Allegiant Air weathers the prickly dynamics of a low fuel environment. Expects steady growth ahead

Although Allegiant Air has tweaked its unique business model during the last couple of years to capitalise on vacancies in medium-sized markets, opportunities remain for the airline in the more typical small markets that it links to its large leisure destinations. Its growth strategy is to operate a mix of those smaller routes and continue to add medium-sized markets when the opportunity arises.

The company may find increasing competition from US ULCCs that contemplate entering larger markets, but Allegiant believes that it can continue to grow in markets that Spirit and Frontier do not find attractive, and also that it has other structural advantages over those airlines.

Allegiant has not escaped the unit revenue pressure plaguing US airlines, but similarly to those airlines the company believes that it can achieve improvement in that metric during 2016. As it has previously noted, some of the revenue weakness is driven by Allegiant's own growth which, the company stresses, is earnings accretive.