Allegiant Air will finally start flying into the New York area. Does this mean a fare war with United is coming? Or will the big airline ignore its much smaller competitor?
Allegiant Air, one of America’s most successful discount airlines, is finally expanding into the Big Apple — or at least close to it.
Allegiant said Tuesday it will add four less-than-daily routes from Newark Liberty International Airport. Starting in November, Allegiant will connect Savannah, Georgia, Asheville, North Carolina, Knoxville, Tennessee and Cincinnati with the New York market.
The new service is unusual for Allegiant for two reasons. First, with the exception of Los Angeles, the airline has mostly avoided the largest U.S. cities, preferring instead to shuttle passengers from smaller markets, like Bismarck, North Dakota and Cedar Rapids, Iowa to warm-weather vacation destinations, including Orlando, Phoenix, and Las Vegas. Second, because Allegiant often chooses out-of-the-ordinarily routes, it usually has no nonstop competition. It will certainly be the only airline flying from Ogdensburg, New York to Sanford, Florida when it starts that route in October.
In this case, Allegiant will challenge United Airlines, which according to analyst Hunter Keay of Wolfe Research, owns 68 percent share in Newark. But Allegiant is hopeful it and United will seek different customer segments, with United attracting business travelers and Allegiant courting price-sensitive passengers on vacation. Allegiant’s introductory fares will be as low as $39 each way, considerable cheaper than United’s.
In the airline business, larger carriers usually respond to discounters in one of two ways. The big airline either ignores the smaller one, or it drops fares and add capacity to try to compete. For several years, American Airlines has regularly price-matched with Spirit Airlines in Dallas/Worth, even though American has much higher costs than its rival. But Spirit has a much larger profile in Dallas/Fort Worth than Allegiant will have in Newark.
Lukas Johnson, vice president of network and pricing for Allegiant, said in an interview that he expects United and Allegiant will coexist. He notes the four markets Allegiant chose are not strategically important to United, which flies most of them with its smallest regional jets.
“I think they are rational and they realize we won’t steal a single business person that is a MileagePlus member,” Johnson said. “It would be foolish for them to drop a $300 average fare market down to $40.”
Johnson said expanding to Newark is less about a strategy shift and more about capitalizing on opportunity. In April, the Federal Aviation Administration dropped rules that required airlines to obtain slots before they could operate from Newark. Before the change, airlines generally could only fly to Newark if they bought slots from another carrier. The cost of the slots did not make the airport economically viable, Johnson said.
Neither Spirit nor Frontier Airlines, the other two U.S. discount carriers, fly into Newark.
“It was kind of out of the blue that it happened,” Johnson said of the FAA’s decision. “It was a big surprise.”
Allegiant is not well known in New York, but that might not matter. Much of its business comes from travelers in smaller markets who go to Allegiant’s website to book vacations. Johnson expects many customers who fly Allegiant to Las Vegas or Florida eventually will consider New York. Over time, Allegiant may also attract New York and New Jersey residents seeking inexpensive vacations in the Southeast.
Johnson said it is possible Allegiant will add more flights from Newark, but does not envision the airline ever having a massive presence there.
“We will see, as things establish, how the name gets out,” he said. “If the service is popular we will continue to try to add some.”
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Photo Credit: Las Vegas-based Allegiant Air is expanding to Newark, New Jersey. David Becker / Associated Press