Thirteen year old Allegiant is a diminutive airline compared with mainline carriers. Their might, however, is far greater than their size would indicate. Allegiant is one of the most profitable airlines, period.
Last year Allegiant reported net income of $76.3 million on revenue of $558 million. Up to thirty percent of Allegiant sales are derived from non-airfare, composed mostly of packages that include hotel and/or car.
In comparison, Southwest Airlines reported net income of only $99 million on revenue of $10 billion.
Allegiant joins the Hawaii market later this year in a field dominated by regional airlines Alaska and Hawaiian Airlines, together with mainline carriers American, Continental, Delta, United and US Air.
These legacy airlines all play on a relatively even field comprised primarily of air only. Each is of course working to improve their all-inclusive package performance, but they have accomplished little in that area compared with Allegiant.
The Allegiant difference.
Two Allegiant destinations are similar to Hawaii: Florida and Las Vegas. There, the carrier has amassed nearly 60 exclusive accommodation deals which are offered in conjunction with air. Not coincidentally, those are the only two major airports Allegiant currently serves. Otherwise, and another Allegiant focus and distinguishing point, is that the company only flies from smaller airports that do not often have competing services.
Allegiant has been on the ground here in Hawaii for over a year shopping for the best deals possible as they begin to put together packages. I expect this to put intense pressure on their competitors because Allegiant will offer Hawaii visitors advantageous accommodation deals not otherwise available. In fact, Allegiant may well choose to sell Hawaii air only in conjunction with accommodations.
Bottom line for Hawaii visitors.
First, it is going to be awhile before this is sorted out, as all of the new planes will not be in service for 18 months. When complete, the six 757’s will be used exclusively for Hawaii service. Depending on utilization, that should afford them the ability to run perhaps 10 daily round trips to the islands. As such, Allegiant will become a major player in Hawaii, and their presence and unique marketing abilities will be taken very seriously.
Hawaii airfares have been climbing higher recently, and deals have been fewer and farther between. Because of the way that Allegiant packages accommodations, cars and other trip expenses with airfares, and based on their history, I believe Allegiant can offer better value in Hawaii deals than any competitor. That will in turn raise the bar, which should result in improved overall value in Hawaii vacations across the board.
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Allegiant has bought or leased 6 Boeing 757 aircraft for their Hawaiian venture. They can’t use their current fleet of MD-80’s as they don’t have sufficient range. The 757 fleet will be ETOP’s and Allegiant will have much stricter regulations and standards to adhere to when flying any ETOP flight. Still believe Hawaiian is the way to go though.
Nobody has said it yet, but Hawaiian Airlines is without question the best/cheapest way back and forth to the islands. Wide leather seats, hot meals etc. The major carriers do not compare. NOW, if Allegiant can compete on quality as well as price, Hawaiian is in for a challenge, but, as others has suggested, Allegiant is a typical cattle car operation and if they bring that attitude to Hawaii, they won’t be in that market very long.
I totally agree with Sue above, flying Allegiant over water with their frequent mechanical issues is scary. Thanks for the post!
The real winner here is most definitely going to be the consumer’s ability to get better land deals in Hawaii. I can’t imagine that the big wholesalers like MLT and Pleasant, who have been in Hawaii for years are going to let the “new kid in town” get better contracts with hotels than they have. It can’t help but have a negative effect on their (MLT and Pleasant) margains though.
I think it is wishful thinking that they will be able to just vacation sales to fill those large aircraft though.
I’ve been following Allegant since their IPO from an investor’s point of view. I wish I’d bought the stock. What gave me caution is that these are the minds who set up ValueJet in the east. Who can forgot their tragic ending. Old planes are cheap for a reason.
The thought of flying Allegiant over water with their frequent mechanical issues is terrifying. There’s no place to divert to in cause of a problem.
I tend to agree with both Jeff and Oliver on this one. I too have taken a vacation on a charter airline in the past and the pitch of the seats was so small that even myself who am short of stature, found the three hour flight to Las Vegas quite uncomfortable. I prefer using Hawaiian as I do get points and upgrades. I also don’t feel like cattle on their planes and they serve a complimentary meal in all classes.
I posted something similar on Crankyflier earlier today:
Looking at Seatguru, they operate their MD-80 fleet with 17″ wide seats at 30″ seat pitch. This reminds me of a terrible charter flight to Hawaii with Suntrips (I think) operated by one of ATA’s L1011 back in the days. I don’t recall for sure if these were the companies… too many Hawaii trips blending together and this flight was one I definitely wanted to forget as quickly as possible. If this is the Allegiant experience to Hawaii, you won’t find me anywhere near their aircraft. I’ll continue to fly in Economy Plus on United and (maybe) benefit from the lower fares triggered by the added pricing pressure.
I generally prefer to put my own package together, even though it may mean somewhat higher prices (but then, earning miles and points, and getting free breakfast/internet thanks to hotel elite status isn’t something to sneeze at either). I do realize that there are many people who either don’t have the desire to spend a lot of time researching/strategizing travel deals/plans (for me it’s part of the fun of traveling) or they simply don’t travel enough to make it worthwhile considering miles/points/elite benefits.
Thanks Oliver,
I tend to concur with your points of view. Nonetheless, this will help bring positive change to our marketplace.
Aloha, Jeff