Monday, February 27, 2006

Allegiant Rising Fast

As noted in this article referenced by a pro-Worcester Airport blog, Allegiant has no plans to stop growing. We have been hearing that they have been starting to make the rounds of banks in hopes of putting together an IPO for sometime this year. We'd expect Raymond James to be in the mix as they acted as an agent in the private placement of equity for Allegiant in the spring of 2005. Although it took a while to put together, Raymond James came through by attracting reputable investors such as Declan Ryan. Ryan is best known for his stake in Ryanair and Tiger Airways. We'd expect Morgan Stanley to be a part of it as well. Why? Name one airline IPO they haven’t been a part of in the past 5 years.

Besides making Maury Gallagher an even more wealthy man than he already is (we assume he cashed out of a bit of his Valujet equity before the stock’s descent), an IPO would also provide even more capital for this already cash rich company to grow. The company said they were sitting on $60mm in cash late last year. That plus the IPO funds would go a far way for a company whose cost of growth is low. MD80 prices have risen to just a few million above part-out levels to $5mm-$9mm (meaning they're still dirt cheap). Since they serve empty airports, they often get nice incentive packages as well. The MD80s might burn a little more than other types, but at that price it’s well worth it.

So they have the airline humming side-by-side with the travel company business and lots of cash to grow, plus there are plenty of sure-fire profitable markets to grow into….or is there? Yes there are, but that brings up one area of concern about Allegiant. They have a spotty market planning record. You might say that they should have a spotty record given that they enter tertiary markets, and we would agree. But, as of summer 2005, they had pulled out of 25% of their markets over only a 5 year period. The Baton Rouge debacle is legendary. This is a cause for concern as it drives doubt about their claims of the mass of growth opportunity remaining and how much time & resources they will waste as they move lower and lower down their list of airports to grow into.


At 4:19 PM, Blogger Alec said...

Allegiant has so far served Worcester (ORH) well:

~ 80-90% load factors.

~ Reliability as long as our hilltop airport isn't fogged in.

~ Service to the top destination (Orlando) in Worcester's primary trade area.

~ Rejuvenation of our empty airport.

At 12:37 AM, Anonymous Anonymous said...

But, as of summer 2005, they had pulled out of 25% of their markets over only a 5 year period.

Gallagher only took control in June 2001, (3 and 1/2 years) investing cash and taking the company out of bankruptcy. Prior to that the company had different management and a different business plan.

In filing for bankruptcy the old Allegiant management shed all scheduled routes except for FAT-LAS. Gallagher then took over and drew up the new plan to focus on leisure travel.

While they have shed routes that didn't work out rather than continue spending money trying to develop them, it isn't 25% of the markets opened in the last 3 or 4 years.

At 9:32 AM, Blogger Emerging Airlines said...

Just to clarify...we have been very impressed by Allegiant and we think they will please their new investors in the not-too-distant future. The post is meant to be highly positive.

The comments about the post-bankruptcy strategy change are fair, though it was not a night and day difference before and after Maury arrived. If we have some time we'll dig into the OAG disks and see if we can get a year by year breakout of the pullouts. Anonymous Commenter, do you have the data nearby? If so and if you are comfortable in shedding your anonymity to EA staff (we wont publish anyone's email or name unless given specific approval to do so), email it to us and we'd be glad to complie it. Allegiant needs to work on a better response than what their current spokesperson says (that if a market doesnt work, we leave quickly). Although that line sounds fine when comparing Allegiant to Trans-Meridien or Pan Am, it doesnt when you are trying to impress investors who are investing in Allegiant's growth and their ability to grow smartly. That being said, this really is not a big deal. Their financial results over the past couple of years speak for itself.

At 5:50 PM, Anonymous Anonymous said...

A. Alot of new functions on the website are really great and new but alot of increasing amounts of callers are very angry about the fact that seats were automatically assigned along with trip flex and the options for not selecting seats or adding the travel protection are not and were not clear and obvious possibilities for them thus making them have to call in and then have us removed and have lead refund. Second part of this would be when credit cards are declined the are told to call us at reservations line instead of the financial institution. They get so angry of being told to make a toll call to our line in order to be told to call the bank.

B The increasing amount of web errors and duplicated bookings due to error messages that passengers experience when they are told the session has expired and page is lost when indeed it has been booked, They rebook and then have to wait on hold to cancel a duplicated booking that takes forever over the phone due to again, having to cancel one of the duplicated or sometimes triplicate booking and get a lead to refund.

please keep in mind that you may be not saving money in the long run. It is a bait and switch airline that misleads its passengers big time by making it very hard to manuver the website without getting anything extra on you which is another reason why they are so profitable.

mainly please please please remember or google the name Maury Gallagher and ValueJet. They are the airline that crashed in the everglades in florida and he owned them and sold them very shortly (about 2 to 3 months prior to the crash) You could be risking alot more than money flying on these (yes paid for ) but very older planes that McDonnell Douglas ( remeber the DC10 dropping out of the sky when they got too old?>>> made back when they were in business. This is a business and they are all in it for the money, not any kind of values. The reason why I can say this is because I worked there for over 2 years and I have seen the greed, behind the scenes maintenance reports and the real reasons why they are not making all the schedules on time and trust me its not always weather. Oh the planes they are getting are the old ones airlines felt were too old to fly btw FLYER BE VERY AWARE


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