Allegiant Travel pledges to serve the vacation needs of residents of more than 60 small US cities in 35 states. Through Allegiant Air, the company provides nonstop service to tourist destinations such as Las Vegas, Los Angeles, and Orlando, Florida, from places such as Cedar Rapids, Iowa; Fargo, North Dakota; and Toledo, Ohio. It maintains a fleet of about 50 MD-80 series aircraft. Besides scheduled service, Allegiant Air offers charter flights for casino operators Caesars Entertainment (formerly Harrah's Entertainment) and MGM MIRAGE, in addition to other customers. Sister company Allegiant Vacations works with partners to allow customers to book hotel rooms and rental cars along with their airline tickets.
The company hopes to thrive by sticking to what it believes to be an underserved niche: Allegiant Air is the only provider of nonstop service to its chosen destinations from most of the markets where it operates. Allegiant Travel has identified about 100 more small cities in the US and Canada as candidates for its services; it also plans to expand its list of leisure destinations. In addition to Las Vegas, Los Angeles, and Orlando, Allegiant Travel offers service to Phoenix; and to two other Florida markets (Fort Lauderdale and Tampa/St. Petersburg).
Allegiant Travel believes the diversity of its revenue mix will help ensure the company's success. The long-term, fixed-fee contract with Harrah's is a predictable and useful supplement to its scheduled airline service. Other sources of revenue include the fees it collects when customers arrange lodging and ground transportation via the Allegiant Air website, and the charges for ancillary services, such as advance seat assignments and in-flight food and beverages. The fees added up, allowing the company to realize a whopping 50% increase in ancillary revenue in 2010; these additional fees played a great part in the company's overall revenue increase of 11%.
Even with these increases, the company is still interested in controlling aircraft-related costs. Allegiant Travel has chosen to fly planes from the venerable MD-80 series, which are readily available second-hand. (The average age of the company's MD-80s is just over 21 years.) The aircraft, formerly an industry mainstay, cost less than new planes, and using a single type of plane makes maintenance simpler and thus less expensive. On the downside, MD-80s are less fuel-efficient than newer aircraft.
In early 2010 the company shifted its business strategy slightly to include longer-haul transportation. It agreed to purchase six Boeing 757-200 aircraft in order to extend its services to Hawaii. Seeing Hawaii as an untapped leisure market ripe with growth, Allegiant Travel plans to have all the new aircraft delivered by 2012. It will cost the company between $75 million and $90 million to acquire and prepare the fleet for service. Until it recieves regulatory approval for extended over water operations, the company has leased two of the Boeing aircraft to a third party.
Just as the company's aircraft have been tested, so has Allegiant Travel's management team. This isn't the first go-round in the airline industry for CEO Maurice Gallagher, who helped found low-fare carrier ValuJet (now AirTran). Gallagher controls about 20% of Allegiant Travel.