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New Planes, Same Allegiant

Allegiant just announced plans to acquire a fleet of 19 Airbus A319s starting in the second quarter of next year. If you rely on Allegiant, however, you can rest easy: The new planes will allow Allegiant to expand with its present business model, not change its successful formula.

Although this move took some industry mavens by surprise, augmenting the MD80s really makes sense. Allegiant has always operated old airplanes it could buy cheaply, trading off higher fuel and maintenance costs for a very low ownership cost. The MD80 was an ideal choice.

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But the MD80 has serious limitations: Its range is insufficient for some long-haul flights Allegiant might like to operate, it’s a runway-eater that can’t get out of some airports Allegiant would like to serve, and fuel and maintenance costs continue to squeeze profits. 

The A319 seems to solve these problems. Prices for used A319s have dropped dramatically in recent months, as the original owners replace them with bigger A320s, A321s, and B737-800s and -900s. Although each Allegiant 319 will probably cost at least twice as an MD80, which seems now to be going for about $2 million, the improved fuel efficiency and lower maintenance costs will more than offset the increased ownership cost. Moreover, 319s can fly more than twice as far as MD80s. Allegiant says the 319s are for growth rather than replacement, but at some point Allegiant will have to retire the rest of its MD80s as too old and too expensive to keep operating.

So you can look for Allegiant to open up some new routes with the A319, but with the same business model: Service from small cities to important visitor destinations, with very low capacity-controlled fares, separate fees for practically everything other than the base transport, and lots of focus on bundling hotels and rental cars.

Now for a combination of speculation and wishful thinking:

  • Although Allegiant has relied mainly on warm-weather visitor destinations such as Orlando, Las Vegas, Phoenix, and, most recently, Honolulu, I believe some small-city airports, such as my home field at Medford, Oregon, could support twice-weekly nonstops to New York and a few other big cities in the East and Midwest, while smaller cities in the East could use nonstops to Los Angeles and San Francisco (or Oakland).
  • Allegiant plans to have 156 seats in each A319, which the planes can accommodate at about the same minimal knee-crunching legroom Allegiant uses on its MD80s. But any plane with more than 150 seats needs an extra flight attendant. What if Allegiant were instead to cut out one row, offer rows in the front with generous legroom for an additional fee, and avoid the incremental crewmember?

Either way, it appears that this latest addition doesn't change much for Allegiant. 

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