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Allegiant Air turns a corner with its transition to Airbus jets

Updated April 24, 2019 - 4:33 pm

Allegiant Travel Co. has officially turned a corner.

Reporting results from its first full quarter using an all-Airbus jet fleet, the company on Wednesday reported fuel costs down 6 percent, no maintenance cancellations over the past 120 days and a 5 percent increase in the number of departures despite having 11 fewer aircraft in 2019 than last year.

“We’re hitting on all cylinders in post-transition,” Allegiant CEO Maury Gallagher said in a conference call with investors.

Speeding up the company’s strategy of ridding itself of all its fuel-guzzling MD-80 jets in favor of twin-engine Airbus A320s and A319s, Allegiant captured operational savings and efficiencies that led to the company’s 65th straight profitable quarter. The company’s airline subsidiary has 84 jets in its fleet with nine more expected to be acquired by the end of the year.

Allegiant traditionally acquires used aircraft from other operators mostly based in Europe.

The company expects the second quarter to be strong because the Easter holiday fell in April instead of March. The company also noted that the federal government shutdown eliminated some Department of Defense charter flights for the airline.

In 2015, Allegiant was scrutinized by the Federal Aviation Administration after a rash of operational problems and flight delays or cancellations. The airline was found to be in compliance, but the incidents spurred the company to accelerate its transformation to an all-Airbus fleet.

Revenue climbed 6.2 percent to $451.6 million for the quarter that ended March 31 while net income was up 3.5 percent to $57.1 million.

While revenue and income were up, their levels failed to meet analysts’ expectations. A survey of 12 Wall Street analysts on average had predicted revenue of $452.1 million.

During the quarter, the airline also added new operational bases at Grand Rapids, Michigan, and Savannah, Georgia, and 35 new routes, including service to Anchorage, Alaska. Most of the company’s route growth was centered around Savannah; Destin, Florida; and Nashville, Tennessee.

The company also broke ground on its newest non-aviation asset, the $470 million, 700-unit Sunseeker Resort in Punta Gorda, Florida, during the quarter and earlier this week announced that it is seeking U.S. Department of Transportation permission to fly its first international routes to Mexico.

During the call, executives explained that the company is attempting to grow revenue through services that support the airline’s flights. While the company generates ancillary revenue through partnerships, the Florida resort, expected to open in late 2021 or early 2022, will cut out the middle man for travelers seeking lodging.

Executives did not offer any additional details on Mexico service, including dates, destinations and routes. But the company expects to sell tickets to Mexico by the end of this year.

The company thrives on serving small- to medium-sized cities with more than 450 domestic routes.

Allegiant shares rose 0.8 percent, $1, to $133.13 a share in Wednesday trading and higher-than-average volume. After hours, the share price dipped 0.2 percent, 24 cents, to $132.89 a share.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.

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