Allegiant expects Q4 PRASM decline

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Low-cost carrier Allegiant Air expects passenger revenue per available seat mile (PRASM) to decline in the fourth quarter, but emphasises that overall revenue growth is more meaningful to the airline as it leverages on ancillary revenue opportunities.

In updated guidance released today with its third quarter financial results, the Las Vegas-based carrier says it expects PRASM to decline between 7% and 9% in the fourth quarter, and to fall by 12% to 14% in October.

Systemwide capacity is expected to grow by 17% to 21% in the fourth quarter, and by 12% to 16% in the first quarter of 2013. Allegiant forecasts that cost per available seat mile (CASM) excluding fuel will decline by 1% to 3% in the fourth quarter, and fall by 5% to 7% in 2012.

The airline has not provided guidance for its total revenue per available seat mile (TRASM) and plans to do that going into the new year, says its president Andrew Levy, who says that TRASM numbers are more meaningful for Allegiant as it focuses on growing its ancillary revenue.

Allegiant's overall ancillary revenue grew 30.7% in the third quarter to $69 million, which made up one-third of its total operating revenue. Of its ancillary revenue, about 86% was contributed by air-related charges like carry-on bag fees while the remaining 14% was contributed by third party products such as hotel stays.

Allegiant began charging for carry-on bags earlier this year, and the airline's chief executive Maurice Gallagher says this has been successful for the airline and has reduced boarding times.

Demand for the fourth quarter is "solid", says Levy. "We are pleased with what we see... demand is good, not great but good and solid."