Looks like Allegiant is taking on 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!

 

[climb2slow]

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.

The challenge with Allegiant is that they are much more than an airline. Their airline revenues are buried in the numbers of allegiant travel. So saying Allegiants income is 73,246,000 does not reflect the income of the airline portion of their operation.

 

[Fubijaakr]

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.

The issue isn't that low AAY or VX pay is making their Companies money. Its the downward pressure those pay scales put on everyone else who flies like equipment. While you're correct that the low pay rates have an infinitesimal effect on the bottom line, that doesn't preclude OUR managers from trying to match those rates in order to enhance THIER stock options.

 

[squall line]

so may AAI begin hiring soon?

 

[funnyman12]

Saying Allegiant only makes money due to low pilot pay is the same as management saying that concessions will save the company. Unless extremely high or low pilot pay does not have that large of affect on the bottom line.

 

[crxpilot]

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

Ok I'll bite, whats the "big" announcement on the 21st?

 

[FlyWolf]

Ok I'll bite, whats the "big" announcement on the 21st?

Allegiant is buying Airtran

 

[JT12345]

Airtran started this I think. Aren't we doing the Apple Vacation flying?

Comparing the 2 companies based on airplane costs is like apples and oranges. Allegiant's profits are not from the airplanes, but the total travel packages. They make money off the customers entire vacation I thought.

I think Airtran is taking a dab in that business model, and Allegiant has to compete now.

 

[armani]

I think FlyWolf maybe on to sometning look at the management lets be honest.

 

[Ty Webb]

Yawn.

 

[Daytonaflyer]

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!

Yes, it was a good post with some good points. However, Allegiant has only had a buy on board program for a few years. They have maintained continual profitability for more than twice that long. The low ticket prices are their choice as they only have direct competition on about 10 routes. They can price tickets higher or lower as needed, but have determined people spend more on package deals and extras if they can save money on the airfare. The current pricing structure maximizes total profit.