Allegiant Air faces bumps ahead in 2014 as costs grow and unit revenues soften in 1Q

Allegiant Air's strong top-line financial performance in FY2013 was belied by cost creep that is continuing into 2014 driven by maintenance expense and investments in yet-to-be revealed non-airline initiatives.

With Allegiant's guidance of unit cost increases for FY2014, no US airline is escaping some level of cost escalation during the year. Similar to sentiments expressed by other carriers, Allegiant concludes it is making the necessary investments now to ensure a profitable future.

Even as Allegiant's core business model - transporting cost-conscious travellers from small US markets to large leisure destinations - has essentially remained intact during the past couple of years, the carrier has also undertaken initiatives that are creating challenges in its cost performance in FY2014. While the company's financial fundamentals still remain strong, wildcards in its cost structure remain, including negotiating labour deals amid increasing tension between management and employees.