Looks like Allegiant is taking on AirTran

[Colonel Savage]

4th Quarter 2008 CASM -Allegiant = 9.1 and AirTran = 10
1st Quarter 2009 CASM - Allegiant = 7.4 and AirTran = 9.2
2nd Quarter 2009 CASM -Allegiant 7.6 and AirTran = 9

Thanks. Looks "fuel cost sensitive".

 

[maxblast72]

Of course Airtran's total CASM systemwide includes operating out of higher operating cost airports (holding, long taxi lines, high gate costs, etc). If you just look at a ABE-MCO leg or TYS-MCO leg, Airtran is probably pretty close to Allegiant's CASM. You also have to remember Airtran is running a smaller airframe which might make it easier to manage the RASM side of the equation.

Be interesting to see if one airline or the other chickens out of some of these markets with the competition. Traditionally, Allegiant has gone the no competition route but may be changing their strategy as they accumulate more money in the bank.

 

[Mr Wu]

It's just a consolidation of routes before the big announcement on the 21st.

 

[anewunion]

A true race to the bottom of the ticket yield game. The Truth of the matter is that AAY at it's current pricing structure is only making a net operating profit on the extras it sells on board. AAI on the other hand could, and should also sell extras. This would allow them to achieve a lower price point with respect to their average ticket price.

This is a very important time for MCO. MCO has always had a very low ticket yield, Actually one of the lowest in the world. We are now going to see for the first time a true battle royal. The LCC's that have taken over MCO are going to be tested for the first time ever from a new ELCC ( Extreme Low Cost) business model. This has never been done. The LCC's are the expensive outfits in town, that's just crazy to think that way.

The reality of the situation, is that AAY has nowhere it go. They cannot go any lower. They have figured out a way to make a profit at the end of the year from exclusively selling product in route. If you stripped out these extras, they would achieve breakeven. So, in turn they are at the ultimate bottom. When they develop a pricing structure, AAY doesn't factor in making a profit. They price on break even, as opposed to everyone else in business factors in a profit. This is the big advantage AAY has.

The trump card is when every one like JB,SW,and AAI get together and dump an enormous amount of seat availability on a market. Can AAY achieve a load factor to break even?. Remember, AAY needs to fill the plane just to break even. That's the unknown. It's all going to come down to who has the most cash to burn. I hope it never happens to the LCC guys that they have to take a pay cut to achieve victory in this blood bath. If that happens we are all screwed.

One last point, It's not the 20 $ gap in Capt. pay that let's AAY make a profit, or charge lower for a round ticket. The 1.018% in total labor costs from paying more to the Capt's would not change the business modal at all. Please stop telling the AAY guys they are only making money because of the low pilot pay. That's crazy talk. And if so, let's look at the other LCC's startup pilot pay scales back in the day. It's not even close to the legacy pay for that time. It was just as bad. So don't call the kettle back boys.

good luck

 

[Beetle007]

Allegiant's net income this year is $73,246,000.

That might be one reason Allegiant's combined stock value is 844 million and Airtran's combined stock value is only 600 million. It seems kind of crazy that Allegiant is worth 40% more than Airtran.

 

[climbhappy]

Spirit operated MD80s before they Airbus. Anyone at HQ pounding their fist saying," we need to plan to replace these gas guzzlers in five years?"...would a Spirit/AAY merger be a good move in a few years...Spirit evolved from a 121 Supp as well.

 

[OurMoney1]

This is a very important time for MCO. MCO has always had a very low ticket yield, Actually one of the lowest in the world. We are now going to see for the first time a true battle royal. The LCC's that have taken over MCO are going to be tested for the first time ever from a new ELCC ( Extreme Low Cost) business model. This has never been done. The LCC's are the expensive outfits in town, that's just crazy to think that way.

I don't think that the battleground is going to be a broad as you think. SWA, JB, Spirit, and Airtran dont serve many of the secondary and third tier markets that Allegiant has developed. And for some reason I dont see Gary Kelly starting Bangor anytime soon. There will always be rumors that WN is opening Allentown and GSP but these have been staple for decades. I recently read that Allentown has been courting WN since 1995 with no success. IF anything I see this type of compeition really hurting LCC and Delta. Both carriers do the secondary markets with their subsidiarys, with dismal yields already in MCO, it will strain the big guys even more. Until Allegiant announces MCO to LGA, BWI, DTW, JFK, MHT, BTV, PVD, I suspect it will be business as usual. The legacies are most prone to further impact in MCO not necessarily the Low Cost models.

 

[OurMoney1]

This is a very important time for MCO. MCO has always had a very low ticket yield, Actually one of the lowest in the world. We are now going to see for the first time a true battle royal. The LCC's that have taken over MCO are going to be tested for the first time ever from a new ELCC ( Extreme Low Cost) business model. This has never been done. The LCC's are the expensive outfits in town, that's just crazy to think that way.

I don't think that the battleground is going to be a broad as you think. SWA, JB, Spirit, and Airtran dont serve many of the secondary and third tier markets that Allegiant has developed. And for some reason I dont see Gary Kelly starting Bangor anytime soon. There will always be rumors that WN is opening Allentown and GSP but these have been staple for decades. I recently read that Allentown has been courting WN since 1995 with no success. IF anything I see this type of compeition really hurting LCC and Delta. Both carriers do the secondary markets with their subsidiarys, with dismal yields already in MCO, it will strain the big guys even more. Until Allegiant announces MCO to SWF, HPN, BWI, DTW, CMH, DAY, PIT, JFK, MHT, BTV, PVD, I suspect it will be business as usual. The legacies are most prone to further impact in MCO not necessarily the Low Cost models.

 

[Propsync]

Very interesting. Many of those are secondary markets, at best, but it will make for a show. Airtran just announced DSM-MCO last week. Of all the markets to sprout dueling nonstops...

You'd be surprised. Des Moines has a population around 200,000. The county is around 400,000. Until I saw a road sign, I thought it was half the size. No NYC, but quite a large town for the middle of nowhere. Guess a lot of them are eager to leave 'Meth City' for a week.

 

[Ty Webb]

Good post, anewunion.

Pilot Pay is such a small part of CASM, especially at AAI, less than 5% of the total operating cost of the aircraft.

Because of the razor-thin margins, though, a change in pilot costs will affect the amount of profit . . . . for example, if every AirTran pilot got a $20,000. raise, after bennies and taxes, it would equal around $45 Million, which isn't going to "make or break" the Company, but it does take their profit down from $170M to $125M which means lower earnings, lower yield, higher P/E and smaller bonuses!