Allegiant revenue soars despite fuel costs

High oil prices didn’t stop rural America from flocking to Florida’s beaches or the bright lights of Las Vegas, if a 48 percent revenue increase for Allegiant Travel Co. is any guide.

Executives at Las Vegas-based Allegiant Air said Wednesday that a 39 percent increase in fuel costs cut into fourth-quarter profits but the niche carrier still posted a double-digit margin for the year.

The low-cost vacation airline hauled in nearly $361 million in revenue for the year and made $44 million in profit, a margin of more than 12 percent.

Allegiant stock rose 12 percent Wednesday, closing the day at $26.61 on the Nasdaq National Market. The stock, however, is still 18 percent lower than it was one year ago. Allegiant also announced a $25 million stock repurchase plan.

Allegiant managed to keep profits up while other airlines struggled, in part by squeezing customers harder with extra charges for preferred seating, checked bags and sales of trinkets coordinated with its Nevada, Arizona and Florida destinations.

So-called ancillary revenue jumped 34 percent in 2007 to $21.53 per passenger for a haul of nearly $65 million, about 18 percent of overall revenue.

Allegiant’s niche of ferrying passengers from small-town airports in places such as Duluth, Minn., and Peoria, Ill., to vacations in Las Vegas, Florida and Arizona remains untapped by competitors.

That makes it possible for the airline to keep posting profits while much of the industry is losing money, cutting service and contemplating consolidation.

“They are this hidden airline,” said Jay Sorenson, president of IdeaWorks, an airline consulting firm in Shorewood, Wis. “They lurk below the surface in these secondary markets.”

Allegiant executives are already implementing plans to keep the company in black ink in 2008 despite there being no relief in sight from high fuel costs.

During a conference call to discuss the 2007 earnings, they said the soft economy will keep the cost of Las Vegas hotel rooms in check, which could prompt more Allegiant flights as well as hotel bookings through the company’s Web site.

Allegiant’s nimble operation also makes it easy for the airline to cut unprofitable routes and shift resources to more lucrative flights.

The lack of competition in Allegiant’s small-town markets also helps. In the past year, the airline increased its charges for checked bags and assigned seats and still managed to increase its load factor, the amount of seats filled on a given flight, to more than 81 percent, one of the highest rates in the industry.

“If this is a recession, we can’t wait for the good times,” said Ponder Harrison, Allegiant’s executive director for marketing and sales.

But the skies aren’t entirely friendly, even for the highly profitable Allegiant.

In 2007, the price it paid for a gallon of jet fuel increased almost 39 percent to $2.90. The first quarter of 2008 will bring a tough comparison to 2007, when Allegiant posted a 17 percent profit margin.

In the fourth quarter of 2007, revenue was up almost 60 percent to $101 million. But the profit margin of 6 percent was only about half of the fourth-quarter margin in 2006, due largely to rising fuel costs. Fourth-quarter operating income of $6 million was a decrease of almost 18 percent from 2006.

“It will be difficult for us to match first-quarter market performance if fuel prices stay at existing levels,” said Andrew Levy, Allegiant’s chief financial officer.

That could prompt the airline to cut more long-haul routes from its schedule in an effort to preserve the profit margin by saving fuel.

“If we determine we need to slow our growth … then we will do so,” Levy said.

Contact reporter Benjamin Spillman at bspillman@reviewjournal.com or (702) 477-3861.

ad-high_impact_4
Business
Bellagio, MGM Resorts International’s luxury hotel turns 20
The more than 3,000-room Bellagio hotel is situated on the site of the former Dunes Hotel. The Dunes was imploded in 1993, and construction of the Bellagio started in 1996. It cost $1.6 billion to build, making it the most expensive hotel in the world at the time. The Bellagio was former Wynn Resorts Ltd. Chairman and CEO Steve Wynn’s second major casino on the Strip after The Mirage. MGM Resorts International acquired the property from Steve Wynn in 2000. (Tara Mack/Las Vegas Review-Journal)
Facial recognition software at G2E – Todd Prince
Shing Tao, CEO of Las Vegas-based Remark Holdings, talks about his facial recognition product. (Todd Prince/Las Vegas Review-Journal)
Former NBA player, Shaquille O'Neal, speaks about his new Las Vegas chicken restaurant
Former NBA player, Shaquille O'Neal, speaks about his new Las Vegas chicken restaurant. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Bobby Baldwin to leave MGM
MGM Resorts International executive and professional poker player Bobby Baldwin is set to leave MGM.
Caesars has new armed emergency response teams
Caesars Entertainment Corp. has created armed emergency response teams. They are composed of former military and law enforcement officials. "These teams provide valuable additional security capabilities,” Caesars spokeswoman Jennifer Forkish said. Caesars is hiring Security Saturation Team supervisors, managers and officers, according to LinkedIn. The company did not say how many people it plans to hire for the units. (Las Vegas Review-Journal)
Las Vegas, airlines prepare for CES
CES in January is expected to attract more than 180,000 attendees. (Las Vegas Review-Journal)
AGS partners with Vegas Golden Knights
AGS is the nation’s second-largest manufacturer of Class II slot machines used primarily in tribal jurisdictions. It announced a marketing partnership with the Vegas Golden Knights NHL team. (Las Vegas Review-Journal)
Lehman Brothers bet big on Las Vegas
Lehman Brothers collapsed 10 years ago, helping send the country into the Great Recession.
Fremont9 opens downtown
Fremont9 apartment complex has opened in downtown Las Vegas. (Marcus Villagran/Las Vegas Review-Journal) @marcusvillagran
Ross & Snow launches in Las Vegas
Luxury shoe brand Ross & Snow has opened in Las Vegas, featuring "functional luxury" with premium shearling footwear. (Bailey Schulz/Las Vegas Review-Journal)
Remote Identification and Drones
DJI vice president of policy and public affairs discusses using remote identification on drones. (Bailey Schulz/Las Vegas Review-Journal)
Drones and public safety in Nevada
Two representatives in the drone industry discuss UAV's impact on public safety. (Bailey Schulz/Las Vegas Review-Journal)
Frontier Airlines to launch flights from Las Vegas to Mexico
Frontier, a Denver-based ultra-low-cost carrier, will become the first airline in more than a decade to offer international service to Canada and Mexico from Las Vegas when flights to Cancun and Los Cabos begin Dec. 15. (Rick Velotta/Las Vegas Review-Journal)
MGM Resorts International CEO Jim Murren addresses Oct. 1 lawsuits
MGM Resorts International Chairman and CEO Jim Murren addresses criticism his company has received for filing a lawsuit against the survivors of the Oct. 1 shooting. (K.M. Cannon/Las Vegas Review-Journal)
MGM Resorts International opens the doors on MGM Springfield
Massachusetts’ first hotel-casino opens in downtown Springfield. The $960 million MGM Springfield has 252 rooms and 125,000-square-feet of casino. (K.M. Cannon/Las Vegas Review-Journal)
MGM Resorts International prepares to open MGM Springfield
Las Vegas-based MGM Resorts International gave news media and invited guests a preview of the $960 million MGM Springfield casino in Massachusetts. The commonwealth's first resort casino will open Friday, Aug. 24. (K.M. Cannon/Las Vegas Review-Journal)
A Walk Through Circus Circus
It only takes a short walk through Circus Circus to realize it attracts a demographic like no other casino on the Strip: families with young children. (Todd Prince/Las Vegas Review-Journal)
Morphy Auctions, a vintage slot machines seller, wants gaming license
Vice president Don Grimmer talks about Morphy Auctions at the company's warehouse located at 4520 Arville Street in Las Vegas on Thursday, Aug. 16, 2018. (Rick Velotta/Las Vegas Review-Journal)
Nevada's venture capital money doesn't stay in state
Zach Miles, associate vice president for economic development for UNLV, said there’s venture money in Southern Nevada, “but trying to find the right groups to tap into for that money is different.” According to a 2017 report from the Kauffman Foundation, Las Vegas ranked number 34 out of 40 metropolitan areas for growth entrepreneurship, a metric of how much startups grow. With a lack of growing startups in Las Vegas, investment money is being sent outside of state borders. The southwest region of the U.S. received $386 million in funding in the second quarter, with about $25.2 million in Nevada. The San Francisco area alone received about $5.6 billion. (source: CB Insights)
Neon wraps can light up the night for advertising
Vinyl wrap company 5150 Wraps talks about neon wraps, a new technology that the company believes can boost advertising at night. (Marcus Villagran/Las Vegas Review-Journal) @brokejournalist
Nevada on the forefront of drone safety
Dr. Chris Walach, senior director of Nevada Institute for Autonomous Systems, talks to a reporter at NIAS's new Nevada Drone Center for Excellence of Public Safety, located inside the Switch Innevation Center in Las Vegas. K.M. Cannon Las Vegas Review-Journal @KMCannonPhoto
Motel 8 on south Strip will become site of hotel-casino
Israeli hoteliers Asher Gabay and Benny Zerah bought Motel 8 on the south Strip for $7.4 million, records show. They plan to bulldoze the property and build a hotel-casino. Motel 8 was built in the 1960s and used to be one of several roadside inns on what's now the south Strip. But it looks out of place today, dwarfed by the towering Mandalay Bay right across the street.
TOP NEWS
News Headlines
Add Event
Home Front Page Footer Listing
Circular
You May Like

You May Like