Ultra low-cost carrier Allegiant Air’s leisure-oriented business is humming along smoothly and shows no sign of slowing.
“Demand remained strong throughout the quarter,” John Redmond, chief executive of Allegiant Travel Company, said during the airline’s quarterly earnings call on 3 May. “We are closely monitoring macro-economic trends, but we have not observed a change in booking behaviour or peak leisure demand.”
Allegiant reported a first-quarter profit of $56.1 million, compared with a $7.9 million loss in 2022.
The Las Vegas-based company said during its 3 May earnings call that it generated $649 million of revenue during the quarter, a 30% increase over the $500 million it reported last year.
Average ancillary revenue per passenger – or how much spent on checked luggage, in-flight snacks and other add-ons – was $75.19, “the highest quarterly result in our history”, Allegiant says.
The ULCC’s load factor was 85.8%, compared with 78.9% during the first quarter of 2022.
Allegiant’s long-in-development Sunseeker Resort in Charlotte Harbor, Florida – which suffered $35 million of property damage from Hurricane Ian – is in the final stages of construction and repair and is set to open 16 October 2023.
“Although we are still sorting through insurance claims related to Hurricane Ian, we have a better line of sight on completion and final budget,” Redmond says. “Given inflationary pressures and supply chain issues, we expect the final capital expenditure budget to be $695 million.”
The carrier is also anticipating a 2.5% reduction in capacity for the full year versus its 2022 performance, citing some of the same snags holding back many of Allegiant’s competitors.
“The industry continues to experience challenges from supply chain delays to [air traffic control] constraints that present the most stress during peak, high-demand periods,” Allegiant says. Despite the tweaks to capacity, booking data continues to reflect a strong demand environment, particularly during peak summer travel periods.”
The carrier introduced three Airbus A320ceos to its fleet during the first quarter and will acquire three more mid-life A320s this year. Allegiant is set to end the year with 127 narrowbody Airbus aircraft.
Further, the ULCC expects to take delivery of the first three of its new Boeing 737 Max “very late in the fourth quarter”, and Allegiant executives expressed confidence that Boeing will fulfill its long-term aircraft delivery commitments.
In January 2022, Allegiant ordered 50 737 Max 7s and 8s and took options for a further 50 airframes. “As of today, we still expect to take delivery of all aircraft in the firm order book by late 2025,” says Scott DeAngelo, Allegiant’s chief marketing officer.
“For capacity-planning purposes, we are not relying on these airplanes for revenue service until early 2024,” he says. “We remain in very active dialogue with Boeing regarding the remainder of our 737 Max delivery schedule.”
“Over the next five or six years… we are planning to be an airline with 200 aircraft,” adds Gregory Anderson, the carrier’s president.
Adding so many Max aircraft so quickly is likely to cause a pilot crunch, however – even in the shorter term, as some of Allegiant’s pilots will be pulled off Airbus aircraft to train on the Max within the next several months.
“We want to be ready to make sure that we can support that order,” Redmond says. “That is another element to limit capacity growth in the back half of the year.”
“Our net [pilot] head count for the year remains roughly flat,” Redmond says. “However, within our schoolhouse, the number of new-hire pilots are outpacing our initial expectations. With a strong recruiting team and pathway programmes in the works, we remain confident in our ability to attract, train and grow pilots.”
Allegiant currently has121 aircraft in service and seven of its narrowbody jets in storage, according to Cirium fleets data.