How Allegiant Air plans to grow one underserved market at a time

Las Vegas-based Allegiant Air, buoyed by its successful launch of service to the Hawaiian islands earlier this year, is setting its sights on Mexico and could begin routes to and from Las Vegas and Orlando by the end of next year or early 2014.

Allegiant executives told a group of 30 meeting at the airline’s annual investors day event Thursday that it would begin moving to develop Mexican markets in the same way it has been successful in the United States — by flying to and from cities that have little or no existing service, but with airports large enough to accommodate the airline’s twin-engine jets.

Executives gave no specifics on routes but said there were at least 10 Mexican cities that met the criteria. The airline also is considering Cancun as a possible resort focus city.

The airline, a division of publicly traded Allegiant Travel Co., must gear up for a bilingual website, call centers, crews and stations and apply for regulatory clearance to fly routes.

By the time Allegiant would begin flying to Mexico, it will have taken delivery of its first Airbus A319 jets, which have greater range and better performance capabilities to fly into airports that are higher in elevation and with shorter runways than those served with the airline’s current fleet of MD-80 jets.

Allegiant began flying to Hawaii from Las Vegas and Fresno, Calif., in June and has made several service announcements to and from other cities. Executives told investors they are still learning Hawaii’s nuances, including how to maximize profitability in a market that has steep peaks and valleys of seasonal demand.

Jude Bricker, Allegiant’s senior vice president of planning, said the startup of service between Fresno and Honolulu was the most successful in the airline’s history.

The airline has found that over time, its California “catchment areas” have expanded and that more passengers are willing to drive to cities like Fresno and Stockton to take advantage of the airline’s low fares.

Other strategies the airline outlined to investors:

• Allegiant will have its first A319 jets by June, but they aren’t planned for regular service until fall 2013. One of the airline’s top goals will be to get the A319 on its operating certificate. Proving runs are scheduled on the plane in February at its Mesa, Ariz., operation.
• The company is in the perfect spot to acquire used aircraft with several carriers retiring their A319s for next-generation planes and others unloading their MD-80 jets. Allegiant believes there’s plenty of flight hours left in used Airbus jets and that they’re more reliable than their MD-80s. The airline will continue to acquire MD-80s for spare engines and parts.
• The airline has rolled out its new website and mobile app and is exploring the use of in-flight sales over the Internet. The new site is powered by a custom-built booking engine, and the airline is experimenting with ways to optimize the sale of hotel rooms, cars and other products. The mobile app is specifically for Las Vegas, but Allegiant is looking to expand it for other cities.
• Allegiant believes there’s more growth potential for ancillary products and fees. The company is considering the development of a loyalty club similar to Spirit Airlines’ $9 Fare Club and branded credit cards. The company also is working to offer discounted fares for tickets paid with debit cards since processing costs are less for those than credit cards. Allegiant’s ancillary revenue has grown steadily since the third quarter of 2011.
• While Allegiant’s charter contract with Caesars Entertainment ends in January, the company said that some of the planes dedicated to Caesars will be retired while others will become available for charter flights for groups traveling for NCAA basketball tournaments in March.

(c)2012 the Las Vegas Sun (Las Vegas, Nev.). Distributed by MCT Information Services.