Allegiant revenue jumps despite financial downturns

Las Vegas-based Allegiant Travel Company managed to increase revenue more than 35 percent in the third quarter despite operating a leisure-based airline at a time when the hospitality and airline industries are suffering from dramatic financial downturns.

Allegiant reported today that it earned $116.9 million in the third quarter, up 35.4 percent from the same quarter in 2007. However, profits on the revenue fell 4.2 percentage points to 6.9 percent, in large part because fuel costs were higher.

During a confence call with analysts company officials were upbeat despite dire predictions for leisure travel. They said lower fuel prices will give the airline more flexibility in the future and discussed several possibilities for increasing revenue further, including the potential to charge passengers for carry-on luggage.

Allegiant was one of the first airlines to charge passengers for checked bags, a move company officials said reduced the average number of checked bags per customer from 1.2 to 0.5.

However, it also resulted in more crowded baggage bins in flight cabins as passengers began to carry more luggage on board.

"Some would argue it sounds like a new revenue opportunity, but we’ll have to address that in future calls," said Ponder Harrison, Allegiant's managing director of marketing and sales.

Analysts say it is the flexibility to make money from myriad sources that is helping Allegiant to reap profits while other airlines falter.

Although the average Allegiant fare is just about $86, ancillary revenue from baggage fees, hotel rooms sales in Las Vegas, Florida and Arizona and other charges increased 51.5 percent in the third quarter to $32.28 per passenger.

"Other domestic airlines have to live off just airfare," said Bob McAdoo of Avondale Partners. "They have a real leg up on the traditional airlines."

At mid-day Allegiant stock was up 3.27 percent to $36.98 per share on the Nasdaq National Market.