The Skift Airline Innovation Report is our weekly newsletter focused on the business of airline innovation. We will look closely at the technological, financial, and design trends at airlines and airports that are driving the next-gen aviation industry.

We provide insights on need-to-know developments in passenger experience, ancillary services, revenue management, loyalty, technology, marketing, airport innovation, the competitive landscape, startups, and changing passenger behavior. The newsletter, sent on Wednesdays, is written and curated by me.  You can find previous issues of the newsletter here.

When considering new routes, U.S. discount airline Allegiant Air has a simple strategy: It flies where other airlines do not.

It’s a profitable approach. But it requires the airline’s network planners — the people who pick new routes — to be creative. Allegiant is growing, but its planners can’t rely on obvious routes, like New York to Chicago, or L.A. to Seattle. Usually, they must build markets where none exist.

That’s how, about five years ago, Allegiant created a base in Punta Gorda, a Western Florida airport with no commercial service. Today, Allegiant flies from Punta Gorda — it’s between Fort Myers and Sarasota — to more than 30 smaller- and medium-sized cities, including St. Cloud, Minnesota; Knoxville, Tennessee; Springfield, Illinois; and Des Moines, Iowa. Allegiant is so bullish on the service it’s building a resort hotel and condominium property nearby so it can sell vacation packages to passengers.

As an air market, Punta Gorda was “discovered” by Lukas Johnson, the airline’s senior vice president for commercial. Now, Allegiant is building a base in Florida’s panhandle, expanding at Destin-Fort Walton Beach Airport. Other carriers fly there, but focus more on shuttling business traffic to their hubs.

Expanding in Destin, which Johnson calls a “huge success,” is a project led by Kristen Shilling-Gonzalez, Allegiant’s director of planning.

For a story published Monday, I spoke to Shilling-Gonzalez about what she’s looking for in new routes, and how Allegiant decides which aircraft to use. She was candid, explaining why Allegiant sometimes cancels routes before they start, telling us why the airline can’t use its MD-80s in the Las Vegas summer heat, and revealing that travelers who tend to drive between two points are a target market. She also gave us the scoop on why Allegiant doesn’t like coast-to-coast routes, and when the airline will fly abroad.

What do you think of Allegiant’s unusual approach? Do you think Allegiant is smart to stick with its niche? Or should it compete with big airlines more often?

Let me know by emailing me at [email protected] Or find me on Twitter.

— Brian Sumers, Airline Business Reporter

Stories of the Week

Should More Airlines Spin Off Their Loyalty Programs? If you’ve listened to an airline earnings call recently, you probably know Joseph DeNardi. He’s an analyst with Stifel obsessed with getting executives to share information about loyalty programs. They often don’t answer him, but that hasn’t stopped him. Now, he’s pushing a theory that more airlines should sell off their frequent flyer programs. Why? “There is far too much value trapped within airline loyalty programs,” he said.

Japan Air Invests $10 Million in Concorde Successor: This news, which broke Tuesday, is surprising for two reasons. One, Japan Airlines is notoriously conservative. And two, the airline won’t gain much from early generations of this supersonic aircraft. Boom’s jets are expected to need a fuel stop to fly to Japan from the continental United States, including from the West Coast. After accounting for the stop, passengers don’t save that much time. Then again, $10 million isn’t much money. Related: Read my August interview with Boom founder and CEO Blake Scholl.

Allegiant Air Agonizes Over New Routes for Months or Even Years: Allegiant can’t fly its MD-80s from some cities at certain times of the year. It sometimes cancels routes before they launch. And it’s not interested in coast-to-coast routes. Learn why in this discussion with the airline’s director of planning, part of my Airline Insiders series.

American Airlines Solves Its Holiday Pilot Problem and Will Not Cancel Any Flights: Will passengers remember this in a month? For two days, this was huge news, with reporters wondering if American would ruin Christmas for tens of thousands of travelers. That never seemed likely — American was always willing to atone for its mistake by paying its pilots extra money — but representatives from the carrier’s pilots union seemed to enjoy putting American on the spot. That was probably a successful strategy, because it forced American to increase its offer. But it made for a mess of a week.

American Airlines Cracks Down on Smart Luggage With Built-In Batteries: This announcement makes sense. How many passengers do you suppose have mistakenly left batteries in these bags when gate-checking them at the last minute? But airline employees are already harried, so it’s not clear how carefully they will enforce these new rules. My guess is some passengers still will forget to remove the batteries.

NAACP Won’t Yet Lift Its American Airlines Travel Advisory: I’ve covered American for awhile, and I’ve seen nothing indicating the problems identified by the NAACP come from the top. That said, it’s a good thing American is training its employees about implicit bias. More companies should do it.

Air France-KLM Starts Operating Hipster-Focused Joon: Air France’s lower-cost brand, Joon, is already flying. Here’s a prediction: Joon might do OK, but over time, the airline could soften some of its overt pandering to travelers younger than 35. For now, the airline advertises itself as a “fashion brand, a rooftop bar, an entertainment channel,” which is ridiculous. It’s an airline. Related: Read my October interview with Air France-KLM CEO Jean-Marc Janaillac, in which we discuss why Joon is necessary.

No, Delta Didn’t Really Go ‘Cancel-Free’ Over the Thanksgiving Holiday: On Monday, Delta said it hadn’t canceled a Delta or Delta Connection flight in November. That may have been technically accurate, but The Points Guy discovered Delta left out an important detail. Its reporter found SkyWest canceled a Delta Connection flight on Nov. 26, and while Delta operated a replacement, it didn’t depart until 18 hours later. By that time, most of the original Skywest passengers had probably reached their destination. Officially, that might not have ended Delta’s perfect streak, but for passengers, it was essentially a canceled flight.

Leahy Reflects on 33 Years at Airbus: When John Leahy, an American, joined Airbus in 1985, the European company had never sold a plane to a U.S. airline. It didn’t have much hope, either. But Leahy, who is retiring as Airbus chief operating officer-commercial, helped changed that, and now just about every U.S. airline — Southwest is an exception — flies Airbus planes. The early years weren’t easy, he told Leeham News and Comment. “If you bought Boeing, and it didn’t turn out to be right, well, it was Boeing’s fault,” he said. “If you went out on a limb and bought this crazy European airplane and it didn’t turn out, people’s careers would be over at that point in time.”

News and Notes

IATA, the global international airline trade group, predicts total global airline profits will hit $38.4 billion in 2018, about $4 million more than it forecasts for 2017. …This summer, United Airlines will fly high-density Boeing 777-200s — with 28 seats in business and 334 in economy — from Newark to Dublin, Madrid, and Barcelona. It had only been flying these 777s on domestic routes, though they fly long segments, including Guam-Honolulu. … Spirit Airlines announced it had a 90.4 percent on-time arrival rate for November. Operational reliability has been a focus for newish CEO Bob Fornaro. … Iberia Airlines will resume flying from Madrid to San Juan, Puerto Rico in March, starting with three weekly flights and increasing to five for the summer peak season. … Hawaiian Airlines is starting to schedule its new Airbus A321neos, a fuel-efficient aircraft that will allow it to enter new markets that would not have been profitable before. This week, it announced San Diego-Maui. … Patrick Quayle, United’s vice president for international planning, makes the Crain’s Chicago Business 40-under-40 list. Quayle’s on an ultra-long-haul kick, having announced Los Angeles-Singapore and Houston-Sydney in recent months.

Radio Gig: I’m the airline analyst for “The Opening Bell,” a morning radio program on WGN in Chicago. Last week, we discussed airline food, American’s pilot drama, and new improvements for United’s Wi-Fi system.

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Skift Airline Business Reporter Brian Sumers [[email protected]] curates the Skift Airline Innovation Report. Skift emails the newsletter every Wednesday. Have a story idea? Or a juicy news tip? Want to share a memo? Send me an email or tweet me.

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Photo Credit: One of Allegiant Air's new Airbus A320s takes off. These airplanes are far more efficient than the MD-80s they replace. Allegiant Air