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Allegiant’s model susceptible as oil spikes; May-2009 traffic preview

3-Jun-2009

Las Vegas-based LCC, Allegiant Air’s ability to offer sustainable low fares requires strict cost control, and a key part of its lower cost structure centres on the operation of ageing MD-80 family jets, which the airline can purchase and refurbish for as little as USD4 million. While the aircraft are less fuel-efficient than newer types, Allegiant is able to purchase them outright for one-tenth the cost of a new B737 aircraft, and because of the low cost of ownership, the carrier is able to fly the aircraft less (seven hours per day versus 13 hours per day at JetBlue), which helps keep labor costs lower. Overall, Allegiant operates with 35 full-time workers per plane compared to more than 50 at other carriers. [983 words]

Unlock the following content in this report:

Subheadings:

  • Ageing fleet adds to vulnerability as fuel price jumps
  • Stock offering by key shareholders
  • Ancillary revenue "firmer than airline tickets"
  • May-2009 traffic preview
  • Total Systems figures maintain health, as charter operations ramp-up

Graphs and data:

  • Allegiant share price and New York Harbour jet fuel price index
  • Allegiant ancillary revenue as a portion of total revenue: 1Q06 to 1Q09
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