Allegiant Travel raises projections for rest of '11


Allegiant Air, the discount airline operated by Allegiant Travel Co., is about to change course again.

During August, passenger counts fell 7.6 percent compared with one year ago to 478,000 passengers for scheduled service, which excludes charters. At the same time, the number of miles each seat flew dropped 9.4 percent and the number of flights fell 10.8 percent.

This marked a rare reversal of the strategy of open-throttle expansion pursued for much of the past decade.

Still, the occupancy rate for Las Vegas-based Allegiant's planes rose from 89.9 percent to 92.3 percent.

During the third quarter, the airline projects that the number of scheduled flights will fall 4 percent to 6 percent and all flights will drop 1 percent to 3 percent. Allegiant runs an extensive charter operation tied to casino resorts, including Harrah's in Laughlin.

In the fourth quarter, however, management expects the number of scheduled flights to rise 5 percent to 9 percent. Just two months ago, the company said that its fourth-quarter schedule would increase only 1 percent to 5 percent.

"We see a lot of opportunity out there," company spokeswoman Kristine Stattuck-Cooper said. "Right now, we don't have enough capacity for the size of the company."

In the past month, Allegiant has announced 13 new routes. Two of them, from Las Vegas to Lexington, Ky., and Knoxville, Tenn., are longer than the average 901-mile flight and will squeeze more hours in the air out of the single Boeing 757 airliner that company currently has in its fleet.

More destinations will be coming in the next few weeks, she said.

Internal changes, such as upgrading the online booking system, bringing in the 757 with more seats than its mainstay derivatives of the MD-80 and overhauling engines to boost their reliability have added to the ability to grow again.

The company was revving up last year, but management found by early summer that had overestimated passenger demand and began to pare the schedule.

That trend was reinforced by fuel prices that began to soar late last year. The average price of a gallon of aviation fuel for scheduled flights jumped 40 percent over the past year to $3.32 per gallon in August, although the cost has flattened in recent months much as gasoline has for motorists.

Allegiant President Andrew Levy noted earlier this year that the company was concerned about how quickly it could boost fares to cover the extra fuel bill because its leisure passengers were very sensitive to price.

Also, Allegiant does not hedge its fuel supply, a form of financial insurance against sudden price spikes, so cutting capacity was the only way to remain profitable.

With the improving outlook and amid a broad market rally on Wednesday, Allegiant Travel shares rose $1.81, or 4.01 percent, to close at $46.99 on the Nasdaq Global Select Market.

Contact reporter Tim O'Reiley at toreiley@reviewjournal.com or 702-387-5290.

 

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