Allegiant Air: crowded planes = good business

August 8th, 2008 at 02:14pm Thomas V. Bona

Allegiant Air, as you may have heard, is one of few airlines boasting a profit these days. The biggest airline making a profit, Southwest Airlines, is only doing so because of its lauded fuel hedges … airline economist Darin Lee told a group of journalists yesterday that SW is otherwise underperforming competitors.

So what Allegiant is pulling off is rather special. And Lee called their 95 percent load factors (how full the planes are) last month “unheard of”. How unheard of? According to Air Transport Association data Lee gave us, load factors for U.S. airlines have increased from 62 percent in 1990 to 80 percent last year.

(”Oh no, I’m sitting next to the chatty reporter!”)

They’ve been packed at RFD. In June, all Allegiant flights in and out of RFD were 97 percent full, according to the airport. In July, they were on average 96 percent full. I asked Robert Ashcroft, Allegiant’s vice president of planning, about this stuff for a story. He said more interesting things than I could fit there, so here’s the full text:

1. Allegiant’s routes out of RFD have load factors at the same level of the airline’s impressive national average. Is that a sign that they’re doing well for Allegiant, and that the seasonal adjustments are at the level they need to be? Another way to ask that is, if fuel prices stabilize at the current level, do your foresee the need for any other adjustments at RFD?

“A corporate goal for the last six to 12 months has been to run the airline as full as possible, so pretty much all our markets are showing very high load factors. The real issue is whether we can fill the flights at decent fares or not. Overall RFD appears to be doing fine, which doesn’t mean we might not add or subtract frequencies on particular routes from RFD.”

2. Why is it important to have such high load factors? Obviously, the fuller the plane, the more efficient the operation … but you’ve gone above and beyond other airlines. Does that give you a competitive advantage?

“Two motivators: the first is to reduce the cost of fuel per passenger. We burn only slightly more fuel if we add another passenger to the aircraft, so fuel cost per passenger declines as we increase the number of people on board. The second motivation is that we appear to be pretty good at getting a steady amount of so-called ancillary revenue (for the charges we levy for things like drinks, advance seat selections, car rentals, hotel rooms, etc) per person. So, the more people we carry, the more ancillary revenue we get.

“The competitive advantage is really that our type of airline (leisure-oriented, selling only nonstop flights, no connections, etc) lends itself better to flying full aircraft than other airlines. 95% full aircraft, such as we did in July in our scheduled service, is really unheard of, and probably infeasible for more traditional airlines.”

3. Have customers reacted to how full planes are … complaining about feeling crowded at all? What feedback, if any, have you had recently?

“Haven’t seen any such feedback, yet. One thing that may be making it a bit more bearable is that the seats in our aircraft are actually relatively far behind each other compared to many other airlines. So people still have a decent amount of leg room, even when the airplane is full. Still, an empty seat next to you is pretty hard to come by on Allegiant at the moment.”

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