Allegiant: a successful niche player with wider lessons for the world's airline industry

Allegiant's business model seems to fly in the face of conventional wisdom. A fleet of old, fuel-inefficient aircraft, flying with low frequencies and at low daily utilisation rates in markets with a high degree of seasonality. Yet the ultra-LCC is consistently profitable and generates free cash flow (operating cash flow in excess of capital expenditure), unlike most of the airline industry.

Allegiant's Vice President for Fleet and Corporate Finance told CAPA's Airline Fleet and Finance Summit in Mar-2014 that his airline was "built to be different". Of course, no business proceeds entirely smoothly and Allegiant faces some challenges, including labour relations issues and successfully taking its business model outside the contiguous United States.

Nevertheless, its return on capital employed is consistently the envy of most carriers. How does Allegiant achieve its strong financial results and what can the rest of the airline industry learn from its approach?