Allegiant MD-80 retirements depend on A320 values

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Allegiant Air may keep its ageing McDonnell Douglas MD-80 fleet flying beyond the end of the decade, as it waits for Airbus A320 values to come down.

Jude Bricker, senior vice-president planning and treasurer of the Las Vegas-based low-cost carrier, says that the retirement of its MD-80s will be determined by the market prices for used A320s, on the sidelines of the Ascend Aviation 2020 Finance Forum in San Francisco on 28 November. If A320 prices stay above the cost of keeping the MD-80s, the airline will continue to fly them as baseline capacity and use the Airbuses for growth, he says.

Allegiant previously said that it would retire the MD-80s before the end of the decade.

The airline values 12-year old A320s at about $12 million to $13 million, says Bricker. This includes about $10 million in maintenance and parts value and a $2 million to $3 million operator premium, he explains.

"There is no problem with availability," he says regarding used A319s and A320s, adding that it is values that will determine future deals for Allegiant.

The airline has four Boeing 757-200s, 56 MD-80s and two MD-87s in service with the average age of the MD-80s being 23 years, according to Flightglobal's Ascend Online database. It plans to retire the MD-87s and five MD-80s in 2013.

Bricker says that Allegiant can keep flying the MD-80s by reducing utilisation and avoiding heavy maintenance costs, especially on the engines. The airline can reduce the number of hours that the older aircraft fly and shift those hours to peak times when it can charge higher fares as it receives A319s, he says.

"Low utilisation is good if you can keep your costs the same," says Bricker. "Moving utilisation onto the A319 is going to take down fuel burn, it's going to reduce out unit costs and add quality flying time to the MD-80 fleet."

Allegiant avoids heavy maintenance on its MD-80 engines by replacing them with ones from parted out aircraft before major overhaul events, says Bricker. He identifies retiring American Airlines MD-80s as a source of engines.

"This is something that I think is going to sustain the MD-80 in our fleet for a very long time," says Bricker.

Fort Worth-based American has 230 of the narrowbody in its fleet, according to Ascend. It will replace the majority of them with new Boeing and Airbus aircraft by the end of the decade.

Allegiant announced that it leased 19 used A319s from Cebu Pacific and GE Capital Aviation Services in July. The aircraft are earmarked for growth and will allow the carrier to expand into new markets, including ones in Mexico, the Rocky Mountains and transcontinental routes.

Bricker says that Allegiant has no "imminent" deals for additional A319s or A320s.