With nose-bleed oil prices, we've seen a string of airline bankruptcies. But as for Allegiant Air (NASDAQ: ALGT) things are much different. In Q1, operating revenues increased 58% to $133.1 million and there was a $9.7 million profit, or $0.47 per share.
So what's going on here? Basically, the company has a strong management team and an innovative business model. That is, the airline markets primarily to smaller cities for leisure travel, to places like Las Vegas and Orlando. The fares are cheap and the flights are non-stop.
What's more, Allegiant has its own reservation system. This not only cuts out the middleman but allows for ancillary revenues. This means charging for baggage, beverages, snacks, as well as hotels, car rentals and so on. It also helps that Allegiant has been aggressive with enhancing its load factors.
True, there are still many risks, especially if oil prices continue to surge, but given the wreckage in the industry, Allegiant's performance has been stellar. In fact, in Tuesday's trading, the stock price spiked 33.70% to $27.81 per share.
Tom Taulli is the author of various books, including The Complete M&A Handbook (www.mergerbook.com) and is also a principal in Averiware, which provides an ERP system to small and midsize businesses.
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Reader Comments (Page 1 of 1)
5-09-2008 @ 8:11PM
pat said...
This will be a short term gain. The customer service is so bad that return customers are falling away. As soon as any other carrier enters their markets many will jump even at increased prices. I have been flying for 30 years and I have never experienced a corporate culture of such complete disregard for the customer.
Warren Buffet would never buy this airline!