind of price increases

This may help answer your question:

Courtesy: Business Rockford

Allegiant Air Lays Off 165 In Las Vegas

http://blogs.e-rockford.com/brianlea...ant-air-lays-off-165-in-las-vegas/


User currently offlineGSPSPOT From United States of America, joined Sep 2003, 3037 posts, RR: 2
Reply 12, posted (3 years 6 months 3 weeks 14 hours ago) and read 1722 times:

Well, in light of this information, maybe this bodes as well as can be for GSP's existing G4 flights (except maybe SFB, as WN will begin daily flights to MCO this month).


Finally made it to an airline mecca!
User currently offlineScottB From United States of America, joined Jul 2000, 6764 posts, RR: 32
Reply 13, posted (3 years 6 months 3 weeks 14 hours ago) and read 1658 times:

Quoting atcsundevil (Reply 10):
I know that they've been very surprised by the amount of Phoenix-origin traffic leaving IWA, particularly since they hardly do any advertising to speak of around here.

That's not necessarily ideal for them, though -- a key part of their business model involves selling third-party goods and services at their "destinations." Phoenix-originating traffic is only helpful to them if yields are near or above break-even on flights where they can't quite gin up enough traffic at the outstation to fill the flights.


User currently offlineatcsundevil From United States of America, joined Mar 2010, 1205 posts, RR: 2
Reply 14, posted (3 years 6 months 3 weeks 2 hours ago) and read 1392 times:

Quoting ScottB (Reply 13):

It's absolutely ideal because it keeps the loads strong during the summer months with locals looking to escape the heat and take a summer vacation. Without locals filling seats in the summer, they'd have to cut frequencies (of which there aren't many to most destinations to begin with) or fly with light load factors from the few insane tourists looking to vacation in 110+ heat. Ancillary revenue through car rentals and hotel/casino packages wouldn't amount to much because hotels and car rentals are incredibly cheap here over the summer. The traffic for the other 7-9 months of the year more than makes up for any slowdown in the hot months, but maintaining strong loads throughout the entire year (regardless of ancillary revenue) says a lot. Of course we know that locals are not part of their targeted market, but if I were a G4 exec, there's no way I'd be complaining.


User currently offlineFATFlyer From United States of America, joined May 2001, 5804 posts, RR: 14
Reply 15, posted (3 years 6 months 2 weeks 6 days 20 hours ago) and read 1278 times:

Just 18 months ago (Sept 2009) Allegiant was saying reverse traffic out of Phoenix was about 30% of the passengers they carried there. Analysis of Jan to June 2009 reverse traffic at all large destination cities from a management presentation:
http://www.sec.gov/Archives/edgar/da...0110465909055581/g271151mmi017.gif

They also have indicated they are working with a few of the smaller cities to develop packages to sell to generate more revenue from that reverse traffic. An example is the hotels they now sell in several cities in Montana.
http://www.allegiantair.com/aaHotelPartners_MTN.php
They are also trying to sell rental cars to the reverse traffic.

The reverse traffic does not generate as much revenue as their normal passenger, but if the reverse traffic is there they are going to look for ways to increase its revenue generation.



"Travel is fatal to prejudice, bigotry, and narrow-mindedness." - Mark Twain
User currently offlineScottB From United States of America, joined Jul 2000, 6764 posts, RR: 32
Reply 16, posted (3 years 6 months 2 weeks 6 days 19 hours ago) and read 1206 times:

Quoting atcsundevil (Reply 14):
It's absolutely ideal because it keeps the loads strong during the summer months with locals looking to escape the heat and take a summer vacation. Without locals filling seats in the summer, they'd have to cut frequencies (of which there aren't many to most destinations to begin with) or fly with light load factors from the few insane tourists looking to vacation in 110+ heat.

And again, I said:

Quoting ScottB (Reply 13):
Phoenix-originating traffic is only helpful to them if yields are near or above break-even on flights where they can't quite gin up enough traffic at the outstation to fill the flights.

If they're having to take meaningful losses on the trips originating from AZA, it might very well make sense to reduce or suspend service during the summer; the fleet is paid-for, so they're not eating expensive lease costs for parked aircraft.


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