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Allegiant revenues grow through ‘ancillary services’

Las Vegas-based Allegiant Airlines grew revenues more than 19 percent in the first quarter but saw profits decline because of higher fuel costs and the purchase of new aircraft.

The air carrier announced earnings for the three-month period that ended March 31 late Monday.

Net income for the quarter was $22.6 million, down 19.8 percent compared with $28.2 million in the same quarter a year ago. The profits translated into earnings per share pf $1.12, down 18.2 percent compared with earnings of $1.37 per share in the first quarter of 2009.

Net revenues in the quarter were $169.6 million, up 19.4 percent compared with $142.1 million in the first quarter last year.

Macquarie Securities gaming analyst Joel Simkins said this morning Allegiant demonstrated that it could drive ticket pricing higher while taking in additional revenue from ancillary services, such as selling hotel rooms and rental cars along with an airline ticket.

“The recently announced expansion into Hawaii should be rich with opportunities to drive ancillary revenues higher since most travellers to Hawaii require a hotel room and many need a rental car,” Simkins said. “As the leisure traveler continues to recover, we believe Alegiant will be able to push airfares higher while still offering a strong value to its customers when compared to other airline alternatives.”

Allegiant said the first quarter of 2009 benefited from the company paying $1.47 per gallon of jet fuel, the lowest quarterly fuel price in more five years. This year, Allegiant saw fuel prices spoke 48 percent to $2.17 per gallon.

 “Our first quarter results continue to reaffirm the stability and strength of our model, Allegiant Chairman and Chief Executive Officer Maurice Gallagher, Jr. said. ““Looking forward, we are excited about our prospects. We began service to Orlando International Airport on Feb. 1 and most recently announced plans to begin Hawaii service.”

The company agreed to buy six Boeing 757-200 series aircraft and closed on the first two planes in March. Allegiant said its capital expenditures during the quarter was $40 million, almost all of which was related to aircraft.

Allegiant generated an average fare per scheduled passenger of $116.49 during the quarter, a nearly $8 increase compared with $108.61 in the same quarter a year ago.

“Beginning in the second quarter of 2008, we increased our focus on filling aircraft to take advantage of strong ancillary revenues and reduce per-passenger costs by spreading costs, particularly fuel, over more passengers,” Gallagher said. “This strategy has worked well and we plan to continue this approach indefinitely.”


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