An Allegiant Air plane lands at Harry Reid International Airport in Las Vegas on July 26, 2022.
Chase Stevens | Las Vegas Review-Journal | Tribune News Service | Getty Images
Allegiant Travel CompanyAcquisition of . sun country airlines Greg Anderson, CEO of the combined company, said Allegiant Air will continue to stand out despite industry turmoil, including rising jet fuel costs.
“Our model was built to protect profits, not to chase growth,” Anderson said in an interview with CNBC.
The Las Vegas-based airline announced in January that it had agreed to buy Minneapolis-based Sun Country for $1.5 billion in cash and stock, including debt. For now, the brand and booking portal will remain separate.
Allegiant says the integrated airline will fly more than 650 routes to about 175 destinations, but Anderson said it will continue to be cautious about capacity expansion. He said the strategy has shielded the airline from some of the problems faced by other low-cost carriers.
Allegiant’s plans include ramping up service during peak travel periods, such as during summer and spring break, and then restarting service on Tuesdays and Wednesdays during low-demand weeks, selling more seats to customers during times when airlines can have more pricing power, Anderson said.
“For example, on Tuesdays in September, we’re going to reduce capacity and actually park more vehicles,” he said.
Allegiant and Sun Country connect smaller cities and vacation destinations with a focus on cost-conscious travelers. The Land of the Sun also operates cargo operations. Amazon.
Anderson said the company also continues to see strong demand from its budget-minded leisure customers, despite rising jet fuel costs. The industry faces billions of dollars in additional costs from expensive jet fuel, which has nearly doubled since the U.S. and Israeli attacks on Iran began in February. Jet fuel is typically the second-largest cost for airlines after labor, and airlines raise fares to pass that cost on to customers.
The Value Airlines Association, which includes Allegiant and Sun Country, announced last month that it was seeking $2.5 billion from the Trump administration to offset high fuel costs, but Transportation Secretary Sean Duffy said he didn’t think it was necessary.
Allegiant reported first-quarter profits of $42.5 million, up 32% year-over-year.
“This shows that some low-cost models can work,” said Raymond James aviation analyst Savanti Sith.
The deal’s completion comes just weeks after the once fast-growing low-cost airline Spirit Airlines was shut down in the largest U.S. airline bankruptcy in a generation.
Allegiant has not disclosed financial projections for the combined company, but said late last month that it expected second-quarter production capacity to be cut 6.5% from a year earlier, and third-quarter production capacity to be flat to slightly lower than a year earlier.
The smaller, low-cost and leisure-focused carriers dwarf their larger competitors, Delta Air Lines, American Airlines, United Airlines and Southwest Airlines, which together command about 80% of the U.S. domestic market, according to federal data.
