Following the completion of the acquisition of Sun Country, Allegiant's CEO articulated the advantages of the low-cost airline model.

　　Allegiant Travel acquires Sun Country Airlines. On Wednesday, the CEO of the merged company, Greg Anderson, stated that Allegiant will continue to stand out despite turmoil in the airline industry, including soaring fuel costs.

　　"Our model is designed to protect profit margins, not chase growth," Anderson told CNBC.

　　The Las Vegas-based airline announced in January that it would acquire Minneapolis-based Sun Country Airlines for $1.5 billion in cash and stock (including debt). Currently, the two airlines' brands and booking platforms will operate independently.

　　According to Allegiant, the merged airline will serve approximately 175 cities and operate on more than 650 routes. Anderson stated that the merged airline will continue to precisely control capacity growth. He noted that this strategy shields the airline from some of the difficulties faced by other low-cost carriers.

　　Anderson said Allegiant's plans include increasing service during peak travel seasons such as summer or spring break, and then reducing service on Tuesdays and Wednesdays when demand is lower, selling more seats to customers when the airline has greater pricing power.

　　“For example, we’ll reduce capacity on a Tuesday in September, putting many fleets out of service,” he said.

　　Allegiant and Sun Country both focus on serving cost-conscious travelers, connecting smaller cities and vacation destinations. Sun Country also transports goods for Amazon.

　　Anderson said that despite soaring jet fuel costs, demand remains strong, even among the airline’s more budget-conscious leisure travelers. Since the U.S.-Israel attacks on Iran in February, jet fuel prices have nearly doubled, adding billions of dollars to the industry’s costs. Jet fuel is typically the second-largest expense for airlines after labor costs, and airlines have been raising fares to pass those costs on to passengers.

　　The Low-Cost Carrier Association (of which Allegiant and Sun Country are members) said last month it had requested $2.5 billion from the Trump administration to offset high fuel costs, but Transportation Secretary Sean Duffy said he didn’t think it was necessary.

　　Allegiant Airlines reported first-quarter profits of $42.5 million, a 32% increase from the same period last year.

　　"This shows that some low-cost models can succeed," said Savanthi Syth, an airline analyst at Raymond James.

　　The acquisition comes just weeks after the collapse of Spirit Airlines, a once-rapidly growing low-cost carrier and one of the largest airline failures in the U.S. in decades.

　　Allegiant has not yet released its post-merger financial forecasts, but said late last month that it expects second-quarter capacity to be down 6.5% year-over-year and third-quarter capacity to be flat or slightly down year-over-year.

　　According to federal data, smaller low-cost and leisure airlines pale in comparison to their larger competitors Delta, American, United, and Southwest, which together account for about 80% of the U.S. domestic market.

Recommended module stock:
SYN6201-0202
SYN6200-5203
SYN6200-5202
SYN6200-4202
SYN6200-2203
SYN6200-0203
SYN6202-2202
SYN6200-0202
SYN6302–2203
SYN6202-4203
SYN6202-4202
SYN6202-2203
SYN6202-2202
SYN6202-1203
SYN6202-1202
SYN6202-0203
SYN6202-0202
SYN6201-5203

More......

RELATED NEWS