ANALYSIS: Allegiant cuts Sin City flights as Las Vegas airport fees rise (Updated)

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After years of growth in Las Vegas, Allegiant Air says it has cut capacity to the city in recent months and scrubbed Las Vegas from future growth plans in response to higher landing and gate fees.

Jude Bricker, Allegiant's senior vice president of planning, says recent fee increases at Las Vegas McCarran International Airport followed the July 2012 opening of the airport's new $2.4 billion Terminal 3.

Allegiant's response has been to cut some flights at the city and upgrade other flights to larger aircraft, says Bricker in comments made during a presentation Thursday at the Bank of America Merrill Lynch 2013 Global Transportation Conference in Boston.

Las Vegas-based Allegiant tells Flightglobal that capacity cuts have been minimal at Las Vegas, but that future growth will be at other cities as a result of higher fees at McCarran.

"There hasn't been a drastic reduction in capacity" at McCarran, the airline says. "Mostly, [the effect] is in the new things we are adding - almost none of it is going into Las Vegas."

McCarran airport says its Airline Affairs Committee approved a landing fee of $2.39 per 1,000 pounds (454kg) for fiscal year 2014, which starts in July. That's up from $2.32 the previous year, according to the airport.

The committee also approved for fiscal year 2014 a gate use fee of $214,459 annually for signatory airlines, which are those that meet certain capacity requirements and other criteria, and $268,074 annually for non-signatory airlines. Allegiant is a signatory airline.

This fiscal year the gate use fee is $238,097 for signatory airlines and $297,621 for non-signatory airlines.

The fee changes are subject to a public hearing, must go before the Board of Clark County Commissioners and can only be instituted with an ordinance change, McCarran says.

The airport adds that airlines, including Allegiant, approved the rate changes in recent weeks "with no significant objections or challenges."

According to data provider Capstats, Allegiant
will have 914,000 available seats from Las Vegas between January and October 2013, a decline of 8.4% from the same ten-month period last year.

Allegiant's number of scheduled flights at Las Vegas will drop 8.5% during the period, to 6,126 flights, Capstats says.

The cuts follow two years of roughly 6% annual capacity growth at McCarran by Allegiant, according to Capstats. Allegiant's overall capacity increased 12% in 2012 to 6.9 million seats.

Capstats, however, could not immediately say whether its capacity data accounts for Allegiant's recent move to increase the number of seats on its MD-80-family aircraft to 166 from 150. The airline also recently begun flying Boeing 757s on routes previously served by MD-80s.

McCarran airport calls Capstats data "questionable", noting that its internal data shows Allegiant's capacity in Las Vegas actually increased slightly from January through October 2013.

Capstats data shows Allegiant's cuts come amid an industry-wide scale back of capacity.

A total of 18.9 million seats will be available from Las Vegas on domestic flights between January and October of this year, an 11% decline from the same period last year, according to Capstats. Nationwide domestic capacity on all US carriers also declined during the period by a few percentage points.

The airport questions Capstats' overall McCarran numbers, too, sayings industry wide capacity is up slightly at the airport this year.

In an earnings call earlier this year, Allegiant said higher McCarran costs drove a 25% year-over-year increase in its 2012 airport expenses, which were $16.5 million.

"Effective July 1 of last year, McCarran's T3 terminal, which is their international terminal, came on line, which increased our cost structure," Allegiant chief financial officer Scott Sheldon said on the call.

The 1.9 million square-foot terminal opened after five years of construction and at a cost of $2.4 billion, according to documents on the airport's website.

The terminal has three levels and 14 gates.

The project also included 8 miles of roadway and an 8-story, 6,000 square-foot parking garage, according to the airport.

Allegiant did not provide further details about its McCarran fees.

This story was updated 28 May to include comments from McCarran airport and more details about the airport's fees.